Friday, August 25, 2017

FW: [Maybank IB] Today's Research - Malaysia-Felda Global Ventures: Noor Ehsanuddin resigns as FGV director. Datuk Noor Ehsanuddin Mohd Harun Narrashid, who stepped down as director of Felda Investment Corp S/B’s listed unit Encorp last week, resigned as

 

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FEATURE
CALLS

Malaysia | Genting Bhd
Still a good value BUY
Samuel Yin Shao Yang

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COMPANY
RESEARCH

Genting Malaysia | Unlucky quarter but operating metrics improved markedly
Samuel Yin Shao Yang

Sunway Construction Group | 2Q17: Results in line
Adrian Wong

AirAsia X Bhd | Signs of great challenges ahead
Mohshin Aziz

Hong Leong Bank | 4Q better than expected
Desmond Ch'ng

Hong Leong Financial Group | Decent FY17 results
Desmond Ch'ng

AMMB Holdings | 1QFY18 results in line
Desmond Ch'ng

MBM Resources | Value for money
Ivan Yap

Nestle Malaysia | Selectively adjusted product prices
Liew Wei Han

QL Resources | 1QFY18: Earnings in line
Liew Wei Han

Kossan Rubber Industries | Better earnings in 2H17
Yen Ling Lee

AEON Co. (M) | 2Q17: Earnings in line
Kevin Wong

KPJ Healthcare | Malaysia still the growth driver
Adrian Wong

TSH Resources | 1H17 missed estimates
Chee Ting Ong

Oldtown | 1QFY18: On track
Liew Wei Han

Al-Salam REIT | 2Q17: Earnings on track
Kevin Wong

KNM Group | Weak 2Q17
Thong Jung Liaw

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MACRO
RESEARCH

Malaysia | Brent Crude Oil – Base Building Mode
Nik Ihsan Raja Abdullah

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COMPANY RESEARCH

Malaysia

Rating Change

Genting Malaysia (GENM MK)
by Samuel Yin Shao Yang

Share Price:

MYR6.05

Target Price:

MYR6.00

Recommendation:

Hold

Unlucky quarter but operating metrics improved markedly

2Q17 earnings missed our expectation but this was largely due to poor Resorts World Genting (RWG) VIP hold rate which ought to normalise. More importantly, RWG visitor arrivals and gaming volumes have resumed growing YoY and robustly at that. That said, opening of 20th Century Fox World (20CFW) has been delayed to mid-2H18. Adjusting for the above, we cut EPS estimates by 1-9% and trim our end-FY18E SOP-TP to MYR6.00 from MYR6.15. At slightly above our new TP, GENM is now a HOLD.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

8,395.9

8,931.6

9,979.0

11,301.9

EBITDA

2,013.1

2,394.9

2,666.0

3,308.1

Core net profit

1,154.7

1,547.4

1,576.9

2,156.6

Core FDEPS (sen)

20.4

27.3

27.7

37.9

Core FDEPS growth(%)

(15.0)

34.0

1.5

36.8

Net DPS (sen)

7.1

16.5

9.3

12.8

Core FD P/E (x)

29.7

22.2

21.8

16.0

P/BV (x)

1.8

1.7

1.6

1.5

Net dividend yield (%)

1.2

2.7

1.5

2.1

ROAE (%)

7.1

14.8

7.7

10.0

ROAA (%)

4.8

5.6

5.4

6.8

EV/EBITDA (x)

12.3

10.5

12.6

10.0

Net debt/equity (%)

0.1

net cash

net cash

net cash

Malaysia

Rating Change

Sunway Construction Group (SCGB MK)
by Adrian Wong

Share Price:

MYR2.32

Target Price:

MYR2.30

Recommendation:

Hold

2Q17: Results in line

SCG's 1H17 net profit of MY71m was in line with ours but below consensus forecast. Growth in the construction segment from higher work progress helped offset the weaker-than-expected precast earnings. We make no change to our earnings forecasts. SCG's share price has gained 37% YTD; the stock is now a HOLD due to its limited upside to our unchanged TP of MYR2.30, pegged to 18x FY18E earnings.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

