Tuesday, August 2, 2016

Malaysia | SP Setia Sales may fall short


FEATURE
CALLS

Malaysia | SP Setia
Sales may fall short
Wei Sum Wong







break





Hartalega | Need to regain its supremacy
Yen Ling Lee







Malaysia Marine & Heavy Engineering | Challenging outlook
Thong Jung Liaw







Malaysia Airports | Stuck in limbo
Mohshin Aziz







Media Chinese International | Many CPs to OMG sale
Samuel Yin Shao Yang







Axis REIT | Acquires an industrial asset
Kevin Wong








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COMPANY RESEARCH





Company Update





SP Setia (SPSB MK)
by Wei Sum Wong





Share Price:
MYR3.05
Target Price:
MYR3.63
Recommendation:
Buy




Sales may fall short

Based on launches in the pipeline and weak buying sentiment in both Malaysia and UK, the latter post-Brexit, SPSB’s internal sales target of MYR4b for FY16 seems challenging. We adjust our FY16/17/18 earnings forecasts by -1% to +7% and our TP to MYR3.63 (-6%; on unchanged 30% discount to RNAV). Despite a lower TP, the implied capital upside is >10%. The stock also offers a 12M forward net yield of 6.3%. Maintain BUY.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
3,810.1
6,746.3
5,493.6
6,244.1
EBITDA
1,107.6
2,063.3
1,208.6
1,373.7
Core net profit
376.0
918.3
705.5
908.8
Core EPS (sen)
14.9
35.7
26.6
34.3
Core EPS growth (%)
(17.2)
140.1
(25.4)
28.8
Net DPS (sen)
9.7
23.0
15.6
19.0
Core P/E (x)
20.5
8.6
11.5
8.9
P/BV (x)
1.0
0.8
0.7
0.7
Net dividend yield (%)
3.2
7.5
5.1
6.2
ROAE (%)
6.6
13.9
8.7
10.1
ROAA (%)
2.9
6.2
4.0
4.6
EV/EBITDA (x)
10.1
4.9
9.1
8.1
Net debt/equity (%)
32.5
19.5
17.0
18.0










Results Preview





Hartalega (HART MK)
by Yen Ling Lee





Share Price:
MYR4.28
Target Price:
MYR3.80
Recommendation:
Sell




Need to regain its supremacy

1QFY3/17 earnings could be softer on the intense nitrile competition. Sequentially, earnings could improve as the glove makers pushed through higher ASPs on slower industry capacity expansion in 2H16. Nevertheless, we see valuation mismatch for Hartalega; not only is Hartalega’s 24x 2016 PER a premium to its peers, it is also higher than its historical mean vis-a-vis its financial prospects. Maintain EPS forecasts, MYR3.80 TP (21x 2017 PER; mean valuation) and SELL recommendation.



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,146.0
1,489.3
1,666.2
1,809.7
EBITDA
321.6
387.1
431.8
472.8
Core net profit
209.7
258.0
277.4
301.4
Core FDEPS (sen)
13.4
15.6
16.7
18.2
Core FDEPS growth(%)
(15.1)
16.5
7.5
8.6
Net DPS (sen)
6.5
9.0
8.5
9.2
Core FD P/E (x)
32.0
27.5
25.6
23.5
P/BV (x)
5.2
4.7
4.3
4.0
Net dividend yield (%)
1.5
2.1
2.0
2.1
ROAE (%)
19.0
18.6
17.7
17.7
ROAA (%)
16.4
15.1
13.2
12.8
EV/EBITDA (x)
20.7
21.0
17.0
15.7
Net debt/equity (%)
net cash
10.9
19.4
21.4










