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FEATURE
CALLS
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Malaysia | Malaysia Strategy
Tourism: Growing
from strength to strength
Chew Hann Wong
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Sunway (SWB MK)
by Wei Sum
Wong
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Share
Price:
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MYR3.27
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Target
Price:
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MYR3.26
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Recommendation:
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Hold
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Construction
outshines property
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While property sales will likely remain slow in 1H17, we
see strong upside potential from construction via Sunway Construction
Group (SCG). YTD, the latter has secured an impressive MYR635m of job
wins, bringing its outstanding orderbook to MYR4.9b. No change to our
earnings forecasts as we have imputed MYR1b of job wins for SCG. Our
RNAV-TP is MYR3.26 (based on an unchanged 40% discount to RNAV).
Maintain HOLD.
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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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4,448.4
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4,725.9
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5,579.1
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6,630.5
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EBITDA
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427.2
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531.1
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811.0
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1,023.3
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Core net profit
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590.7
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547.4
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543.9
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607.4
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Core EPS (sen)
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33.7
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29.5
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26.4
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29.4
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Core EPS growth (%)
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(1.6)
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(12.5)
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(10.6)
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11.7
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Net DPS (sen)
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37.0
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12.1
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7.9
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8.8
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Core P/E (x)
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9.7
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11.1
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12.4
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11.1
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P/BV (x)
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0.9
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0.9
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0.9
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0.8
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Net dividend yield (%)
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11.3
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3.7
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2.4
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2.7
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ROAE (%)
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11.7
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8.4
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7.1
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7.5
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ROAA (%)
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4.1
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3.1
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2.9
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3.1
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EV/EBITDA (x)
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21.8
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18.4
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14.9
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12.8
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Net debt/equity (%)
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45.2
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40.9
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52.8
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61.5
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SECTOR RESEARCH
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Under siege
by Chee
Ting Ong
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The EU Parliament is threatening to ban the use of
palm oil in biofuel by 2020 and plans to introduce a single
sustainable certification scheme. If approved by the EU Commission,
we estimate the immediate threat will be on ~3.3m MT or 46% of EU’s
palm oil import used in biofuel. This will have negative consequences
not just on palm oil prices but other vegetable oils as well. Stay
Neutral for now. Our BUYs in the region are BPLANT, SOP, BAL, AALI,
LSIP and TBLA.
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MACRO RESEARCH
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Tourism: Growing from strength to strength
by Chew
Hann Wong
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China to Malaysia airline bookings from 16 Mar- 31 Aug
2017 surged 72% YoY after China discouraged its citizens from
visiting South Korea. Assuming 2017 Chinese tourist arrivals grow by
a narrower 50% YoY, we estimate that this will lift total tourist arrivals
by 4% YoY. This development reinforces our positive view on the
tourism industry. Direct beneficiaries to the positive growth in
tourist arrivals which we have existing BUYs are MAHB, AirAsia, GENT,
Al-Salam REIT, Sunway REIT and IGB REIT.
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Chew Hann Wong
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Samuel Yin
Shao Yang
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Base effect boost to trade growth
by
Suhaimi Ilias
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Continued robust export and import growth in Feb 2017
of +26.5% YoY (Jan 2017: +13.6% YoY) and +27.7% YoY (Jan 2017: +16.1%
YoY) respectively contributing to +MYR8.7b trade surplus (Jan 2017:
+MYR4.7b). Low bases in early-2016, pick up in global economic activities
and firmer commodity prices are boosting trade growth in early-2017
amid risks from US trade policy and commodity price outlook.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Armada return to the grand line
by Tee
Sze Chiah
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FBMKLCI slid 2.52pts to close at 1,744.67 yesterday
amid intermittent profit taking in selective blue chips. Broader
market, however, was in a more jovial mood with gainers outpaced
losers by 612 to 353. A total of 4.43b shares worth MYR3.42b changed
hands. Fed’s hawkish tone (plans to pare down its USD4.5t balance
sheet) may spook the local market today. We expect the benchmark
index to range between 1,736 and 1,750. Support is pegged at 1,736
and 1,715.
