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| | | | | | | | | | | | | | | | Share Price: | MYR1.01 | Target Price: | MYR1.32 | Recommendation: | Buy | | |
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| | | Buys land in Seri Kembangan | | We are positive on UEMS' latest land purchase in Seri Kembangan (Klang Valley) for its fair pricing. More importantly, the new land will help UEMS to diversify its geographical spread, reducing its dependency on Iskandar Malaysia (IM). The land, which carries an estimated GDV of MYR700m, is expected to enhance our RNAV/shr by +1sen. We maintain our earnings forecasts and MYR1.32 RNAV-TP (on an unchanged 0.45x P/RNAV). BUY. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 1,749.9 | 1,841.5 | 1,933.6 | 1,578.6 | EBITDA | 299.6 | 224.4 | 509.5 | 382.5 | Core net profit | 257.2 | 147.3 | 270.8 | 155.4 | Core FDEPS (sen) | 5.2 | 2.9 | 5.2 | 3.0 | Core FDEPS growth(%) | (51.1) | (44.8) | 83.9 | (42.6) | Net DPS (sen) | 1.6 | 0.0 | 0.0 | 0.0 | Core FD P/E (x) | 19.5 | 35.4 | 19.2 | 33.5 | P/BV (x) | 0.7 | 0.7 | 0.6 | 0.6 | Net dividend yield (%) | 1.6 | 0.0 | 0.0 | 0.0 | ROAE (%) | na | na | na | na | ROAA (%) | 2.2 | 1.2 | 2.0 | 1.1 | EV/EBITDA (x) | 24.0 | 35.9 | 15.8 | 23.6 | Net debt/equity (%) | 24.3 | 40.7 | 41.3 | 53.7 |
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| | | | | SECTOR RESEARCH | | | | | | | 2017 has been good, 2018 to be even better
by Mohshin Aziz |
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| | | | | | The sector should fare well in 2018 on sustained global GDP growth and benign inflation. New capacity output is manageable and demand-supply is forecasted to be balanced, thus providing a stable outlook on ASPs. PCHEM is our top pick as it is a beneficiary of higher crude oil prices as its feedstock cost is relatively fixed, thus ensuring margin expansion. Production ramp-up will drive LCT's earnings growth but it is susceptible to naphtha price volatility which is on an uptrend. | |
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| | | | | | | | US ethylene expansion and its impact on the world
by Mohshin Aziz |
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| | | | | | Many fear US ethylene new builds will inundate global supply and cause a bearish outlook. It may not be that simple. US exports will face competition, trade barriers and the threat of the invisible hand. Exports will make their way to Europe and Latin America fairly easily, but China has proven to be a buyer of last resort and it is the only market large enough to absorb future US supplies. Overall, we are optimistic global demand-supply is in balance and the product price outlook is stable. | |
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| | | | | | | | Late bloom
by Chee Ting Ong |
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| | | | | | Malaysia's November 2017 output is highest on record for that month. This is due to the delay in peak cropping pattern. We believe the high stockpile has been largely priced in - CPO spot price fell MYR375/t in the past 30 days. We expect MoM output to decline from now till Feb 2018. In view of tightening supply, we anticipate stronger CPO prices in 1Q18. Our 12M NEUTRAL sector call is reiterated. We have BUYs on SDPL, IOI, SOP, BAL, DSNG and TBLA. SELL BWPT. | |
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| | | | MACRO RESEARCH | | | | | | | Manufacturing-led slowing in industrial output
by Suhaimi Ilias |
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| | | | | | Industrial production (IP) growth in Oct 2017 moderated to +3.4% YoY (Sep 2017: +4.7% YoY) mainly as manufacturing slowed for the third month in a row. Short-term manufacturing sector outlook remains positive based on the pickup in Malaysia's manufacturing PMI (Nov 2017: 52.0; Oct 2017: 48.6). | |
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| | | | | | | | Net external demand vs domestic demand
by Suhaimi Ilias |
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| | | | | | In Oct 2017, exports and imports in USD rose +6.6% YoY (Sep 2017: +4.9% YoY) and +13.1% YoY (Sep 2017: +4.4% YoY), while trade deficit widened to a record –USD2.8b (Sep 2017: -USD2.0b). While net external demand may be a drag on 4Q 2017's real GDP growth, domestic demand and manufacturing looks firm, taking cue from the stronger imports alongside the rise in manufacturing PMI. | |
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| | | | | | | | FBMSCAP Recovery in Sight
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI closed higher yesterday buoyed by buying interest in banking stocks. At day's end, the benchmark index ended 1,729.57 after rising 10.10pts – gains led by HLFG, HLBANK, PBBANK and CIMB. Market breadth has improved significantly after gainers outpaced losers 500 to 372. A total of 2.15b shares worth MYR2.33b changed hands. | |
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| | NEWS | | | Outside Malaysia:
U.S: Wholesale prices climbed more than forecast in November, boosted by a jump in the costs of goods that included gasoline, a Labor Department report showed. Producer-price index rose 0.4% for a third straight month. PPI advanced 3.1% YoY, the most since January 2012. Excluding food and energy, core gauge rose 0.3% from prior month and was up 2.4% YoY from November 2016. Price pressures in the production pipeline are firming up gradually, with commodity costs rising the most since January even as services prices cooled. (Source: Bloomberg)
