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Share
Price:
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MYR10.50
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Target
Price:
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MYR10.00
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Recommendation:
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Hold
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Acquisition in
Indonesia
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GENP is acquiring the rights to develop 21,995 ha of oil
palm plantations in Indonesia for USD42m (MYR173m) cash; at fair
valuations. As only 3,127 ha nucleus area has been planted, we are
Neutral on the acquisition in the short term but positive on its long
term prospects. We maintain our earnings forecasts for now. GENP
remains a HOLD with an unchanged RNAV-based TP of MYR10.00.
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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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1,642.9
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1,374.9
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1,601.5
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1,778.8
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EBITDA
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562.6
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358.7
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512.0
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638.3
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Core net profit
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380.0
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205.7
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322.5
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414.0
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Core EPS (sen)
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49.3
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26.3
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41.2
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52.9
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Core EPS growth (%)
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22.7
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(46.7)
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56.8
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28.4
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Net DPS (sen)
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10.0
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5.5
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8.2
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10.6
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Core P/E (x)
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21.3
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40.0
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25.5
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19.8
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P/BV (x)
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2.1
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1.9
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1.8
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1.7
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Net dividend yield (%)
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1.0
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0.5
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0.8
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1.0
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ROAE (%)
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10.4
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5.1
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7.4
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8.9
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ROAA (%)
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7.3
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3.2
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4.3
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5.3
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EV/EBITDA (x)
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14.1
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26.3
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18.6
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14.9
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Net debt/equity (%)
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net cash
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20.5
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23.7
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22.3
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SECTOR RESEARCH
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Sector Note
by
Mohshin Aziz
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Hitting all the
right spots
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1Q16 financial results were spectacular for a few
reasons. First, all four carriers were profitable which is a rarity.
Second, the industry’s average load factor was >80%, which is a
record for 1Q performance. Third, the profits margin achieved by AirAsia
was a global record for the period. Things have never been this good
for the sector. Given that the dynamics are unchanged in 2Q16 and
perhaps 3Q16, we expect airlines to deliver supernormal profits in
the subsequent quarters.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Slow hiring now
after the firing earlier
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Unemployment rate was stable at 3.5% in Apr 2016.
Seasonally-adjusted rate rose to 3.6% (Mar 2016: 3.5%). We expect
unemployment rate to average 3.5% in 2016 (2016 YTD: 3.5%; 2015:
3.2%).
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Suhaimi Ilias
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Zamros
Dzulkafli
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Economics Research
by
Suhaimi Ilias
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Index of leading economic indicators fell for the
sixth consecutive month in Apr 2016 by -2.6% YoY (Mar 2016: -2.1%
YoY). Data suggests further slowing of real GDP growth in 2Q 2016.
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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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Poised to
re-visit 1,611 soon
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The FBMKLCI fell by 4.53 points to close at 1,629.52
yesterday, while the FBMEMAS and the FBM100 lost 38.25 points and
38.39 points respectively. In terms of market breadth, the
gainer-to-loser ratio was 296-to-456, while 360 counters were
unchanged. A total of 1.27b shares were traded valued at MYR1.30b.
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NEWS
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Outside Malaysia:
E.U: Tests London’s financial hub status by targeting
clearing. It was a historic win for London’s finance industry: a court in
Luxembourg ruled against the European Central Bank and for George
Osborne, allowing euro-denominated trades to be cleared in the U.K. Now,
Great Britain’s choice to leave the European Union puts the Chancellor of
the Exchequer’s 2015 win - and the U.K.’s role providing services for the
USD 493t derivatives market in jeopardy, weakening a key pillar of the
City of London. Unless it accepts European regulations, as non-EU member
Norway does, “we cannot locate in London what are called the
clearinghouses,” said Francois Villeroy de Galhau, governor of the Bank
of France and a member of the ECB’s Governing Council. “We’ll see what
these negotiations produce,” Villeroy de Galhau said on France Inter
radio on Saturday. “But if there is no Norway-style accord, the European
financial centers have cards to play.” (Source: Bloomberg)
Russia: Takes a USD 6.1b bite out of banks to crimp
liquidity. Reserve-ratio requirements will be increased by 75 basis
points from Aug. 1 for ruble and foreign-currency liabilities, policy
makers said in a statement. That will force lenders to set aside almost
RUB 400b (USD 6.1b), according to Russia’s biggest bank, Sberbank PJSC.
The monetary authority is raising ratios on liabilities in rubles for the
first time since Elvira Nabiullina took over as governor in 2013, adding
to its policy mix to manage a buildup of cash while inflation remains
almost double the central bank’s 4% target. Higher requirements are
already draining funds from the financial industry, with loan-loss
provisions jumping by 5.3%, or RUB 287b, since the start of the year,
central bank data show. (Source: Bloomberg) .
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Other News:
Construction: MMC-Gamuda faces suit over MRT land
acquisition. MMC Corp and Gamuda, through their partnership in the Klang
Valley Mass Rapid Transit (KVMRT) project is being sued by Accolade Land
Sdn Bhd. The claim of over MYR300m with interest and costs is for
allegedly breaching a land acquisition contract. No details of the land
in question were disclosed in the filings with Bursa Malaysia. (Source:
The Edge Financial Markets)
Ahmad Zaki Resources: Wins MYR152.3m job in Pahang. The
company has bagged a MYR152.3m contract from the Public Works Department
to build a bridge over Sungai Kuantan connecting Kuantan to Bandar Putra,
Tanjung Lumpur in Pahang. The company receives the letter of award from
the Public Works Department last Friday. (Source: The Edge Financial
Markets)
Sunway Construction Group: Secures MYR66.3m contract. The
company’s sub-subsidiary Sunway Engineering Sdn Bhd was awarded a
MYR66.3m project by Zecon Medicare Sdn Bhd for electrical services and
air conditioning and mechanical ventilation system for the proposed
development of University Kebangsaan Malaysia Children Specialist
Hospital. The project is a public-private partnership initiative and is
to be completed on April 30, 2018. It is expected to contribute
positively to the earnings of SunCon group from the financial year ending
Dec 31, 2016 onwards. (Source: The Sun Daily)
YTL: Looking for infrastructure utility assets in the UK.
The conglomerate is looking for bargains after the UK vote to leave the
European Union (EU). The company said that it will look for
infrastructure utilities assets in the UK over the next two to three
years. The company has about MYR13.5b in cash that could be used to fund
expansion. (Source: The Edge Financial Markets)
SapuraKencana Petroleum: Signs GSA with Petronas. The
company’s wholly-owned subsidiary, SapuraKencana Energy Sarawak Inc,
signed a gas sales agreement (GSA) to supply gas to Petronas from 4QFY17
onwards. This is related to the gas production from the B15 gas field and
SK130 production sharing contract (PSC) contractors, therefore they are
joint sellers under the agreement. SapuraKencana Energy Sarawak was
awarded by Petronas to operate Block SK310 PSC back on June 17, 2008.
(Source: The Edge Financial Markets)
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