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Share
Price:
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MYR13.30
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Target
Price:
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MYR14.20
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Recommendation:
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Buy
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Overhang done;
U/G to BUY
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Into FY16, we expect Singapore operations and other export
sales to help support growth while also acting as a buffer to
potentially more subdued domestic operations on weaker consumer
sentiment. Our earnings forecasts are unchanged. With reduced regulatory
risk post the recent excise tax hike, we raise our DCF-TP to MYR14.20
(+MYR1.20). Our revised TP implies 18x FY16 PER, which is just slightly
above its 5-year mean of 17.7x. Upgrade CAB to BUY. FY16E dividend
yield of 5.8% adds to its merits.
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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1,635.1
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1,659.9
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1,723.6
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1,781.8
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EBITDA
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293.6
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305.9
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324.3
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336.9
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Core net profit
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211.6
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228.3
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236.8
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245.7
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Core EPS (sen)
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69.2
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74.7
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77.5
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80.4
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Core EPS growth (%)
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15.0
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7.9
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3.7
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3.8
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Net DPS (sen)
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69.3
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72.0
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77.0
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80.0
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Core P/E (x)
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19.2
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17.8
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17.2
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16.5
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P/BV (x)
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13.0
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12.1
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11.5
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11.2
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Net dividend yield (%)
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5.2
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5.4
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5.8
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6.0
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ROAE (%)
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72.2
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70.5
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68.9
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68.8
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ROAA (%)
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33.6
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34.2
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34.2
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34.0
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EV/EBITDA (x)
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12.2
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11.7
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12.6
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12.1
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Net debt/equity (%)
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net cash
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net cash
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net cash
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net cash
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Share
Price:
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MYR3.23
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Target
Price:
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MYR4.30
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Recommendation:
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Buy
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Action-packed
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We are positive on Inari's joint venture with PCL
Technologies which could possibly expand its addressable market in
China for the fiber-optics products. Our earnings forecasts and MYR4.30
TP (17x CY17 EPS) are unchanged pending further clarity from
management. Reiterate BUY; we continue to favor Inari in the
semiconductor space for its long-term growth prospects anchored on new
job wins.
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FYE Jun (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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793.7
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933.1
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1,222.8
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1,473.2
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EBITDA
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134.8
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187.3
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240.7
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309.4
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Core net profit
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102.8
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151.5
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186.7
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227.4
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Core EPS (sen)
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11.3
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16.3
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19.2
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23.4
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Core EPS growth (%)
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138.9
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43.9
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18.0
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21.8
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Net DPS (sen)
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6.8
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8.9
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7.7
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9.4
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Core P/E (x)
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28.5
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19.8
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16.8
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13.8
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P/BV (x)
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11.4
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5.6
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4.8
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4.0
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Net dividend yield (%)
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2.1
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2.8
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2.4
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2.9
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ROAE (%)
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49.4
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38.1
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31.4
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31.6
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ROAA (%)
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23.6
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22.7
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20.3
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21.0
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EV/EBITDA (x)
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15.6
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11.9
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12.5
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9.9
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Net debt/equity (%)
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6.7
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net cash
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net cash
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net cash
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SECTOR RESEARCH
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Sector Note
by Chee
Ting Ong
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Planters are generally concerned over production
uncertainties in 2016 (especially in 1H) due to the lag effect from
2015’s dry weather. But this is typically more than compensated by
higher CPO price in the short term. El Nino offers a situational play
(not structural) on the sector. 1H16 provides good trading
opportunities in anticipation for CPO price to stage a mini rally to
above MYR2,700/t sometime in 2Q16, we forecast. Our BUYs in the
region are IOI, FR, AALI, LSIP, BAL, SOP and TAH.
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MACRO RESEARCH
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Technical Research
by Lee
Cheng Hooi
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Persistent
selling above 1,700
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The FBMKLCI lost 10.07 points to close at 1,687.86
yesterday, while the FBMEMAS and FBM100 dropped 68.29 points and
65.23 points, respectively. In terms of market breadth, the
gainer-to-loser ratio was 287-to-567, while 316 counters were
unchanged. A total of 2.01b shares were traded valued at MYR2.07b.
