Thursday, August 25, 2016

Plantation: B10 biodiesel programme delayed. According to Plantation Industries and Commodi






Maxis Bhd | Comforting
Chi Wei Tan







RHB Bank | Impairment in 2Q16
Desmond Ch'ng







IJM Corporation | Results fall short
Li Shin Chai







Inari Amertron | Strong rebound in earnings
Ivan Yap







Alam Maritim | 1H16 in line
Thong Jung Liaw







QL Resources | 1QFY17: Within expectations
Liew Wei Han







Perisai Petroleum | 1H16 in line
Thong Jung Liaw









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Malaysia | Growth stabilizing after slowdown
Suhaimi Ilias







Malaysia | Slowed on base effect
Suhaimi Ilias








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COMPANY RESEARCH





Company Update





Maxis Bhd (MAXIS MK)
by Chi Wei Tan





Share Price:
MYR6.33
Target Price:
MYR5.90
Recommendation:
Hold




Comforting

Management’s discussions during Maxis’ Analyst Day yesterday revolved mainly around operations and network. We remain comforted by management’s emphasis on monetisation. Maintain HOLD with an unchanged TP of MYR5.90. Risk-reward is now skewed to the downside, with share price having breached our TP (which excludes spectrum fees).



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
8,389.0
8,601.0
8,629.1
8,853.3
EBITDA
4,242.0
4,398.0
4,314.6
4,426.7
Core net profit
1,734.5
1,809.5
1,692.5
1,757.2
Core EPS (sen)
23.1
24.1
22.5
23.4
Core EPS growth (%)
(9.9)
4.3
(6.5)
3.8
Net DPS (sen)
40.0
20.0
20.0
20.0
Core P/E (x)
27.4
26.3
28.1
27.0
P/BV (x)
10.1
11.3
10.8
10.3
Net dividend yield (%)
6.3
3.2
3.2
3.2
ROAE (%)
32.4
40.6
39.5
39.0
ROAA (%)
9.8
9.8
8.9
9.1
EV/EBITDA (x)
13.9
13.6
13.0
12.5
Net debt/equity (%)
158.9
205.5
192.7
172.6










TP Revision





RHB Bank (RHBBANK MK)
by Desmond Ch'ng





Share Price:
MYR4.99
Target Price:
MYR5.30
Recommendation:
Hold




Impairment in 2Q16

Impaired loans trended higher while the impairment allowance on Swiber marred 2Q16. Nevertheless, RHB’s operational performance was better than expected thus our FY16-18 earnings forecasts are raised by 4-5%. Our revised TP is MYR5.30 (+15sen) on the back of an unchanged PBV of 0.9x for a prospective FY17 ROE of 9.8%. HOLD.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Operating income
6,234.9
6,191.2
6,260.8
6,497.9
Pre-provision profit
2,823.7
2,398.0
3,141.7
3,350.2
Core net profit
1,925.6
1,722.2
2,117.8
2,229.6
Core EPS (MYR)
0.71
0.66
0.53
0.56
Core EPS growth (%)
3.2
(7.4)
(20.2)
5.3
Net DPS (MYR)
0.06
0.12
0.16
0.17
Core P/E (x)
7.0
7.5
9.4
9.0
P/BV (x)
0.7
1.0
0.9
0.9
Net dividend yield (%)
1.2
2.4
3.2
3.4
Book value (MYR)
7.31
5.11
5.58
5.83
ROAE (%)
10.8
9.4
10.6
9.8
ROAA (%)
0.9
0.8
0.9
0.9










Results Review





IJM Corporation (IJM MK)
by Li Shin Chai





Share Price:
MYR3.40
Target Price:
MYR3.60
Recommendation:
Hold




Results fall short

1QFY3/17 core earnings missed estimates largely due to weaker earnings from Kuantan Port and plantation. Earnings should pickup with its strong outstanding construction orderbook of e.MYR8.6b and growing demand for piles. However, full-year earnings would likely miss our forecast due to the weak 1QFY17. We keep our estimates pending an update with management. Maintain HOLD with an unchanged SOP-TP of MYR3.60.



