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| | | | | | | | | | | | | | | | Share Price: | MYR1.72 | Target Price: | MYR2.02 | Recommendation: | Buy | | |
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| | | Steeling through the storm | | CSC is in a strong position to reap the benefits of a pick-up in domestic steel demand and plug the supply gap. It should ride the cyclical recovery in steel prices as the international supply-demand balance is improving. Valuations are undemanding at below its 5-year historical forward P/E average of 10.5x. We forecast15% pa earnings growth for FY18-19E. Our TP is based on 10.5x FY18F EPS. We also like its net cash position and strong FCF that can reward shareholders with stable payouts. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,017.1 | 1,035.2 | 1,142.4 | 1,236.7 | EBITDA | 96.3 | 106.4 | 106.8 | 118.7 | Core net profit | 35.5 | 68.5 | 61.2 | 70.8 | Core EPS (sen) | 9.6 | 18.6 | 16.6 | 19.2 | Core EPS growth (%) | nm | 94.0 | (10.8) | 15.7 | Net DPS (sen) | 8.0 | 14.0 | 8.3 | 9.6 | Core P/E (x) | 18.0 | 9.3 | 10.4 | 9.0 | P/BV (x) | 0.8 | 0.8 | 0.8 | 0.7 | Net dividend yield (%) | 4.7 | 8.1 | 4.8 | 5.6 | ROAE (%) | 6.9 | 8.7 | 7.4 | 8.3 | ROAA (%) | 4.4 | 8.0 | 6.8 | 7.5 | EV/EBITDA (x) | 1.8 | 4.9 | 3.0 | 2.5 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR10.48 | Target Price: | MYR11.20 | Recommendation: | Hold | | |
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| | | A premium price for young trees in South Kalimantan | | GENP's acquisition of 12,893ha young oil palm trees in Kalimantan at ~USD13,130/ha is at a premium to ~USD6,000/ha replacement costs. That said, we are positive over its longer term prospect, but expect minor earnings dilution (<5%) in the near term given its low yields at the initial years. Maintain earnings forecasts pending a management update. Maintain HOLD and TP of MYR11.20 on 26x 2017 PER, its 5-year mean. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,374.9 | 1,480.1 | 1,662.2 | 1,901.8 | EBITDA | 358.7 | 536.3 | 566.8 | 735.3 | Core net profit | 205.7 | 295.3 | 342.2 | 469.5 | Core EPS (sen) | 26.3 | 37.2 | 43.1 | 59.1 | Core EPS growth (%) | (46.7) | 41.5 | 15.9 | 37.2 | Net DPS (sen) | 5.5 | 21.0 | 8.6 | 11.8 | Core P/E (x) | 39.9 | 28.2 | 24.3 | 17.7 | P/BV (x) | 1.9 | 1.8 | 1.7 | 1.6 | Net dividend yield (%) | 0.5 | 2.0 | 0.8 | 1.1 | ROAE (%) | 4.7 | 8.3 | 7.1 | 9.1 | ROAA (%) | 3.2 | 3.9 | 4.3 | 5.6 | EV/EBITDA (x) | 24.9 | 17.6 | 15.8 | 11.9 | Net debt/equity (%) | 8.1 | 11.8 | 7.4 | 3.2 |
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| | | | | SECTOR RESEARCH | | | | | | | Recovery still intact
by Ivan Yap |
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| | | | | | As expected, July 2017 TIV softened 3% MoM to 48.6k units (+14% YoY), bringing 7M17 TIV to 333.0k units (+5% YoY) – on-track to meet our 2017 TIV forecast of 610k (+5% YoY). Meanwhile, a 37% MoM recovery in July TIP to 44.0k units (+12% YoY) also point to better sales ahead. We remain BUYers of MBM for its Perodua exposure and TCM on trough valuations. | |
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| | | | MACRO RESEARCH | | | | | | | Continued above-5% growth
by Suhaimi Ilias |
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| | | | | | In line with our estimate and above consensus, real GDP growth gained momentum for the fourth straight quarter to +5.8% YoY growth in 2Q 2017 (1Q 2017: +5.6% YoY). 1H 2017 growth was +5.7% YoY (1H 2016: +4.0% YoY). Raised our 2017 and 2018 real GDP growth forecasts to +5.5% (+5.1% previously) and +5.1% (+4.9% previously) respectively. | |
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| | | | | | | | Wider current account surplus
by Suhaimi Ilias |
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| | | | | | Current account surplus widened in 2Q 2017 to +MYR9.6b or +2.9% of GDP (1Q 2017: +MYR5.3b or +1.6% of GDP) on larger goods account surplus and smaller deficits both services and income accounts. We revised current account surplus forecast to +MYR31.1b or +2.3% of GDP from +MYR23.2b or +1.8% of GDP previously (2016: +MYR29.0b or +2.4% of GDP). | |
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| | | | | | | | Technology Sector – Still an attractive choice
by Nik Ihsan Raja Abdullah |
