[Maybank Kim Eng] Today's Research - Malaysia

30 Nov 2015, Monday

g Company Research - Alliance Financial Group: A decent 2QFY16; U/G to BUY | Desmond Ch'ng - Barakah Offshore Petroleum: 9M15 below; D/G to SELL | Thong Jung Liaw - Sarawak Oil Palms: Hurt by fair valuation losses | Chee Ting Ong - Mah Sing Group: Hit by higher admin expenses | Wei Sum Wong - TH Plantations: Uninspiring cost of production | Li Shin Chai - Wah Seong: 9M15 below; cut earnings & TP | Thong Jung Liaw g Sector Research - Regional Aviation: Indian aviation – Jekyll and Hyde | Mohshin Aziz

MY: Alliance Financial Group (AFG MK) Share Price: MYR3.55 Target Price: MYR4.20 Recommendation: Buy Desmond Ch'ng (603) 2297 8680 desmond.chng@maybank-ib.com Rating Change: A decent 2QFY16; U/G to BUY FYE Mar (MYR m) FY14A FY15A FY16E FY17E Operating income 1,349.0 1,383.0 1,463.5 1,510.6 Pre-provision profit 720.8 736.1 789.1 811.7 Core net profit 557.8 530.8 533.4 544.5 Core FDEPS (MYR) 0.37 0.35 0.35 0.36 Core FDEPS growth(%) 4.1 (5.3) 0.5 2.1 Net DPS (MYR) 0.29 0.15 0.17 0.17 Core FD P/E (x) 9.7 10.2 10.2 9.9 P/BV (x) 1.3 1.2 1.1 1.1 Net dividend yield (%) 8.3 4.3 4.6 4.8 Book value (MYR) 2.74 2.95 3.14 3.33 ROAE (%) 13.6 12.3 11.5 11.0 ROAA (%) 1.2 1.0 1.0 1.0 §  2QFY16 results within expectations. Positively, NIM expanded for the second consecutive quarter. §  We like AFG for its strong capital base, liquid balance sheet and SME niche. §  Upgrade to BUY with a higher TP of MYR4.20 (from MYR4.00) – dividend yield of 4.6% provides support. MY: Barakah Offshore Petroleum (BARAKAH MK) Share Price: MYR0.90 Target Price: MYR0.65 Recommendation: Sell Thong Jung Liaw (603) 2297 8688 tjliaw@maybank-ib.com Ivan Yap (603) 2297 8612 ivan.yap@maybank-ib.com Rating Change: 9M15 below; D/G to SELL FYE Dec (MYR m) FY13A FY14A FY15E FY16E Revenue 298.9 949.0 513.6 596.0 EBITDA 94.8 163.7 23.3 69.5 Core net profit 41.1 84.9 (12.7) 23.2 Core EPS (sen) 4.8 9.8 (1.5) 2.7 Core EPS growth (%) 23.8 106.5 nm nm Net DPS (sen) 0.0 0.0 0.0 0.0 Core P/E (x) 18.9 9.1 (61.3) 33.5 P/BV (x) 3.2 1.9 2.0 1.8 Net dividend yield (%) 0.0 0.0 0.0 0.0 ROAE (%) 27.1 32.4 (3.6) 6.5 ROAA (%) 9.3 13.8 (1.7) 3.4 EV/EBITDA (x) 15.9 4.4 31.9 10.3 Net debt/equity (%) 108.5 11.0 net cash net cash §  Fell into the red in 3Q15, disrupted by delays in carrying out several key projects; next 12 months will be tough. §  Cut 2015-17 forecasts by 30-151%; executing T&I ‘Package A’ work is essential to recovery in 2016. §  Downgrade to SELL (from HOLD) with a lower TP of MYR0.65, as we roll forward to 10x FD 2017 PER (vs 2016 10x FD PER). MY: Sarawak Oil Palms (SOP MK) Share Price: MYR4.65 Target Price: MYR5.23 Recommendation: Buy Chee Ting Ong (603) 2297 8678 ct.ong@maybank-ib.com Results Review: Hurt by fair valuation losses FYE Dec (MYR m) FY13A FY14A FY15E FY16E Revenue 1,711.4 2,852.8 2,923.5 3,124.9 EBITDA 246.1 290.1 223.1 345.7 Core net profit 93.9 112.8 67.7 153.3 Core EPS (sen) 21.4 25.7 15.4 34.9 Core EPS growth (%) (40.3) 19.7 (40.0) 126.5 Net DPS (sen) 4.5 5.0 2.0 3.8 Core P/E (x) 21.7 18.1 30.2 13.3 P/BV (x) 1.7 1.5 1.5 1.3 Net dividend yield (%) 1.0 1.1 0.4 0.8 ROAE (%) 7.2 8.8 5.0 10.6 ROAA (%) 3.8 4.3 2.4 5.3 EV/EBITDA (x) 13.4 9.7 11.9 7.6 Net debt/equity (%) 27.8 33.5 35.9 31.1 §  3Q15 results disappointed on fair valuation losses on financial derivatives and negative refining margin. §  2015 EPS cut by 15%. Leaving 2016-17 EPS unchanged. §  