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Share
Price:
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MYR2.28
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Target
Price:
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MYR2.58
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Recommendation:
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Buy
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Another chance
to strike your own lottery
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Since MAG reported poor 2Q16 results on 18 Aug 2016, its
share price has eased 8%. That said, the poor results were due to an
unusually high prize payout ratio that should not recur. Jackpots sales
and read throughs from competitors hint that 3Q16 sales may grow YoY.
The potential of a large cash call from U-Mobile has also been reduced.
Maintain earnings estimates and MYR2.58 DCF-based TP. With 13% upside
potential and 7% dividend yield, we upgrade MAG to BUY from HOLD.
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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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2,886.5
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2,767.0
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2,768.1
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2,758.4
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EBITDA
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416.1
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373.9
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336.0
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391.6
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Core net profit
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254.8
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226.5
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212.1
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258.5
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Core EPS (sen)
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17.9
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15.9
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14.9
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18.2
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Core EPS growth (%)
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(21.9)
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(10.9)
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(6.3)
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21.9
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Net DPS (sen)
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20.0
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16.0
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16.0
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16.0
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Core P/E (x)
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12.8
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14.3
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15.3
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12.6
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P/BV (x)
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1.3
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1.3
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1.4
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1.3
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Net dividend yield (%)
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8.8
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7.0
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7.0
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7.0
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ROAE (%)
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10.4
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9.3
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8.8
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10.7
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ROAA (%)
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6.9
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6.2
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5.9
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7.5
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EV/EBITDA (x)
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10.7
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11.4
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11.7
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10.0
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Net debt/equity (%)
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21.3
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25.7
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26.3
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24.8
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NEWS
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Outside Malaysia:
Global: GDP is projected to slow to 3.1% in 2016 before
recovering to 3.4% in 2017. The forecast, revised down by 0.1 percentage
point for 2016 and 2017 relative to April, reflects a more subdued
outlook for advanced economies following the June U.K. vote in favor of
leaving the European Union (Brexit) and weaker-than-expected growth in
the United States. These developments have put further downward pressure
on global interest rates, as monetary policy is now expected to remain
accommodative for longer. (Source: IMF WEO Oct 2016)
Brazil: Industry records worst drop in almost five years
in August, eliminating gains recorded over the past five straight months
and pointing to a long road to economic recovery. Production fell 3.8%
MoM from July and was the worst performance since January 2012.
Industrial output fell 5.2% YoY, the national statistics agency said. The
data highlights the challenges facing Brazil’s industry even as signs of
economic recovery emerge. Business confidence has been rising steadily as
Finance Minister Henrique Meirelles pushes measures to rein in spending
and pull Latin America’s largest economy from recession. (Source:
Bloomberg)
E.U: ECB said to build taper consensus as QE decision time
nears. The European Central Bank will probably gradually wind down bond
purchases before the conclusion of quantitative easing, and may do so in
steps of EUR 10b (USD 11.2b) a month, according to euro-zone central-bank
officials. An informal consensus has built among policy makers in the
past month that asset buying will have to be tapered once a decision is
taken to end the program, the officials said, asking not to be identified
because their deliberations are confidential. They didn’t exclude that QE
could still be extended past the current end-date of March 2017 at the
full pace of EUR 80b (USD 90b) a month. (Source: Bloomberg)
U.K: IMF lifts forecast for economy in 2016 despite
Brexit. The International Monetary Fund became the latest forecaster to
upgrade its outlook for the U.K. this year after the economy proved more
resilient than expected following the vote to leave the European Union.
In its World Economic Outlook published, the Washington-based lender
predicted growth of 1.8% instead of the 1.7% projected in July. That
would make it the fastest-growing economy in the Group of Seven. The IMF
cut its 2017 forecast to 1.1% from 1.3% and noted its estimates depended
on smooth negotiations with the EU. “Slower growth is expected since the
referendum as uncertainty in the aftermath of the Brexit vote weighs on
firms’ investment and hiring decisions and consumers’ purchases of
durable goods and housing,” it said. (Source: Bloomberg)
Crude Oil: Resumes advance as U.S. industry data shows
inventory dropped by 7.6 million barrels last week, according to the
American Petroleum Institute. An agreement between OPEC and non-members
could trim output by 1.2 million barrels a day and boost prices by as
much as USD 15 a barrel, according to Venezuela’s oil minister. Brent for
December settlement was USD 50.87/bbl on the London-based ICE Futures
Europe exchange. (Source: Bloomberg)
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Other News:
Tenaga Nasional: Subsidiary sets up USD2.5b sukuk
programme. Tenaga Nasional (TNB) wholly-owned subsidiary TNB Global
Ventures Cpital has set up a USD2.5b (MYR10.3b) multi-currency sukuk
programme for general corporate purposes. Moody’s Investors Service Inc
gave the bond programme an A3 and stable rating, while Standard &
Poor’s Rating Services assigned a BBB+ and stable rating.The sukuk
programme does not have a fixed tenure, but any sukuk issued will have
such maturities as may be agreed between TNB Global Ventures Capital and
relevant dealer. (Source: The Edge Financial Daily)
Perisai Petroleum: JV partner get financing offer. Perisai
Petroleum Teknologi and JV partner Emas Offshore Ltd (EOL) have received
an indicative offer of financing from a financial institution, following
the rejection of Perisai’s initial restructuring plan by bondholders for
its SGD125m (MYR377m) medium-term notes (MTN). The offer would be
utilised to reach a mutually acceptable resolution with the company’s
noteholders through the availability of a sum of USD20m (MYR82.6m).
Perisai and EOL are in discussion with the financial institution to
procure a formal letter of offer subject to satisfaction of certain
conditions. (Source: The Star)
Econpile: Gets MYR280m contract. Econpile Holdings has
secured a contract worth MYR280m for the construction work of a mixed
development in Kuala Lumpur. ASM Development (KL) Sdn Bhd has offered it
a contract to undertake diaphragm wall, contiguous bored pile,
earthworks, piling works and basement structure works. The mixed
development comprised a seven-block serviced apartment, retail units and
car park. (Source: The Star)
Perdana Petroleum: Bags MYR67m charter deal. Perdana
Petroleum has secured a MYR67m contract to provide a floating accommodation
vessel to Petronas Carigali Sdn Bhd. The charter will run for a period of
three years from Sept 17, with an extension option of two years. The
risks associated with the contract are normal operational risks which can
be mitigated through the group’s system of project management and
internal business controls. (Source: The Edge Financial Daily)
Lion Corp: Shares to be delisted on Oct 12. Practice Note
17 (PN17) Lion Corp will see its shares removed from the local bourse on
Oct 12. The company has resolved that it will not be submitting the
appeal in view that all material developments in relation to the
regularisation plan have been disclosed to Bursa for their deliberation
in arriving at the decision. On Sept 29 this year, Bursa rejected its
application for another extension to Nov 30, citing there was no material
development towards the finalisation and submission of the plan to the
regulatory authorities. (Source: The Edge Financial Daily)
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