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| | | | | | | | | | | | | | | | Share Price: | MYR4.98 | Target Price: | MYR7.85 | Recommendation: | Buy | | |
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| | | DOE issues stop-work order on TE3 | | The Department of Environment (DOE) has on 1 Oct 2017 issued a stop-work order for LCT's KBR Catalytic Olefins Technology catalytic cracking reactor within its TE3 Project to mitigate and reduce odour emission and eliminate surface oil sheen/film discharge. Management is confident it will resolve this issue soon and the commercial startup of TE3 remains on-track by 4Q17. We keep our earnings forecasts, MYR7.85 TP (pegged to global peer average 2017 EV/EBITDA of 8.2x) and BUY call. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 8,147.8 | 8,136.6 | 8,003.8 | 10,523.6 | EBITDA | 1,548.0 | 2,193.0 | 1,769.6 | 2,468.4 | Core net profit | 625.9 | 1,396.5 | 1,193.5 | 1,555.9 | Core EPS (sen) | 36.2 | 80.8 | 52.5 | 68.5 | Core EPS growth (%) | nm | 123.1 | (35.0) | 30.4 | Net DPS (sen) | 5.9 | 6.9 | 17.4 | 22.6 | Core P/E (x) | 13.7 | 6.2 | 9.5 | 7.3 | P/BV (x) | 1.4 | 1.1 | 0.9 | 0.8 | Net dividend yield (%) | 1.2 | 1.4 | 3.5 | 4.5 | ROAE (%) | 11.3 | 18.6 | 11.8 | 11.9 | ROAA (%) | 9.4 | 16.7 | 10.3 | 10.7 | EV/EBITDA (x) | na | na | 4.5 | 3.8 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR1.71 | Target Price: | MYR2.02 | Recommendation: | Buy | | |
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| | | FY17E earnings still on track | | The recent recovery in China's steel prices could encourage manufacturers to lock in purchases ahead of any further increases in prices, and this bodes well for CSC's product sales. CSC's margins are also expected to be higher QoQ in 3Q17, supported by lower raw material costs procured in 2Q17. We reiterate our BUY call with an unchanged TP of MYR2.02. Our valuation is based on 10.5x (5-year historical forward PER) FY18E EPS. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,017.1 | 1,035.2 | 1,142.4 | 1,236.7 | EBITDA | 96.3 | 106.4 | 106.8 | 118.7 | Core net profit | 35.5 | 68.5 | 61.2 | 70.8 | Core EPS (sen) | 9.6 | 18.6 | 16.6 | 19.2 | Core EPS growth (%) | nm | 94.0 | (10.8) | 15.7 | Net DPS (sen) | 8.0 | 14.0 | 8.3 | 9.6 | Core P/E (x) | 17.8 | 9.2 | 10.3 | 8.9 | P/BV (x) | 0.8 | 0.8 | 0.8 | 0.7 | Net dividend yield (%) | 4.7 | 8.2 | 4.8 | 5.6 | ROAE (%) | 6.9 | 8.7 | 7.4 | 8.3 | ROAA (%) | 4.4 | 8.0 | 6.8 | 7.5 | EV/EBITDA (x) | 1.8 | 4.9 | 3.0 | 2.5 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | MACRO RESEARCH | | | | | | | Flows & Lookouts
by Chew Hann Wong |
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| | | | | | The last eight trading days of Sep 2017 saw quite sizeable foreign net sell of Malaysia equities resulting on an overall net sell position for the month of September. We are mindful of further profit-taking by foreign investors after the YTD gains in equities and MYR. Stocks with both sizeable foreign shareholding and share price rise for the YTD are more vulnerable. | |
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| | | | | | | | FBMKLCI: Searching for a Reversal Signal
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI ended marginally lower yesterday. At day's end, the benchmark eased 0.80pts to 1,754.78, led by declines in TM, KLCC and BAT. Market breadth was negative with losers outpacing gainers by 538 to 288. A total of 2.23b shares worth MYR1.74b changed hands. The benchmark has fallen for nine consecutive days on the back of foreign selling. The downtrend does not look complete yet, but we do not rule out the possibility of a technical rebound, particularly on the back of firmer US markets. | |
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| | NEWS | | | Outside Malaysia:
U.S: Manufacturing expands at fastest pace in 13 years. American manufacturing expanded last month at the fastest pace in 13 years, in part because of effects from two major hurricanes, figures from the ISM showed. Factory index climbed to 60.8, the highest since May 2004, from 58.8; readings above 50 indicate expansion. Measure of new orders increased to 64.6, the strongest since February, from 60.3. Employment gauge rose to 60.3, the best reading in more than six years, from 59.9 while index of prices paid advanced to 71.5, the highest since May 2011, from 62. (Source: Bloomberg)
