Tuesday, July 25, 2017

Tex Cycle Tech.,Sunway Construction,Sunzen Biotech, Jaks Resources

SECTOR FOCUS OF THE DAY
Plantation Sector : De-rating of smaller plantation companies                     NEUTRAL

Over the past couple of weeks, PE valuations of the small to mid-cap plantation have de-rated while those of the large-caps have remained stable. Share prices of Genting Plantations (GenP), TSH Resources and IJM Plantations (IJMP) have fallen by 7% to 16% from their highs this year. On the other hand, share prices of Sime Darby, Kuala Lumpur Kepong (KLK) and IOI Corporation have been relatively unchanged. Based on yesterday's prices, the smaller companies are currently 29% cheaper than the large caps. TSH and IJMP are trading at FY18F PE multiples of 16.9x to 17.8x. The exception is GenP, which is still trading on par with the larger caps. GenP's FY18F PE of 23.5x is close to KLK's 24.1x and IOI's 23.5x.  

We attribute the fall in the share prices of the smaller plantation companies to the 21% decline in CPO prices from this year's high of RM3,278/tonne. Purer plantation companies are more vulnerable to a slide in CPO prices. We estimate that a RM100/tonne change in average CPO price would improve or decrease the net profit of the purer plantation companies like IJMP and GenP by 4% to 7%. On the other hand, net profit of the larger plantation companies would only be affected by 2% to 3%. We are reviewing our recommendations or fair values for GenP and TSH Resources as their share prices have fallen below our target prices. We maintain NEUTRAL on the plantation sector. Although we do not have any BUY call, we would recommend KLK for investors who would like exposure to the plantation sector. 

Others :
Sasbadi Holdings : Legal claim by Pelangi                                                                BUY
Automobile :  Plodding on to the next half                                                           NEUTRAL


STOCKS ON RADAR
Tex Cycle Tech.,Sunway Construction,Sunzen Biotech, Jaks Resources 


ECONOMIC HIGHLIGHT
US : Expect balance sheet reduction to take centre stage at July FOMC meeting


NEWS HIGHLIGHTS
Lotte Chemical Titan Holding : Lotte Chemical spends RM226mil in share buyback
Dagang NeXchange : DNeX in merger talks to boost profit
Scomi Group : Auditors raise doubts on Scomi’s business ability due to ongoing disputes
Axis-REIT : Axis-REIT to acquire land, buildings for RM155m

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails