Affin Daily Insight (LV) - 6 August 2014 - MMHE / HARTA / GTRONICS / DMR

Top Calls

Results Note � MMHE (REDUCE, downgrade from ADD) - Bumpy road ahead, downgrade to REDUCE MMHE reported a weaker-than-expected 1H14 PBT of RM59.8m (-45.4%yoy) due to lower profit margins and the recognition of an estimated RM10m one-off mutual separation scheme expense. The 1H14 core PBT only accounts for 28-29% of consensus and our full year PBT forecast. MMHE has adopted a new approach to account for its profit from the EPCIC contracts. Under the new treatment, MMHE will recognise a lower profit in the early and mid-stages and the profit recognition will only accelerate at the tail-end. We cut our FY14-16E core EPS by 25-38% to account for: (i) the weaker-than-expected 1H2014 earnings; (ii) delays in projects� profit recognition following the change in accounting treatment; and (iii) lower profit margins due to stiff competition. We downgrade our rating to REDUCE from ADD with a lower TP of RM3.10 (from RM4.20) based on an unchanged 21x CY15 PER.

Other Calls

Results Note � Hartalega (ADD, maintain) - NGC likely to lift capacity constraints

Results Note � Globetronics (BUY, maintain) - Another record earnings delivery

Debt Market Research - Buying on lower volumes, stronger MYR but higher VIX/risk premium

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