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| | | | | | | | | | | | | | | | Share Price: | MYR2.30 | Target Price: | MYR2.10 | Recommendation: | Hold | | |
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| | | Outshining its siblings | | We resume coverage on Sime Darby Bhd with a HOLD following the demerger of its plantation and property subsidiaries with a new SOP- TP of MYR2.10, implying a FY19 PER of 18x. While we are positive on the demerger to establish 3 specialised champions in their respective fields, we believe that SDB's share price performance post re-listing has fully reflected its asset values. Longer term, the successful execution of SDB's strategies will be the key for further re-rating. HOLD for 3% yields. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 29,452.0 | 31,087.0 | 32,452.1 | 34,042.5 | EBITDA | 1,471.0 | 1,319.0 | 1,764.2 | 1,774.2 | Core net profit | 807.7 | 933.0 | 716.5 | 796.7 | Core EPS (sen) | 12.8 | 13.7 | 10.5 | 11.7 | Core EPS growth (%) | (66.8) | 7.5 | (23.2) | 11.2 | Net DPS (sen) | 27.0 | 23.0 | 6.8 | 7.6 | Core P/E (x) | 18.0 | 16.8 | 21.8 | 19.6 | P/BV (x) | 0.4 | 0.4 | 1.2 | 1.2 | Net dividend yield (%) | 11.7 | 10.0 | 3.0 | 3.3 | ROAE (%) | 2.5 | 1.8 | 3.3 | 6.0 | ROAA (%) | 1.3 | 1.4 | 1.6 | 3.3 | EV/EBITDA (x) | 16.9 | 12.8 | 10.4 | 10.2 | Net debt/equity (%) | 36.3 | 2.8 | 12.3 | 9.4 |
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| | | | | | | | | | | | | | Share Price: | MYR4.36 | Target Price: | MYR6.00 | Recommendation: | Buy | | |
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| | | Hits a minor snag | | Management remains confident that the recent case involving bills of demand from the Royal Malaysian Customs of Perak is in their favour. We maintain our earnings forecasts and MYR6.00 SOP-TP as we are not imputing any material impact from the case. | | |
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| | FYE Feb (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 768.1 | 809.4 | 812.2 | 834.0 | EBITDA | 107.8 | 118.9 | 113.5 | 122.2 | Core net profit | 50.7 | 38.4 | 39.5 | 40.8 | Core EPS (sen) | 20.0 | 15.1 | 15.6 | 16.1 | Core EPS growth (%) | 40.4 | (24.3) | 2.9 | 3.4 | Net DPS (sen) | 17.5 | 22.5 | 15.6 | 16.1 | Core P/E (x) | 21.8 | 28.8 | 28.0 | 27.1 | P/BV (x) | 2.8 | 2.3 | 3.4 | 3.4 | Net dividend yield (%) | 4.0 | 5.2 | 3.6 | 3.7 | ROAE (%) | 10.8 | 12.4 | 9.8 | 12.6 | ROAA (%) | 6.5 | 4.4 | 4.0 | 3.8 | EV/EBITDA (x) | 11.4 | 9.8 | 10.8 | 9.8 | Net debt/equity (%) | 6.8 | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR1.00 | Target Price: | MYR1.10 | Recommendation: | Buy | | |
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| | | Acquires more QSR properties | | We are mildly positive on the purchases as the leasebacks are based on triple net lease agreements. Meanwhile, its proposed private placement of new units could enlarge its share base by 11%. Our earnings forecasts and DDM-TP of MYR1.10 (8.2% cost of equity) are intact. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 20.7 | 76.1 | 82.9 | 84.6 | Net property income | 15.7 | 56.9 | 58.5 | 59.8 | Distributable income | 7.1 | 36.0 | 37.1 | 38.2 | DPU (sen) | 1.1 | 5.4 | 5.5 | 5.6 | DPU growth (%) | na | 400.0 | 1.2 | 3.2 | Price/DPU(x) | 92.1 | 18.4 | 18.2 | 17.7 | P/BV (x) | 1.0 | 0.9 | 0.9 | 0.9 | DPU yield (%) | 1.1 | 5.4 | 5.5 | 5.7 | ROAE (%) | na | 7.8 | 6.0 | 6.2 | ROAA (%) | na | 3.7 | 3.8 | 3.9 | Debt/Assets (x) | 0.4 | 0.4 | 0.4 | 0.4 |
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| | | | | | MACRO RESEARCH | | | | | | | Bouncing back
by Chew Hann Wong |
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| | | | | | 3Q17 aggregate core earnings of our research universe rose 10.6% YoY (+9.0% QoQ), lifting growth to 6.6% for 9M17. After earnings revisions for the respective stocks, we now expect +8.8%/+9.6% core profit growth for our research universe in 2017/2018, +7.5%/+5.0% for the KLCI (imputing also constituents change, including the demerger of Sime Darby Berhad, in full effect from 18 Dec 2017). We shave our end-2018 KLCI target to 1,840 (-1%) on 15.6x 12M forward PER (mean) post results housekeeping. | |
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| | | | | | | | Flows & Lookouts
by Chew Hann Wong |
