Wednesday, April 19, 2017

Property: Property market sees continued softening. The property market continued to soften in 2016, recording a fall in both volume and value of transactions with almost all sub-sectors recording decline in market activity. According to the Property Market Report 2016 launched by the Valuation & Property Services Department yesterday, transaction volume fell 11.5% to 320,000 while transaction value fell 3% to MYR145.4b last year. (Source: The Sun Daily)






RHB Bank | Credit costs a wild card
Desmond Ch'ng







CapitaLand Malaysia Mall Trust | 1Q17: Earnings in line
Kevin Wong









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COMPANY RESEARCH





TP Revision





RHB Bank (RHBBANK MK)
by Desmond Ch'ng





Share Price:
MYR5.12
Target Price:
MYR5.45
Recommendation:
Hold




Credit costs a wild card

We think that RHB’s Singapore O&G exposure is manageable and positively, management does not envisage any capital raising post MFRS9. Credit cost is a wild card – every 50bp reduction in our estimates would raise earnings by 2.8%. Our FY18/FY19 earnings forecasts are marginally raised by 2% to factor in higher non-interest income. Maintain HOLD but we roll forward our valuation base year to FY18 on an unchanged P/BV of 0.9x (9.7% ROE), thus raising our TP marginally to MYR5.45 (+20sen).



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Operating income
6,174.7
6,193.2
6,447.7
6,756.0
Pre-provision profit
2,545.0
3,094.5
3,321.9
3,526.8
Core net profit
1,798.4
1,874.6
2,131.2
2,265.8
Core EPS (MYR)
0.69
0.49
0.53
0.57
Core EPS growth (%)
(3.3)
(29.7)
9.3
6.3
Net DPS (MYR)
0.12
0.12
0.16
0.17
Core P/E (x)
7.4
10.5
9.6
9.1
P/BV (x)
1.0
0.9
0.9
0.8
Net dividend yield (%)
2.3
2.3
3.1
3.3
Book value (MYR)
5.11
5.42
5.62
6.05
ROAE (%)
9.9
9.5
9.6
9.7
ROAA (%)
0.8
0.8
0.9
0.9










Results Review





CapitaLand Malaysia Mall Trust (CMMT MK)
by Kevin Wong





Share Price:
MYR1.59
Target Price:
MYR1.55
Recommendation:
Hold




1Q17: Earnings in line

1Q17 results were within expectations. The slower YoY earnings was due to lower occupancy rates and negative rental reversions at the three malls. We nudge down FY17’s earnings forecasts by 2% but maintain FY18-19’s after factoring in a temporary pullback of The Mines’ occupancy rate. Our DDM-TP is unchanged at MYR1.55 (cost of equity: 8.2%) due to marginal impact to our valuation.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
344.8
372.6
377.0
394.2
Net property income
226.4
248.2
257.5
271.0
Distributable income
162.8
171.1
180.3
193.7
DPU (sen)
7.7
7.6
8.0
8.5
DPU growth (%)
(3.5)
(2.0)
4.9
6.6
Price/DPU(x)
20.5
21.0
20.0
18.7
P/BV (x)
1.2
1.2
1.2
1.2
DPU yield (%)
4.9
4.8
5.0
5.3
ROAE (%)
6.3
6.1
6.3
6.8
ROAA (%)
4.1
4.0
4.1
4.4
Debt/Assets (x)
0.3
0.3
0.3
0.3








MACRO RESEARCH






Sticky jobless rate amid high youth unemployment
by Suhaimi Ilias


Economics Research





Unemployment rate stayed at 3.5% for the third consecutive month in Feb 2017 and have been hovering at 3.4%-3.5% since Dec 2015. Maintained our full-year average unemployment rate forecasts of 3.4%.












Technology Index grasping sky
by Tee Sze Chiah


Technical Research





FBMKLCI rose 6.67pts to 1,740.60 yesterday, tracking gains in overnight US markets. Broader market was equally jovial, with gainers outpacing losers by 552 to 327. A total of 2.78b shares worth MYR2.45b changed hands. Technically, the bullish Harami candlestick pattern formed on Monday was followed by a white candle yesterday. This implies that momentum now favours the bull. However, subdued performance in overnight US market may pare down interest today.







