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Share
Price:
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MYR4.55
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Target
Price:
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MYR4.55
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Recommendation:
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Hold
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NEUTRAL on sale
of GENHK
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GENM will dispose its entire 16.9% stake in Genting Hong
Kong (GENHK SP, Not Rated) for USD415m (MYR1.7b) cash to Golden Hope
Limited. The sale will not have a material impact on GENM’s recurring
earnings and the sales proceeds are unlikely to be returned as special
DPS. Thus, we maintain our core earnings estimates. As the GENHK shares
will be disposed at USD0.29/sh, a tad below the USD0.32/sh value we
assigned to them previously, we also maintain our MYR4.55 SOTP-based
TP.
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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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8,229.4
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8,395.9
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9,677.2
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11,087.6
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EBITDA
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2,247.6
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2,153.5
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2,768.9
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3,173.1
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Core net profit
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1,358.1
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1,256.4
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1,390.7
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1,599.3
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Core EPS (sen)
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23.9
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22.2
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24.5
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28.2
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Core EPS growth (%)
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(20.8)
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(7.4)
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10.6
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15.0
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Net DPS (sen)
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6.5
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7.1
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7.9
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9.0
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Core P/E (x)
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19.0
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20.5
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18.5
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16.1
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P/BV (x)
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1.6
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1.4
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1.3
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1.2
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Net dividend yield (%)
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1.4
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1.6
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1.7
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2.0
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ROAE (%)
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7.5
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7.1
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13.5
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7.8
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ROAA (%)
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6.7
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5.2
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5.0
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5.6
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EV/EBITDA (x)
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9.7
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11.5
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8.8
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7.7
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Net debt/equity (%)
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net cash
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0.1
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net cash
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net cash
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SECTOR RESEARCH
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Sector Note
by
Desmond Ch'ng
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While loan growth continued to slow in Aug 2016 (+4.2%
YoY), the positive is that industry credit growth (bonds plus loans)
was higher at 5.4% YoY. NEUTRAL on the sector with our industry loans
growth forecast unchanged at 5.3% for 2016 and 2017 respectively. We
maintain our BUY calls on BIMB, AFG and HL Bank.
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MACRO RESEARCH
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Economics Research
by
Suhaimi Ilias
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Money supply (M3) growth inched up for the second
successive month in Aug 2016 to +2.4% YoY (Jul 2016: +2.3% YoY) as
surge in net private sector debt issuance (Aug 2016: +98.9% YoY; July
2016: +229.2% YoY) and rise in external reserves (Aug 2016: USD97.5b;
July 2016: USD97.3b) offset slower growth in deposits (Aug 2016:
+1.9% YoY; July 2016: +2.1% YoY) and loans (Aug 2016: +4.2% YoY; July
2016: +5.1% 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: Manufacturing expanded at modest pace in September
after unexpectedly shrinking a month earlier, underscoring limited progress
for the battered sector. The Institute for Supply Management’s index
advanced to 51.5 from August’s 49.4 reading that marked the first
contraction in six months. A reading above 50 signals growth. New orders
and production swung into expansion territory last month, indicating
prospects are gradually improving across America’s manufacturing
landscape. At the same time, factories continued to focus on becoming
leaner by trimming inventories and cutting employment. (Source:
Bloomberg)
U.S: Fed’s Dudley advises caution in raising interest
rates. Federal Reserve Bank of New York President William Dudley
suggested the central bank should be cautious in raising interest rates,
given limits on its ability to respond to a recession with borrowing
costs close to zero. Noting concerns from some economists that the risk
of a recession is increasing, Dudley told a central-banking seminar
hosted at his bank that the Fed may have limited room to cut rates in the
event of a downturn in the next few years. That may raise the need to
turn again to unconventional policies, such as purchasing bonds. (Source:
Bloomberg)
E.U: Euro-Area manufacturing quickens as Germany leads
uneven growth. Manufacturing in the euro area accelerated in September as
incoming new business grew at the fastest pace in three months. A
Purchasing Managers Index for manufacturing rose to 52.6 from 51.7 in
August, in line with earlier estimate, IHS Markit said. The expansion was
driven by stronger demand from both domestic and international customers,
the London-based company said in a statement. (Source: Bloomberg)
U.K. Factories boom as pound’s Brexit plunge boosts
exports. U.K. factories had their best month in more than two years in
September as the weaker pound sent export orders surging. IHS Markit’s
monthly Purchasing Managers Index jumped to 55.4 from 53.4 in August,
capping the industry’s best quarter this year. The reading, the highest
since June 2014 and far above economists’ forecast for 52.1, pushes the
index further above the key 50 line that divides expansion from
contraction. Export orders increased the most since January 2014 in
September, and Markit said manufacturing probably helped to lift GDP in
the third quarter. (Source: Bloomberg)
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Other News:
SapuraKencana Petroleum: Bags MYR889m worth of contracts.
