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Share
Price:
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MYR4.91
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Target
Price:
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MYR5.00
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Recommendation:
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Hold
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A well-oiled
machine
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The views, deeds and plans shared by Digi’s senior
management during its Analyst Day last Friday once again left a
positive impression. While industry conditions remain challenging, Digi
is well-poised to ride out the storm in our view. Share price has already
rebounded c.10% from its recent trough. Maintain HOLD with an unchanged
TP of MYR5.00.
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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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7,018.5
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6,914.0
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7,015.4
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7,188.7
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EBITDA
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3,163.5
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2,982.3
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2,995.6
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3,105.5
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Core net profit
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2,031.1
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1,722.6
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1,688.0
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1,726.0
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Core EPS (sen)
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26.1
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22.2
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21.7
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22.2
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Core EPS growth (%)
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19.1
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(15.2)
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(2.0)
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2.3
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Net DPS (sen)
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26.0
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22.0
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21.7
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22.2
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Core P/E (x)
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18.8
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22.2
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22.6
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22.1
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P/BV (x)
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55.6
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73.5
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73.5
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73.5
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Net dividend yield (%)
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5.3
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4.5
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4.4
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4.5
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ROAE (%)
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301.5
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285.8
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325.0
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332.3
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ROAA (%)
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50.4
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38.4
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35.7
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36.0
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EV/EBITDA (x)
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15.3
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14.4
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13.1
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12.7
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Net debt/equity (%)
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77.0
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204.2
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229.2
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250.7
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SECTOR RESEARCH
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Sector Note
by Yen
Ling Lee
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Though sector’s share price (YTD: -32%) and valuation
(at forward PERs of 10-27x now, from peak of 14-35x) have fallen
substantially, we think the current valuations have yet to fully
reflect the slowing financials (ROEs, margin, earnings growth). We
maintain our NEGATIVE view on the sector. A better time to re-enter
could be after the weak 2Q16 results, which may see PER valuations
down to their historical mean levels.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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The drop in index of leading economic indicators eased
to -0.8% YoY in May 2016 vs -2.7% YoY in Apr 2016. Trend suggests
further slowing of real GDP growth in 2Q 2016 but there is emerging
sign of the slowdown stabilizing going into 3Q 2016.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Economics Research
by
Suhaimi Ilias
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Hovering around
USD97b level…
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External reserves as at 15 Jul 2016 inched up to
USD97.3b (MYR390.8b) from USD97.2b (MYR390.4b) on 30 Jun 2016, equal
to 8.2 months of retained imports and 1.2 times of short-term
external debt. External reserves hover around USD97b amid volatile
portfolio capital flows.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Technical Research
by Lee
Cheng Hooi
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FBMKLCI’s
rebound hopes evaporate
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The FBMKLCI fell 10.98 points WoW to close at 1,657.42
as the US Department of Justice seized 1MDB assets. The market moved
in a wider range and daily volume ranged from 1.38b to 1.93b shares.
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NEWS
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Outside Malaysia:
E.U: ‘Sluggish’ Euro Area sees initial Brexit fallout in
services. The euro area’s service sector cooled in July as the U.K.’s
vote to leave the European Union clouded the region’s outlook, according
to Markit Economics. It’s Purchasing Managers Index for the sector
slipped to an 18-month low, dipping to 52.7 from 52.8, it said. While a
manufacturing measure and a joint gauge for both sectors also slipped,
all three remained above the 50 level that signals expansion. The
International Monetary Fund said this week that it had become less
optimistic on global growth, and warned the damage could worsen if
confidence falters among investors and companies. (Source: Bloomberg)
E.U: ECB said to see no rush for September move with QE on
track. European Central Bank policy makers currently see no urgent need
to adjust or expand their bond-buying program in September, according to
Euro-Area officials familiar with the matter. The Governing Council,
which met in Frankfurt on Thursday, views its EUR 1.7tr (USD 1.9tr) quantitative-easing
plan as effective even after the U.K.’s vote to leave the European Union,
and at no immediate risk of running into a shortage of assets, the people
said. While potential changes to QE will probably be discussed at the
next gathering on Sept. 8, there is no reason to expect substantial
alterations unless the outlook worsens, the people said. (Source:
Bloomberg)
U.K: Brexit wreaks havoc on economy as recession risk
increases. The U.K.’s decision to leave the European Union inflicted an
immediate blow on the economy as business activity shrank at its fastest
pace since the last recession seven years ago. In the weeks following
Brexit, there was a “dramatic deterioration,” Markit Economics said in a
one-time report published. Services and manufacturing shrank and a gauge
of the private-sector economy plunged to 47.7, well below the 50 level
that divides expansion from contraction. The slump is the strongest
evidence yet that politics is propelling the world’s fifth largest
economy into recession. The pound dropped after the report was published,
with Markit saying its latest readings put the economy on course to
contract by 0.4% this quarter. (Source: Bloomberg)
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Other News:
TNB: Construction of TNB's MYR12b Jimah East Power plant
begins. The construction of the MYR12b Jimah East Power (JEP) plant, in
Port Dickson, Negri Sembilan has begun. Two greenfield power units to be
constructed at the site will increase Tenaga Nasional Bhd's (TNB)
generation capacity from the current 22,747.53MW to 25,198.53MW by the
end of 2020. TNB owns 70% of the project through the acquisition of Edra
Global Energy Bhd's stake in Jimah East Power Sdn Bhd (JEP) from
1Malaysia Development Bhd (1MDB) for MYR46.98m in July 2015. Japanese
conglomerate Mitsui & Co Ltd and Chugoku Electric Power, are TNB's
strategic partner in JEP with each owning 15% of the remaining stake in
the company. (Source: The Sun Daily)
Bumi Armada: Ties up with Indian firm for FPSO bids. Bumi
Armada and India’s Shapoorji Pallonji and Co Pte Ltd (SPCL) are currently
in the midst of bidding for a contract in the floating production,
storage and off-loading (FPSO) vessel business. The companies would set
up a joint venture (JV) to be known as Shapoorji Pallonji Bumi Armada
Godavari Pte Ltd in India. The JV arrangement will enable the Bumi Armada
group to expand and carry out its FPSO business, as well as mitigate its
financial and project execution risk exposure. (Source: The Star)
Wah Seong: Bags MYR73.9m Statoil contract. The pipe
coating unit has been further awarded a MYR73.87m contract from Statoil
ASA Norway to provide pipe shipping and related services for the Johan
Sverdrup Export Pipeline Project. Last year, its unit clinched a
MYR165.8m (USD39.6m) contract from the Norwegian oil company for coating
work for the same project. The contract, involving shipping of pipes to a
port in Norway and subsequent offloading, is expected to start in the
2QFY17 and be completed by the 1QFY18. (Source: The Sun Daily)
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