Friday, February 17, 2017

Destini: Buys stake in defence equipment firm. The company has bought a military helicopter supply company today, enabling it to get a share of a MYR321.9m contract between the company and Malaysian Ministry of Defence (MinDef).Destini said its wholly-owned subsidiary Destini Prima S/B acquired a 70% stake in defence equipment manufacturer, Halaman Optima S/B for MYR






British American Tobacco | FY16: In line
Liew Wei Han









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Malaysia Gaming - NFO | Game changer in CGHA amendments?
Samuel Yin Shao Yang









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Malaysia | Pick up
Suhaimi Ilias







Malaysia | Wider current account surplus
Suhaimi Ilias







Malaysia | MSCI Emerging Market playing catch up
Tee Sze Chiah








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COMPANY RESEARCH





TP Revision





British American Tobacco (ROTH MK)
by Liew Wei Han





Share Price:
MYR48.78
Target Price:
MYR49.80
Recommendation:
Hold




FY16: In line

4Q16 results were in line. While in the near term industry volumes may remain weak on still weak consumer sentiment, we believe that BAT’s restructuring plans may provide some support to earnings. Also, into 2017, we may see illicit market share gradually normalise lower on increased efforts and new strategies from the Customs Department. FY17E dividend yield of 4.9% should provide support to its share price.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
4,581.5
3,756.4
3,650.1
3,619.3
EBITDA
1,277.3
929.6
911.1
927.6
Core net profit
914.5
675.1
689.3
701.9
Core EPS (sen)
320.3
236.4
241.4
245.8
Core EPS growth (%)
0.5
(26.2)
2.1
1.8
Net DPS (sen)
312.0
278.0
236.6
240.9
Core P/E (x)
15.2
20.6
20.2
19.8
P/BV (x)
25.5
22.7
22.2
21.7
Net dividend yield (%)
6.4
5.7
4.9
4.9
ROAE (%)
170.0
124.4
111.1
110.7
ROAA (%)
73.4
56.2
57.9
58.9
EV/EBITDA (x)
12.8
13.8
15.4
15.1
Net debt/equity (%)
50.5
15.8
14.4
12.4







SECTOR RESEARCH






Game changer in CGHA amendments?
by Samuel Yin Shao Yang


Sector Note





An amendment to the Common Gaming Houses Act 1953 (CGHA) will be tabled in Parliament in Mar 2017 to combat online gambling. This may be positive for the legal NFO sector which has been losing market share to illegal NFOs who operate online. We are hopeful that this will help to rejuvenate the legal NFO market which has been contracting at 2% CAGR since 2010. That said, we maintain our earnings estimates for BST and MAG which have imputed CY2017 gross NFO sales growth of +2% and +0% respectively


Samuel Yin Shao Yang







MACRO RESEARCH






Pick up
by Suhaimi Ilias


Economics Research





Real GDP growth picked up for the second consecutive quarter to +4.5% YoY in 4Q 2016 (3Q 2016: +4.3% YoY) on expansions in both domestic demand and net external demand. No change in our 2017 growth forecasts of +4.4% after the +4.2% growth in 2016.












Wider current account surplus
by Suhaimi Ilias


Economics Research





Current account surplus widened in 4Q 2016 to +MYR12.3b or +3.7% of GDP (3Q 2016: +MYR6.0b or +1.9% of GDP) on significant improvement in goods account surplus which offset the deficits in services and income accounts. For full-year 2016, current account surplus was +MYR25.2b or 2.0% of GDP. We expect 2017 current account surplus to be +MYR24.7b or +1.9% of GDP.












MSCI Emerging Market playing catch up
by Tee Sze Chiah


Technical Research





FBMKLCI ended a tad lower yesterday after losing 2.20pts to settle at 1,707.59. Market breath was negative with losers outpacing gainers by 501 to 368 while 379 stocks remained unchanged. Trading volume of 2.1b worth MYR2.2b was recorded. The benchmark index remained above 1,700 despite recent consolidation, suggesting that selling pressure was well-absorbed. Therefore, we expect the FBMKLCI to resume its uptrend in the near-term.







NEWS


Outside Malaysia:

U.S. Housing starts exceed estimates after a stronger December. Builders started work on more U.S. homes than forecast in January after an upward revision to starts in the prior month, a sign construction was on a steady path entering 2017. Residential starts totaled an annualized 1.25 million, easing from a 1.28 million pace in the prior month, a Commerce Department report showed. Permits, a proxy for future construction, increased at the fastest pace since November 2015 on a pickup in applications for apartment building. (Source: Bloomberg)

Indonesia: Holds rates while it braces for further Fed hikes. Indonesia’s central bank kept its benchmark interest rate unchanged to help shore up the economy in the face of tighter U.S. monetary policy and the threat of capital outflows. Governor Agus Martowardojo and his board held the seven-day reverse repurchase rate at 4.75% on Thursday. Six rate cuts in 2016 and rising inflation pressures are giving policy makers in Indonesia reason to pause, with Martowardojo earlier this month saying they are turning more cautious because of growing global risks. Fed Chair Janet Yellen said this week every central bank meeting is “live” for a possible rate hike. (Source: Bloomberg)

U.S: Crude exports rise to record high as shale surges. The U.S., which leads the world in oil demand, is moving up the list of top exporters. Last week the country shipped out 1.03 million barrels a day of crude, the most in more than 23 years of data compiled by the Energy Information Administration. Exports have averaged 695,000 for the first six weeks of 2017, up from 450,000 a year earlier, shortly after the U.S. overturned a longtime ban of most exports to countries other than Canada. (Source: Bloomberg)





Other News:

YFG: Bags MYR245m PR1MA project. The group has bagged a MYR245m contract for sub-contract works involving construction of 1Malaysia People's Housing Programme (PR1MA) houses in Pedas, Rembau, Negeri Sembilan. YFG said it has received a letter of award from Wearegold S/B for the project. The project involves the building and infrastructure works of the proposed development of 1,572 units of PR1MA homes. YFG said the project is expected to commence on a date to be notified in writing by Wearegold and to be completed within 24 months. (Source: The Edge Financial Daily)

Destini: Buys stake in defence equipment firm. The company has bought a military helicopter supply company today, enabling it to get a share of a MYR321.9m contract between the company and Malaysian Ministry of Defence (MinDef).Destini said its wholly-owned subsidiary Destini Prima S/B acquired a 70% stake in defence equipment manufacturer, Halaman Optima S/B for MYR5.5m.In November 2016, Halaman Optima inked a supply contract with the Malaysian government for the procurement of six Multipurpose Armed Reconnaissance Model MD530G worth MYR321.9m for the Armed Forces.(Source:The Edge Financial Daily)

Yong Tai: Eyes Bukit Bintang property devt via Iconic Paragon. The tourism and cultural property developer is venturing into the vibrant Bukit Bintang property sector via its proposed investment in Iconic Paragon S/B which is buying 1.08 acres of leasehold land in that area. The group is planning to take up a 70% stake in Iconic Paragon, which is a private developer. Both companies inked an MoU on Thursday which would see Yong Tai emerging as a strategic shareholder in Iconic Paragon. (Source: The Sun Daily)

Uzma: Wins MYR50m Petronas job. Uzma has bagged a MYR50m contract from Petronas Carigali S/B to provide through tubing downhole tools and services. The two-year contract is effective from Jan 1, 2015 to Dec 31, 2016 with an extension option of one year from Jan 1, 2017 to Dec 31, 2017. The oil and gas services company added the value of the contact was estimated at MYR50m over the primary contract period. (Source: The Star)


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