1,916.9

1,788.8

2,347.4

2,219.0

EBITDA

178.2

188.3

211.2

227.3

Core net profit

127.2

123.5

146.2

162.4

Core EPS (sen)

9.8

9.6

11.3

12.6

Core EPS growth (%)

11.4

(2.9)

18.4

11.1

Net DPS (sen)

4.0

5.0

4.0

4.4

Core P/E (x)

23.6

24.3

20.5

18.5

P/BV (x)

6.7

6.1

5.1

4.3

Net dividend yield (%)

1.7

2.2

1.7

1.9

ROAE (%)

32.4

26.2

27.0

25.3

ROAA (%)

9.5

8.2

8.0

7.9

EV/EBITDA (x)

8.7

9.9

11.4

10.3

Net debt/equity (%)

net cash

net cash

net cash

net cash

Malaysia

Rating Change

AirAsia X Bhd (AAX MK)
by Mohshin Aziz

Share Price:

MYR0.39

Target Price:

MYR0.39

Recommendation:

Hold

Signs of great challenges ahead

2Q17 core net loss was MYR5.7m (+55% YoY) after adjusting for FX-translation and AAX's share of losses in associates. This was below our expectation due to a higher-than-expected 13% YoY yield erosion. Staff cost, maintenance and user fees were also higher than expected. We cut FY17-19 earnings forecasts by 29%, 33% and 26% to factor in these new variables. TP has been reduced to MYR0.39 (-13%), based on unchanged 8x PER, but we rolled forward our base year to 2018. Upgrade to HOLD.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

3,062.6

4,006.5

4,628.0

4,937.6

EBITDAR

813.4

1,235.6

1,340.7

1,339.1

Core net profit

(328.4)

205.5

176.5

200.0

Core EPS (sen)

(9.6)

5.0

4.3

4.8

Core EPS growth (%)

nm

nm

(14.1)

13.3

Net DPS (sen)

0.0

0.0

0.0

0.0

Core P/E (x)

nm

7.9

9.2

8.1

P/BV (x)

2.1

1.5

1.4

1.2

Net dividend yield (%)

0.0

0.0

0.0

0.0

ROAE (%)

(49.1)

29.3

21.6

17.3

ROAA (%)

(8.5)

4.8

3.9

4.1

EV/EBITDAR (x)

2.1

1.8

1.5

1.8

Net debt/equity (%)

179.7

68.5

30.3

57.3

Malaysia

Results Review

Genting Bhd (GENT MK)
by Samuel Yin Shao Yang

Share Price:

MYR9.79

Target Price:

MYR12.00

Recommendation:

Buy

Still a good value BUY

2Q17 results disappointed largely due to poor Resorts World Genting (RWG) VIP hold rate. We trim our earnings estimates by 3% p.a.. Utilising our higher revised TP for GENS (SGD1.35 vs SGD1.25 previously), lower revised TPs for GENM (MYR6.00 vs MYR6.15) and GENP (MYR10.54 vs MYR11.20) and ascribing an unchanged 21% discount to SOP/sh (20-year mean), our GENT TP is little changed at MYR12.00 (MYR11.90 previously). We continue to prefer GENT as a cheaper proxy to GENM and GENS.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

18,100.4

18,365.8

19,787.8

21,960.1

EBITDA

5,393.8

6,028.2

7,596.9

8,813.8

Core net profit

1,297.6

1,525.3

2,239.3

2,813.6

Core FDEPS (sen)

34.8

40.8

53.5

66.4

Core FDEPS growth(%)

(24.3)

17.1

31.3

24.1

Net DPS (sen)

3.5

12.5

16.1

19.9

Core FD P/E (x)

28.1

24.0

18.3

14.7

P/BV (x)

1.1

1.0

1.0

0.9

Net dividend yield (%)

0.4

1.3

1.6

2.0

ROAE (%)

