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Share
Price:
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MYR4.15
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Target
Price:
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MYR5.28
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Recommendation:
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Hold
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Short term pinch
for longer term gain
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Our back-of-the-envelope calculation suggests that SOP’s
FY17 EPS could be diluted by up to 19% as it acquires young estates in
a deal worth MYR873m in cash via rights issue and borrowings. Valuation
wise, we believe the brownfield estates are fairly priced at an implied
EV/planted ha of ~MYR34,000. But this related party transaction (RPT)
exercise which is short term EPS dilutive will cap SOP’s near term
upside. We downgrade SOP to HOLD pending clarification from management.
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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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2,852.8
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3,642.4
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3,774.6
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3,940.8
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EBITDA
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290.2
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274.8
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322.4
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412.4
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Core net profit
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112.8
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84.9
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118.5
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170.9
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Core EPS (sen)
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25.7
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19.2
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26.9
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38.7
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Core EPS growth (%)
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19.7
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(25.0)
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39.5
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44.2
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Net DPS (sen)
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5.0
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3.8
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5.4
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7.7
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Core P/E (x)
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16.2
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21.6
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15.5
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10.7
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P/BV (x)
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1.4
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1.3
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1.2
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1.1
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Net dividend yield (%)
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1.2
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0.9
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1.3
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1.9
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ROAE (%)
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8.8
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6.2
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8.2
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11.0
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ROAA (%)
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4.3
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3.0
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3.9
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5.4
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EV/EBITDA (x)
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9.7
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9.8
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7.9
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6.0
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Net debt/equity (%)
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33.5
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46.7
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41.6
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32.9
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MACRO RESEARCH
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Strategy Research
by Chew
Hann Wong
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Watchful for
opportunities
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Brexit had created an immediate shockwave, but this
was short-lived. Still, the macro backdrops have changed, and this is
a new concern. We remain cautious into 3Q16 until early-4Q16, taking
into consideration the new uncertainties brought on by Brexit and the
external calendar ahead. Domestic catalysts are lacking as corporate
earnings growth stays slow. Against these backdrops, we believe the
KLCI’s near-term direction will remain very much driven by the
external developments.
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Economics Research
by
Suhaimi Ilias
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Eyes on Politics
& Policies…
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Increased downside to the global economic growth in
the wake of Brexit given the potential knock-on effect to the rest of
EU and the sizeable shares of US and Asian exports to EU. This is on
top of the ongoing post-GFC cyclical and structural constraints on
growth like debt, deflation, demography, as well as the availability
and effectiveness of major central banks’ policy tools.
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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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The FBMKLCI rose by 8.62 points to close at 1,654.84
yesterday, while the FBMEMAS and the FBM100 gained 43.29 points and
45.15 points respectively. In terms of market breadth, the
gainer-to-loser ratio was 342-to-359, while 335 counters were
unchanged. A total of 1.01b shares were traded valued at MYR1.22b.
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NEWS
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Outside Malaysia:
E.U: ECB spends EUR 85.1b on QE in Brexit-blighted June.
The European Central Bank bought EUR 85.1b (USD 94.8b) of debt in June as
it boosted its asset-purchase program before the summer holiday period,
and as officials considered how to handle the fallout from the U.K.’s
decision to quit the European Union. Holdings of public and
private-sector debt climbed to EUR 1.08tr as of June 30, data on the
ECB’s website showed. The period includes the week after the U.K. sent
shockwaves through the financial system with its Brexit vote. (Source:
Bloomberg)
U.K: Business expectations fall ‘off a cliff’ after Brexit
vote. U.K. business confidence dropped and pessimism about the economic
outlook almost doubled in the week after Britain voted to leave the
European Union, according to a survey. An index published by YouGov Plc
and the Centre for Economics and Business Research tumbled to 105 from
112.6 in the three days ended June 23, the referendum date. The survey,
which was carried out between June 28 and July 1, also found the
proportion of businesses that are pessimistic about the economic outlook
climbed to 49% from 25%. (Source: Bloomberg)
U.K: Osborne floats 15% business tax to boost post-Brexit
economy. Chancellor of the Exchequer George Osborne set a goal of lowering
the corporate tax rate to 15% in an effort to keep businesses investing
in the U.K. as it prepares to leave the European Union. Osborne, who
campaigned to remain in the EU, said in an interview with the Financial
Times that he accepted the result of the June 23 referendum and now wants
to mitigate the economic impact. Britain currently has a 20% tax rate for
business that’s scheduled to fall to 19% in April and to 17% in 2020.
(Source: Bloomberg)
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Other News:
Construction: Two more MRT2 packages to open for tender in
3Q. Mass Rapid Transit Corp Sdn Bhd (MRT) awarded three work packages
worth MYR1.38b for the Sg Buloh-Serdang-Putrajaya (SSP Line) of the Klang
valley Mass Rapid Transit (MRT2). The work is for engineering
procurement, construction, testing and commissioning of power supply and
distribution system for the SSP Line. (Source: The Edge Financial Daily).
Tenaga Nasional: Takes EC and KeTTha to court. TNB is in
disputes with EC and KeTTha over the PPA which the utility group was
supposed to signed with YTL Power International. The PPA is for TNB to
buy electricity generated by YTL Power Generation’s a wholly-owned unit
of YTL Power International and 800MW power plant in Paka. If TNB is
successful in the court case, YTL Power, which is facing shrinking
electricity revenue from Singapore will be adversely affected as the
extension on Paka Plant could have helped to offset some of the earnings
shortfalls across the causeway. (Source: The Edge Financial Daily).
NWP Holdings : Eyes construction opportunities to return
to black. NWP inked two memorandums of understanding (MoU) yesterday: The
first may result in it being appointed as the main contractor of a
proposed development comprising 160 service suites in Melaka, while the
second is to form a strategic partnership with another company for future
construction projects. The first MoU was signed with property developer
Listari Marina Sdn Bhd and the second MoU was inked with China-based
mechanical and engineering installation company, SCEGC installation Group
Company Ltd. (Source: The Edge Financial Daily)
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