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Share
Price:
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MYR4.61
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Target
Price:
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MYR4.10
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Recommendation:
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Sell
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Normalising
earnings
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While 4Q earnings will likely rebound on the higher ASPs
and lower latex cost, it is already imputed in ours and street’s
forecasts. We maintain our FY8/16 EPS but lower our FY8/17-18 EPS by
6%/3% on lower sales volume assumptions. Based on an unchanged 15x 2017
PER (mean valuation), our TP is reduced to MYR4.10 (-6%). Maintain
SELL. We still see downside risk to street’s forecasts as earnings will
likely fall in FY8/17 with Top Glove actively passing through the
USD/MYR benefits.
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FYE Aug (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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2,275.4
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2,510.5
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2,979.8
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3,057.9
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EBITDA
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298.5
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454.3
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564.4
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511.4
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Core net profit
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180.5
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279.8
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376.9
|
326.6
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Core EPS (sen)
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14.6
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22.6
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30.4
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26.3
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Core EPS growth (%)
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(8.2)
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55.0
|
34.7
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(13.3)
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Net DPS (sen)
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8.0
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11.5
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15.2
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13.2
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Core P/E (x)
|
31.7
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20.4
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15.2
|
17.5
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P/BV (x)
|
4.1
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3.6
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3.2
|
2.9
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Net dividend yield (%)
|
1.7
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2.5
|
3.3
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2.9
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ROAE (%)
|
13.3
|
18.6
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22.1
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17.4
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ROAA (%)
|
9.8
|
12.1
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13.4
|
10.8
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EV/EBITDA (x)
|
9.4
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10.1
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9.7
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10.5
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Net debt/equity (%)
|
net cash
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net cash
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net cash
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net cash
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Share
Price:
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MYR0.72
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Target
Price:
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MYR0.73
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Recommendation:
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Hold
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Earnings
recovery deferred
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Weak 4QFY3/16 results were largely due to One Media Group,
which may be sold soon. That said, we understand the outlook in
Malaysia is still less than sanguine. We cut our earnings estimates
13-15% but leave our dividends estimates unchanged. Consequently, our
new TP is MYR0.73 (from MYR0.80), premised on revised 10.5x CY16 PER,
post-Mar 2010 12M forward PER mean. Downgrade to HOLD from BUY.
Dividend yields of >6.8% should limit downside potential to share
price, in our view.
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FYE Mar (MYR m)
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FY15A
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FY16A
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FY17E
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FY18E
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Revenue
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1,589.3
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1,362.3
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1,378.7
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1,402.8
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EBITDA
|
268.1
|
206.6
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210.6
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223.1
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Core net profit
|
144.4
|
111.6
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118.4
|
129.8
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Core EPS (sen)
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8.6
|
6.6
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7.0
|
7.7
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Core EPS growth (%)
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(8.3)
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(22.7)
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6.1
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9.6
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Net DPS (sen)
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3.4
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4.3
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4.9
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5.4
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Core P/E (x)
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8.4
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10.9
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10.3
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9.4
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P/BV (x)
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1.6
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1.5
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1.4
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1.3
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Net dividend yield (%)
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4.8
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6.0
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6.8
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7.5
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ROAE (%)
|
19.4
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13.9
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13.8
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14.3
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ROAA (%)
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9.4
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7.1
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7.8
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8.8
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EV/EBITDA (x)
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4.5
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5.5
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5.2
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4.7
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Net debt/equity (%)
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5.9
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net cash
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net cash
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net cash
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Samuel Yin Shao
Yang
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Jade Tam
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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External reserves as at 15 June 2016 edged up to
USD97.4b (MYR383.2b) from USD97.3b (MYR382.6b) on 31 May 2016,
equivalent to 8.1 months retained imports and 1.2 times short-term
external debt. Year-to-date, external reserves increased by +2.2%
from USD95.3b at end-2015.
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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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FBMKLCI has
turned neutral
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The FBMKLCI rose by 3.46 points to close at 1,637.46
on Tuesday, while the FBMEMAS and the FBM100 gained 43.34 points and
45.08 points respectively. In terms of market breadth, the
gainer-to-loser ratio was 325-to-419 while 349 counters were
unchanged. A total of 1.20b shares were traded valued at MYR1.13b.
