Monday, March 13, 2017

Construction: MRT Corp awards four work packages worth MYR2.74b. Mass Rapid Transit Corp S/B has awarded four work package contracts with a total value of MYR2.74b for the construction of the MRT Sungai Buloh-Serdang-Putrajaya (SSP) Line. The award for three packages, which completes the t


FEATURE
CALLS

Regional | Regional Plantations
Lowest stockpile in 6 years
Chee Ting Ong







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Sunway Construction Group | KVMRT 2 works win
Chew Hann Wong







Westports Holdings | Taking a backseat
Yen Ling Lee







Padini | Awaiting next catalyst
Kevin Wong










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COMPANY RESEARCH





Company Update





Sunway Construction Group (SCGB MK)
by Chew Hann Wong





Share Price:
MYR1.75
Target Price:
MYR1.90
Recommendation:
Buy




KVMRT 2 works win

SCG’s MYR212m KVMRT 2 station works win is a good addition, lifting its outstanding order book to MYR4.99b. We have imputed job win potential and keep our earnings forecasts. Maintain BUY with an unchanged MYR1.90 TP on 15x FY18 PER (+1SD).



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,916.9
1,788.8
2,347.4
2,208.5
EBITDA
178.2
188.6
209.0
226.4
Core net profit
127.7
123.5
145.7
160.7
Core EPS (sen)
9.9
9.6
11.3
12.4
Core EPS growth (%)
11.9
(3.3)
18.0
10.3
Net DPS (sen)
4.0
5.0
3.9
4.3
Core P/E (x)
17.7
18.3
15.5
14.1
P/BV (x)
5.0
4.6
3.8
3.3
Net dividend yield (%)
2.3
2.9
2.3
2.5
ROAE (%)
32.6
26.2
27.0
25.1
ROAA (%)
9.2
8.0
8.9
9.3
EV/EBITDA (x)
8.7
9.9
8.3
7.4
Net debt/equity (%)
net cash
net cash
net cash
net cash










TP Revision





Westports Holdings (WPRTS MK)
by Yen Ling Lee





Share Price:
MYR3.88
Target Price:
MYR3.80
Recommendation:
Hold




Taking a backseat

THE Alliance has picked PSA as its hub in this region and we expect UASC to move some of its volume out of Westports to PSA. Imputing for the potential volume loss, we lower our throughput growth forecasts for 2017-19 resulting in lower EPS forecasts by up to 17%. Consequently, our DCF-TP is now a lower MYR3.80 (-14%; 2025-54 growth rate: 2%, WACC: 6.7%). We think this development is largely priced-in with Westports’ share price having weakened 10% YTD. HOLD.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,578.3
1,804.3
1,837.2
1,820.0
EBITDA
869.1
963.5
967.7
975.9
Core net profit
504.9
616.6
620.6
526.8
Core EPS (sen)
14.8
18.1
18.2
15.4
Core EPS growth (%)
(1.4)
22.1
0.7
(15.1)
Net DPS (sen)
11.1
14.0
13.6
11.6
Core P/E (x)
26.2
21.5
21.3
25.1
P/BV (x)
7.0
6.4
5.9
5.6
Net dividend yield (%)
2.9
3.6
3.5
3.0
ROAE (%)
27.6
32.1
28.9
23.0
ROAA (%)
12.8
14.7
13.6
10.9
EV/EBITDA (x)
17.0
16.0
15.0
14.7
Net debt/equity (%)
39.7
35.3
57.7
48.4










Company Update





Padini (PAD MK)
by Kevin Wong





Share Price:
MYR2.91
Target Price:
MYR3.00
Recommendation:
Hold




Awaiting next catalyst

Post recent meeting with management, we remain positive on Padini’s potential to sustain its near-term growth as the company remains committed to growing its topline via new outlets, active promotions and competitive pricing. Meanwhile, Padini also plans to expand its business regionally in 2018. We raise our FY17-19E earnings forecasts by 0.3%-3% and our new TP is MYR3.00 (+25sen), pegged to 12x FY18 PER.



FYE Jun (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
977.9
1,301.2
1,510.2
1,659.3
EBITDA
145.3
221.7
241.2
268.3
Core net profit
80.2
136.4
150.6
165.0
Core EPS (sen)
12.2
20.7
22.9
25.1
Core EPS growth (%)
(11.8)
70.0
10.4
9.6
Net DPS (sen)
10.0
11.5
10.0
10.0
Core P/E (x)
23.9
14.0
12.7
11.6
P/BV (x)
4.7
4.1
3.5
2.9
Net dividend yield (%)
3.4
4.0
3.4
3.4
ROAE (%)
20.2
31.4
29.4
27.3
ROAA (%)
13.7
19.5
17.5
16.7
EV/EBITDA (x)
4.6
5.8
6.6
5.7
Net debt/equity (%)
net cash
net cash
net cash
net cash







SECTOR RESEARCH






Lowest stockpile in 6 years
by Chee Ting Ong


Sector Note





The market appears to have brushed off MPOB’s lowest stockpile in 6 years last Friday. Rather it chose to focus on a 26% MoM decline in exports estimates for 1-10th March as 3M CPO price was down -2.4% DoD. As highlighted last week, we turned cautious on the sector although we think the recent CPO price selldown was overdone given the low stockpile. A short term rebound in CPO price is possible before prices resume their downtrend into 2H17. Our BUYs are BPLANT, SOP, BAL, AALI, LSIP, TBLA.