4.7

6.4

6.6

7.5

ROAA (%)

1.6

1.7

2.4

3.0

EV/EBITDA (x)

8.3

7.6

7.8

6.7

Net debt/equity (%)

net cash

net cash

net cash

net cash

Malaysia

Results Review

Hong Leong Bank (HLBK MK)
by Desmond Ch'ng

Share Price:

MYR15.50

Target Price:

MYR15.90

Recommendation:

Hold

4Q better than expected

HL Bank saw decent earnings growth in FY17 and fundamentals of the group very much remain stable, though pre-emptive measures resulted in a higher GIL ratio during the year. Management's targets for FY18 look achievable and our forecasts are maintained. Much, however, is factored into the share price, in our view, and we maintain a HOLD call with an unchanged TP of MYR15.90, pegged to a CY18 PBV of 1.4x (ROE: 10.2%).

FYE Jun (MYR m)

FY16A

FY17A

FY18E

FY19E

Operating income

4,177.9

4,550.6

4,846.4

5,079.4

Pre-provision profit

2,263.1

2,543.1

2,772.0

2,935.2

Core net profit

2,075.4

2,145.0

2,353.2

2,462.7

Core EPS (MYR)

1.09

1.05

1.13

1.18

Core EPS growth (%)

(16.7)

(3.6)

7.5

4.7

Net DPS (MYR)

0.41

0.45

0.48

0.51

Core P/E (x)

14.2

14.8

13.7

13.1

P/BV (x)

1.6

1.5

1.4

1.4

Net dividend yield (%)

2.6

2.9

3.1

3.3

Book value (MYR)

9.74

10.47

10.85

11.27

ROAE (%)

11.0

9.8

10.2

10.3

ROAA (%)

1.1

1.1

1.2

1.2

Malaysia

TP Revision

Hong Leong Financial Group (HLFG MK)
by Desmond Ch'ng

Share Price:

MYR16.70

Target Price:

MYR18.40

Recommendation:

Hold

Decent FY17 results

HLFG's FY17 core earnings were within expectations with commendable growth across its key commercial banking, insurance and investment banking divisions. Our forecasts are maintained but our SOP-derived TP is raised to MYR18.40 from MYR17.10, on rolling forward valuations with unchanged valuation parameters. Our HOLD call is maintained.

FYE Jun (MYR m)

FY16A

FY17A

FY18E

FY19E

Operating income

4,543.3

5,034.6

5,394.0

5,675.5

Pre-provision profit

2,258.9

2,812.3

3,094.6

3,288.2

Core net profit

1,489.5

1,608.8

1,744.4

1,840.8

Core EPS (MYR)

1.35

1.41

1.53

1.61

Core EPS growth (%)

(9.0)

4.2

8.4

5.5

Net DPS (MYR)

0.38

0.38

0.44

0.47

Core P/E (x)

12.4

11.9

10.9

10.4

P/BV (x)

1.2

1.2

1.2

1.1

Net dividend yield (%)

2.3

2.3

2.6

2.8

Book value (MYR)

13.37

14.47

14.34

15.48

ROAE (%)

10.5

10.1

10.6

10.8

ROAA (%)

0.7

0.7

0.8

0.8

Malaysia

TP Revision

AMMB Holdings (AMM MK)
by Desmond Ch'ng

Share Price:

MYR4.52

Target Price:

MYR4.80

Recommendation:

Hold

1QFY18 results in line

Positively, loan momentum has gathered pace while NIMs have been relatively stable. Meanwhile, management states that there are no contingent liabilities outside the scope of normal business that it is aware of. Based on our projections, however, we expect ROEs to be flat at about 8.4% into FY19 and with little expectation of an expansion in ROEs, we have lowered our CY18 PBV multiple peg to 0.8x from 0.9x and our TP is cut to MYR4.80 from MYR5.25.

