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Share
Price:
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MYR0.72
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Target
Price:
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MYR1.05
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Recommendation:
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Buy
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Updates and
progress
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The 29% fall in share price from the FPSO Armada Claire
dispute has more than priced in the worst-case 23sen/shr impact. Should
BArmada win the legal tussle against Woodside, there is a potential 18
sen upside, not factored in yet. That aside, the execution of 4
FPSO/FSU projects in hand is crucial to BArmada's prospects beyond
2016. Otherwise, the OSV and T&I businesses will remain challenging
up to 2017. Our MYR1.05 SOP-TP excludes any compensation impact from
FPSO Claire debacle.
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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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2,397.3
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2,179.7
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1,898.4
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2,904.6
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EBITDA
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1,029.4
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1,101.7
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1,185.1
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1,598.7
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Core net profit
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399.6
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360.7
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305.6
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625.8
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Core EPS (sen)
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7.9
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6.1
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5.2
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10.7
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Core EPS growth (%)
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(48.4)
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(22.2)
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(15.3)
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104.8
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Net DPS (sen)
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1.6
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0.8
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0.0
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0.0
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Core P/E (x)
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9.1
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11.7
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13.8
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6.7
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P/BV (x)
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0.5
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0.6
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0.6
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0.5
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Net dividend yield (%)
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2.3
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1.1
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0.0
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0.0
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ROAE (%)
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7.2
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5.2
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4.1
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8.0
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ROAA (%)
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3.4
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2.2
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1.6
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3.2
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EV/EBITDA (x)
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8.2
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11.4
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9.5
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6.6
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Net debt/equity (%)
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43.2
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89.6
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93.3
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77.4
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SECTOR RESEARCH
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Mar 2016 TIV of 48.8k units (-28% YoY) was still
subpar (below 55k units p.m.), having considered an unusually strong
Mar 2015 TIV driven by pre-GST sales. We cut our 2016 TIV forecast to
620k units (-7% YoY) from 645k units (-3% YoY) to account for the weaker-
than-expected 1Q16 TIV (-22% YoY). We remain NEUTRAL on the sector
with BUYs on Pecca (Top Pick) and BAuto. SELL UMWH due to the
negative outlook for its key Auto and O&G divisions.
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MACRO RESEARCH
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Technical Research
by Lee
Cheng Hooi
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FBMKLCI to head
below 1,700
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The FBMKLCI fell 6.53 points to close at 1,711.15
yesterday, while the FBMEMAS and FBM100 tumbled 34.38 and 34.90
points respectively. In terms of market breadth, the gainer-to-loser
ratio was 329-to-422, while 408 counters were unchanged. A total of
1.49b shares were traded valued at MYR1.91b.
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NEWS
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Outside Malaysia:
U.S: Slump in housing starts in March leaves economy
looking for growth drivers. Construction began on 1.09 million homes at
an annual rate last month, down 8.8% from February and the fewest in five
months, figures from the Commerce Department showed. Building permits, a
proxy for work in the next month or two, also unexpectedly declined,
making a quick snap- back in activity less likely. (Source: Bloomberg)
Germany: Investor confidence climbed for a second month,
rising to the highest level this year, as concerns over China’s economy
eased and the European Central Bank ramped up euro-area stimulus. The ZEW
Center for European Economic Research said that its index of investor and
analyst expectations, which aims to predict economic developments six
months ahead, advanced to 11.2 in April from 4.3 in the previous month.
(Source: Bloomberg)
Russia: Consumer demand stagnates as unemployment tops
forecasts. The jobless rate rose for the first time in four months,
climbing to 6% from 5.8% in February, the Federal Statistics Service in
Moscow said. Retail sales fell 5.8% YoY after a revised 4.3% YoY drop,
while real wages slipped 3% YoY. (Source: Bloomberg)
Japan: Trade surplus in March as imports drop for
fifteenth month. Shipments to overseas dropped 6.8% YoY, while imports
declined 14.9% YoY, leaving a surplus of JPY 755b (USD 6.9b). Even as
concern rises among Japanese policy makers that the yen’s 10%
appreciation this year will undermine exports, the gain cuts the nation’s
import bill. The average oil price declined 21% YoY in March this year
from the same month in 2015, cutting Japan’s fuel costs. (Source:
Bloomberg)
S. Korea: Bank of Korea cuts GDP forecast to 2.8% for 2016
compared with a previous forecast of 3%, Bank of Korea Governor Lee Ju
Yeol said in a press conference after the central bank’s decision to hold
its key interest rate unchanged at a record low 1.5%. (Source: Bloomberg)
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Other news:
Aviation: Malaysia Airlines CEO, in a surprise move,
resigns. Christopher Mueller, CEO and MD will step down at end of
September and its parent Khazanah Nasional Bhd said it is on the hunt to
find his replacement. Malaysia Airlines cited “changing personal
circumstances” as the reason for Mueller’s resignation. He will remain
with the airline as non-executive director. (Source: The Edge Financial
Daily)
MISC: On Lookout for ‘bargain’ FPSOs and petroleum
tankers. It believes that the number of new tenders, new contracts may be
limited but there are going to be assets for sale as more assets will
come into the market over next two to three years as the low oil price is
likely to drag out the distressed period for oil and gas companies. On
its outlook for 2016, MISC said its profit from liquefied natural gas
shipping and offshore business unit has a high level of certainty and
security due to long-term charters. (Source: The Sun Daily)
Mah Sing: Wins suits in MYR359.5m land dispute. It has
succeeded in the High Court to strike out the claims by seven persons
that the MYR359.5m sale and purchase agreement (SPA) between Mah Sing’s
wholly-owned unit and three land trustees invalid. As a recap, the seven,
claiming to be undivided registered proprietors/beneficial owners of the
land, claimed that the SPA was invalid. (Source: The Edge Financial
Daily)
Integrated Logistics: To sell warehousing units for
HKD137.3m. It is selling two of its Hong Kong-based warehousing outfits,
in line with its aim to divest most of its remaining operations in China.
This is in view of the increasingly competitive business environment and
projected increase in rental and labour costs. It plans to utilize 87% of
its proceeds to repay borrowings, and the reaming for expenses related to
disposals. It expects to realize interest savings of HKD4.2m per year.
(Source: The Edge Financial Daily)
Can-One: Asset sale a way for it to trim debts. Several
parties including KWAP, have expressed interest in its subsidiary,
F&B Nutrition Bhd, which manufactures sweetened creamers and
condensed filled milk. The announcement came after the cancellation of
Aspire Insight Sdn Bhd’s MYR1.47b offer to buy out the aluminum can
manufacturing business owned by Can-One’s associate company, Kian Joo Can
Factory Bhd. Can-One, however, clarified that no formal proposal has been
received yet. (Source: The Edge Financial Daily)
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