NEWS


Outside Malaysia:

Global: IMF raises forecast while warning of protectionism threat. The emergence of protectionist forces could undermine a modest brightening of the global growth outlook and is putting severe strain on the post-World War II economic order, the International Monetary Fund said. The IMF raised its forecast for global growth to 3.5% this year, up 0.1 percentage point from January the Washington-based fund said in the latest update to its World Economic Outlook. Expansion will pick up to 3.6% in 2018, unchanged from the projection three months ago. The upgrade offers a glimmer of optimism following a trend in recent years of the fund downgrading its growth forecasts. The pickup is being fueled by “buoyant” financial markets and a long-awaited cyclical recovery in manufacturing and trade, the IMF said. Still, global growth remains subdued compared with past decades, and the risk of “trade warfare” is still hanging over the world economy, IMF chief economist Maurice Obstfeld warned. (Source: Bloomberg)

U.S: Factory production falls most since August on autos. Output at U.S. manufacturers fell in March by the most since August as production of automobiles and parts and business equipment declined, Federal Reserve data showed. Factory production dropped 0.4%, following a 0.3% rise in February. Total industrial production gained 0.5% on a record jump in utility output. Capacity utilization, which measures the amount of a plant that is in use, rose to 76.1% from 75.7% in the prior month. (Source: Bloomberg)

U.S: Housing starts fell in March to a four-month low as starts of single-family properties settled back from the strongest pace in almost a decade. Residential starts decreased 6.8% to a 1.22 million annualized rate from a 1.30 in February. Permits, a proxy for future construction, climbed 3.6% to a 1.26 million annualized rate in March. (Source: Bloomberg)

U.K: May sees election opportunity in Brexit economy’s sweet spot. The U.K. economy is in a sweet spot and Theresa May’s not letting it go to waste. The lowest unemployment in more than a decade and forecast- defying growth give the U.K. prime minister a favorable backdrop for the snap vote she called. That positive environment was reinforced just hours after her announcement when the International Monetary Fund published a huge upgrade to Britain’s outlook. May’s unexpected gamble on an early national election on June 8 is aimed at strengthening her hand going into the talks on leaving the European Union. (Source: Bloomberg)

China: Outbound investment continued to slump in March as foreign acquisitions remained under tight scrutiny amid efforts to curb capital outflows. Outward direct investment dropped to USD 7.11b in March, down 30.1% YoY, the Ministry of Commerce said. ODI fell 48.8% YoY to USD 20.5b in the first quarter. The slump follows record overseas purchases last year, when firms snapped up everything from soccer teams to property. (Source: Bloomberg)





Other News:

Property: Property market sees continued softening. The property market continued to soften in 2016, recording a fall in both volume and value of transactions with almost all sub-sectors recording decline in market activity. According to the Property Market Report 2016 launched by the Valuation & Property Services Department yesterday, transaction volume fell 11.5% to 320,000 while transaction value fell 3% to MYR145.4b last year. (Source: The Sun Daily)

Vivocom: Bags MYR44.71m worth of contracts. The group has secured three contract wins with a combined value of MYR44.71m, for the installation of aluminium and glazing works. Two of the contracts were awarded by PJD Construction S/B, comprising a MYR6.01m contract for design, fabrication, supply, delivery and installation of aluminium and glazing works for a hotel, and another MYR13.5m deal for two blocks of serviced apartments. Both projects are located in Pahang. Another contract — worth RM25.2 million — was awarded by Setiakon Builders Sdn Bhd for aluminium and glazing works for four 40-storey serviced apartment blocks in Damansara, Selangor. (Source: The Edge Financial Daily)

ML Global: eyes more JVs, land buys to undertake property projects. ML Global,which is planning to diversify into property development and investment, says it is in the midst of exploratory talks to buy more lands and to undertake more joint ventures to develop small to medium scale projects. The board expects ML GLobal's existing business activities to be diversified to include property development and property investment. It anticipates the net profit from the new businesses may contribute over 25% of the total net profits of ML Global in future financial years. (Source: The Edge Financial Daily)


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