Friday, March 17, 2017

YTL Power: Poised to start USD2.1b power project in Jordan. YTL Power International’s unit, Attarat Power Co’s (APCO) USD2.1b (MYR9.3b) oil shale power project in Jordan has reached financial close for the project to construct the first oil shale-fired power station and open cas






Top Glove | Improved demand-supply
Yen Ling Lee







Berjaya Sports Toto | 3QFY4/17: A forgettable quarter
Samuel Yin Shao Yang









break





Malaysia | The FBMKLCI’s rocket
Tee Sze Chiah








break


COMPANY RESEARCH





Results Review





Top Glove (TOPG MK)
by Yen Ling Lee





Share Price:
MYR5.20
Target Price:
MYR6.20
Recommendation:
Buy




Improved demand-supply

Despite the spike in key input costs, 2QFY8/17 was sequentially stronger but within expectations. We think Top Glove’s near-term earnings could remain strong as its latest ASPs have already reflected the high input prices. Demand-supply dynamic has also improved as the industry’s expansion is relatively slower. Maintain our EPS forecasts, BUY and TP of MYR6.20 (20x 2018 PER; +1SD to mean). Key catalysts will be the falling latex price and strong USD/MYR. Foreign shareholding is at record low.



FYE Aug (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
2,510.5
2,888.5
3,360.6
3,657.9
EBITDA
454.3
523.3
507.8
573.7
Core net profit
279.8
361.1
325.9
375.7
Core EPS (sen)
22.6
29.1
26.3
30.3
Core EPS growth (%)
55.0
29.0
(9.7)
15.3
Net DPS (sen)
11.5
14.5
13.1
15.1
Core P/E (x)
23.1
17.9
19.8
17.2
P/BV (x)
4.0
3.5
3.3
3.0
Net dividend yield (%)
2.2
2.8
2.5
2.9
ROAE (%)
89.9
76.9
51.9
59.9
ROAA (%)
12.1
13.5
11.8
12.6
EV/EBITDA (x)
10.1
9.5
12.1
10.5
Net debt/equity (%)
net cash
net cash
net cash
net cash










Results Review





Berjaya Sports Toto (BST MK)
by Samuel Yin Shao Yang





Share Price:
MYR2.98
Target Price:
MYR3.05
Recommendation:
Hold




3QFY4/17: A forgettable quarter

Earnings and dividends disappointed due to higher-than-expected prize payout ratio and a one-off GST adjustment. We cut our FY17 EPS by 14% to reflect the aforementioned but trim our FY18 and FY19 EPS estimates by only 3% and 2% as we expect the prize payout ratio to normalize and the GST adjustment not to recur. Consequently, we trim our SOP-based TP by 3% to MYR3.05. We hope the amended Common Gaming Houses Act 1953 will be passed as this will enable BST to regain market share.



FYE Apr (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
5,283.6
5,563.2
5,495.3
5,571.4
EBITDA
558.6
496.4
465.5
522.2
Core net profit
343.5
308.6
272.0
316.2
Core EPS (sen)
25.5
22.9
20.2
23.5
Core EPS growth (%)
(0.6)
(10.3)
(11.8)
16.3
Net DPS (sen)
21.5
19.0
16.5
19.3
Core P/E (x)
11.7
13.0
14.8
12.7
P/BV (x)
5.9
5.2
4.9
4.6
Net dividend yield (%)
7.2
6.4
5.5
6.5
ROAE (%)
55.1
42.5
34.4
37.4
ROAA (%)
15.6
12.6
10.5
12.8
EV/EBITDA (x)
8.4
9.0
9.3
8.2
Net debt/equity (%)
35.0
35.4
26.3
17.7


Samuel Yin Shao Yang






MACRO RESEARCH






The FBMKLCI’s rocket
by Tee Sze Chiah


Technical Research





FBMKLCI skyrocketed yesterday, rising 19.78pts to close the day at 1,737.14, a new high since Aug 2015. Market breadth was equally jovial with gainers outpaced losers by 666 to 286. A total of 3.39b shares worth MYR3.58b changed hands yesterday. FBMKLCI edged higher and broke its previous high of 1,734 on foreign buying. Despite the overwhelming positive sentiment, we expect some consolidation today as market digests its recent gain ahead of the weekend break.







