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| | | | | | | | | | | | | | | | Share Price: | MYR6.19 | Target Price: | MYR7.50 | Recommendation: | Buy | | |
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| | | Slight uplift in ROEs post MFRS9? | | The key takeaway from our meeting with management is that the group's credit cost guidance is likely to be little changed post-MFRS9, which is of some comfort. Based on our computation, there could a slight uplift in the group's ROEs post-MFRS9 as well. We maintain our BUY call and TP of MYR7.50 which tags on a FY18 PBV of 1.3x. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Operating income | 15,395.8 | 16,065.3 | 17,022.2 | 18,119.9 | Pre-provision profit | 6,146.8 | 7,413.6 | 8,155.8 | 8,984.3 | Core net profit | 3,411.2 | 3,414.4 | 4,440.2 | 5,151.8 | Core EPS (MYR) | 0.40 | 0.39 | 0.50 | 0.58 | Core EPS growth (%) | 5.6 | (2.4) | 27.4 | 16.0 | Net DPS (MYR) | 0.14 | 0.20 | 0.26 | 0.30 | Core P/E (x) | 15.4 | 15.8 | 12.4 | 10.7 | P/BV (x) | 1.3 | 1.2 | 1.2 | 1.1 | Net dividend yield (%) | 2.3 | 3.2 | 4.2 | 4.8 | Book value (MYR) | 4.87 | 5.24 | 5.37 | 5.65 | ROAE (%) | 8.7 | 7.9 | 9.6 | 10.6 | ROAA (%) | 0.8 | 0.7 | 0.9 | 1.0 |
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| | | | | | MACRO RESEARCH | | | | | | | Fuelled-up headline inflation
by Suhaimi Ilias |
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| | | | | | Inflation in Sep 2017 accelerated to +4.3% YoY (Aug 2017: +3.7% YoY) while core inflation stable at +2.4% YoY (Aug 2017: +2.4% YoY). Similarly in Jan-Sep 2017, inflation faster at +4.0% YoY (Jan-Sep 2016: +2.2% YoY) while core inflation steady at +2.5% YoY (Jan-Sep 2016: +2.6% YoY). Adjust 2017 and 2018 forecasts to +4.0% (3.5%-4.0% previously) and 2.5%-3.0% (2.0%-2.5% previously) on higher crude oil price assumption. | |
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| | | | | | | | Reserves rebuilding continues
by Suhaimi Ilias |
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| | | | | | Total gross external reserves rose +USD0.2b to USD101.4b at mid-Oct 2017 (end-Sep 2017: USD101.2b) equal to 7.5 months of retained imports and 1.1 times of short-term external debt. This was despite indication of subdued foreign flows in the equities and bond market this month, suggesting contributions from trade and FDI flows. Year to date, external reserves rose +7.2%, and at current pace, it could be at USD103b-USD104b by end-2017. | |
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| | | | | | | | Correction on MXAPJ Index an Opportunity to Hunt ASEAN Construction Stocks
by Nik Ihsan Raja Abdullah |
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| | | | | | After breaking out of its "Ichimoku Cloud" in Jan 2017, the MSCI Asia Pacific ex. Japan Index (MXAPJ Index) continued to trend higher. There were intermittent pullbacks along the way but the index remained above the "Cloud", implying that the bull is still strong here. However, with the MXAPJ Index hitting a near-term peak of 554, we expect some correction to take place. The index could trend towards the lower support at between 533 and 538 over the next few days. | |
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| | NEWS | | | Outside Malaysia:
U.S: Posts largest fiscal-year budget shortfall since 2013, as a pickup in spending exceeded revenue gains. The federal government's gap grew to USD 665.7b in the 12 months through Sept. 30, compared with a USD 585.6b shortfall in fiscal 2016, the Treasury Department said. That was in line with the Congressional Budget Office's estimate of USD 668b. Treasury Secretary Steven Mnuchin and Budget Director Mick Mulvaney, in a statement accompanying the report, blamed weaker- than-expected tax receipts on historically "sub-par" economic growth. (Source: Bloomberg)
