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| | | | | | | | | | | | | | | | Share Price: | MYR3.10 | Target Price: | MYR3.55 | Recommendation: | Buy | | |
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| | | Minor hiccups | | 1QFY18 core earnings of MYR47m met only 18%/19% of our and consensus FY18 forecasts, dragged by the China ops. Going forward, we expect strong earnings rebound QoQ driven by strong volume loading in China and much larger box-build orders at its Malaysia ops. Nonetheless, we lower FY18-20E earnings by 7% each, to account for lower margins at its China ops and incorporating a revised USD/MYR of 4.10-4.15. We roll forward valuations to CY19 on an unchanged 17.5x PER to derive a new MYR3.55 TP; BUY. | | |
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| | FYE Jul (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,175.6 | 3,281.3 | 4,489.9 | 5,309.4 | EBITDA | 226.4 | 322.0 | 458.5 | 537.4 | Core net profit | 135.4 | 175.6 | 244.1 | 298.4 | Core EPS (sen) | 8.6 | 11.1 | 15.4 | 18.9 | Core EPS growth (%) | (18.0) | 29.7 | 39.0 | 22.3 | Net DPS (sen) | 4.7 | 5.9 | 7.7 | 9.4 | Core P/E (x) | 36.2 | 27.9 | 20.1 | 16.4 | P/BV (x) | 5.6 | 4.6 | 4.2 | 3.7 | Net dividend yield (%) | 1.5 | 1.9 | 2.5 | 3.0 | ROAE (%) | 14.2 | 16.1 | 21.8 | 23.8 | ROAA (%) | 7.1 | 7.2 | 7.9 | 8.6 | EV/EBITDA (x) | 10.9 | 12.6 | 12.3 | 10.5 | Net debt/equity (%) | 18.4 | 28.3 | 36.0 | 31.7 |
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| | | | | | MACRO RESEARCH | | | | | | | Keep Growing & Carry On…
by Suhaimi Ilias |
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| | | | | | We expect global growth momentum to sustain in 2018, while key risks are inflation and financial stability. Malaysia's macro backdrop remains positive as we forecast another year of above-5% real GDP growth, at +5.3%. For equities, we estimate core earnings to grow +9.7% in 2018 for our research universe. Our end-2018 KLCI target is 1,840. In this writeup, we highlight five investment themes, and refresh our top equity BUY picks for 2018. | |
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| | | | | | | | Slower start to 4Q 2017
by Suhaimi Ilias |
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| | | | | | Distributive trade growth rose +7.1% YoY in Oct 2017 (Sep 2017: +5.4% YoY) on pickups in wholesale trade (Oct 2017: +7.6% YoY; Sep 2017: +6.9% YoY) and retail trade (Oct 2017: +8.5% YoY; Sep 2017: +7.0% YoY) amid flattish motor vehicle trade (Oct 2017: +0.1% YoY; Sep 2017: -5.6% YoY). Retail trade - a proxy to private consumption expenditure – at the start of 4Q 2017 was below the +10.4% YoY rise in 3Q 2017. | |
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| | | | | | | | Status quo
by Suhaimi Ilias |
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| | | | | | As expected, BSP's final Monetary Board meeting for 2017 kept the overnight borrowing rate at 3.00%, together with the overnight lending rate and overnight deposit rate which remained at 3.50% and 2.50% respectively. We maintained the outlook of two +25bps hikes in 2018. | |
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| | NEWS | | | Outside Malaysia:
U.S: Retail sales rose more than forecast in November and the previous month was revised higher, indicating a broad strengthening of consumer demand as the holiday shopping season got under way, according to Commerce Department figures. Overall sales climbed 0.8% (est. 0.3% gain) after a 0.5% increase in prior month (revised from 0.2% rise). Sales minus motor-vehicle dealers increased 1% after an upwardly revised 0.4% gainSo-called retail control group sales -- which are used in GDP calculations and exclude food services, auto dealers, building materials stores and gasoline stations -- also rose 0.8% following a revised 0.4% rise11 of 13 major retail categories showed gains. (Source: Bloomberg)
E.U: The European Central Bank maintained its pledge to move slowly in winding down euro-area stimulus, as investors wait to see if President Mario Draghi will unveil a more upbeat economic outlook. Policy makers reiterated that they'll halve asset purchases to EUR30b (USD35b) a month, starting in January and continuing until at least the end of September. They left interest rates unchanged and repeated that they expect borrowing costs to stay at present levels until well past the end of net bond-buying. They also repeated their pledge to step up or extend the program if needed, and stressed that additional support will come from their policy of reinvesting maturing debt. (Source: Bloomberg)
