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| | | | | | | | | | | | | | Share Price: | MYR4.47 | Target Price: | MYR5.60 | Recommendation: | Buy | | |
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| | | Values have emerged | | Weak demand for 2017's North American premium smartphones will translate to lower production in 1H18. As such, we expect volume loading for GTB's sensors to be negatively impacted between Mar-Jul 2018, before picking up again prior to 2018's launch of new smartphones in Sep 2018. For this, we cut FY18-20 earnings by 11%-17% and lower our TP to MYR5.60 (-11%), pegged to an unchanged 18x CY19 EPS. Nonetheless, we feel that recent selling is overdone (-32% YTD); upgrade to BUY for 25%. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 215.3 | 304.6 | 362.1 | 427.0 | EBITDA | 51.2 | 82.8 | 115.4 | 137.0 | Core net profit | 25.7 | 50.0 | 69.2 | 87.8 | Core FDEPS (sen) | 9.0 | 17.4 | 24.1 | 30.6 | Core FDEPS growth(%) | (64.6) | 94.4 | 38.5 | 26.9 | Net DPS (sen) | 16.0 | 13.0 | 17.2 | 21.8 | Core FD P/E (x) | 49.9 | 25.7 | 18.5 | 14.6 | P/BV (x) | 4.8 | 4.5 | 4.2 | 3.8 | Net dividend yield (%) | 3.6 | 2.9 | 3.8 | 4.9 | ROAE (%) | 9.1 | 18.8 | 23.7 | 27.9 | ROAA (%) | 7.7 | 14.1 | 16.9 | 20.1 | EV/EBITDA (x) | 16.0 | 21.7 | 10.3 | 8.6 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | Share Price: | MYR1.39 | Target Price: | MYR1.86 | Recommendation: | Buy | | |
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| | | Less risk, high return | | The correction in the share price of CSC has been exaggerated over tariff effect on US steel imports. As few major steel exporters to the US earned exemptions, it should ease concerns over the risk of local CRC market imbalances. We make no changes to our forecasts and maintain our BUY call with an unchanged TP of MYR1.86 based on 10.5x FY18 EPS. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,035.2 | 1,323.3 | 1,286.4 | 1,368.8 | EBITDA | 106.4 | 105.1 | 110.9 | 122.4 | Core net profit | 72.5 | 62.3 | 65.5 | 74.2 | Core EPS (sen) | 19.7 | 16.9 | 17.7 | 20.1 | Core EPS growth (%) | 58.6 | (14.2) | 5.1 | 13.2 | Net DPS (sen) | 14.0 | 10.0 | 8.9 | 10.0 | Core P/E (x) | 7.1 | 8.2 | 7.8 | 6.9 | P/BV (x) | 0.6 | 0.6 | 0.6 | 0.6 | Net dividend yield (%) | 10.1 | 7.2 | 6.4 | 7.2 | ROAE (%) | 8.7 | 7.3 | 7.8 | 8.5 | ROAA (%) | 8.5 | 7.0 | 7.2 | 7.8 | EV/EBITDA (x) | 4.9 | 3.9 | 2.2 | 1.8 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | SECTOR RESEARCH | | | | | | Exports boosted by CPO duty free exemption | NEUTRAL
by Chee Ting Ong |
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| | | | | | The timely CPO duty export exemption since 8 Jan for a period of 3 months lifted Malaysia's March exports to its 19-month high. However, March's stockpile of 2.32m MT was marginally higher-than-expected due to strong output. Given the extension of CPO duty free exemption till month-end and upcoming Ramadhan demand, we expect further decline in stockpile in April. We maintain our NEUTRAL call on the sector with selected BUYs on IOI, FR, GENP, SOP, and BAL. | |
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| | MACRO RESEARCH | | | | | | Dow Jones Industrial Average: Downward Bias Still Intact
by Nik Ihsan Raja Abdullah |
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| | | | | | Late buying support on selected blue chips lifted FBMKLCI 11.27pts higher at 1,860.98. Momentum was calm throughout the day after the Election Commission announced the polling date and after President Xi's keynote on Boao Forum for Asia which defused tariff tensions. Market breadth remained positive with gainers outpacing losers by 995 to 221. A total of 3.73b shares worth MYR2.71b changed hands. | |
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| NEWS | | | Outside Malaysia:
U.S: Wholesale prices climbed more than forecast in March, reflecting broad increases in the costs of services and goods, a Labor Department report showed. Producer-price index rose 0.3% MoM after 0.2% MoM gain the previous month. PPI climbed 3% YoY, the most since November, after 2.8% YoY gain in prior 12-month period. (Source: Bloomberg)
U.S: 'New Normal' of U.S.-China tensions seen weighing on investment. U.S.-China trade tensions may be a lingering reality that puts as much as USD400b in investment at risk in the world's two biggest economies, a new report said. Chinese investment into the U.S. slumped last year to USD29b from USD46b, as the Asian nation restricted outbound capital and the Trump administration took a tough stance on deals, according to the report from New York- based research firm Rhodium Group and the National Committee on U.S.-China Relations. U.S. investment into China was little changed at USD14b. (Source: Bloomberg)
