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alt=break v:shapes="_x0000_i1027">
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Share
Price:
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MYR0.77
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Target
Price:
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MYR1.08
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Recommendation:
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Buy
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Nord Stream 2
game changer
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We raise 2017-18 earnings by 84%-727% to factor in the
Nord Stream 2 contract win. We estimate the contract value to be
MYR2.4b-MYR3b, sizeable to single-handedly drive WSC and address its
orderbook replenishment and earnings risks over the next 3 years. WSC’s
valuations are inexpensive now relative to growth, a prospect that
currently eludes the market. Our new TP (+731% from initial MYR0.13),
based on an unchanged 10x 2017 PER, offers a 40% upside.
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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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2,438.6
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1,839.5
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1,605.0
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2,550.0
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EBITDA
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296.6
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143.3
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87.5
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223.8
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Core net profit
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145.4
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22.7
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(6.6)
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83.5
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Core EPS (sen)
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18.8
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2.9
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(0.9)
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10.8
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Core EPS growth (%)
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215.9
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(84.4)
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nm
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nm
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Net DPS (sen)
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5.7
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3.0
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0.0
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0.0
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Core P/E (x)
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4.1
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26.0
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(89.0)
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7.1
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P/BV (x)
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0.5
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0.5
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0.5
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0.5
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Net dividend yield (%)
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7.4
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3.9
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0.0
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0.0
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ROAE (%)
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14.1
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2.1
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(0.6)
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7.3
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ROAA (%)
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5.4
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0.8
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(0.2)
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3.0
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EV/EBITDA (x)
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6.4
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12.2
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17.0
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6.9
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Net debt/equity (%)
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71.7
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80.4
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71.2
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70.3
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Share
Price:
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MYR4.39
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Target
Price:
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MYR4.10
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Recommendation:
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Hold
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Stronger 2H16
required for Niaga
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CIMB Niaga’s (Niaga, BNGA IJ, Not Rated) 2Q16 results were
decent but with cumulative 1H16 net profit at just 33% of our full-year
forecast, 2H16 has to play catch-up. At this stage, we deem the results
to be within expectations and maintain our forecasts for CIMB Group.
CIMB Group remains a HOLD with an unchanged TP of MYR4.10, pegged to an
FY17 P/BV of 0.8x.
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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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Operating income
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14,145.9
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15,395.8
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15,869.0
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16,764.9
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Pre-provision profit
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5,854.0
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6,146.8
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6,669.3
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7,193.7
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Core net profit
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3,159.0
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3,411.2
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3,647.7
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3,885.5
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Core EPS (MYR)
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0.38
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0.40
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0.43
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0.46
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Core EPS growth (%)
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(31.1)
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5.6
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6.3
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6.5
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Net DPS (MYR)
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0.15
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0.14
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0.18
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0.19
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Core P/E (x)
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11.5
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10.9
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10.3
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9.6
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P/BV (x)
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1.0
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0.9
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0.9
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0.8
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Net dividend yield (%)
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3.4
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3.2
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4.1
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4.3
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Book value (MYR)
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4.53
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4.87
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4.98
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5.25
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ROAE (%)
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9.3
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8.7
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8.8
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8.9
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ROAA (%)
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0.8
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0.8
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0.8
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0.8
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SECTOR RESEARCH
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Sector Note
by
Desmond Ch'ng
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There continues to be very little to excite where the
banking data for June is concerned. Loan growth continues to
moderate, loan approvals are still declining, deposits are still
contracting YoY, while there has been some stress in asset quality. A
challenging environment no doubt, thus our NEUTRAL weight. BUY AFG,
HL Bank and HLFG.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Growth
languishing at low single-digit
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Money supply (M3) growth remained sluggish (June 2016:
+1.9% YoY; May 2016: +2.2% YoY), affected by decline in total
deposits and slower credit growth amid stable external reserves.