Company Update





Malaysia Marine & Heavy Engineering (MMHE MK)
by Thong Jung Liaw





Share Price:
MYR1.08
Target Price:
MYR0.90
Recommendation:
Sell




Challenging outlook

1H16 results are in line, with a weaker QoQ earnings trend. Orderbook replenishment is a challenge in a capex deprived environment. Earnings visibility is poor while cash is depleting. An asset impairment exercise is not discounted given the low yard utilisation. MMHE is not a privatisation candidate, in our view. Our MYR0.90 TP is pegged to 1x EV/order backlog. MMHE needs a significant order win to warrant a re-rating, in our view. Valuations meanwhile are expensive.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
2,700.5
2,459.0
1,298.6
1,003.1
EBITDA
248.2
157.9
88.4
84.0
Core net profit
173.1
93.3
41.8
36.8
Core EPS (sen)
10.8
5.8
2.6
2.3
Core EPS growth (%)
(26.8)
(46.1)
(55.2)
(12.1)
Net DPS (sen)
0.0
0.0
0.0
0.0
Core P/E (x)
10.0
18.5
41.3
47.0
P/BV (x)
0.7
0.6
0.6
0.6
Net dividend yield (%)
0.0
0.0
0.0
0.0
ROAE (%)
6.6
3.5
1.6
1.3
ROAA (%)
3.6
2.1
1.1
1.0
EV/EBITDA (x)
10.2
4.8
10.4
10.9
Net debt/equity (%)
net cash
net cash
net cash
net cash


Thong Jung Liaw








TP Revision





Malaysia Airports (MAHB MK)
by Mohshin Aziz





Share Price:
MYR6.01
Target Price:
MYR6.25
Recommendation:
Hold




Stuck in limbo

We believe the domestic issue at Turkey will reduce international tourist arrivals for a minimum of two years. We cut our FY16-18 earnings forecasts for MAHB by -60%, -44% and -47%, respectively, factoring in slower growth and a lower international passenger mix profile at ISG. We trim our DCF-based TP for MAHB by 2% after having cut by 10% earlier on 18 Jul. No change to our HOLD call, with a revised TP of MYR6.25 (from MYR6.40) based on a 10-yr DCF (WACC: 9.6%; terminal growth: 2%).



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
3,343.7
3,871.0
4,204.4
4,506.7
EBITDA
815.4
1,342.0
1,505.0
1,623.8
Core net profit
146.5
(118.0)
39.4
136.7
Core EPS (sen)
10.9
(7.4)
2.4
8.2
Core EPS growth (%)
(62.9)
nm
nm
247.0
Net DPS (sen)
10.4
0.9
3.4
8.3
Core P/E (x)
55.2
nm
253.1
72.9
P/BV (x)
1.1
1.1
1.2
1.2
Net dividend yield (%)
1.7
0.1
0.6
1.4
ROAE (%)
2.2
(1.5)
0.5
1.6
ROAA (%)
0.9
(0.5)
0.2
0.7
EV/EBITDA (x)
15.8
10.1
9.6
8.5
Net debt/equity (%)
58.6
52.2
51.3
44.8










Company Update





Media Chinese International (MCIL MK)
by Samuel Yin Shao Yang





Share Price:
MYR0.76
Target Price:
MYR0.73
Recommendation:
Hold




Many CPs to OMG sale

MCIL has proposed to dispose its entire 73% shareholding in One Media Group (OMG). That said, many conditions precedent have to be satisfied including acquiring all of OMG’s businesses except Ming Pao Weekly. At this point, we are unable to quantify the net sales proceeds attributable to MCIL that may be returned to investors. Also, our previous estimate of a 4-5% EPS accretion may not materialize. Maintain estimates, HOLD call and MYR0.73 TP on 10.5x CY16 PER for now.



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,589.3
1,362.3
1,378.7
1,402.8
EBITDA
268.1
206.6
210.6
223.1
Core net profit
144.4
111.6
118.4
129.8
Core EPS (sen)
8.6
6.6
7.0
7.7
Core EPS growth (%)
(8.3)
(22.7)
6.1
9.6
Net DPS (sen)
3.4
4.3
4.9
5.4
Core P/E (x)
8.9
11.5
10.8
9.9
P/BV (x)
1.7
1.5
1.4
1.4
Net dividend yield (%)
4.5
5.6
6.5
7.1
ROAE (%)
19.4
13.9
13.8
14.3
ROAA (%)
9.4
7.1
7.8
8.8
EV/EBITDA (x)
4.5
5.5
5.6
5.0
Net debt/equity (%)
5.9
net cash
net cash
net cash