FYE Mar (MYR m)

FY16A

FY17A

FY18E

FY19E

Operating income

3,693.3

3,620.8

3,905.9

4,141.0

Pre-provision profit

1,519.0

1,460.4

1,702.9

1,877.2

Core net profit

1,355.9

1,216.5

1,389.3

1,454.4

Core EPS (MYR)

0.45

0.40

0.46

0.48

Core EPS growth (%)

(17.2)

(10.3)

13.9

4.7

Net DPS (MYR)

0.16

0.18

0.18

0.19

Core P/E (x)

10.0

11.2

9.8

9.4

P/BV (x)

0.9

0.9

0.8

0.8

Net dividend yield (%)

3.4

3.9

4.1

4.3

Book value (MYR)

5.03

5.32

5.59

5.88

ROAE (%)

9.2

7.8

8.4

8.4

ROAA (%)

1.0

0.9

1.0

1.0

Malaysia

Company Update

MBM Resources (MBM MK)
by Ivan Yap

Share Price:

MYR2.18

Target Price:

MYR2.75

Recommendation:

Buy

Value for money

In the first analyst briefing hosted by MBM's new CEO and CFO, management wasted no time by addressing concerns of continuous losses at its 78%-owned OMI operations. Elsewhere, cost cuts and management restructuring, especially in the motor trading division, were undertaken since early-2017 and should contribute to better results gradually. We make no change to our earnings forecasts, MYR2.75 TP (10x FY18 PER) and BUY rating on MBM for its exposure to Perodua.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

1,815.1

1,670.2

1,727.0

1,832.9

EBITDA

49.7

(24.3)

22.1

31.0

Core net profit

87.6

102.6

82.2

107.3

Core EPS (sen)

22.4

26.2

21.0

27.5

Core EPS growth (%)

(21.9)

17.1

(19.8)

30.5

Net DPS (sen)

10.0

6.0

4.5

6.0

Core P/E (x)

9.7

8.3

10.4

7.9

P/BV (x)

0.5

0.5

0.5

0.5

Net dividend yield (%)

4.6

2.8

2.1

2.8

ROAE (%)

5.4

4.2

5.0

6.3

ROAA (%)

3.7

4.3

3.4

4.3

EV/EBITDA (x)

28.2

nm

60.5

42.4

Net debt/equity (%)

8.8

10.5

8.7

6.7

Malaysia

Company Update

Nestle Malaysia (NESZ MK)
by Liew Wei Han

Share Price:

MYR84.20

Target Price:

MYR78.00

Recommendation:

Hold

Selectively adjusted product prices

NESZ has since 1 Jul 2017 selectively adjusted upwards product prices by up to 4% (eg. coffee, ice-cream and noodle products) and we believe that this could act as a buffer against higher costs. Also a positive is that into 3Q17, raw materials such as Robusta and Milk have shown some softening price trends. Coupled with new product/variant launches and a gradual recovery in consumer sentiment, we believe that NESZ's domestic operations could sustain positive momentum into 2H17.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

4,838.0

5,063.5

5,342.0

5,715.9

EBITDA

886.0

932.0

943.9

1,013.0

Core net profit

588.5

598.4

638.2

673.7

Core EPS (sen)

251.0

255.2

272.2

287.3

Core EPS growth (%)

6.9

1.7

6.6

5.6

Net DPS (sen)

260.0

270.0

270.5

285.5

Core P/E (x)

33.5

33.0

30.9

29.3

P/BV (x)

27.9

30.5

30.3

30.1

Net dividend yield (%)

3.1

3.2

3.2

3.4

ROAE (%)

79.5

94.0

98.3

103.1

ROAA (%)

24.6

24.0

24.7

24.6

EV/EBITDA (x)

19.8

19.9

21.2

19.7

Net debt/equity (%)

47.4

39.1

37.0

35.1

Malaysia

Results Review

QL Resources (QLG MK)
by Liew Wei Han

Share Price:

MYR4.95

Target Price:

MYR4.60

Recommendation:

Hold

1QFY18: Earnings in line

1QFY3/18 results were within expectations. We expect stronger quarters ahead on gradual improvement of fish ASPs and farm produce (eggs) prices. As for its palm oil division, increasing maturity profile of its plantation in Indonesia should help support growth into the medium term. We tweak earnings forecasts marginally; our DCF-based TP of MYR4.60 (WACC: 7.0%, long-term growth: 2.0%) is intact.

