Tuesday, February 14, 2017

DNeX: To advise on Thailand border's road charge vehicle entry permit system. Its 51%-owned subsidiary DNeX RFID S/B has been appointed as the exclusive project consultant for the road charge vehicle entry permit system for the Thailand-Malaysia border and other borders






Hock Seng Lee | A better year
Chew Hann Wong







IJM Corporation | MCKIP, Kuantan Port: Progress update
Chew Hann Wong









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Malaysia | ‘Sticky’ jobless rate……
Suhaimi Ilias







Malaysia | Greasy & oily
Tee Sze Chiah








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COMPANY RESEARCH





Company Update





Hock Seng Lee (HSL MK)
by Chew Hann Wong





Share Price:
MYR1.67
Target Price:
MYR1.90
Recommendation:
Buy




A better year

2016 saw two sizeable job wins which lifted HSL’s outstanding order book to a record MYR2.2b. Physical construction have however been slow, and are expected to progress meaningfully only in 2017. We lower our 2016/ 2017 net profit forecasts by 3%/13% as we push back the start of earnings contribution from these two major works to 2Q17. HSL’s valuations remain undemanding at 12.0x 2017 PER; share price -20% after a major job win on 18 Mar 2016. Maintain BUY with a trimmed MYR1.90 TP.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
604.7
654.7
507.8
615.7
EBITDA
109.4
109.2
90.2
111.8
Core net profit
76.9
76.2
61.5
76.8
Core EPS (sen)
14.0
13.9
11.2
14.0
Core EPS growth (%)
(9.2)
(0.9)
(19.4)
24.9
Net DPS (sen)
2.8
2.4
1.9
2.4
Core P/E (x)
11.9
12.0
14.9
12.0
P/BV (x)
1.5
1.4
1.3
1.2
Net dividend yield (%)
1.7
1.4
1.1
1.4
ROAE (%)
na
na
na
na
ROAA (%)
9.7
9.4
7.4
8.6
EV/EBITDA (x)
7.1
8.6
8.8
6.8
Net debt/equity (%)
net cash
net cash
net cash
net cash










Company Update





IJM Corporation (IJM MK)
by Chew Hann Wong





Share Price:
MYR3.44
Target Price:
MYR3.60
Recommendation:
Buy




MCKIP, Kuantan Port: Progress update

We visited Malaysia-China Kuantan Industrial Park (MCKIP) and Kuantan Port last week and returned feeling upbeat on their progress. Alliance Steel’s integrated steel mill plant in MCKIP is expected to commence operations by end-2017 while Kuantan Port’s New Deepwater Terminal construction progress stands at 26.7%, with Phase 1A to complete by end-2017 too. The visit reaffirms our view on MCKIP and Kuantan Port being priced assets to IJM. No change to our earnings forecasts and SOP-TP of MYR3.60.



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
5,448.3
5,128.2
6,679.2
7,610.6
EBITDA
1,434.8
1,166.7
1,221.9
1,425.1
Core net profit
530.2
509.3
589.1
701.2
Core EPS (sen)
16.3
14.3
16.4
19.6
Core EPS growth (%)
(15.0)
(12.5)
15.3
19.0
Net DPS (sen)
7.5
10.0
7.0
7.0
Core P/E (x)
21.1
24.1
20.9
17.6
P/BV (x)
1.3
1.4
1.3
1.2
Net dividend yield (%)
2.2
2.9
2.0
2.0
ROAE (%)
6.3
9.1
6.4
7.2
ROAA (%)
2.8
2.6
2.9
3.3
EV/EBITDA (x)
12.0
15.4
14.8
12.6
Net debt/equity (%)
45.2
40.4
41.3
36.9








MACRO RESEARCH






‘Sticky’ jobless rate……
by Suhaimi Ilias


Economics Research





Unemployment rate increased to 3.5% in Dec 2016 from 3.4% in Nov 2016. The full-year 2016 jobless rate matched our 3.5% estimate for 2016 (2015: 3.2%) and we expect unemployment rate to be at 3.4% this year.












