Friday, October 27, 2017

FW: [Maybank IB] Today's Research - Malaysia

 

 

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COMPANY
RESEARCH

Lotte Chemical Titan Holdings | Things are getting back to normal
Mohshin Aziz

Tenaga Nasional | Let there be yield
Chi Wei Tan

Public Bank | 3Q17 results within expectations
Desmond Ch'ng

Pavilion REIT | 3Q17: Some setback at da:men
Kevin Wong

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COMPANY RESEARCH

Malaysia

Results Review

Lotte Chemical Titan Holdings (TTNP MK)
by Mohshin Aziz

Share Price:

MYR5.18

Target Price:

MYR7.85

Recommendation:

Buy

Things are getting back to normal

3Q17 core net profit of MYR253m was slightly below expectations due to larger-than-expected associate loss. Else, the underlying performance was consistent with management's guidance. Outlook is positive as LCT will be running at full operating rate from 4Q17 onwards. We lower 2017-19 earnings forecasts by 9%, 6% and 3% to factor in the associate loss and tweak some cost parameters. We maintain our TP of MYR7.85 which implies 6.6x 2018 EV/EBITDA vs. peer-group average of 6.9x. Maintain BUY.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

8,147.8

8,136.6

7,879.3

10,299.7

EBITDA

1,548.0

2,193.0

1,659.0

2,373.2

Core net profit

625.9

1,396.5

1,084.3

1,462.6

Core EPS (sen)

36.2

80.8

49.1

66.2

Core EPS growth (%)

nm

123.1

(39.3)

34.9

Net DPS (sen)

5.9

6.9

17.4

21.8

Core P/E (x)

14.3

6.4

10.6

7.8

P/BV (x)

1.4

1.1

1.0

0.9

Net dividend yield (%)

1.1

1.3

3.4

4.2

ROAE (%)

11.3

18.6

10.8

11.6

ROAA (%)

9.4

16.7

9.6

10.4

EV/EBITDA (x)

na

na

5.2

4.1

Net debt/equity (%)

net cash

net cash

net cash

net cash

Malaysia

Results Review

Tenaga Nasional (TNB MK)
by Chi Wei Tan

Share Price:

MYR14.34

Target Price:

MYR16.20

Recommendation:

Buy

Let there be yield

FY8/17 earnings were in line with ours, but below consensus. Dividend surprised positively by coming in at the top-end of policy. Tenaga remains our top pick for the sector, given its compelling valuation and stable earnings profile. Reiterate BUY with an unchanged MYR16.20 TP.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

44,531.5

47,416.9

15,726.6

48,629.4

EBITDA

14,794.2

15,469.0

5,391.8

16,689.8

Core net profit

7,725.8

6,896.1

2,424.0

7,647.6

Core EPS (sen)

136.9

121.9

42.8

135.1

Core EPS growth (%)

9.6

(11.0)

(64.8)

215.5

Net DPS (sen)

32.0

61.0

21.4

67.6

Core P/E (x)

10.5

11.8

33.5

10.6

P/BV (x)

1.5

1.4

1.4

1.3

Net dividend yield (%)

2.2

4.3

1.5

4.7

ROAE (%)

14.8

12.6

4.2

12.7

ROAA (%)

6.2

5.0

1.7

5.3

EV/EBITDA (x)

6.3

6.5

19.2

6.1

Net debt/equity (%)

32.6

37.5

36.9

32.5

Malaysia

Results Review

Public Bank (PBK MK)
by Desmond Ch'ng

Share Price:

MYR20.48

Target Price:

MYR20.00

Recommendation:

Hold

3Q17 results within expectations

We maintain our forecasts following Public Bank's 3Q17 results which were within expectations. We expect the group to achieve its ROE target of 15% this year, but unless earnings growth momentum picks up, we anticipate a slippage in ROE to 14% in FY18. A potential catalyst, nevertheless, could be an uplift in ROEs post-MFRS9 if part of its provisions can be written back. HOLD call maintained with an unchanged TP of MYR20.00, pegged to a FY18 PBV of 1.9x.

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Operating income

9,438.8

9,896.0

10,509.8

10,920.3

Pre-provision profit

6,523.6

6,684.6

7,048.6

7,309.7

Core net profit

4,955.2

5,146.4

5,369.8

5,488.0

Core EPS (MYR)

1.28

1.33

1.39

1.42

Core EPS growth (%)

9.7

3.9

4.3

2.2

Net DPS (MYR)

0.56

0.58

0.63

0.64

Core P/E (x)

16.0

15.4

14.7

14.4

P/BV (x)

2.5

2.3

2.1

1.9

Net dividend yield (%)

2.7

2.8

3.1

3.1

Book value (MYR)

8.09

8.86

9.70

10.55

ROAE (%)

16.7

15.7

15.0

14.0

ROAA (%)

1.4

1.4

1.4

1.4

Malaysia

TP Revision

Pavilion REIT (PREIT MK)
by Kevin Wong

Share Price:

MYR1.73

Target Price:

MYR1.70

Recommendation:

Hold

3Q17: Some setback at da:men

3Q17 results were below estimates due to weaker tenancies at da:men USJ and higher opex at Pavilion KL. We lower our earnings forecasts by c.5% p.a. and DDM-TP to MYR1.70 (-5sen; cost of equity: 7.5%).

