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| | | | | | | | | | | | | | Share Price: | MYR4.79 | Target Price: | MYR5.03 | Recommendation: | Buy | | |
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| | | Strong headline profits | | 1HFY18 headline PATMI rose seven-fold to MYR956m, lifted by stronger downstream performance, coupled with FX translation gains of MYR265m as IOI benefited from a stronger Ringgit. A first interim DPS of 4.5sen was declared (ex-date: 16 Mar). Maintain trading BUY with an unchanged TP of MYR5.03 on 29x FY18 PER (its historical 5-year mean). Completion of Loders disposal is the immediate catalyst as a 12.5sen special DPS potentially awaits investors post completion disposal. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 11,739.3 | 14,127.3 | 13,210.4 | 13,573.6 | EBITDA | 1,494.6 | 1,603.8 | 2,238.2 | 2,132.7 | Core net profit | 951.5 | 1,022.8 | 1,090.7 | 1,224.8 | Core EPS (sen) | 14.7 | 16.3 | 17.3 | 19.5 | Core EPS growth (%) | 27.8 | 10.5 | 6.6 | 12.3 | Net DPS (sen) | 8.0 | 9.5 | 10.8 | 9.7 | Core P/E (x) | 32.5 | 29.4 | 27.6 | 24.6 | P/BV (x) | 4.3 | 4.0 | 3.7 | 3.4 | Net dividend yield (%) | 1.7 | 2.0 | 2.3 | 2.0 | ROAE (%) | 8.9 | 10.0 | 17.4 | 14.5 | ROAA (%) | 5.6 | 5.7 | 6.0 | 6.6 | EV/EBITDA (x) | 22.6 | 21.2 | 15.8 | 16.2 | Net debt/equity (%) | 73.4 | 75.4 | 57.6 | 46.2 |
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| | | | | | | | | | | | Share Price: | MYR4.37 | Target Price: | MYR4.90 | Recommendation: | Buy | | |
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| | | A strong finish to the year | | FY17 core earnings of MYR263m came in well above ours/consensus forecasts. The outperformance against our forecast was largely due to stronger contribution from OMS. We lift FY18E/FY19E earnings upwards by 15%/16% to incorporate the stronger earnings from OMS. Our SOP-TP is raised to MYR4.90 (+9%) as we roll forward valuation base year and incorporate the value of OMS earnings into our SOP-based calculation. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,551.3 | 1,606.7 | 2,098.7 | 2,244.1 | EBITDA | 418.9 | 404.2 | 423.1 | 439.0 | Core net profit | 212.4 | 263.2 | 297.3 | 322.0 | Core EPS (sen) | 19.8 | 24.5 | 27.7 | 30.0 | Core EPS growth (%) | (13.2) | 23.9 | 12.9 | 8.3 | Net DPS (sen) | 6.3 | 8.0 | 11.1 | 12.0 | Core P/E (x) | 22.1 | 17.8 | 15.8 | 14.6 | P/BV (x) | 2.1 | 2.0 | 1.9 | 1.7 | Net dividend yield (%) | 1.4 | 1.8 | 2.5 | 2.7 | ROAE (%) | 8.0 | 9.4 | 12.2 | 12.3 | ROAA (%) | 6.4 | 7.0 | 6.9 | 6.9 | EV/EBITDA (x) | 10.5 | 10.3 | 11.0 | 10.6 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | Share Price: | MYR1.15 | Target Price: | MYR1.40 | Recommendation: | Buy | | |
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| | | 2QFY18: Above estimates | | 2QFY6/18 results and 2nd interim gross DPU of 1.99sen (YTD: 3.97sen) were above expectations. The outperformance, relative to our forecast, was due to better earnings from the Australian hotels. YoY, the stronger earnings was also largely driven by higher revenue at selected Malaysian assets and a new hotel. We tweak FY18/19/20 earnings forecasts by +4%/-2%/-2% but maintain our DDM-TP of MYR1.40. CY 18 net yield is an attractive 6.5%. