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| | | | | | | | | | | | | | | | Share Price: | MYR88.00 | Target Price: | MYR78.00 | Recommendation: | Hold | | |
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| | | Better 4Q ahead? | | 3Q17 results were within our expectations. We expect 4Q to be stronger YoY in the absence of phasing/higher A&P spent (est. MYR30m) in the prior year quarter due to earlier Chinese New Year in 2017. With the recent softening price trend of raw materials such as Robusta and Milk, this could help ease gross profit margin pressure moving forward. Along with a possible gradual recovery in consumer sentiment, we believe that NESZ would see pricing power improve into 2018. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 4,838.0 | 5,063.5 | 5,342.0 | 5,715.9 | EBITDA | 886.0 | 932.0 | 943.9 | 1,013.0 | Core net profit | 588.5 | 598.4 | 638.2 | 673.7 | Core EPS (sen) | 251.0 | 255.2 | 272.2 | 287.3 | Core EPS growth (%) | 6.9 | 1.7 | 6.6 | 5.6 | Net DPS (sen) | 260.0 | 270.0 | 270.5 | 285.5 | Core P/E (x) | 35.1 | 34.5 | 32.3 | 30.6 | P/BV (x) | 29.1 | 31.9 | 31.7 | 31.5 | Net dividend yield (%) | 3.0 | 3.1 | 3.1 | 3.2 | ROAE (%) | 79.5 | 94.0 | 98.3 | 103.1 | ROAA (%) | 24.6 | 24.0 | 24.7 | 24.6 | EV/EBITDA (x) | 19.8 | 19.9 | 22.1 | 20.6 | Net debt/equity (%) | 47.4 | 39.1 | 37.0 | 35.1 |
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| | | | | | | | | | | | | | Share Price: | MYR8.00 | Target Price: | MYR7.60 | Recommendation: | Hold | | |
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| | | Tight supply environment | | Strong 2QFY18 results were above expectations, driven by sales volume growth, lower NBR cost and efficiency gains. Given the robust demand for nitrile gloves, Hartalega is accelerating its expansion, which will support its earnings growth momentum ahead. We raise our FY18-20 EPS by 4-12% as we raise our capacity assumption. Consequently, our TP is raised to MYR7.60 (+5%) based on an unchanged 27x 2018 PER (+1SD to mean). Maintain HOLD. | | |
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| | FYE Mar (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,498.3 | 1,822.1 | 2,451.0 | 2,730.1 | EBITDA | 386.8 | 419.4 | 586.1 | 675.7 | Core net profit | 257.6 | 283.0 | 421.9 | 480.7 | Core FDEPS (sen) | 15.5 | 17.1 | 25.2 | 28.8 | Core FDEPS growth(%) | 16.3 | 9.8 | 47.9 | 13.9 | Net DPS (sen) | 8.0 | 8.5 | 12.7 | 14.5 | Core FD P/E (x) | 51.5 | 46.9 | 31.7 | 27.8 | P/BV (x) | 8.7 | 7.8 | 7.0 | 6.2 | Net dividend yield (%) | 1.0 | 1.1 | 1.6 | 1.8 | ROAE (%) | na | na | na | na | ROAA (%) | 15.1 | 13.3 | 17.0 | 17.1 | EV/EBITDA (x) | 21.0 | 19.9 | 23.1 | 20.1 | Net debt/equity (%) | 10.9 | 11.3 | 16.6 | 14.9 |
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| | | | | | MACRO RESEARCH | | | | | | | Reserves continues its upward crawl
by Suhaimi Ilias |
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| | | | | | Total gross external reserves rose to USD101.5b at end-Oct 2017 (mid-Oct 2017: USD101.4b; end-Sept 2017: USD101.2b) on sustained positive trade flows amid net foreign selling in equities and bonds as well as unwinding of BNM's net short forward position. Current reserves level is equivalent to 7.6 months of retained imports and 1.1 times of short-term external debt. | |
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| | | | | | | | Inflation rate hit year's high
by Suhaimi Ilias |
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| | | | | | Headline inflation rate in Oct 2017 picked up for the fourth consecutive month to +3.5% YoY (Sep 2017: +3.4% YoY) while core inflation rate eased slightly to +3.2% YoY (Sep 2017: +3.3% YoY). Inflation in Jan-Oct 2017 was +3.2% YoY. Adjust our full-year 2017 and 2018 headline inflation rate forecast to +3.2% (from +3.0%) and +3.6% (from +3.5%) respectively. | |
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| | | | | | | | KLTEC Index: A New 12-year High
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI soared 8.65pts to 1,750.94 yesterday, thanks to late buying support on GENT, GENM and PTG. Broader market, however, remained negative with losers outpacing gainers by 499 to 378. A total of 3.02b shares worth MYR2.67b changed hands. With market expecting OPR to remain unchanged at 3%, investors will likely focus on 3Q17 corporate earnings for lead. Technically, we believe FBMKLCI will trade between 1,745 and 1,755 today. Downside supports are 1,730 and 1,713. | |
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| | NEWS | | | Outside Malaysia:
U.S: Consumer credit rises by most since November 2016 as credit-card debt exceeded USD1tr, Federal Reserve data showed. Total credit rose USD 20.8b or at a 6.6% annualized rate. Non-revolving debt outstanding climbed USD14.4b. Revolving credit outstanding increased USD6.4b, the biggest gain in four months. The pickup in September consumer credit capped a quarter in which debt outstanding grew at an annualized 5.5%, the fastest quarterly pace this year. (Source: Bloomberg)