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NEWS
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Outside Malaysia:
U.S: Fed officials see more upside than downside in risks
to outlook. Some Federal Reserve policy makers are thinking about
something that hasn’t occurred to them in a long time: the risk that
economic activity exceeds their forecasts now seems to outweigh the risk
that it doesn’t. That’s the message from an appendix to the records of
their March 14-15 meeting, published. While a firm majority of the
central bank’s 17-member Federal Open Market Committee continues to view
risks as “broadly balanced,” the total number of officials who see a
chance of better-than- forecast outcomes for employment and inflation
rose to the most since the Fed began publishing the assessments with the
January 2012 meeting. (Source: Bloomberg)
U.S: Fed favors plan to start shrinking balance sheet
later in 2017. Most Federal Reserve officials said they backed a policy
change that would begin shrinking the central bank’s USD 4.5tr balance
sheet later this year, as they reiterated their outlook for gradual
interest-rate increases. “Most participants anticipated that gradual
increases in the federal funds rate would continue and judged that a
change to the committee’s reinvestment policy would likely be appropriate
later this year,” according to minutes of the Federal Open Market Committee’s
March 14-15 meeting released. (Source: Bloomberg)
E.U: Euro-area output accelerated less than forecast in
March as activity in services came in slightly weaker than expected. A
composite Purchasing Managers’ Index climbed to 56.4 from 56 in February,
the highest level in almost six years, HIS Markit said. Even so, the
reading is below a previous flash estimate of 56.7, with a gauge for
services strengthening less than previously estimated. (Source:
Bloomberg)
U.K: Services sector grew faster than expected in March as
companies raised their prices at the quickest pace in 8 1/2 years. The
better-than-forecast momentum in IHS Markit’s monthly Purchasing
Managers’ Index was accompanied by stronger growth in new business,
though hiring slowed. The headline activity gauge rose to 55 from 53.3 in
February. That’s above the key 50 level that divides expansion from
contraction. (Source: Bloomberg)
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Other News:
OSK: Partners EPF in AUD2.8b Melbourne project. OSK
Holdings has roped in EPF as its financial partner to develop an upcoming
five-acre (2.02ha) mixed-use-development in Melbourne, Australia, with an
expected GDV of some AUD2.8b (MYR9.39b). EPF is taking a 49% equity
interest in Yarra Park City Pty Ltd (YPC) for AUD154m, which holds the
development rights for the Melbourne Square project located in Southbank,
Melbourne. (Source: The Edge Financial Daily)
WCT: Bags LRT3 job worth MYR185.9m. WCT Holdings has
bagged an MYR185.9m contract from Prasarana Malaysia to construct a depot
for LRT3. Its wholly-owned unit, WCT (WB) received a letter of acceptance
for the job on Tuesday. Under the deal, WCT will build the Johan Setia
Depot and take on other associated construction works related to the
37km-long LRT3, which has 26 stations covering Bandar Utama, Shah Alam
and Klang, until Johan Setia in Klang. The works are expected to be
completed within the next 18 months. (Source: The Edge Financial Daily)
Serba Dinamik: Clinches five deals worth MYR469m. It was
awarded a four-year contract by Shell MDS (M) S/B for the provision of
mechanical maintenance and project services with a value of MYR65m. The
second contract, worth MYR45m, was awarded by Petronas Carigali S/B for
the maintenance of gas compressors. The third is for the provision of
turbomachinery maintenance and engineering support services for Muhammed
Jabar Trading and Contracting with a value of about MYR331.95m. For the
three-year contract awarded by Petrofac (Malaysia PM304) Ltd, it is for
the provision of condition based monitoring with a value of MYR2m. Serba
Dinamik also bagged an one-year contract from Petronas Floating LNG1 (L)
Ltd for the provision of manpower, workshop facilities and equipment for
rotating equipment overhaul and repair work with a value of MYR25m.
(Source: The Sun Daily)
AEON: Purchase of land in Johor aborted. Aeon Co (M) has
terminated an MYR34.85m acquisition of a piece of land measuring 20 acres
in Batu Pahat, Johor, earmarked for the construction of a shopping
centre. This was due to the non-fulfilment of the condition precedents
within the conditional period and both parties not reaching an agreement
to further extend the conditional period. The company will seek the
refund of the earnest deposit, balance deposit, first and second payment
totaling MYR13.94m from the vendor pursuant to the terms and conditions
of the sale and purchase agreement. (Source: The Sun Daily)
Carimin Petroleum: Carimin, Thailand’s Emas Energy team
up. Carimin Petroleum has inked a collaboration agreement with Emas
Energy Services (Thailand) Ltd to pursue tender bids involving
decommissioning, well plug and abandonment services in Malaysia and other
countries. Both parties will jointly discuss and mutually agree on the
possibility of the next level of business collaborations, including
consortium/joint operation and joint venture. The collaboration agreement
will be valid for one year from yesterday. (Source: The Sun Daily)
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