China: Central bank edged borrowing costs higher after the Federal Reserve's decision to tighten monetary policy. Hours after the Fed's quarter percentage-point move, the People's Bank of China increased the rates it charges in open- market operations and on its medium-term lending facility, though making smaller adjustments than the U.S. central bank. China also boosted rates on another policy tool, the standing lending facility, according to two people familiar with the matter, who asked not to be named as they're not authorized to talk to media.(Source: Bloomberg)
Indonesia: Central bank left its benchmark interest rate unchanged as expected, saying eight rate cuts since the start of last year was sufficient to drive a recovery in Southeast Asia's biggest economy. Governor Agus Martowardojo and his board held the seven-day reverse repurchase rate at 4.25%. After lowering interest rates by 200 basis points since the beginning of last year to boost economic growth, Bank Indonesia's focus has shifted to controlling inflation risks and maintaining stability in the rupiah as the U.S. central bank tightens monetary policy. (Source: Bloomberg) | |
| | | | | Other News:
Tiger Synergy: Gets MYR1b affordable homes contract. Tiger Synergy has won a MYR1b contract to build affordable homes ini Seremban. The contract, awarded by Elite Community S/B, involves the development of 5,000 apartment units on a 123-acre (49.7ha) leasehold land. The building will comprise 15 blocks of 21-storey apartments with three different built-up areas. The planning approval for the project will be submitted upon final design review and approvals from all the relevant authorities. (Source: The Edge Financial Daily)
Oldtown: Proceeds with Cambodia foray. Oldtown, which has received a privatisation offer for MYR3.18 per share, is continuing with its expansion plans into Cambodia. Its wholly owned subsidiary Kopitiam Asia Pacific S/B had on Dec 14, 2017 entered into a master licence agreement with Biniton Food & Beverage Co Ltd and Bun Khang to confer the right to operate the restaurant business under the brand name of "Oldtown White Coffee" in Cambodia. The agreement is valid for five years beginning from Dec 14, 2017 with an option to renew for two consecutive terms of five years each. The first Cambodian outlet is scheduled to be opened by the second quarter of 2018. (Source: The Sun Daily)
AmanahRaya REIT: To dispose of land. AmanahRaya REIT has proposed to sell a piece of freehold land in Shah Alam to Nippon Express (M) S/B for MYR105m. Proceeds from the disposal will be used to partly settle existing loads from Affin Bank. The balance of the proceeds will be used for working capital or to part finance the group's future potential acquisition. The disposal consideration was derived on a willing buyer-willing seller basis after taking into account the total market value of the land of MYR102m, as appraised by an independent valuer. (Source: The Edge Financial Daily)
Country View: To sell Kulim land for MYR119.9m. Country View proposes to dispose of 139 pieces of land in Kulim, Kedah measuring 1.74 m sq metres for MYR119.9m. Proceeds from the deal will be partly used for its land acquisition in Johor Baru for MYR310m, which was announced on October 30, 2017. (Source: The Sun Daily)
EA Holdings: To buy packet food seller for MYR78.75m, proposes bonus issue. EA Holdings is diversifying into the package food business by buying a 90% stake in Sunland Volonte Agency S/B for MYR78.75m, which will be satisfied via the issuance of 1.59b new shares at an issue price of four sen per share and MYR15m cash. EA Holdings is acquiring 225,000 shares in Sunland from Datuk Cheong Soo Han, Law Kum Wah, Chong Nyet Fan and Goh Swee Sim. The acquisition will not trigger a mandatory takeover offer as the combined shareholding of the four individuals will be 31.4% and will be diluted to as low as 26% if all the group's warrants were to be exercised by warrant holders. (Source: The Edge Financial Daily) | |
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