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| | | | | | | | | | | | | | | | Share Price: | MYR2.14 | Target Price: | MYR1.95 | Recommendation: | Hold | | |
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| | | Weathering through | | 1QFY4/18 earnings disappointed as associates' contribution plunged amid still weak operating margins as BAuto phases out the current CX-5 model prior to a new CX-5 introduction by end-Sep 2017. We believe that 1QFY18 earnings should have bottomed; we cut FY18 net profit forecasts by 7% on lower associates' contribution and higher A&P expenses but keep FY19-20 numbers largely unchanged. Pegged to unchanged 12.5x CY18 PER, our new TP is MYR1.95. With limited upside for now, maintain HOLD. | | |
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| | FYE Apr (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,095.4 | 1,660.0 | 2,099.9 | 2,242.4 | EBITDA | 267.2 | 166.5 | 233.2 | 287.6 | Core net profit | 201.4 | 118.8 | 151.2 | 195.5 | Core FDEPS (sen) | 17.3 | 10.2 | 13.0 | 16.8 | Core FDEPS growth(%) | (9.6) | (40.8) | 27.0 | 29.6 | Net DPS (sen) | 16.9 | 11.7 | 10.4 | 11.8 | Core FD P/E (x) | 12.4 | 21.0 | 16.5 | 12.7 | P/BV (x) | 4.7 | 5.6 | 5.3 | 4.7 | Net dividend yield (%) | 7.9 | 5.4 | 4.9 | 5.5 | ROAE (%) | 39.3 | 24.1 | 33.0 | 38.9 | ROAA (%) | 23.9 | 12.5 | 16.3 | 20.5 | EV/EBITDA (x) | 8.4 | 14.2 | 10.2 | 8.2 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | SECTOR RESEARCH | | | | | | | Stockpile climbing, but not as fast as anticipated
by Chee Ting Ong |
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| | | | | | Aug 2017 stockpile reached 18-month high mainly on rising output, but still slightly below market expectations. There is a chance that the 2.0m MT psychological stock level may be breached in Sept, pressuring CPO prices on the downside as output is expected to peak in Sept/Oct. However, the CPO price downside may be cushioned somewhat by fresh concerns that suggest 4Q17 output may potentially disappoint as post El Nino recovery may only fully materialize in 2018. Stay NEUTRAL. | |
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| | | | MACRO RESEARCH | | | | | | | Manufacturing growth momentum continues
by Suhaimi Ilias |
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| | | | | | Industrial production picked up to +6.1% YoY in July 2017 (June 2017: +4.0% YoY) as manufacturing output clocked its fastest growth in three years of +8.0% YoY (June 2017: +4.7% YoY). Short-term outlook remains positive as global manufacturing PMI picked up to 53.1 in Aug 2017 (Jul 2017: 52.7), the highest in over six years. | |
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| | | | | | | | FBMKLCI: Can New Up Leg Hold Up?
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI rose 2.84pts to 1,782.74 yesterday, led by gains in selective index linked stocks like Hong Leong Bank, TM and SIME. Market breadth was positive with gainers outpacing losers by 527 to 350. A total of 2.73b shares worth MYR2.16b changed hands. Market could extend yesterday's gain amid easing geopolitical tensions and stronger overnight US markets. There could be renewed interest on construction stocks today, driven by job wins. | |
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| | NEWS | | | Outside Malaysia:
E.U: ECB Governors promise caution to calm fears over stimulus exit. As the European Central Bank prepares to wind down its ultra-accommodative stimulus, some of its top officials are telling investors not to fret. "Too much emphasis has been put on the fears of policy normalization," Governing Council member Ardo Hansson wrote in an article for the Eurofi conference in Tallinn this week. "One must understand that the process of normalization of policy stance is very gradual, and in fact it has been already started." The Estonian central banker's comments -- which acknowledge that the ECB's bond purchases were slowed as of April this year -- follow the council's cue last week that a decision on the next step of the program is likely in October. While policy makers are considering various options on how a gradual winding-down process might look, some have expressed concern over the prospect that financial conditions will tighten and damage the economy. (Source: Bloomberg)
Italy: Production unexpectedly rises in sign of faster recovery. Italian industrial output unexpectedly increased in July, adding to signs the country's economy may expand this year at a faster pace than previously estimated. Production gained 0.1% from June, when it rose 1.1%, statistics agency Istat said in Rome. On an annual, workday adjusted basis, industrial output was up 4.4% YoY in July. The euro region's third-biggest economy expanded 0.4% in the three months through June, the same as in the previous two quarters. (Source: Bloomberg)
Thailand: Bank of Thailand spurns calls for rate cut amid currency surge. Thailand's central bank signalled that an interest rate cut is unlikely, rebuffing the government's call for policy easing to help bolster the economy. "Any further cut in the policy rate may increase risk to stability of the financial system," Mathee Supapongse, deputy governor for monetary stability, said in a speech. "Low interest rates for a period of time will lead to underestimation of risk from the search for yield behavior." (Source: Bloomberg) | |
| | | | | Other News:
George Kent: Wins HK water meter tender again. The group has bagged a contract to deliver water meters to Hong Kong's Water Supplies Department (WSD) for the second time. Under the USD6.86m (MYR28.72m) contract, the company would supply 650,000 DN15 Brass PSM-T water meters to WSD in 24 shipments within two years. (Source: The Star)
Cypark Resources: Secures MYR16.96m landfill closure contract. The group has secured a MYR16.96m contract for the closure and restoration of a landfill in Negeri Sembilan. The contract was awarded by the National Solid Waste Management Department, an agency under the Urban Wellbeing, Housing and Local Government Ministry. The group said the contract, which is expected to be completed in November 2018, will contribute positively towards its earnings for its 2017 and 2018 financial years. (Source: The Edge Financial Daily)
HSS Engineers: Associate company wins MYR5m contract. Its associate, HSS Integrated S/B has been appointed as engineering consultant for the upgrading of high priority water distribution system for the Iskandar Malaysia region for MYR5.1m. The contract encompasses engineering design and construction supervision for the high priority project. The works are to commence on Sept 19, 2017, with targeted completion in 2Q22. (Source: The Sun Daily)
Ibraco: To buy four parcels of PJ land for MYR37m. Ibraco has proposed to buy four parcels of vacant freehold land in Petaling Jaya, Selangor, measuring a total of 15,811.16 sq m for MYR37.44m which will be settled via a combination of debt and equity. The land acquisition move, which marked its second venture in expanding its business in West Malaysia, was formalised after Ibraco inked sales and purchase agreements with two firms: Milan Sanctuary S/B and Jurapat S/B. (Source: The Edge Financial Daily) | |
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