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| | | | | | | | | | | | | | Share Price: | MYR1.97 | Target Price: | MYR2.70 | Recommendation: | Buy | | |
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| | | Share price over-corrected? | | Post analyst briefing yesterday, we lower FY18-20 net profit forecasts by 7%-12% on higher opex at the Malaysian operations, affected by VSI's inability to pass through (i) higher labour costs; (ii) a specific input material price hike for older consumer electronics in production. Alongside a regional de-rating of technology names due to concerns of a US-China trade war, we lower our CY19 PER target for VSI to 16x to derive a new MYR2.70 TP. Maintain BUY. | | |
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| | FYE Jul (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,175.6 | 3,281.3 | 4,174.5 | 4,946.4 | EBITDA | 226.4 | 322.0 | 370.2 | 461.2 | Core net profit | 135.4 | 175.6 | 182.1 | 247.5 | Core EPS (sen) | 8.6 | 11.1 | 11.5 | 15.6 | Core EPS growth (%) | (18.0) | 29.7 | 3.7 | 36.0 | Net DPS (sen) | 4.7 | 5.9 | 5.8 | 7.8 | Core P/E (x) | 23.0 | 17.7 | 17.1 | 12.6 | P/BV (x) | 3.5 | 2.9 | 2.7 | 2.4 | Net dividend yield (%) | 2.4 | 3.0 | 2.9 | 4.0 | ROAE (%) | 14.2 | 16.1 | 16.5 | 20.5 | ROAA (%) | 7.1 | 7.2 | 6.0 | 7.4 | EV/EBITDA (x) | 10.9 | 12.6 | 10.3 | 8.3 | Net debt/equity (%) | 18.4 | 28.3 | 33.8 | 31.4 |
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| | MACRO RESEARCH | | | | | | FBMKLCI Index: No Real Winner in the Short Term
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI took a beating yesterday as sentiment was spooked by the selloff in US markets on Monday. At day's end, the benchmark fell 7.57pts to 1,850.78, led by declines in ASTRO, NESZ and TNB. Broader market remained negative with losers outpacing gainers by 699 to 236. A total of 1.89b shares worth MYR1.90b changed hands. Expect FBMKLCI to snap a two-day decline after Wall Street rebounded overnight. There could be spillover buying on tech stocks, mirroring gains in Amazon. | |
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| NEWS | | | Outside Malaysia:
U.S: Job openings in U.S. increased in March, new private gauge shows. The wait for timely data on U.S. job openings just got shorter, with a fresh attempt by a company to produce an index ahead of the government's report. An index of positions waiting to be filled rose in March by 11% from the previous month to 166.7, according to the new gauge released by iCIMS Inc., a recruiting-software provider based in Holmdel, New Jersey, that processes more than 3 million jobs and 61 million applications a year. On an unadjusted basis, openings were up 24%, close to the average March gain over the previous three years. The data are consistent with other signs that the labor market remains tight. It provides a picture of March vacancies ahead of the government's monthly employment report. (Source: Bloomberg)
U.S: Car-sales rebound eases concern on first-quarter GDP slump. Stronger-than-forecast automobile sales have formed a silver lining for the cloud that was hanging, like in years past, over first-quarter U.S. economic growth. Purchases of cars and light trucks unexpectedly picked up to a 17.4 million annualized rate in March, the fastest this year, according to data from WardsAuto. The rebound will support gains in retail sales and consumer spending, bolstering the view that the biggest chunk of the economy is emerging from a recent soft patch as tax cuts give Americans more spending power. (Source: Bloomberg)
U.S: Tariff list aims at technology China wants to dominate. The U.S. proposed imposing 25% tariffs on about USD50b worth of Chinese-made products, focusing on high-tech items from semiconductors to lithium batteries while seeking to minimize the impact on American consumers. "This level is appropriate both in light of the estimated harm to the U.S. economy, and to obtain elimination of China's harmful acts, policies, and practices," the U.S. Trade Representative's office said. The U.S. is targeting the 1,300 product lines to try and force China to change its intellectual property practices, the office said. In deciding which products to hit, U.S. officials identified items that "benefit from Chinese industrial policies, including Made in China 2025," USTR said, referring to Beijing's plan to dominate key strategic technologies. (Source: Bloomberg)
E.U: Euro-area manufacturing expanded at the weakest pace in eight months in March as factories delayed production due to increasing capacity constraints. A Purchasing Managers' Index dropped to 56.6 from 58.6 - in line with a previous flash estimate -- IHS Markit said. Activity slowed across countries and industries in the region but remained indicative of solid growth nonetheless, it said. (Source: Bloomberg)
Australia: Central bank left interest rates unchanged, with Governor Philip Lowe instead turning the spotlight abroad to rising U.S. funding costs that could hurt local borrowers. Lowe and his board kept the cash rate at a record-low 1.5% for a 20th straight month, with markets and economists expecting no change in policy until next year. He signaled increasing concerns at the reverberations from President Donald Trump's policies amid the U.S.'s growing trade spat with China and a recent surge in short-term money market rates at home. (Source: Bloomberg) | |
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Vertice: Bags MYR218.5m contract, its biggest to-date win. The group has been awarded a sub-contract job valued at MYR218.48m in relation to upgrading works of the federal road from Gambang, Pahang, to Segamat, Johor. Vertice said its job scope involves the coordination, inspection, testing, commissioning, as well as obtaining final approval for works done for the proposed upgrading works of the Federal Road 12. (Source: The Edge Financial Daily)
Petronas: Delivers first LNG cargo to Hokuriku Electric. Petronas has delivered its first liquefied natural gas (LNG) cargo to Japan's Hokuriku Electric Power Co in mid-March. The delivery is the beginning of an agreement signed with Hokuriku Electric Power Co in December 2016. It will see Petronas supplying up to six cargoes of LNG per year for 10 years, Petronas said in a statement. (Source: The Sun Daily)
Bina Puri: Seeks collaboration with Sabah state investment arm to build hydropower plants. Its wholly-owned subsidiary BP Energy S/B had on March 29 signed a Memorandum of Understanding with Warisan Harta Sabah to collaborate on the proposed development of the hydropower sites, which are expected to have capacity of 5 megawatts (MW) and 3.5 MW respectively. Collaborating with Warisan Harta Sabah will give Bina Puri an advantageous platform to venture into the development of hydropower plants in the state, the group said. (Source: The Edge Financial Daily) | |
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