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FEATURE
CALLS
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China | Regional Auto
Proton-Geely
eyes the ASEAN region
Ivan Yap
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Share
Price:
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MYR4.85
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Target
Price:
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MYR6.00
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Recommendation:
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Buy
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Exploring the
value ZON-e
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We like Atlan for its inorganic growth catalysts,
resilient earnings, healthy balance sheet and favourable dividend
support which could compensate for its limited near-term earnings
growth. Atlan is deep in value from a SOP perspective. Potential total
return is 27% based on our MYR6.00 SOP-TP and 3.2% FY18 net yield.
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FYE Feb (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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768.1
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809.4
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812.2
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834.0
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EBITDA
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107.8
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118.9
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113.5
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122.2
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Core net profit
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50.7
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38.4
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39.5
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40.8
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Core EPS (sen)
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20.0
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15.1
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15.6
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16.1
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Core EPS growth (%)
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40.4
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(24.3)
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2.9
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3.4
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Net DPS (sen)
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17.5
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22.5
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15.6
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16.1
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Core P/E (x)
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24.3
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32.0
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31.1
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30.1
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P/BV (x)
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3.1
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2.6
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3.8
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3.8
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Net dividend yield (%)
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3.6
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4.6
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3.2
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3.3
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ROAE (%)
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10.8
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12.4
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9.8
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12.6
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ROAA (%)
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6.5
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4.4
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4.0
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3.8
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EV/EBITDA (x)
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11.4
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9.8
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11.9
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10.8
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Net debt/equity (%)
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6.8
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net cash
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net cash
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net cash
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Share
Price:
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MYR6.13
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Target
Price:
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MYR7.00
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Recommendation:
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Buy
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Earnings expand
on lower credit costs in 1Q17
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1Q17 was a decent operating quarter for CIMB Group and our
forecasts are maintained. ROEs are expected to expand further in FY18
and as it stands, our FY18E ROE of 10.2% trails management’s target of
10.5-11%. Amid better prospects ahead, we keep our BUY call with a
higher TP of MYR7.00 (+70sen), pegging on a higher PBV of 1.2x to
reflect the overall improvement in the operating environment and the
potential for upside surprises to earnings if credit costs come in
lower than expected.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Operating income
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15,395.8
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16,065.3
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16,982.4
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17,970.3
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Pre-provision profit
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6,146.8
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7,413.6
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8,116.0
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8,834.7
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Core net profit
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3,411.2
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3,414.4
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4,393.8
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4,995.3
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Core EPS (MYR)
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0.40
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0.39
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0.50
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0.56
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Core EPS growth (%)
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5.6
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(2.4)
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26.1
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13.7
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Net DPS (MYR)
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0.14
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0.20
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0.25
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0.28
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Core P/E (x)
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15.2
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15.6
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12.4
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10.9
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P/BV (x)
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1.3
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1.2
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1.1
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1.1
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Net dividend yield (%)
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2.3
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3.3
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4.1
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4.6
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Book value (MYR)
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4.87
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5.24
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5.38
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5.66
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ROAE (%)
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8.7
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7.9
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9.5
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10.2
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ROAA (%)
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0.8
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0.7
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0.9
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0.9
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Share
Price:
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MYR2.94
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Target
Price:
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MYR3.75
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Recommendation:
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Buy
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BUY opportunity
emerged?
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AirAsia’s share price tumbled by 14% in the past two days
as investors take caution as many airlines have reported weak 1Q17
results. We believe that AirAsia’s 1Q17 profits will not disappoint as
the short-haul market remains strong. We estimate a core net profit of
MYR360m (-21% YoY), the lower YoY profit is expected as 2016 was an
exceptional year. Valuations have turned attractive; AirAsia is the
second cheapest LCC globally. BUY with a TP of MYR3.75, based on
unchanged 10x 2017 PER.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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6,297.7
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6,923.9
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7,058.0
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7,678.5
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EBITDAR
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2,629.9
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3,276.6
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2,900.0
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2,801.7
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Core net profit
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177.7
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1,557.6
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1,238.9
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1,280.7
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Core EPS (sen)
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6.4
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56.0
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37.4
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38.6
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Core EPS growth (%)
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434.5
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776.1
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(33.2)
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3.4
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Net DPS (sen)
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3.0
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4.0
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45.0
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9.0
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Core P/E (x)
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46.0
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5.3
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7.9
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7.6
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P/BV (x)
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1.8
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1.2
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1.3
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1.1
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Net dividend yield (%)
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1.0
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1.4
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15.3
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3.1
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ROAE (%)
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12.0
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36.8
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17.5
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15.2
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ROAA (%)
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0.9
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7.2
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5.9
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6.1
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EV/EBITDAR (x)
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5.2
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4.6
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4.1
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4.9
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Net debt/equity (%)
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228.9
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133.7
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27.5
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45.2
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Share
Price:
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MYR2.42
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Target
Price:
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MYR2.95
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Recommendation:
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Buy
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Surprises on the
downside
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1Q17 core net profit of MYR19m (-53% QoQ, -2% YoY) missed
estimates at just 16%/20% of our/consensus FY17 forecasts with
underperformance coming from the auto parts manufacturing operations
and its auto parts JV. Taking into account the weak 1Q17, and slower
recovery of its auto parts operations, we cut FY17-19 earnings
forecasts by 6%-12%. Correspondingly, our TP is lowered to MYR2.95,
based on unchanged 10x FY18 PER peg. Maintain BUY on MBM for exposure
to Perodua.