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NEWS
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Outside Malaysia:
EU: Warns of contagion from France, Italy economic
weaknesses. The European Commission warned France and Italy that
weaknesses in their economies risk triggering a new wave of contagion to
other countries as it placed the two nations in its most severe category
for economic imbalances. The euro bloc’s second- and third-largest
economies, as well as Portugal and two non-euro countries -- Bulgaria and
Hungary -- have “excessive imbalances,” the European Union’s executive
arm said. The EU said it will escalate its policing of these countries’
spending policies as it warned of rising levels of public debt. (Source:
Bloomberg)
Germany: January industrial production jumped by the most
in more than six years, in a sign that strong domestic demand may be
helping to underpin output even as external trade cools. Production,
adjusted for seasonal swings, climbed 3.3% from the prior month after
retreating a revised 0.3% in December, data from the Economy Ministry in
Berlin showed. That’s the biggest increase since September 2009 and the
first gain in three months. (Source: Bloomberg)
China: Export slump deepened in February, highlighting the
challenge for policy makers seeking to keep the economy humming at home
while trade acts as a brake on growth. The week-long Chinese New Year
holidays fell in February this year, closing factories and curbing
shipments. That saw exports tumble 25.4% YoY in U.S. dollar terms, the
biggest decline since May 2009. Imports extended a streak of declines to
16 months, slumping 13.8% YoY, leaving a trade surplus of USD 32.6b. A
slowdown in global trade is making it harder for China’s leaders, who are
gathered in Beijing this week to set the nation’s economic plans, to keep
growth at the targeted 6.5% to 7% range. (Source: Bloomberg)
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Other News:
B10 biodiesel: Programme on course. The Government is
confident of implementing the B10 biodiesel programme this year. The move
was in line with the country's commitment as a member of the Council of
Palm Oil Producing Countries with Indonesia to increase the usage of palm
oil in biodiesel. Indonesia is currently implementing B15 and is moving
towards B20. On Malaysia's slower implementation of biodiesel programme
compared to Indonesia, it was due to the different structural systems in
two countries as well as the cost involved and the availability of crude
palm oil (CPO) stock. (Source: The Star)
Bumi Armada: To initiate legal action over FPSO contract
termination. Maintaining that the sudden termination of its floating
production, storage and offloading (FPSO) contract in the Balnaves field
off north-western Australia is not valid, the group will pursue the
matter in court. Its wholly-owned subsidiary Armada Balnaves Pte Ltd
(ABPL) has received a notice from Woodside Energy Julimar Pty Ltd to
terminate the contract in relation to the charter of the Armada Claire
vessel. ABPL intends to fully enforce its rights under that contract,
including initiating legal proceedings, against Woodside for the
“unlawful purpoted termination”. (Source: The Edge Financial Daily)
Sona Petroleum: Confident shareholders will approve Stag
Oilfield deal. Sona Petroleum, which managed to cut the purchase price
for its qualifying acquisition by half, is confident that its
shareholders will approve the deal to acquire Stag Oilfield, offshore
Western Australia, at an EGM to be held at the end of this month. Sona
Petroleum, which has until July 29, 2016 to secure its qualifying
acquisition, has come under the spotlight following the pending
liquidation of its peer, CLIQ Energy, which failed to obtain approval for
its acquisition. For the deal to pass through, the company must obtain
the approval of shareholders representing at least 75% of its issued
shares. Once approved, it is expected to be completed in the first half
of the year. (Source: The Sun Daily)
Xidelang: Terminates plan to acquire Chinese apparel
maker. Xidelang Holdings Ltd has called off its proposed acquisition of
apparel maker JinJiang YangSen Garments Co Ltd. The two sides could not
agree on the acquisition consideration as well as the propotion of cash
and the number of consideration shares for the satisfaction of the
acquisition. (Source: The Edge Financial Daily)
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