Tuesday, June 28, 2016

Genting Plantations | Acquisition in Indonesia






Genting Plantations | Acquisition in Indonesia
Chee Ting Ong









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Malaysia Aviation | Hitting all the right spots
Mohshin Aziz









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Malaysia | Slow hiring now after the firing earlier
Suhaimi Ilias







Malaysia | Still got the blues…
Suhaimi Ilias







Malaysia | Poised to re-visit 1,611 soon
Lee Cheng Hooi








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COMPANY RESEARCH





Acquisition





Genting Plantations (GENP MK)
by Chee Ting Ong





Share Price:
MYR10.50
Target Price:
MYR10.00
Recommendation:
Hold




Acquisition in Indonesia

GENP is acquiring the rights to develop 21,995 ha of oil palm plantations in Indonesia for USD42m (MYR173m) cash; at fair valuations. As only 3,127 ha nucleus area has been planted, we are Neutral on the acquisition in the short term but positive on its long term prospects. We maintain our earnings forecasts for now. GENP remains a HOLD with an unchanged RNAV-based TP of MYR10.00.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
1,642.9
1,374.9
1,601.5
1,778.8
EBITDA
562.6
358.7
512.0
638.3
Core net profit
380.0
205.7
322.5
414.0
Core EPS (sen)
49.3
26.3
41.2
52.9
Core EPS growth (%)
22.7
(46.7)
56.8
28.4
Net DPS (sen)
10.0
5.5
8.2
10.6
Core P/E (x)
21.3
40.0
25.5
19.8
P/BV (x)
2.1
1.9
1.8
1.7
Net dividend yield (%)
1.0
0.5
0.8
1.0
ROAE (%)
10.4
5.1
7.4
8.9
ROAA (%)
7.3
3.2
4.3
5.3
EV/EBITDA (x)
14.1
26.3
18.6
14.9
Net debt/equity (%)
net cash
20.5
23.7
22.3







SECTOR RESEARCH






Sector Note
by Mohshin Aziz


Hitting all the right spots





1Q16 financial results were spectacular for a few reasons. First, all four carriers were profitable which is a rarity. Second, the industry’s average load factor was >80%, which is a record for 1Q performance. Third, the profits margin achieved by AirAsia was a global record for the period. Things have never been this good for the sector. Given that the dynamics are unchanged in 2Q16 and perhaps 3Q16, we expect airlines to deliver supernormal profits in the subsequent quarters.









MACRO RESEARCH






Economics Research
by Suhaimi Ilias


Slow hiring now after the firing earlier





Unemployment rate was stable at 3.5% in Apr 2016. Seasonally-adjusted rate rose to 3.6% (Mar 2016: 3.5%). We expect unemployment rate to average 3.5% in 2016 (2016 YTD: 3.5%; 2015: 3.2%).












Economics Research
by Suhaimi Ilias


Still got the blues…





Index of leading economic indicators fell for the sixth consecutive month in Apr 2016 by -2.6% YoY (Mar 2016: -2.1% YoY). Data suggests further slowing of real GDP growth in 2Q 2016.












Technical Research
by Lee Cheng Hooi


Poised to re-visit 1,611 soon





The FBMKLCI fell by 4.53 points to close at 1,629.52 yesterday, while the FBMEMAS and the FBM100 lost 38.25 points and 38.39 points respectively. In terms of market breadth, the gainer-to-loser ratio was 296-to-456, while 360 counters were unchanged. A total of 1.27b shares were traded valued at MYR1.30b.







NEWS


Outside Malaysia:

E.U: Tests London’s financial hub status by targeting clearing. It was a historic win for London’s finance industry: a court in Luxembourg ruled against the European Central Bank and for George Osborne, allowing euro-denominated trades to be cleared in the U.K. Now, Great Britain’s choice to leave the European Union puts the Chancellor of the Exchequer’s 2015 win - and the U.K.’s role providing services for the USD 493t derivatives market in jeopardy, weakening a key pillar of the City of London. Unless it accepts European regulations, as non-EU member Norway does, “we cannot locate in London what are called the clearinghouses,” said Francois Villeroy de Galhau, governor of the Bank of France and a member of the ECB’s Governing Council. “We’ll see what these negotiations produce,” Villeroy de Galhau said on France Inter radio on Saturday. “But if there is no Norway-style accord, the European financial centers have cards to play.” (Source: Bloomberg)

Russia: Takes a USD 6.1b bite out of banks to crimp liquidity. Reserve-ratio requirements will be increased by 75 basis points from Aug. 1 for ruble and foreign-currency liabilities, policy makers said in a statement. That will force lenders to set aside almost RUB 400b (USD 6.1b), according to Russia’s biggest bank, Sberbank PJSC. The monetary authority is raising ratios on liabilities in rubles for the first time since Elvira Nabiullina took over as governor in 2013, adding to its policy mix to manage a buildup of cash while inflation remains almost double the central bank’s 4% target. Higher requirements are already draining funds from the financial industry, with loan-loss provisions jumping by 5.3%, or RUB 287b, since the start of the year, central bank data show. (Source: Bloomberg) .





Other News:

Construction: MMC-Gamuda faces suit over MRT land acquisition. MMC Corp and Gamuda, through their partnership in the Klang Valley Mass Rapid Transit (KVMRT) project is being sued by Accolade Land Sdn Bhd. The claim of over MYR300m with interest and costs is for allegedly breaching a land acquisition contract. No details of the land in question were disclosed in the filings with Bursa Malaysia. (Source: The Edge Financial Markets)

Ahmad Zaki Resources: Wins MYR152.3m job in Pahang. The company has bagged a MYR152.3m contract from the Public Works Department to build a bridge over Sungai Kuantan connecting Kuantan to Bandar Putra, Tanjung Lumpur in Pahang. The company receives the letter of award from the Public Works Department last Friday. (Source: The Edge Financial Markets)

Sunway Construction Group: Secures MYR66.3m contract. The company’s sub-subsidiary Sunway Engineering Sdn Bhd was awarded a MYR66.3m project by Zecon Medicare Sdn Bhd for electrical services and air conditioning and mechanical ventilation system for the proposed development of University Kebangsaan Malaysia Children Specialist Hospital. The project is a public-private partnership initiative and is to be completed on April 30, 2018. It is expected to contribute positively to the earnings of SunCon group from the financial year ending Dec 31, 2016 onwards. (Source: The Sun Daily)

YTL: Looking for infrastructure utility assets in the UK. The conglomerate is looking for bargains after the UK vote to leave the European Union (EU). The company said that it will look for infrastructure utilities assets in the UK over the next two to three years. The company has about MYR13.5b in cash that could be used to fund expansion. (Source: The Edge Financial Markets)

SapuraKencana Petroleum: Signs GSA with Petronas. The company’s wholly-owned subsidiary, SapuraKencana Energy Sarawak Inc, signed a gas sales agreement (GSA) to supply gas to Petronas from 4QFY17 onwards. This is related to the gas production from the B15 gas field and SK130 production sharing contract (PSC) contractors, therefore they are joint sellers under the agreement. SapuraKencana Energy Sarawak was awarded by Petronas to operate Block SK310 PSC back on June 17, 2008. (Source: The Edge Financial Markets)


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