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 426.3 | 449.7 | 470.1 | 496.1 | Net property income | 198.9 | 209.6 | 230.6 | 241.7 | Distributable income | 104.5 | 122.7 | 135.0 | 151.5 | DPU (sen) | 7.1 | 7.3 | 7.1 | 8.0 | DPU growth (%) | (1.0) | 2.4 | (2.0) | 12.2 | Price/DPU(x) | 16.2 | 15.8 | 16.1 | 14.4 | P/BV (x) | 0.8 | 0.8 | 0.8 | 0.8 | DPU yield (%) | 6.2 | 6.3 | 6.2 | 7.0 | ROAE (%) | (0.3) | (0.5) | 1.8 | 1.9 | ROAA (%) | 2.9 | 3.1 | 3.1 | 3.4 | Debt/Assets (x) | 0.4 | 0.3 | 0.4 | 0.4 |
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| | | | | | | | | | | | Share Price: | MYR3.60 | Target Price: | MYR4.15 | Recommendation: | Buy | | |
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| | | 4Q17: Slight shortfall | | FY17 core net profit came in slightly below our expectations on lower-than-expected contribution from its discontinued China operations. However, Don Sahong construction progress remains on track, with cumulative physical progress at 46.5% as of end-Dec 2017. MFCB expects Don Sahong to reach e.80% physical completion by end-2018. We make no changes to our earnings and TP pending an update with management. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 915.5 | 910.9 | 767.9 | 662.5 | EBITDA | 258.2 | 218.9 | 224.5 | 185.4 | Core net profit | 121.5 | 131.7 | 120.0 | 92.5 | Core EPS (sen) | 35.1 | 34.3 | 31.3 | 24.1 | Core EPS growth (%) | 90.1 | (2.4) | (8.9) | (22.9) | Net DPS (sen) | 5.0 | 4.0 | 2.0 | 2.0 | Core P/E (x) | 10.2 | 10.5 | 11.5 | 14.9 | P/BV (x) | 1.2 | 1.2 | 1.1 | 1.0 | Net dividend yield (%) | 1.4 | 1.1 | 0.6 | 0.6 | ROAE (%) | na | na | na | na | ROAA (%) | 8.7 | 7.7 | 5.8 | 3.7 | EV/EBITDA (x) | 2.7 | 7.4 | 9.3 | 13.5 | Net debt/equity (%) | net cash | 6.1 | 35.9 | 58.5 |
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| | | | | | | | | | | | Share Price: | MYR1.20 | Target Price: | MYR1.25 | Recommendation: | Hold | | |
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| | | Lacklustre for now | | 1HFY18 results were below expectation, with the miss stemming from higher-than-expected interest expense and taxes. Maintain HOLD with a lower MYR1.25 TP (-7%), as we incorporate the effects of a recent share dividend and our earnings cuts. With dividend yield no longer compelling, the investment thesis will largely revolve around the accretive new projects, which remain some time from commissioning. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 10,240.5 | 9,778.2 | 9,412.0 | 9,587.9 | EBITDA | 2,777.5 | 2,464.2 | 2,587.2 | 2,694.4 | Core net profit | 872.0 | 676.5 | 539.2 | 598.7 | Core FDEPS (sen) | 11.2 | 8.7 | 6.9 | 7.7 | Core FDEPS growth(%) | (8.5) | (22.8) | (20.3) | 11.0 | Net DPS (sen) | 10.0 | 5.0 | 5.0 | 5.0 | Core FD P/E (x) | 10.7 | 13.8 | 17.3 | 15.6 | P/BV (x) | 0.7 | 0.7 | 0.7 | 0.7 | Net dividend yield (%) | 8.3 | 4.2 | 4.2 | 4.2 | ROAE (%) | 8.8 | 5.2 | 4.1 | 4.4 | ROAA (%) | 2.0 | 1.5 | 1.1 | 1.2 | EV/EBITDA (x) | 9.0 | 11.2 | 10.1 | 9.8 | Net debt/equity (%) | 115.6 | 125.1 | 125.0 | 124.0 |
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| | | | | | | | | | | | Share Price: | MYR5.29 | Target Price: | MYR5.10 | Recommendation: | Hold | | |
