Friday, April 21, 2017

Serba Dinamik: Inks MoA with UK firm to collaborate on MRO services. The group has proposed to team up with UK-based Nicol & Andrew Group Plc to collaborate on maintenance, repair and overhaul (MRO) and in-situ or on-site services for the Malaysian oil and gas, petrochemical, oleochemical, marine, plantation, energy, power production and distribution, water and waste water as well as general industries. (Source: The Edge Financial Daily)






Public Bank | 1Q results within expectations
Desmond Ch'ng







British American Tobacco | 1Q17: Below expectations
Liew Wei Han









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Malaysia Aviation | The good times continues
Mohshin Aziz









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COMPANY RESEARCH





TP Revision





Public Bank (PBK MK)
by Desmond Ch'ng





Share Price:
MYR19.92
Target Price:
MYR20.00
Recommendation:
Hold




1Q results within expectations

Public Bank’s 1QFY17 results were generally within expectations. We estimate the potential for a 1.4-for-1 bonus issue, should it decide to distribute its share premium account, which would be a positive. That aside, with pedestrian earnings growth of about 3-4% in FY17 and FY18, we expect ROAEs to slip to 14% in FY18 from 14.8% in FY17. Correspondingly, our TP is raised to MYR20 from MYR19.70 on rolling forward valuations but on a lower PBV multiple of 1.9x versus 2x previously.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Operating income
9,438.8
9,896.0
10,307.6
10,761.5
Pre-provision profit
6,523.6
6,684.6
6,928.6
7,237.1
Core net profit
4,955.2
5,146.4
5,296.9
5,492.7
Core EPS (MYR)
1.28
1.33
1.37
1.42
Core EPS growth (%)
9.7
3.9
2.9
3.7
Net DPS (MYR)
0.56
0.58
0.59
0.61
Core P/E (x)
15.5
14.9
14.5
14.0
P/BV (x)
2.5
2.2
2.0
1.9
Net dividend yield (%)
2.8
2.9
3.0
3.1
Book value (MYR)
8.09
8.86
9.73
10.64
ROAE (%)
16.7
15.7
14.8
14.0
ROAA (%)
1.4
1.4
1.4
1.3










TP Revision





British American Tobacco (ROTH MK)
by Liew Wei Han





Share Price:
MYR47.06
Target Price:
MYR47.10
Recommendation:
Hold




1Q17: Below expectations

1Q17 results fell short. It has yet to be seen if the illicit market share would normalise lower into the year. We understand that Customs currently has a target to reduce illicit market share by 50% over the next three years. Much of the legal industry’s volume recovery will depend on how successful Customs is in addressing the illicit issue. Any further excise tax hike freeze may also provide some breather.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
4,581.5
3,756.4
3,294.8
3,382.7
EBITDA
1,277.3
929.6
802.1
844.1
Core net profit
914.5
675.1
606.5
639.1
Core EPS (sen)
320.3
236.4
212.4
223.8
Core EPS growth (%)
0.5
(26.2)
(10.2)
5.4
Net DPS (sen)
312.0
278.0
208.2
219.3
Core P/E (x)
14.7
19.9
22.2
21.0
P/BV (x)
24.6
21.9
21.5
21.1
Net dividend yield (%)
6.6
5.9
4.4
4.7
ROAE (%)
170.0
124.4
97.9
101.1
ROAA (%)
73.4
56.2
51.7
55.0
EV/EBITDA (x)
12.8
13.8
16.8
16.0
Net debt/equity (%)
50.5
15.8
12.0
10.9







SECTOR RESEARCH






The good times continues
by Mohshin Aziz


Sector Note





We turned more positive on stronger-than-expected traffic growth which allay fears for yield erosion. Airlines are maintaining good capacity discipline and pushing load factors to new heights. Input costs are mixed due to the floundering MYR against the USD, but jet fuel is lower than forecasted and will help push for stable margins in 1Q17. We remain positive on MAHB, followed by AirAsia. We keep our HOLD call on AirAsia X as we think the risk-reward is fairly reflected in its price.









