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Share
Price:
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MYR1.13
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Target
Price:
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MYR0.90
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Recommendation:
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Sell
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One negative,
two positives
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We cut 2016-18 revenue by 16%-32% on reduced visibility at
its offshore division. Replenishment is a challenge in a capex deprived
environment. On a positive note, MMHE has secured a 3-year extension on
its Investment Tax Allowance (ITA) to 2019, which would see MMHE
sanctioning the expansion of its dry-dock facilities. For that, we cut
2016 earnings by 19% but lift 2017-18 by 37%-89% (ITA impact). That
said, valuations are expensive. Our unchanged TP is pegged to 1x
EV/backlog.
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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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2,700.5
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2,459.0
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1,298.6
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1,003.1
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EBITDA
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248.2
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157.9
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88.4
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84.0
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Core net profit
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173.1
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93.3
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41.8
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36.8
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Core EPS (sen)
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10.8
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5.8
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2.6
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2.3
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Core EPS growth (%)
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(26.8)
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(46.1)
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(55.2)
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(12.1)
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Net DPS (sen)
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0.0
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0.0
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0.0
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0.0
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Core P/E (x)
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10.4
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19.4
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43.2
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49.2
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P/BV (x)
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0.7
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0.7
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0.7
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0.7
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Net dividend yield (%)
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0.0
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0.0
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0.0
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0.0
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ROAE (%)
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6.6
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3.5
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1.6
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1.3
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ROAA (%)
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3.6
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2.1
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1.1
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1.0
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EV/EBITDA (x)
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10.2
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4.8
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11.3
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11.8
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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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Share
Price:
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MYR1.91
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Target
Price:
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MYR1.95
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Recommendation:
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Hold
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Decent run; D/G
to HOLD
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Following OTB’s share price gain, we believe the stock is
now fairly valued with its near-term earnings potential largely in the
price. We now rate OTB a HOLD. We maintain our earnings forecasts but
raise our TP to MYR1.95 (+10sen) after rolling forward our valuation
base to CY17 (from FY17), tagging on an unchanged target PER of 14.8x
(mean).
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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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397.7
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393.4
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422.0
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459.2
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EBITDA
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82.9
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84.5
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91.2
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95.6
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Core net profit
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51.0
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55.3
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57.6
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61.3
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Core EPS (sen)
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11.2
|
11.9
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12.4
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13.2
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Core EPS growth (%)
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4.2
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6.1
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4.3
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6.4
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Net DPS (sen)
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6.0
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9.0
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6.8
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7.3
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Core P/E (x)
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17.0
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16.0
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15.3
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14.4
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P/BV (x)
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2.6
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2.4
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2.3
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2.1
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Net dividend yield (%)
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3.1
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4.7
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3.6
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3.8
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ROAE (%)
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15.2
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15.8
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15.4
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15.3
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ROAA (%)
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11.8
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12.5
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12.4
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12.4
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EV/EBITDA (x)
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8.2
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6.5
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7.9
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7.3
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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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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Exports in May 2016 dropped -0.9% YoY (Apr 2016: +1.6%
YoY) while imports rebounded by +3.1% YoY (Apr 2016: -2.3% YoY),
resulting in the trade surplus narrowing substantially to +MYR 3.26b
(Apr 2016: +MYR 9.05b). Brexit is the latest headwinds on external trade
as “political economy” risk adds to the uncertainties on global
economic and trade growth.
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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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The FBM KLCI rose 12.17 points WoW to close at
1,646.22 after BREXIT on 24 June. The market traded in a narrow range
and average daily volume fell from 1.47b to 1.13b shares last week.
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NEWS
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Outside Malaysia:
U.S: Most industries see limited Brexit impact, ISM says.
Most purchasing executives at American factories and service producers
expect little impact on their operations and staffing levels this year
after the U.K. voted to leave the European Union, a sign any fallout on
the domestic economy will be limited. Sixty-one percent of those surveyed
by the Institute for Supply Management expected a ‘negligible’ financial
impact on their business due to Brexit, while 27 percent expected a
‘slightly negative’ outcome. Most of those polled by the Tempe,
Arizona-based group from June 25 to June 29 indicated they would probably
not pare headcounts as a result of the vote, and only a small share of
panelists said they would hire fewer employees. (Source: Bloomberg)
E.U: Euro-Area manufacturing grows at fastest pace in six
months. A Purchasing Manufacturers’ Index rose to 52.8 from 51.5,
slightly higher than the flash estimate of 52.6, Markit Economics said.
The results were collected prior to the result of Britain’s European
Union referendum, which saw the country vote to leave the bloc. Eurostat
said in a separate report that unemployment in the 19-nation region fell
to 10.1% in May, the lowest in almost five years. (Source: Bloomberg)
China: Manufacturing treads water in June as services perk
up. China’s official factory gauge retreated to the dividing line between
improvement and deterioration last month, while a measure of services
perked up, underscoring the two-speed pace of growth in the world’s
second-largest economy. Manufacturing purchasing managers index at 50 in
June, matching economist estimates in a Bloomberg survey and dropping
from 50.1. Non-manufacturing PMI was at 53.7, compared with 53.1 in May.
Labor market components of both PMI gauges decreased; manufacturing
employment fell to 47.9 while the services reading dropped to 48.7.
(Source: Bloomberg)
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Other News:
Tropicana Corp: Sells land for MYR569m. Tropicana Desa
Mentari Sdn Bhd, Tropicana Corp’s indirect unit, is disposing of freehold
land with 251.59 acres of developable area in Gelang Patah, Johor for
MYR569.87m to Tiarn Oversea Group Sdn Bhd. The net proceeds of about
MYR218.4m after repayment of bank borrowings, taxes and any related
expenses arising from the disposal would be used for working capital
and/or repayment of the group’s bank borrowings. (Source: The Star)
MRCB: Bags MYR189m contract to restore Pahang river
estuary. Malaysian Resources Corp received a letter of award from the
Malaysian Irrigation and Drainage Department last Friday to carry out the
Pahang river estuary conservation (Phase 3) project, package 2, which
involves restoring the estuary of the river near Kuala Pahang. The
construction period is two years and the project is expected to be
completed by July 2018. (Source: The Edge Financial Daily)
SLP Resources: Eyes another record year with new products.
Plastic packaging manufacturer, SLP Resources remains bullish on its
earnings prospects this financial year, with an estimated growth of at
least 10%, as it looks to introduce its new products to new markets, and
continue investing in capacity expansion. The company is looking at expanding
its overseas market and is eyeing the huge China market, where the change
from a one-child policy to two is a boon to its new ultra-thin breathable
and non-breathable polyethylene backsheets, which can be used in the
making of diapers. (Source: The Edge Financial Daily)
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