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Share
Price:
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MYR3.32
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Target
Price:
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MYR4.06
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Recommendation:
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Buy
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49%-owned FPSO
Lam Son’s charter terminated
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The termination of its 49%-owned FPSO Lam Son, effective 1
Jul 2017 is a negative surprise. We estimate that the compensation fees
will more than offset outstanding loans but FY18-FY20 earnings/ NPV
will be lower by 7-14% (-MYR18m-49m)/ 7% (-29sen) respectively,
reducing our SOP-based TP to MYR4.06 from MYR4.35. We do not rule out a
sizeable impairment in FY18 on this matter. This aside, FPSO Allan is
another potential risk, which could further cut our NPV by 22sen/shr.
Remain BUY.
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FYE Jan (MYR m)
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FY16A
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FY17A
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FY18E
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FY19E
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Revenue
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1,038.6
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764.2
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812.7
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1,139.7
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EBITDA
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261.0
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283.8
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470.4
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697.6
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Core net profit
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173.1
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219.5
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227.2
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274.4
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Core EPS (sen)
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16.2
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20.6
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21.3
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25.7
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Core EPS growth (%)
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17.5
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26.8
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3.5
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20.8
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Net DPS (sen)
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1.5
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16.8
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1.8
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1.9
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Core P/E (x)
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20.5
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16.1
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15.6
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12.9
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P/BV (x)
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1.6
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1.5
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1.4
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1.3
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Net dividend yield (%)
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0.4
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5.1
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0.6
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0.6
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ROAE (%)
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12.0
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8.5
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9.3
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10.6
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ROAA (%)
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4.8
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3.9
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3.6
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4.3
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EV/EBITDA (x)
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15.6
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21.4
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13.8
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8.7
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Net debt/equity (%)
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51.9
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114.7
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119.9
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92.4
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NEWS
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Outside Malaysia:
U.S: Manufacturing kept expanding at robust pace in March,
demonstrating momentum in an industry that struggled for the better part
of the last two years, Institute for Supply Management data showed. ISM’s
diffusion index eased to 57.2 from February’s 57.7, which was the highest
since August 2014; readings above 50 indicate growth. Measure of orders
cooled to 64.5 in March from 65.1. Factory employment gauge climbed to
58.9, the strongest reading since June 2011, from 54.2. Prices-paid index
increased to 70.5, the highest since May 2011, from 68. (Source:
Bloomberg)
E.U: Unemployment fell to the lowest in almost eight years
and a measure of manufacturing accelerated as factories in the region’s
biggest economies benefited from improving global growth. The average
jobless rate declined to 9.5% in February from 9.6% in January. It’s been
decreasing steadily from a peak of more than 12% in 2013 and is now at
the lowest since May 2009. Separately, IHS Markit said its Purchasing
Managers’ Indexes for Germany, France and Italy all rose in March,
helping to pushing its euro-region gauge to the highest since 2011. New
export business increased in all three nations. (Source: Bloomberg)
U.K: Manufacturing unexpectedly cooled for a third month
in March and may weaken further this quarter, according to IHS Markit.
Its factory Purchasing Managers Index declined to 54.2 from 54.5 in
February, above the key 50 level that divides expansion from contraction.
The factory survey “compared favorably” to its long-run trend, according
to Markit, with the slowdown centered on consumer-goods producers. While
manufacturing probably made a “solid contribution” to economic growth in
the first quarter, there’s been a definite loss of momentum. (Source:
Bloomberg)
Crude Oil: Libya’s oil production said to rebound as
biggest field reopens. Libya’s crude production rebounded to about
660,000 barrels a day as the OPEC nation’s biggest oil field resumed
output after about a week of disruption. Force majeure on the Zawiya
export terminal was lifted after pumping resumed at Sharara, the nation’s
biggest oil field, Mustafa Sanalla, chairman of Libya’s state-run
National Oil Corp., said. Libya’s overall production is 660,000 barrels a
day, according to a person familiar with the matter who isn’t authorized
to speak to the media and asked not to be identified. Libya’s output had
dropped to about 500,000 barrels a day last week when production was
halted at Sharara, according to the same person. (Source: Bloomberg)
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Other News:
Alam Maritim: Bags MYR26m marine transport contract. The
group has bagged a MYR26.09m job to supply a 40-tonne utility boat for
the Terengganu Crude Oil Terminal Operation in Kerteh, Malaysia.It
secured the contract from Petronas Maritime Services S/B a subsidiary of
MISC. The contract is valid for four years and 211 days, and carries a
one-year optional extension. (Source: The Edge Financial Daily)
Chin Hin: Acquires Mi Polymer for MYR35m.The group has
acquired Mi Polymer Concrete Pipes S/B for MYR35m. Further to the
acquisition Mi Polymer had made a profit guarantee of MYR6m to the group
this year and would contribute positively to group earnings. Mi Polymer
was in midst of constructing its second factory costing MYR2m, which was
expected to be completed by the end of this year. Currently, Chin Hin’s
orderbook stands at about MYR300m, including MYR10m from Mi Polymer,
which would last the group for three years. (Source: The Star)
Kelington: Secures MYR19.3m worth of new contracts in
China. Kelington has secured two new contracts in China from a global
multinational corporation semiconductor manufacturer worth MYR19.3m. The
contracts commence immediately, with targeted completion in December.
Separately, Kelington said it has now secured up to MYR76.05m worth of
new orders in the first quarter of 2017, bringing its current outstanding
orderbook total to MYR239.3m.(Source: The Edge Financial Daily)
HSS Engineers: Associate lands MYR18m high-speed rail
contract. Its associate company, HSS Integrated S/B, has received a
MYR17.89m Reference Design Consultant 05 (RDC05) deal for the Kuala
Lumpur-Singapore High-Speed Rail (HSR). The scope of RDC05 comprises all
of HSR infrastructure required from the state border between Malacca and
Johor to the northern end of the Iskandar Puteri Station. HSS Engineers
said the contract was for 12 months and would start within 2Q17. (Source:
The Star)
MMC: To fully own Penang Port. The group has proposed to
acquire the remaining 51% equity interest in Penang Port S/B from Seaport
Terminal (Johore) S/B for MYR220m cash. MMC said the proposed acquisition
would enable it to be in full control of Penang Port and be in the
position to determine its future strategic direction, which is in line
with its initiative to make further strategic investments in ports and
logistics. (Source: The Sun Daily)
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