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Sunway (SWB MK)
by Wei Sum
Wong
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Share
Price:
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MYR4.35
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Target
Price:
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MYR4.03
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Recommendation:
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Hold
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Buys land in
Kajang and Subang
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We are positive on Sunway’s latest land purchases in
Kajang and Subang for their strategic locations. While the 4 parcels of
industrial land in Subang will only be developed in the later years,
the Kajang project should start contributing to earnings from 2019
onwards. The two land purchases could potentially enhance our RNAV by
+4sen (+2sen to TP). We maintain our earnings forecasts, MYR4.03
RNAV-TP and HOLD rating.
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FYE Dec (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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4,448.4
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4,725.9
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5,579.1
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6,630.5
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EBITDA
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427.2
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531.1
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811.0
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1,023.3
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Core net profit
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590.7
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547.4
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543.9
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607.4
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Core EPS (sen)
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33.7
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29.5
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26.4
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29.4
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Core EPS growth (%)
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(1.6)
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(12.5)
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(10.6)
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11.7
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Net DPS (sen)
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37.0
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12.1
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7.9
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8.8
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Core P/E (x)
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12.9
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14.8
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16.5
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14.8
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P/BV (x)
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1.2
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1.2
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1.1
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1.1
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Net dividend yield (%)
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8.5
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2.8
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1.8
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2.0
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ROAE (%)
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na
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na
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na
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na
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ROAA (%)
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4.1
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3.1
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2.9
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3.1
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EV/EBITDA (x)
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21.7
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18.3
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17.6
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14.9
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Net debt/equity (%)
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45.2
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40.9
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52.8
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61.5
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Share
Price:
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MYR0.96
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Target
Price:
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MYR1.30
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Recommendation:
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Buy
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Secures a
MYR104m job
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WSC’s MYR104m job win from Siemens SAS is a continuous
positive to its overall replenishment works. Overall, we like its
visible growth, undemanding valuations and its efforts to strengthen
its balance sheet. Our TP is unchanged, pegged to 12x 2018 PER.
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FYE Dec (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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1,839.5
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1,276.6
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2,150.0
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2,198.4
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EBITDA
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143.3
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53.6
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233.8
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241.3
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Core net profit
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22.7
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(23.3)
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77.2
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83.5
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Core EPS (sen)
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2.9
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(3.0)
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10.0
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10.8
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Core EPS growth (%)
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(84.4)
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nm
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nm
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8.2
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Net DPS (sen)
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3.0
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0.5
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0.0
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0.0
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Core P/E (x)
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32.9
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nm
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9.7
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8.9
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P/BV (x)
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0.7
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1.0
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0.8
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0.7
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Net dividend yield (%)
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3.1
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0.5
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0.0
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0.0
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ROAE (%)
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0.9
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(23.2)
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20.1
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8.4
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ROAA (%)
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0.8
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(0.8)
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2.7
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2.6
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EV/EBITDA (x)
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12.2
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30.4
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7.0
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6.4
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Net debt/equity (%)
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73.6
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104.7
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74.0
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57.8
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SECTOR RESEARCH
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An uptick in June loan growth
by
Desmond Ch'ng
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The pick-up in non-HH loan growth is encouraging, and
we look forward to ongoing expansion in this segment if our industry
loan growth estimate of 5.4% for 2017 is to be achieved, against
annualized loan growth of 3.5% todate. We maintain our NEUTRAL call on
the sector and our BUY pick is BIMB for its above-industry loan
growth and twin earnings growth support from both the Islamic Bank
and Syarikat Takaful.
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MACRO RESEARCH
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Flows & Lookouts
by Chew
Hann Wong
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Foreign investors continued to be net buyers of
Malaysia equities in Jul 2017, but at a tapered pace of MYR0.4b. This
lifts foreign net buy for Jan-Jul 2017 to MYR11.2b. Cumulative
foreign net buy since early-2010, a figure which we track closely,
has climbed to MYR15.3b end-Jul 2017 (high was MYR49.4b end-May
2013). Malaysia equities continue to receive the most of foreign net
buy in the region in 2017 YTD. Foreign holdings at end-Jul 2017
should be marginally higher than end-Jun 2017’s 23.0.
