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Share
Price:
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MYR4.98
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Target
Price:
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MYR4.22
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Recommendation:
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Sell
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Headwind blows
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Even with the recent selling price adjustments to its
industrial and wholesale segments (est. +7-30%), we caution that these
may not be enough to cushion overall higher operating and raw sugar
costs. Moreover, should raw sugar price continue trending up, the
lagged effect of the cost past-through may put further pressure on
margins. Upside risks include the removal or upward adjustments to the
domestic retail ceiling sugar sales price (MYR2.84/kg). Maintain SELL.
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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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2,281.5
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2,307.3
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2,524.7
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2,713.3
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EBITDA
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383.4
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384.1
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317.4
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418.0
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Core net profit
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257.0
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271.1
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178.0
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194.0
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Core EPS (sen)
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36.6
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38.6
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25.3
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27.6
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Core EPS growth (%)
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1.5
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5.5
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(34.3)
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9.0
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Net DPS (sen)
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24.0
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26.0
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15.2
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16.6
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Core P/E (x)
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13.6
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12.9
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19.7
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18.0
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P/BV (x)
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1.8
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1.7
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1.7
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1.6
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Net dividend yield (%)
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4.8
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5.2
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3.1
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3.3
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ROAE (%)
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13.5
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13.8
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8.6
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9.0
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ROAA (%)
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11.0
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10.3
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6.0
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5.5
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EV/EBITDA (x)
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9.6
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9.9
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13.3
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11.1
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Net debt/equity (%)
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10.4
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14.9
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34.0
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52.1
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NEWS
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Outside Malaysia:
U.S: Fed’s Lacker says fiscal stimulus likely to prompt
rate hikes. Federal Reserve Bank of Richmond President Jeffrey Lacker
said that easier U.S. fiscal policy may require higher interest rates,
but it’s too early for the central bank to react to potential policy
changes by the incoming administration of president-elect Donald Trump.
“A more stimulative fiscal outlook usually warrants higher policy rates,”
Lacker told reporters before a speaking engagement at Washington College.
“And that can pose challenges for us when the extent of the prospective
fiscal stimulus is uncertain.” (Source: Bloomberg)
Brazil: Real slumps as bank intervention fail to halt
selloff. The BRL fell to its weakest level in five months as the central
bank’s interventions to support the currency failed to counter rising
U.S. yields. Brazil’s currency declined for the fourth consecutive day,
weakening 3.4344 per USD in Sao Paulo. The real tumbled after Donald
Trump’s victory in the Nov. 8 election in the U.S. fueled speculation
rates will rise in the world’s largest economy. The slump led Brazil’s
central bank to intervene to help stem the move. Brazil’s local benchmark
rate -- at 14% -- is the highest among the Group of 20 countries and is
28 times the overnight rate in the U.S. (Source: Bloomberg)
Russia: Economy shrinks less than forecast as stagnation
looms. Gross domestic product fell 0.4% YoY in the third quarter after a
decline of 0.6% YoY in the previous three months, the Federal Statistics
Service, citing preliminary data. The world’s biggest energy exporter is
shaking off its longest slump under President Vladimir Putin after oil
prices stabilized. (Source: Bloomberg)
Crude Oil: OPEC said to start final diplomatic push to
heal oil-cut divide. OPEC nations embarked on a final diplomatic effort
to secure a deal on oil cuts, with Qatar, Algeria and Venezuela leading
the push to overcome the divide between the group’s biggest producers,
according to a delegate familiar with the talks. The behind-the-scenes
diplomacy comes after bilateral meetings over the weekend failed to
resolve the rifts, leaving just two weeks to finalize an agreement before
the Nov. 30 ministerial meeting in Vienna, according to the delegate, who
asked not to be identified because the discussions are private. Saudi
Arabia, Iraq and Iran are still at odds over how to share output cuts,
the person said. (Source: Bloomberg)
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Other News:
TM: Secures MYR916.1m deal to provide digital terrestrial
TV services to MYTV. The group had today signed a 15-year contract to
provide digital terrestrial television broadcasting infrastructure,
network facilities and related services to MYTV Broadcasting S/B (MYTV)
for MYR916.1m. MYTV is an infrastructure and network service provider
controlled by tycoon Tan Sri Syed Mokhtar Albukhary. TM said the service
agreement enables the telco to take part in the transformation in the
broadcasting industry in Malaysia, with the aim of creating a dynamic
broadcasting sector that offers more choices in entertainment,
interactive TV as well as high-quality informative programmes. (Source:
The Edge Financial Daily)
Al Aqar REIT: In deal to sell Hotel Selesa, office block
for MYR100m. Damansara REIT Managers S/B, the manager of Al-`Aqar
Healthcare REIT, has entered into a sale and purchase agreement with
Optimum Impress S/B to sell a freehold land with an integrated commercial
development comprising a 27-storey hotel, known as Hotel Selesa and a
31-storey office block with basement and elevated car parks, for MYR100m
cash. The proposed disposal will enable Al-`Aqar to realise the value of
its investment in Hotel Selesa Tower and use proceeds for the repayment
of bank borrowings, working capital and/or future acquisition. (Source:
The Sun Daily)
Daibochi: To invest MYR29m to expand into Myanmar. The
flexible packaging manufacturer will invest USD6.8m (MYR29m) to set up a
joint venture company in Myanmar to tap into the growing consumer
packaging market there. The group had on Monday inked an memorandum of
agreement with Myanmar Smart Pack Industrial Company Ltd (MSP) to set up
a production facility in Myanmar, under the JV company, Daibochi
Packaging (Myanmar) Co. Ltd. (DPM). (Source: The Star)
Southern Steel: Better price, lower cost, return Southern
Steel to the black in 1QFY17. The group returned to the black in its
first quarter ended Sept 30, 2016 (1QFY17), with a net profit of
MYR19.3m, compared to a net loss of MYR51.91m in the same time last year,
due to higher selling price and lower cost. The return to profitability
was also achieved despite slightly lower revenue recorded in the quarter,
which slipped 1.1% to MYR585.75m from MYR592.44m last year. The group
recorded a profit before tax of MYR33m compared with a loss before tax of
MYR57m last year. (Source: The Edge Financial Daily)
AmFIRST REIT: Reports higher net property income of
MYR35.58m for 1HFY17. The company net property income (NPI) rose 23.6% to
MYR18.07m in the second quarter ended Sept 30, 2016 (2QFY17) from
MYR14.62m a year ago. AmFIRST REIT said NPI for the first six months to
Sept 30, 2016 (1HFY17) rose 18.03% to MYR35.58m from MYR30.14m a year
ago. AmFIRST REIT has declared an interim income distribution of 1.93 sen
per unit for 1HFY17 amounting to MYR13.25m representing approximately
100% of the realized distributable net income for the period. (Source:
The Edge Financial Daily)
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