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| | | | | | | | | | | | | | | | Share Price: | MYR1.79 | Target Price: | MYR2.00 | Recommendation: | Buy | | |
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| | | Tempering dividend expectations | | While we do not expect 3Q17 earnings to disappoint, we gather that MAG may not maintain its DPR policy of >80% lest accusations of it divvying too much cash before a final verdict on its tax penalty is reached. Thus, we cut our DPS estimates by 24-27% and DCF-based TP by 7% to MYR2.00. That said, we maintain our tactical BUY call as its share price has fully discounted the tax penalty and there will be upside if the final tax penalty is nil or markedly less and/or MAG reverts to >80% DPR again. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 2,767.0 | 2,659.3 | 2,546.3 | 2,597.3 | EBITDA | 373.9 | 326.7 | 346.1 | 353.9 | Core net profit | 226.5 | 189.4 | 210.2 | 219.6 | Core EPS (sen) | 15.9 | 13.3 | 14.8 | 15.4 | Core EPS growth (%) | (10.9) | (16.3) | 11.0 | 4.5 | Net DPS (sen) | 16.0 | 13.0 | 9.0 | 9.5 | Core P/E (x) | 11.3 | 13.4 | 12.1 | 11.6 | P/BV (x) | 1.1 | 1.1 | 1.0 | 1.0 | Net dividend yield (%) | 8.9 | 7.3 | 5.0 | 5.3 | ROAE (%) | 9.3 | 7.8 | 8.6 | 8.6 | ROAA (%) | 6.2 | 5.2 | 5.9 | 6.2 | EV/EBITDA (x) | 11.4 | 11.4 | 9.0 | 8.5 | Net debt/equity (%) | 25.7 | 24.1 | 20.4 | 16.4 |
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| | | | | SECTOR RESEARCH | | | | | | | On the cusp of a positive turnaround?
by Samuel Yin Shao Yang |
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| | | | | | After seven years of decline, industry revenue appears to be stabilising. During their most recent quarterly results, BST and MAG reported that their gaming revenue/draw was stable or even grew YoY. 3Q17 industry lotto revenue even hit a record high. Enforcement against illegal NFOs also appears to be stepping up. To be sure, legislation needs to be passed to cement these gains. Trim MAG TP by 7% to MYR2.00 for lower DPR of 60% (80% previously). At this point, we prefer BST over MAG. | |
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| | | | MACRO RESEARCH | | | | | | | FBMSCAP Index – Uptrend to Resume
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI closed little changed on Monday amid lack of fresh catalysts. At day's end, the benchmark eked out a minor gain of 0.03pts to 1,764.03. Broader market remained positive, underpinned by interest on second and lower liners, with gainers outpacing losers by 430 to 401. A total of 2.83b shares worth MYR1.71b changed hands. Market may head for a mixed start today over concerns on political uncertainty in the UK (Brexit negotiations), Spain and Turkey. | |
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| | NEWS | | | Outside Malaysia:
Germany: Industry rebounded from a summer lull with its best month in six years, keeping Europe's largest economy on a solid footing in the second half of the year. Output, adjusted for seasonal swings and inflation, increased 2.6% from July when it fell a revised 0.1%, the Economy Ministry said. That's the biggest increase since July 2011 for the typically volatile gauge and compares with forecasts for a 0.9% gain. Production was up 4.7% YoY. (Source: Bloomberg)
U.K: Labor-cost pressures look hotter than BOE had expected. U.K. labor-cost pressures are stronger than the Bank of England anticipated, giving policy makers an extra incentive to begin raising interest rates for the first time in decade. Annual growth in unit labor costs was 2.4% in the second quarter, the Office for National Statistics said. It revised the number up from a 1.6% rate published last week after an error was found in the data. The first quarter was revised to 3.5%, the fastest in almost four years. (Source: Bloomberg)
U.K: Retail sales advance as Brexit price increases persist. U.K. retailers are losing the battle against higher prices, potentially strengthening the case for the Bank of England to increase interest rates next month. A report from the British Retail Consortium and KPMG showed like-for-like sales increased 1.9% YoY-- a fourth straight month of gains. Still, the fastest growth since April was mainly driven by consumers paying more for essential items as retailers passed on the impact of the pound's drop since the Brexit vote to shoppers. (Source: Bloomberg)