NEWS


Outside Malaysia:

E.U: Car-sales growth cooled in February as political uncertainty clouds the area’s economic outlook and the market becomes increasingly saturated after three years of expansion. After a 10% jump in January, industrywide registrations rose 2.1% to 1.1 million vehicles last month, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said. (Source: Bloomberg)

U.K: Brexit fight with Scotland escalates as May rejects vote. Prime Minister Theresa May rejected Scotland’s bid to hold a referendum on independence before the U.K. leaves the European Union, the latest twist in the increasingly acrimonious fight over Brexit with the nationalist government in Edinburgh. While not ruling one out eventually, May’s team said they would not even discuss a new referendum at a time when the focus was on getting the best Brexit deal for the whole U.K. Scottish First Minister Nicola Sturgeon demanded the power to call a plebiscite by spring 2019 on whether Scotland, which voted to remain in the EU, should break away. (Source: Bloomberg)

China: Central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the Federal Reserve in tightening policy. Hours after the Fed’s quarter percentage-point move, the People’s Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility. The central bank said markets expected higher borrowing costs and that open-market rate increases don’t necessarily equate to interest-rate hikes, according to a statement. The cost of seven-, 14- and 28-day reverse-repurchase agreements was raised 10 basis points each. That followed an increase in early February (Source: Bloomberg)

Crude oil: Saudi Arabia says oil-supply cuts may be extended if necessary. OPEC and its allies may prolong production cuts after they expire in June if the world’s crude inventories remain excessive, Saudi Arabia’s Energy Minister said. The curbs will be sustained if stockpiles are “still above the five-year average, if the markets are still not confident in the outlook, if we don’t see companies and investors feel good about the health of the global oil industry,” Khalid Al-Falih said in a Bloomberg television interview in Washington. “We want to signal to them that we’re going to do what it takes to bring the industry back to a healthy situation.” (Source: Bloomberg)





Other News:

YTL Power: Poised to start USD2.1b power project in Jordan. YTL Power International’s unit, Attarat Power Co’s (APCO) USD2.1b (MYR9.3b) oil shale power project in Jordan has reached financial close for the project to construct the first oil shale-fired power station and open cast mine in Jordan. The building of the 554 MW gross/470 MW net oil shale-fired mine mouth power station will start shortly and the power station was scheduled to start operation in mid-2020. The shareholders had committed to provide base shareholder funding of up to USD528m (MYR2.3b). (Source: The Star)

Mudajaya: Signs 21-year PPA with TNB to build solar plant in Perak. Its indirect wholly-owned unit Sinar Kamiri S/B has signed a 21-year PPA with TNB. The agreement will allow it to build a large-scale photovoltaic plant in Sungai Siput, Perak, that has a capacity of 49MW, on a build-own operate basis. The PPA, which has an expected commercial operation date of Aug 31, 2018, governs the sale and purchase obligations of the energy generated by the project between Sinar Kamiri and TNB for a period of 21 years from the commercial operation date in accordance with the agreed terms and conditions. (Source: The Edge Financial Daily)

AirAsia: Revived plan to acquire business jet, eyes charter ops. AirAsia is making a second attempt to acquire a 20-year-old aircraft from Caterham Jet Global Ltd (CJG) for USD10m (MYR44.3m) cash, with a plan to operate charter and private unscheduled business jet operations. It had entered into a SPA with CJG for the acquisition of Bombardier BD-700-1A10 Global Express. This is deemed a related party transaction as AirAsia executive chairman Tan Sri Tony Fernandes are the sole shareholders of CJG, via their private vehicle Tune Group S/B. (Source: The Edge Financial Daily)


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