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Share
Price:
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MYR1.27
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Target
Price:
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MYR1.35
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Recommendation:
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Buy
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3Q16 earnings on
track
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3Q16 results were in line whereby the higher YoY revenue
was offset by higher non-operating expenses. We nudge up FY16-18 net
profit forecasts by 0.6-1.9% as we adjust our key assumptions, but our
MYR1.35 DDM-TP is intact. We continue to like MQREIT for its resilient
earnings and sustained distributions which are backed by long-term
office tenants.
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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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70.2
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115.2
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131.2
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185.1
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Net property income
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53.3
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90.3
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101.9
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140.1
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Distributable income
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34.2
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54.0
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61.1
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92.6
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DPU (sen)
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7.5
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6.9
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7.8
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7.8
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DPU growth (%)
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0.0
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(8.1)
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12.8
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(0.9)
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Price/DPU(x)
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16.8
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18.3
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16.2
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16.4
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P/BV (x)
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0.9
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0.9
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0.9
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1.0
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DPU yield (%)
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5.9
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5.5
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6.2
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6.1
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ROAE (%)
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7.5
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8.4
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6.7
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8.2
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ROAA (%)
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4.7
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4.9
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3.8
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4.7
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Debt/Assets (x)
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0.4
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0.4
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0.4
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0.4
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Share
Price:
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MYR78.40
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Target
Price:
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MYR78.00
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Recommendation:
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Hold
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Fairly valued
for now
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We expect 4Q16 results be to seasonally weaker on higher
A&P expenses. Its mass market appeal consumer goods and new product
launches should continue to help support domestic sales growth.
Meanwhile, export sales should continue the positive growth momentum on
new product launches to neighbouring countries. Nevertheless, we
believe NESZ is fairly valued now, trading about in line with its
5-year mean of 26.8x. Maintain HOLD with an unchanged DCF-TP of
MYR78.00.
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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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4,808.9
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4,838.0
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5,152.4
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5,554.3
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EBITDA
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837.2
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886.0
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1,025.6
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1,080.6
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Core net profit
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550.4
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590.7
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670.1
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694.2
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Core EPS (sen)
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234.7
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251.9
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285.8
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296.1
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Core EPS growth (%)
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(2.0)
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7.3
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13.4
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3.6
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Net DPS (sen)
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235.0
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260.0
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282.9
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293.1
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Core P/E (x)
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33.4
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31.1
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27.4
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26.5
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P/BV (x)
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23.7
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25.9
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25.7
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25.5
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Net dividend yield (%)
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3.0
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3.3
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3.6
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3.7
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ROAE (%)
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69.1
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79.5
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94.1
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96.6
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ROAA (%)
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25.1
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24.7
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26.3
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26.1
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EV/EBITDA (x)
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19.4
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19.8
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18.2
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17.3
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Net debt/equity (%)
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20.4
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47.4
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42.6
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37.9
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SECTOR RESEARCH
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Sector Note
by Chee
Ting Ong
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The 2017’s palm oil outlook will focus on supply. The
current drawdown in inventory will reverse in 2017 when yields
recover post El Nino. This may lead to a sharp correction in CPO
price in 2H17 during its seasonal peak output months. In the near
term, CPO price is likely to trade sideways till 1Q17. We maintain
our NEUTRAL call on the sector. Bottom-up, we prefer Singapore (BUY
FR & BAL) and Indonesia (BUY AALI, LSIP & TBLA) listed
planters over Malaysian peers for their cheaper valuations.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Implies better
3Q 2016 GDP
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Industrial Production (IP) growth accelerated +6.7%
YoY in Sep 2016 (Aug 2016: +0.5% YoY) and expanded +1.3% YoY in 3Q
2016 (2Q 2016: +1.4% YoY), suggesting upward revision to final 3Q
2016 GDP from the earlier advanced estimate of +0.6% YoY (2Q 2016: +2.0%
YoY).
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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: Smaller trade deficit adds to chances of bigger GDP
rebound. Tracking estimates of third-quarter U.S. growth are rising
because of a shrinking merchandise trade deficit, though a drop in
September imports shows a step back in underlying demand in the economy.
The goods-trade gap narrowed 5.2% to USD 56.1b in September, the smallest
since March, based on Census Bureau data, while figures on wholesale and
retail inventories showed increases, according to a preliminary report
issued by the Commerce Department. (Source: Bloomberg)
U.S: Sales of new homes remain close to an almost
nine-year high. Purchases of new U.S. homes in September stayed close to
an almost nine-year high, showing residential real estate were
maintaining momentum heading into the quieter selling season. Sales
climbed 3.1% to a 593,000 annualized rate from an August pace that was
weaker than initially reported, Commerce Department data showed.
Purchases in June and July were revised lower. (Source: Bloomberg)
Brazil: Disappointing jobs report suggests slow recovery.
Brazil lost more jobs than forecast in September, reinforcing concern
that the country’s economy faces a slow and difficult recovery. Latin
America’s largest economy shed a net 39,282 positions last month. Brazil
has lost nearly 3 million jobs over the past two years amid the deepest
recession on record, souring the mood of the country as President Michel
Temer plans to overhaul the pension system and labor legislation.
(Source: Bloomberg)
U.K. Consumers binge on borrowing after August BOE rate
cut. U.K. consumer credit is rising at the fastest pace in a decade and
the Bank of England’s interest-rate cut is fueling borrowing, according
to the British Bankers Association. Its monthly report showed credit
surged an annual 6.7% in September, up from 5.3% a year earlier and the
biggest increase since December 2006. Credit card borrowing was up 6.1%,
while short-term loans and overdrafts rose 7.2%, the most since 2013.
(Source: Bloomberg)
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Other News:
BHS Industries: In discussions with potential investors
for Pekan tissue paper factory. BHS Industries is in talks with potential
investors to set up a 5,000 tonne capacity tissue paper factory, as part
of the first phase of the Pekan Green Technology Park in Kg Paloh Hinai,
Pekan, Pahang. BHS is developing a total of 375 acres of land in Pekan
into a green technology park where the main industries located in the
park will be using green technology to convert empty fruit bunches into
pulp and paper, box liner paper, corrugated paper and tissue paper. The
development will be divided into five phases. For Phase 1, the total
construction cost expected to be incurred abot MYR4.2m on infrastructural
work as part of the cost of construction. (Source: The Edge Financial
Daily)
Mudajaya: Sets up USD200m note programme, eyes overseas
investments. Mudajaya’s wholly-owned subsidiary Mudajaya Ventures Ltd has
established a euro medium-term note (EMTN) programme with nominal value
of up to USD200m (MYR832m). It had obtained Bank Negara’s approval for
the EMTN programme. The programme will have an availability term of 10
years from the issuance date of the first series of the notes. The
proceeds from the issuance of the notes would be utilised towards funding
new overseas investments in Indonesia, the Philippines and other
countries identified by the management, as well as for general corporate
purposes. (Source: The Star)
Yong Tai: Secures en bloc sales worth MYR461m. Yong Tai
has secured en bloc sales worth MYR461m and a fit out contract worth
MYR412m from Phase 1A of Impression City, a mixed development project.
Its subsidiary YTB Impression Sdn Bhd (YTB) signed a sale and purchase
agreement (SPA) with Orient Venture Properties Bhd for the sale of 262
units of retail lots and lofts in Phase 1A. The company will also carry
out renovation works on the property for Orient Venture Properties under
the fit out contract. (Source: The Sun Daily)
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