STOCK FOCUS OF THE DAY
Hock Seng Lee: Riding out the downturn HOLD
We keep our earnings forecast for FY18F but cut those of FY19-20F by 14% and 15% respectively. We trim our FV by 4% to RM1.25 (from RM1.30) but maintain our HOLD call for Hock Seng Lee (HSL). The FY19-20F earnings forecast downgrade is largely to factor in a lower assumption for job wins of RM250mil annually (from RM400mil previously) during our forecast period.
Our new FV is based on 10x revised FY19 EPS, from 9x previously, in line with our widened benchmark forward target P/E of 7-10x for small-cap construction stocks (from 7-9x previously) to reflect the slight improvement in the sentiment towards small-cap construction stocks of late.
We are still cautious on the outlook for the local construction sector. However, we believe HSL will be able to ride out the current downturn in the sector relatively better than its peers, given its substantial order backlog that should keep it busy over the next 3-4 years, coupled with its ability to compete under an open bidding system.
Others:
Axiata Group: Vodafone-Idea merger to be completed next month BUY
Velesto Energy: Naga 7 charter from Shell HOLD
QUICK TAKE
Plantation Sector: News flow for week 23 – 27 July NEUTRAL
RETAIL RESEARCH
Stocks On Radar: CCK Consolidated, Telekom Malaysia, AEON Co, United U-Li Corporation
ECONOMIC HIGHLIGHT
US: Will growth remain sustainable?
NEWS HIGHLIGHTS
CIMB Group: Says no Touch ‘n Go IPO anytime soon
Ho Hup Construction Co: New property launches to boost profit growth
Sapura Energy: Likely to list E&P unit on Bursa
Chin Well: Increases industrial fastener production
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