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| | | | | | | | | | | | | | | | Share Price: | MYR3.78 | Target Price: | MYR4.50 | Recommendation: | Buy | | |
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| | | Secures a 6-month extension | | We are positive on the six-month extension for CMS' State Road maintenance concession in Sarawak as it would help to address the earnings overhang, especially with the concession ending on 31 Dec 2017. The rationale for this extension is to facilitate negotiations and to finalize terms for a renewal of a long-term agreement, and thus we do not discount the possibility of CMS securing a new longer term concession on renewed terms once the details have been ironed out. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,788.0 | 1,551.3 | 1,950.8 | 2,197.6 | EBITDA | 394.8 | 418.9 | 388.1 | 420.3 | Core net profit | 244.7 | 212.4 | 221.3 | 258.9 | Core EPS (sen) | 22.8 | 19.8 | 20.6 | 24.1 | Core EPS growth (%) | 7.0 | (13.2) | 4.2 | 17.0 | Net DPS (sen) | 4.5 | 6.3 | 8.2 | 9.6 | Core P/E (x) | 16.6 | 19.1 | 18.3 | 15.7 | P/BV (x) | 2.0 | 1.8 | 1.7 | 1.6 | Net dividend yield (%) | 1.2 | 1.7 | 2.2 | 2.6 | ROAE (%) | 13.0 | 8.0 | 9.7 | 10.7 | ROAA (%) | 8.1 | 6.4 | 6.1 | 6.6 | EV/EBITDA (x) | 14.3 | 10.5 | 10.6 | 9.8 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR1.55 | Target Price: | MYR1.24 | Recommendation: | Sell | | |
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| | | Recovery into 2018? | | We await further delivery of results, noting that its 18-month 'Back to Basics' programme, which was unveiled in end-July 2017, is on-going. We expect a better 2018 as SEM fine-tunes its cost efficiencies (eg. supply chain costs, labour costs) and on new store growth, but for now, valuations are lofty. We keep our earnings forecasts, SELL call and TP of MYR1.24 (26x CY18 PER; about in line with peer average). | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 2,006.3 | 2,103.4 | 2,170.7 | 2,434.1 | EBITDA | 127.4 | 126.5 | 122.3 | 140.0 | Core net profit | 55.8 | 54.0 | 46.4 | 58.2 | Core EPS (sen) | 4.6 | 4.4 | 3.8 | 4.8 | Core EPS growth (%) | (3.3) | (3.3) | (14.1) | 25.6 | Net DPS (sen) | 4.7 | 4.7 | 1.9 | 2.4 | Core P/E (x) | 34.0 | 35.2 | 41.0 | 32.6 | P/BV (x) | 11.2 | 54.0 | 32.5 | 21.7 | Net dividend yield (%) | 3.0 | 3.0 | 1.2 | 1.5 | ROAE (%) | 27.5 | 52.5 | 99.1 | 79.8 | ROAA (%) | 7.5 | 7.1 | 5.8 | 6.7 | EV/EBITDA (x) | 13.8 | 14.3 | 15.9 | 13.6 | Net debt/equity (%) | net cash | 188.2 | 79.8 | 0.7 |
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| | | | | SECTOR RESEARCH | | | | | | | A decent 3Q17 for banks
by Desmond Ch'ng |
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| | | | | | 9M17 core net profit growth has been respectable and we project aggregate 2017 earnings growth of 13.7% for the banks in our coverage, aided in large part by the expansion in NIMs. This growth is projected to taper off to 5.8% in 2018 amid flat NIMs and stable credit costs. Upside risks to earnings would be if NIMs or credit costs surprise positively. Amid stable ROEs of about 10%, we maintain our Neutral call on the sector, with BUYs on HLFG, CIMB and BIMB. | |
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| | | | MACRO RESEARCH | | | | | | | Soft headline inflation, firm core inflation
by Suhaimi Ilias |
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| | | | | | Headline inflation rate in Nov 2017 eased to +3.3% YoY (Oct 2017: +3.5% YoY) after four consecutive month of rising while core inflation rate edged up marginally to +3.3% YoY (Oct 2017: +3.2% YoY). With inflation for Jan-Nov 2017 at +3.2% YoY, we maintain our full-year 2017 and 2018 headline inflation rate at +3.2% and +3.6% respectively. | |
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| | | | | | | | Finance Index Made a Reversal at Critical Support
by Nik Ihsan Raja Abdullah |
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| | | | | | Late buying support lifted FBMKLCI 11.71pts higher yesterday. Finance stocks stole the limelight, offsetting losses in SIME and SDPL. At day's end, the benchmark rose 0.7% to 1,724.84. Notwithstanding that, broader market remained weak, with losers outpacing gainers by 624 to 298. A total of 1.83b shares worth MYR2.23b changed hands. Following the selloff in Wall Street overnight as well as a lack of catalyst locally, we believe investors will switch into risk-off mode today. | |
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| | NEWS | | | Outside Malaysia:
U.S: Growth in service industries cools from a 12-year high in November, as orders eased and supply chains normalized following two hurricanes, an Institute for Supply Management survey showed. Non-manufacturing index fell to 57.4 from 60.1; readings above 50 indicate growth. Index of supplier deliveries fell to 54 from October's 58 reading that matched the highest since November 2005. Measure of business activity eased to 61.4 from 62.2; gauge of new orders dropped to 58.7 from 62.8. (Source: Bloomberg)
