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| | | | | | | | | | | | | | | | Share Price: | MYR7.40 | Target Price: | MYR8.75 | Recommendation: | Buy | | |
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| | | The best year of its life | | 3Q17 core PATAMI of MYR917m (+2.9% YoY, -5.1% QoQ) was above ours and consensus. The higher ASP more than offset the net effect of turnaround activities in the quarter that lowered utilisation rate by 14ppt YoY to 86%. Management provided a positive forward outlook and we raise our 2017-19 earnings forecast by +4.4%, +14.5% and +16.2% respectively. We roll forward the base year to 2018 and apply the same global peer group average EV/EBITDA multiple of 8.0x to derive a new TP of MYR8.75. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 13,536.0 | 13,860.0 | 14,516.6 | 15,502.7 | EBITDA | 5,036.0 | 5,388.0 | 6,812.9 | 6,572.1 | Core net profit | 2,754.0 | 3,138.0 | 4,159.5 | 3,964.7 | Core EPS (sen) | 34.4 | 39.2 | 52.0 | 49.6 | Core EPS growth (%) | (1.3) | 13.9 | 32.6 | (4.7) | Net DPS (sen) | 18.0 | 19.0 | 26.0 | 25.0 | Core P/E (x) | 21.5 | 18.9 | 14.2 | 14.9 | P/BV (x) | 2.4 | 2.2 | 2.0 | 1.9 | Net dividend yield (%) | 2.4 | 2.6 | 3.5 | 3.4 | ROAE (%) | na | na | na | na | ROAA (%) | 9.3 | 10.0 | 12.6 | 11.2 | EV/EBITDA (x) | 10.2 | 9.2 | 7.8 | 7.5 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR2.76 | Target Price: | MYR3.00 | Recommendation: | Hold | | |
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| | | Under-recovery continues | | GMB's results were in line, taking into account seasonality. GMB seemingly further under-recovered on gas cost in 3Q17, which means a tariff surcharge looks increasingly likely to be imposed in 1H18. Maintain HOLD with an unchanged MYR3.00 TP for now. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 3,619.0 | 4,053.0 | 4,928.0 | 5,848.8 | EBITDA | 191.0 | 264.6 | 253.8 | 264.7 | Core net profit | 106.2 | 165.1 | 161.1 | 170.0 | Core EPS (sen) | 8.3 | 12.9 | 12.5 | 13.2 | Core EPS growth (%) | (36.7) | 55.6 | (2.5) | 5.5 | Net DPS (sen) | 8.3 | 12.9 | 12.5 | 13.2 | Core P/E (x) | 33.4 | 21.5 | 22.0 | 20.8 | P/BV (x) | 3.7 | 3.5 | 3.5 | 3.5 | Net dividend yield (%) | 3.0 | 4.7 | 4.5 | 4.8 | ROAE (%) | 10.7 | 16.6 | 15.8 | 16.7 | ROAA (%) | 5.5 | 7.7 | 7.2 | 7.2 | EV/EBITDA (x) | 14.9 | 10.2 | 12.4 | 11.8 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR1.59 | Target Price: | MYR1.95 | Recommendation: | Buy | | |
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| | | Interim dividend surprise | | While we trimmed FY19/20 earnings by 3-4%, valuations are still attractive with RCE trading at a prospective 2018 PER of just 6.8x. Moreover, having raised our DPS assumption, the FY18E yield of 3.8% is decent. The slowdown in loan growth to a 5-6% pace is healthier in the long run, and what would be a positive is if NIMs hold up better than expected. Our TP is lowered to MYR1.95 on a lower CY18 PBV of 1.3x, supported by a prospective ROE of 16.6%. | | |
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| | FYE Mar (MYR m) | FY16A | FY17A | FY18E | FY19E | Operating income | 120.9 | 166.7 | 182.7 | 196.6 | Pre-provision profit | 79.6 | 123.6 | 135.1 | 145.4 | Core net profit | 39.6 | 73.7 | 84.1 | 89.7 | Core EPS (MYR) | 0.12 | 0.24 | 0.22 | 0.24 | Core EPS growth (%) | 35.9 | 94.0 | (7.7) | 6.7 | Net DPS (MYR) | 0.46 | 0.03 | 0.06 | 0.07 | Core P/E (x) | 12.9 | 6.6 | 7.2 | 6.7 | P/BV (x) | 1.2 | 1.4 | 1.2 | 1.0 | Net dividend yield (%) | 28.6 | 1.9 | 3.8 | 4.1 | Book value (MYR) | 1.34 | 1.16 | 1.35 | 1.55 | ROAE (%) | 7.7 | 16.4 | 17.6 | 16.2 | ROAA (%) | 2.8 | 4.5 | 4.7 | 4.6 |
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| | | | | | | | | | | | | | Share Price: | MYR1.00 | Target Price: | MYR1.15 | Recommendation: | Buy | | |
