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Share
Price:
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MYR15.80
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Target
Price:
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MYR17.00
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Recommendation:
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Buy
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BOC’s listing
still on the table
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We continue to peg HL Bank’s valuations to a PBV multiple
of 1.4x (ROE: 10.1%), but with valuations rolled forward to CY17 from
CY16. As a result, our TP for HL Bank is now raised to MYR15.00 from
MYR14.40. Correspondingly, our RNAV valuation for HLFG is raised to
MYR17.00 from MYR16.30. We maintain a BUY on both HL Bank and HLFG.
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FYE Jun (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Operating income
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4,549.2
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4,490.9
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4,732.2
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4,990.3
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Pre-provision profit
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2,583.1
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2,490.7
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2,503.8
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2,956.0
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Core net profit
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1,706.9
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1,576.2
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1,608.6
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1,624.0
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Core FDEPS (MYR)
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1.63
|
1.51
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1.54
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1.55
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Core FDEPS growth(%)
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14.7
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(7.7)
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2.1
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1.0
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Net DPS (MYR)
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0.38
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0.38
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0.32
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0.33
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Core FD P/E (x)
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9.7
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10.5
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10.3
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10.2
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P/BV (x)
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1.4
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1.3
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1.2
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1.1
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Net dividend yield (%)
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2.4
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2.4
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2.0
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2.1
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Book value (MYR)
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10.90
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12.45
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13.74
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14.82
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ROAE (%)
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15.8
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12.8
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11.1
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9.9
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ROAA (%)
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0.9
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0.8
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0.8
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0.7
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Share
Price:
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MYR1.46
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Target
Price:
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MYR1.45
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Recommendation:
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Hold
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1Q16 in line
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1Q16 earnings were within our and consensus’ expectations.
YoY earnings growth was largely supported by additional contributions
from its new assets and improved profits from Gurney Plaza and East
Coast Mall. However, we remain cautious on Sungai Wang Plaza which
could limit near-term earnings. Maintain HOLD with unchanged earnings
forecasts and DCF-based TP of MYR1.45 (WACC: 7.2%, terminal yield:
6.5%).
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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315.4
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344.8
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365.5
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380.5
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Net property income
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208.9
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226.4
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250.9
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260.4
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Distributable income
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158.4
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162.8
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177.4
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185.1
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DPU (sen)
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8.0
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7.7
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7.9
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8.1
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DPU growth (%)
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0.7
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(3.5)
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1.5
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3.6
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Price/DPU(x)
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18.2
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18.9
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18.6
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17.9
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P/BV (x)
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1.1
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1.1
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1.1
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1.1
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DPU yield (%)
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5.5
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5.3
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5.4
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5.6
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ROAE (%)
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6.7
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6.3
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6.2
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6.5
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ROAA (%)
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4.5
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4.1
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4.0
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4.1
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Debt/Assets (x)
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0.3
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0.3
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0.3
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0.3
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Share
Price:
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MYR1.39
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Target
Price:
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MYR1.38
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Recommendation:
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Hold
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Enhancing food
supply chain?
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Collaboration with a sizeable food supplier could enhance
its food supply chain. In the longer term, earnings enhancement would
depend on the demand for its potential food offerings. We maintain our
earnings forecasts, HOLD call and TP of MYR1.38 (FY17 PER of 25x).
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FYE Dec (MYR m)
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FY14A
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FY15A
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FY16E
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FY17E
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Revenue
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1,893.1
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2,006.3
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2,179.2
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2,497.3
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EBITDA
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130.9
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126.5
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141.8
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162.7
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Core net profit
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58.1
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55.8
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60.2
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68.1
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Core EPS (sen)
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4.7
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4.6
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4.9
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5.6
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Core EPS growth (%)
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15.9
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(3.3)
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7.8
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13.1
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Net DPS (sen)
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5.1
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4.7
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2.5
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2.8
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Core P/E (x)
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29.5
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30.5
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28.3
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25.0
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P/BV (x)
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7.3
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10.0
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8.5
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7.3
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Net dividend yield (%)
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3.7
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3.4
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1.8
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2.0
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ROAE (%)
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38.4
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27.5
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32.5
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31.3
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ROAA (%)
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8.5
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7.6
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7.7
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7.7
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EV/EBITDA (x)
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12.3
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14.0
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11.1
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9.4
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Net debt/equity (%)
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net cash
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net cash
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net cash
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net cash
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SECTOR RESEARCH
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Sector Note
by Thong
Jung Liaw
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OPEC: Can’t
agree to freeze
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The Saudi Arabia-Iran dispute dissipated the chances
of a production freeze. For that, the oil market will remain
depressed with weakness in oil price expected to persist.
