Westports Holdings : Challenging 2H17 outlook

STOCK FOCUS OF THE DAY

Maxis : Resilient service revenue despite subscriber loss                                               HOLD

We maintain our HOLD recommendation on Maxis with an unchanged DCF-derived fair value of RM5.76/share (based on a discount rate of 7% which is equivalent to its WACC and a terminal growth rate assumption of 2%). This implies an FY17F EV/EBITDA of 11x, 1SD below its 3-year average of 12x. Our forecasts are maintained even though Maxis’ 1HFY17 normalised net profit of RM998mil appears to be above expectations, accounting for 54% of our and 52% of street’s FY17F earnings. The group’s second interim dividend of 5 sen, which translates to a 10 sen for 1HFY17 (flat YoY), is within market expectations and management’s payout policy of 75%.

We expect subsequent quarters to be weaker due to lower data roaming revenues in tandem with the termination of Maxis’ 3G radio access network arrangement with U Mobile in stages over an 18-month period ending on 27 Dec 2018. As a comparison, 1H earnings averaged at 53% for FY14-FY16. The stock’s FY17F EV/EBITDA of 11x is almost at parity to its 3-year average, while dividend yields are decent at 4%.

Others :

Westports Holdings : Challenging 2H17 outlook                                                                  HOLD

British American Tobacco : Wary of impending regulatory hurdles                             SELL

STOCKS ON RADAR

CCK Consolidated Hldgs, Fajarbaru Builder Group, Guan Chong, Cuscapi

ECONOMIC HIGHLIGHT

Euro : Tapering decision a key watch for global markets

NEWS HIGHLIGHTS

O&G sector  : Another oil and gas casualty

Insurance sector : Foreign insurers look at RM8.58bil deals in Malaysia

Tien Wah Press Holdings : Tien Wah follows BAT lead

Bina Darulaman : Bina Darulaman unveils RM2.6bil township projects in Kedah