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Share
Price:
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MYR1.87
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Target
Price:
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MYR1.60
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Recommendation:
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Hold
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Gaining back
some sweetness
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51%-sugar subsidiary, MSM MK (HOLD), received a relief
yesterday as the government raised ceiling prices of domestic refined
sugar by 4%-7%. Our MSM analyst is positive on this development,
raising his EPS forecasts by 7%/16%/13% for FY17/18/19 which correspondingly
raises our FGV’s EPS by 8%/12%/6% (on low base). As FGV still trades
93x/51x FY17-18 PER, it remains a HOLD with unchanged TP of MYR1.60 on
1x trailing P/BV.
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FYE Dec (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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15,558.8
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17,282.6
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17,785.1
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17,943.1
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EBITDA
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1,180.8
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1,073.1
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903.9
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1,029.9
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Core net profit
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(100.2)
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(170.6)
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73.4
|
135.2
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Core EPS (sen)
|
(2.7)
|
(4.7)
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2.0
|
3.7
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Core EPS growth (%)
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nm
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nm
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nm
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84.2
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Net DPS (sen)
|
4.0
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0.0
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1.2
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2.2
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Core P/E (x)
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nm
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nm
|
93.0
|
50.5
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P/BV (x)
|
1.2
|
1.2
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1.2
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1.2
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Net dividend yield (%)
|
2.1
|
0.0
|
0.6
|
1.2
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ROAE (%)
|
1.9
|
0.6
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1.3
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2.3
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ROAA (%)
|
(0.5)
|
(0.8)
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0.3
|
0.6
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EV/EBITDA (x)
|
10.0
|
11.3
|
15.6
|
13.5
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Net debt/equity (%)
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36.7
|
49.2
|
57.5
|
54.4
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Share
Price:
|
MYR4.43
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Target
Price:
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MYR4.70
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Recommendation:
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Hold
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Upward
adjustments to sugar ceiling prices
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Effective 1 Mar 2017, the ceiling prices for coarse grain
white refined sugar for both wholesalers and retailers have been
increased by 7%/4% to MYR2.87/kg and MYR2.95/kg respectively. This
should help MSM to partly mitigate rising raw sugar costs. We raise our
earnings forecasts by 7-16% factoring in the higher ASPs. Consequently,
our TP is now a higher MYR4.70 (+60sen, 16.0x 2018 PER).
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FYE Dec (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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2,307.3
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2,658.4
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2,821.9
|
3,119.6
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EBITDA
|
384.1
|
191.6
|
275.0
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359.1
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Core net profit
|
271.1
|
120.7
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162.5
|
205.9
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Core EPS (sen)
|
38.6
|
17.2
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23.1
|
29.3
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Core EPS growth (%)
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5.5
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(55.5)
|
34.6
|
26.7
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Net DPS (sen)
|
26.0
|
10.3
|
13.9
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17.6
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Core P/E (x)
|
11.5
|
25.8
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19.2
|
15.1
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P/BV (x)
|
1.5
|
1.6
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1.5
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1.5
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Net dividend yield (%)
|
5.9
|
2.3
|
3.1
|
4.0
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ROAE (%)
|
13.8
|
6.0
|
8.0
|
9.8
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ROAA (%)
|
10.3
|
4.1
|
4.6
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5.2
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EV/EBITDA (x)
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9.9
|
19.4
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13.4
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10.3
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Net debt/equity (%)
|
14.9
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8.0
|
28.4
|
27.3
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Share
Price:
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MYR76.02
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Target
Price:
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MYR78.00
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Recommendation:
|
Hold
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4Q16 briefing
takeaways
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There could some headwinds ahead, given the uptick in raw
material costs. However, we sense that NESZ has room for efficiency
gains or that it could pass such cost increases through to consumers.
Growing export sales could also act as a buffer. NESZ is fairly valued
now, in our view, trading at 27.9x PER, in line with its 5Y mean. Our
DCF-TP is unchanged at MYR78.00. FY17E DY of 3.6% should provide
support to share price.
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FYE Dec (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
|
4,838.0
|
5,063.5
|
5,342.0
|
5,715.9
|
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EBITDA
|
886.0
|
932.0
|
943.9
|
1,013.0
|
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Core net profit
|
588.5
|
598.4
|
638.2
|
673.7
|
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Core EPS (sen)
|
251.0
|
255.2
|
272.2
|
287.3
|
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Core EPS growth (%)
|
6.9
|
1.7
|
6.6
|
5.6
|
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Net DPS (sen)
|
260.0
|
270.0
|
270.5
|
285.5
|
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Core P/E (x)
|
30.3
|
29.8
|
27.9
|
26.5
|
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P/BV (x)
|
25.2
|
27.5
|
27.4
|
27.2
|
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Net dividend yield (%)
|
3.4
|
3.6
|
3.6
|
3.8
|
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ROAE (%)
|
79.5
|
94.0
|
98.3
|
103.1
|
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ROAA (%)
|
24.6
|
24.0
|
24.7
|
24.6
|
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EV/EBITDA (x)
|
19.8
|
19.9
|
19.1
|
17.8
|
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Net debt/equity (%)
|
47.4
|
39.1
|
37.0
|
35.1
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MACRO RESEARCH
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The devil is still in the details…
by
Suhaimi Ilias
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President Trump’s first address to the Congress
reiterate the “America First” theme and highlighted policy priorities
i.e. tax reform, fair trade, immigration and border security,
business regulations, defence and public safety. However, the speech
overall lacked specifics, except for the USD1tr infrastructure
investment, hence the guessing game on Trump’s policies will
continue.
