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FEATURE
CALLS
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Malaysia | AEON Co. (M)
Awaiting
retail’s comeback; U/G to HOLD
Kevin Wong
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Share
Price:
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MYR2.40
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Target
Price:
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MYR2.20
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Recommendation:
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Hold
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Awaiting
retail’s comeback; U/G to HOLD
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Post meeting with management, we came out slightly more
positive on 2017’s earnings growth outlook. We upgrade AEON to HOLD
(from SELL) (i) given limited downside to our unchanged MYR2.20 TP
after share price fell 18% over the past twelve months, (ii) new AEON
malls are gaining more traction and we believe some recovery in
Retailing segment’s earnings would come in soon. Our earnings forecasts
are intact; our MYR2.20 TP is pegged to 28x FY18 PER (+0.5 SD of mean).
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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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3,834.6
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4,038.7
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4,196.7
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4,352.6
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EBITDA
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443.9
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448.8
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504.9
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530.9
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Core net profit
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133.4
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79.7
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98.8
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110.3
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Core EPS (sen)
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9.5
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5.7
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7.0
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7.9
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Core EPS growth (%)
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(32.5)
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(40.2)
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23.8
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11.7
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Net DPS (sen)
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4.0
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3.0
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3.5
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3.9
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Core P/E (x)
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25.3
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42.3
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34.1
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30.6
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P/BV (x)
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1.8
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1.8
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1.8
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1.7
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Net dividend yield (%)
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1.7
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1.3
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1.5
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1.6
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ROAE (%)
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7.4
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4.3
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5.2
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5.7
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ROAA (%)
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3.6
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1.9
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2.2
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2.4
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EV/EBITDA (x)
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9.9
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10.0
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8.5
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8.1
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Net debt/equity (%)
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30.1
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46.3
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45.4
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44.3
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Share
Price:
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MYR18.38
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Target
Price:
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MYR18.30
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Recommendation:
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Hold
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1Q17: Within
expectations
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1Q17 results were in line with expectations. Weaker YoY
results were mainly due to earlier timing of Chinese New Year as HEIM
saw earlier sell-in in 4QCY16. Given no further upside, we now rate
HEIM as a HOLD. While in the near term that demand may remain subdued,
we believe HEIM’s ongoing cost management drive (eg. global procurement
initiatives with Heineken N.V) could help support growth in the near
term. We keep our earnings forecasts and DCF-TP of MYR18.30.
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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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1,748.9
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2,810.3
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1,918.0
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1,993.3
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EBITDA
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329.0
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620.4
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437.8
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455.1
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Core net profit
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214.2
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427.3
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289.5
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303.2
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Core EPS (sen)
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70.9
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141.4
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95.8
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100.4
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Core EPS growth (%)
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8.1
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99.5
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(32.2)
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4.7
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Net DPS (sen)
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71.0
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145.0
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95.0
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100.0
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Core P/E (x)
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25.9
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13.0
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19.2
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18.3
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P/BV (x)
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14.8
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14.1
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13.5
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13.0
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Net dividend yield (%)
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3.9
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7.9
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5.2
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5.4
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ROAE (%)
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58.4
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111.2
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72.1
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72.5
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ROAA (%)
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30.7
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57.1
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36.4
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37.8
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EV/EBITDA (x)
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13.2
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8.1
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12.6
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12.1
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Net debt/equity (%)
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6.0
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17.8
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net cash
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net cash
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MACRO RESEARCH
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MISC sailed into horizon
by Tee
Sze Chiah
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FBMKLCI rose 8.24pts to 1,744.08 yesterday, helped by
last minute buying spurt in selected blue chips. Broader market,
however, remained subdued with losers outpaced gainers by 506 to 427.
A total of 4.02b shares worth MYR2.57b changed hands. Yesterday’s rebound
could signal a reversal in recent downtrend. But we still need the
benchmark to close above 1,750 to confirm the reversal. We expect the
benchmark index to hover between 1,740 and 1,750 today.
