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Share
Price:
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MYR5.20
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Target
Price:
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MYR6.20
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Recommendation:
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Buy
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Improved
demand-supply
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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.
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FYE Aug (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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2,510.5
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2,888.5
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3,360.6
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3,657.9
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EBITDA
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454.3
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523.3
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507.8
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573.7
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Core net profit
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279.8
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361.1
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325.9
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375.7
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Core EPS (sen)
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22.6
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29.1
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26.3
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30.3
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Core EPS growth (%)
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55.0
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29.0
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(9.7)
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15.3
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Net DPS (sen)
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11.5
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14.5
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13.1
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15.1
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Core P/E (x)
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23.1
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17.9
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19.8
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17.2
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P/BV (x)
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4.0
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3.5
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3.3
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3.0
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Net dividend yield (%)
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2.2
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2.8
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2.5
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2.9
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ROAE (%)
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89.9
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76.9
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51.9
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59.9
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ROAA (%)
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12.1
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13.5
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11.8
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12.6
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EV/EBITDA (x)
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10.1
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9.5
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12.1
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10.5
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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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Share
Price:
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MYR2.98
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Target
Price:
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MYR3.05
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Recommendation:
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Hold
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3QFY4/17: A
forgettable quarter
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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.
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FYE Apr (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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5,283.6
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5,563.2
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5,495.3
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5,571.4
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EBITDA
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558.6
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496.4
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465.5
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522.2
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Core net profit
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343.5
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308.6
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272.0
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316.2
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Core EPS (sen)
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25.5
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22.9
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20.2
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23.5
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Core EPS growth (%)
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(0.6)
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(10.3)
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(11.8)
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16.3
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Net DPS (sen)
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21.5
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19.0
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16.5
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19.3
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Core P/E (x)
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11.7
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13.0
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14.8
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12.7
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P/BV (x)
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5.9
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5.2
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4.9
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4.6
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Net dividend yield (%)
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7.2
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6.4
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5.5
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6.5
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ROAE (%)
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55.1
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42.5
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34.4
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37.4
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ROAA (%)
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15.6
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12.6
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10.5
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12.8
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EV/EBITDA (x)
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8.4
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9.0
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9.3
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8.2
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Net debt/equity (%)
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35.0
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35.4
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26.3
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17.7
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MACRO RESEARCH
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The FBMKLCI’s rocket
by Tee
Sze Chiah
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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.
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NEWS
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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)
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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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