FYE Dec (MYR m)

FY15A

FY16A

FY17E

FY18E

Revenue

413.9

459.7

485.0

558.7

Net property income

291.5

314.8

315.4

368.2

Distributable income

248.9

248.8

243.1

281.9

DPU (sen)

7.4

7.4

7.2

7.8

DPU growth (%)

3.1

0.5

(2.7)

7.9

Price/DPU(x)

23.4

23.3

24.0

22.2

P/BV (x)

1.4

1.3

1.3

1.2

DPU yield (%)

4.3

4.3

4.2

4.5

ROAE (%)

6.3

6.1

5.7

6.0

ROAA (%)

5.1

4.5

4.0

4.2

Debt/Assets (x)

0.2

0.3

0.2

0.2

MACRO RESEARCH

MY: Traders' Almanac

KLCON Index Made a Critical Reversal within Support Zones
by Nik Ihsan Raja Abdullah

Technical Research

FBMKLCI eased 2.25pts to 1,736.80 yesterday, led by declines in IHH, YTL and AMM. Broader market, however, turned positive with gainers outpacing losers by 420 to 383. A total of 2.52b shares worth MYR2.13b changed hands. Sentiments will likely stay choppy throughout the day as investors cautiously awaits the 2018 Budget. Meanwhile, O&G stocks could attract a following after oil price gained strength. Technically, we expect FBMKLCI to trade between 1,732 and 1,745.

NEWS

Outside Malaysia:

U.S: Goods-trade gap in September widens to four-month high as imports rise for the first time since April, according to preliminary figures released by the Commerce Department. The report also showed inventories increased at wholesalers and fell at retailers. Goods-trade gap increased to USD 64.1b from USD 63.3b in August. Wholesale inventories increased 0.3% MoM, after revised 0.8% MoM rise in the prior month. Retail stockpiles fell 1% MoM as auto inventories dropped by most since 2009. (Source: Bloomberg)

U.S: Pending home sales weaker than forecast, held back by Irma. A gauge of contract signings to purchase previously-owned U.S. homes was unchanged in September at the lowest level since the start of 2016 as Hurricane Irma depressed sales in the southeast and a limited number of listings restrained activity elsewhere, according to data released from the National Association of Realtors in Washington. Index held at 106 after a 2.8% decline. Gauge dropped 5.4% YoY from September 2016 on unadjusted basis, the biggest year-over-year decrease since April. Contract signings fell in the South and rose in the other three regions. (Source: Bloomberg)

E.U: ECB slows asset purchases as Draghi heads for stimulus exit. The European Central Bank will reduce its monthly bond purchases next year in a step toward ending a program that has spent more than EUR 2tr (USD 2.4 trillion) trying to revive euro-area inflation. Policy makers agreed to scale back buying to EUR 30b a month starting in January and continue for nine months until the end of September. That'll take its total holdings to at least EUR 2.55tr. Still, the central bank also emphasized that it'll move extremely cautiously. It kept its pledge to step up or extend buying further if needed, changed the language on its reinvestment strategy for maturing debt, and reiterated that banks will be able to borrow as much as they need in refinancing operations. (Source: Bloomberg)

Spain: Unemployment fell to a nine-year low in the third quarter, providing some good economic news for the government as it tries to get a grip on the political crisis in Catalonia. The rate declined to 16.4% from 17.2% in the previous three months, Spain's Statistics Institute said. Breaking down the data, the number of people without a job fell by 182,600 people to 3.7 million. Hiring in services, industry and construction led employment growth for the quarter. The figures come as the central government in Madrid prepares to rein in a separatist push in Catalonia that is putting the economic outlook at risk. While a surge in unemployment to a record during the recession played a part in fuelling the region's demands for independence, an improvement in the labor market in recent years hasn't eased ambitions to secede. (Source: Bloomberg)

Japan: Inflation holds to steady pace as BOJ policy meeting nears. Japan's key price gauge remained unchanged in September, underscoring the enduring challenge facing the Bank of Japan ahead of a policy meeting next week. Core consumer prices, which exclude fresh food, rose 0.7% YoY in September, the same pace as the previous month. Excluding fresh food and energy, prices rose 0.2% YoY. Overall prices gained 0.7%. (Source: Bloomberg)

Other News:

Infrastructure: HSR's AssetsCo tender likely to be called in December. A tender to set up a privately-financed asset company (AssetsCo) for the Kuala Lumpur-Singapore High Speed Rail (HSR) project is likely to be called in mid-December. The rail assets would include track-work, power, signalling and telecommunications. "It will then take a year for the governments to decide on who will be the winners. It needs a year as it is a complicated tender," said Mohd Nur Ismal. MyHSR Corp and Land Transport Authority of Singapore (LTA) have always emphasised that the tender will be carried out in an open and fair manner. They noted that every bid will be assessed on its own merits and there will not be any requirement for local partners. (Source: Bernama)

Sumatec Resources: To buy Kazakh oil field's concession owner for MYR1.55b. The company has entered into head of agreement with Markmore Sdn Bhd for the purpose of recording their understanding and intention in respect of the proposed purchase of entire equity interest in Markmore Energy (Labuan) Ltd for MYR1.55b. In a filing with Bursa Malaysia, Sumatec said Markmore Energy, through it wholly-owned subsidiary, Markmore Central Asia B.V, holds the entire participatory in CaspiOilGas LLP (COG), which in turn the concession owner and operator of the Rakushechnoye oil and gas field in Kazakhstan. "The proposed acquisition is also a step in increasing the hydrocarbon reserves for Sumatec to arrest its natural production decline, thereby ensuring the company's continuous growth," it said. (Source: Bernama)

TMC Life Sciences: In high growth phase, eyes 1,100 beds. The company is now at a high growth stage with plans in place for capacity expansion to add more beds and medical suites, said group CEO Roy Quek. He said the company, which currently operates a 200-bed hospital, was aiming for a five-fold growth in the number of beds to 1,100 beds, expected to be ready in stages after 2020. Quek said the group's brownfield expansion project costing MYR300m, occupying one-third of the company's existing six hectares land in Kota Damansara, had received the building plan approval from the local council and was expected to commence construction by end-2017. (Source: The Star Online)

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