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| | | | | | | | | | | | | | Share Price: | MYR1.29 | Target Price: | MYR1.42 | Recommendation: | Hold | | |
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| | | New MFRS 116 impacts negatively | | With the adoption of the revised MFRS 116 wef 1 Jan 2018, we estimate TSH is likely to raise its yearly plantation depreciation charges by MYR30m p.a, and revise downwards its shareholders' fund by -29%. We lower our FY18-20 EPS forecasts by -15%/-13%/-11% to reflect the new MFRS. We believe recent price weakness has largely priced in the negatives. TSH remains a HOLD with a lower TP of MYR1.42 (previously MYR1.65) on unchanged 19x FY18 PER (about 1SD below its 5-year mean). | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 872.3 | 1,073.5 | 1,127.9 | 1,135.2 | EBITDA | 155.2 | 249.9 | 251.4 | 265.2 | Core net profit | 69.2 | 100.8 | 103.5 | 119.4 | Core EPS (sen) | 5.1 | 7.4 | 7.5 | 8.6 | Core EPS growth (%) | (8.3) | 43.7 | 1.3 | 15.4 | Net DPS (sen) | 2.0 | 2.0 | 1.8 | 2.1 | Core P/E (x) | 25.1 | 17.5 | 17.2 | 14.9 | P/BV (x) | 1.2 | 1.7 | 1.6 | 1.5 | Net dividend yield (%) | 1.6 | 1.6 | 1.4 | 1.6 | ROAE (%) | 2.9 | 9.0 | 10.0 | 10.2 | ROAA (%) | 2.1 | 3.2 | 3.5 | 3.9 | EV/EBITDA (x) | 26.2 | 14.7 | 12.8 | 11.9 | Net debt/equity (%) | 84.1 | 110.4 | 101.5 | 89.1 |
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| | SECTOR RESEARCH | | | | | | Crude oil: Up, up and away? | POSITIVE
by Thong Jung Liaw |
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| | | | | | We posit that the geopolitical supply risk (instability in Middle East and unrest in Venezuela) could trigger volatility in the oil market, leading to oil price potentially overshooting above USD80/bbl and put the sector to be back in the limelight in the interim. We reiterate our POSITIVE view for the sector. Our three key BUYs are Dialog, Yinson and SAPE. | |
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| | | | | | Brace yourself for MFRS impact
by Chee Ting Ong |
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| | | | | | Most Malaysian listed planters will need to comply with MFRS 116 and 141 this year. A few large cap planters have "early" adopted them and the impact had been a mix bag. For the rest of the stocks under our coverage, we believe TSH will be most impacted. Its upstream assets is presently valued at MYR30,800/ha, double its peers. We lower TSH's TP and FY18-20E EPS by -11% to -15%, but retained our HOLD call. We maintain NEUTRAL on the sector with selective BUYs on IOI, GENP, SOP. | |
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| | MACRO RESEARCH | | | | | | ASEAN Equities: Rebound is Imminent
by Nik Ihsan Raja Abdullah |
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| | | | | | MSCI AC ASEAN (PR) USD Index (MXSO) staged a pullback last week but the magnitude was steeper than expected. The index violated our initial target of 866.00, hitting a low of 855.53. That said, the candles continue to hold on above the 61.8% Fibonacci Retracement level of 848.00, suggesting that the bias remains bullish. | |
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| NEWS | | | Outside Malaysia:
E.U: Sounds trade-war alarm as Trump points gun 'at our head'. The European Union warned about the costs of a trans-Atlantic trade war while bracing for one to erupt after the U.S. signaled it will reject the bloc's demand for an unconditional waiver from metals-import tariffs. Donald Trump's administration is asking Europe, Canada and other allies to accept quotas in exchange for an exemption from steel and aluminum tariffs that kick in May 1, when a temporary waiver expires. This puts the EU in the difficult position of either succumbing to U.S. demands that could breach international commerce rules or face punitive tariffs. Forcing governments to limit shipments of goods violates World Trade Organization rules, which prohibit so-called voluntary export restraints. The demand is also contrary to the entire trade philosophy of the 28-nation bloc, which is founded on the principle of the free movement of goods. The White House last month temporarily shielded some trading partners including the EU from the duties, at 25% for imported steel and 10% for aluminum on the grounds of protecting national security. (Source: Bloomberg)