U.K: Inflation unexpectedly accelerated to the highest rate in more than 5 1/2 years in November, forcing Bank of England Governor Mark Carney to explain why price growth is so far above target. Consumer prices rose 3.1% YoY, driven by the cost of air fares and computer games, the Office for National Statistics said. That's up from 3% YoY in October and the highest since March 2012. It means Carney is now compelled to write a letter to Chancellor of the Exchequer Philip Hammond explaining why inflation is more than 1 percentage point away from the official 2% target. BOE officials hiked interest rates for the first time in a decade last month to keep a lid on price pressures. Core inflation, which excludes volatile food and energy prices, was unchanged at 2.7% YoY. (Source: Bloomberg)
Singapore: Retail sales drop for second month in a row to mark the first back-to-back contractions since 2014. Purchases declined 0.1% YoY in October after falling 0.6% YoY in September, according to the Singapore Department of Statistics. October's slump was led by a 23.4% YoY plunge in computer and telecommunications equipment, while food retailers claimed the second-biggest drop at 3.9% YoY. (Source: Bloomberg)
Indonesia: Credit growth to expand a second year on rate outlook as economic expansion accelerates and infrastructure spending gathers momentum amid a benign outlook for global interest rates, according to the nation's deposit insurance agency. Loan growth is seen at 10% in 2018, compared with 9.2% estimated for this year, said Fauzi Ichsan, chief executive of Indonesia Deposit Insurance Corporation, known as LPS. Southeast Asia's largest economy may expand 5.3% next year from about 5.1% this year, he said. (Source: Bloomberg)
Crude Oil: Resumes gains on signs U.S. crude stockpiles extended drop. Inventories fell 7.38 million barrels last week, the American Petroleum Institute was said to report. Brent oil in London closed lower as concerns eased about the impact of the closure of a North Sea pipeline. Brent for February settlement was USD 63.34/bbl. (Source: Bloomberg) | |
| | | | | Other News:
Oil & Gas: Petronas, Vopak JV inks USD1.25b financing pact. PT2SB, a JV between Royal Vopak and Petronas, Dialog and Johor state, has signed a USD1.25b (MYR5.1b) financing agreement with a syndicate of nine banks for an oil storage terminal. The financing will cover the PT2SB terminal in Pengerang , Johor. Its construction started in early 2015 and is due for completion in the first half of 2019. It will have an initial storage capacity of 1.65m cu m for crude oil, refined oil products, petrochemicals and liquified petroleum gas. The project is estimated to cost about USD1.6b, of which around 20% will be funded with equity contributions by shareholders and the rest via project financing through the banking syndicate. (Source: The Edge Financial Daily)
KLK: Buys chemicals firm in Netherlands for MYR187.2m. KLK proposes to acquire Elementis Special Ties Netherlands B.V. (ESN) for an enterprise value of EUR39m (MYR187.2m). Its wholly owned subsidiary Kolb Distribution AG had on December 11 entered into an agreement to acquire from Elementis B.V. its entire interest in ESN comprising 3,404 ordinary shares of nominal value EUR1,000 each, together with its working capital, assets and business associated with its surfactant chemicals business at ESN's 1.62 ha site at Delden, the Netherlands. Upon completion of the proposed acquisition, the Delden site will continue to supply a range of specialty chemicals to Elementis Specialties Inc under a long-term supply agreement. The proposed acquisition, which is expected to be completed in the first half of 2018, will be funded by a combination of the group's existing cash reserves and bank borrowings. (Source: The Sun Daily)
Bursa Malaysia: Launches Islamic Securities Selling and Buying Negotiated Transaction framework. Bursa Malaysia launched the world's first syariah-compliant alternative to the conventional Securities Borrowing and Lending Negotiated Transaction (SBLNT) framework, called Islamic Securities Selling and Buying Negotiated Transaction (ISSBNT), to further develop the Shariah-compliant securities market. Securities Borrowing and Lending (SBL) allows investors to short sell in a bid to create a more vibrant capital market. As of now, there are a total of 270 stocks can be short sold, according to Bursa Malaysia website. The ISSBNT, designed and based on the SBLNT framework, is developed to provide a more facilitative trading environment and improve trading liquidity and velocity of securities whereby market participants have an alternative avenue, that is compliant with syariah principles. (Source: The Sun Daily)
Anzo: Unit accepts MYR29m subcontract. Anzo Holdings' wholly-owned subsidiary Anzo Construction S/B (ACSB) has accepted a letter of award from QuicBuild System S/B (QBSB) for the appointment of ACSB as sub-contractor for a MYR28.92m job for a 14-storey new office building at Jalan Hospital Ipoh, Perak. The job relates to the supply materials, labour, tools equipment, workmanship and machineries for the execution of building and infrastructure works.The scopes of works of ACSB includes preliminaries and general conditions; building works; infrastructure works; and prime cost and provisional sums. The contract has a duration of 19 months and the completion date is June 14, 2019. (Source: The Sun Daily)
Fajarbaru: Clinches MYR22.05m Pos Malaysia job. Fajarbaru Builder Group has bagged a MYR22.05m contract for the expansion and renovation of Integrated Parcel Sortation Centre at Pos Malaysia International Hub at Kuala Lumpur International Airport. The contract is for a period of eight months. (Source: The Sun Daily) | |
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