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Share
Price:
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MYR1.64
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Target
Price:
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MYR1.60
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Recommendation:
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Hold
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Decelerating ST
prospects
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We have cut FY17/18/19 core earnings forecasts by
87%/85%/20% and SOP-based TP by 20% to MYR1.60 which implies 0.8x FY17
P/BV, on dimmer operating prospects at its drilling and E&C
divisions, a new setback that has not been fully factored in by the market.
Our revised FY17 net profit forecast of MYR108m is significantly below
consensus’ MYR837m. Its energy division remains a wild card, a major
swing factor not fully priced in yet. We downgrade our call to HOLD.
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FYE Jan (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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9,943.0
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10,184.0
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7,232.9
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7,633.5
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EBITDA
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3,120.5
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3,088.6
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2,254.8
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2,242.9
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Core net profit
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1,216.7
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1,009.4
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107.6
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143.3
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Core EPS (sen)
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20.3
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16.9
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1.8
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2.4
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Core EPS growth (%)
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13.6
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(16.8)
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(89.3)
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33.2
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Net DPS (sen)
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4.3
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1.4
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0.0
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0.0
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Core P/E (x)
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8.1
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9.7
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91.0
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68.3
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P/BV (x)
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0.8
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0.8
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0.8
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0.8
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Net dividend yield (%)
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2.7
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0.8
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0.0
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0.0
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ROAE (%)
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11.0
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8.3
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0.9
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1.2
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ROAA (%)
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4.0
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2.8
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0.3
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0.4
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EV/EBITDA (x)
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10.2
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8.9
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11.4
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11.2
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Net debt/equity (%)
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131.0
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134.2
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129.5
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123.1
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Share
Price:
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MYR1.88
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Target
Price:
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MYR1.90
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Recommendation:
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Hold
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Troubled by KRR;
D/G to HOLD
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4QFY6/16 results were below expectations as net profit was
largely dragged down by Kenny Rogers Roasters in Malaysia and
Indonesia. 4th interim net DPS of 1.0sen, however, was above our
expectations. We lower FY17-18 earnings forecasts by 17-24% and lower our
TP to MYR1.90 (-45sen; pegged to 22.5x CY17 FD PER).
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FYE Apr (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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376.8
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554.1
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609.7
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679.8
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EBITDA
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213.7
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79.5
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70.4
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83.8
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Core net profit
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25.7
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22.9
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26.5
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34.8
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Core FDEPS (sen)
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6.8
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6.0
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7.0
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9.2
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Core FDEPS growth(%)
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(2.4)
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(11.4)
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15.7
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31.5
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Net DPS (sen)
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5.8
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4.3
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3.1
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4.1
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Core FD P/E (x)
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27.7
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31.3
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27.0
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20.5
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P/BV (x)
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1.8
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1.8
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1.7
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1.7
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Net dividend yield (%)
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3.1
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2.3
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1.7
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2.2
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ROAE (%)
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9.2
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5.8
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6.5
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8.3
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ROAA (%)
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5.7
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3.1
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3.5
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4.6
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EV/EBITDA (x)
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5.1
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11.2
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12.8
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10.8
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Net debt/equity (%)
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39.1
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48.5
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48.3
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47.4
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SECTOR RESEARCH
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Sector Note
by Chee
Ting Ong
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May ‘16
stockpile at 5-year low
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Malaysia MPOB’s May 2016 stockpile hit 62-month low at
1.65m MT, driven by low FFB yields on lagged effect of 2015’s
drought. We expect CPO price to hit fresh highs of MYR2,800-2,900/t
in June/July 2016 following the low stockpile before CPO price starts
to retrace when output picks up from Aug 2016. Meanwhile, it is still
premature to expect a steep recovery in 2Q16 earnings vs full-year
forecasts due to low 2Q16 output. We maintain NEUTRAL on a 12M view.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Industrial production (IP) growth picked to +3.0% YoY
in Apr 2016 (Mar 2016: +2.8% YoY) despite slower manufacturing
growth, thanks to the rebound in mining activities and higher power
output.
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Suhaimi Ilias
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Zamros
Dzulkafli
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NEWS
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Outside Malaysia:
U.S: American consumer sentiment in June eases from a
one-year high as favorable views about personal finances were offset by
concerns about the economy’s prospects, a University of Michigan survey
showed. Current conditions index, which takes stock of Americans’ views
of their personal finances, climbed to 111.7, the highest since July
2005, from 109.9. Measure of expectations six months from now fell to
83.2 from 84.9 in May that was the best since June 2015. (Source:
Bloomberg)
U.K: Cameron relying on labour rivals in 10-day fight to
stop Brexit. Prime Minister David Cameron has turned to his archrivals in
the Labour Party to win over undecided voters with just 10 days to stop
Britain from voting to leave the European Union. Gordon Brown, who was
ousted by Cameron in 2010, will make the case to stay in the 28-nation
bloc, and other media interventions have been moved aside to ensure the
former premier is heard. The support of Labour voters will be crucial if
the government is to avert a so-called Brexit in the June 23 referendum.
(Source: Bloomberg)
U.K: Consumer spending rises slowest in over 2 years, Visa
says. U.K. consumer spending rose 0.8% y/y in May, the slowest gain since
Feb. 2014, according to Visa Europe’s U.K. Consumer Spending Index.
E-commerce spending rose 2.3% while “face-to-face” spending fell 0.8%.
Consumer spending growth has “finally caught up with the uncertainty
around the U.K. economy;” consumers have curbed overall spending,
especially on expensive items. (Source: Bloomberg)
Crude Oil: Extends losses as U.S. rigs drilling for crude
rise 2nd week. Rigs targeting crude in the U.S. rose by 3 to 328 last
week, capping the first two-week gain since August, Baker Hughes Inc.
said. Iran is seeking to boost output by 600,000 to 700,000 barrels a day
over five years from fields in an area west of the Karoun River along the
Iraqi border, Oil Minister Bijan Namdar Zanganeh said. (Source:
Bloomberg)
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Other News:
Hektar REIT: Acquires 1Segamat Mall. The company is buying
1Segamat Shopping Centre from EcoFirst Consolidated’s unit Tashima
Development Sdn Bhd for MYR104m. Upon completion of the proposed
acquisition, Hektar REIT will own six retail malls nationwide. (Source:
The Sun Daily)
AirAsia: To appoint advisers to evaluate offer for its
leasing arm. The company is appointing advisers, to evaluate the USD1b
(MYR4.1b) offer it has received for its aircraft leasing company, Asia
Aviation Capital Ltd (AAC). AirAsia’s board of directors will then decide
whether to do a full sale or a partial sale. AAC’s business has been
growing rapidly and is competing with established leasing companies to
get third party airline deals. (Source: The Sun Daily)
Scomi Engineering: Files claims against Prasarana. The
company’s wholly-owned subsidiary, Scomi Transit Projects Sdn Bhd (STP)
has served four payment claims on Prasarana Malaysia amounting MYR365m.
The claims, which are in relation to the Kuala Lumpur monorail fleet
expansion project, were served last Friday pursuant to Section 5 of the
Construction Industry Payment & Adjudication Act 2012, after STP
received a notice from Prasarana which gave the company 14 days to renew
a performance bond connected with the project, failing which the project
contract will terminate. (Source: The Sun Daily)
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