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Share
Price:
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MYR1.91
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Target
Price:
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MYR2.20
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Recommendation:
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Buy
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Weak car sales
in 1Q17
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TCM’s 1Q17 may not be the best quarter to gauge the
expected improvement in its 2017 operations due to a slump in 1Q17
Nissan car sales, affected by changes in TCM’s marketing strategies.
The expected fall in 1Q17 revenue could be mitigated at the operating
level should there be more positive adjustments to component costs by
Nissan Motor. Nonetheless, we remain BUYers of TCM from a trough
valuation angle; currently trading at 0.4x P/NTA. Our MYR2.20 TP, based
on 0.5x 2017 P/NTA, is unchanged.
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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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5,716.7
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5,460.8
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5,319.6
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5,710.5
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EBITDA
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307.2
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158.9
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192.4
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227.1
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Core net profit
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76.5
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(48.4)
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(12.0)
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23.8
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Core EPS (sen)
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11.7
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(7.4)
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(1.8)
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3.7
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Core EPS growth (%)
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11.5
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nm
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nm
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nm
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Net DPS (sen)
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5.0
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2.0
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1.0
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1.0
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Core P/E (x)
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16.3
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nm
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nm
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52.3
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P/BV (x)
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0.4
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0.4
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0.4
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0.4
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Net dividend yield (%)
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2.6
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1.0
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0.5
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0.5
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ROAE (%)
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2.7
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(1.9)
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(0.4)
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0.8
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ROAA (%)
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1.5
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(0.9)
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(0.2)
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0.4
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EV/EBITDA (x)
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9.1
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16.8
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14.4
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12.0
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Net debt/equity (%)
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37.7
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51.2
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52.3
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50.2
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MACRO RESEARCH
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Flows & lookouts
by Chew
Hann Wong
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Foreign investors net bought MYR2.7b of Malaysia
equities in Apr 2017, bringing net buy for the YTD to MYR8.4b, the
highest streak of monthly foreign net buy after Feb-Apr 2016’s MYR7b.
Cumulative foreign net buy since early-2010 climbed to MYR12.5b from
end-2016’s MYR4.1b. 2017 YTD, foreign net buy in Malaysia equities in
value terms is the highest in the region, after three consecutive
years (over 2014-16) of net sell totaling MYR29.7b.
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KL Finance Index – Resistance Zones
by Tee
Sze Chiah
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FBMKLCI surged 10.41pts to 1,778.47 yesterday, led by
gains in banking stocks. Market breadth was equally bullish, with
gainers outpacing losers by 594 to 411. A total of 3.88b shares worth
MYR3.48b changed hands. Despite gaining almost 50pts over the past
two weeks, the current rally shows no sign of stopping. With
overnight US markets ended higher, we expect the benchmark index to
extend its gains, likely to gyrate between 1,770 and 1,789 in the
near-term.
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NEWS
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Outside Malaysia:
E.U: Euro-area factories expanded output at the fastest
pace since 2011 as the currency bloc’s economy continued to gather
momentum. A gauge of manufacturing activity rose to 56.7 in April from
56.2 the previous month, IHS Markit reported. An April 21 preliminary
estimate was for an increase to 56.8. (Source: Bloomberg)
U.K: Manufacturing unexpectedly grew at the fastest pace
in three years in April as the domestic market strengthened and the
pound’s depreciation boosted exports. A measure of factory conditions
rose to 57.3 from 54.2 in March, according to IHS Markit’s Purchasing
Managers’ Index. Growth in new orders and exports also gathered pace.
(Source: Bloomberg)
Indonesia: Turns to other tools as inflation curbs policy
room. Indonesia’s move last week to ease reserve limits on lenders may
spur credit growth at a time when Federal Reserve rate increases and
faster inflation makes it difficult for policy makers to cut interest
rates. Consumer prices rose at the fastest pace in more than a year in
April, gaining 4.17% YoY, according to data released. That compares with
the central bank’s target range of 3% to 5%. While inflation pressures
have reduced scope to lower the benchmark interest rate from 4.75%, Bank
Indonesia has eased the daily minimum primary reserve requirement ratio
for lenders starting in July, partly to free up cash in the capital
market. (Source: Bloomberg)
Australia: Kept interest rates unchanged as faster
inflation and signals of looming fiscal stimulus combine with an upswing
in global growth. “Above-trend growth is expected in a number of advanced
economies,” Reserve Bank of Australia Governor Philip Lowe said. “The
improvement in the global economy has contributed to higher commodity
prices, which are providing a significant boost to Australia’s national
income.” The central bank also left the cash rate at a record-low 1.5% to
allow regulatory rules targeting riskier property loans to take effect
amid hot housing markets in Sydney and Melbourne. (Source: Bloomberg)
Crude Oil: OPEC deepens oil production cuts as laggards
improve compliance. The Organization of Petroleum Exporting Countries
deepened production cuts in April with laggards improving compliance with
its historic deal to limit output. Overall, output fell by 40,000 barrels
a day from a month earlier to 31.895 million barrels, according to a
Bloomberg News survey of analysts, oil companies and ship-tracking data.
Iraq, the second-biggest producer in the group, and Venezuela came closer
to their targets. OPEC began production cuts on Jan. 1 in a bid to reduce
swollen global inventories and bolster the price of oil, which is still
stuck at half its 2014 level. Total output – including Libya and Nigeria
-- remains 135,000 barrels a day above target, putting the group about 90
percent of the way toward its goal. (Source: Bloomberg)
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Other News:
Anzo: Appointed main contractor for Phase 2 of Porto De
Melaka Hotel. Its wholly-owned subsidiary Harvest Court Construction S/B
has been appointed the main contractor for Phase 2 of the Porto De Melaka
Hotel and Resort development in Malacca. The contract is worth MYR109.3m
for a contract period of 36 months. The contract entails main building
works, architecture and mechanical and electrical works for the basement,
associated infrastructure works, interior fit-out and furnishing and
installation of equipment. (Source: The Edge Financial Daily)
Ikhmas Jaya: Gets piling job for Mayang Mall in
Terengganu. Awarded a MYYR62.4m contract to carry out earthworks and
piling for the first phase of a mixed-use development project in Kuala
Terengganu, including a shopping mall and 10-storey car park. The work
was expected to be completed within a year from May 9. Year to date, the
group has secured to a total orderbook replenishment value of MYR144.7m.
(Source: The Star)
Trive: To supply solar components for MYR150m UTM solar
farm project. The group will work with Universiti Teknologi Malaysia
(UTM) to develop a solar farm with a gross development value of MYR150m,
through a collaboration agreement between the university and VSolar
Group. UTM will provide a suitable site of approximately 20 acres per 10
megawatts (MW) for solar energy generation facilities up to a capacity of
30MW. (Source: The Edge Financial Daily)
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