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| | | | | | Nov 2017 saw higher foreign participation due to increased overall trades from MSCI rebalancing (14 Nov) and the listings of Sime Darby Plantation and Sime Darby Property (30 Nov). However, in terms of foreign net buy vs. net sell, they mostly 'square off' to a small net sell of MYR0.1b. As global markets wind down for the year, we expect trades on the Malaysia bourse to slow too, in Dec. That said, we continue to expect a mild upside at year end. Our revised end-2018 KLCI target is 1,840 (-1%). | |
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| | | | | | | | FBMKLCI Index: Heading into "Bottom Fishing" Zones
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI started the week on a weaker note, falling 4.73pts to 1,713.13 yesterday, led by declines in key blue chips such as SDPR, IJM and SDPL. Market breadth was negative with losers outpacing gainers by 659 to 286. A total of 1.80b shares worth MYR2.57b changed hands. With US markets ended mixed, local bourses could extend its weakness today. Technology counters may face increasing selling pressure, taking its cue from the selldown in Nasdaq. | |
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| | NEWS | | | Outside Malaysia:
U.K: Retail sales rise on food as Black Friday falls short. U.K. retail sales rebounded last month, fueled by higher food spending as Black Friday sales failed to tempt enough British shoppers to open their wallets for other things. The British Retail Consortium said sales rose 0.6% on a like-for-like basis after slumping the most in seven months in October. They climbed 1.5% in total terms. Yet the numbers suggest households are still reluctant to spend on non-essentials given the squeeze on budgets. Wages are lagging behind inflation and Brexit is creating uncertainty for the economy. The BRC said that in the three months through November, nominal food sales increased 2.8% on a like- for-like basis, buoyed by inflation, while non-food sales fell 1.2%. (Source: Bloomberg)
U.K: Business lobby says get used to subdued economic growth. The U.K. economy's "lukewarm" growth will continue for some time and may even weaken in coming years, according to the Confederation of British Industry. In its latest outlook, the CBI sees expansion of 1.5% next year and 1.3% in 2019, which would be the worst annual performance since 2009, when the economy shrank. It also said the downside risks to its projections are high, as they assume Brexit goes smoothly, with the U.K. reaching agreement on a transition deal with the European Union early next year. That would come into effect when it leaves the bloc in March 2019. While domestic demand will stay "soft" over the period, there is support for the economy from net trade, the CBI said. (Source: Bloomberg)
China: Warning indicator for banking stress fell for a fifth-straight quarter, signalling that the leadership's drive to squeeze risk from the financial system is making progress. China's credit-to-gross domestic product "gap" declined to 18.9% in the second quarter from 22.1% in the first three months of this year, according to data released by the Bank for International Settlements in Basel, Switzerland. That's down from a high of 28.8% in the first quarter of 2016 and below the 2013 level of 19%. The gap is the difference between the credit-to-GDP ratio and its long-term trend. The series captures total borrowing by the private non-financial sector, such as households and non-financial companies, according to the BIS, known as the central bank for central banks. (Source: Bloomberg)
Japan: Kuroda vows to stay course after speculation over tightening. Bank of Japan Governor Haruhiko Kuroda gave the clearest signal yet that his recent comments about the "reversal rate" theory weren't an indication of tighter monetary policy in the coming year. The BOJ's yield-curve control program, partly intended to address the impact of monetary easing on Japanese banks, has been successful and hasn't created any problems for financial institutions such as those described in the reversal rate theory, Kuroda said during a conference in Tokyo when asked about his comments last month. (Source: Bloomberg)
