Thursday, May 18, 2017

Cahya Mata Sarawak : Bullish on FY17 prospects

MRCB : Proposed rights issue to raise up to RM2.86bil                                                    BUY

We maintain our BUY call on MRCB with an unchanged fair value of RM1.89, based on a 10% discount to its RNAV. We make no changes to our earnings forecasts. MRCB has proposed to undertake a renounceable rights issue of up to 2.86bil new ordinary shares in MRCB together with up to 571.3mil free detachable warrants on the basis of one rights share for every one (1 for 1) existing MRCB share held and one free rights warrant for every five rights shares subscribed for (1 for 5), on an entitlement date to be determined later.

The issue price for the rights issue and the exercise price for the warrants will be determined at a later date based on a discount of not less than 20% and a premium of not less than 20% to the theoretical ex-rights price respectively. Under the minimum scenario, the enlarged total issued share capital of MRCB will increase to 4.35bil shares, while under the maximum scenario, the enlarged share capital will increase to 5.71bil shares, after the full exercise of ESOS and warrants. Using an indicative rights issue price of RM1.00 and exercise price of RM1.60 for the warrants, this exercise will raise RM2.17bil (minimum scenario) or up to RM2.86bil (maximum scenario). We are surprised by the proposal. On the positive side, the proposal will have an immediate impact in reducing the gearing of MRCB, which will translate into lower interest costs for the group, and better earnings trajectory. However, we believe the substantially enlarged share base of MRCB may have a dilutive impact on the earnings per share of the group moving forward, which will be negative for the shareholders. 

Others :
Cahya Mata Sarawak : Bullish on FY17 prospects                                                                                BUY
Carlsberg Brewery : Valuations fairly reflective of outlook                                             HOLD
Inari Amertron : Iris scanning chip production up and running                                      HOLD
Mah Sing Group : Titiwangsa land acquisition is earnings, cash flow positive          HOLD
UEM Sunrise : Positive start to the year Hold

Malayan Flour Mills,Mitrajaya Holdings,BP Plastics Holding,Lii Hen Industries

Malaysia : 4th month of negative returns

Plantation Sector : Malaysian palm oil price registers sharpest daily gain in a week
Priceworth International : Priceworth gets green light to log at Sabah forest reserve
Anzo Holdings : Anzo swings back to the black in Q4

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