China: Vows no return for shuttered steelmakers as curbs bite. China will prevent shuttered or illegal steel plants from returning to the market, according to an official at the nation's lead economic planning body, signaling a commitment to a campaign by the world's top producer that has helped to raise prices. The nation will stick to its capacity-cuts mission this year, Ning Jizhe, vice chairman of the National Development and Reform Commission, told reporters at a weekend briefing during the 19th Communist Party Congress. Separately, NDRC Chairman He Lifeng said cuts to steel and coal capacity had resulted in more than 1.1 million workers being "reemployed" after job cuts. (Source: Bloomberg)
Japan: Abe placed to lead through 2021 after big election win. Prime Minister Shinzo Abe's gamble on an early election may have just won him a chance to lead Japan through 2021. Abe, 63, saw his ruling coalition retain its two-thirds majority in the 465-member lower house in an election. That boosts his chances at winning another term next year as head of his Liberal Democratic Party, which could make him Japan's longest serving leader. The landslide win -- helped along by a disparate and weak opposition -- paves the way for more ultra-easy monetary policy that has boosted stocks to the highest level in two decades and helped Asia's second-biggest economy expand for six straight quarters. Yet pressure is also growing for Abe to tackle Japan's swollen debt, increase stagnant wages and overhaul the labor market to replenish a rapidly aging workforce. (Source: Bloomberg)
Crude Oil: Extends gains as OPEC says all options open on re-balancing. OPEC and its partners including Russia achieved a record level of compliance to output cuts during September, according to a statement from the committee responsible for monitoring the agreement. In the U.S., drillers reduced the rig count a third week to the lowest since June, according to Baker Hughes. Brent for December settlement was USD 58.05/bbl. (Source: Bloomberg) | |
| | | | | Other News:
Aviation: Bellew resigned on Oct 8 without a job. Malaysia Airlines Berhad's outgoing CEO Peter bellew resigned without a job on Oct 8. According to Bellew, Khazanah Nasional and the airline's chairman, had done everything to persuade him to stay the course. His resignation letter was given to the chairman. More than a week later, Malaysia Airlines said in a statement that it was caught off-guard by the announcement that Bellew would be returning to Ryanair Holdings as COO. Speaking at the press conference yesterday, Bellew explained that Malaysia Airlines did not make any announcement on his resignation sooner could be because the chairman was trying his best to retain him. It is apparent that Ryanair might have approached Bellew again after his resignation from the airline. (Source: The Edge Financial Daily)
Hartalega: Higher capacity boost for the company. The company expects stronger revenue growth this year, surpassing its average YOY revenue growth of 28%. Managing director Kuan Mun Leong told StarBiz that he anticipated higher revenue growth this year on the back of higher capacity from its new plants at the Next Generation Integrated Glove Manufacturing Complex (NGC) facilities in Sepang. The NGC facilities will have a total of six plants by 2021. "We have completed the construction of three plants which are running currently. We have also commissioned the fourth. Each plant will have 12 lines. Over the next five years, Hartalega aims to have an average growth of 15% per annum in terms of manufacturing output via capacity expansion. (Source: The Star Online)
Nationwide Express: Sees Airpak buy as growth catalyst. Following the signing of a new deal for its acquisition of Airpak Express (M) Sdn Bhd, loss-making Nationwide Express Holdings maintains it is on track for a turnaround in FY18. According to the managing director Rozilawati Basir, "This is why we want to push for integration as soon as possible. It is going to be tough but it's something we are committed to be doing". She added that the Airpak acquisition is expected to be a catalyst of growth although the new deal is smaller than an earlier negotiated agreement. The new agreement, which encompasses Airpak's assets, all of its staff, as well as some of its liabilities excluding old trade receivables, is targeted to be completed 1Q18. (Source: The Edge Financial Daily) | |
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