SapuraKencana Petroleum (SKPetro) has been awarded three contracts worth
USD215m (MYR889m) in total. The first award is related to Oil and Natural
Gas Corp Ltd’s B127 Cluster Pipeline RTR Project. The contract is for 20
months. Another contract is for the provision of the tender assist
drilling rig SKD Pelaut for Brunei Shell Petroleum Sdn Bhd. The contract
is for a firm period of two years with options to extend for an
additional two years. The third contract, for two months, was awarded by
Petronas Carigali Sdn Bhd for the provision of underwater maintenance
services for Sepat MOPU (mobile offshore production unit). (Source: The
Sun Daily)
Gas Malaysia: To raise up to MYR700m from sukuk. Gas
Malaysia has established an Islamic Commercial Papers (ICPs) Programme
and an Islamic Medium Term Notes (IMTNs) Programme. The company proposes
to issue ICPs of up to MYR700m in nominal value under the ICP programme
and up to MYR700m in nominal value under the IMTN Programme, subject to a
combined aggregate limit of up to MYR700m in nominal value under the
syariah principle of Murabahah (via Tawarruq arrangement). The ICP
Programme and the IMTN Programme will have a tenure of seven years and 10
years respectively from the date of the first issue under the respective
programmes. The ICPs and IMTNs are unsecured and will not be listed on
Bursa Securities or on any other stock exchange. (Source: The Sun Daily)
MISC: Unit begins arbitration against Sabah Shell. MISC’s
wholly owned subsidiary Gumusut-Kakap Semi-Floating Production System (L)
Ltd (GKL) has commenced arbitration proceedings against Sabah Shell
Petroleum Co Ltd (SSPC), with claims of USD245m (MYR1.01b). GKL filed a
notice of adjudication dated Sept 23, 2016 under CIPAA 2012 and a notice
of arbitration dated Sept 2, 2016 with the Kuala Lumpur Regional Centre
for Arbitration to begin arbitration proceedings against SSPC. The legal
proceedings were commenced to seek resolution on contractual disputes
covering claims for outstanding additional lease rates, payment for
completed variation works and other associated costs under the lease
agreement dated Nov 9, 2012 entered into between GKL and SSPC for the
construction and lease of the Gumusut-Kakap Semi-Floating Production
System (Semi-FPS) for the purposes of the production of crude oil.
(Source: The Sun Daily)
Perisai Petroleum: Bondholders reject restructuring plan.
Perisai failed to convince a group of bond investors to agree to its debt
restructuring plan. More than 70% of investors who voted yesterday
rejected the company’s proposal to extend the maturity of the bond to Feb
3, 2017. Over 20 bondholders gathered to vote on the plan to prolong
maturity of its SGD125m (MYR378.3m), 6.875% bond due yesterday. Bond
investors last week demanded immediate repayment after talks with the
company collapsed. (Source: The Edge Financial Daily)
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