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Share
Price:
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MYR7.50
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Target
Price:
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MYR7.60
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Recommendation:
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Hold
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Diminishing
termination risk
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Weaker 2Q16 results were below expectations on the higher
depreciation charges. We think earnings could be weaker in 3Q (on
softer petroleum tanker rate) but to pick up again in 4Q (additional
earnings from new LNG and offshore assets, as well as seasonal strength
in petroleum tanker rate). We lower our 2016-18 EPS by 8% p.a. on the
higher depreciation but maintain our HOLD call and SOP-based TP of
MYR7.60.
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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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9,296.3
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10,908.4
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9,758.7
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9,688.6
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EBITDA
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3,024.0
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3,913.2
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4,277.1
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4,583.3
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Core net profit
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1,942.5
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2,782.0
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2,204.8
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2,268.4
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Core EPS (sen)
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43.5
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62.3
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49.4
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50.8
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Core EPS growth (%)
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37.0
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43.2
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(20.7)
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2.9
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Net DPS (sen)
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10.0
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20.0
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12.3
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12.7
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Core P/E (x)
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17.2
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12.0
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15.2
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14.8
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P/BV (x)
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1.2
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0.9
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0.9
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0.9
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Net dividend yield (%)
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1.3
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2.7
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1.6
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1.7
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ROAE (%)
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7.4
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8.8
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6.1
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6.0
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ROAA (%)
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4.7
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6.2
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4.4
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4.2
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EV/EBITDA (x)
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12.3
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11.2
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9.4
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8.7
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Net debt/equity (%)
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14.1
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2.4
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14.4
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12.7
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NEWS
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Outside Malaysia:
U.K: BOE cuts rate to 0.25%; Vote 9-0; Expands QE and buys
corporate bonds. Bank of England says it will buy GBP 60b gilts over six
months and buy GBP10b corporate bonds over 18 months. BOE announces
term-funding scheme to mitigate impact of low rates on some lenders while
signaling it may cut interest rate to near zero later this year. BOE says
Brexit has weakened outlook and cut 2017 GDP forecast to 0.8% v 2.3%
while keeping 2016 target at 2%. (Source: Bloomberg)
U.K: Hiring plunges as BOE warns that unemployment will
rise. The number of people being hired for permanent positions slumped
the most in seven years in July, putting the jobs market in a “dramatic
freefall.” An index of permanent positions dropped to 45.4 from 49.3 in
June, Market and the Recruitment and Employment Confederation said.
That’s below the key 50 level and marks the weakest reading since May
2009. The report provides a fresh indication that the U.K.’s decision to
leave the European Union will hold back economic growth, the day after
the Bank of England said that the outlook had weakened “markedly.”
(Source: Bloomberg)
Japan: BOJ doubled its exchange-traded fund purchases,
suggesting it’s opting to increase the daily amount from now on rather
than how often it buys, according to Tokai Tokyo Research Center. The
central bank bought JPY 70.7b (USD 697mn) in ETFs under its main buying
program, slightly more than a doubling of daily purchases last month, the
BOJ said. The central bank needs to accelerate the pace of purchases
after saying on July 29 it would boost total annual buying by 82% to JPY
6t. (Source: Bloomberg)
Indonesia: President Joko Widodo called for spending curbs
as the budget deficit in Southeast Asia’s largest economy continues to
deteriorate on the back of a shortfall in tax revenue and falling
commodity prices. Finance Minister Sri Mulyani Indrawati, who took office
last week, revised this year’s fiscal shortfall to 2.5% of GDP and told
reporters that the government estimates a revenue gap of IDR 219t (USD
16.7b). The deficit target was raised from 2.35%, bringing it closer to
the mandated ceiling of 3%. (Source: Bloomberg)
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Other News:
Construction: Jaks, Zelan win SUKE contracts. Zelan-Hasrat
Sedaya Consortium and JAK Resources have clinched jobs for Projek
Penswastaan Lebuhraya Bertingkat Sungai Besi–Ulu Kelang Package (SUKE)
from Turnpike Synergy Sdn Bhd. Jak’s wholly-owned unit Jaks Sdn Bhd won a
MYR508.5m package, while Zelan Construction Sdn Bhd and Hasrat Sedaya Sdn
Bhd won another package worth MYR257.61m through an unicorporated
consortium, Zelan-Hasrat Sedaya Consortium. SUKE is a 31.8km elevated
highway, which begins at Sri Petaling and exits at Ulu Kelang. The
contract duration is 30 months, with an expected completion date on Feb
28,2019. (Source: The Edge Financial Daily)
Wah Seong: Wins MYR167m subcontract. The company’s
indirect subsidiary PT Wasco Engineering Indonesia has bagged a
subcontract worth MYR166.7m from Schneider Electric France SAS (SEF) to
design and build seven prefabricated area sub-stations for a project in
Kazakhstan. The scope of the subcontract work involves 3D modelling,
structural analysis and design, blast wall design and design of all
ancillary systems such as lighting, safety, fire and gas detection. The
subcontract also includes the provision of all necessary manufacturing
drawings and full procurement of all items within its design scope and
subsequently fully responsible for all aspects of the construction phase
including installation and integration of all the free issue equipment.
The project activity is expected to commence in 3Q16 and to be completed
by Dec 31, 2018. (Source: The Sun Daily)
AirAsia: To launch sale of leasing unit this month. The
company has hired Credit Suisse Group AG, BNP Paribas SA and RHB Bank to
handle the sale of its leasing unit, Asia Aviation Capital Ltd. It will
kick off this month with completion by early next year. According to
Reuters, the company is looking to sell a majority stake and also open to
a full sale, and the deal could value the business at about USD1b
(MYR4.05b), adding that final valuation could change depending on talks
with potential buyers. Reuters, citing sources, also reported that the
company was considering paying a special dividend from the proceeds and
that the carrier plans to tap potential suitors, including leasing units
of China’s HNA Group, China Merchants Bank, and the aviation leasing company
backed by Hong Kong billionaire Li Ka-shing for the sale. The three
parties did not respond to requests for comments. (Source: The Edge
Financial Daily)
OCK Group: Acquires Vietnamese telecom tower firm. The
company acquired the entire stake in Vietnam's Southeast Asia
Telecommunications Holdings Pte Ltd (SEATH) for USD50m (MYR203.85m). The
conditional share sale and purchase agreement was signed by OCK's
indirect 60%-owned subsidiary, OCK Vietnam Tower Pte Ltd yesterday with
Vietnam Infrastructure Ltd for the deal. OCK Vietnam Tower is a joint
venture between OCK Group and CapAsia Telecommunications Ltd, a fund
managed by Capital Advisors Partners Asia Pte Ltd. Both parties will
contribute USD20m to fund the acquisition, while the remaining USD30m will
come from bank borrowings. Upon completion of the acquisition, SEATH will
become an indirect 60%-owned subsidiary of OCK. (Source: The Sun Daily)
Comintel Corp: Partners with Guinea’s government for ICT
project. The company has signed a MoU to implement innovative
telecommunications and ICT solutions in Republic of Guinea for an
estimated USD42.85m (MYR173.2m) project. The tripartite MoU comprises of
Comintel, the Guinea government and Export-Import Bank of Malaysia Bhd
(Exim Bank) and was signed in Jakarta yesterday. It will focus on
supplying, installing and commissioning telecommunications and ICT
equipment based on needs and feasibility studies in areas defined by
Guinea. The project is expected to commence early next year and be
completed in two years. (Source: The Edge Financial Daily)
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