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Share
Price:
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MYR2.44
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Target
Price:
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MYR2.65
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Recommendation:
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Buy
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Positive
near-term outlook
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Upcoming 4Q16 results could see better earnings on higher
sales volume and margin expansion. The near-term demand outlook is
bright as we expect tight supply of bars/rods in 2017. Coupled with
higher margin expectations, we have raised our 2017-18 EPS forecasts by
13%/12%. Our new TP of MYR2.65 (+6%) is based on 10x PER (mean) on a
diluted 2017 EPS, shifting from asset-based valuation on improved
earnings outlook.
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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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2,291.9
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1,760.9
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2,159.3
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2,259.9
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EBITDA
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127.0
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12.4
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239.7
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268.8
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Core net profit
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23.3
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(135.5)
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127.0
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148.1
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Core EPS (sen)
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4.5
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(25.9)
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24.3
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26.4
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Core EPS growth (%)
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90.2
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nm
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nm
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8.8
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Net DPS (sen)
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1.0
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0.0
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9.7
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8.5
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Core P/E (x)
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54.7
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nm
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10.0
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9.2
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P/BV (x)
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1.2
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1.4
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1.3
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1.1
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Net dividend yield (%)
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0.4
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0.0
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4.0
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3.5
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ROAE (%)
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2.2
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(13.6)
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13.2
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13.8
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ROAA (%)
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0.8
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(5.2)
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5.3
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6.2
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EV/EBITDA (x)
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15.0
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128.1
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9.1
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8.0
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Net debt/equity (%)
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126.2
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133.6
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90.4
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76.5
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MACRO RESEARCH
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Potential pullback lurking
by Tee
Sze Chiah
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FBMKLCI closed barely unchanged last Friday, ended
merely 0.09pts higher to close at 1,707.68. Broader market also
showcased a similar trend with losers outpaced gainers by 431 to 427.
Trading volume of 2.22b worth MYR2.4b was recorded. This week, market
could be in a consolidation mode as selling pressure has built up for
a while. The benchmark index could test its 61.8% and 72% Fibonacci
Zones, between 1,680 and 1,690 this week. Immediate downside supports
are 1,700 and 1,680.
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NEWS
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Outside Malaysia:
Germany: Merkel resists Trump, says euro's value is out of
her hands. German Chancellor Angela Merkel said the euro has a “valuation
problem” that’s beyond her control and questioned President Donald
Trump’s suggestion that the German luxury cars in his New York
neighborhood reflect an unfair trade advantage. Merkel said the euro’s
exchange rate does contribute to Germany’s trade surplus, though that’s
because European Central Bank’s needs to set monetary policy that
responds to disparate economic performances across 19 nations. The euro
reached a 14- year low of $1.0388 in December. “If we still had the
deutsche mark, it would be valued differently than the euro is now,”
Merkel said in response to a question about Germany’s current-account
surplus at the Munich Security Conference. “But that’s an independent
monetary policy over which I as chancellor have zero influence.” (Source:
Bloomberg)
U.K: Blair urges Brexit opponents to rise up and fight to
stay in EU. Tony Blair urged opponents of Brexit to “rise up” and fight
to change the British people’s minds about leaving the European Union, in
a speech that aimed to show U.K. Prime Minister Theresa May that she
won’t get everything her own way. “People voted without knowledge of the
true terms of Brexit,” the former Labour prime minister said in a speech
in London. “As these terms become clear, it is their right to change
their mind. Our mission is to persuade them to do so.” (Source:
Bloomberg)
China: Record global buying spree wanes amid capital flow
curbs. China’s record outbound investment slumped last month as
authorities stepped up scrutiny of acquisitions overseas and other deals
to keep money from flowing out of the country. The world’s biggest
trading nation saw outward investment decline 35.7% YoY in yuan terms in
January, the Ministry of Commerce said. Foreign direct investment to the
nation also dropped by 9.2%. Overseas purchases surged to a record last
year. Last month, the foreign exchange regulator rolled out measures to
further examine such deals. The government has announced new rules aimed
at keeping money in the country as officials seek to stem capital
outflows and bolster the weakening yuan. (Source: Bloomberg)
Crude Oil: Holds gains as U.S. producers boost drilling
amid OPEC cuts. Oil held gains above USD 53/bbl as investors weighed
rising U.S. drilling activity against OPEC production cuts which have
kept prices in a narrow trading range. In the U.S., drillers increased
the rig count to the highest since October 2015, according to Baker Hughes
Inc. Russia may trim output by more than 100,000 barrels a day this
month, more than initially planned under the deal with OPEC, Interfax
reported, citing Energy Minister Alexander Novak. (Source: Bloomberg)
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Other News:
Protasco: Bags MYR90m road maintenance job from Perak
government. The group has bagged a contract worth MYR90.1m for the
routine and periodic maintenance of agricultural roads in Perak. The
two-year contract, which will end on Feb 19, 2019, was awarded by the
Perak government to Protasco's subsidiary Empaya Indera S/B. The contract
is expected to contribute positively to the net assets and earnings of
the group for the financial year ending Dec 31, 2017. (Source: The Edge
Financial Daily)
CB Industrial: Wins two contracts worth MYR67m. Its
wholly-owned subsidiary PalmitEco Engineering S/B has been awarded two
contracts worth a total of MYR67.01m by PT Lifere Agro Kapuas, a
subsidiary of United Malacca. The contracts are for imports of materials
and equipment, and civil, structural, mechanical and electrical works for
a new palm oil mill in Kalimantan, Indonesia. The first contract (import
portion) is worth about MYR17.2m while the second contract (local
portion) is worth IDR149.22b (about MYR49.8m). (Source: The Sun Daily)
Sumatec: To raise MYR400m to fund Kazakh projects,
ventures into LPG production. The Oil and gas services provider announced
to Bursa today a slew of corporate proposals related to its Kazakhstan
projects, with plans to raise some MYR400m via private placement, share
issuance and rights issues with warrants. The company has also inked an
agreement with Ken Makmur Holdings S/B and Markmore Energy Labuan Ltd to
produce liquefied petroleum gas and condensate, as it seeks a new source
of income. The LPG production will only start after the group has
completed its cash call exercise. (Source: The Edge Financial Daily)
Pintaras Jaya: 2Q net profit jumps three-folds. The
company net profit jumped by three folds to MYR11.31m for its second
quarterly results in the financial period ended Dec 31, 2016 (2QFY17),
from MYR2.53m in the previous year, due largely to a significant
improvement in contribution by its construction division and higher
investment income. Revenue increased by 92% to MYR59.77m, from MYR31.21m
a year ago. Pintaras said the construction division achieved a high
revenue of MYR52m in the recent quarter, compared with its earnings of
MYR23m in the same quarter last year. (Source: The Edge Financial Daily)
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