MACRO RESEARCH






Dow Jones Index recovery play
by Tee Sze Chiah


Technical Research





FBMKLCI ended 2.66pts higher yesterday amid renewed interest in selected blue chips. Broader market was equally positive with gainers outpacing losers by 498 to 368. A total of 2.64b shares worth MYR2.24b changed hands. Technically, although the benchmark is hovering above the 1,740 level, we caution that trading could be choppy in the near-term, as the index tries to establish a base above the current support level.







NEWS


Outside Malaysia:

U.S: Mortgage rates drop to five-month low with 30-year at 3.97%. The average rate for a 30-year fixed mortgage was down from 4.08% last week and the lowest since November, Freddie Mac said in a statement. The average 15-year rate decreased to 3.23% from 3.34%, the McLean, Virginia-based mortgage-finance company said. (Source: Bloomberg)

U.S: Fuel consumption climbs to highest in nine years for March. Total deliveries of petroleum products, a measure of consumption, advanced 0.2% YoY to 19.7 million barrels a day last month, the industry-funded American Petroleum Institute said. Demand increased for jet fuel and distillate fuel, a category that includes diesel and heating oil, while consumption of gasoline dropped. (Source: Bloomberg)

Germany: March tax revenue rises 7.5% YoY; Finance Ministry report. Germany’s Finance Ministry sees a “continuation of the solid growth dynamic” last quarter, according to monthly report. Germany’s current-account surplus receded “slightly” in first two months. Robust employment helped boost gross income tax revenue; intake from sales tax also increased. Labor market remains “very positive” at start of year. (Source: Bloomberg)

S. Korea: April first 20 days export rise 28.4% YoY to USD 30.37b. Imports rise 16.4% YoY to USD 25.38b, according to Korea Customs Service. Trade surplus was at USD 4.99b. (Source: Bloomberg)

Taiwan: Central bank joined its mainland counterpart in introducing new open market operations to help guide borrowing costs more precisely ahead of an expected rate increase this year. The monetary authority announced that it will give banks more flexibility in short-term fund options with securities called seven-day negotiable certificates of deposit starting Friday. The securities will be re-issued regularly, the central bank said. The certificates are intended to help complete the yield curve and offer more bidding options for the banks, according to Chen Chiu-tang, deputy director-general of central bank’s department of banking. (Source: Bloomberg)





Other News:

Serba Dinamik: Inks MoA with UK firm to collaborate on MRO services. The group has proposed to team up with UK-based Nicol & Andrew Group Plc to collaborate on maintenance, repair and overhaul (MRO) and in-situ or on-site services for the Malaysian oil and gas, petrochemical, oleochemical, marine, plantation, energy, power production and distribution, water and waste water as well as general industries. (Source: The Edge Financial Daily)

MISC: Working on FPSO deals to up offshore biz contribution. MISC is working on three to four floating, production, storage and offloading (FPSO) deals that can potentially push its offshore business contribution to make up a third of its profits, from 20% in 2016. President and group CEO Yee Yang Chien explained that profit from the offshore business can increase to one third if the three to four FPSO deals can be secured, and assuming its other segments like LNG shipping as well as petroleum and product shipping do not grow. (Source: The Sun Daily)

WZ Satu: Sees 9% growth in 2Q earnings. Net profit grew 9% in 2QFY17 to MYR5.33m, from MYR4.89m a year ago, thanks for better performance in its manufacturing and oil and gas (O&G) operations. Cumulatively, 1HFY17 recorded a net profit of MYR13.83m, which was 48% higher than MYR9.33m in 1HFY16. Its revenue expanded 23.7% over the same period to MYR268.16m, from MYR216.86m. (Source: The Edge Financial Daily)

Meda Inc: To sell The Summit Hotel Bukit Mertajam for MYR20m. The group is disposing of its hotel The Summit Hotel Bukit Mertajam in Penang for MYR20m to partially fund its working capital requirements. The price represents a premium of 45.14% over the market value of the property of MYR13m as ascribed by LaurelCap S/B on Dec 30, 2016. The proposed disposal will result in the group realising a gain of MYR6.05m. (Source: The Edge Financial Daily)


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