Maintain BUY and TP of MYR5.23 on 15x 2016 PER. MY: Mah Sing Group (MSGB MK) Share Price: MYR1.40 Target Price: MYR1.38 Recommendation: Hold Wei Sum Wong (603) 2297 8679 weisum@maybank-ib.com Results Review: Hit by higher admin expenses FYE Dec (MYR m) FY13A FY14A FY15E FY16E Revenue 2,005.6 2,904.7 2,694.0 2,893.1 EBITDA 391.1 536.8 589.5 648.2 Core net profit 280.6 339.2 360.6 388.0 Core EPS (sen) 16.2 18.4 15.0 16.2 Core EPS growth (%) (25.7) 13.8 (18.3) 7.6 Net DPS (sen) 8.0 6.5 6.0 6.5 Core P/E (x) 8.7 7.6 9.3 8.7 P/BV (x) 1.2 1.1 1.1 1.0 Net dividend yield (%) 5.7 4.6 4.3 4.6 ROAE (%) 17.6 16.1 13.4 12.0 ROAA (%) 6.9 6.9 6.0 5.5 EV/EBITDA (x) 8.1 7.2 6.0 5.5 Net debt/equity (%) 15.5 35.8 5.0 6.0 §  9M15 net profit of MYR274m (+5% YoY) is below expectation. §  Property sales are on track. MSGB’s short-term focus remains on the affordable housing segment. §  Lower earnings forecasts by 2-4%. Our RNAV-TP is largely intact at MYR1.38 (-1sen). Maintain HOLD. MY: TH Plantations (THP MK) Share Price: MYR1.26 Target Price: MYR1.30 Recommendation: Hold Li Shin Chai (603) 2297 8684 lishin.c@maybank-ib.com Results Review: Uninspiring cost of production FYE Dec (MYR m) FY13A FY14A FY15E FY16E Revenue 470.0 488.9 423.4 543.2 EBITDA 176.6 156.8 138.6 197.6 Core net profit 63.1 34.4 24.0 43.4 Core EPS (sen) 7.2 3.9 2.7 4.9 Core EPS growth (%) (38.3) (45.7) (30.3) 81.0 Net DPS (sen) 3.6 2.0 1.4 2.5 Core P/E (x) 17.6 32.4 46.5 25.7 P/BV (x) 0.9 0.9 0.9 0.9 Net dividend yield (%) 2.9 1.6 1.1 1.9 ROAE (%) 5.5 2.9 2.0 3.5 ROAA (%) 2.2 1.0 0.7 1.3 EV/EBITDA (x) 16.5 16.8 18.3 12.7 Net debt/equity (%) 72.5 60.7 82.7 78.6 §  9M15 core net profit was within our expectation but below Street’s. §  We are leaving our EPS forecasts unchanged. Stock lacks short term catalyst amidst high 9M15 cost of production of MYR2,060/t. §  Maintain HOLD and TP of MYR1.30 based on 1x trailing P/NTA. MY: Wah Seong (WSC MK) Share Price: MYR1.08 Target Price: MYR0.60 Recommendation: Sell Thong Jung Liaw (603) 2297 8688 tjliaw@maybank-ib.com TP Revision: 9M15 below; cut earnings & TP FYE Dec (MYR m) FY13A FY14A FY15E FY16E Revenue 1,779.4 2,438.6 1,765.0 1,605.0 EBITDA 157.9 295.1 158.9 140.1 Core net profit 45.5 139.6 30.8 30.1 Core EPS (sen) 6.0 18.1 4.0 3.9 Core EPS growth (%) (32.7) 203.3 (77.9) (2.3) Net DPS (sen) 5.1 5.7 2.0 0.0 Core P/E (x) 18.1 6.0 27.1 27.7 P/BV (x) 0.8 0.8 0.8 0.7 Net dividend yield (%) 4.7 5.3 1.9 0.0 ROAE (%) 4.6 13.6 2.8 2.7 ROAA (%) 1.9 5.2 1.1 1.1 EV/EBITDA (x) 11.8 6.4 10.4 11.2 Net debt/equity (%) 45.6 71.7 56.4 47.6 §  Turned red in 3Q15 due to slowdown in workflows and higher taxes. Sub-MYR1b order backlog is lowest in 3 years. §  Cut 2015-17 earnings by 34%-58%. Depleting orders, replenishment risks and margin squeeze are key concerns. §  Cut TP to MYR0.60 (-33%) as we roll forward valuations to 10x 2017 PER. Maintain SELL. MY: Regional Aviation Recommendation: Overweight Mohshin Aziz (603) 2297 8692 mohshin.aziz@maybank-ib.com Osbert Tang (86) 21 5096 8370 osberttang@kimeng.com.hk Sector Note: Indian aviation – Jekyll and Hyde §  One of the fastest growing global markets with the potential to become the 2nd or 3rd largest for air travel by 2033. §  The challenging environment will lead to the big getting bigger and the small struggling to survive or fading away. §  Positive on IndiGo and GoAir, neutral on Jet Airways, and negative on AirAsia India, Vistara Air and SpiceJet.