FYE Mar (MYR m)

FY16A

FY17A

FY18E

FY19E

Revenue

2,853.9

3,012.0

3,241.6

3,492.3

EBITDA

368.1

394.6

411.2

468.5

Core net profit

192.1

185.9

208.1

234.9

Core EPS (sen)

15.4

14.9

16.7

18.8

Core EPS growth (%)

4.9

(3.2)

12.0

12.9

Net DPS (sen)

4.3

7.3

5.2

5.8

Core P/E (x)

32.2

33.2

29.7

26.3

P/BV (x)

3.9

3.5

3.3

3.0

Net dividend yield (%)

0.9

1.5

1.1

1.2

ROAE (%)

12.7

11.7

11.5

12.0

ROAA (%)

7.1

6.2

6.4

6.9

EV/EBITDA (x)

16.5

16.4

17.3

15.3

Net debt/equity (%)

31.3

33.5

39.3

38.2

Malaysia

Rating Change

Kossan Rubber Industries (KRI MK)
by Yen Ling Lee

Share Price:

MYR7.15

Target Price:

MYR7.25

Recommendation:

Hold

Better earnings in 2H17

Glove division posted better earnings but overall 2Q17 net profit was marginally weaker (-2% QoQ) due to weaker performance of its Technical Rubber Product (TRP)/cleanroom divisions and higher tax rate. However, we expect earnings to be stronger in 2H17 given the lower rubber costs and capacity growth. We lower our FY17-19 EPS forecasts by 5-12% and our TP is subsequently lowered to MYR7.25 (unchanged 19x 2018 PER; mean). Given the reduced upside, we D/G the stock to HOLD.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

1,635.9

1,668.3

2,073.2

2,336.1

EBITDA

343.2

291.8

344.0

402.8

Core net profit

203.3

170.9

198.6

243.5

Core EPS (sen)

31.8

26.7

31.1

38.1

Core EPS growth (%)

41.4

(15.9)

16.2

22.6

Net DPS (sen)

12.0

11.0

12.4

15.2

Core P/E (x)

22.5

26.7

23.0

18.8

P/BV (x)

4.7

4.2

3.8

3.4

Net dividend yield (%)

1.7

1.5

1.7

2.1

ROAE (%)

22.7

16.6

17.4

19.1

ROAA (%)

14.8

11.5

12.2

13.2

EV/EBITDA (x)

17.4

14.7

13.7

11.7

Net debt/equity (%)

1.7

4.8

7.6

7.2

Malaysia

Results Review

AEON Co. (M) (AEON MK)
by Kevin Wong

Share Price:

MYR2.05

Target Price:

MYR2.20

Recommendation:

Hold

2Q17: Earnings in line

2Q17 results were within expectations whereby YoY earnings growth was attributed to improved revenue and operating profit margins at both the Retailing and Property Management Services segments. We maintain our FY17-19 earnings forecasts and MYR2.20 TP (pegged to an unchanged 28x FY18 PER, +0.5SD of mean).

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

3,834.6

4,038.7

4,159.9

4,352.6

EBITDA

443.9

448.8

500.9

530.9

Core net profit

133.4

79.7

93.2

110.2

Core EPS (sen)

9.5

5.7

6.6

7.9

Core EPS growth (%)

(32.5)

(40.2)

16.9

18.3

Net DPS (sen)

4.0

3.0

3.3

3.9

Core P/E (x)

21.6

36.1

30.9

26.1

P/BV (x)

1.6

1.5

1.5

1.5

Net dividend yield (%)

2.0

1.5

1.6

1.9

ROAE (%)

7.4

4.3

4.9

5.7

ROAA (%)

3.6

1.9

2.1

2.4

EV/EBITDA (x)