FYE Mar (MYR m)
FY16A
FY17A
FY18E
FY19E
Revenue
5,448.3
5,128.2
6,679.2
7,610.6
EBITDA
1,434.8
1,166.7
1,221.9
1,425.1
Core net profit
530.2
509.3
589.1
701.2
Core EPS (sen)
16.3
14.3
16.4
19.6
Core EPS growth (%)
(15.0)
(12.5)
15.3
19.0
Net DPS (sen)
7.5
10.0
7.0
7.0
Core P/E (x)
20.9
23.8
20.7
17.4
P/BV (x)
1.3
1.3
1.3
1.2
Net dividend yield (%)
2.2
2.9
2.1
2.1
ROAE (%)
7.0
5.8
6.4
7.2
ROAA (%)
2.8
2.6
2.9
3.3
EV/EBITDA (x)
11.8
15.0
14.7
12.5
Net debt/equity (%)
51.4
45.8
47.0
42.1










Results Review





Inari Amertron (INRI MK)
by Ivan Yap





Share Price:
MYR3.06
Target Price:
MYR3.20
Recommendation:
Buy




Strong rebound in earnings

While the QoQ rebound in 4QFY6/16 earnings, driven by production ramp-up, were largely expected, the quantum was a positive surprise. Going forward, we expect earnings to climb further, boosted by stronger RF demand from Broadcom in Sep 2016 to meet the demands of major smartphone makers notwithstanding a possibility of higher RF content in next generation smartphones. We retain our earnings forecasts pending a briefing today. Our MYR3.20 TP (15x CY17 PER) is unchanged for now. Maintain BUY.



FYE Jun (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
933.1
1,040.9
1,341.4
1,552.5
EBITDA
187.3
203.0
269.7
332.4
Core net profit
147.0
155.5
193.1
218.7
Core EPS (sen)
15.8
16.0
19.9
22.5
Core EPS growth (%)
36.5
1.3
24.2
13.3
Net DPS (sen)
8.9
8.4
8.9
10.1
Core P/E (x)
19.4
19.1
15.4
13.6
P/BV (x)
5.3
4.3
3.8
3.3
Net dividend yield (%)
2.9
2.7
2.9
3.3
ROAE (%)
37.0
25.5
26.2
25.7
ROAA (%)
22.0
18.2
19.8
19.0
EV/EBITDA (x)
11.9
13.3
10.7
8.5
Net debt/equity (%)
net cash
net cash
net cash
net cash










Company Update





Alam Maritim (AMRB MK)
by Thong Jung Liaw





Share Price:
MYR0.28
Target Price:
MYR0.11
Recommendation:
Sell




1H16 in line

Interim results came in line, on a stronger QoQ performance. Overall, the OSV market is expected to be tough over the next 24 months. Optimising costs and OSV utilisation, and preserving cash flows remain key. Surviving through this down cycle is paramount. Alam’s valuations is expensive vis-à-vis its peers. Our TP is on 10x 2017 PER (unchanged).



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
391.6
350.2
226.7
256.0
EBITDA
81.5
71.9
47.4
54.4
Core net profit
56.2
63.1
1.2
9.9
Core EPS (sen)
6.4
6.8
0.1
1.1
Core EPS growth (%)
(24.7)
5.9
(98.1)
721.5
Net DPS (sen)
0.0
0.0
0.0
0.0
Core P/E (x)
4.4
4.2
219.7
26.7
P/BV (x)
0.3
0.3
0.3
0.3
Net dividend yield (%)
0.0
0.0
0.0
0.0
ROAE (%)
7.8
7.4
0.1
1.1
ROAA (%)
3.9
4.9
0.1
0.8
EV/EBITDA (x)
7.7
6.5
5.8
4.6
Net debt/equity (%)
9.1
8.2
1.2
net cash


Thong Jung Liaw








Results Review





QL Resources (QLG MK)
by Liew Wei Han





Share Price:
MYR4.38
Target Price:
MYR4.15
Recommendation:
Hold




1QFY17: Within expectations

1QFY3/17 net profit is in line, at 20% of our full-year estimates. Historically, 1Q is the weakest quarter and we expect stronger 2Q and 3Q supported by festivities and better livestock and marine product margins. We maintain our earnings forecasts, HOLD call and DCF-TP of MYR4.15 (7.5% WACC, 2.0% long term growth).



