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Share
Price:
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MYR6.12
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Target
Price:
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MYR5.90
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Recommendation:
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Hold
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Not too bad
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1H16 results turned out to be in-line, with the postpaid
pricing debacle not having that severe of an impact. Management
guidance is unchanged, while there remains no update on the 900/1800MHz
spectrum fee. Maintain HOLD with an unchanged TP of MYR5.90. Risk-reward
is now skewed to the downside, with share price having breached our TP
(which excludes spectrum fees).
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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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8,389.0
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8,601.0
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8,629.1
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8,853.3
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EBITDA
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4,242.0
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4,398.0
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4,314.6
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4,426.7
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Core net profit
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1,734.5
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1,809.5
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1,692.5
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1,757.2
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Core EPS (sen)
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23.1
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24.1
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22.5
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23.4
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Core EPS growth (%)
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(9.9)
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4.3
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(6.5)
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3.8
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Net DPS (sen)
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40.0
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20.0
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20.0
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20.0
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Core P/E (x)
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26.5
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25.4
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27.1
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26.1
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P/BV (x)
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9.7
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11.0
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10.5
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9.9
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Net dividend yield (%)
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6.5
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3.3
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3.3
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3.3
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ROAE (%)
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32.4
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40.6
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39.5
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39.0
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ROAA (%)
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9.8
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9.8
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8.9
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9.1
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EV/EBITDA (x)
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13.9
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13.6
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12.6
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12.2
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Net debt/equity (%)
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158.9
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205.5
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192.7
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172.6
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Headline slowed,
core stable
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As expected, headline inflation rate eased to +1.6%
YoY (May 2016: +2.0% YoY) with broad-based easing in CPI components,
while core inflation stable at +2.1% YoY (May 2016: +2.1% YoY). YTD
2016 headline inflation is +2.7% YoY while core inflation at +2.8% YoY.
Revised our 2016 headline inflation rate forecast range to +2.3%-2.8%
(from 2.7%-3.2% earlier).
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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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Index is still
range bound
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The FBMKLCI inched down by 0.94 points to close at
1,669.61 yesterday and the FBMEMAS and the FBM100 declined 2.43
points and 6.00 points respectively. In terms of market breadth, the
gainer-to-loser ratio was 435-to-367, while 369 counters were
unchanged. A total of 1.93b shares were traded valued at MYR1.64b.
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NEWS
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Outside Malaysia:
Brazil: Keeps rate amid persistent high prices, stagnant
GDP. Brazil’s central bank kept the benchmark interest rate unchanged,
matching analyst expectations as policy makers struggle to tame stubborn
inflation without exacerbating a crippling recession. Policy makers, led
for the first time by their new chief, Ilan Goldfajn, held the so-called
Selic rate at 14.25% for their eighth consecutive meeting.(Source:
Bloomberg)
E.U: Consumer confidence within the euro area deteriorated
in July after the U.K. voted to leave the European Union. An index of
consumer confidence dropped to minus 7.9 this month, following a revised
reading of minus 7.2 in June, the European Commission said. By requiring
a renegotiation of its economic ties, Britain’s June 23 vote has cast a
pall over the region’s future. The International Monetary Fund announced
it had grown less optimistic on the prospects for global growth and
warned the damage could worsen if confidence falters among investors and
companies. (Source: Bloomberg)
U.K: Labour market showed continuing strength ahead of the
country’s decision to vote to leave the European Union. The unemployment
rate fell to 4.9% in the three months through May, the lowest since the
third quarter of 2005, the Office for National Statistics said. The
number of people in work rose 176,000, the most this year, to a record
31.7 million. There was a mixed picture from wage data, with basic pay
growth unexpectedly slowing to 2.2% from 2.3%. Total earnings increased
2.3%, up from 2%. All the data were collected before June 23, meaning
they don’t reflect any impact on the economy from the Brexit vote.
