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| | | | | | | | | | | | | | | | Share Price: | MYR2.50 | Target Price: | MYR2.70 | Recommendation: | Buy | | |
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| | | Six consecutive years of earning growth | | Inari's FY6/17 core net profit of MYR206m came in within our and consensus expectations at 96%/103%. FY17 headline net profit included a gain of MYR20m from the disposal of PCL Technologies (4977 TT; Not Rated) shares. Our FY18-19 earnings forecasts are unchanged pending an analyst briefing today. Our MYR2.70 TP is pegged on unchanged 20x CY18 PER (10% premium to our target PER peg for Malaysian listed technology companies within our coverage for its superior visibility). Maintain BUY. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,043.1 | 1,176.3 | 1,715.9 | 1,960.5 | EBITDA | 203.7 | 303.8 | 358.0 | 401.3 | Core net profit | 155.8 | 206.4 | 268.3 | 299.7 | Core EPS (sen) | 7.8 | 9.8 | 12.7 | 14.2 | Core EPS growth (%) | 1.7 | 26.5 | 30.0 | 11.7 | Net DPS (sen) | 4.2 | 8.3 | 9.6 | 10.7 | Core P/E (x) | 32.3 | 25.5 | 19.6 | 17.6 | P/BV (x) | 7.3 | 6.0 | 5.5 | 5.0 | Net dividend yield (%) | 1.7 | 3.3 | 3.8 | 4.3 | ROAE (%) | 24.3 | 29.2 | 29.3 | 29.8 | ROAA (%) | 18.2 | 19.9 | 21.6 | 22.4 | EV/EBITDA (x) | 13.8 | 13.3 | 13.7 | 12.1 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR3.19 | Target Price: | MYR3.75 | Recommendation: | Buy | | |
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| | | Better earnings in 2H17 | | Weaker 2Q17 earnings was within our expectation due to the seasonally softer demand and higher raw material inventory cost. However, we expect stronger earnings in 2H17 given the steep hikes in ASPs and potential pent up demand from the mega infrastructure projects. Maintain BUY and TP of MYR3.75, based on unchanged 10x 2017 PER (mean) on 30% diluted EPS. AJR is a key beneficiary of the construction upcycle in Malaysia. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,760.9 | 1,870.1 | 2,294.1 | 2,374.5 | EBITDA | 12.4 | 296.1 | 348.0 | 350.1 | Core net profit | (74.9) | 166.8 | 210.7 | 215.1 | Core EPS (sen) | (14.3) | 31.9 | 37.6 | 38.4 | Core EPS growth (%) | nm | nm | 17.9 | 2.1 | Net DPS (sen) | 0.0 | 15.0 | 16.1 | 16.5 | Core P/E (x) | nm | 10.0 | 8.5 | 8.3 | P/BV (x) | 1.8 | 1.6 | 1.3 | 1.2 | Net dividend yield (%) | 0.0 | 4.7 | 5.1 | 5.2 | ROAE (%) | (13.6) | 16.7 | 18.3 | 16.5 | ROAA (%) | (2.9) | 7.0 | 8.7 | 8.4 | EV/EBITDA (x) | 128.1 | 6.9 | 7.1 | 6.7 | Net debt/equity (%) | 133.6 | 84.6 | 64.9 | 50.7 |
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| | | | | | | | | | | | | | Share Price: | MYR1.65 | Target Price: | MYR2.10 | Recommendation: | Buy | | |
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| | | 1Q results within expectations | | RCE's 1QFY3/18 results were within expectations and while loan growth had moderated during the period, we do expect a pick-up in the subsequent quarters. The pipeline for loans remains healthy at this stage and asset quality remains stable. We maintain our earnings forecasts and our TP of MYR2.10, pegged to a CY18 P/BV of 1.4x (CY18E ROE: 17%). BUY – at our TP, RCE would trade at a CY18 PER of just 8.9x. | | |
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| | FYE Mar (MYR m) | FY16A | FY17A | FY18E | FY19E | Operating income | 120.9 | 171.7 | 192.4 | 213.7 | Pre-provision profit | 79.6 | 101.5 | 143.9 | 160.4 | Core net profit | 39.6 | 73.7 | 84.1 | 92.0 | Core EPS (MYR) | 0.12 | 0.24 | 0.22 | 0.24 | Core EPS growth (%) | 35.9 | 94.0 | (7.7) | 9.5 | Net DPS (MYR) | 0.46 | 0.03 | 0.04 | 0.04 | Core P/E (x) | 13.4 | 6.9 | 7.5 | 6.8 | P/BV (x) | 1.2 | 0.4 | 1.2 | 1.1 | Net dividend yield (%) | 27.6 | 1.8 | 2.1 | 2.4 | Book value (MYR) | 1.34 | 4.64 | 1.34 | 1.55 | ROAE (%) | 7.7 | 16.4 | 17.6 | 16.7 | ROAA (%) | 2.8 | 4.5 | 4.7 | 4.7 |
