Thursday, May 11, 2017

Gadang Holdings: Gadang JV secures MYR327m job. Gadang CRFG Consortium S/B a 51:49 joint venture between Gadang Engineering (M) S/B and CRFG Malaysia has bagged a MYR327.90m contract from TRX City S/B to upgrade part of the Jalan Tun Razak highway. The contract involves the traffic dispersal and upgrading the stretch from Jalan Langgak Golf to the Kampung Pandan roundabout. (Source: The Star)






YTL Power | A resolution finally
Chi Wei Tan







Ta Ann | Negative surprise on its timber
Chee Ting Ong







Gas Malaysia | No clear read-through
Chi Wei Tan







Hartalega | Strong 4Q but expected
Yen Ling Lee









break





Malaysia | Construction Index: northern wall broken
Nik Ihsan Raja Abdullah








break


COMPANY RESEARCH





Company Update





YTL Power (YTLP MK)
by Chi Wei Tan





Share Price:
MYR1.51
Target Price:
MYR1.50
Recommendation:
Hold




A resolution finally

The successful conclusion to the land lease agreement (LLA) negotiations and official PPA signing puts an end to the uncertainty surrounding YTLP’s Malaysia plant. Our TP already reflects the PPA extension, as we had merely assumed a deferment in start date when the LLA impasse first began. Maintain HOLD with an unchanged TP of MYR1.50.



FYE Jun (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
11,858.1
10,240.5
9,359.9
9,729.7
EBITDA
3,112.9
2,717.8
2,599.7
2,791.0
Core net profit
894.9
872.0
697.9
846.6
Core FDEPS (sen)
12.3
11.2
9.0
10.9
Core FDEPS growth(%)
(35.2)
(8.5)
(20.0)
21.3
Net DPS (sen)
10.0
10.0
10.0
10.0
Core FD P/E (x)
12.3
13.4
16.8
13.8
P/BV (x)
0.9
0.9
0.9
0.9
Net dividend yield (%)
6.6
6.6
6.6
6.6
ROAE (%)
8.4
8.8
5.6
6.8
ROAA (%)
2.1
2.0
1.6
2.0
EV/EBITDA (x)
8.7
9.3
10.3
9.8
Net debt/equity (%)
138.5
115.6
122.7
125.1










Company Update





Ta Ann (TAH MK)
by Chee Ting Ong





Share Price:
MYR3.62
Target Price:
MYR4.25
Recommendation:
Hold




Negative surprise on its timber

The proposal to raise Sarawak’s hill timber charges to MYR50 per cu m (from 80sen) is negative on earnings. We keep our earnings forecasts for Ta Ann for now pending further clarification with management. But there is a 4-6% downside risk to our FY17-19 EPS forecasts if the revised cess is implemented. Our TP, pegged onto forward earnings, consequently has downside potential too. Maintain HOLD.



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
1,048.3
1,147.1
997.7
1,048.0
EBITDA
328.2
277.6
277.6
313.6
Core net profit
177.3
121.6
125.9
138.1
Core EPS (sen)
39.9
27.3
28.3
31.0
Core EPS growth (%)
74.7
(31.4)
3.5
9.7
Net DPS (sen)
16.7
10.0
12.7
14.0
Core P/E (x)
9.1
13.2
12.8
11.7
P/BV (x)
1.4
1.3
1.2
1.1
Net dividend yield (%)
4.6
2.8
3.5
3.9
ROAE (%)
16.7
9.9
9.6
9.9
ROAA (%)
9.2
6.0
5.8
6.0
EV/EBITDA (x)
6.2
6.8
7.0
5.9
Net debt/equity (%)
11.2
5.5
20.5
11.0










Rating Change





Gas Malaysia (GMB MK)
by Chi Wei Tan





Share Price:
MYR3.10
Target Price:
MYR3.20
Recommendation:
Hold




No clear read-through

GMB’s results were in line, taking into account seasonality. GMB’s spread seemingly trended below our MYR1.90/mmBTU assumption, but we note spreads are volatile on a quarterly basis. Our earnings forecasts and MYR3.20 TP are unchanged. With the share price now approaching our TP, we downgrade the stock to HOLD (from BUY).



FYE Dec (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
3,619.0
4,053.0
4,720.0
5,549.9
EBITDA
191.0
264.6
266.5
274.9
Core net profit
106.2
165.1
170.7
178.5
Core EPS (sen)
8.3
12.9
13.3
13.9
Core EPS growth (%)
(36.7)
55.6
3.4
4.6
Net DPS (sen)
8.3
12.9
13.3
13.9
Core P/E (x)
37.5
24.1
23.3
22.3
P/BV (x)
4.1
3.9
3.9
3.9
Net dividend yield (%)
2.7
4.1
4.3
4.5
ROAE (%)
10.7
16.6
16.7
17.5
ROAA (%)
5.5
7.7
7.7
7.7
EV/EBITDA (x)
14.9
10.2
13.5
12.9
Net debt/equity (%)
net cash
net cash
net cash
net cash










TP Revision





Hartalega (HART MK)
by Yen Ling Lee





Share Price:
MYR5.39
Target Price:
MYR5.30
Recommendation:
Hold




Strong 4Q but expected

Strong 4QFY3/17 net profit was driven by the higher sales volume as well as forex-related gains. Our FY18-19 EPS forecasts are raised marginally by 1% p.a. after updating for FY17 numbers. Our TP is also raised to MYR5.30 (+5%) as we attach its latest mean PER of 22x (from 21x) on 2018 EPS. Though near-term earnings growth momentum is strong (we project +29% in FY18), the stock is fairly valued, now trading at mean.