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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1,774.1
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1,815.1
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1,670.2
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1,866.3
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EBITDA
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17.8
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49.7
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(24.3)
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35.1
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Core net profit
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112.2
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87.6
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102.6
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104.2
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Core EPS (sen)
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28.7
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22.4
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26.2
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26.7
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Core EPS growth (%)
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(18.8)
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(21.9)
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17.1
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1.6
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Net DPS (sen)
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8.0
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10.0
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6.0
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8.0
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Core P/E (x)
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8.4
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10.8
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9.2
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9.1
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P/BV (x)
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0.6
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0.6
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0.6
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0.6
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Net dividend yield (%)
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3.3
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4.1
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2.5
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3.3
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ROAE (%)
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7.6
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5.4
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4.2
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6.3
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ROAA (%)
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4.6
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3.7
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4.3
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4.3
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EV/EBITDA (x)
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91.1
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28.2
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nm
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41.6
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Net debt/equity (%)
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11.2
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8.8
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10.5
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10.0
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Share
Price:
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MYR1.78
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Target
Price:
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MYR1.75
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Recommendation:
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Hold
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Slow start to
the year
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Adjusted for FX gains, TSH’s 1Q17 core earnings were
within expectations. Earnings were off to a slow start as its post El
Nino output recovery (+10% YoY) has lagged peers. Nonetheless, we
expect output and earnings to play catch up in the coming quarters,
especially in the final quarter. Trading at 19x FY17 PER, its 5-year
historical mean, TSH remains a HOLD with unchanged TP of MYR1.75 on 19x
2017 PER.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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799.5
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872.5
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1,094.6
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1,137.6
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EBITDA
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173.6
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180.8
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186.6
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225.7
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Core net profit
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75.5
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72.4
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123.5
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157.3
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Core EPS (sen)
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5.6
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5.4
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9.2
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11.7
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Core EPS growth (%)
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(43.0)
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(4.1)
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70.6
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27.4
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Net DPS (sen)
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2.0
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2.0
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2.8
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3.5
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Core P/E (x)
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31.7
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33.1
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19.4
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15.2
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P/BV (x)
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1.8
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1.6
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1.5
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1.4
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Net dividend yield (%)
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1.1
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1.1
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1.5
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2.0
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ROAE (%)
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(8.1)
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4.0
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8.0
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9.6
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ROAA (%)
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2.6
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2.2
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3.5
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4.3
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EV/EBITDA (x)
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23.7
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22.4
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21.0
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17.4
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Net debt/equity (%)
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88.4
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84.3
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77.9
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72.6
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Share
Price:
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MYR1.16
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Target
Price:
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MYR1.22
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Recommendation:
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Hold
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A relatively
good start to 2017
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1Q17 results were in-line. We are keeping our earnings
forecasts unchanged as our estimated all-in cost of production of
~MYR2,200/t for 2017 remains a key concern as we anticipate lower CPO
price in 2H17. Trading at 22x 2017 PER, THP remains a HOLD with an
unchanged TP of MYR1.22 on 0.8x trailing P/NTA (-1SD of 3-year mean).
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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455.3
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562.3
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532.0
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569.1
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EBITDA
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110.2
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172.7
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195.8
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203.5
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Core net profit
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13.3
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46.1
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47.4
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49.4
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Core EPS (sen)
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1.5
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5.2
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5.4
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5.6
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Core EPS growth (%)
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(61.4)
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247.3
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2.7
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4.2
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Net DPS (sen)
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0.0
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6.0
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1.6
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1.7
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Core P/E (x)
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77.2
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22.2
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21.6
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20.8
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P/BV (x)
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0.8
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0.7
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0.7
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0.7
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Net dividend yield (%)
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0.0
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5.2
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1.4
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1.4
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ROAE (%)
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5.0
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11.0
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3.3
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3.4
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ROAA (%)
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0.4
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1.3
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1.3
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1.4
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EV/EBITDA (x)
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23.0
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14.2
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12.8
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12.0
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Net debt/equity (%)
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71.4
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63.6
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63.4
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59.3
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Chee Ting Ong
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Amirah Azmi
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Share
Price:
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MYR1.42
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Target
Price:
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MYR1.10
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Recommendation:
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Sell
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1Q17: Below
expectations
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1Q17 results fell short mainly due to weaker-than-expected
sales growth and higher-than-expected operating expenses (ie. minimum
wage hike). We believe that focus on cost efficiencies should continue
in the near term. We cut FY17/18/19 earnings forecasts by 19%/14%/11%
after lowering our new stores opening assumption to 145 p.a. for
FY17-19 (from 160-180 p.a.) and assuming higher opex. Maintain SELL
with a lower MYR1.10 TP (-20sen) on an unchanged 26x CY18 PER.