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| | | | | | | | | | | | | | Share Price: | MYR1.66 | Target Price: | MYR1.78 | Recommendation: | Hold | | |
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| | | D/G to HOLD; acquisition may hamper future dividend payout | | 2Q17's core earnings exceeded expectation. But this positive could be overshadowed by concern over its intent to acquire ~11,579 ha of land in Sabah for MYR750m or MYR64,772/ha. At 441x historical PER, it is expensive. Pending a meeting, we downgrade BPLANT to HOLD (from BUY) over lower visibility of sustained high dividend payouts in FY18-19 following this potential huge investment. Our RNAV-TP of MYR1.78 is, however, unchanged. HOLD for its ~7.8% net dividend yield for FY17. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 615.2 | 707.9 | 726.0 | 756.3 | EBITDA | 112.9 | 188.4 | 181.5 | 198.6 | Core net profit | 31.6 | 81.5 | 79.7 | 101.1 | Core EPS (sen) | 2.0 | 5.1 | 5.0 | 6.3 | Core EPS growth (%) | (49.6) | 157.7 | (2.1) | 26.8 | Net DPS (sen) | 13.0 | 14.5 | 13.0 | 6.2 | Core P/E (x) | 84.0 | 32.6 | 33.3 | 26.3 | P/BV (x) | 1.2 | 1.2 | 1.0 | 1.0 | Net dividend yield (%) | 7.8 | 8.7 | 7.8 | 3.7 | ROAE (%) | 3.5 | 10.4 | 25.5 | 3.9 | ROAA (%) | 1.0 | 2.5 | 2.3 | 2.7 | EV/EBITDA (x) | 26.4 | 17.0 | 15.1 | 13.8 | Net debt/equity (%) | 21.9 | 21.5 | net cash | net cash |
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| | | | | | | | | | | | Ta Ann (TAH MK)
by Chee Ting Ong |
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| | | | | Share Price: | MYR3.47 | Target Price: | MYR4.00 | Recommendation: | Hold | | |
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| | | Worsening 2H17 timber outlook | | 2Q17 results were above expectations driven by its plantation division. But 2H17 timber outlook looks sombre with new cess hike and even lower export quotas (both effective 1 July 2017). We maintain our earnings forecasts and TP for now. A second interim DPS of 5sen was declared (ex-date: 6 Sept). Ta Ann remains a HOLD despite 15% upside to our TP of MYR4.00 on 15x 2017 PER (5-year mean) on timber outlook concern. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,048.3 | 1,147.8 | 942.4 | 975.0 | EBITDA | 317.4 | 268.6 | 264.7 | 288.0 | Core net profit | 168.4 | 125.6 | 118.8 | 123.4 | Core EPS (sen) | 37.9 | 28.2 | 26.7 | 27.7 | Core EPS growth (%) | 66.0 | (25.4) | (5.4) | 3.8 | Net DPS (sen) | 16.7 | 10.0 | 12.0 | 12.5 | Core P/E (x) | 9.2 | 12.3 | 13.0 | 12.5 | P/BV (x) | 1.3 | 1.2 | 1.1 | 1.1 | Net dividend yield (%) | 4.8 | 2.9 | 3.5 | 3.6 | ROAE (%) | 15.9 | 10.2 | 9.1 | 8.9 | ROAA (%) | 8.7 | 6.2 | 5.4 | 5.3 | EV/EBITDA (x) | 6.4 | 7.0 | 7.1 | 6.1 | Net debt/equity (%) | 11.2 | 5.4 | 19.7 | 10.3 |
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| | | | | | | | | | | | | | Share Price: | MYR1.45 | Target Price: | MYR1.53 | Recommendation: | Hold | | |
