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Share
Price:
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MYR6.29
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Target
Price:
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MYR6.00
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Recommendation:
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Hold
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Solid
monetisation
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FY16 results were ahead of our forecasts as margins
surprised on the upside. This, in our view, reflects a relatively
manageable operating environment (certainly not as dire as commonly
mooted). We lift FY17/ FY18 earnings forecasts. Maintain HOLD with a raised
TP of MYR6.00 (+20sen). Risk-reward remains relatively balanced in our
view.
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FYE Dec (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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8,601.0
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8,612.0
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8,795.0
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8,973.7
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EBITDA
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4,398.0
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4,469.0
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4,529.4
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4,621.5
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Core net profit
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1,809.5
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1,927.5
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1,863.8
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1,878.4
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Core EPS (sen)
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24.1
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25.7
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24.8
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25.0
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Core EPS growth (%)
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4.3
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6.5
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(3.3)
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0.8
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Net DPS (sen)
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20.0
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20.0
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20.0
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20.0
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Core P/E (x)
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26.1
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24.5
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25.3
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25.1
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P/BV (x)
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11.3
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10.0
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9.3
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8.7
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Net dividend yield (%)
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3.2
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3.2
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3.2
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3.2
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ROAE (%)
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39.1
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45.2
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38.0
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35.6
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ROAA (%)
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9.8
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10.0
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9.4
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9.3
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EV/EBITDA (x)
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13.6
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12.1
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12.4
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12.1
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Net debt/equity (%)
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205.5
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194.5
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177.1
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156.4
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Chi Wei Tan
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Syairah Malek
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Share
Price:
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MYR4.75
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Target
Price:
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MYR3.80
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Recommendation:
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Sell
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Dampened by
rising NBR cost
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We expect Hartalega’s upcoming 3QFY3/17 results to be
flattish at the net profit level as the higher NBR cost offset the
higher sales volume and higher USD/MYR. While ASP is on a rising trend,
we think it still lags behind that of NBR cost. We maintain our EPS
forecasts, SELL call and TP of MYR3.80 (21x 2017 PER; mean). Trading at
1-year fwd PER of 25x, valuation is demanding given its weaker
financial metrics (margins, ROEs) and peers’ average PER of 17x.
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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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1,146.0
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1,498.3
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1,627.7
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1,860.1
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EBITDA
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321.6
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386.8
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426.6
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495.5
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Core net profit
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209.7
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257.6
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277.2
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315.1
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Core FDEPS (sen)
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13.4
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15.5
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16.7
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19.0
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Core FDEPS growth(%)
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(15.1)
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16.3
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7.6
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13.7
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Net DPS (sen)
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6.5
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8.0
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8.4
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9.6
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Core FD P/E (x)
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35.6
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30.6
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28.4
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25.0
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P/BV (x)
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5.8
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5.2
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4.8
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4.3
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Net dividend yield (%)
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1.4
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1.7
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1.8
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2.0
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ROAE (%)
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19.0
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18.6
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17.6
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18.3
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ROAA (%)
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16.4
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15.1
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13.0
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12.8
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EV/EBITDA (x)
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20.7
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21.0
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19.1
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16.7
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Net debt/equity (%)
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net cash
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10.9
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21.5
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26.1
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SECTOR RESEARCH
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SMALL-CAP STOCKS FRENZY
by Tee
Sze Chiah
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FBMKLCI was little changed on Wednesday after losing
0.34pts to settle at 1,688.50. Overall market was better after 471
stocks ended in green while 389 stocks closed in negative territory.
Total trading volume was at 2.28b, valued at MYR2.32b. For today, we
maintain our optimistic view as no reversal signals were spotted with
the exception of 5-minute chart. As such, we expect the benchmark
index to retest its two resistance levels at 1,692 and 1,696 in the
near-term.
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MACRO RESEARCH
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Strong finish to 2016
by
Suhaimi Ilias
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Exports and imports ended last year on a high with Dec
2016’s growth of at +10.7% YoY (Nov 2016: +7.8% YoY) and +11.5% YoY
(Nov 2016: +11.2% YoY) respectively as recovery in commodity prices
and exports added to the sustained manufacturing exports growth. The
outlook for this year is clouded by President Trump’s trade policy
despite encouraging signs for commodity and manufacturing exports in
early-2017.
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Suhaimi Ilias
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Zamros
Dzulkafli
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NEWS
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Outside Malaysia:
U.S: Jobless claims unexpectedly fall to lowest since
November, echoing a vibrant job market. Jobless claims fell by 12,000 to
234,000 in the week ended Feb. 4, a report from the Labor Department
showed. The average number of applications filed over the past four weeks
reached the lowest point since 1973. The latest results extend a trend of
historically low claims, with applications staying below 300,000 in the
longest streak since 1970. A shortage of skilled workers is prompting
companies to hold on to existing employees while continuing to add more
workers to help fulfill demand. (Source: Bloomberg)
U.S: Home prices rose in 89% of metro areas in 4Q 2016, as
competition heated up for a record-low supply of listings, the National
Association of Realtors said. The median price of an existing
single-family home rose from a year earlier in 158 of the 178 areas
measured, the group said in a report. In the third quarter, 87% of
metropolitan areas had price increases. Thirty-one regions had gains of
10% of more in the three months through December, up from 25 in the third
quarter. (Source: Bloomberg)
U.S: Trump promises ‘phenomenal’ tax plan as Ryan’s ideas
draw fire. President Donald Trump said a “phenomenal” plan to overhaul
business taxes may be released within the next “two or three weeks,”
heightening expectations as House Republican lawmakers are raising
objections to their own leaders’ favored plan. Trump offered no details
-- and White House Press Secretary Sean Spicer told reporters later that
specifics would emerge only in the coming weeks. Still, he said the White
House is at work on an outline of the most comprehensive business and
individual tax overhaul since 1986. During a meeting with U.S. airline
executives, Trump said his plans call for “lowering the overall tax
burden of American businesses, big league.” He added: “We’re going to be
announcing something I would say over the two or three weeks that will be
phenomenal in terms of tax.” (Source: Bloomberg)
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Other News:
Tanco: Disposes of Duta Vista suites for MYR50m. Its
indirect wholly-owned subsidiaries Tanco Properties S/B and Tanco Resorts
signed a sales and purchase agreement today with Eternal Village for the
proposed en-bloc sale of the 68 units of apartments and seven common area
unit parcels with 75 car park bays within a six-storey building for
MYR50m. After the exercise is completed, the proposed disposal is
expected to result in a net gain of about MYR4.86m after taking into
account the carrying value of the property and related expenditure
amounting to MYR44.89m, estimated provision for income tax/real property
gains tax (net of deferred tax) totalling MYR150,000, and expenses in
relation to the proposed disposal costing MYR100,000.(Source: The Edge
Financial Daily)
SCGM: Set to build new facility in Kulai. The group is set
to commence construction of its new MYR54m manufacturing facility in
Kulai, Johor. The facility, spread over 7.8ha is located about 5km from
the company’s existing premises, and scheduled for completion in December
2018. In a statement on Wednesday, Managing director Datuk Seri Lee Hock
Chai said the enlarged production floor space and new machinery at the
facility, would bump up the group’s extrusion capacity by 73% to 62.6
million kg per year from the current 36 million. (Source: The Star)
Spring Gallery: To diversify into property. Ceramics and
pottery products manufacturer Spring Gallery proposes to diversify into
the property investment and development business, which will potentially
contribute at least 25% to the company’s net profit. The group said it
intends to venture into property development through a residential
development project in Kuala Lumpur, whereby it had on April 22 entered
into a heads of agreement to acquire an 80% stake in Klasik Ikhtiar S/B
for MYR3.5m. (Source: The Sun Daily)
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