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| | | | | | Despite weakness in NASDAQ of late, Bloomberg Asia Pacific Technology Index (BPRTECH Index) was holding well. The candles continue to trade above its 60-day (green) and 90-day EMA (red) lines as well as the "Ichimoku Cloud". The correction from 242.00 high hit a low of 229.00 but was quick to bounce back. Based on Heikin-Ashi chart, we spotted a bullish reversal pattern. Stochastic indicator has staged a positive crossover and we expect BPRTECH Index to edge towards its previous high of 245.20. | |
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| | NEWS | | | Outside Malaysia:
U.S: Surge in expectations drives gain in consumer sentiment. Consumer sentiment climbed in August to a seven-month high as a measure of the outlook for the U.S. economy and personal finances registered the largest one-month advance since the end of 2011, according to University of Michigan survey. Sentiment index rose to 97.6 from 93.4 in July. Expectations measure jumped to 89 from 80.5. (Source: Bloomberg)
U.S. Officially launches investigation of China's IP practices. U.S. Trade Representative Robert Lighthizer officially started a probe into China's intellectual-property practices, less than a week after President Donald Trump asked him to consider the move. The U.S. will investigate China's policies and practices related to technology transfer, IP and innovation to determine if the behavior is "unreasonable or discriminatory" or restricts U.S. commerce, Lighthizer said in a statement. "After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation," Lighthizer said. (Source: Bloomberg)
U.K. Sets combative tone for Brexit talks as divisions persist. Britain returned to a provocative posture a week before Brexit talks with the European Union resume in a bid to pivot discussions toward a trade deal. Prime Minister Theresa May's government will publish five new position papers this week after declaring that it's "stepping up pressure" on the bloc to shift the negotiations away from the terms of separation. The use of fighting words in the past have not budged the EU, which has time on its side. (Source: Bloomberg)
Crude Oil: Holds gains near 1-week high as U.S. drilling slows further. Drillers targeting crude cut the rig count by 5 to 763, the second decline this month, according to data from Baker Hughes Inc. Royal Dutch Shell Plc, the world's largest oil trader, is said to have loaded its first crude from Libya in five years over the weekend. Brent for October settlement was USD 52.84/bbl on the London-based ICE Futures Europe exchange. (Source: Bloomberg) | |
| | | | | Other News:
Healthcare: Urgent need to regulate healthcare fees. The call for better regulation of medical fees in the country's private healthcare sector has gained currency after Bank Negara Malaysia (BNM) stressed the importance of addressing the issue of rising inflation of medical insurance. The central bank will come out with a framework as soon as possible to reduce the medical insurance rate, which is projected to rise to 12.7% this year. (Source: The Edge Financial Daily)
TMC Life Sciences: MYR5b healthcare project in Johor Baru intact – TMC. TMC Life Sciences plans to set up the MYR5b Vantage Bay Healthcare City in Johor Baru (JB) – comprising the Thomson Iskandar Medical Hub, a health sciences education platform and a wellness hub – remains intact. On TMC's plans for Thomson Iskandar which encompasses the 500-bed Hospital Iskandariah and an adjoining medical tower, TMC is still working with the health ministry to obtain their approval for the design of the project. As it is a greenfield project with many innovative elements in keeping with TMC's desire to make it an iconic landmark for healthcare in Johor, the planning and approval process will take more time than a run-of-the-mill project. (Source: The Edge Financial Daily)
KUB Malaysia: May monetise property assets to help expansion. KUB Malaysia is considering plans to monetise its property assets as the group seeks to raise MYR70m to pay for expansion of its core businesses. The group owns the 13-storey Menara Seri Kinta in Ipoh and one acre prime land in Petaling Jaya that has been earmarked for a commercial redevelopment project. In his presentation at the StarLive event on Saturday, the group is exploring the possibility of setting up a new liquefied petroleum gas (LPG) terminal. KUB is considering bringing in a German company as a partner for the project. A decision on whether to proceed with the project is expected next year. The new terminal will allow the company to capture a bigger share of the cooking gas market in the region. (Source: The Star) | |
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