Crude Oil: OPEC crude output drops to six-month low on Angola maintenance. Total production fell 80,000 barrels a day to 32.47 million a day last month, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That was the lowest level since May, when output was 32.29 million. Angola led the declines in November, with a drop of 100,000 barrels a day from October. Output from Saudi Arabia, the biggest producer within OPEC, dropped 40,000 barrels a day to 9.97 million a day over the month. Venezuela's crude production came in at 1.86 million barrels a day, unchanged from a revised October level. Output in the Latin American country, which has the largest crude reserves in the world, is in long-term decline as its state-owned oil company faces a cash crunch and billions of dollars of debt repayments. (Source: Bloomberg) | |
| | | | | Other News:
UOA Development: Ups stake in property developer firm for MYR159.5m. UOA Development is buying further 35% stake in Everise Project S/B from Kaginic Assets Holdings S/B for MYR159.5m, which would bring its total shareholding in the property development company to 74%. Kaginic Assets had made an offer to dispose its entire interest in Everise and UOA, as an existing major shareholder. UOA Development, yesterday, entered into a share sale agreement (SSA) with its 39%-owned associate Everise and Kaginic Assets for the stake acquisition. The proposed buy involves Kaginic Assets' 105,000 shares worth MYR152.07m and 7.46m redeemable preference shares at MYR7.46m. (Source: The Edge Financial Daily)
Cypark Resources: To build solar PV plant in N Sembilan. Cypark Resources has been awarded a contract by Energy Commission (EC) to build a large-scale solar photovoltaic (PV) plant of 30MWac (43.18MWdc) at Empangan Terip, Negeri Sembilan. This follows a competitive bid process conducted by the EC. In filing with Bursa Malaysia yesterday, Cypark's wholly-owned subsidiary Cypark Renewable Energy S/B (CRE) had on Nov 28 received a letter of acceptance of offer from the EC for the project. The group's participation in the project is via a consortium comprising Revenue Vantage S/B and CRE. (Source: The Edge Financial Daily)
Ireka Corp: Ireka partners Beijing-based CRRC to venture into urban rail projects. Ireka Corp has teamed up with the world's largest manufacturer of rolling stock and rail-related products and systems CRRC Urban Traffic (Europe) Co Ltd (CRRC UT) to venture into rail projects. In filing with Bursa Malaysia yesterday, the MoU served the purpose for the collaboration in rail, urban traffic solution, tourism and infrastructure projects in Malaysia and Southeast Asia. Simultaneous to the MoU, Ireka also signed a share subscription agreement with CRRC UT, a member of China-based CRRC Group, to invest in Ireka and subsequently establish a JV relationship between both parties, of which Ireka holds 51% and CRRC UT holds 49%. (Source: The Edge Financial Daily)
Kronologi Asia: Kronologi, Temasek unit in data services. Kronologi Asia sees its new partnership with Temasek Holdings Pte Ltd's unit to provide data backup services, as one that will open up avenues for the group to do business with the public sector. On Nov 20, Kronologi announced its wholly-owned unit had inked an agreement with Trusted Source Pte Ltd – a unit of Temasek Management Services, which is in turn a member of Temasek to jointly provide private data backup services for Trusted Source's subsidiaries. (Source: The Edge Financial Daily)
Handal Resources: Handal partners Chinese firm to develop solutions for O&G industry. Handal Resources has partnered China-based Harbin Jingwei Advanced Composite Material and Engineering Corp to jointly develop and promote innovations and advance material application for the O&G industry in Malaysia and the region.Harbin Jingwei, which is involved in the business of advanced high performance composite material, is a unit of Shanghai EB Pipeline Engineering Ltd. Under the collaboration agreement inked on Nov 28, Handal will jointly develop and promote solutions/ products and perform project management for contracts secured, while Shanghai EB will provide technical know-how on advance material engineering. This project is under China policy of "One Belt, One Road". (Source: The Edge Financial Daily) | |
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