Tuesday, October 25, 2016

Ekovest: Bags MYR255.5m beautification job from DBKL. Its wholly-owned subsidiary EkoRiver Construction S/B has bagged a MYR255.49m contract from the Kuala Lumpur City Hall (DBKL) to undertake improvement and beautification wo






Telekom Malaysia | Not quite clear on prices
Chi Wei Tan







Bursa Malaysia | 3Q16 results review
Chew Hann Wong







Ta Ann | Expensive Sarawak acquisition
Chee Ting Ong







British American Tobacco | 3Q16: No surprises
Liew Wei Han







Axis REIT | 3Q16 in line; sells Axis Eureka
Kevin Wong









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Singapore | Edging closer to zero
Suhaimi Ilias








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COMPANY RESEARCH





Company Update





Telekom Malaysia (T MK)
by Chi Wei Tan





Share Price:
MYR6.58
Target Price:
MYR6.20
Recommendation:
Hold




Not quite clear on prices

Management did not directly address the halving of fixed broadband prices as mentioned in Budget 2017. Nevertheless, we do not rule out the possibility that the government was referring to unit prices (on a per Mbps basis) rather than absolute prices, in which case, the impact to TM would not be that detrimental. Maintain HOLD with an unchanged TP of MYR6.20.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
11,235.1
11,721.6
12,251.2
12,893.4
EBITDA
3,728.2
3,677.0
3,883.6
4,100.1
Core net profit
941.2
894.9
803.2
805.8
Core EPS (sen)
25.9
23.8
21.4
21.4
Core EPS growth (%)
(10.8)
(8.1)
(10.2)
0.3
Net DPS (sen)
22.9
21.4
19.2
19.3
Core P/E (x)
25.4
27.6
30.8
30.7
P/BV (x)
3.2
3.2
3.1
3.1
Net dividend yield (%)
3.5
3.3
2.9
2.9
ROAE (%)
11.3
9.1
10.3
10.2
ROAA (%)
4.3
3.8
3.3
3.2
EV/EBITDA (x)
7.5
7.9
7.5
7.2
Net debt/equity (%)
39.5
45.7
54.1
58.7










Results Review





Bursa Malaysia (BURSA MK)
by Chew Hann Wong





Share Price:
MYR8.80
Target Price:
MYR8.90
Recommendation:
Hold




3Q16 results review

Bursa’s 3Q16 net profit of MYR44m was within our expectation. We make no change to our earnings forecasts for now as we continue to monitor trading activities in the final quarter. Our TP is unchanged at MYR8.90, pegging the stock to 23x PER on FY17 earnings. Maintain HOLD for its decent dividend yield of 4.1% for FY17.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
503.8
518.5
527.1
545.2
EBITDA
297.0
302.5
301.6
309.6
Core net profit
198.2
198.6
200.4
205.8
Core EPS (sen)
37.2
37.2
37.5
38.5
Core EPS growth (%)
14.4
(0.0)
0.7
2.7
Net DPS (sen)
54.0
34.5
35.0
36.0
Core P/E (x)
23.7
23.7
23.5
22.9
P/BV (x)
6.3
5.8
5.7
5.6
Net dividend yield (%)
6.1
3.9
4.0
4.1
ROAE (%)
25.4
25.6
24.7
24.8
ROAA (%)
11.7
10.6
9.2
9.0
EV/EBITDA (x)
13.7
13.8
14.7
14.2
Net debt/equity (%)
net cash
net cash
net cash
net cash










