| | | | FEATURED
CALLS | | Malaysia | Gamuda
Sizeable targets remain
Adrian Wong | | | | | | |
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| | | | | | | | | | | | | | | | Share Price: | MYR5.36 | Target Price: | MYR6.00 | Recommendation: | Buy | | |
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| | | Sizeable targets remain | | Construction of KVMRT 2 and Pan Borneo Sarawak Highway continue to progress as Gamuda continues to vie for works from the East Coast Rail Link (ECRL) and KVLRT 3. Meanwhile, property sales for FY7/17 is ahead of its initial target. We make no change to our earnings forecasts and RNAV-based TP, pending FY17 results release on 28 Sep. Gamuda remains a BUY; one of our top picks for the Construction sector. | | |
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| | FYE Jul (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 2,399.9 | 2,121.9 | 3,328.4 | 4,031.6 | EBITDA | 638.0 | 548.5 | 744.2 | 848.1 | Core net profit | 682.1 | 626.1 | 680.9 | 761.2 | Core EPS (sen) | 28.9 | 26.0 | 28.1 | 31.4 | Core EPS growth (%) | (6.6) | (10.2) | 8.2 | 11.7 | Net DPS (sen) | 12.0 | 12.0 | 12.0 | 12.0 | Core P/E (x) | 18.5 | 20.6 | 19.1 | 17.1 | P/BV (x) | 2.0 | 1.9 | 1.8 | 1.7 | Net dividend yield (%) | 2.2 | 2.2 | 2.2 | 2.2 | ROAE (%) | 11.6 | 9.5 | 9.5 | 10.0 | ROAA (%) | 5.8 | 4.6 | 4.7 | 5.0 | EV/EBITDA (x) | 23.4 | 29.0 | 23.9 | 20.8 | Net debt/equity (%) | 47.9 | 55.2 | 56.2 | 50.4 |
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| | | | | SECTOR RESEARCH | | | | | | | Raising ASPs to defend margins
by Yen Ling Lee |
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| | | | | | Share prices of stocks in our universe fell 2-7% in one week due to the strengthening of MYR against USD and also higher raw material prices. Given the mild supply shortage of rubber gloves, we think glove players will be able to adjust their ASPs promptly in order to keep their margins intact. We upgrade Top Glove to BUY (from HOLD) with an unchanged TP of MYR6.20 (19x CY18 PER, +1SD to mean) as share price has fallen into BUY territory. | |
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| | | | MACRO RESEARCH | | | | | | | Consumer spending momentum still intact
by Suhaimi Ilias |
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| | | | | | Distributive trade volume index (DTI) increased +9.4% YoY in July 2017 (June 2017: +7.0% YoY), driven by retail trade growth (July 2017: +12.9% YoY; June 2017: +12.7% YoY) and rebound in motor vehicle trade (July 2017: +7.0% YoY; June 2017: -6.3% YoY), indicating the momentum in consumer spending growth in 1H 2017 was sustained in early-3Q 2017. | |
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| | | | | | | | Apple – The "X" Factor
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI slipped 3.79pts to 1,786.07 yesterday in spite of the stronger overnight US markets. Late selldown in GENM, CIMB and AXIATA weighed on the benchmark, halting a two-day streak of gains. Market breadth was negative with losers outpacing gainers by 480 to 385. A total of 2.69b shares worth MYR1.85b changed hands. Construction stocks could attract some interest on job wins while there could be spillover buying on tech stocks. | |
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| | NEWS | | | Outside Malaysia:
U.S: Wholesale prices increase on jump in energy costs. Rising U.S. wholesale prices in August reflect the biggest jump in energy costs since January, while underlying inflation remained contained, a Labor Department report showed. Producer-price index rose 0.2% after 0.1% drop the previous month. PPI in August rose 2.4% YoY after 1.9% YoY gain in prior 12-month period. (Source: Bloomberg)
U.K: Central London property prices continued to slump in August, contrasting with "resilient" performances elsewhere in the U.K., according to the Royal Institution of Chartered Surveyors. While values nationally posted a modest recovery from July's four-year low, real-estate agents in London gave their bleakest assessment since 2008, RICS said in a survey published. The outlook for the capital is also subdued, with prime central London the only area in which prices expectations are negative over the next 12 months. Property prices as a whole were driven by increases in Northern Ireland, Scotland and the northwest, according to the survey. RICS said 61% of respondents felt landlords would exit the market over the coming year in light of recent policy changes that mean many will pay more tax, while only 12% saw a greater number of entrants. The drop in supply will see annual rental growth grow 3% over the next five years, outpacing a 2% rise in house prices, they predicted. (Source: Bloomberg)
U.K: Basic wages rose an annual 2.1% in the three months through July, unchanged from the second quarter and below market forecasts. Pay fell 0.4% when adjusted for inflation, which is now running just shy of 3%.The squeeze has taken a toll on consumer spending, creating a drag on the economy. Bank of England Governor Mark Carney has said that an "element of Brexit uncertainty" is preventing firms from awarding bigger wage increases, while other explanations include poor productivity and companies clamping down on pay to offset rising import costs, another Brexit fallout. Pressure on real incomes is particularly hitting public-sector workers, who have had pay increases capped at 1% since 2013. (Source: Bloomberg)
Crude Oil: Holds gains near five-week high on stronger demand outlooks. Oil held gains near a five-week high as the International Energy Agency and OPEC boosted demand forecasts. Global demand will climb this year by the most since 2015, the IEA said. OPEC raised estimates for the amount of crude it will need to supply in 2018 on stronger consumption from Europe and China. U.S. oil output gained last week as operations returned after Hurricane Harvey. Brent for November settlement was USD 55.16/bbl. (Source: Bloomberg) | |
| | | | | Other News:
EITA Resources: Bags MYR11.3m contract for supply of 23 lifts. Its wholly-owned subsidiary EITA Elevator S/B has bagged a subcontract worth MYR11.3m to supply and install 23 lifts for a residential development in Setapak. The contract is expected to be completed by Aug 14, 2020. (Source: The Edge Financial Daily)
HSS Engineers: Associate firm bags MYR10m consultancy deal. Its associate company HSS Integrated S/B has been appointed project management consultant by PNB Commercial S/B for a mixed development project in Taman Perling, Johor Bahru, for MYR10m.The contract, which comes into effect from the acceptance of the appointment letter, is slated to be completed in the 4Q22. (Source: The Sun Daily)
Enra: Eyes MYR10b jobs in marginal oil fields within the region. The group is eyeing MYR1b upstream jobs in marginal oil fields in Southeast Asia and Australia, which it hopes to secure in 24 months. Enra president and group chief executive officer Datuk Mazlin Junid said it is working with foreign partners in order to leverage on its expertise to carry out low-cost base projects on fields that have an exploration period of three to four years. (Source: The Edge Financial Daily)
Versatile Creative: To sell its entire stake in Iris. Versatile Creative plans to sell its 3.98% equity interest in smart card maker Iris Corp which is worth MYR18.2m. Versatile's wholly-owned subsidiary Versatile Paper Boxes S/B is the third largest shareholder in Iris, after Felda Investment Corp S/B (19.79%) and Caprice Development S/B (9.09%). (Source: The Star)
CAB Cakaran: To set up poultry abattoir in Singapore. The group is setting up a poultry slaughtering facility in Singapore, along with a dormitory for its workers. CAB's 51%-owned unit, Tong Huat Poultry Processing Factory Pte Ltd, has inked a shareholder agreement with four parties to subscribe to stakes in Singapore Poultry Hub Pte Ltd, which will operate and manage the facility. (Source: The Edge Financial Daily) | |
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