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| | | Shifting into acquisition mode | | Post meeting with management, we gained better clarity on its short to mid-term acquisition plans to grow its portfolio. Elsewhere, we remain positive on its existing assets such as KOMTAR JBCC which could remain resilient. Our earnings forecasts and DDM-TP of MYR1.15 (cost of equity: 8.2%) are intact. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 20.7 | 76.1 | 83.4 | 85.0 | Net property income | 15.7 | 56.9 | 61.2 | 62.4 | Distributable income | 7.1 | 36.0 | 39.7 | 40.8 | DPU (sen) | 1.1 | 5.4 | 5.9 | 6.0 | DPU growth (%) | na | 400.0 | 8.5 | 2.7 | Price/DPU(x) | 92.1 | 18.4 | 17.0 | 16.5 | P/BV (x) | 1.0 | 0.9 | 0.9 | 0.9 | DPU yield (%) | 1.1 | 5.4 | 5.9 | 6.0 | ROAE (%) | na | 7.8 | 6.5 | 6.6 | ROAA (%) | na | 3.7 | 4.1 | 4.1 | Debt/Assets (x) | 0.4 | 0.4 | 0.4 | 0.4 |
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| | | | | | MACRO RESEARCH | | | | | | | Further pick up in quarterly GDP
by Suhaimi Ilias |
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| | | | | | Supply-side indicators suggest firmer 3Q 2017 real GDP growth on faster manufacturing, rebound in mining and sustained growth in services, which offset slower palm oil output (hence agriculture) and construction activities. We estimate 3Q 2017 GDP of +6.0% YoY (2Q 2017: +5.8% YoY (2Q 2017: +5.8% YoY). | |
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| | | | | | | | OPR unchanged but with upside bias
by Suhaimi Ilias |
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| | | | | | BNM kept the Overnight Policy Rate (OPR) at 3.00% at its last MPC meeting for the year but Monetary Policy Statement (MPS) signals upside bias in OPR in 2018. This is in line with our view of post-election +25bps hike in OPR next year. Our eyes is on the MPC meeting in May 2018 as the earliest possible timing of the move to raise OPR. | |
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| | | | | | | | Stable jobless rate amid job and income growth
by Suhaimi Ilias |
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| | | | | | Unemployment rate was 3.4% in Sep 2017, staying in the 3.4%-3.5% range since Dec 2015. Year-to-date average is 3.4%, in line with our full-year forecast of 3.4% (2016: 3.5%). Jobless rate is stable amid employment and income growth, led by manufacturing and services sectors. | |
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| | | | | | | | Policy interest rate still on hold
by Suhaimi Ilias |
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| | | | | | As expected, BSP's Monetary Board meeting yesterday kept the overnight borrowing rate unchanged at 3.00%, together with the overnight lending rate and overnight deposit rate which remained at 3.50% and 2.50% respectively. We see BSP keeping the rates at the last meeting for the year on 14 Dec 2017, and maintain the outlook of two +25bps hikes in 2018. | |
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| | | | | | | | FBMSCAP Index: Slow & Steady
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI rebounded yesterday, rising 2.61pts to 1,746.81 at day's end, led by gain in ROTH, PTG and GENT. Broader market turned positive, with gainers barely outpacing losers by 431 to 428. A total of 3.09b shares worth MYR2.34b changed hands. Despite yesterday's gain, investors should brace for a bumpy ride today amid external headwinds such as delay in US tax-reform bill. Profit taking activities could also accelerate ahead of the weekend break. | |
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| | NEWS | | | Outside Malaysia:
E.U: Euro-area economy will grow at the fastest pace in a decade this year, while the U.K. heads into an extended slowdown, the European Commission said, highlighting the increasing divergence between the continent and the British economy. Raising its 2017 forecast for the 19-country bloc to 2.2% from 1.7% in May, the EU's executive arm cited "resilient private consumption," and it predicted a 2.1% expansion in 2018. It cut its 2017 prediction for the U.K. and sees growth cooling to just 1.1% in 2019, which would be the worst performance since the recession of 2009. (Source: Bloomberg)
