Top Glove | Reversal of tailwinds

COMPANY RESEARCH Top Glove | Reversal of tailwinds Yen Ling Lee

MACRO RESEARCH Malaysia | Gapped down, sell on rallies Lee Cheng Hooi

NEWS Outside Malaysia Other News

COMPANY RESEARCH

Malaysia Company Update Top Glove (TOPG MK) by Yen Ling Lee Share Price: MYR5.01 Target Price: MYR4.60 Recommendation: Hold Reversal of tailwinds While the upcoming 3QFY8/16 results could be sequentially weaker, it could still be within ours and market’s expectations. Nevertheless, we cut FY8/17-18 EPS forecasts by 11% p.a. on a lower USD/MYR assumption of 4.00. We also lower 2017 PER target to its mean of 15x (from 19x) given its normalising earnings outlook. Consequently, our new TP is MYR4.60 (from MYR6.50) and the stock is now a HOLD (previously BUY). FYE Aug (MYR m) FY14A FY15A FY16E FY17E Revenue 2,275.4 2,510.5 2,972.0 3,039.9 EBITDA 298.5 454.3 623.5 581.8 Core net profit 180.5 279.8 400.2 367.2 Core EPS (sen) 14.6 22.6 32.3 29.6 Core EPS growth (%) (8.2) 55.0 43.0 (8.2) Net DPS (sen) 8.0 11.5 16.1 14.8 Core P/E (x) 34.4 22.2 15.5 16.9 P/BV (x) 4.5 3.9 3.4 3.1 Net dividend yield (%) 1.6 2.3 3.2 3.0 ROAE (%) 13.3 18.6 23.4 19.3 ROAA (%) 9.8 12.1 14.2 12.0 EV/EBITDA (x) 9.4 10.1 9.6 10.0 Net debt/equity (%) net cash net cash net cash net cash Yen Ling Lee    (603) 2297 8691    lee.yl@maybank-ib.com

MACRO RESEARCH MY: Technicals Technical Research by Lee Cheng Hooi Gapped down, sell on rallies The FBMKLCI fell by 11.45 points to close at 1,629.77 yesterday, while the FBMEMAS and FBM100 declined 85.43 and 80.84 points respectively. In terms of market breadth, the gainer-to-loser ratio was 202-to-644 while 294 counters were unchanged. A total of 1.48b shares were traded valued at MYR1.21b. Lee Cheng Hooi    (603) 2297 8694    chenghooi.lee@maybank-ib.com

NEWS Outside Malaysia: U.K: Four polls put U.K. on course to leave EU as ‘Sun’ backs Brexit. Britain appeared to be on course to leave the European Union, with four polls from three companies putting the “Leave” campaign ahead of “Remain.” Monday saw a day of intense volatility on the currency markets, as the pound swung between losses of 1% and gains of 0.5%. Then in the evening came a series of polls putting “Leave” ahead. In the day’s final blow to “Remain,” the Sun, Britain’s biggest-selling newspaper, backed a so-called Brexit on its front page. (Source: Bloomberg) China: Investment growth slows in May. Fixed asset investment, an important gauge of infrastructure spending, slowed to its weakest pace in 16 years government statistics showed, a worrying trend despite other signs of economic stabilisation in the Asian giant. The moderation comes after a record credit binge in the first quarter of the year, a splurge aimed at stimulating China’s slowing economy. Fixed asset investment rose 9.6% YoY in the first five months of the year according to the National Bureau of Statistics. The world’s number two economy, a key driver of global expansion, grew just 6.9% in 2015, the weakest rate in a quarter of a century. (Source: AFP) India: Retail inflation accelerated more than estimated in May, the second surprise in as many months that reduces room for more interest-rate cuts. Consumer prices rose 5.76% YoY after a 5.47% increase in April, the Statistics Ministry said. Focus now shifts to the monsoon, which waters more than half of India’s farmlands and can keep food costs low. While the weather department has forecast above-normal rainfall this year after two droughts, more clarity will emerge only next month on how much help it will offer central bank Governor Raghuram Rajan in meeting his 5% CPI target for March 2017. (Source: Bloomberg) Other News: Aviation: Rayani Air appeals for second chance. The airline will appeal to the Malaysia’s airline authority after the Malaysian Aviation Commission (Mavcom) and Department of Civil Aviation (DCA) revoked the airline’s Air Service Licence and Air Operator's Certificate, effective Monday. The revocation is said to be caused by the company breaching the conditions of the license and lacks financial and management capacity for operations. (Source: The Star) Crest Builder: Clinches MYR438.3m contract. The company wins a contract to build residential and commercial buildings at Sime Darby Property’s KL East development in Setapak. The project is expected to take about 30 months from site possession to complete, with completion targeted by the first quarter of 2019. (Source: The Edge Financial Daily) Westports: Poised to lose biggest customer. The company’s largest customer, French container shipping firm CMA GGMSA, plans to move its shipping traffic from Malaysia to Singapore following a deal with the Port of Singapore (PSA). Last year, the company handled 9.1m 20-foot equivalent units (TEUs) of containers, 30% of which were businesses from CMA CGM. (Source: The Edge Financial Daily) LTKM: Buys CN Asia land. The company, plans to buy four parcels of adjoining land measuring 25,837sq m, currently occupied by CN Asia Corporation for MYR58.4m, for future property development. LTKM also agreed to buy two other leasehold land measuring 4,760sq m and 4,849sq m respectively from Crystal Bond Sdn Bhd and Marvellous Production Sdn Bhd. CN Asia will use the sale proceeds mainly to repay its bank borrowings and future working capital. (Source: The Sun Daily)