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Share
Price:
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MYR1.73
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Target
Price:
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MYR1.80
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Recommendation:
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Buy
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Acquires first
industrial asset; U/G to BUY
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We are positive on SunREIT’s proposed acquisition of an
industrial asset for MYR91.5m. The deal is yield accretive based on our
estimated FY18 net property yield of 6.1%. We nudge up our FY18-19
earnings forecasts by ~1% p.a. but maintain our DDM-TP of MYR1.80.
Upgrade to BUY as we anticipate SunREIT to gain from inorganic growth
especially from its sponsor which has a strong asset pipeline. Also,
SunREIT offers resilient retail earnings and a decent total return of
9%.
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FYE Jun (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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453.5
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507.0
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522.6
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568.3
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Net property income
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340.8
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373.9
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395.8
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433.7
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Distributable income
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256.6
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270.6
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268.6
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299.0
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DPU (sen)
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7.8
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8.3
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8.2
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9.1
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DPU growth (%)
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4.3
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5.2
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(1.0)
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10.9
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Price/DPU(x)
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22.1
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21.0
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21.2
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19.1
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P/BV (x)
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1.3
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1.3
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1.3
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1.3
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DPU yield (%)
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4.5
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4.8
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4.7
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5.2
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ROAE (%)
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14.1
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8.1
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6.7
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7.5
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ROAA (%)
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4.0
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4.0
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4.1
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4.4
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Debt/Assets (x)
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0.3
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0.3
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0.3
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0.4
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SECTOR RESEARCH
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New is always better
by Ivan
Yap
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2017 will be an interesting year especially for the
smartphone supply chain. Alongside growth in infrastructure spending
to support tomorrow’s advancement in technology applications, these
will translate to demand/visibility for the semiconductor segment. Also,
persistent strength in USD beyond our base assumption of USD1/MYR4.15
should also boost net exporters’ earnings. Nonetheless, we remain
NEUTRAL on the sector as valuation is fair at 15x 2017 PER for
expected earnings growth of 30%.
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MACRO RESEARCH
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A good quarter in the making
by
Suhaimi Ilias
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Industrial production (IP) growth of +6.2% YoY (Oct
2016: +4.2% YoY) in Nov 2016 was a 20-month high. Growth in Oct-Nov
2016 picked up to +5.2% YoY (3Q 2016: +4.0% YoY), implying
steady-to-firmer real GDP growth in 4Q 2016 (3Q 2016: +4.3% YoY),
consistent with our full-year 2016 real GDP growth estimate of +4.2%.
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Suhaimi Ilias
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Zamros
Dzulkafli
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NEWS
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Outside Malaysia:
Brazil: In surprise rate cut, central bank signals new
pace of easing ahead. Brazil slashed its benchmark interest rate in an
unexpected move, as policy makers ratcheted up their efforts to jumpstart
the country’s stagnant economy. The central bank board, led by President
Ilan Goldfajn, unanimously voted to lower the benchmark Selic rate by
three quarters of a point to 13% in a move that was predicted by just
four of the 48 analysts in a Bloomberg survey. In a strong message to
start 2017, the bank said that inflation appears to be converging to
target and that growth is still weaker than expected. The cut was the
deepest yet of the current easing cycle, which began in October last
year. While inflation has slowed to its lowest level in over two and a
half years, high debt levels and waning confidence among both businesses
and consumers still hinder growth. (Source: Bloomberg)
U.K: Industrial production rose more than forecast in
November, led by a surge in oil and gas as a major North Sea field
resumed operations. The 2.1% increase from October, the biggest in seven
months, was more than double the 1% predicted by economists in a
Bloomberg survey. Manufacturing also rose more than expected, by 1.3%.
The advance in industrial output followed a 1.1% drop in October and
means it will have to rise 0.3% in December to avoid a second quarterly
decline. Production fell 0.4% in the three months through September,
detracting from overall economic growth. (Source: Bloomberg)
Japan: Stronger exports boost November current-account
surplus. Japan’s current-account surplus for November was JPY 1.42tr (USD
12.3b), underpinned by a pickup in foreign demand. The surplus widened
28% YoY. The primary income surplus shrank almost 22% YoY to JPY 1.2tr.
(Source: Bloomberg)
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Other News:
Gadang: To develop MYR160m townhouse project. Its indirect
wholly-owned subsidiary Tema Warisan S/B has entered into a deal to
develop a townhouse project with a gross development value of MYR160m in
Taman Putra Perdana, Puchong. The JV is expected to be completed within
42 months from the date the building plans approval is obtained. As of
October 2016, Gadang's order book stood at MYR603.7m. The group said in
November that it has been actively tendering for government
infrastructure and building projects worth MYR5.2b in total. (Source: The
Edge Financial Daily)
Paramount Corp: To buy 66% in REAL Education. The group
has proposed to acquire a 66% equity stake in REAL Education Group S/B
for MYR183m cash as part of its strategy to expand its education business.
The proposed acquisition is in line with the Paramount’s 5-year strategy
to expand its private and international school business to new
geographical locations and the more affordably priced segment, and to
move downstream in to the kindergarten segment. The purchase
consideration would be funded through a combination of internally
generated funds and bank borrowings. (Source: The Star)
HeveaBoard: Buys Seremban land for MYR13.46m to boost
production. The group has proposed to acquire a piece of leasehold vacant
land in Seremban for MYR13.46m through its wholly-owned unit HeveaPac S/B
in order to expand its production capacities to meet demand. HeveaPac is
principally engaged in manufacturing ready-to-assemble furniture, and the
vacant land is located next to its existing manufacturing plants. The
group added that the acquisition will be financed by internally generated
funds (33%) and bank borrowing (67%). (Source: The Edge Financial Daily)
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