Company Update





Ta Ann (TAH MK)
by Chee Ting Ong





Share Price:
MYR3.58
Target Price:
MYR3.75
Recommendation:
Hold




Expensive Sarawak acquisition

We are short term negative on Ta Ann’s latest acquisition of largely immature estates near Kuching at an estimated EV per planted ha of MYR56,020; which is 65% more than Sarawak Oil Palm’s (HOLD) recent proposed acquisition of MYR34,000/ha. This acquisition is likely to be EPS dilutive on Ta Ann over the next 2-3 years given the high acquisition costs and low FFB yield in the initial years of harvesting. Ta Ann is a HOLD with an unchanged TP of MYR3.75 on 15x 2016 PER.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
1,020.7
1,046.8
1,009.5
1,081.0
EBITDA
243.2
323.9
249.8
265.7
Core net profit
110.6
185.9
111.0
120.7
Core EPS (sen)
24.9
41.8
25.0
27.1
Core EPS growth (%)
82.6
68.1
(40.3)
8.7
Net DPS (sen)
16.7
16.7
11.2
12.2
Core P/E (x)
14.4
8.6
14.3
13.2
P/BV (x)
1.5
1.3
1.3
1.2
Net dividend yield (%)
4.7
4.7
3.1
3.4
ROAE (%)
11.9
17.5
9.2
9.5
ROAA (%)
6.0
9.6
5.6
6.2
EV/EBITDA (x)
6.9
6.3
7.0
6.5
Net debt/equity (%)
18.1
12.0
8.8
7.5










Rating Change





British American Tobacco (ROTH MK)
by Liew Wei Han





Share Price:
MYR50.24
Target Price:
MYR48.50
Recommendation:
Hold




3Q16: No surprises

3Q16 results were in line. While we do not rule out the possibility of an excise tax hike this year, we believe any adjustment should be moderate in view of overall industry volume weakness, and that the focus could also be on stepping up enforcement to combat illicits; which in turn could improve excise tax collection. We now rate BAT as a HOLD (from SELL) following the share price decline since end-July 2016.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
4,796.0
4,581.5
3,986.1
3,683.9
EBITDA
1,277.0
1,277.3
958.8
926.7
Core net profit
910.0
914.5
660.0
671.8
Core EPS (sen)
318.7
320.3
231.2
235.3
Core EPS growth (%)
10.5
0.5
(27.8)
1.8
Net DPS (sen)
309.0
312.0
208.0
223.5
Core P/E (x)
15.8
15.7
21.7
21.4
P/BV (x)
27.4
26.2
18.8
18.0
Net dividend yield (%)
6.2
6.2
4.1
4.4
ROAE (%)
174.7
170.0
123.7
86.3
ROAA (%)
68.5
73.4
50.9
48.3
EV/EBITDA (x)
14.8
12.8
14.9
15.4
Net debt/equity (%)
65.9
50.5
net cash
net cash










Results Review





Axis REIT (AXRB MK)
by Kevin Wong





Share Price:
MYR1.75
Target Price:
MYR1.70
Recommendation:
Hold




3Q16 in line; sells Axis Eureka

3Q16 results and third interim gross DPU of 2.05sen were in line. The slower YoY earnings were due to flat revenue growth and higher interest costs. Elsewhere, we are positive on AXRB’s proposal to dispose Axis Eureka for MYR56m. We trim our FY17-18 earnings forecasts by ~2% p.a. and nudge down our DDM-based TP by 2sen to MYR1.70.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
140.0
165.7
168.5
176.3
Net property income
118.5
141.9
142.6
150.3
Distributable income
81.3
91.5
92.3
97.7
DPU (sen)
8.9
7.6
7.6
8.0
DPU growth (%)
6.8
(14.9)
(0.1)
5.8
Price/DPU(x)
19.7
23.1
23.2
21.9
P/BV (x)
1.4
1.4
1.4
1.4
DPU yield (%)
5.1
4.3
4.3
4.6
ROAE (%)
9.4
7.2
6.8
7.2
ROAA (%)
4.4
4.3
4.3
4.5
Debt/Assets (x)
0.3
0.3
0.3
0.4








MACRO RESEARCH






Economics Research
by Suhaimi Ilias


Edging closer to zero





Headline deflation eased to -0.2% YoY in Sep 2016 (Aug 2016: -0.3% YoY) while core inflation moderated slightly to +0.9% YoY (Aug 2016: +1.0% YoY) on lower services inflation. The slower deflation was mainly due to slower drop in “Transport” costs. Maintain our full-year headline and core inflation rate forecasts at-0.4% and +1.0% respectively.