9.9

10.0

7.6

7.1

Net debt/equity (%)

30.1

46.3

46.1

44.5

Malaysia

TP Revision

KPJ Healthcare (KPJ MK)
by Adrian Wong

Share Price:

MYR4.20

Target Price:

MYR4.40

Recommendation:

Hold

Malaysia still the growth driver

2Q17 results were above our street-low forecast but below consensus. YoY growth continues to be supported by the Malaysian hospitals, with the drag from earnings coming from Indonesia and Australia. We raise our FY17-19 net profit forecasts by 11%-12% after incorporating higher patient growth figures for FY17 and tweaking for average revenue per patient. We derive a new higher SOP-based TP of MYR4.40.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

2,818.5

3,021.1

3,399.0

3,636.1

EBITDA

350.9

351.6

407.9

431.6

Core net profit

144.6

125.4

145.3

151.7

Core EPS (sen)

13.9

11.5

13.7

14.3

Core EPS growth (%)

13.3

(17.4)

18.6

4.4

Net DPS (sen)

7.0

4.8

6.8

7.1

Core P/E (x)

30.1

36.5

30.7

29.5

P/BV (x)

3.0

2.9

2.7

2.6

Net dividend yield (%)

1.7

1.1

1.6

1.7

ROAE (%)

9.8

9.8

8.9

8.9

ROAA (%)

4.0

3.2

3.6

3.5

EV/EBITDA (x)

16.0

16.7

14.3

13.7

Net debt/equity (%)

72.5

72.2

72.5

73.5

Malaysia

TP Revision

TSH Resources (TSH MK)
by Chee Ting Ong

Share Price:

MYR1.71

Target Price:

MYR1.73

Recommendation:

Hold

1H17 missed estimates

TSH's 1H17 results were below expectations. However, earnings may still play catch up in 2H17 on seasonally higher output and still healthy CPO prices thus far in 3Q17. We lower our FY17-19 EPS forecasts by -1-2% to incorporate 2.7% of new share issuance in Apr/Jul 2017. TSH remains a HOLD, with a lower TP of MYR1.73 (-1%) on unchanged 19x 2017 PER, -0.5SD its 5-year historical mean.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

799.5

872.3

1,094.6

1,137.6

EBITDA

163.9

176.5

186.7

225.8

Core net profit

75.5

73.3

124.0

158.4

Core EPS (sen)

5.6

5.4

9.1

11.5

Core EPS growth (%)

(43.0)

(2.8)

66.9

26.0

Net DPS (sen)

2.0

2.0

2.7

3.4

Core P/E (x)

30.5

31.4

18.8

14.9

P/BV (x)

1.7

1.5

1.4

1.3

Net dividend yield (%)

1.2

1.2

1.6

2.0

ROAE (%)

(8.1)

4.0

7.8

9.3

ROAA (%)

2.6

2.2

3.5

4.3

EV/EBITDA (x)

25.1

23.0

20.3

17.0

Net debt/equity (%)

88.4

84.1

73.0

68.7

Malaysia

Results Review

Oldtown (OTB MK)
by Liew Wei Han

Share Price:

MYR2.79

Target Price:

MYR2.90

Recommendation:

Hold

1QFY18: On track

1QFY18 results were in line. FMCG should remain the growth driver on growing exports to Greater China (eg. China, Hong Kong, Taiwan). Meanwhile, OTB's F&B division should provide a stable earnings base over the medium term. Our earnings forecasts, HOLD call and TP of MYR2.90 (18x CY18 PER) are unchanged. Dividend yield of 3.0% (FY18E) should provide support to its share price.

