STOCK IN FOCUS
Kian Joo Can Factory : Strong MYR to alleviate pain of rising material prices HOLD
We are raising Kian Joo Can Factory's (Kian Joo) fair value to RM3.25/share from RM3.00/share previously, but maintain our HOLD recommendation. Our fair value is pegged to an FY19F PE of 11x, representing a discount to its larger peers which are trading at 14x. The discount is warranted by the group's smaller market capitalisation. We have raised our FY18F/FY19F earnings forecasts by 7%/16% after revising our USD/MYR assumption to 3.95 from 4.15 for both years. In our assumption, we have lowered ASP marginally to account for Kian Joo's bid to maintain competitiveness by offering discounts to customers.
Based on our estimates, approximately 20% of Kian Joo's revenue and 35% of total costs are denominated in USD. In other words, Kian Joo is a net beneficiary of the strengthening MYR as its raw materials are partially imported. Our sensitivity analysis shows that for every 1% appreciation in the MYR against the USD, Kian Joo's earnings would be amplified by 3%.
Recall that Kian Joo was adversely affected by rising raw material prices as well as the strong USD in 2017. At the current price, we believe the company is fairly valued with the near-term challenges factored in.
Other reports
Only World Group : Navigating MAPS to its destination HOLD
Econpile Holdings : Bagging piling works for Tenaga's property project HOLD
QUICK TAKE
Genting Singapore : Implications of MBS' 4QFY17 results HOLD
STOCKS OIN RADAR
Malaysia Steel Works, Frontken Corporation, Dagang NeXchange, UEM Sunrise
ECONOMIC REPORT
Malaysia — Inflation fails to dampen MYR's mood
NEWS HIGHLIGHTS
2018 a period of consolidation for EcoWorld
PA Resources gets RM600mil job
Datasonic’s JV in Tanzania to take off this year
Stronger ringgit good for F&N as net importer
DISCLAIMER:
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
****************************************************************************************************************************************************************************************************************************************************************************************************************
DISCLAIMER:
This message may contain confidential and privileged information for its intended recipient(s) only. If you are not an intended recipient, you are hereby notified that any review, dissemination, and distribution, printing or copying of this message or any part thereof is strictly prohibited. Please delete the entire message and inform the sender of the error. Any opinions, conclusions and other information in this message that are unrelated to official business of AmBank Group are those of the individual sender and shall be understood as neither explicitly given nor endorsed by AmBank Group.
****************************************************************************************************************************************************************************************************************************************************************************************************************
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.