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| | | | | | | | | | | | | | Share Price: | MYR9.00 | Target Price: | MYR9.85 | Recommendation: | Hold | | |
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| | | Acquisition-led EPS growth | | We are positive on Top Glove's proposed acquisition of Aspion given the EPS accretion, reasonable valuation and strategic proposition. Incorporating for Aspion, our FY18-20E EPS is raised by 4%-11%. We also raised our 2019 PER target to 24x (from 20x; similar to our PER target for Kossan) given post-acquisition robust 2-year EPS CAGR of 23% and margin improvement. Our new TP is MYR9.85 (from MYR7.50). Maintain HOLD. | | |
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| | FYE Aug (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,888.5 | 3,409.2 | 4,142.4 | 5,084.2 | EBITDA | 523.3 | 485.0 | 652.1 | 825.4 | Core net profit | 361.1 | 332.7 | 433.8 | 511.3 | Core EPS (sen) | 28.9 | 26.5 | 34.4 | 40.1 | Core EPS growth (%) | 27.9 | (8.0) | 29.6 | 16.5 | Net DPS (sen) | 14.5 | 14.5 | 17.2 | 20.0 | Core P/E (x) | 31.2 | 33.9 | 26.2 | 22.5 | P/BV (x) | 6.2 | 5.6 | 5.1 | 4.6 | Net dividend yield (%) | 1.6 | 1.6 | 1.9 | 2.2 | ROAE (%) | 21.1 | 17.4 | 20.5 | 21.7 | ROAA (%) | 13.5 | 11.9 | 11.3 | 10.6 | EV/EBITDA (x) | 9.6 | 14.4 | 19.6 | 15.6 | Net debt/equity (%) | net cash | net cash | 64.7 | 54.2 |
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| | MACRO RESEARCH | | | | | | Brent Crude Oil and Dollar Fate Intertwine; Oil Up Dollar Down
by Nik Ihsan Raja Abdullah |
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| | | | | | Although indicators are overbought, Brent Crude Oil has yet to show any meaningful weakness. The rally from USD44.35 low in June 2017 has swung past the critical resistance-turned-support at USD58.30, and is now heading towards the USD69.60-USD72.70 congestion zone. At present, the trend is still up but we reckon that it could be choppy in the near-term due to the tussle between the bulls and the bears. | |
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| NEWS | | | Outside Malaysia:
U.S. December retail sales gain caps robust holiday season. U.S. retail sales increased in December for a fourth month, indicating strong consumer demand throughout the holiday season, according to Commerce Department figures released. Overall sales rose 0.4% after a revised 0.9% November gain. Sales excluding motor-vehicle dealers also increased 0.4% after climbing an upwardly revised 1.3%. So- called retail-control group sales, which are used to calculate GDP and exclude food services, auto dealers, building materials stores and gasoline stations, rose 0.3% following an upwardly revised 1.4% advance that was largest since 2005. 9 of 13 major retail categories showed stronger results. (Source: Bloomberg)
E.U: Euro-Area economic boom to roll on after strong start to 2018. Europe's growth resurgence is showing little sign of losing steam yet and economists have taken notice. In Bloomberg's monthly survey, the first of the year, respondents bumped up their 2018 outlook to 2.2%, close to the decade-high 2.4% pace estimated for last year. The optimism is in contrast to the muted view at the start of 2017. Economists back then saw momentum slowing, but had to keep upgrading projections to keep up with the economy's performance. The 19-nation region has started the year with a string of positive numbers, including stronger business sentiment in Germany and France, its biggest economies. Having long cast off its "sick man" tag, the improvements have given fresh impetus to the European Central Bank's hawkish policy makers to push for an end to crisis-era stimulus. (Source: Bloomberg)
U.K: London housing woe endures as prices drop to 2 1/2-year low. The new year brought little cheer for London's housing market with asking prices dropping to the lowest since August 2015. New sellers cut prices 1.4% in January to an average of GBP 600,926, according to a report by Rightmove Plc. In a further concerning sign for the market, the average number of days required to sell a house jumped to the longest since January 2012, reaching 78 from 71 a month earlier. The report suggests 2018 won't be any brighter for the capital's housing market, which was the worst performing in the U.K. in 2017. (Source: Bloomberg) | |
| | | | | Other News:
T7 Global: Partners China's largest construction firm to win M'sian rail projects. The group has formed a joint venture with a unit of China's largest construction and real estate conglomerate to bid for rail-related projects in Malaysia. The JV — named T7 China Construction Third Engineering S/B— will also take up other infrastructure and construction projects in the country. The JV is 51%-owned by T7's subsidiary T7 Kemuncak S/B and 49% by China Construction Third Engineering S/B — a unit of China Construction Third Engineering S/B , which is in turn a subsidiary of China State Construction Engineering Corp Ltd. (Source: The Edge Financial Daily)
Paramount: Buys Cyberjaya land for MYR149.7m to develop residential project. The group's wholly-owned subsidiary Paramount Property (Lakeside) S/B is buying 41.41 acres of land in Cyberjaya for MYR149.71m to build a gated and guarded landed residential development. The proposed acquisition is in line with the group strategy of replenishing its land bank at locations with strong growth potential. (Source: The Edge Financial Daily)
Titijaya Land: To ink MoU with Tokyu Land for collaboration in real estate development. Titijaya Land Bhd said it will enter into a memorandum of understanding (MoU) with Japan-based Tokyu Land Corp (TLC) tomorrow, to create a platform for collaboration in the aspects of real estate development, by way of either equity participation, joint operations or other means of collaboration. The group said the objective of the MoU is to establish a provisional collaboration to share and exchange their respective knowledge and expertise in the real estate industry and to collaborate for any property development projects. (Source: The Sun Daily) | |
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