FYE Mar (MYR m)

FY16A

FY17A

FY18E

FY19E

Revenue

393.4

425.2

459.4

503.5

EBITDA

84.7

97.1

107.9

115.7

Core net profit

55.3

65.6

69.8

75.8

Core EPS (sen)

11.9

14.2

15.1

16.4

Core EPS growth (%)

6.1

18.6

6.5

8.5

Net DPS (sen)

9.0

10.0

8.3

9.0

Core P/E (x)

23.4

19.7

18.5

17.1

P/BV (x)

3.6

3.5

3.2

3.0

Net dividend yield (%)

3.2

3.6

3.0

3.2

ROAE (%)

15.0

16.6

18.1

18.1

ROAA (%)

12.5

14.5

14.8

14.9

EV/EBITDA (x)

6.4

11.5

10.4

9.4

Net debt/equity (%)

net cash

net cash

net cash

net cash

Malaysia

Results Review

Al-Salam REIT (SALAM MK)
by Kevin Wong

Share Price:

MYR1.01

Target Price:

MYR1.15

Recommendation:

Buy

2Q17: Earnings on track

2Q17 results and 1st interim gross DPU of 2.85sen were in line. The stronger YoY earnings were mainly contributed by KOMTAR JBCC and supported by KFCH College and QSR Properties which are on long-term leases. Our earnings forecasts and DDM-TP of MYR1.15 (cost of equity: 8.2%) are intact.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

20.7

76.1

83.4

85.0

Net property income

15.7

56.9

61.2

62.4

Distributable income

7.1

36.0

39.7

40.8

DPU (sen)

1.1

5.4

5.9

6.0

DPU growth (%)

na

400.0

8.5

2.7

Price/DPU(x)

93.5

18.7

17.2

16.8

P/BV (x)

1.0

1.0

1.0

0.9

DPU yield (%)

1.1

5.3

5.8

6.0

ROAE (%)

na

7.8

6.5

6.6

ROAA (%)

na

3.7

4.1

4.1

Debt/Assets (x)

0.4

0.4

0.4

0.4

Malaysia

Results Review

KNM Group (KNMG MK)
by Thong Jung Liaw

Share Price:

MYR0.23

Target Price:

MYR0.25

Recommendation:

Hold

Weak 2Q17

Results remain erratic, as expected, with continued losses in 2Q17. Our earnings forecasts are unchanged, contributions from its Thai RE operations to partially alleviate its O&G business. KNM is fairly valued, in our view, trading at 0.5x NTA, in view of a weakening replenishment outlook. KNM needs to build a consistent earnings stream, manage its costs and steadily grow its RE operations to warrant a re-rating. Our unchanged TP of MYR0.25 is based on0.5x FY17E NTA (in line with peers).

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

1,641.3

1,646.8

1,320.3

1,550.7

EBITDA

205.7

(160.8)

94.8

144.0

Core net profit

45.7

(262.3)

7.0

45.7

Core EPS (sen)

2.4

(12.3)

0.3

2.1

Core EPS growth (%)

3.4

nm

nm

551.1

Net DPS (sen)

0.0

0.0

0.0

0.0

Core P/E (x)

9.4

nm

69.9

10.7

P/BV (x)

0.2

0.2

0.2

0.2

Net dividend yield (%)

0.0

0.0

0.0

0.0

ROAE (%)

2.0

(12.2)

0.3

1.9

ROAA (%)

1.1

(5.8)

0.2

1.0

EV/EBITDA (x)

7.1

nm

14.2

9.1

Net debt/equity (%)

19.2

37.4

35.8

33.9

MACRO RESEARCH

MY: TRADERS' ALMANAC

Brent Crude Oil – Base Building Mode
by Nik Ihsan Raja Abdullah

Technical Research

FBMKLCI rose 2.56pts to 1,775.50 yesterday amid late buying support in selected index-linked stocks such as IJM, IOI and GENM. Market breadth was positive with gainers outpacing losers by 433 to 414. Trading volume was at 2.13b shares valued at MYR1.98b. With US markets ended lower overnight on concerns over the US debt ceiling, we expect selling pressure to intensify today.