Germany: Industrial production fell in September as factories took a breather after a strong performance in the previous month. Output, adjusted for seasonal swings and inflation, dropped 1.6% MoM from August, when it surged 2.6% MoM, the fastest pace in six years, according to the Economy Ministry. Production was up 3.6% YoY. (Source: Bloomberg)
U.K: House-price growth accelerated in the last three months, reflecting the continued imbalance of supply and demand in the property market. Prices between August and October were 2.3% higher than in the previous three months, the lender said -- the fastest growth since January. On an annual basis, prices increased 4.5%, the most since February. Despite the pickup, confidence in housing is falling. According to Halifax, sentiment is now at its lowest in almost five years. Supply is also declining, with the number of new sellers falling for the 19th consecutive month in September. According to Nationwide Building Society, annual home-price inflation is running about 2.5%. (Source: Bloomberg)
China: Has a plan that could hand Trump a win on the deficit. China's Commerce Minister Zhong Shan laid out a list of measures being undertaken that could help narrow the USD327b gap, America's largest with any nation. China will host its first-ever import fair in November next year, and will roll out tax, fiscal and administrative initiatives aimed at helping foreign firms sell more into what is becoming a big and sophisticated consumer market, Zhong wrote. Slated for Shanghai in November 2018, the China International Import Expo (CIIE) reflects China's "sincere wish to open its market to the world and its sense of responsibility as a big country to push for an open world economy," he said. (Source: Bloomberg)
Japan: Tightest labor market in decades looks like it's helping part-time workers much more than their full-time colleagues. Hourly pay for part-time workers climbed 2.3% YoY in September, according to wages data released. And it's risen 2% or more each month throughout 2017. Meanwhile, full-time workers only saw a 0.2% gain in their scheduled monthly pay in September, and they haven't seen gains of even 1% since October 2000. Adding in overtime and bonuses, workers came away with a 0.9% increase in pay in September. (Source: Bloomberg) | |
| | | | | Other News:
ML Global: Bags MYR270.5m housing development jobs. Its wholly-owned MITC Engineering S/B has secured two housing development projects totalling MYR270.5m in Ijok, Selangor. For a contract sum of MYR139.5m, the first project entails the construction of 980 double-storey townhouses, with three units of Tenaga Nasional Bhd (TNB) substations, a guardhouse, a multipurpose hall, to be completed by April 2019. The second project, valued at MYR131m, is to build 673 double-storey terrace houses, a two-storey community centre, a surau and a guard house, and three TNB substations. Completion is scheduled for February 2019. (Source: The Edge Financial Daily)
O&C Resources: Plans To Buy Land From Tropicana City. The group is purchasing 4,101 square feet or 1.01 acres of freehold land in Petaling Jaya for MYR24.59m from Tropicana City S/B to diversify its business operation into property development. The purchase is expected to be funded via bank facilities and internally-generated funds. (Source: The Edge Financial Daily)
Gas Malaysia: In joint venture with Sime Darby Offshore Engineering. Venture 1 S/B (GMV1), a wholly-owned subsidiary of Gas Malaysia Ventures S/B, which in turn is a wholly-owned subsidiary of Gas Malaysia, had entered into a joint-venture agreement with Sime Darby Offshore Engineering S/B to provide electricity, steam, chilled water, hot water, hot air and/or any other utilities via combined heat and power system to industries in Malaysia. GMV1 will hold a 70% stake and SDOE the remaining 30% in the JV company which will have a paid-up capital of MYR5m. The move will see Gas Malaysia diversify from gas distribution to energy business. (Source: The Sun Daily)
GHL: Buys stake in Vietnam mobile payment facilitator. GHL Systems has announced its entry into Vietnam by acquiring a 31.16% stake in MPOS Global Limited for USD3.32m (MYR14.04m). MPOS Global and Vietnam MPOS Technology provide the first and only non-bank mobile payment acceptance terminals and financial solutions for individuals and businesses through a 0%-interest installment scheme linked with 12 major banks across Vietnam. Both GHL and Vietnam MPOS's strategy is to cement a strong Vietnamese presence in mobile and internet payments, including next generation payment solutions such as QR-code and NFC. (Source: The Sun Daily) | |
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