E.U: Euro-area factories are scrambling to add staff as burgeoning orders stretch capacity. A Purchasing Managers Index for the region's manufacturing industry rose to 58.1 in September from 57.4 the previous month, London-based IHS Markit said. That compares with a preliminary reading of 58.2 and is the highest level in more than six and a half years. A gauge for employment rose at the fastest pace since the survey began in 1997. The currency bloc's economy is on track to expand 2.2% this year, the strongest pace in a decade as global trade, central bank stimulus and political risks all combine to support growth. (Source: Bloomberg)
U.K: Manufacturing growth remained "solid" in September and inflation pressures built, according to an industry survey. The findings, in IHS Markit's monthly purchasing-manager survey, are likely to keep the Bank of England on track toward an interest-rate increase. Governor Mark Carney said that there may be a need for tightening in the "relatively near term." While the key factory index slipped to 55.9 from 56.7 in August, that's still well above the 50 level that divides expansion from contraction. A measure of input costs jumped and factories are passing on at least some of the increase. Output prices advanced at the fastest pace in four months. (Source: Bloomberg) | |
| | | | | Other News:
Petronas Chemicals: Sells 50% of PRPC Polymers. The company is selling a 50% stake in wholly-owned unit PRPC Polymers Sdn Bhd to Saudi Arabian Oil Co's (Saudi Aramco) subsidiary under a planned estimated USD900m (MYR3.8b) deal to share PRPC Polymers' business risk. PCG said it was selling the 50% stake in PRPC Polymers to Saudi Aramco's wholly-owned subsidiary Aramco Overseas Holdings Coöperatief UA (AOHC). PCG said the estimated USD900m deal includes the divestment of 50% of any shareholder loans held by PCG in PRPC Polymers to AOHC. (Source: The Edge Markets)
Tenaga Nasional: Eyes 13 projects with Belgian power transmission firm. The company proposed 13 collaborative projects under a two-year strategic collaboration to share best practices in capacity building with European transmission system operator Elia System Operator SA. The collaborative projects are part of a MoU signed between TNB and Elia where both parties would cooperate in asset management, cross-boundary system and market operations, grid development, network studies and renewable integration. The parties will also exchange technical information such as through annual reports and surveys, solution to problems, technical visits, study trips and the necessary training programs. The two-year MoU is extendable for another year. (Source: The Edge Markets)
Malaysia Airports: Hopes to welcome five new airlines next year. According to the company's managing director, Datuk Mohd Badlisham Ghazali, the company expects to bring in five new airlines into Malaysia next year. He said, " I just returned from World Routes, an airline event in Barcelona. If all goes well, five new airlines from the few countries that haven't flown here in Malaysia will fly to KL by next year". He also expressed hope that the government would set aside funds to boost the capacity of some of its airports such as Subang, Penang and Kota Kinabalu. (source: The Edge Financial Daily)
Carimin Petroleum: Wins contract from Petronas Carigali. The company won a five-year contract from Petronas Carigali Sdn Bhd to provide maintenance, construction and modification Services (Package [Offshore] Peninsular Malaysia Oil) for an undisclosed sum. The duration of the contract was for a primary period of five years with one year extension option effective from Sept 20 and will expire on Sept 19, 2022, at an agreed fixed schedule of rates. The contract is expected to contribute positively to its earnings over the duration of the contract. (Source: The Edge Markets) | |
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