FYE Mar (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
2,707.8
2,853.9
3,054.3
3,224.0
EBITDA
340.9
368.1
403.6
447.8
Core net profit
183.1
192.1
211.5
235.8
Core EPS (sen)
14.7
15.4
17.0
18.9
Core EPS growth (%)
14.5
4.9
10.1
11.5
Net DPS (sen)
4.3
4.3
4.7
5.2
Core P/E (x)
29.9
28.5
25.8
23.2
P/BV (x)
3.8
3.4
3.1
2.8
Net dividend yield (%)
1.0
1.0
1.1
1.2
ROAE (%)
13.5
12.7
12.7
12.8
ROAA (%)
7.6
7.1
7.1
7.3
EV/EBITDA (x)
16.4
16.5
15.6
14.2
Net debt/equity (%)
39.0
32.9
39.2
37.6










Company Update





Perisai Petroleum (PPT MK)
by Thong Jung Liaw





Share Price:
MYR0.20
Target Price:
MYR0.24
Recommendation:
Hold




1H16 in line

2Q16 results, despite being weaker QoQ, are still on track to meet our FY16 earning forecast. Overall, Perisai’s key agenda is to ride through the cyclical downturn and address several short term challenges like: (i) restructuring its MTNs due in Oct 2016, (ii) divesting its underperforming assets and (iii) cut costs. Executing these plans will ease its financials. Our unchanged TP imputes a 10% discount to its 1x EV/replacement valuation to reflect the short term risk.



FYE Dec (MYR m)
FY14A
FY15A
FY16E
FY17E
Revenue
122.1
214.8
191.6
182.8
EBITDA
50.2
118.4
76.7
67.9
Core net profit
11.8
3.2
0.6
(16.2)
Core EPS (sen)
1.0
0.3
0.1
(1.4)
Core EPS growth (%)
(84.1)
(73.2)
(80.2)
nm
Net DPS (sen)
0.0
0.0
0.0
0.0
Core P/E (x)
19.9
74.2
374.5
nm
P/BV (x)
0.2
0.4
0.3
0.3
Net dividend yield (%)
0.0
0.0
0.0
0.0
ROAE (%)
1.1
0.3
0.1
(2.2)
ROAA (%)
0.6
0.1
0.0
(0.7)
EV/EBITDA (x)
34.2
15.3
21.7
24.0
Net debt/equity (%)
90.9
192.4
173.9
164.2


Thong Jung Liaw






MACRO RESEARCH






Economics Research
by Suhaimi Ilias


Growth stabilizing after slowdown





The drop in index of leading economic indicators eased for the second month to -0.4% YoY in June 2016 vs -0.8% YoY in May 2016. Trend suggests emerging sign of the real GDP growth slowdown since 2Q 2015 is stabilising.












Economics Research
by Suhaimi Ilias


Slowed on base effect





Inflation rate eased to +1.1% YoY (June 2016: +1.6% YoY) amid broad-based easing in CPI components, while core inflation was relatively stable at +2.0% YoY (June 2016: +2.1% YoY). YTD 2016 inflation is +2.4% YoY while core inflation at +2.7% YoY. Revised our 2016 inflation rate forecast range to 2.0%-2.5% from 2.3%-2.8%.