Policy-wise, BNM cut OPR by 25bps at its “post-Brexit” 12-13 July
2016 MPC, and our eyes are on the 22-23 Nov 2016 MPC meeting, which
is after the potential risk event of US Presidential Election on 8
Nov 2016.
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Suhaimi Ilias
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Zamros
Dzulkafli
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NEWS
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Outside Malaysia:
U.S: Struggling economy propped up by consumer-spending
gain. The U.S. economy stumbled in the first half of 2016 as companies
retrenched, leaving consumers to shoulder the burden of sustaining growth
heading into the presidential election. A 4.2% gain in household
purchases in the second quarter, among the biggest of the current
expansion, was the lone bright spot in an otherwise bleary picture as the
economy had its worst first half since 2011. Businesses hunkered down,
trimming inventories and reducing outlays on equipment and construction
projects, while government agencies also cut back. That limited the gain
in gross domestic product last quarter to a 1.2% annualized rate, figures
from the Commerce Department showed. (Source: Bloomberg)
Saudi Arabia: Said to have offered USD 4b to banks. Saudi
Arabia’s central bank offered lenders short-term loans in late June to
help ease liquidity constraints, according to five people familiar with
the matter. The Saudi Arabian Monetary Agency, or SAMA, as the central
bank is known, offered about SAR 15b (USD 4b), two of the people said,
asking not to be identified as the information is private. The loans were
offered at a discounted rate, two of the people said. SAMA offered
individual banks as much as SAR 1.5b, based on their balance sheets, four
people said. The loans are for up to one year. (Source: Bloomberg)
Crude Oil: Resumes decline toward USD 40 as US drilling
gains amid glut of crude and fuel supplies that are at the highest
seasonal level in at least two decades. Brent for October settlement
dropped as much as 42 cents, or 1 percent, to USD 43.11/bbl on the
London-based ICE Futures Europe exchange. Drillers boosted the number of
rigs by 3 for the longest run of gains since August, according to a data
from Baker Hughes Inc. Libya has reopened four oil export ports,
according to a statement from the Petroleum Facilities Guard. (Source:
Bloomberg)
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Other News:
AirAsia: Air Asia, Scottish firm in data analytics JV.
AirAsia’s data science unit MadCience Consulting Sdn Bhd has entered into
an agreement with Scotland’s Big Data For Humans Ltd (Bd4h) to set up a
data analytics joint venture (JV) in Asia Pacific. The JV will be
responsible for building a software-as-a-service business in the region,
with its first client being AirAsia. It will be operated through Big Data
For Humans APAC Ltd (Bd4h APAC), which is expected to commence operations
in 4QFY16. MadCience Consulting also subscribed to one million unsecured
convertible loan notes issued by Bd4h for GBP1m (MYR5.36m), of which
GBP500,000 will be used to finance the JV. (Source: The Sun Daily)
FGV: FGV, Felda still working on restructuring land lease
deal. The planned restructuring of Felda Global Ventures Holdings Bhd’s
(FGV) 99-year land lease agreement (LLA) with its parent company is work
in progress with nothing concrete formulated yet, says FGV group
president and CEO Datuk Zakaria Arshad. To recap, the LLA between FGV and
its parent company Federal Land Development Authority (Felda) entails FGV
having to pay Felda a fixed lease amount of MYR250m per year in cash for
20 years. Zakaria said, the company is planning to reduce the LLA land
and to increase the direct ownership of land. The reduction of the LLA
land is by carving out marginal non-productive land and returning that
back to Felda while increasing direct ownership is by acquiring new
plantations. (Source: The Star)
WZ Satu: Accepts MYR27m contract. WZ Satu has accepted a
letter of award worth MYR27.03m from Shell MDS (Malaysia) Sdn Bhd for the
mechanical package of SMDS Pipeline project for a duration of 13 months
and is expected to commence on Aug 1, 2016. The contract is expected to
contribute positively to WZ Satu’s future earnings and net assets per
share for the financial year ending Aug 31, 2017. (Source: The Sun Daily)
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