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Share
Price:
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MYR5.61
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Target
Price:
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MYR6.20
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Recommendation:
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Hold
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Stronger
earnings ahead
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Sequentially softer 3QFY8/17 net profit (-6% QoQ, +24%
YoY) was within our expectation as we expect earnings to rebound in
4QFY17 on lower raw material prices and higher sales volume. We
maintain our earnings forecasts, HOLD call and TP of MYR6.20 (20x 2018
PER; +1SD to mean). We will turn buyers if share price dip further as
we like the stock for its quality management and dominant position
(c.20% of global market share) in the ever-growing glove industry.
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FYE Aug (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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2,510.5
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2,888.5
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3,364.6
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3,657.9
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EBITDA
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454.3
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523.3
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510.8
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573.7
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Core net profit
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279.8
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361.1
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328.3
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375.8
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Core EPS (sen)
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22.6
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29.1
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26.5
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30.3
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Core EPS growth (%)
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55.0
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29.0
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(9.1)
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14.5
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Net DPS (sen)
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11.5
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14.5
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13.2
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15.1
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Core P/E (x)
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24.9
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19.3
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21.2
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18.5
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P/BV (x)
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4.3
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3.8
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3.5
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3.2
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Net dividend yield (%)
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2.0
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2.6
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2.4
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2.7
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ROAE (%)
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19.1
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21.1
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17.3
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18.1
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ROAA (%)
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12.1
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13.5
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11.9
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12.6
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EV/EBITDA (x)
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10.1
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9.5
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13.0
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11.4
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Net debt/equity (%)
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net cash
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net cash
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net cash
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net cash
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MACRO RESEARCH
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Cautious & uneven hiring
by
Suhaimi Ilias
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Unemployment rate in Apr 2017 remained at 3.4% for the
second consecutive month, and in the 3.4%-3.5% range since Dec 2015. Our
full-year average unemployment rate forecast is 3.4% (Jan-Apr 2017:
3.5%; 2016: 3.5%). Online job ads indicate uneven and cautious hiring
trends.
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Suhaimi Ilias
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Zamros
Dzulkafli
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ASEAN Index & Constructions Stocks review
by Nik
Ihsan Raja Abdullah
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MSCI Asean Index (MXSO Index) maintains its upward
trajectory despite recent pullback. The run-up from 658.90 low in
December 2016 is still intact, with the index forming a series of
higher highs and higher lows pattern. However, as buying momentum has
waned, depicted by a downtick in William %R, expect a minor pullback
in the near-term. However, this is likely to be temporary given that
the index is still trading above the 20-day and 60-day EMA lines, as
well as the “Ichimoku Cloud”.
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Nik Ihsan Raja
Abdullah
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Tee Sze Chiah
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NEWS
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Outside Malaysia:
U.K: London home sellers cut price for second time in
three months as waning buyer interest hints that the slowdown may
continue. Prices dropped 2.4% MoM in June -- the biggest for that month
since 2010 -- leaving them down 1.4% YoY from a year earlier, Rightmove
Plc said. Nationally, asking prices slipped 0.4%, pushing the annual gain
to the weakest since 2013. In London, buyer activity “remains subdued
compared to the recent boom years,” Rightmove said. (Source: Bloomberg)
Japan: Has surprise trade deficit in May on energy import
jump. Japan’s trade balance unexpectedly fell into deficit in May on a
strong rise in energy imports, even as overall exports and shipments to
China, the U.S. and Europe all rose by double digits. Exports rose 14.9%
YoY, according to data released by the Ministry of Finance. Imports
increased 17.8% YoY, resulting in a trade deficit of JPY 203.4b (USD
1.8b). (Source: Bloomberg)
Crude Oil: Trades below USD 48/bbl as U.S. drillers extend
record rig streak. U.S. drillers targeting crude added rigs for a 22nd
straight week, the longest stretch in three decades, according to data
from Baker Hughes Inc. Demand will rise during the third quarter,
according to Suhail Mohammed Al Mazrouei, energy minister for the United
Arab Emirates. Brent for August settlement eased to USD 47.25/bbl.
(Source: Bloomberg)
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Other News:
IHH Healthcare: Closer to buying Fortis stake. The
company’s managing director Dr Tan See Leng referred India as “IHH’s
fourth growth market”. It is believed that the group is looking closer at
strengthening its operations in the continent. IHH and Fortis Healthcare
Ltd are said to be in the advanced stage of negotiations and due
diligence, according to news reports in India. The reports noted that IHH
is likely to but a majority stake in Fortis. When asked about the slew of
reports emerging from India, the healthcare group’s spokesperson said
“IHH is always looking at various value accretive opportunities. However,
it is not appropriate for us to comment on specific transactions and we
will update the market if there are any material developments.” Fortis operates
only about 4,000 beds currently, although it has plans to increase the
number by 7%-10% each year. (Source: The Edge Financial Daily)
Hengyuan Refining: Okays two projects costing MYR685m. The
company is investing USD160m (MYR700m) in two projects at its refining
complex in Port Dickson, Negri Sembilan. Investment in the first project,
estimated at USD135m would enable the group to economically produce Euro
4M Mogas with the installation of an integrated complex. The second
project, estimated at USD25m, involves the replacement of the top dome
and catalyst separation system of the regenerator reactor of the Long
Residue Catalytic Cracking Unit (LRCCU). (Source: The Edge Markets)
Eastern & Oriental: Sells Lone Pine Hotel. The
property developer is divesting one of its subsidiaries, E&O Express
Sdn Bhd (EOE), which owns and operates the Lone Pine Hotel in Batu
Feringghi, Penang, for MYR85m. Following the divestment, E&O expects
to realise an estimated gain on disposal after taxation of approximately
MYR23.3m. A share sale agreement has been inked with Langkawi Saga
Shopping Centre Sdn Bhd and Lubritrade Trading Pte Ltd to effect the
disposal. Of the sale proceeds, the bulk will be used for working capital
and repayment of bank borrowings, while MYR1.14m will be used for
estimated expenses with regards to the proposed sale. Specifically,
E&O said MYR21.84m will be used for settlement of a redemption sum
owed by EOE to an unnamed local financial institution, while MYR11.09m
will be to settle a loan EOE took from E&O. (Source: The Edge
Markets)
Rev Asia: Eyes new division in technology media. The
company asserted that its core business will remain in the technology
sector following the sale of its 70%-owned digital media subsidiary to
Media Prima. In May, the Internet media company sold its subsidiary Rev
Asia Holdings Sdn Bhd (RAHSB) to Media Prima for MYR105m, thereby
divesting its entire stake in the digital media arm. After the group's
annual general meeting today, Rev Asia independent non-executive chairman
Datuk Larry Gan Nyap Liou told reporters the group expects the sale to be
completed by 3Q17, and will award shareholders with the proposed dividend
of 44 sen per share. On completion of the sale, Gan said Rev Asia should
have up to MYR8m cash, which will be used for new business acquisition.
(Source: The Edge Markets)
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