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Share
Price:
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MYR20.14
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Target
Price:
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MYR19.70
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Recommendation:
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Hold
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A more subdued
outlook
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Into 2017, management guides for slower loan growth, NIM
compression and higher overheads. These, nevertheless, are factors that
we have already taken into account and thus our forecasts are
maintained. On the back of an FY17E ROE of 14.8%, we peg on a P/BV of
2x to derive our unchanged TP of MYR19.70. The group’s strong
fundamentals are reflected in current pricing, 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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Operating income
|
9,438.8
|
9,896.0
|
10,307.6
|
10,761.5
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Pre-provision profit
|
6,523.6
|
6,684.6
|
6,928.6
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7,237.1
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Core net profit
|
4,955.2
|
5,146.4
|
5,296.9
|
5,492.7
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Core EPS (MYR)
|
1.28
|
1.33
|
1.37
|
1.42
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Core EPS growth (%)
|
9.7
|
3.9
|
2.9
|
3.7
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Net DPS (MYR)
|
0.56
|
0.58
|
0.59
|
0.61
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Core P/E (x)
|
15.7
|
15.1
|
14.7
|
14.2
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P/BV (x)
|
2.5
|
2.3
|
2.1
|
1.9
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Net dividend yield (%)
|
2.8
|
2.9
|
2.9
|
3.0
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Book value (MYR)
|
8.09
|
8.86
|
9.73
|
10.64
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ROAE (%)
|
16.7
|
15.7
|
14.8
|
14.0
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ROAA (%)
|
1.4
|
1.4
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1.4
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1.3
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Share
Price:
|
MYR1.02
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Target
Price:
|
MYR0.90
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Recommendation:
|
Sell
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Take profit; D/G
to SELL
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MMHE’s share price has appreciated by 15% post our upgrade
to HOLD in 19 Dec 2016 and is now 12% ahead of our MYR0.90 TP, pegged
to 1x EV/ order backlog (unchanged). We advocate investors to lock-in
gains ahead of headwinds in its upcoming 4Q16 results due next week.
MMHE needs a significant order win to warrant a re-rating, in our view.
In addition, we maintain our view - we do not see MMHE as a
privatisation candidate. Our earnings forecasts are unchanged.
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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
|
2,700.5
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2,459.0
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1,298.6
|
1,003.1
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EBITDA
|
248.2
|
157.9
|
88.4
|
84.0
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Core net profit
|
173.1
|
93.3
|
41.8
|
36.8
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Core EPS (sen)
|
10.8
|
5.8
|
2.6
|
2.3
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Core EPS growth (%)
|
(26.8)
|
(46.1)
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(55.2)
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(12.1)
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Net DPS (sen)
|
0.0
|
0.0
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0.0
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0.0
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Core P/E (x)
|
9.4
|
17.5
|
39.0
|
44.4
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P/BV (x)
|
0.6
|
0.6
|
0.6
|
0.6
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Net dividend yield (%)
|
0.0
|
0.0
|
0.0
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0.0
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ROAE (%)
|
5.0
|
1.7
|
1.6
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1.3
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ROAA (%)
|
3.6
|
2.1
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1.1
|
1.0
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EV/EBITDA (x)
|
10.2
|
4.8
|
9.3
|
9.7
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Net debt/equity (%)
|
net cash
|
net cash
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net cash
|
net cash
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NEWS
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Outside Malaysia:
U.S: Productivity gains cooled last quarter; labor costs
rose. The measure of employee output per hour increased at a 1.3%
annualized rate, after a revised 3.5% rise in the prior three months,
Labor Department figures showed. Expenses per worker rose at a 1.7% pace.
(Source: Bloomberg)
U.S: Filings for jobless benefits fell to 246,000 last
week, marking 100 straight weeks of claims below 300,000. That’s the
longest streak since 1970 and indicates a healthy job market. Jobless
claims declined by 14,000 to 246,000 in the week ended Jan. 28, a Labor
Department report showed. The sustained trend of historically low jobless
claims shows businesses are retaining existing employees as they face a
shortage of skilled workers amid a tight labor market. (Source:
Bloomberg)
Singapore: Sees little growth in fixed-asset investments
this year after commitments fell to the lowest level since at least 2007,
the Economic Development Board said. Capital investment in facilities and
equipment planned over the next five years stood at SGD 9.4b (USD 6.7b) last
year and should stabilize at around SGD 8b to SGD 10b in coming years,
Beh Swan Gin, chairman of the EDB, told reporters. (Source: Bloomberg)
Australia: Posted a record trade surplus as iron ore and
coal exports surged on the back of demand from China and Japan. Exports
climbed 5% from month earlier, while imports rose 1% and trade surplus
was at AUD 3.51b for December. Largest value of coal exports since
November 2008; highest value of iron ore exports since March 2014.
Australia’s trade performance closely correlates with demand from China’s
old growth drivers like infrastructure and apartment construction. The
government in Beijing’s stimulus program, together with cutbacks in coal
output, has helped underpin a surge in coal and iron ore prices that’s
now reflected in Australia’s sharply improved trade balance. However, the
impact of a fall in coal prices since November remains to be seen.
(Source: Bloomberg)
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Other News:
Vizione: Raises MYR58.92m, eyes more construction job. The
group has raised gross proceeds of MYR58.92m, following the completion of
its two-for-one rights issue with free detachable warrants. Given the
funding, Vizione is set to secure more construction projects to enhance
its future earnings. Vizione said it managed to secure a final
subscription level of 99.84%, equivalent to 582.92 million rights shares.
(Source: The Edge Financial Daily)
Daya Materials: Subsidiary to provide crowd/passenger
systems solution. Its 67% owned subsidiary Daya OCI S/B will work with an
agency under the purview of the Finance Ministry to set up a
crowd/passenger systems solution for the transportation industry in
Malaysia. The group had signed a memorandum of understanding with
Technology Depository Agency S/B to establish “a close cooperative
relationship between the parties” for the project. (Source: The Star)
Uzma: Takes part in joint study with Petronas, academia.
The group has announced its participation in a joint industry project
agreement (JIP) which looks to better equip oil and gas industry players
with improved methods for carbon dioxide (CO2) injection modelling for
future Enhanced Recovery Oil (EOR) projects. Uzma will join Petronas
first ever JIP with Heriot-Watt University, Petronas Research S/B and
Institute of Technology Petronas S/B. The joint study will span the next
three years, whereby the project will focus on minimising uncertainties
affecting the predictions of hydrocarbon recovery as well as supporting the
simulation studies through the acquisition of key physical data. (Source:
The Sun Daily)
MMC: MMC-Gamuda JV to pay firm MYR109m to settle SMART
dispute. MMCEG-Gamuda Joint Venture, which is 50:50 owned by Gamuda and
MMC Corp, said yesterday it has agreed to pay Wayss & Freytag
(Malaysia) S/B MYR109.14m as a final settlement on a contract dispute
involving the SMART (Stormwater Management and Road Tunnel) project.
Following the amicable settlement, the parties have taken steps to
terminate the arbitration proceedings. Gamuda and MMC said the settlement
would save further costs and time as opposed to continuing with the
protracted legal process that has been ongoing since 2008. (Source: The
Sun Daily)
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