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| | | | | | | | | | | | | | Share Price: | MYR0.80 | Target Price: | MYR1.00 | Recommendation: | Buy | | |
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| | | 1Q18: Missed estimates | | 1Q18 came in below our estimates / street's expectations, mainly due to an unexpected loss at its often-dependable marine business unit (MBU). This led to a cut in FY18E earnings. The fabrication segment has bottomed and is at the cusp of a cyclical recovery. Valuations are near historical lows and MMHE is lagging its regional peers, that have re-rated on rising oil price / sentiment / activity. Sizeable job wins would offer an immediate re-rating opportunity. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,191.3 | 956.4 | 952.4 | 1,129.8 | EBITDA | 91.9 | (1.3) | 26.0 | 81.1 | Core net profit | (0.8) | (61.3) | (61.4) | 2.7 | Core EPS (sen) | (0.0) | (3.8) | (3.8) | 0.2 | Core EPS growth (%) | nm | nm | nm | nm | Net DPS (sen) | 0.0 | 3.0 | 0.0 | 0.0 | Core P/E (x) | nm | nm | nm | 467.6 | P/BV (x) | 0.5 | 0.5 | 0.5 | 0.5 | Net dividend yield (%) | 0.0 | 3.8 | 0.0 | 0.0 | ROAE (%) | (5.2) | 1.3 | (2.4) | 0.1 | ROAA (%) | (0.0) | (1.8) | (1.8) | 0.1 | EV/EBITDA (x) | 8.9 | nm | 26.5 | 8.3 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | MACRO RESEARCH | | | | | | Minimum wage
by Chew Hann Wong |
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| | | | | | The country's minimum wage - introduced in Jan 2013 and last raised in Jul 2016 by 11-15% - is due for another review this year. At a targeted MYR1,500 per month and to be standardised nationwide, this is 50-63% higher than the present MYR1,000 for Peninsular Malaysia and MYR920 for East Malaysia. Minimum wage hike, together with the expected across-the-board "knock on" effect on salaries, will impact as many as 10.5m workers or 72.5% of the 14.45m private sector workforce, we estimate. | |
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| | | | | | Exports up, import down, trade surplus widened
by Suhaimi Ilias |
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| | | | | | In Mar 2018, exports rebounded +2.2% YoY (Feb 2018: -2.0% YoY), imports fell further by -9.6% YoY (Feb 2018: -2.8% YoY), trade surplus widened to +MYR14.7b (Feb 2018: +MYR9.0b). In 1Q 2018, exports slowed to +5.8% YoY (4Q 2017: +12.4% YoY), imports dropped -0.8% YoY (4Q 2017: +14.4% YoY), trade surplus up +77% YoY (4Q 2017: -1.1%), signaling net external demand was positive to 1Q 2018 GDP growth. | |
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| | | | | | Inflation rate stays above 4%
by Suhaimi Ilias |
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| | | | | | Headline inflation rate continue to edge higher in Apr 2018 to +4.5% YoY (Mar 2018: +4.3% YoY) on sustained inflationary impact of the Package 1 of the tax reform measures as well as elevated FNAB and utility costs. Our full-year 2018 inflation rate forecast under the new CPI series (2012=100) is +4.2% (YTD 2018: +4.0%; 2017: +2.9%). | |
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| | | | | | ASEAN Equities in May: Correction to be Prolonged
by Nik Ihsan Raja Abdullah |
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| | | | | | We had earlier expected MSCI AC ASEAN (PR) USD Index to decline towards the 50-day EMA line and middle Bollinger Band (refers to Regional Traders' Almanac dated 23 Apr 2018). The Index, however, continued the downward move and extended losses as well as slipped below lower Bollinger Band at 848 last week. This implies that the bears are now in control. We now expect the index to fall towards the 830 and 818 supports in the near-term, in line with the seasonal factor. | |
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| NEWS | | | Outside Malaysia:
China: U.S.-China trade talks end in discord as demands show wide rift. Two days of U.S.-China trade discussions ended in Beijing with an agreement to keep on talking, and little else. China's official Xinhua News Agency reported Friday afternoon that both sides reached a consensus on some trade issues while acknowledging major disagreements on some matters. It said they would continue discussions, without providing specifics for when they would start again. Neither side briefed the media while the U.S. delegation led by Treasury Secretary Steven Mnuchin departed Beijing in the evening. While a cure-all deal was always a long shot, the discord between the world's two biggest economies means skittish global markets will continue to face ongoing trade tensions. The immediate question is whether the U.S. got enough wins to delay planned tariffs of up to USD150b on Chinese imports. (Source: Bloomberg)
France: Outlook changed to positive by Moody's on Macron reforms. France affirmed by Moody's; outlook changed from stable. Moody's cites French President Emmanuel Macron's ambitious and wide-ranging reform program and the government's commitment to fiscal consolidation. Reform program won't be fully implemented until late next year, and the impact of these reforms on growth and France's balance sheet won't be visible for some time, Moody's says. Moody's sees France's budget deficit declining further to 2.3% of GDP this year. (Source: Bloomberg)
Crude Oil: Iran opposes higher oil prices, signalling divide with Saudis. Iran, faced with a possible restoration of U.S. sanctions, came out against higher oil prices, signalling a split with fellow OPEC member Saudi Arabia, which is showing a willingness to keep tightening crude markets. A "suitable price" for crude is USD60/bbl to USD65/bbl, Amir Hossein Zamaninia, deputy oil minister for international and commercial affairs, said in an interview in Tehran. Oil Minister Bijan Namdar Zanganeh said earlier in the day that Iran supports "reasonable" oil prices and is not an advocate of costlier crude. Brent crude futures surged to almost USD75/bbl as traders braced for the possible re-imposition of U.S. restrictions on Iran. The Persian Gulf country's regional arch- rival Saudi Arabia is said to want crude closer to USD80/bbl in part to support a stake sale in state energy giant Aramco. The OPEC nations continue to clash in proxy conflicts from Syria to Yemen. (Source: Bloomberg) | |
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Dagang NeXchange: To provide e-wallet service for incoming local and foreign vehicles. Its subsidiary has won a sub-contract to provide a touch-and-go electronic wallet service for local and foreign vehicles entering the country. DNeX said 51%-owned DNeX RFID S/B was awarded the job by the main contractor, TCSens S/B. It did not specify the value of the sub-contract, but said the project could generate annual revenue ranging from MYR19m to MYR21m, with an estimated project margin of 35% in the first three years. (Source: The Edge Financial Daily)
Axiata: Edotco buys 80% stake in firm that'll build telco infra in Kedah for MYR140m. Its 63%-owned unit Edotco Group S/B is taking up an 80% stake in Tanjung Digital S/B (TDSB), which has obtained the right to build telecommunication infrastructure in Kedah, for MYR140m. Axiata said the acquisition will be funded via internal funds, of which about MYR25m shall be for the sale shares, and MYR115m for the redemption of funding facility in TDSB. It said the acquisition will allow edotco to expand its presence in Kedah with a sizeable portfolio of about 225 towers. (Source: The Edge Financial Daily)
Ahmad Zaki Resources: Unit secures MYR100m loan facility from Affin Bank. Its 51%-owned subsidiary Matrix Reservoir S/B has obtained a loan facility of MYR100m from Affin Bank Bhd.AZRB said the loan facility is to supplement the capital expenditure and working capital of Matrix Reservoir in relation to its operations at Tok Bali Supply Base in Kelantan. (Source: The Edge Financial Daily) | |
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