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Share
Price:
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MYR5.00
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Target
Price:
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MYR4.25
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Recommendation:
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Sell
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Pricey valuation
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The unexciting 4QFY8/16 results was within expectations.
While the rising USD/MYR may lift Top Glove’s share price, we caution
that the latex price is also on the rise and our EPS forecasts have
already imputed for stronger quarterly earnings ahead. We trim our
FY17-18 EPS forecasts slightly by 2%/3% and introduce our FY19 EPS,
projecting flattish 3-year (FY16-19) net profit CAGR. TP is raised to
MYR4.25 (+4%) as we update for its latest 5-year rolling fwd PER of 16x
(from 15x). Maintain SELL.
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FYE Aug (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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2,510.5
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2,888.5
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3,125.2
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3,338.0
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EBITDA
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454.3
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523.3
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509.2
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534.8
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Core net profit
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279.8
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361.1
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321.8
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340.2
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Core EPS (sen)
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22.6
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29.1
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25.9
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27.4
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Core EPS growth (%)
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55.0
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29.0
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(10.9)
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5.7
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Net DPS (sen)
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11.5
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14.5
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13.0
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13.7
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Core P/E (x)
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22.2
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17.2
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19.3
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18.2
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P/BV (x)
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3.9
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3.4
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3.1
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2.9
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Net dividend yield (%)
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2.3
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2.9
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2.6
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2.7
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ROAE (%)
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89.9
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76.9
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51.3
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54.2
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ROAA (%)
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12.1
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13.5
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11.7
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11.6
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EV/EBITDA (x)
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10.1
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9.5
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11.5
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10.8
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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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NEWS
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Outside Malaysia:
U.S: Fed says several FOMC members saw rate rise
relatively soon. U.S. central bankers debating the merits of raising
interest rates last month described the decision as a close call, with
several saying a rate hike was needed “relatively soon,” minutes of the
September meeting showed. “Several members judged that it would be
appropriate to increase the target range for the federal funds rate
relatively soon if economic developments unfolded about as the committee
expected,” the minutes from the Sept. 20-21 gathering in Washington
showed. “It was noted that a reasonable argument could be made either for
an increase at this meeting or for waiting for some additional
information on the labor market and inflation.” (Source: Bloomberg)
U.S: Job openings fell in August to lowest level this
year. Job openings in the U.S. declined more than projected in August to
the lowest level this year and hiring cooled from a month earlier, a
Labor Department report showed. Number of positions waiting to be filled
dropped by 388,000 to 5.44 million (forecast was 5.80 million), from a
revised 5.83 million in July, according to the Job Openings and Labor
Turnover Survey. Monthly decline was biggest since August 2015. Hiring
decreased to 5.21 million from 5.26 million; the hiring rate held at
3.6%. Some 2.98 million Americans quit their jobs, little changed from
July; the quits rate stayed at 2.1%. Layoffs declined to 1.62 million
from 1.64 million. (Source: Bloomberg)
U.K: Housing market strengthened in September after the
shock inflicted by the Brexit vote faded and a shortage of properties for
sale persisted. The Royal Institution of Chartered Surveyors said its
house-price gauge rose to 17 from 13 in August as an increasing number of
real-estate agents reported appreciating prices. Values continued to
decline in central London, home to the priciest real-estate in the
country. The housing market endured a rocky first half as a tax surcharge
on investment properties and the decision to leave the European Union
kept buyers at bay. (Source: Bloomberg)
China: Passenger-vehicle sales surged 29% last month, led
by small-car makers Geely Automobile Holdings Ltd. and Mazda Motor Corp.,
as consumers seeking to beat an expiring tax cut helped clear inventory
on dealer lots. Deliveries of sedans, minivans, sport utility and
multipurpose vehicles to dealerships rose to 2.27 million units in
September, the state-backed China Association of Automobile Manufacturers
said. (Source: Bloomberg)
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Other News:
Hibiscus Petroleum: Buys Shell’s 50% equity interest in
Sabah contract for USD25m.The company is buying Shell’s 50% equity
interest in the 2011 North Sabah EOR Production Sharing Contract for
USD25m. Managing director Dr Kenneth Pereira said, this acquisition is in
line with the growth strategy of the group to invest in profitable
development and producing business operations in their identified core
geographical areas of interest. The acquisition is expected to complete
in 2017, subject to obtaining regulatory approval from Petroliam Nasional
and consent from Petronas Carigali. (Source: The Edge Financial Daily)
N2N: Proposes to buy AFE Solutions for MYR86m. The group
is proposing the acquisition of Hong Kong-based financial data and
trading solutions provider AFE Solutions Ltd for a cash consideration of
USD20.6m (MYR86.3m) to expand the company’s regional presence. AFE has a
regional presence in Hong Kong, Macau and Vietnam. Through the
acquisition, N2N is able to leverage on AFE’s expertise in information
solutions as well as its customer base of brokerage firms and
international and regional banks to complement its existing business and
expand into new markets to grow its presence in the region which is in
line with the company’s expansion plans. (Source: The Star)
Crest Builder: Bags MYR84.27m job to build multistory car
parks. The group has bagged a MYR84.27m contract from Asianmax Corp S/B
to build five-storey car parks at five separate locations. The project is
expected to take 12 months to complete. With the latest win, the group
construction order book stands at MYR1.2b along with property development
GDV of MYR4.1b. (Source: The Edge Financial Daily)
Perisai Petroleum: Becomes PN17 company. The upstream oil
and gas provider has been classified as a Practice Note 17 (PN17) company
after its unit Perisai Capital Inc defaulted on USD25m debt notes due on
Oct 3. Perisai defaulted on its debt repayment after the holders of its
USD125m (RM377.27mil) 6.875% medium-term notes rejected its proposals to,
among others, defer the payment of interest due on Oct 3 and to postpone
the maturity date to Feb 3, 2017. (Source: The Star)
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