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FYE Dec (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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2,006.3
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2,103.4
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2,170.7
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2,434.1
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EBITDA
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127.4
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126.5
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116.0
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133.5
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Core net profit
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55.8
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54.0
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41.0
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52.5
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Core EPS (sen)
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4.6
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4.4
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3.3
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4.3
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Core EPS growth (%)
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(3.3)
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(3.3)
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(24.0)
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28.0
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Net DPS (sen)
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4.7
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4.7
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1.7
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2.1
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Core P/E (x)
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31.2
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32.2
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42.4
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33.2
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P/BV (x)
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10.2
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49.4
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31.2
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21.2
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Net dividend yield (%)
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3.3
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3.3
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1.2
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1.5
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ROAE (%)
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27.5
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52.5
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90.2
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76.3
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ROAA (%)
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7.5
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7.1
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5.2
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6.1
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EV/EBITDA (x)
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13.8
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14.3
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15.4
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13.1
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Net debt/equity (%)
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net cash
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188.2
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88.5
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7.5
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Share
Price:
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MYR0.87
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Target
Price:
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MYR0.77
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Recommendation:
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Sell
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Plying at murky
water
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Substantially weaker 3QFY6/17 was below our expectation
with all segments posted weaker earnings. Outlook is getting tougher
due to the slow EPCC market as well as the scrapping of the cabotage
policy (wef. Jun 2017), which may result in foreign shipping operators
competing for the niche East-West Malaysia cargoes. We cut our FY17-19
EPS forecasts by 33-43% and also lower our SOP-based TP to MYR0.77
(-14%), indicating CY18 PER of 11x (mean: 7x). Downgrade to SELL (from
HOLD).
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FYE Jun (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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507.0
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592.7
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513.8
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567.6
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EBITDA
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97.4
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133.3
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65.7
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78.8
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Core net profit
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48.2
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59.0
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19.8
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30.2
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Core EPS (sen)
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12.0
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14.7
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4.9
|
7.5
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Core EPS growth (%)
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44.2
|
22.5
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(66.5)
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52.7
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Net DPS (sen)
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2.5
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2.0
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1.0
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1.5
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Core P/E (x)
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7.2
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5.9
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17.6
|
11.5
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P/BV (x)
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1.2
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1.1
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1.0
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0.9
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Net dividend yield (%)
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2.9
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2.3
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1.1
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1.7
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ROAE (%)
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na
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na
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na
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na
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ROAA (%)
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9.0
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10.0
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3.3
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4.9
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EV/EBITDA (x)
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5.1
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3.1
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5.7
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4.5
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Net debt/equity (%)
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net cash
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0.4
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net cash
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net cash
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SECTOR RESEARCH
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Proton-Geely eyes the ASEAN region
by Ka
Leong Lo
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In perhaps the most-anticipated marriage in Malaysia’s
auto industry, Zhejian Geely (ZG), parent of Geely Automotive (175
HK, BUY, TP HKD12.80), has emerged as the new strategic partner of
Proton. It has proposed to acquire 49.9% of Proton from DRB-HICOM (DRB
MK, Not Rated). We view this development positively for Malaysia's
auto sector, which could emerge as a secondary car export hub by
riding on Geely's strong brand name and developed platforms to
penetrate the ASEAN markets.
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Rystad Energy’s Information Session: Key takeaways
by Thong
Jung Liaw
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Rystad Energy, an independent upstream database &
advisory firm with its headquarter in Norway recently hosted its
in-house O&G session, sharing its thoughts on shale development,
OPEC’s strategy, assessment and outlook of the O&G sector, just
to name a few. In total, it expects a stronger oil price outlook,
increase in global investment spending and shale growth. Our key BUYs
are SapE, Yinson, Dialog and Wah Seong.
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MACRO RESEARCH
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Gold futures: Trend favours the bear
by Tee
Sze Chiah
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FBMKLCI rose 3.84pts to 1,771.01 yesterday. Sentiment,
however, was cautious throughout the day. There were 546 losers and
419 gainers. Turnover was 3.37b shares valued at MYR2.89b. Today,
expect market to remain lethargic as disappointing corporate earnings
and worries over faster rate hike in the US would weigh on the
benchmark. Technically, resistance is at 1,777 while downside
supports are 1,754 and 1,744.