FYE Mar (MYR m)
FY16A
FY17A
FY18E
FY19E
Revenue
1,498.3
1,822.1
2,198.8
2,412.9
EBITDA
386.8
419.4
520.9
594.8
Core net profit
257.6
283.0
366.7
412.4
Core FDEPS (sen)
15.5
17.1
21.9
24.7
Core FDEPS growth(%)
16.3
9.8
28.6
12.5
Net DPS (sen)
8.0
8.0
10.3
11.6
Core FD P/E (x)
34.7
31.6
24.6
21.8
P/BV (x)
5.9
5.3
4.7
4.2
Net dividend yield (%)
1.5
1.5
1.9
2.1
ROAE (%)
na
na
na
na
ROAA (%)
15.1
13.3
14.9
15.0
EV/EBITDA (x)
21.0
19.9
17.7
15.5
Net debt/equity (%)
10.9
11.3
14.8
13.7








MACRO RESEARCH






Construction Index: northern wall broken
by Nik Ihsan Raja Abdullah


Technical Research





FBMKLCI failed to hold onto its early gains on Tuesday. At day’s end, the benchmark closed 1.59pts lower at 1,766.56. Broader market was relatively mixed with losers still outpacing gainers by 455 to 427. A total of 3.23b shares worth MYR2.73b were transacted. The pullback, in our view, was healthy as the index remains above the recent low of 1,754. Expect bargain hunting for today in light of strong recovery in oil price.







NEWS


Outside Malaysia:

U.S: Fed’s Rosengren favors three more 2017 hikes to foil overheating. Federal Reserve Bank of Boston President Eric Rosengren urged his policy-making colleagues to raise interest rates three more times this year and consider starting to shrink the central bank’s balance sheet after their next hike to avoid creating an “over-hot economy.” Rosengren said he, along with most economists in the Blue Chip Economic Indicators survey - expects above-potential growth over the next year, pushing unemployment even farther below its lowest sustainable level. Unemployment fell to 4.4% in April, already under his 4.7% estimate for full employment. (Source: Bloomberg)

U.K: Demand for housing dropped to a nine-month low in April in a sign the property market continues to cool, according to the Royal Institution of Chartered Surveyors. A measure of inquiries from potential buyers fell to minus 4 from 1 in March, RICS said in its monthly survey of real- estate agents. A gauge of instructions from sellers also declined. Increases in home values have slowed this year as accelerating inflation erodes household incomes and Brexit clouds the economic outlook. RICS said anecdotal evidence also pointed to a lack of properties for sale, uncertainty ahead of the June 8 general election, and a previous rise in stamp duty as hampering activity. (Source: Bloomberg)

Japan: Records another strong current-account surplus in March, supported by income from overseas investments and the profits of trade. The surplus tends to be larger in March as that’s the end of the financial year and many companies book overseas revenue, adding to the primary income surplus. Surplus was JPY 2.9tr (USD 25.4b). The primary income surplus was JPY 2.2tr. The surplus in goods trade was almost JPY 866b. (Source: Bloomberg)

Crude Oil: Holds biggest gain this year as U.S. stockpiles extend drop. Oil held its biggest gain this year as U.S. crude stockpiles fell by more than twice what had been forecast, continuing a decline from a record and easing an inventory overhang. Stockpiles dropped by 5.25 million barrels last week for a fifth weekly decline, according to government data. It’s the biggest fall this year and compares with the median estimate for a 2-million barrel decrease in a Bloomberg survey. Gasoline and distillate supplies also shrank, helping allay concerns about another gain in U.S. crude output. Brent for July settlement advanced to USD 50.22/bbl a barrel. (Source: Bloomberg)





Other News:

Gadang Holdings: Gadang JV secures MYR327m job. Gadang CRFG Consortium S/B a 51:49 joint venture between Gadang Engineering (M) S/B and CRFG Malaysia has bagged a MYR327.90m contract from TRX City S/B to upgrade part of the Jalan Tun Razak highway. The contract involves the traffic dispersal and upgrading the stretch from Jalan Langgak Golf to the Kampung Pandan roundabout. (Source: The Star)

ManagePay: Unit to facilitate card payments for new taxi e-hailing app. The group has been appointed by a joint venture company (JVCo) formed by major taxi consortiums here known as PICK N GO S/B as the sole card payment facilitator for the JVCo's taxi e-hailing mobile application. Additionally, MPay will is deploying card terminals or MPOS for the acceptance of physical card payments for up to 8,000 registered taxis in Malaysia under the consortium by end of this year.(Source: The Edge Financial Daily)

TRC Synergy : Signs agreement with Starwood Australia to manage hotel in Melbourne. Its wholly-owned subsidiary, TRC (Aust) Pty Ltd (TRCA), entered into a 12-year operating service agreement (OSA) with Starwood Australia to run the hotel known as Element Melbourne Richmond. Both parties also signed a Centralized Services Agreement for certain services provided to the hotel; and a Design Review Agreement for certain services with regards to the design and development of the hotel. (Source: The Edge Financial Daily)


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