China: Foreign-exchange reserves posted an eighth-straight monthly rise in September, as the pressure of cash outflows eased amid capital controls and a stronger yuan. The world's largest foreign currency stockpile climbed USD17b to USD3.109tr, the People's Bank of China said. The run of increases in the reserves is the longest since mid-2014, when the holdings peaked at USD4t before declining through early this year. (Source: Bloomberg)
Crude Oil: Iraq and Iran accelerate oil exports in battle with Saudi Arabia. Iraq and Iran boosted crude exports in September, taking advantage of a slower pace of shipments from rival Saudi Arabia to win buyers in key markets like China and the U.S. Iraq shipped 3.98 million barrels of crude a day, the highest since December, while Iran's exports rose to 2.28 million barrels a day, the most since February, according to ship-tracking data compiled by Bloomberg. Saudi Arabia's exports were 6.68 million barrels a day, the second-lowest for this year, the data show. (Source: Bloomberg) | |
| | | | | Other News:
Mudajaya: Wins MYR1.16b LRT3 job. wholly-owned unit Mudajaya Corp Bhd clinched a contract worth MYR1.16b for works related to the Light Rail Transit Line 3 (LRT3). Mudajaya Corp received the Letter of Acceptance from Prasarana Malaysia for the construction of guideway, stations, park and ride, ancillary buildings and other associated works. The contract brings Mudajaya's outstanding orderbook to MYR3.5b. (Source: The Edge Markets)
KNM: To partner with China-based firm for UK power plant. After more than 3 years in the making, the company may finally be able to get its 17MW waste-to-energy power plant in Peterborough, the UK, off the group. A JV is expected to be announced with a China-based counterpart later today to finance the project. If so, it would be a long-awaited catalyst for the group. According to source, the Chinese party will be funding the construction cost of the entire project. Early estimates of the project placed the cost aroung GBP151m (MYR841.9m) in capex for Phase 1 alone. It is understood that the Chinese party will take on the role as engineering, procurement and construction (EPC) contractor for the project. (Source: The Edge Financial Daily)
AirAsia X: Sees S Korea as a connecting hub. The company had announced yesterday Jeju Island as its third destination in South Korea, also disclosed that it is exploring the east Asian nation as a connecting hub to the US. According to its CEO Benyamin Ismail, the budget carrier is planning to speak to the US and South Korean governments on the matter, and check if the airlines would enjoy the right to operate fifth freedom flights between these two countries. He added that the airline is targeting an 80% load factor and 110,000 passengers for the Jeju flights in 12 months. (Source: The Edge financial Daily)
Serba Dinamik: Signs JV to set up chlor-alkali plant in Tanzania. The company is going to jointly set up and operate a chlorine skid mounted chlor-alkali plant in Tanzania, which marks its expansion into the African continent. Its wholly-owned unit Serba Dinamik International Ltd (SDIL) has inked a joint venture agreement with Tanzanian company, water-related solution supplier Junaco (T) Ltd (JTL), for the development of the 45-tonnes-per-day plant that will be located on an industrial plot in the Msufini Area, in the Kibaha District Coast Region. To undertake the project, Serba Dinamik and its partner will set up a special purpose vehicle in Dubai known as Msufini LLC, which will fully own the plant. SDIL will hold a 25% stake in Msufini, while JTL will own the remainder. Serba Dinamik said it will be able to expand its business into a new region that is Tanzania, which will ultimately expand its brand recognition into Africa for the first time. It will also be able to participate in the engineering, procurement, construction and commissioning works, which is valued at MYR295.26m (USD69.8m). (Source: The Edge Financial Daily) | |
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