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| | | Pick-up in works recognition remains an uncertainty | | 2Q17 results were below ours and consensus expectations largely on slower construction progress. We cut FY17/18 earnings forecasts by 25%/10% after adjusting for slower works recognition from major projects. Subsequently, we derive a new lower TP of MYR1.53 (-16%) pegged to lower 12x FY18 PER (-1 SD). Stock is now a HOLD. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 654.7 | 498.5 | 408.8 | 582.7 | EBITDA | 109.2 | 83.7 | 69.5 | 104.0 | Core net profit | 76.2 | 56.5 | 45.1 | 70.0 | Core EPS (sen) | 13.9 | 10.3 | 8.2 | 12.7 | Core EPS growth (%) | (0.9) | (25.9) | (20.2) | 55.2 | Net DPS (sen) | 2.4 | 2.4 | 2.4 | 2.4 | Core P/E (x) | 10.5 | 14.1 | 17.7 | 11.4 | P/BV (x) | 1.2 | 1.1 | 1.1 | 1.0 | Net dividend yield (%) | 1.7 | 1.7 | 1.7 | 1.7 | ROAE (%) | na | na | na | na | ROAA (%) | 9.4 | 6.7 | 5.3 | 7.9 | EV/EBITDA (x) | 8.6 | 9.5 | 9.1 | 6.0 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR1.50 | Target Price: | MYR1.60 | Recommendation: | Hold | | |
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| | | Closing FY17 on a softer tone | | FY6/17 core net profit of MYR14.7m (-11% YoY) met only 93% of our and consensus' full-year estimates. Despite 4QFY17's strong QoQ revenue rebound (+27% QoQ), unusually high taxes hindered earnings recovery to previous levels. We lower our FY18-19 net profit forecasts by 5%-8% on higher tax rates and opex forecasts mainly from usage of outsourced labour; we also introduce our FY20 earnings forecast. Maintain HOLD with a lower TP of MYR1.60 (-6%), pegged on unchanged 14.5x CY18 EPS. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 126.3 | 122.2 | 144.9 | 150.8 | EBITDA | 22.6 | 21.0 | 28.3 | 30.7 | Core net profit | 16.5 | 14.8 | 20.0 | 21.4 | Core EPS (sen) | 8.8 | 7.9 | 10.6 | 11.4 | Core EPS growth (%) | (8.0) | (10.5) | 35.3 | 7.1 | Net DPS (sen) | 4.0 | 5.0 | 5.3 | 5.7 | Core P/E (x) | 17.1 | 19.1 | 14.1 | 13.2 | P/BV (x) | 1.8 | 1.7 | 1.6 | 1.5 | Net dividend yield (%) | 2.7 | 3.3 | 3.5 | 3.8 | ROAE (%) | 12.7 | 9.2 | 11.8 | 11.9 | ROAA (%) | 11.3 | 8.0 | 10.4 | 10.6 | EV/EBITDA (x) | 9.4 | 10.0 | 6.7 | 5.8 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR0.25 | Target Price: | MYR0.25 | Recommendation: | Hold | | |
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| | | Volatility challenge | | We cut FY17-18 earnings by 35-86%, in view of weaker order backlog expectations. Earnings visibility is expected to be a challenge with much volatility ahead over the next 18 months. As such, we downgrade KNM to a HOLD with a lower TP of MYR0.25 (-57%), changing our valuation methodology to 0.5x NTA (from 0.4x EV/ MYR1.3b backlog previously). | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,641.3 | 1,646.8 | 1,320.3 | 1,550.7 | EBITDA | 205.7 | (160.8) | 94.8 | 144.0 | Core net profit | 45.7 | (262.3) | 7.0 | 45.7 | Core EPS (sen) | 2.4 | (12.3) | 0.3 | 2.1 | Core EPS growth (%) | 3.4 | nm | nm | 551.1 | Net DPS (sen) | 0.0 | 0.0 | 0.0 | 0.0 | Core P/E (x) | 10.0 | nm | 74.4 | 11.4 | P/BV (x) | 0.2 | 0.2 | 0.2 | 0.2 | Net dividend yield (%) | 0.0 | 0.0 | 0.0 | 0.0 | ROAE (%) | 2.0 | (12.2) | 0.3 | 1.9 | ROAA (%) | 1.1 | (5.8) | 0.2 | 1.0 | EV/EBITDA (x) | 7.1 | nm | 14.6 | 9.3 | Net debt/equity (%) | 19.2 | 37.4 | 35.8 | 33.9 |
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| | | | | SECTOR RESEARCH | | | | | | | RHB-AMMB merger off
by Desmond Ch'ng |
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| | | | | | Mergers are proving quite difficult, from the looks of it, with this being the second time in recent years that a proposed merger has been called off; the previous one being the proposed CIMB-RHB-MBSB merger back in 2014. We would have been neutral to slightly positive on the RHB-AMMB merger but now that it has been called off, it is back to square one and the focus will be on the operational and financial performance of both banks as they announce their results over the next couple of days. | |
