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alt=break v:shapes="_x0000_i1026">
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Share
Price:
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MYR1.72
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Target
Price:
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MYR1.88
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Recommendation:
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Buy
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Improving
prospects
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We lift our FY17-19 earnings forecasts by 6%-12% to
account for (i) higher USD/MYR forex rate and (ii) a strong turnaround
in the China operations (via 43.6%-owned VSIG) underpinned by solid
demand for VSIG’s new ODM air purifier models. Correspondingly, our TP
is raised to MYR1.88 (+5%) on unchanged 14x CY18 PER (based on 30%
premium to peers). VSI is a growth stock with 17% 3-year earnings CAGR
and is our preferred player in the EMS space; reiterate BUY.
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FYE Jul (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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1,936.9
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2,175.6
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2,797.1
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3,193.9
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EBITDA
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239.2
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226.4
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303.0
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356.1
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Core net profit
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135.7
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135.1
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159.3
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197.5
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Core FDEPS (sen)
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10.4
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8.5
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10.1
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12.5
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Core FDEPS growth(%)
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111.8
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(18.2)
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17.9
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24.0
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Net DPS (sen)
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4.8
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4.7
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4.6
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5.3
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Core FD P/E (x)
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16.5
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20.1
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17.1
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13.8
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P/BV (x)
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2.9
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2.5
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2.0
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1.8
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Net dividend yield (%)
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2.8
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2.7
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2.7
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3.1
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ROAE (%)
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20.4
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14.2
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15.5
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15.1
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ROAA (%)
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8.0
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7.0
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7.6
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8.5
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EV/EBITDA (x)
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8.5
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9.2
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9.0
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7.7
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Net debt/equity (%)
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17.2
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18.4
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10.3
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net cash
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Share
Price:
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MYR1.23
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Target
Price:
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MYR1.11
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Recommendation:
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Hold
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Disposes land in
Canada
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UEMS’ land sale in Canada (for CAD113m) is not a surprise
to us as UEMS has earlier indicated its intention to divest its other
overseas assets and focus on its domestic and Australian property
projects. The land sale, which will be completed by 3Q 2017, is
expected to result in a net gain of CAD22m. We raise 2017 net profit
forecast by +44% to factor in the land sale gain. Our RNAV-TP is
largely unchanged at MYR1.11 (+1sen) on an unchanged 60% discount to
MYR2.85 RNAV/shr (+2sen).
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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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1,749.9
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1,841.5
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1,873.6
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1,578.6
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EBITDA
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299.6
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224.4
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485.5
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382.5
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Core net profit
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257.2
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147.3
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254.8
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192.6
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Core FDEPS (sen)
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5.2
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2.9
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4.9
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3.7
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Core FDEPS growth(%)
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(51.1)
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(44.8)
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73.0
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(24.4)
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Net DPS (sen)
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1.6
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0.0
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0.0
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0.0
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Core FD P/E (x)
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23.8
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43.1
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24.9
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33.0
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P/BV (x)
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0.8
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0.8
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0.8
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0.8
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Net dividend yield (%)
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1.3
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0.0
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0.0
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0.0
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ROAE (%)
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na
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na
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na
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na
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ROAA (%)
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2.2
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1.2
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1.9
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1.4
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EV/EBITDA (x)
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24.0
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35.9
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18.9
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24.4
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Net debt/equity (%)
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24.3
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40.7
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43.1
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44.5
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MACRO RESEARCH
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Slower start to 2017 after strong finish to 2016
by
Suhaimi Ilias
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Industrial production (IP) growth in Jan 2017
decelerated to +3.5% YoY (Dec 2016: +4.8% YoY) as sharply slower
growth in mining output and electricity generation offset sustained
growth momentum in manufacturing production growth.
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Suhaimi Ilias
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Zamros
Dzulkafli
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Decoupling from futures prices
by Tee
Sze Chiah
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Late buying support lifted FBMKLCI higher yesterday.
At day’s end, the benchmark rose 4.34pts to close at 1,721.92.
Broader market was mixed, with losers outpaced gainers by 493 to 471.
A total of 3.78b shares worth MYR3.08b changed hands yesterday. With
the emergence of buying interest, FBMKLCI is set to test its
immediate resistance at 1,730 in the near-term. The benchmark could
range between 1,715 and 1,735 today. Support is at 1,705 and 1,690.
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NEWS
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Outside Malaysia:
U.K: House prices rose at their fastest pace in a year
last month as high-value London property showed signs of a rebound. The
0.6% increase in values lifted the average to GBP 297,832 (USD 362,000),
Acadata and LSL said in a report. Nevertheless, annual price growth
softened for a 12th month, to 2.4%, the lowest since 2013. According to
regional data for January, London home prices gained 0.4% from December,
snapping a two-month decline, and gains in the high-value areas of the
capital contributed to the increase in February. (Source: Bloomberg)
S. Korea: Presidential election raises prospect of fiscal
stimulus. As South Korea’s presidential hopefuls rush to prepare for an
election due in less than two months, economists are expecting whoever
wins will introduce a supplementary budget to bolster the economy.
Expectations of more spending prompted JPMorgan Chase & Co. to
withdraw its forecast for a rate cut. It now sees rates on hold at 1.25%
for this year. Societe Generale SA had expected two cuts in 2017 but now
forecasts no change as economic data is improving and the candidates are
focusing on containing record household debt. (Source: Bloomberg)
Singapore: Big businesses overtake small firms as job
creators. Singapore’s larger companies created more jobs last year than
small and medium-sized businesses for the first time since 2013 as the
economy struggled in the face of sluggish domestic demand and a slump in
global trade. Bigger companies defined as those with annual revenue
exceeding SGD 100m (USD 71m) or employing more than 200 staff -- added a
net 4,300 jobs last year, more than double the 2,100 by smaller firms,
the Ministry of Manpower said in a written reply to a question from a
lawmaker. (Source: Bloomberg)
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Other News:
Sasbadi: Secures two publishing deals with Malaysia’s exam
board. Sasbadi has entered into two publishing agreements with Majlis
Peperiksaan Malaysia (MPM) through its wholly-owned subsidiary Sasbadi
S/B (SSB). MPM will grant an exclusive licence to SSB to prepare,
publish, distribute, market and sell the collections of past year
question papers for Sijil Tinggi Persekolahan Malaysia (STPM) examination
and Malaysian University English Test (MUET), as well as the reports on
the STPM examination and MUET for the examination years of 2017,2018,and
2019. (Source: The Edge Financial Daily)
BHS Industries: Granted extra land by Pahang govt for
power project. BHS Industries has received approval from the Pahang
government granting the company’s wholly owned subsidiary, Ultimate Ivory
S/B, approval for an additional 35.41ha of land in Pekan, Pahang, for
MYR873,446. The land is earmarked for construction of a power generation
project using solid waste. Details of the project are not available, as
it is still in the preliminary discussion stage. The purchase
consideration was fixed by Pahang State Government. An amount of
MYR200,000 shall be paid by Ultimate Ivory as earnest money within one
month from the date of the approval letter. The balance is payable when
demanded by the Pahang State Government. (Source: The Sun Daily)
Borneo Oil: Proposes issuance of bonus shares, warrants.
Borneo Oil is planning a bonus issue of 2.11b shares on the basis of four
bonus shares for every eight existing shares held, with 528.09m warrants
on a one-for-eight basis. The proposed bonus share issuance will be
implemented concurrently with the proposed bonus issue of warrants. The
gross proceeds to be raised from the exercise of the warrants will be
used as additional working capital for the company and its subsidiaries.
(Source: The Edge Financial Daily)
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