MACRO RESEARCH






Palm oil’s Achilles’ heel
by Tee Sze Chiah


Technical Research





FBMKLCI eked out 0.16pts to close at 1,717.58 on Friday despite hovering in the negative territory for most of the day. Market breadth was marginally positive with gainers outpaced losers by 471 to 435. A total of 3.4b shares worth MYR3.2b changed hands on Friday. As FBMKLCI recovered from its recent pullback, bargain hunting activity has emerged near its support level at 1,715. Expect FBMKLCI to range within 1,715 to 1,735 today. Support remains at 1,705 and 1,690.







NEWS


Outside Malaysia:

U.S: Nonfarm payrolls rose 235k; unemployment rate at 4.7%. Nonfarm payrolls, net revisions, added 9,000 from prior two months. Participation rate was 63% vs prior 62.9%. Average hourly earnings rose 0.2%. Manufacturing payrolls rose 28k after rising 11k in the prior month. (Source: Bloomberg)

U.K: Brexit minister seeks to avert Tory revolt before vote. U.K. Brexit Secretary David Davis is seeking to avert a rebellion within the ruling Conservative Party that could complicate government efforts to trigger divorce negotiations with the European Union by the end of this month. The House of Commons will vote on a bill authorizing Prime Minister Theresa May to begin the formal two- year process for Brexit. Some Conservatives are pushing for Parliament to have a say on what happens if the talks end without an agreement and have indicated they may oppose her unless she concedes. (Source: Bloomberg)

Singapore: To cut property stamp duties, ease debt ratio rules. Calibrated adjustments to seller’s stamp duty and total debt servicing ratio framework from March 11, according to joint statement from the Monetary Authority of Singapore, Ministry of National Development and Ministry of Finance. Seller’s stamp duties to be revised to holding periods of up to 3 years, down from current 4 years. Seller’s stamp duty rate lowered by four percentage points for each tier; to range from 4% to 12%. (Source: Bloomberg)

Crude Oil: Extends losses as U.S. supply glut counters Libya disruption. Oil extended losses after a jump in U.S. supplies erased three months of gains following OPEC’s deal to cut output. The U.S. oil rig count rose by eight to 617 last week, the highest since September 2015, according to Baker Hughes Inc. data. Libya’s crude output dropped 11% as clashes among armed groups led to the closure of some of the OPEC nation’s biggest oil export terminals. Brent for May settlement dropped to USD 50.85/bbl a barrel. (Source: Bloomberg)





Other News:

Construction: MRT Corp awards four work packages worth MYR2.74b. Mass Rapid Transit Corp S/B has awarded four work package contracts with a total value of MYR2.74b for the construction of the MRT Sungai Buloh-Serdang-Putrajaya (SSP) Line. The award for three packages, which completes the tenders for all 10 viaduct work packages for the SSP Line, were made following a One-Stop Procurement I (OSPC I) meeting chaired by Prime Minister Datuk Seri Najib Abdul Razak. The MYR858.18m work package V205 was awarded to Trans Resources Corp S/B. The second work package V206 was awarded to Gadang Engineering (M) S/B for MYR952.09m. The third work package V209 worth MYR715.99m was awarded to Acre Works S/B. The work package worth MYR212.3m was bagged by Sunway Construction S/B. (Source: The Sun Daily)

Banking: Bank Rakyat a takeover target. Bank Rakyat, Malaysia’s profitable Islamic co-operative bank, has become a takeover target as part of Bank Negara’s bigger plan to consolidate the financial sector. The idea is being floated around and among the institutions exploring the takeover of Bank Rakyat is PNB. Local conventional banks are also said to be eyeing Bank Rakyat. It is still at an infancy stage. It’s early days and remains an idea that is being explored. (Source: The Star)

WCT: JV in Doha sued for MYR130m. WCT Holding’s unincorporated 50:50 JV with Arabtec Construction LLC (ATC) in Doha, Qatar, is being sued for AED107.73m (MYR130.56m) by Triumpher Steel Construction Group Ltd (TSC) in relation to the Nad Al Sheba Dubai Racecourse project. WCT’s Middle East regional office in Doha had on March 6 received from the Dubai International Arbitration Center a request for arbitration dated Feb 27 filed by TSC, naming ATC as the first respondent and WCT Dubai branch as the second respondent. WCT will take the necessary legal actions to defend itself and to oppose the claims. (Source: The Sun Daily)

UMW Oil & Gas: Wins contract from Vestigo Petroleum. Its wholly owned subsidiary UMW Offshore Drilling S/B (UOD) has been awarded a drilling rig services contract by marginal fields developer Vestigo Petroleum S/B. The value of the contract was not disclosed. It will deploy its UMW Naga 2, an independent-leg cantilever jack-up rig with a drilling depth capability of 30,000 feet and a rated operating water depth of 350 feet, for the contract. The contract is to drill one firm well, commencing end of the first quarter of 2017. (Source: The Sun Daily)


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