Monday, June 19, 2017

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






Top Glove | Stronger earnings ahead
Yen Ling Lee









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Malaysia | Cautious & uneven hiring
Suhaimi Ilias







Regional | ASEAN Index & Constructions Stocks review
Nik Ihsan Raja Abdullah








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COMPANY RESEARCH





Results Review





Top Glove (TOPG MK)
by Yen Ling Lee





Share Price:
MYR5.61
Target Price:
MYR6.20
Recommendation:
Hold




Stronger earnings ahead

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.



FYE Aug (MYR m)
FY15A
FY16A
FY17E
FY18E
Revenue
2,510.5
2,888.5
3,364.6
3,657.9
EBITDA
454.3
523.3
510.8
573.7
Core net profit
279.8
361.1
328.3
375.8
Core EPS (sen)
22.6
29.1
26.5
30.3
Core EPS growth (%)
55.0
29.0
(9.1)
14.5
Net DPS (sen)
11.5
14.5
13.2
15.1
Core P/E (x)
24.9
19.3
21.2
18.5
P/BV (x)
4.3
3.8
3.5
3.2
Net dividend yield (%)
2.0
2.6
2.4
2.7
ROAE (%)
19.1
21.1
17.3
18.1
ROAA (%)
12.1
13.5
11.9
12.6
EV/EBITDA (x)
10.1
9.5
13.0
11.4
Net debt/equity (%)
net cash
net cash
net cash
net cash








MACRO RESEARCH






Cautious & uneven hiring
by Suhaimi Ilias


Economics Research





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.












ASEAN Index & Constructions Stocks review
by Nik Ihsan Raja Abdullah


Technical Research





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”.







NEWS


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)





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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