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| | | Need more concrete signs of recovery | | 4Q17 net loss widened (+91% QoQ) and was above our and street's expectations. Though industry's cement demand may improve in 2H18, we think LMC's near-term earnings may remain in the red if ASPs stay at current depressed level. We cut FY18-19E EPS and introduce FY20E. Maintain HOLD with a lower TP of MYR5.10 (-26%), based on a lower P/B peg of 1.5x (-2SD to mean; previously P/B of 1.9x at -1SD). | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,552.2 | 2,248.8 | 2,518.5 | 2,928.2 | EBITDA | 302.1 | (44.7) | 125.4 | 368.8 | Core net profit | 84.9 | (215.2) | (83.8) | 100.9 | Core EPS (sen) | 10.0 | (25.3) | (9.9) | 11.9 | Core EPS growth (%) | (66.3) | nm | nm | nm | Net DPS (sen) | 5.0 | 0.0 | 0.0 | 10.7 | Core P/E (x) | 52.9 | nm | nm | 44.6 | P/BV (x) | 1.5 | 1.6 | 1.6 | 1.6 | Net dividend yield (%) | 0.9 | 0.0 | 0.0 | 2.0 | ROAE (%) | 2.5 | (7.3) | (3.0) | 3.6 | ROAA (%) | 2.0 | (5.0) | (1.9) | 2.3 | EV/EBITDA (x) | 20.7 | nm | 39.2 | 13.1 | Net debt/equity (%) | 4.6 | 13.5 | 14.9 | 12.4 |
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| | | | | | | | | | | | Share Price: | MYR3.70 | Target Price: | MYR3.85 | Recommendation: | Hold | | |
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| | | Fairly valued | | Stronger 4Q17 net profit (+18% QoQ) was lifted by a lower effective tax rate and came in within expectations. Our FY18-19E EPS is nudged up slightly by 1% p.a. on post results housekeeping and we introduce FY20 forecast. We think earnings momentum could sustain on China's continued supply reform policy. That said, valuations are fair. Maintain our HOLD call and TP of MYR3.85, based on an unchanged 10x PER (about-mean) on 30% diluted EPS. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,870.1 | 2,195.2 | 2,338.1 | 2,366.9 | EBITDA | 296.1 | 325.3 | 347.6 | 349.6 | Core net profit | 166.8 | 199.7 | 219.0 | 223.0 | Core EPS (sen) | 31.9 | 35.7 | 39.1 | 39.8 | Core EPS growth (%) | nm | 11.7 | 9.6 | 1.8 | Net DPS (sen) | 15.0 | 19.0 | 18.9 | 19.2 | Core P/E (x) | 11.6 | 10.4 | 9.5 | 9.3 | P/BV (x) | 1.8 | 1.6 | 1.4 | 1.3 | Net dividend yield (%) | 4.1 | 5.1 | 5.1 | 5.2 | ROAE (%) | 16.7 | 18.0 | 17.1 | 15.9 | ROAA (%) | 7.0 | 8.5 | 9.0 | 9.0 | EV/EBITDA (x) | 6.9 | 8.6 | 7.7 | 7.3 | Net debt/equity (%) | 84.6 | 64.3 | 54.6 | 42.3 |
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| | SECTOR RESEARCH | | | | | | Jan 2018 TIV: Uninspiring but…
by Ivan Yap |
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| | | | | | Double-digit MoM decline in January TIV is no strangers to the industry as car sales typically cool down following a strong 4Q, driven by aggressive sales campaigns to clear inventories. What caught our attention in this recent set of numbers was the TIP whereby production hit an all-time high at 68k units, indicating a strong February TIV. Our 2018 TIV forecast of 610k units (+6% YoY) is unchanged and we remain POSITIVE on the sector with bottom-up preference for Perodua and Mazda exposures. | |
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| | MACRO RESEARCH | | | | | | Mis-leading index of economic indicators…?