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Suhaimi Ilias
|
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Zamros
Dzulkafli
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Soybean Oil in Fifth Gear
by Tee
Sze Chiah
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FBMKLCI rebounded after sixth consecutive day of
losses. At day’s end, the index rose 3.92pts to settle at 1,697.69.
Broader market was positive with gainers outpacing losers by 546 to
360. Trading volume of 3.02b worth MYR2.31b was recorded. Yesterday’s
trading volume was higher compared to a day ago and therefore, we
expect bargain-hunting session to continue, with potential rebound
likely to lift FBMKLCI towards the upper resistance at between 1,705
and 1,710.
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NEWS
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Outside Malaysia:
U.S: Manufacturing expands at fastest pace since August
2014 as factory managers reported stronger orders and production. The
Institute for Supply Management’s index climbed to 57.7, the sixth
straight advance, from 56 a month earlier, the Tempe, Arizona-based
group’s report showed. Readings above 50 indicate growth. The ISM’s gauge
of orders increased to the highest level in just over three years, while
an index of production posted its best reading since March 2011. The data
were preceded by recent regional indicators showing similar strength that
has prevailed since the presidential election as companies begin to step
up investment and the global economy stabilizes. (Source: Bloomberg)
E.U: Euro-area manufacturing accelerated for a sixth month
in February amid signs that inflation pressures may be starting to build
as factories struggle to keep up with demand. A Purchasing Managers’
Index climbed to 55.4, IHS Markit said. The reading compares with a flash
estimate of 55.5 and is up from 55.2 in January. Companies raised output
charges at the fastest pace in more than five years as higher commodity
prices and a weaker euro drove up costs, while suppliers took longer to
fill orders, the London-based company said. (Source: Bloomberg)
U.K: House prices rose more than expected in February,
according to Nationwide Building Society, a sign that the market’s
strength has extended into this year. Prices gained 0.6% from January, a
third month of gains. From a year earlier, prices climbed 4.5% to an
average of GBP 205,846 (USD 254,000). Britain’s housing market and the
wider economy have been surprisingly resilient since the vote to leave
the European Union in June. (Source: Bloomberg)
China: Official factory gauge firmed in February as
producer prices rebounded, giving top officials gathering in Beijing a
solid economic backdrop as they seek to rein in financial risk.
Manufacturing purchasing manager’s index climbed to 51.6 in February from
51.3 in January. Non-manufacturing PMI stood at 54.2 versus 54.6 in January.
Private manufacturing PMI from Caixin Media and Markit Economics climbed
to 51.7. (Source: Bloomberg)
S. Korea: Exports rose for a fourth month in February, led
by sales of semiconductors and petroleum products. The biggest increase
in shipments was to China, where there was also a surge in demand for
Korean cosmetics. Exports rose 20.2% YoY (estimate was +13.6% YoY), data
from the trade ministry show. Imports increased 23.3% YoY (estimate was
+21.2% YoY), leaving a trade surplus of USD 7.2b (estimate was USD 4.9b).
(Source: Bloomberg)
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Other News:
Axiata: Axiata Digital, Huawei sign MoU to bring IoT
capabilities across Asia. Axiata Group’s wholly-owned subsidiary Axiata
Digital and Huawei on Wednesday signed a MoU to jointly promote Internet
of Things (IoT) services across Asia. Under the agreement, Huawei would
provide its cutting edge IoT connectivity technologies and application
verticals such as connected car, smart home and smart meters. Axiata
Digital, in turn, would provide the cloud-based IoT application
enablement platform that allows for services to be deployed rapidly and cost
effectively. (Source: The Star)
LKL International: LKL, Sri Lanka’s TMI to jointly
distribute Japanese medical devices in Malaysia. LKL International is
teaming up with TMI Solutions Pvt Ltd to distribute selected Nihon
Kohden-branded medical devices in Malaysia. Its wholly owned subsidiaries
Medik Gen S/B and LKL Advance Metaltech S/B had entered into a JV
agreement with TMI to form a company, TMI Medik Group S/ B (TMG). LKL
International will hold a 70% stake in TMG and the rest by TMI. The
business activities to be carried out by the JV company, will begin
within three months. (Source: The Sun Daily)
HeiTech Padu: Signs MYR41.87m agreement with PNB. HeiTech
Padu has signed a MYR41.87m agreement with PNB for the supply,
installation, commissioning, operation and maintenance of managed
wide-area network infrastructure services for PNB. The contract would be
for a five-year period commencing from Sept 1, 2016 to Aug 31, 2021. It
had received a consent letter from PNB for HeiTech Padu to release an
announcement to the local bourse. (Source: The Star)
Petrol One Resources: Secures contract for Asia Petroleum
Hub. The agreement was signed between its indirect wholly-owned
subsidiary Petrol One Offshore S/B (POOSB) and Dalian Jinzhou Heavy
Machinery Co Ltd (DJHM). POOSB will provide a supply base measuring five
acres (2ha) on a plot of land located adjacent to the Port of Tanjung
Pelepas in Johor, along with the warehouse and logistic support, agency
services and custom clearance, and marine support services. Meanwhile,
DJHM, will pay a fee for the support services at a rate of cost plus 5%.
(Source: The Edge Financial Daily)
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