U.S: Trade deficit in October widest since January on record imports that reflect steady domestic demand, Commerce Department data showed. Gap increased 8.6% to USD48.7b from revised USD 44.9b in prior month that was wider than previously reported. Imports climbed 1.6% to USD244.6b, boosted by mobile phones, apparel, household goods and service-related purchases. Exports were unchanged at USD195.9b as more shipments of petroleum were offset by declines of capital equipment, consumer goods. (Source: Bloomberg)
E.U: Euro-area economic momentum accelerated to its fastest pace in over six years in November, setting the scene for a buoyant end to a year that saw political wobbling across much of the region. A Purchasing Managers' Index for manufacturing and services rose to 57.5 in November, IHS Markit said. That's up from 56.0 in October and matches a Nov. 23 flash estimate. Output was bolstered by booming manufacturing, which only saw one stronger expansion in the 20-year survey history. (Source: Bloomberg)
U.K: Services growth slowed in November from the fastest pace in six months as price pressures intensified. The services Purchasing Managers Index fell to 53.8 from 55.6 in October, IHS Markit said. Input costs increased the most since 2011 and prices charged rose at the fastest clip since 2008. While the U.K. economy is on track to expand about 0.5% in the fourth quarter, higher oil prices and the depreciation of the pound since the Brexit vote are keeping a lid on optimism, Markit said. (Source: Bloomberg)
S. Korea: Raises top corporate tax rate as 2018 budget passed. South Korea's parliament raised the nominal corporate tax rate for the highest earning companies, a move that runs counter to the current global trend. Lawmakers agreed to increase the rate on companies whose taxable income exceeds KRW300b (USD 276m) to 25% from 22%, the current top rate. While that's a modest victory for President Moon Jae-in to take away from his budget battle with opposition parties, he had previously hoped to apply the new rate at a lower threshold of KRW200b. Moon was elected in May with vows to reduce inequality and to be a "jobs president." (Source: Bloomberg) | |
| | | | | Other News:
Oil & Gas: Petronas unit agrees share swap with Shell's Africa operator. Petronas South African unit, Engen and Vivo Energy Holding BV agreed to a deal worth as much as ZAR3.5b (MYR1.05b) to combine some of their African fuel-retail assets. The deal represents about 20% of Engen's equity value. Vivo Energy, which operates more than 1,800 gas stations across 15 African countries under the Royal Dutch Shell plc brand, will exchange some of its shares for stock in Engen Holdings (Pty) Ltd. The transaction may involve a "cash element". (Source: The Edge Financial Daily)
Construction: MYR60m worth of LRT3 contracts set aside for small bumi contractors. About MYR60m worth of small contracts in the LRT3 project will be made available to bumiputera contractors. The contracts will be for 120 smaller work packages, which the LRT3 main work package contractors are required to allocate to bumiputera contractors CIDB grade G2 to G4. The work packages will comprise, but are not limited to, areas such as surface works, mechanical and engineering works, concrete works, external architectural works and interior fittings out works. (Source: The Edge Financial Daily)
Axis REIT: Acquires 40th property; total assets now at MYR2.46b. Axis REIT added its 40th property – an industrial facility in Gebeng, Kuantan to its portfolio yesterday. The property comprises two contiguous parcels of land with buildings which are used for pipe coating-related industrial activities. This latest acquisition will increase the total assets under management of the trust to MYR2.46b. According to Axis REIT Managers (ARMB), one parcel of land was fully paid yesterday at the purchase price of MYR120m, with the lease of the property commencing accordingly as specified in the terms and conditions of the sales and purchase agreement. The balance purchase price of the second parcel, at MYR35m, will be paid at a later stage once the completion requirement is fulfilled in accordance with the agreement. (Source: The Edge Financial Daily)
Pharmaniaga: Partners Delhi lab, MoF to manufacture halal vaccines. Pharmaniaga is partnering Delhi-based MSD Wellcome Trust Hilleman Laboratories Private Ltd (Hilleman) and ministry of finance (MoF) entity to develop and manufacture halal vaccines to be incorporated in Malaysia's national immunisation programmes. In a filing with the stock exchange, Pharmaniaga entered a memorandum of collaboration yesterday with Hilleman and the MoF unit, Technology Depository Agency (TDA), to coordinate their efforts to do so. The project covers the exchange of personnel from the companies for purposes such as teaching, research and training in relation to halal vaccines. The memorandum is effective for two years from the signing. (Source: The Edge Financial Daily) | |
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