U.K: British businesses are feeling upbeat about the economy, according to a Lloyds Bank survey. Just over half said they were more optimistic about the economy than they were three months ago. Nevertheless, the balance expecting stronger trading fell, the report published showed. The survey of 1,200 companies was carried out between March 29 and April 18. Figures showed the economy registered its worst performance since the end of 2012 in the first quarter. The retail sector had the weakest level of confidence, Lloyds said, as adverse weather in the first quarter hit sales. A separate survey from the Confederation of British Industry showed private-sector output rising at its slowest pace since 2016 in the latest three months, with consumer firms "particularly weak," reflecting the pressure on incomes from inflation. (Source: Bloomberg)
China: Steel industry posts lower profits for 1Q 2018. China's iron and steel industry made total profits of CNY56.9b in 1Q 2018, lower than the fourth quarter of last year, state-run Xinhua News Agency reported, citing data from China Iron and Steel Association. Steel prices fell about CNY1,000 per metric ton in the first quarter, but rebounded slightly in April. If prices can not exceed CNY4,000 per metric ton in May and June, steel companies are unlikely to report higher profits for this year, Xinhua cited CISA's Secretary General Liu Zhenjiang as saying. (Source: Bloomberg)
Southeast Asia: Leaders agree to fast track regional trade pact. Southeast Asian leaders agreed to work intensively toward an agreement by the end of this year on plans to create what could potentially be the world's biggest trading bloc. Attempts to advance the so-called Regional Comprehensive Economic Partnership were a key talking point at a summit of the Association of Southeast Asian Nations that concluded in Singapore. If ever fully achieved, the partnership would include the 10 Asean nations as well as China, India, Japan, South Korea, Australia and New Zealand, and cover one third of world's economy and almost half its population. While the pact doesn't seek to impose higher standards in areas such as labor and environmental protection, like the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership signed earlier this year, consensus is proving elusive. A major obstacle is India's requirement that any agreement to reduce tariffs on goods and services should allow for free movement of people, something India wants for its highly skilled information technology sector. (Source: Bloomberg) | |
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Auto: Perodua CEO hopes talks will not impact its partnership with Daihatsu. Perusahaan Otomobil Kedua Sdn Bhd's president and CEO Datuk Dr Aminar Rashid Salleh said he hopes that the talks between UMW Holdings and MBM Resources will not have any negative impact on the partnership between Perodua and its technological partner Daihatsu Motor Co Ltd. He was commenting on The Edge Financial Daily's report entitled "Concerns on Perodua's technology partner unfounded, says CEO" that was published last Friday. The report quoted Aminar as saying that "there should not be any concerns on Daihatsu. I'm sure the shareholders can sort the issues out among themselves. For us at Perodua, it is still business as usual and whatever the shareholders decide, we will respect their decision". Aminar clarified what he meant by those comments in a statement yesterday— that he hopes that the talks between UMW and MBMR will not have any negative impact on the partnership between Perodua and Daihatsu. (Source: The Edge Financial Daily)
MISC: Allocates USD4b for capex. The company has allocated USD4b in capex over the next five years with the aim of securing more floating production storage and offloading (FPSO), and shuttle tankers projects. Its FPSO segment is grouped under offshore business and shuttle tankers comes under the petroleum and product shipping segment. According to the president and CEO, Yee Yang Chien, USD500m would be set aside for potential FPSO and shuttle tanker contracts yet to be secured this year. Yee also said 30% of the capex would be funded from equity and 70% from bank borrowings. The LNG segment contributed the majority of the company's earnings followed by the offshore business. (Source: The Sun Daily)
Petronas Dagangan: Syed Zainal is the new MD/CEO. The company will have Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir as its new managing director and CEO. The company said in a statement yesterday that he will assume the posts with effect from June 1. He takes over from Datuk Mohd Ibrahimnuddin Mohd Yunus who is resigning as the managing director and CEO due to the staff mobility within the Petronas Group. (Source: The Sun Daily) | |
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