Thursday, August 2, 2018

FW: [Maybank IB] Today's Research - Malaysia

 

 

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FEATURED
CALLS

Malaysia | Malaysia Banking
Loan growth still trending up
Desmond Ch'ng

 

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COMPANY
RESEARCH

Malakoff Corporation | An unexpected acquisition
Chi Wei Tan

Boustead Plantations | SPA finally inked
Chee Ting Ong

Malaysia Marine Heavy Engr | 2Q18: In line
Thong Jung Liaw

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COMPANY RESEARCH

Malaysia

Company Update

Malakoff Corporation (MLK MK)
by Chi Wei Tan

Share Price:

MYR1.04

Target Price:

MYR1.15

Recommendation:

Buy

An unexpected acquisition

With renewables increasingly becoming an area of focus, Malakoff's acquisition of Alam Flora could strengthen its case for future waste-to-energy bids. The implied transaction multiple of 12.8x historical PER (for a cash-generative entity) appears non-excessive, and should mitigate potential related-party concerns. Reiterate BUY, with an unchanged MYR1.15 TP pending deal completion.

FYE Dec (MYR m)

FY16A

FY17A

FY18E

FY19E

Revenue

6,098.4

7,130.4

6,714.4

6,687.7

EBITDA

2,835.6

2,631.5

2,344.7

2,382.7

Core net profit

355.5

310.0

280.7

359.1

Core EPS (sen)

7.1

6.2

5.6

7.2

Core EPS growth (%)

(21.6)

(12.8)

(9.4)

27.9

Net DPS (sen)

7.0

6.2

5.6

7.0

Core P/E (x)

22.3

18.0

18.5

14.5

P/BV (x)

1.3

0.8

0.8

0.8

Net dividend yield (%)

4.4

5.6

5.4

6.7

ROAE (%)

6.1

4.9

4.2

5.4

ROAA (%)

1.2

1.0

0.9

1.2

EV/EBITDA (x)

7.1

6.1

6.3

5.7

Net debt/equity (%)

214.1

156.6

135.4

117.9

Malaysia

Company Update

Boustead Plantations (BPLANT MK)
by Chee Ting Ong

Share Price:

MYR1.27

Target Price:

MYR1.22

Recommendation:

Hold

SPA finally inked

We are negative on BPLANT's acquisition of old, low yielding estates at a revised value of MYR79,216/ha (from MYR69,000). This is one of the highest price recorded by the industry in recent years. This purchase will unlikely be earnings accretive in the foreseeable years. Shareholders can only hope for more land disposals to boost BPLANT's earnings to sustain its high dividend payouts. At current share price, the downside to our unchanged RNAV-based TP of MYR1.22 is 4% - maintain HOLD.

FYE Dec (MYR m)

FY16A

FY17A

FY18E

FY19E

Revenue

707.9

760.1

721.1

757.8

EBITDA

188.4

230.2

170.6

190.1

Core net profit

81.5

134.7

71.7

92.7

Core EPS (sen)

3.6

6.0

3.2

4.1

Core EPS growth (%)

157.7

65.3

(46.8)

29.3

Net DPS (sen)

10.4

13.9

4.4

4.4

Core P/E (x)

29.6

19.6

39.7

30.7

P/BV (x)

1.1

1.0

1.1

1.1

Net dividend yield (%)

9.6

11.8

3.5

3.5

ROAE (%)

10.4

28.1

2.8

3.7

ROAA (%)

2.5

4.4

2.5

3.3

EV/EBITDA (x)

17.0

12.3

16.3

14.6

Net debt/equity (%)

21.5

4.8

net cash

net cash

Malaysia

Results Review

Malaysia Marine Heavy Engr (MMHE MK)
by Thong Jung Liaw

Share Price:

MYR0.80

Target Price:

MYR1.00

Recommendation:

Buy

2Q18: In line

The losses for 1H18 were expected. That said, the worst is over for MMHE. Its cash/ cost management is in order and the tenders pipeline is on the rise (+54% QoQ) - major positives for MMHE. A rise in orders replenishment is an immediate re-rating catalyst. In addition, valuations are inexpensiv, at near historical low. Our MYR1.00 TP offers a 27% upside.

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

464.6

P/BV (x)

0.7

0.5

0.5

0.5

Net dividend yield (%)

0.0

3.5

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

26.2

8.2

Net debt/equity (%)

net cash

net cash

net cash

net cash

SECTOR RESEARCH

MY: Malaysia Banking

Loan growth still trending up
by Desmond Ch'ng

Sector Note

A strong pick-up in auto financing ahead is implied from June's auto loan application (+15% YoY) and approval (+20% YoY) numbers. Also encouraging is the trend in working capital loan application/approval numbers. Industry loan growth of 5% YoY in June 2018 is higher than our full-year forecast of 4.5% which we maintain for now, in anticipation of a slowdown post the prevailing tax free (GST-SST) period. Neutral on the sector, with AMMB, Alliance Bank, HLFG and BIMB being our BUYs.