TP Revision





Axis REIT (AXRB MK)
by Kevin Wong





Share Price:
MYR1.77
Target Price:
MYR1.70
Recommendation:
Hold




Acquires an industrial asset

We are positive on AXRB’s proposed purchase of an industrial property in Rawang, Selangor. The deal is yield accretive based on an estimated FY17 net property yield of 7.2%. We nudge up FY17-18 earnings forecasts by +1%. Despite having just marginal earnings impact from the deal, we raise our DCF-TP to MYR1.70 (+15sen) as we roll forward our valuation.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
140.0
165.7
173.4
188.0
Net property income
118.5
141.9
147.4
160.5
Distributable income
81.3
91.5
97.1
108.3
DPU (sen)
8.9
7.6
7.9
8.9
DPU growth (%)
6.8
(14.9)
5.1
11.6
Price/DPU(x)
19.9
23.4
22.3
20.0
P/BV (x)
1.5
1.4
1.4
1.4
DPU yield (%)
5.0
4.3
4.5
5.0
ROAE (%)
6.9
6.8
7.2
8.0
ROAA (%)
4.4
4.3
4.5
5.0
Debt/Assets (x)
0.3
0.3
0.3
0.3








NEWS


Outside Malaysia:

U.S. Manufacturing growth cooled in July from one-year high, though at a slower pace, indicating gradual improvement that could help the economy emerge from a weak first half of the year. The Institute for Supply Management’s index cooled to 52.6 from a one-year high of 53.2 a month. (Source: Bloomberg)

E.U: Euro-area manufacturing slowed in July as uncertainty following the U.K.’s vote to leave the European Union damped new orders. A Purchasing Managers’ Index dropped to 52 in July from 52.8, slightly less than a July 22 estimate of 51.9, Markit Economics said. In Germany, the currency bloc’s largest economy, output expanded at the fastest pace in more than two years, while momentum faded in Italy and Spain and production declined in France and Greece. A reading above 50 indicates expansion. (Source: Bloomberg)

U.K: Brexit hit factories harder than initially estimated, suffering its biggest drop in more than three years. A Purchasing Managers’ Index slumped to 48.2, below the one-off flash reading of 49.1, Markit Economics said. The index has only fallen below the 50 mark - which separates expansion from contraction - one other time since early 2013. The index was at 52.4 in June. The report suggests that Britain’s decision to leave the European Union may have a harsher impact on the economy than initially expected. (Source: Bloomberg)

Japan: Set to give details of JPY 28tr (USD 273b) stimulus package, as it seeks to bolster an economy threatened by a strengthening yen and weak consumer spending. Prime Minister Shinzo Abe flagged the size of the stimulus package in a speech last week, saying more investment was needed to expand the world’s third-largest economy. He said it would be used to provide better port facilities for cruise ships and accelerate the construction of a high-speed maglev train line. About JPY 7tr of the total will consist of actual spending, according to a person familiar with the matter, with the rest being made up of loans and other financing – probably spread over several years. (Source: Bloomberg)

S. Korea: Exports fell more than expected in July, underscoring the difficulties policy makers face, even as they look to use monetary and fiscal policies to boost growth. The government is hoping to see exports rebound in the second half of 2016. Exports fell 10.2% YoY (estimate -6.7%), the trade ministry reported, which fell for 19th straight monthly. Imports fell 14% YoY (estimate -10.5%). Trade surplus was USD 7.8b, down from record USD 11.5b in June. (Source: Bloomberg)





Other News:

Bina Puri: Clinches MYR80m job. The company’s wholly owned subsidiary, Bina Puri Sdn Bhd has bagged a MYR80m contract from Arus Sutera Sdn Bhd to provide project management consultancy services for a 440-unit walk-up flats in Sabah under the People’s Housing Project. The works for the project will be completed within 42 months. (Source: The Edge Financial Daily)

Coastal Contracts: Enters Indonesian LNG market. The company has entered into a MoU with PT Jaya Samudra Karunia International (JSK Internasional) and Yudha Kurniawan Tanos to acquire 215 shares or a 49% equity stake in JSK Gas, a unit of JSK Internasional for USD6.55m. Upon completion of the deal, Coastal will hold 1715 shares stake in JSK Gas and be recognized as a jointly controlled entity of the group. JSK Gas was recently awarded the LNG regasification and LNG storage contracts to support a 200MWh gas-fired power plant in Bali, Indonesia by an Indonesian state-owned company. The JV will focus on floating LNG regasification facilities. (Source: The Edge Financial Daily)

UMW Holdings: Partners with Spark Labs. The company’s wholly-owned subsidiary, UTech Americas Inc, has partnered with Spark Labs International Inc of the US to participate in the technology co-working business in North America. The initial contribution to capital of the JV will be USD2m, on a 50:50 basis. The JV, as specified in the agreement, is entered to cooperate for the mutual benefit of both parties in the engagement of the business to provide co-working spaces and/or offices for leases and various professional services. (Source: The Edge Financial Daily) ________________________________________


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