Greasy & oily
by Tee Sze Chiah


Technical Research





FBMKLCI resumed its bullish bias after closing above the 1,700.00 psychological levels. The benchmark index rose 11.30pts to settle at 1,710.24. Broader market reaction was positive with 522 gainers versus 378 losers while another 350 counters remained unchanged. Total trading volume was at 2.47b, valued at MYR2.22b. Buoyed by positive US markets, we expect FBMKLCI to test the upper resistance of 1,720 and 1,728 in the near-term, with possible profit taking activities to come in between.







NEWS


Outside Malaysia:

E.U: Trump, Brexit pose risk to outlook of Euro-area economy, EU says. The election of Donald Trump in the U.S. and the U.K.’s decision to leave the European Union are heightening economic risk in the euro area, the European Commission said, as it predicted growth would slow this year. In its first set of economic forecasts compiled since Trump’s victory and with the British government gearing up to officially trigger Brexit, the Brussels-based commission said that the euro area’s economic recovery is “assailed by risks.” The 19-nation region will grow by 1.6% of GDP this year, slower than the 1.7% expansion last year. (Source: Bloomberg)

China: Central bank restarted the use of an instrument that adds cash to the financial system, helping ease liquidity concerns before USD 153b of funds come due this week. The monetary authority sold a total CNY 100b (USD 14.5b) of reverse-repurchase agreements, the first auction after a six-day pause, a statement posted on its website showed. While the open-market operations resulted in a net withdrawal of CNY 90b because of maturing contracts, the resumption signals that policy makers don’t want a sudden tightening of money supply, according to Bank of Tokyo-Mitsubishi UFJ (China) Ltd. The People’s Bank of China last week allowed CNY 625b of reverse repos to mature, mopping up cash after adding record funds in the days before the week-long Lunar New Year holidays. (Source: Bloomberg)

India: Inflation grew at its slowest pace on record even as the central bank unexpectedly held interest rates in its monetary policy review last week. Consumer prices rose 3.17% in January from a year earlier, the Statistics Ministry said in a statement. Food prices rose 0.53% compared with a 1.37% increase the previous month. (Source: Bloomberg)





Other News:

DNeX: To advise on Thailand border's road charge vehicle entry permit system. Its 51%-owned subsidiary DNeX RFID S/B has been appointed as the exclusive project consultant for the road charge vehicle entry permit system for the Thailand-Malaysia border and other borders with Thailand. The group has accepted a letter of award dated Feb 9 from Tiffa Edi Services Co Ltd for the appointment, which entails that the group provides consultancy, advice and services as the technology partner and solution provider for the project. (Source: The Edge Financial Daily)

DBE Gurney: Expands Harumi chain to Sabah. Integrated poultry company DBE Gurney Resources will open two new HARUMi fast food restaurants in Sabah this year, as part of its plan to expand the local fried chicken brand across Southeast Asia, Taiwan and China. Apart from restaurant formats, the group will open 19 kiosks and two food trucks in the state. This is part of its expansion plan to establish 3,000 kiosks, 300 food trucks and 30 HARUMi restaurants across Malaysia by 2018. At the same time, D.B.E. Gurney plans to set up new HARUMi restaurants in Taiwan and Chongqing, China within the second quarter of this year, leveraging on the expertise of D.B.E. Gurney’s Taiwanese partner. (Source: The Edge Financial Daily)

Ekovest: To pay 25 sen special dividend post DUKE stake sale. The group has completed the sale of a 40% stake in the Duta-Ulu Kelang Expressway (DUKE) concession to the Employees Provident Fund Board (EPF), and will be paying a 25 sen special dividend to shareholders. Ekovest said its shares will trade ex-dividend on Feb 23, with the payout slated for March 8. Ekovest previously said it was disposing of its 40% equity interest held in Konsortium Lebuhraya Utara-Timur (KL) S/B (Kesturi) to the EPF for MYR1.13b. Kesturi is the concessionaire for DUKE, a 34-km highway comprising two phases, with a concession period of 54 years. It was previously an indirect wholly-owned unit of Ekovest. On completion of the stake sale, it is left with a 60% stake in Kesturi. (Source: The Edge Financial Daily)


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