Nevertheless, we continue to reiterate that a production freeze would
not address the imbalances. A collective production cut is THE
catalyst which would be sentiment positive. We remain NEUTRAL from
the fundamental perspective, but continue to expect a trading market.
SAKP, BArmada, Yinson and KNM are our key picks.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Stimulus-driven
soft-landing
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China’s 1Q 2016 GDP growth eased marginally to +6.7%
YoY (4Q 2015: +6.8% YoY), within the official full-year target growth
of 6.5%-7.0%, on effect of monetary and fiscal stimuli, which are
expected to continue this year as per the target of sustained money
supply growth and larger budget deficit in 2016. Maintained our
full-year growth forecast of +6.5% (2015: +6.9%).
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Suhaimi Ilias
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Zamros
Dzulkafli
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Technical Research
by Lee
Cheng Hooi
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Markets continue
the upward trek
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The FBM KLCI inched up 9.59 points WoW to close at
1,727.99, as blue chip nibbling since last Wednesday lifted the local
index. The weekly volume rose from 1.50b to 1.85b shares.
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NEWS
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Outside Malaysia:
U.K. House prices hit record in April as landlords spark
chain reaction. Average asking prices rose 1.3% from March to GBP 307,033
(USD 437,000), the property website operator said in a report published.
It left values 7.3% YoY higher than a year earlier. The increase came as
many homeowners traded up to larger properties after selling to
buy-to-let investors eager to complete transactions before a tax hike on
second homes took effect on April 1. Chancellor of the Exchequer George
Osborne introduced the 3 percentage-point surcharge amid fears landlords
were pushing house prices beyond the reach of first-time buyers. (Source:
Bloomberg)
China: Property boost to GDP risks fading after
debt-fueled rise. China’s expansion may face stronger headwinds this year
should the debt-fueled boost from real estate, a key driver of recent
economic growth, prove unsustainable. The economy grew 1.1% in the first
quarter from the prior quarter, the slowest quarter-to-quarter expansion
in data since 2011, the National Bureau of Statistics said. Housing
demand helped boost growth, with output of real-estate services adding
9.1% YoY while construction activities rose 7.8% YoY, NBS said. (Source:
Bloomberg)
Crude Oil: Plunges after output talks fail amid Saudi
demands over Iran. Futures fell as much as 6.8% in New York, the biggest
intraday drop since Feb. 1. The summit in the Qatari capital, which
dragged on for more than ten hours beyond its initially scheduled
conclusion, finished with no final accord. Discussions stumbled after
Saudi Arabia and other Gulf nations wouldn’t agree to any deal unless all
OPEC members joined including Iran, which wasn’t present at the meeting,
Russian Energy Minister Alexander Novak told reporters. (Source:
Bloomberg)
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Other news:
Kian Joo: MYR1.5b takeover offer called off. Takeover off
for Kian Joo was called off last Friday on mutual termination by the
company and the offeror, Aspire Insight Sdn Bhd. The BSA, ASA (asset sale
agreement) and PSA (property sale agreement) will cease to have any
effect and will become null and void and neither party shall have any
claim whatsoever against the other, Kian Joo said. To recap, Aspire
Insight, which is controlled by the Employees Provident Fund and Kian Joo
COO Freddie Chee Khay Leong, had in November 2013 launched a takeover
offer for Kian Joo. (Source: The Sun Daily)
Mesiniaga: Wins contract extension worth MYR145.9m. The
original contract is worth MYR90m, covering a period of five years from
June 11, 2014. It is for the supply, delivery, installation, testing,
commissioning, post- acceptance maintenance and support services of new
IP core and service edge. With the award of the supplementary agreement,
the expiry of the contract is now extended from June 11, 2019 to May 31,
2020. (Source: The Sun Daily)
SAM Engineering: Ready to rock. It says it is on its way
to achieve MYR1b revenue goal. With the aerospace business as anchor, we
have strategically positioned ourselves to capture more long-term
aerospace contract, said SAM Engineering. At present, its order book for
the aerospace business exceeds MYR3.5b and this will ensure steady growth
in many years. In the long term, it intends to bring revenue contribution
from aerospace business to 80% as the business provides the company with
a steady stream of profit. (Source: The Edge Financial Daily)
Amway: High operating costs continues to pressure. Amway
recognized that operating costs which includes sales and marketing
programmes, and foreign exchange rate changes, which has contributed to
the slide in net profit over the last two years, will continue to put
pressure on the group. It will take some time for Amway to normalize
unless it passes all the costs of the weaker ringgit to consumer.
However, to support the business, the group’s capex is expected to
increase. It will be more aggressive in investing in A&P for Amway
Business Owners and also enhance technology and infrastructure (including
upgrading its online platform and physical shops) in order to sustain
group’s sales. (Source: The Edge Financial Daily)
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