[Maybank IB] Today's Research - Malaysia

COMPANY RESEARCH IOI Corporation | Glimmer of hope Chee Ting Ong Genting Malaysia | To venture into tribal casinos Samuel Yin Shao Yang AirAsia Bhd | Share issuance to founders Mohshin Aziz

MACRO RESEARCH Malaysia | Uncertain market rebound phases Lee Cheng Hooi

NEWS Outside Malaysia Other News

COMPANY RESEARCH

Malaysia Company Update IOI Corporation (IOI MK) by Chee Ting Ong Share Price: MYR4.54 Target Price: MYR4.97 Recommendation: Hold Glimmer of hope RSPO Secretariat has provided solutions to problems which could arise in IOI’s supply chain due to the suspension of its RSPO certification. We believe this should help minimise business disruption and ease investors’ concern. With MYR2.7b market cap (-9%) shaved off the past two weeks, lost of CSPO premium and consequential compliance costs, we believe the financial losses have been largely priced in. HOLD with an unchanged TP of MYR4.97 on 30x FY17 PER (+1SD of mean). FYE Jun (MYR m) FY14A FY15A FY16E FY17E Revenue 12,664.1 11,621.0 11,577.3 12,211.1 EBITDA 2,376.3 847.4 1,579.3 1,762.0 Core net profit 1,549.4 860.1 927.6 1,069.3 Core FDEPS (sen) 24.0 13.3 14.4 16.6 Core FDEPS growth(%) (6.9) (44.6) 7.8 15.3 Net DPS (sen) 20.0 9.0 7.2 8.3 Core FD P/E (x) 18.9 34.1 31.6 27.4 P/BV (x) 4.9 5.8 5.3 4.8 Net dividend yield (%) 4.4 2.0 1.6 1.8 ROAE (%) 15.7 15.5 17.5 18.5 ROAA (%) 7.9 6.0 6.9 7.7 EV/EBITDA (x) 15.8 36.9 21.6 19.2 Net debt/equity (%) 58.6 96.1 82.5 70.9 Chee Ting Ong    (603) 2297 8678    ct.ong@maybank-ib.com

Malaysia Company Update Genting Malaysia (GENM MK) by Samuel Yin Shao Yang Share Price: MYR4.47 Target Price: MYR4.55 Recommendation: Hold To venture into tribal casinos As we had expected, GENM confirmed that it will be managing the First Light Resorts & Casino for seven years from its opening in mid-2017. To date, GENM has invested USD249.5m (MYR973m) in the resort in exchange for fixed interest rate of 15% p.a.. As we do not have all the required data points, we estimate that this development may add 8% to group core net profit but only MYR0.03 to our SOP-based TP due to the short tenure of management contract. FYE Dec (MYR m) FY14A FY15A FY16E FY17E Revenue 8,229.4 8,395.9 9,677.2 11,087.6 EBITDA 2,247.6 2,153.5 2,768.9 3,173.1 Core net profit 1,358.1 1,256.4 1,390.7 1,599.3 Core EPS (sen) 23.9 22.2 24.5 28.2 Core EPS growth (%) (20.8) (7.4) 10.6 15.0 Net DPS (sen) 6.5 7.1 7.9 9.0 Core P/E (x) 18.7 20.2 18.2 15.8 P/BV (x) 1.6 1.3 1.3 1.2 Net dividend yield (%) 1.5 1.6 1.8 2.0 ROAE (%) 8.6 7.1 7.1 7.8 ROAA (%) 6.7 5.2 5.0 5.6 EV/EBITDA (x) 9.7 11.5 8.6 7.5 Net debt/equity (%) net cash 0.1 net cash net cash Samuel Yin Shao Yang    (603) 2297 8916    samuel.y@maybank-ib.com