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| | | | MACRO RESEARCH | | | | | | | PALM OIL – THE AUGUST RALLY
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI rose 2.60pts to 1,774.22 yesterday, led by bargain hunting in selected blue chips such as Genting Malaysia, Sime Darby and Telekom Malaysia. Market breadth turned positive with gainers outpacing losers by 419 to 385. A total of 1.77b shares worth MYR1.88b changed hands. With US markets ended firmer overnight, expect investors to switch to risk-on mode today. Momentum should also be supported by the relatively healthy corporate earnings thus far. | |
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| | NEWS | | | Outside Malaysia:
Germany: Investor sentiment drops on euro and dieselgate woes. German investor confidence declined for a third month amid concern that the widening diesel scandal and the strengthening euro will weigh on Europe's largest economy. An expectations index, which aims to predict economic developments six months ahead, fell to 10 from 17.5 in July, according to the ZEW Center for European Economic Research. That's the lowest level since October. With the euro's 12% gain against the dollar this year threatening to damp German exports, the country's benchmark DAX Index of stocks has dropped for two consecutive months and is flat-lining in August. At the same time, the country's flagship car industry is reeling from the emissions cheating scandal, which threatens to damage its reputation with foreign buyers. (Source: Bloomberg)
U.K.: First July budget surplus since 2002 on tax boost. Britain posted its first July budget surplus in 15 years last month as payments of self-assessed income tax poured in. Revenue exceeded spending by GBP184m (USD240m) compared with a deficit of GBP308m a year earlier, the Office for National Statistics said. July is a good month for the public finances, with the Treasury receiving higher-than-normal receipts of income tax. Self-assessed receipts jumped 11% from a year earlier and there was also a boost from value-added tax revenue, which rose 5%. Debt costs in the fiscal year to date rose by 23%, the biggest increase for the period since 2010. The deficit has fallen from 10% of GDP in 2010 to 2.3% last year. (Source: Bloomberg)
China: Money market is bracing for yet another squeeze as USD340b NCDs come due. A record CNY2.3t (USD340b) of negotiable certificates of deposit are set to mature next month, adding to the stress of an official deleveraging drive that has pressured onshore bonds lower in all but two months of this year. The flood of maturities comes at an especially challenging time for the nation's interbank market, with lenders hoarding cash every September to satisfy quarter-end regulatory checks. Chinese lenders sold CNY11t of NCDs in the first seven months of this year, while CNY8.9t matured in the same period. (Source: Bloomberg)
S. Korea: Rejects U.S. request to revise trade agreement. South Korea rejected a U.S. proposal to revise a five-year-old trade deal as the Trump administration pushed for major changes it says will cut its trade gap with the Asian nation. "The U.S. asked for resolution of its trade imbalance, full implementation of the existing FTA, and modification and amendment of the current deal," South Korean Trade Minister Kim Hyun-chong told reporters in Seoul after speaking with U.S. Trade Representative Robert Lighthizer via video- conference. The officials spoke amid joint meetings in the South Korean capital after Lighthizer last month gave notice that the U.S. wants to amend the deal. "We told the U.S. that it's necessary to figure out the reasons for the trade imbalance through a joint study to research, analyze and assess the effect of the FTA," Kim said. (Source: Bloomberg)
