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Share
Price:
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MYR1.67
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Target
Price:
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MYR1.90
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Recommendation:
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Buy
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A better year
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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.
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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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604.7
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654.7
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507.8
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615.7
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EBITDA
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109.4
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109.2
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90.2
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111.8
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Core net profit
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76.9
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76.2
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61.5
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76.8
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Core EPS (sen)
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14.0
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13.9
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11.2
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14.0
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Core EPS growth (%)
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(9.2)
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(0.9)
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(19.4)
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24.9
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Net DPS (sen)
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2.8
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2.4
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1.9
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2.4
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Core P/E (x)
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11.9
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12.0
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14.9
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12.0
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P/BV (x)
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1.5
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1.4
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1.3
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1.2
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Net dividend yield (%)
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1.7
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1.4
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1.1
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1.4
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ROAE (%)
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na
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na
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na
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na
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ROAA (%)
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9.7
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9.4
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7.4
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8.6
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EV/EBITDA (x)
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7.1
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8.6
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8.8
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6.8
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Net debt/equity (%)
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net cash
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net cash
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net cash
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net cash
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Chew Hann Wong
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Adrian Wong
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Share
Price:
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MYR3.44
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Target
Price:
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MYR3.60
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Recommendation:
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Buy
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MCKIP, Kuantan
Port: Progress update
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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.
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FYE Mar (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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5,448.3
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5,128.2
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6,679.2
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7,610.6
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EBITDA
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1,434.8
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1,166.7
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1,221.9
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1,425.1
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Core net profit
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530.2
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509.3
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589.1
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701.2
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Core EPS (sen)
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16.3
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14.3
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16.4
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19.6
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Core EPS growth (%)
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(15.0)
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(12.5)
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15.3
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19.0
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Net DPS (sen)
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7.5
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10.0
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7.0
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7.0
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Core P/E (x)
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21.1
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24.1
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20.9
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17.6
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P/BV (x)
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1.3
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1.4
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1.3
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1.2
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Net dividend yield (%)
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2.2
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2.9
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2.0
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2.0
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ROAE (%)
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6.3
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9.1
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6.4
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7.2
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ROAA (%)
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2.8
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2.6
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2.9
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3.3
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EV/EBITDA (x)
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12.0
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15.4
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14.8
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12.6
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Net debt/equity (%)
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45.2
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40.4
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41.3
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36.9
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Chew Hann Wong
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Adrian Wong
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MACRO RESEARCH
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‘Sticky’ jobless rate……
by
Suhaimi Ilias
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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.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Greasy & oily
by Tee
Sze Chiah
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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.
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NEWS
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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)
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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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