NEWS

Outside Malaysia:

Global: Central bank balance sheets are headed for a great divergence. A brief convergence this year in the dollar value of the balance sheets of the Federal Reserve, the European Central Bank and the Bank of Japan has passed and the trio are now set to take very different paths. After all three touched USD4.5t in April, they've split, mostly due to a rally in the euro and strength in the yen. This divergence has big implications for the central banks the next time crisis threatens the global economy. The Fed and the ECB are likely to have more room to dive back into asset purchases or cut interest rates, while the BOJ may find itself pinned down unless it can find a way out of its current predicament before the next problem comes along. (Source: Bloomberg)

U.S: Sales of previously owned homes decline to 11-month low. An unexpected decline in sales of previously owned U.S. homes last month to the lowest level since August 2016 indicates rising prices and lean inventories are impeding faster growth in the housing market, National Association of Realtors data showed. The July figure was depressed by weakness in the Midwest and Northeast. Contract closings fell 1.3% MoM to a 5.44m annual rate. Median sales price rose 6.2% YoY to USD 258,300. Inventory of available properties decreased 9% YoY to 1.92m, marking the 26th consecutive year-on-year decline. (Source: Bloomberg)

U.K: Consumer spending barely grows, restraining economy. Consumer-spending growth slowed in the second quarter as car sales fell and business investment stagnated, holding back economic momentum. The 0.1% increase in household expenditure was the weakest since 2014 and meant consumer activity added just 0.1% point to GDP. Business investment flat lined and net trade failed to contribute to growth for a second consecutive quarter. Car sales declined after a strong first quarter, when demand was boosted ahead of a tax change. The economy grew 0.3% in the period. Over the first six months of the year, it recorded its weakest performance since 2012, and the Office for National Statistics said expansion has "slowed markedly." (Source: Bloomberg)

China: Liquidity stress signs build as fund cost jumps at auction. Chinese lenders paid the highest interest rate in more than two years to borrow short-term government funds, adding to recent signs of a mismatch between the demand and supply of cash. The People's Bank of China auctioned CNY 80b (USD 12b) of three-month treasury deposits on behalf of the Ministry of Finance at 4.51%, according to a statement on its website. Liquidity has been cramped this week, with the PBOC draining funds on all four trading days. The lack of injections in open-market operations and the auction of state funds suggest that policy makers are trying to push the use of more expensive, longer-term financing. (Source: Bloomberg)

Japan: Stuck in inflation doldrums as core CPI inches up to 0.5% YoY. Japan's key measure of price changes rose so slightly in July, lagging well behind gains in economic growth as the central bank struggles to spur significant improvement in inflation. Core consumer prices, which exclude fresh food, increased 0.5% YoY. Excluding fresh food and energy, prices climbed 0.1% YoY. Overall, nationwide prices rose 0.4% YoY. (Source: Bloomberg)

Other News:

Mlabs System: Wins USD10m contract. Mlabs Systems's unit has bagged a USD10m (MYR42.8m) contract for computer generated imagery production work. Its wholly owned subsidiary Multimedia Research Lab S/B has accepted a letter of award from Red Dragon Media Ltd for the contract. The contract will then be transferred to a joint-venture company, tentatively named Gold Dragon Media S/B. It is valid until June 2018. (Source: The Sun Daily)

SHL Consolidated: Eyes Myanmar's affordable housing market. SHL Consolidated's joint-venture company (JVco) with Japan-based Marubeni Corp is looking to tap into the Myanmar affordable housing market, in line with their Asean business venture initiative. Instead of entering new geographical markets, the JVco plans to leverage on areas where Marubeni has strong presence in, and that Myanmar is a potential starting point as Marubeni is already involved in industrial projects here. (Source: The Edge Financial Daily)

Felda Global Ventures: Noor Ehsanuddin resigns as FGV director. Datuk Noor Ehsanuddin Mohd Harun Narrashid, who stepped down as director of Felda Investment Corp S/B's listed unit Encorp last week, resigned as Felda Global Ventures Holdings (FGV) director on Thursday. The 53-year-old Kota Tinggi MP resigned due to "professional and personal reasons." Noor Ehsanuddin was appointed to the FGV board on July 16, 2013. (Source: The Star)

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