Indonesia: Bank Indonesia's rate cut shows its comfort with rupiah outlook. Indonesia's central bank surprised most economists by lowering interest rates, reflecting its relative comfort with the currency and inflation outlook. The benchmark rate was cut by a quarter point to 4.5%. Bank Indonesia reduced borrowing costs six times last year, making it Asia's biggest rate cutter. Governor Agus Martowardojo and his board had put policy easing on hold until now, concerned that tightening U.S. monetary policy may spur outflows from emerging markets and undermine the currency. With the Federal Reserve sticking to gradual rate hikes in the face of subdued inflation, the rupiah has been relatively stable this year, gaining about 1% against the dollar. (Source: Bloomberg) | |
| | | | | Other News:
Far East: Buys land in Pahang from PHG Plantation for MYR110.57m. Far East Holdings is buying a 3,204-acre (1,297ha) plot from PHG Plantation S/B for MYR110.57m. The group has entered into a sale and purchase agreement with PHG Plantation yesterday, to buy the land in Rompin, Pahang. The proposed acquisition is in line with its expansion plans and would broaden the group's core income base, through increased plantation acreage at a reasonable cost and at a strategic location. (Source: The Edge Financial Daily)
UMW Oil & Gas: UMW-OG bags MYR113m contract from Repsol. UMW Oil & Gas Corp (UMW-OG) has been awarded an MYR113m contract for the provision of jack-up drilling rig services for Repsol Oil & Gas Malaysia Limited. UMW Offshore Drilling S/B (UOD) was awarded the contract by Repsol. UOD is a wholly-owned subsidiary of UMW Malaysian Ventures S/B, which in turn is a wholly-owned subsidiary of UMW-OG. The contract is for the provision of drilling rig services for Repsol's drilling programme and UMW-OG has assigned its UMW Naga 5 for the contract. The one-year contract comes with a one-year extension option, and work is expected to commence in the middle of September. (Source: The Sun Daily)
Ewein: Unit terminates Penang land purchase. Ewein's 60%-owned Ewein Zenith II S/B has terminated the acquisition of a piece of land measuring 4.4252 acres in Tanjong Pinang, Penang, for MYR162m from Consortium Zenith Construction S/B. The abortion is due to the substantial reduction in land size to only about 2 acres following a land alienation exercise. Pursuant to the termination agreement, Consortium Zenith has to refund a sum of MYR16.2m, being the deposit, to Ewein Zenith II within three months. Consortium Zenith holds the remaining 40% stake in Ewein Zenith II. (Source: The Sun Daily)
Goh Ban Huat: Buys land in KL for MYR39.5m. Goh Ban Huat's (GBH) wholly owned subsidiary GBH Land S/B is acquiring a piece of freehold land measuring 9,924.814 square metres from Puncak Melati S/B for MYR39.53m. Each square metre for the property located in Mont Kiara would cost MYR3,982.64, which is below the market value of MYR4,600 per square metre as per Raine & Horne's Valuation Report. The acquisition will be financed with internally generated funds and is expected to be completed within three months. (Source: The Sun Daily) | |
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