by Suhaimi Ilias |
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| | | | | | Index of leading economic indicators slowed to +1.6% YoY in Dec 2017 (Nov 2017: +4.4% YoY). On quarterly basis, it rose +3.1% YoY 4Q 2017 (3Q 2017: +2.5% YoY). Our observation is the index growth leads GDP growth by a quarter, implying pick up in 1Q 2018 GDP growth, but to note 4Q 2017 GDP growth moderated despite pick up in the index's 3Q 2017 growth. | |
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| | | | | | BCOM Index: Challenging Strong Resistance, Again
by Nik Ihsan Raja Abdullah |
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| | | | | | Bloomberg Commodity Index (BCOM) has rebounded from the Jan 2016 low of 72.33. The index was in a recovery mode with the candles making a series of high lows. Although it has failed to take out the 89.50 level recently, BCOM Index is still holding well above both the 20-week and 60-week EMA lines. This is primarily banking on Crude Oil, which has bounced off from its 20-week EMA line. Technical reading on BCOM Index is encouraging, particularly the Stochastic and MACD indicators. | |
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| NEWS | | | Outside Malaysia:
U.K: Consumer services grow at fastest pace in a year, CBI says. Britain's services sectors, making up the biggest part of the economy, saw growth improve this month, helped by a rebound at restaurants, bars and other consumer industries. After faster inflation meant a rough ride for household spending in 2017, the figures from the Confederation of British Industry suggest some improvement. Consumer services growth was the strongest in a year, while confidence also picked up. The report also showed that business services such as accountancy and marketing expanded at the fastest pace in more than two years in February. (Source: Bloomberg)
China: Xi follows Putin in laying ground to rule for decades. China's Communist Party is set to repeal presidential term limits in a move that would allow Xi Jinping to rule beyond 2023, completing the country's move away from a political system based on collective leadership. The party's Central Committee announced that it was seeking to strike a constitutional provision barring the head of state from serving more than two consecutive terms. That would remove the only formal barrier to Xi, who is also party leader and commander-in-chief of the military, staying in power indefinitely. (Source: Bloomberg)
Philippine: Uses Dollar pile against speculators, Governor says. The Philippine central bank sells dollars from its pile to curb excessive peso volatility against speculators using a cut in banks' reserve ratios "as pretext," Governor Nestor Espenilla said. The peso, the worst-performing among emerging markets next to the Argentine currency, fell the most in three weeks on Feb. 19 after the Bangko Sentral ng Pilipinas (BSP) announced a cut in lenders' reserve requirement ratio (RRR) to 19% from 20%. While the move effective March will free up PHP90b (USD1.7b) from banks' vaults, Espenilla said this isn't monetary easing. (Source: Bloomberg)
Crude Oil: Saudis see oil output cuts easing in 2019 without hurting market. OPEC and its allies including Russia may next year ease the crude-output curbs that have helped prices recover from the worst crash in a generation, according to Saudi Arabia's oil minister. With the market moving toward equilibrium and bloated inventories shrinking, the next step for global producers will be to phase out the reductions, Khalid Al-Falih told reporters in New Delhi. The nations taking part in the supply curbs are currently studying what a crude re-balancing will entail, and will announce their next steps once that's analyzed, he said. (Source: Bloomberg) | |
| | | | | Other News:
Port: Penang Port to expand container handling capacity, cruise operations. Penang Port S/B has allocated MYR180m capital expenditure (capex) this year, mainly for operations at the North Butterworth Container Terminal (NBCT). Container operations – the core business of the country's oldest port – bring in about 68% of its total revenue. The container terminal would be expanded to increase its handling capacity to 2.8m to 2.9m 20-foot equivalent units (TEUs) annually, from the current two million. (Source: The Sun Daily)
Scientex: Buys flexible plastic packaging firm for MYR190m. Scientex is acquiring the entire stake in Klang Hock Plastic Industries S/B (KHPI) for MYR190m cash, which will set the tone for the group to become a regional powerhouse in the flexible plastic packaging market. Its wholly owned subsidiary Scientex Packaging Film S/B had entered into a sale and purchase agreement with Law Wan Hong @ Lew Wan Hong, Ng Boon Eu, Lew Pei See @ Law Pei See and Lew Pei Lin @ Law Pei Lin for the acquisition. The acquisition comes with a profit guarantee of MYR18m profit before tax for the 12-month period to March 31, 2019. The purchase will be financed with internally generated funds. (Source: The Sun Daily)
Vsolar: Power plant project with UTM lapses. VSolar Group's plan to develop a 30MW solar energy plant with Universiti Teknologi Malaysia (UTM) has been aborted. Both parties had mutually agreed to terminate their joint venture agreement (JVA) for the development of solar energy generation facilities. Following the termination, VSolar will continue to explore opportunities in the acquisition and development of other solar projects. (Source: The Sun Daily)
Kuantan Floor Mills: To expand into pet food industry. Kuantan Flour Mills (KFM), a Practice Note 17 (PN 17) company, has entered into a memorandum of understanding (MoU) with MCM Petcare S/B for a proposed business collaboration to facilitate its expansion into trading and retailing of pet food products. The collaboration could be executed either through a business collaboration arrangement between both parties or a direct acquisition of a majority equity interest in MCM. The MoU is valid for a period of six months. (Source: The Sun Daily)
Scomi Engineering: To be delisted on Feb 28. Scomi Engineering (SEB) will be delisted from Bursa Malaysia on February 28 after the completion of its merger with parent company Scomi Group. To recap, it was supposed to be a three-way merger between Scomi, SEB and Scomi Energy Services (SESB). However, the proposal received objection from SESB shareholders. As a result, Scomi did not proceed with its merger with SESB. (Source: The Sun Daily) | |
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