NEWS


Outside Malaysia:

U.S: Existing-home sales drop for first time since February. Sales of previously owned homes dropped more than forecast in July from a nine-year high, restrained by limited choices for buyers, National Association of Realtors data showed. Contract closings declined 3.2% to a 5.39 million annual rate (forecast was 5.51 million). Sales declined 6.7% YoY from July 2015 before seasonal adjustment. Median price of an existing home rose 5.3% YoY from July 2015 to USD 244,100. Inventory of available properties decreased 5.8% YoY to 2.13 million units. (Source: Bloomberg)

Germany: Trade was the main driver of economic growth in 2Q 2016 as domestic demand suffered from a slump in investment. Net trade contributed 0.6 percentage point to growth, with exports rising 1.2% and imports falling 0.1%, the Federal Statistics Office said. Private and government spending also bolstered output. GDP rose a seasonally-adjusted 0.4% in the three months through June. (Source: Bloomberg)

France: Jobless claims dropped to an 18-month low, helping President Francois Hollande fulfill a promise to cut joblessness before the next election. The number of people actively looking for work fell by 19,100, or 0.5%, to 3.51 million in July, the Labor Ministry said. The decline brings the number of claimants to its lowest level since February 2015. The Socialist president has been dogged by high unemployment throughout his mandate and has repeatedly said that he needs to reverse an increase in joblessness in order to seek a second mandate. (Source: Bloomberg)

U.K: Consumer credit rose the fastest in almost a decade in July, as shoppers hit the stores for summer goods and took advantage of low interest rates on loans. The British Bankers’ Association said credit rose 6.4% YoY, up from 6.3% YoY in June and the quickest pace since December 2006. Business lending rose 2.6% YoY, the most since early 2015. The weak spot was housing, where the number of mortgage approvals for house purchase fell about an annual 19% in July to 37,662. In the year so far, approvals are up 2%. (Source: Bloomberg)

China: Imposed limits on lending by peer-to-peer platforms to individuals and companies in an effort to curb risks in the country’s loosely-regulated shadow-banking sector. An individual can borrow up to CNY 1m (USD 150,000) from P2P sites, including a maximum of CNY 200,000 from any one site, the China Banking regulatory Commission said. Corporate borrowers face caps of CNY 5m and CNY 1m. The lenders are barred from taking public deposits or selling wealth-management products and must appoint qualified banks as custodians and improve information disclosure, the regulator said. (Source: Bloomberg)





Other News:

Plantation: B10 biodiesel programme delayed. According to Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong, Malaysia will delay the implementation of a higher-biodiesel mandate to 4Q16, from its earlier plan of July. The B10 programme, which requires a minimum bio-content of 10% in biodiesel for the transport sector, has already been delayed twice this year. A higher-biodiesel mandate would increase demand for palm oil, which is used as a component of biodiesel. Full implementation of the B10 programme would consume 750,000 tonnes of palm oil a year. (Source: The Edge Financial Daily)

George Kent: Bags MYR1b MRT job with China partner. MRT Corp has awarded a MYR1.01b MRT Sungai Buloh-Serdang-Putrajaya Line (SSP Line) to a joint venture between George Kent and China Communications Construction Co Ltd (CCCC). MRT Corp said the work package is for engineering, procurement, construction, testing and commissioning of track works, maintenance vehicles and work trains. CCCC and George Kent hold 51% stake and 49% in the joint venture respectively. CCCC-George Kent, which beat six other tenderers, fared very well in the technical portion of the evaluation. Inclusive of this award, MRT Corp has now awarded a total of 22 work packages for the SSP Line. (Source: The Sun Daily)

Global Oriental: More cautious about new launches. The property developer and restaurant chain operator, is expecting the property market downturn to persist until at least 2018. The executive director, Wee Beng Aun told The Edge Financial Daily that the group will be more cautious in launching new projects under the current economic environment. He added “ We can see that there are not many speculative buyers-more are genuine homeowners, which is good for the industry. The market will take some time to recover; by 2018, [property] sentiment will be more positive. Nevertheless, the company will still be launching projects that are worth over MYR900m in the current financial year ended 31 March 2017. (Source: The Edge Financial Daily)


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