NEWS


Outside Malaysia:

E.U: Euro-area economic momentum accelerated to the fastest pace this year, adding to evidence that growth is becoming more resilient. A Purchasing Managers’ Index for manufacturing and services rose to 53.7 in October from 52.6 in September, IHS Markit said. This is the fastest pace since the beginning of 2016. (Source: Bloomberg)

E.U: Budget deficits in the Euro Area narrowed to an eight-year low in the second quarter amid mounting signs that the economic recovery is gaining traction. The euro area’s seasonally-adjusted budgetary shortfall fell to 1.5% of output compared with 2.1% in the same period a year ago, the European Union’s statistics agency said. That is the smallest shortfall since early 2008. Having contended with bank bailouts, recessions and a sovereign debt crisis, European authorities hope to return to tighter budget discipline as prospects for growth improve. Under European Union rules, nations are supposed to keep their debt ratios below 60% of output and limit deficits to 3%. (Source: Bloomberg)

S. Korea: Economy grew more than forecast in 3Q 2016, supported by a property market boom, while exports and consumption were disappointing. GDP expanded 0.7% in the third quarter from the previous three months, when it gained 0.8%. The economy expanded 2.7%% YoY, according to data released by the central bank. Biggest contributor to growth was construction investment, which added 0.6 percentage point to expansion from previous quarter; net exports shaved 0.6 percentage point off GDP. (Source: Bloomberg)

Crude Oil: Trades near USD 50/bbl as OPEC chief seeks to resolve output plan. OPEC Secretary-General Mohammed Barkindo is set to visit Baghdad for talks aimed at resolving a deal on output after Iraq said it should be exempt from planned cuts. Barkindo will meet with the prime minister and oil minister, according to people familiar with the matter, after Iraq said it should be excluded from the deal due to conflict with Islamic militants. Brent for December settlement was USD 51.46/bbl as it ended the session at a premium of USD 0.94/bbl to WTI. (Source: Bloomberg)





Other News:

Ekovest: Bags MYR255.5m beautification job from DBKL. Its wholly-owned subsidiary EkoRiver Construction S/B has bagged a MYR255.49m contract from the Kuala Lumpur City Hall (DBKL) to undertake improvement and beautification works. Ekovest said the contract includes the construction of an interceptor system and its related works to improve the quality of the river water, which includes a water treatment system along Sungai Gombak and Sungai Klang. The completion period for the works is 130 weeks. Ekovest managing director Datuk Seri Lim Keng Cheng said the total outstanding construction order book will be increased to MYR5.54b (Source: The Edge Financial Daily)

I-Bhd: 3QFY16 net profit surges 2.6 times. The group, whose third quarter net profit surged 2.6 times, has managed to turn around its theme park that impacted its performance in the first half of the year. Executive chairman, Lim Kim Hong said given their 30% dividend policy, the group expect to record dividends for their shareholder this year. Net profit surged to MYR22.4m or 2.11 sen a share in the third quarter ended Sep 30,2016 (3QFY16), from MYR8.56m or 0.81 sen a share a year ago, underpinned by the on-going development of its flagship i-City project in Shah Alam. (Source: The Edge Financial Daily)

Telekom: Same price, twice broadband speed for UniFi customers. Telekom has announced its Broadband Improvement Plan for 2017 to provide Malaysians with higher value offerings. Under the initiative, the average broadband speeds for residential UniFi customers will be doubled, but for the same price. Eligible customers nationwide will begin enjoying the upgrades in stages, beginning January 2017 onwards. In addition, Telekom Malaysia will also be introducing a new broadband package offering for non-UniFi customers in 2017. To date, Telekom Malaysia has more than 2.37 million broadband customers, of which over 900,000 are UniFi customers. (Source: The Star)

Metronic Global: Seeks EGM to remove MNC Wireless directors. Metronic Global and one other shareholder of MNC Wireless have served a special notice to loss-making MNC Wireless to convene an extraordinary general meeting (EGM) to seek shareholders' approval to remove five directors. They seek to remove MNC Wireless' chairman Wong Kok Seong, chief executive officer and executive director Christopher Tan Chor How, executive director Pang Siaw Sian, independent non-executive director Thu Soon Shien and non-independent non-executive director Kua Khai Shyuan. MNC Wireless is proposing a renounceable right issue of up to 283.42 million new shares, together with up to 188.95 million free warrants at an issue price of 10 sen per rights share on the basis of three rights shares with two free warrants for every one existing MNC Wireless shares. (Source: The Edge Financial Daily)


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