E.U: ECB warns complacency is the enemy as Euro Region recovers. With the euro-area economy in the best shape in almost 20 years, now is the time to prepare for future slumps, according to European Central Bank policy maker Benoit Coeure. The region's expansion is proving increasingly balanced and robust, much like its upturn in 1999, the ECB Executive Board member said. But while current monetary stimulus will continue as long as necessary, the success must also be nurtured by structural reforms that will better equip the region for the next shock, he said. (Source: Bloomberg)
China: Factory prices kept surging last month as authorities curb production in smokestack industries to combat pollution. The producer price index rose 6.9% YoY in October. The consumer price index climbed 1.9% YoY, the statistics bureau said. (Source: Bloomberg)
Japan: Core machine orders fell more than expected in September. And more of the same is expected for the rest of the year. The 8.1% drop in September, which was the worst since May 2014, according to the cabinet office. The decline isn't enough to wipe out the strong results from July and August in both manufacturing and non-manufacturing, and feed into what should be solid third-quarter economic growth figures to be released next week. (Source: Bloomberg)
Crude Oil: Set for fifth weekly gain as Saudi upheaval counters output. Arrests on the weekend of senior Saudi Arabian officials in an anti-corruption probe is seen as consolidating power for Crown Prince Mohammed bin Salman, who supports extending OPEC-led output cuts. While prices eased during the week, record weekly U.S. oil production and a surprise increase in crude stockpiles. Brent for January settlement was USD63.93/bbl. (Source: Bloomberg) | |
| | | | | Other News:
MyEG: Proposes to diversify into foreign workers' accommodation programme. MyEG Services proposes to diversify its existing principal activities to include the foreign workers' accommodation programme. It entails the setting up and management of centralised and integrated living quarters or hostels throughout the country to house foreign workers. It believes the proposed diversification complements the group's existing foreign workers permit renewal business as the future rental income derived from the FWAP is expected to provide a new source of recurring income stream. (Source: The Sun Daily)
Zecon: Sees cash cow in 25.5 years children's hospital concession. Zecon which saw its financials bogged down by escalating project cost for the financial year ended June 30, sees its cash cow being a 25.5 year lease rental and maintenance concession for the children specialist hospital at University Kebangsaan Malaysia. The group which is also tasked to build the hospital under a Private Finance Initiative, said the concession period will be divided into two phases--- a 15-year primary period and another 10 years as the secondary period. Zecon is expected to see about more or less of a MYR100m per annum, coming in during the 15 year period in lease rental and less than MYR100m in the remainder of the concession period. (Source: The Sun Daily)
Malayan Flour Mills: 3Q net profit surges 70% to MYR23.51m. Malayan Flour Mills (MFM) reported a 70% surge in net profit for its third financial quarter ended Sept 30, 2017 (3QFY17) to MYR23.51m or 4.27 sen per share, from MYR13.83m or 2.51 sen per share in 3QFY16, due to higher profit in its flour and grains trading segment, coupled with a higher share of profit from its joint venture company, PT Bungasari Flour Mills Indonesia. MFM reported a 2.7% increase in revenue to MYR630.97m in 3QFY17, from MYR614.4m a year ago, on higher sales in flour and grains trading segment, which was partially offset by lower sales recorded in its poultry integration segment. (Source: The Edge Financial Daily) | |
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