Malaysia Company Update AirAsia Bhd (AIRA MK) by Mohshin Aziz Share Price: MYR1.83 Target Price: MYR1.80 Recommendation: Hold Share issuance to founders AirAsia announced that it has entered into an agreement with Tune Live Sdn. Bhd., owned by the founders of AirAsia, to issue and allot 559m of new shares (16.7% of AirAsia’s enlarged share base) at an issue price of MYR1.84; this will raise MYR1,006m of capital. This corporate exercise requires shareholders’ approval via an upcoming EGM. We are neutral on this development for now and it does not change our fair value assessment of the group which is based on 1x 2016 P/BV. FYE Dec (MYR m) FY14A FY15A FY16E FY17E Revenue 5,415.7 6,299.1 6,088.7 6,515.1 EBITDAR 1,769.1 2,617.4 2,591.7 2,574.8 Core net profit 432.9 278.7 757.7 788.0 Core EPS (sen) 15.6 10.0 27.2 28.3 Core EPS growth (%) (22.2) (35.7) 171.9 4.0 Net DPS (sen) 0.0 0.0 7.0 7.0 Core P/E (x) 11.8 18.3 6.7 6.5 P/BV (x) 1.1 1.1 1.0 0.9 Net dividend yield (%) 0.0 0.0 3.8 3.8 ROAE (%) 9.1 6.2 16.0 14.8 ROAA (%) 2.3 1.3 3.5 3.6 EV/EBITDAR (x) 10.7 5.3 5.8 5.6 Net debt/equity (%) 249.9 228.9 196.6 165.0 Mohshin Aziz    (603) 2297 8692    mohshin.aziz@maybank-ib.com

MACRO RESEARCH MY: Technicals Technical Research by Lee Cheng Hooi Uncertain market rebound phases The FBM KLCI inched up 6.76 points WoW to close at 1,710.55, as some minor blue chip nibbling lifted the local index. The weekly volume fell from 1.85b to 1.49b shares. Lee Cheng Hooi    (603) 2297 8694    chenghooi.lee@maybank-ib.com

NEWS Outside Malaysia: U.S: Payrolls increased 215,000 in March as wages picked up. Employment in the U.S. climbed and wages picked up in March, signs of labor-market durability in the face of lethargic global growth. The 215,000 gain in payrolls followed a revised 245,000 February advance, a Labor Department report showed Friday. Average hourly earnings increased 0.3 percent from a month earlier, while the jobless rate crept up to 5 percent as more people entered the labor force.(Source: Bloomberg) Japan: Companies inflation expectations decline as confidence wanes. Japanese companies cut their forecasts for inflation for the next five years from now, indicating that even after adopting a negative-rate policy, the Bank of Japan is struggling to persuade businesses that sustained price gains will take hold. Companies project 1.2% of inflation at this time in five years, down from 1.4% estimated in December, according to a BOJ Tankan report for March released. In three years, they expect 1.3% price growth, and 0.8% in one years. (Source: Bloomberg) Crude Oil: Russian oil output rises to record as freeze in doubt. Russia’s oil output set a post-Soviet high in March as the success of a proposed crude production freeze between OPEC members and other major producers appeared to be in doubt. Russian production of crude and a light oil called condensate climbed 2.1% in March from a year earlier to 10.912 million barrels a day, according to the Energy Ministry’s CDU-TEK unit. That narrowly beat the previous high of 10.910 million barrels in January. With most of the Organization of Petroleum Exporting Countries members, Russia and some others outside the group scheduled to meet in Doha this month to discuss an accord on capping output, Saudi Arabia’s Mohammed bin Salman signaled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. Prices on Friday sank more than 4% after the comments. Iran previously said it plans to boost production after the lifting of sanctions following a deal to curb its nuclear program. (Source: Bloomberg) Other News: Petronas Dagangan: 2H outlook difficult to predict. Managing director and CEO Mohd Ibrahimnuddin Mohd Yunus said how things pan out would depend on the sentiments of the market. PDB is retaining last year’s strategy of optimal inventory management, cost optimisation as well as efficient supply and distribution this year, in light of the volatile oil prices. It is looking at opening seven to 10 petrol stations in Malaysia this year, from 15 to 17 stations last year. (Source: The Sun Daily) Vivocom: Construction our main driver for 2016. It targets revenue of MYR760m for this financial year ending Dec 31, 2016 (FY16) and expects the construction business to contribute 70-75% of its revenue, mainly driven by projects from China Railway Construction Corp Ltd (CRCC). The remaining 10-15% to group revenue will be split between aluminium and telco. Vivocom said its orderbook stood at MYR2.7b, with construction making up MYR2.4b and this can keep the group busy for three years. (Source: The Sun Daily) Panasonic Malaysia (non-listed): Predicts slower sales growth in FY17 due to weaker consumer sentiment. It is forecasting sales growth of 5% in FY17, though at a slower pace than FY16’s growth of 7%. One of its strategies in this soft environment is to target affluent customers whom are probably less affected. Panasonic Malaysia is 40% owned by Bursa Malaysia listed Panasonic Manufacturing Malaysia. (Source: The Edge Financial Daily)