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NEWS
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Outside Malaysia:
U.S: Most Fed officials saw tightening soon, favored
unwind plan. Most Federal Reserve officials judged “it would soon be
appropriate” to tighten monetary policy again and backed a plan that
would gradually shrink their USD 4.5tr balance sheet. “Most participants
judged that if economic information came in about in line with their
expectations it would soon be appropriate for the committee to take
another step in removing some policy accommodation,” according to minutes
from the Federal Open Market Committee’s May 2-3 gathering released in
Washington. (Source: Bloomberg)
China: Moody’s Investors Service cut its rating on debt
for the first time since 1989, challenging the view that the nation’s
leadership will be able to rein in leverage while maintaining the pace of
economic growth. Stocks and the yuan slipped in early trading after
Moody’s reduced the rating to A1 from Aa3, with markets paring losses in
the afternoon. Moody’s cited the likelihood of a “material rise” in
economy-wide debt and the burden that will place on the state’s finances,
while also changing the outlook to stable from negative. (Source:
Bloomberg) Singapore: Posts smaller GDP contraction than earlier
estimated, underpinned by a pick-up
Singapore: Posts smaller GDP contraction than earlier
estimated, underpinned by a pick-up in manufacturing. Gross domestic
product declined an annualized 1.3% in the first quarter from the
previous three months, according to a revised estimate from the Ministry
of Trade and Industry; it projected a 1.9% decline last month. Compared
with a year earlier, GDP rose 2.7% YoY. The government maintained its GDP
growth forecast for 2017 of 1% to 3%, and said the economy will likely
grow faster than the 2% expansion in 2016, barring any downside risks.
(Source: Bloomberg)
Thailand: Central bank held its key interest rate near a record
low to support economic growth that’s lagging peers in Southeast Asia.
The one-day bond repurchase rate was left at 1.5%, with monetary policy
committee members voting unanimously in favor, the Bank of Thailand said.
The central bank has kept rates steady since 2015, refraining from easing
policy despite muted inflation pressures and calls by the International
Monetary Fund to spur flagging consumption and investment. (Source:
Bloomberg)
Crude Oil: OPEC set to prolong cuts as effort to clear oil
glut goes slow. OPEC and its allies were poised to extend their
production cuts for another nine months after last year’s agreement
failed to clear a global supply glut or deliver a sustainable price
recovery. Six months after forming an unprecedented coalition of 24
nations and delivering output reductions that exceeded all expectations,
some of the world’s largest oil producers faced the fact that they’d
fallen well short of their goal. The sluggish decline in fuel stockpiles
isn’t their only concern. U.S. crude production rose to 9.32 million
barrels a day last week, an increase of 550,000 this year to the highest
since August 2015, according to data from the Energy Information
Administration. That wipes out almost a third of the supply reduction
from OPEC and its allies and the output surge could double by year-end,
consultant IHS Markit Ltd. told the group at a meeting last week.
(Source: Bloomberg)
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Other News:
Sarawak Cable: Unit bags MYR81.37m transmission line job
from TNB. Its wholly-owned subsidiary Trenergy Infrastructure S/B has
bagged an MYR81.37m job from Tenaga Nasional. The contract — for the
double circuit 500kV overhead transmission line from Alor Gajah to Bahau
South in Melaka — is expected to contribute to its books from FY17 to
FY19. (Source: The Edge Financial Daily)
Sentoria: Bags MYR61m design and build job. Its
wholly-owned subsidiary Sentoria Bina S/B will undertake a construction
project involving 506 units of single-storey semi-detached houses in
Pahang worth MYR60.8m. The job was awarded by HA Properties S/B. It is
set to start on July 1, to be completed by Jun 30, 2019. (Source: The
Edge Financial Daily)
Hap Seng Plantations: 1Q profit jumps 105% with higher CPO
prices.Net profit jumped 105% in its first quarter ended March 31
(1QFY17) to MYR34.1m from MYR16.6m a year ago, thanks to higher crude
palm oil and palm kernel selling prices. Quarterly revenue climbed 38% to
MYR144.10m from MYR104.16m last year. (Source: The Edge Financial Daily)
Sunsuria: 2Q net profit surges over fivefold on strong
sales. Net profit for the second quarter ended March 31 (2QFY17) surged
more than fivefold to MYR18m, from MYR3.15m on the back of strong sales.
Quarterly almost tripled to MYR103.68m from MYR38.82m a year earlier. The
group is venturing into construction, having acquired 51% stake in
construction company Prosperspan Construction S/B — now known as Sunsuria
Asas S/B — just last month. (Source: The Edge Financial Daily)
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