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NEWS
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Outside Malaysia:
U.S: Trump says China not FX manipulator, sees Dollar too
strong. President Donald Trump said he won’t brand China a currency
manipulator, retreating from a core campaign promise, though he argued
that a strong dollar is hampering the ability of American firms to
compete. Trump, in an interview with the Wall Street Journal, appeared to
acknowledge that China hasn’t been intervening to weaken its currency
recently. “They’re not currency manipulators," he said. It’s a shift
of opinion after Trump accused China during last year’s election campaign
of manipulating its currency to gain the upper hand in trade and vowed to
label the country a manipulator on his first day. (Source: Bloomberg)
Brazil: Pledge for aggressive rate cuts to help recovery.
Brazil’s central bank signaled further aggressive key rate cuts are in
store after slashing borrowing costs by the most in nearly eight years to
help boost growth. Policy makers led by central bank President Ilan
Goldfajn voted unanimously to reduce the benchmark rate by a full
percentage point to 11.25% following two 75 basis-point cuts. The
monetary authority has lowered borrowing costs 300 basis points since
beginning the easing cycle in October. "This moderate
intensification of the pace of monetary easing, relative to the pace set
in the January and February Copom meetings, is, at this time,
appropriate," bank officials wrote in the statement accompanying the
rate decision. They reiterated that the disinflation process is more
widespread, and that food prices are providing a favorable supply shock.
(Source: Bloomberg)
U.K: London housing in its deepest slump since the
financial crisis. London’s housing market is in its worst slump since the
depths of the financial crisis eight years ago, part of a broader
slowdown that may continue. The Royal Institution of Chartered Surveyors
said its price balance for the city fell to the lowest since February
2009 last month. It declined to minus 49, indicating that a greater
percentage of agents reported drops in March. Still, more respondents
than not still expect prices in London to rise over the next year, the
report showed. Nationally, the RICS price index stayed at 22, though the
expectations for both values and sales over the next year weakened. New
buyer inquiries and sales were stagnant, with prime properties among the
worst performers, according to report. (Source: Bloomberg)
Singapore: Economy contracts annualized 1.9% in 1Q 2017.
Preliminary estimates from the Ministry of Trade and Industry showed
gross domestic product declined on an annualized basis compared with an
expansion of 12.3% in the fourth quarter. Compared to a year ago, GDP
rose 2.5% YoY in the first quarter (Source: Bloomberg)
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Other News:
Construction: CIDB projects 8% growth for construction
sector. Construction Industry Development Bhd (CIDB) is rooting for 8%
growth in the construction industry after dipping to 7.4% last year from
8.2% in 2015, which the agency believes will be steered by mega projects
such as Mass Rapid Transit, Petronas’ Rapid project in Pengerang, Johor
and the Pan-Borneo highway in Sabah and Sarawak. Construction volume is
expected to increase to MYR170b this year from MYR166b in 2016 with 6,305
projects and MYR140b in 2015 which came from 7,455 projects. (Source: The
Sun Daily)
Lion Industries: Sells steel plant to Yinson for MYR47.7m.
Its unit Lion Metal Industries S/B had entered into a sale and purchase
agreement with Yinson for the disposal of a 3.23-ha parcel of land in
Klang, Selangor, for MYR45m excluding tax. It said that the Amsteel plant
in Klang was valued by PPC International S/B at MYR45m, which is a
premium of MYR22.51m over the audited net book value of the property as
at June 30, 2016. (Source: The Star)
MNC Wireless: To tie up with M3Tech for DFTZ venture. MNC
Wireless and M3 Technologies (Asia) have emerged as among the first
technology firms to establish a presence in the Malaysia Digital Free
Trade Zone (DFTZ) after entering a memorandum of understanding for the
development of an e-commerce platform. MNC said that the collaboration
would entail an inclusive e-commerce platform with integrated payment
gateway solutions and end-to-end logistics support, which will be
operated in the DFTZ. (Source: The Star)
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