MACRO RESEARCH

MY: Traders' Almanac

Brent Crude Oil: Seeking to Test a Lower Support
by Nik Ihsan Raja Abdullah

Technical Research

FBMKLCI rose for eight consecutive days thanks to late buying support on selected blue chips. At the day's end, the benchmark index rose 4.06pts to 1,788.31. Advancers were led by DIGI, GENM and AIRPORT. Market breadth turned positive with gainers outpacing losers by 449 to 432. A total of 2.33b shares worth MYR2.05b changed hands. Mixed performance in overnight US markets amid US-China trade tensions could put pressure on the local bourses today.

NEWS

Outside Malaysia:

U.S: To analyse higher tariff on USD200b of china goods. The Trump administration said it's weighing whether to increase the proposed tariff on USD200b of Chinese goods to 25% from 10%, stepping up pressure on Beijing to change its trade practices. President Donald Trump has asked U.S. Trade Representative Robert Lighthizer to consider hiking the duties, which could be implemented as early as next month. The proposed higher tariff "is intended to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets," Lighthizer said in an emailed statement. (Source: Bloomberg)

U.S: Fed keeps September rate hike in focus amid 'strong' economy. Federal Reserve officials left U.S. interest rates unchanged and stuck with a plan to gradually lift borrowing costs amid "strong" growth that backs bets for a hike in September. Economic activity has been "rising at a strong rate," and unemployment "has stayed low," the Federal Open Market Committee said in a statement released in Washington. "Household spending and business fixed investment have grown strongly." While leaving rates on hold as expected, the committee repeated guidance for "further gradual increases" in its policy benchmark, lining up September's FOMC meeting for the third hike of the year. (Source: Bloomberg)

E.U: Euro-area manufacturing has seen its most subdued spell in more than one-and-a-half years this summer as companies held off on orders while assessing the uncertain outlook for trade and the economy. A Purchasing Managers' Index for manufacturing stood at 55.1 in July, only slightly higher than June's 18-month low of 54.9, IHS Markit said. The reading is in line with a previous flash estimate. (Source: Bloomberg)

U.K: Manufacturing growth slowed more than expected last month, casting doubt on the strength of the economy as Bank of England policy makers hold their crunch meeting. IHS Markit's Purchasing Managers Index for the industry fell to a three-month low of 54 in July, from 54.3 in June, the firm said. Markit said output growth slowed to a 16-month low, with production of intermediate goods falling for the first time in two years. A weaker expansion of new work from domestic sources offset a stronger increase in export orders, while positive sentiment among manufacturers slid to a 21-month low, amid concerns over Brexit uncertainty and the exchange rate. (Source: Bloomberg)

India: Central bank raised its benchmark interest rate to the highest in two years as it stepped up efforts to curb inflation and stem capital outflows. Five of the six members of the monetary policy committee voted to raise the repurchase rate by 25 basis points to 6.5%, with Ravindra Dholakia the only one opposing it, the Reserve Bank of India said. The committee kept the policy stance neutral. The MPC said momentum in domestic economic activity continued to be sustained and the output gap had virtually closed. However, uncertainty around domestic inflation needs to be carefully monitored in the coming months, it said. (Source: Bloomberg)

Other News:

DRB-Hicom: To see MYR735.4m gain from disposal of Alam Flora. DRB-Hicom is selling its entire 97.37% stake in waste disposal management company Alam Flora S/B to Malakoff Corp Bhd for MYR944.61m in cash. As for Malakoff, it said the acquisition will enable it to expand its business and activities into environmental-related services. Half of the proceeds is intended to repay DRB-Hicom's Islamic medium-term notes and borrowings, and the rest for investments in existing businesses and future investment opportunities. (Source: The Edge Markets)

Borneo Aqua Harvest: New gold plant starts commercial operation. The group said it has successfully commissioned its gold processing plant and gold production commercially, and will make the appropriate monthly production announcement in due course. Last year, Bahvest managing director Datuk Lo Fui Ming told The Edge Financial Daily the group expected to see the full impact from the gold mining business in the FY19. (Source: The Edge Markets)

Datasonic: Ongoing lawsuit will not affect passport contract. The group said the ongoing lawsuit between its wholly-owned unit Datasonic Technologies S/B and Percetakan Keselamatan Nasional S/B (PKN), a wholly-owned subsidiary of Fima Corp Bhd, will not affect its five-year contract with the government to supply Malaysian passport booklets. It said this is because PKN was only its appointed subcontractor for an interim period of six months, that is from Dec 1, 2016 to May 31, 2017. (Source: The Edge Markets)

 

Our team profiles: Regional, Malaysia, Singapore, Indonesia, Thailand, Vietnam, Philippines, Greater China & India

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