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KL Finance Index – Risk Escalating
by Nik
Ihsan Raja Abdullah
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FBMKLCI rose 5.10pts to 1,765.13 yesterday amid
bargain hunting activities. Broader market, however, remained
negative with losers outpacing gainers by 542 to 297. A total of
1.82b shares worth MYR2.24b changed hands. Sentiment could improve
today following the stellar performance in overnight US markets but
trading could be choppy as oil prices eased. Technically, we expect
FBMKLCI to resume its upward trajectory, with the benchmark trading
between 1,750 and 1,775 in the near-term.
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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.S. Factory gauge continues to signal solid growth in
July. American manufacturers turned in another solid month in July amid
steady growth in production, orders and employment, according to figures
from the Institute for Supply Management released. Factory index eased to
56.3 from 57.8 a month earlier; readings above 50 indicate growth.
Employment gauge cooled to 55.2 from 57.2. ISM’s gauge of new orders
eased to 60.4 from 63.5. (Source: Bloomberg)
E.U: Euro-Area economy steams ahead as ECB waits for inflation.
The euro-area economy expanded apace in the second quarter, a sign the
bloc’s upswing is becoming increasingly robust and self-sustaining. Gross
domestic product in the 19-country region rose 0.6% in the three months
through June, after increasing 0.5% at the start of the year. Figures
from economic confidence to joblessness and manufacturing output have
signaled the economy was gaining steam, underpinning expectations by the
European Central Bank that price pressures would eventually begin to build.
Policy makers are preparing for a debate in the autumn about the future
path of quantitative easing, which has helped reduce financing costs for
firms and households, thus stimulating demand. (Source: Bloomberg)
Germany: Unemployment continued to decline in July in a
sign of confidence in Europe’s largest economy. The number of people out
of a job dropped by a seasonally adjusted 9,000 to 2.537 million, data
from the Federal Labor Agency in Nuremberg showed. The jobless rate
remained at 5.7%, the lowest level since the country’s reunification.
(Source: Bloomberg)
U.K: Manufacturing growth accelerated for the first time
in three months in July, bolstered by the strongest jump in export orders
in seven years. A measure of factory output rose to 55.1 from a revised
54.2 in June, according to IHS Markit’s Purchasing Managers’ Index.
Companies reported that export orders, which climbed to the
second-highest reading since records began in 1992, were boosted by the
pound exchange rate as well as stronger economic growth in the euro area,
North America and Asia-Pacific regions. (Source: Bloomberg)
S. Korea: Exports surge 20% as global demand supports
growth. South Korea’s exports topped expectations in July, as strong
global demand continues to underpin the nation’s economy. Exports jumped
20% YoY in July, a seventh straight double-digit increase and the ninth
consecutive gain, data from the Ministry of Trade, Industry and Energy
showed. Imports advanced 15% YoY resulting in a trade surplus of USD
10.6b. (Source: Bloomberg)
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Other News:
Paramount Corp: Selling KDU Campus, asset to be injected
into syariah-compliant REIT. Paramount Corp is disposing of its Sri KDU
Campus for MYR165m, which will be injected into the country’s first
syariah-compliant unlisted real estate investment trust (REIT), Alpha
REIT. Its wholly-owned subsidiary Sri KDU S/B entered into a master
agreement and triple net lease agreement with RHB Trustees, the trustee
for Alpha REIT. Under the agreements, Sri KDU will sell its Sri KDU
Campus in Petaling Jaya and lease the property from the trustee for 10
years with options to extend the lease for two renewal terms of 10 years
each. The deal will see it book a gain of MYR72.9m. (Source: The Star)
Wah Seong: Bags MYR103.6m Kazakhstan job from Siemens. Was
Seong Corp has bagged a USD24.2m (MYR103.6m) contract from Siemens SAS of
France to build three substations including heating, ventilation and
air-conditioning systems for a project in Kazakhstan. The contract is
awarded to its indirect subsidiary PT Wasco Engineering Indonesia by
Siemens. The contract is expected to comemnce in the third quarter of
this year, with completion by Oct 30, 2018. (Source: The Edge Financial
Daily)
Kerjaya Prospek: Bags MYR46m STP2 land reclamation job.
Kerjaya Prospek Group has bagged a MYR46m subcontract to carry out land
reclamation works for phase 2B of the Seri Tanjung Pinang phase 2 (STP2)
project in Penang. Its 70%-owned subsidiary Future Rock S/B has accepted
a letter of award from China Communications Construction Co (M) S/B for
the proposed job. The construction work to be undertaken by Future Rock
was expected to commence on July 27, with completion on May 26, 2018.
(Source: The Edge Financial Daily)
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