E.U: ECB says don't worry as Euro area hits economic soft patch. The European Central Bank's top officials lined up to express cautious confidence in the euro-area economy after a series of reports pointing to a surprisingly weak start to the year, while reiterating that they'll move only slowly toward ending stimulus. President Mario Draghi and three of his most-senior colleagues signaled that while inflation remains too low and a global trade spat poses a new threat, the upturn is still intact. The comments come just over two weeks before the Governing Council meets to discuss how and when it might end its bond-buying program. (Source: Bloomberg)
U.K: Firms facing a shortage of workers are pushing up starting salaries, according to IHS Markit and the Recruitment and Employment Confederation. Pay for temporary or contract staff rose at the quickest pace in six months in March, as the supply of job candidates fell sharply, they said in a report. Vacancies grew across all categories, with engineers and IT workers the most sought after for permanent roles, and hotel and catering employees in highest demand for temporary jobs. Britain's decision to leave the European Union is making it harder for U.K. firms to attract workers from overseas, putting them under greater pressure to recruit from the domestic workforce. Signs of stronger wage growth may add weight to expectations that the Bank of England will raise interest rates next month. (Source: Bloomberg)
China: Xi vows to ease foreign ownership in financial firms in 2018. Chinese President Xi Jinping vowed to push ahead with efforts to open the nation's financial industry this year even as a trade dispute with the U.S. heats up. China will ensure policies announced last November to remove foreign ownership limits on banks, brokerages and insurers will be implemented in 2018, Xi said at the Boao Forum in Hainan. The nation will accelerate opening of its insurance industry, as well as ease requirements for foreign financial institutions to set up operations and expand their business scope, he added. Xi gave a deadline for freeing up the nation's USD40tr financial sector despite trade tensions stemming from U.S. President Donald Trump's plans to impose tariffs on Chinese exports. In November, China said it will remove foreign ownership limits on banks and allow overseas firms to take majority stakes in local securities ventures -- part of its efforts to "substantially" ease barriers in the industry. (Source: Bloomberg) | |
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Vertice: Construction unit bags MYR339.9m SUKE project. Its wholly-owned Vertice Construction S/B has bagged a subcontract worth MYR339.86m to construct and complete the mainline and other associated works of the Sungai Besi-Ulu Kelang (SUKE) elevated expressway. Construction period for the SUKE project is expected to last 19 months from the date of possession of the site, which is April 16, 2018.This is the group's largest construction project to date. (Source: The Edge Financial Daily)
YFG: Bags MYR55m job to build homes under Armed Forces housing scheme. The group has bagged an MYR55m contract to build 418 units of one-storey houses for the Angkatan Tentera Malaysia housing scheme in Tampin, Negeri Sembilan. The project is expected to commence on May 8 and be completed within 24 months. (Source: The Edge Financial Daily)
Boustead Holdings: Bags MYR44.77m job to maintain Navy's vessel. Its subsidiary Boustead Naval Shipyard S/B has received a MYR44.77m contract for the maintenance and upgrading of combat management system for a Royal Malaysian Navy vessel. The contract was offered by the Ministry of Defence and is expected to contribute positively to the group's earnings for the financial year ending Dec 31, 2018. (Source: The Edge Financial Daily)
TSR Capital: Seals development rights to build homes in Kwasa Damansara. The group has entered into a development rights agreement with a unit of Kwasa Land to build 260 units of residential properties valued at MYR295m.The project, located at Kwasa Damansara township, will include link villas, cluster villas, exclusive villas, town villas and condominiums. It is expected to be completed within six years in 2024. (Source: The Star)
Destini: Destini, Felcra in joint venture to provide MRO services. Destini and Felcra inked a memorandum of understanding (MoU) to provide, among others, maintenance, repair and overhaul (MRO) services for industrial facilities and equipment for the agriculture and related industries within Malaysia and the Asean region. Destini said the MoU will serve as a platform for Destini Engineering Technologies S/ to provide MRO services in the plantation industry, which is in line with its strategic direction of diversification of its recurring revenue within Destini's core business of MRO services. (Source: The Sun Daily) | |
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