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NEWS
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Outside Malaysia:
U.S: Home prices rose 5.9% in April from a year earlier as
job growth spurred competition for a limited number of listings. Prices
climbed 0.2% on a seasonally adjusted basis from March, the Federal
Housing Finance Agency said. Values have increased steadily as buyers,
bolstered by an improving labor market and easing mortgage standards,
battle for a tight supply of homes on the market. Inventory at the end of
April was down 3.6% from a year earlier, according to the National
Association of Realtors. (Source: Bloomberg)
U.S: IMF cut its forecast for U.S. growth this year,
urging the Federal Reserve to lean toward modestly overshooting its
inflation target in considering whether the economy can handle higher
interest rates. The IMF said the U.S. economy will grow 2.2% this year,
less than its projection of 2.4% in April. The fund left unchanged its
forecast for a 2.5% expansion in 2017. There’s a clear case for the Fed
to proceed on a "very gradual" path in raising its benchmark
rate, the IMF said. (Source: Bloomberg)
E.U: ECB reinstated its waiver on Greek debt, restoring
the access of the nation’s banks to regular refinancing lines but
stopping short of including such bonds in quantitative easing for now.
The ECB “decided to reinstate the waiver affecting the eligibility of
marketable debt instruments issued or fully guaranteed by the Hellenic
Republic,” the institution said in a statement. “The Governing Council
also acknowledges the commitment of the Greek government to implementing
the ESM macroeconomic adjustment program and, therefore, expects
continued compliance with its conditionality.” The central bank acted
after euro-area governments last week approved the payment of EUR 7.5b
(USD 8.5b) of aid for Greece, ending months of wrangling over the nation’s
economic reforms. The waiver, allowing banks to pledge junk- rated Greek
sovereign debt as collateral against ECB funding, had been suspended
since February 2015. (Source: Bloomberg)
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Other News:
Utilities: Air Selangor could delay CAPEX works.
Pengurusan Air Selangor Sdn Bhd may face delays in obtaining its
operating licence due to uncertainties relating to the acquisition of
Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash). One of the issues
dragging down Air Selangor is the status of Splash, which is not wholly
owned by the state. As a result, there is a delay in the submission of a
three-year capital expenditure plan to the federal government and hence
would not be able to undertake major upgrading works to improve the water
infrastructure in the state. Under the previous master agreement signed
between the state and federal governments last year, a sum of MYR250m had
been allocated for the acquisition of Splash, compared to the MYR2.8b valuation
demanded by its shareholders. (Source: The Star)
AirAsia: Acquires private jet for USD10m. The company is
buying the private jet plane that has been used by its executive chairman
Datuk Kamarudin Meranun and group chief executive officer Tan Sri Tony
Fernandes since 2012 for USD10m (MYR40.3m). The company had signed to
purchase the Bombadier BD-700-1A10 Global Express 9M-CJG from Caterhamjet
Global Ltd (CJG), a Tune Group member. The transaction is considered to
be a related party transaction as Kamaruddin and Fernandes are also
directors and shareholders of CJG (with 18.56% indirect stake each).
(Source: The Star)
Scomi Engineering: Obtains interimm injunction against
Prasarana. The company’s subsidiary, Scomi Transit Projects Sdn Bhd (STP)
has obtained an interim order and injunction restraining Prasarana
Malaysia Bhd from terminating the MYR494m KL Monorail expansion contract.
To recap, STP served claims on Prasarana for MYR365m in respect of
contract price variations and claims for extension of time and related
costs/price increases.This was after Prasarana served notice for STP to
renew a performance bond related to the project. The inter partes hearing
has been set for Monday, June 27. (Source: The Sun Daily)
Sona Petroleum: To be liquidated. The SPAC company will be
liquidated after shareholders vetoed the purchase of Stag Oilfield in
Australia as its qualifying acquisition amid an oil price rout that
spooked investors' confidence in SPACs. Sona investors can expect a cash
distribution of about 48 sen per share based on its trust account of
MYR538.6m as at end Dec 2015. The timeline of the payout is still being
discussed and have yet to be finalised. (Source: The Sun Daily)
Borneo Aqua Harvest: Cancels acquisition plans. The
company dropped plans to acquire Wullersdorf Resources Sdn Bhd and
diversify into the exploration for minerals, mining and mining-related
businesses. The company said its cooperative agreement with Southsea Gold
Sdn Bhd in relation to the prospecting, exploration, extraction and
commercialisation of mining business at Bukit Mantri in Tawau, Sabah,
lapsed on Monday. To recap, the company entered into a conditional share
sale agreement on Nov 20, 2015. (Source: The Sun Daily)
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