STOCK FOCUS OF THE DAY
MSM Malaysia : Earnings recovery in FY18F HOLD
Maintain HOLD on MSM Malaysia with an unchanged fair value of RM4.00/share, which is based on a FY18F PE of 25x. MSM is currently trading at FY18F PE of 24.9x and FY19F PE of 23.6x. We believe that MSM would be able to pay dividends in spite of its poor earnings performance in FY17F. Hence, we have forecast a small gross DPS of 3 sen for FY17F. Gross DPS is forecast to be higher at 8 sen in FY18F in line with the earnings recovery.
We have left MSM's FY18F net profit unchanged. However for FY17F, we are now forecasting a net loss of RM34.7mil vs. a net profit of RM12.8mil previously. We have assumed that the group would only return to the black in 4QFY17 instead of 3QFY17. We reckon that 3QFY17 would still be challenging due to the high cost of raw sugar inventory.
We visited MSM's sugar refinery in Prai recently. The site visit affirmed that operating conditions are improving. FY17F is expected to be a washed-out year for MSM. However for FY18F, we expect MSM to swing back into profitability on the back of a fall in raw sugar costs. Raw sugar accounts for almost 80% of MSM's production costs. In terms of demand, we have assumed that MSM's sales volume would improve by 5.7% in FY18F compared with a decline of 3.1% in FY17F. Volume growth in FY18F is expected to be driven mainly by export sales from the new sugar refinery in Tanjung Langsat, Johor.
Others :
Sunway Construction : Wins BBCC and Singapore precast contracts BUY
STOCKS ON RADAR
Eonmetall Group, Comfort Gloves, Plastrade Tech., Malaysia Pacific Ind.
ECONOMIC HIGHLIGHT
Malaysia : Exports to support manufacturing output
NEWS HIGHLIGHTS
Transportation & Logistics : Malaysia Airlines mulls stake sale to another carrier
Transportation & Logistics : Khazanah to give ‘final approval’ for new haj airline by year-end
Rubber Gloves Sector : Rubber glove exports to hit all-time high
Petronas Dagangan : To install 100EV charging stations by 2018
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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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