(Source: Bloomberg)
Turkey: Declares 3-month emergency as Erdogan pursues
coup-makers. Turkey will impose a three-month state of emergency as the
government pursues those responsible for a failed military coup,
President Recep Tayyip Erdogan said. The country won’t be under military
rule, with army units taking orders from provincial governors, Erdogan
said in Ankara after a day of meetings with top generals on the National
Security Council, and then ministers in cabinet. (Source: Bloomberg)
New Zealand: RBNZ says lower rates likely to be needed to
lift inflation. New Zealand’s central bank said further monetary easing
is probably needed to lift inflation, reinforcing expectations of an
interest-rate cut next month. “At this stage it seems likely that further
policy easing will be required to ensure that future average inflation
settles near the middle of the target range,” the Reserve Bank of New Zealand
said in a statement in Wellington. The release was an assessment of
economic conditions and not a review of the official cash rate, which
isn’t scheduled until Aug. 11. (Source: Bloomberg)
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Other News:
Aviation: Malaysia Airlines tries to regain lost market
share, lower fares seen. MAS tries to regain market share it has lost
over recent years by offering lower fares for the Economy Class. MAS will
add six to seven new destinations next year, which will allow the airline
to tap new segments of the market. MAS chief executive officer Peter
Bellew said, that MAS have got better in purchasing, handling cost is 50%
lower, catering cost is 20% lower and fuel 5%-6% lower. The company has
also cut 6,000 jobs and shrunk its network by 30%. (Source: The Star)
Hua Yang: Proposes 1-for-3 bonus issue; 1QFY17 net profit
down. Property developer Hua Yang, which saw its first quarter net profit
fall 20%, has proposed to undertake a one-for-three bonus issue to reward
its shareholders and increase its capital base to better reflect its
current scale of operations. Hua Yang said the exercise will also
potentially improve the liquidity and marketability of Hua Yang shares,
which is expected to be completed in the second half of 2016. Among the
group's developments are the One South mixed development in Seri
Kembangan, Selangor, the Bandar Universiti Seri Iskandar township in
Perak and the Taman Pulai Indah township in Johor Baru. (Source: The Edge
Financial Daily)
PetChem: Appoints Barakah Offshore as panel contractor.
Barakah Offshore Petroleum Bhd’s unit, PBJV Group Sdn Bhd has been
appointed as a panel contractor for construction works to be performed at
Petchem subsidiaries for a contract of 2 year with an option for one year
extension. The contract involves in assisting Project Engineering
Centralised Services or individual plant owner in undertaking
procurement, construction, installation and commissioning work for plant
modification and improvement projects throughout PetChem operating units
in Peninsular Malaysia. (Source: The Star)
PPB: Warns of adverse impact on 2Q results from Wilmar.
The group financial results for 2QFY16 will be adversely affected, after
its 18.55%-owned associate, Wilmar International issue a profit warning
yesterday. Due to challenging operating conditions, the group is
expecting a net loss of USD230m (MYR926.9m) in 2QFY16. Wilmar said,
2QFY16 losses were largely attributed to the manufacturing sub-segment
within oilseeds and grains and partially to the sugar segment. The losses
for 2QFY16 are expected to be greater on-year because of the delay in
harvesting due to the rain and accounting-mark-to-market losses on hedges
as a result of higher sugar prices. (Source: The Edge Financial Daily)
Distributive trade statistics points to further pick up in
real private consumption last quarter. The Department of Statistics has
just started to release monthly distributive trade statistics versus
quarterly releases previously. For the month of May 2016, the index of
total distributive trade rose +5.8% YoY vs +5.0% YoY in Apr 2016, the
fastest this year and since Dec 2015’s +6.7% YoY. The pick up was driven
by faster growth in wholesale trade (May 2016: +9.0% YoY; Apr 2016: +8.6%
YoY) and retail trade (May 2016: +6.5% YoY; Apr 2016: +5.8% YoY) as motor
vehicle trade unsurprisingly dropped further but at slower pace (May
2016: -4.3% YoY; Apr 2016: -8.1% YoY). For Apr-May 2016, the index rose
+5.4% YoY vs +5.1% YoY in 1Q 2016 on firmer growth in wholesale trade (Apr-May
2016: +8.8% YoY; 1Q 2016: +7.9% YoY; 44.9% of the total index) and retail
trade (Apr-May 2016: +6.2% YoY; 1Q 2016: +5.5% YoY; 40.9% of the total
index) as motor vehicle trade declined (Apr-May 2016: -6.2% YoY; 1Q 2016:
-5.0% YoY; 14.2% of the total index). The overall trend in total
distributive trade augurs well for real private consumption growth (54%
of real GDP), which has picked up pace since 4Q 2015 to +4.9% YoY and
further to +5.3% YoY in 1Q 2016 from the post-GST low of +4.1% YoY in 3Q
2015, indicating the GST effect is diminishing and income-boosting
measures mianly targeted for the low- and middle-income consumers i.e.
higher amount and more recipients of BR1M; 3 perce
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