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| | | | | | | | | | | | | | Share Price: | MYR1.89 | Target Price: | MYR1.84 | Recommendation: | Hold | | |
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| | | Hold your horses | | White Horse is the largest ceramic tile manufacturer in Malaysia with a ~31% market share. Earnings prospects are largely determined by the residential/commercial property cycle, which remains in a cyclical downturn. That said, we expect its earnings to bottom out in FY18 before picking up from FY19 onwards as supply and demand rebalances in the residential/commercial sector. We initiate coverage with HOLD and a TP of MYR1.84 based on FY18 PBV of 0.57x (1SD below its historical 12M fwd PBV mean) | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 695.2 | 642.8 | 634.6 | 652.4 | EBITDA | 90.4 | 54.4 | 56.7 | 66.9 | Core net profit | 36.1 | 11.6 | 10.9 | 20.4 | Core EPS (sen) | 16.2 | 5.1 | 4.8 | 8.9 | Core EPS growth (%) | (40.2) | (68.5) | (6.6) | 87.5 | Net DPS (sen) | 10.0 | 7.0 | 7.0 | 7.0 | Core P/E (x) | 11.7 | 37.1 | 39.8 | 21.2 | P/BV (x) | 0.5 | 0.6 | 0.6 | 0.6 | Net dividend yield (%) | 5.3 | 3.7 | 3.7 | 3.7 | ROAE (%) | 3.5 | 0.7 | 1.5 | 2.7 | ROAA (%) | 2.9 | 1.0 | 1.0 | 1.9 | EV/EBITDA (x) | 6.0 | 10.2 | 9.3 | 7.6 | Net debt/equity (%) | 12.2 | 14.6 | 12.6 | 10.5 |
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| | MACRO RESEARCH | | | | | | FBMKLCI Index: Downside Risk is Rising
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI plunged 34.84pts to 1,815.94 yesterday after China announced new tariffs on US goods. Blue chips took a beating, led by AMM, GENM and MAXIS. Likewise, dark cloud loomed over the regional bourses on trade war fears. Market breadth was bearish with losers overwhelmingly outpacing gainers by 1,105 to 111. A total of 3.27b shares worth MYR2.78b changed hands. Market could be choppy in the early going but confidence should improve after Wall Street made a comeback. | |
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| NEWS | | | Outside Malaysia:
U.S: China trade spat seen adding risks but not sinking U.S. economy. The latest tariff salvos between the U.S. and China have brought a trade war closer to reality. It's risk that the world's biggest economy is well positioned to ride out. China said it would impose an additional 25% levy on around USD50b of U.S. imports including soybeans, automobiles, chemicals and aircraft, in retaliation for a host of tariffs proposed hours earlier by President Donald Trump's administration. (Source: Bloomberg)
U.S: Fed officials say China trade brawl clouds policy outlook. Federal Reserve officials warn an escalating trade dispute between the U.S. and China is adding an unwelcome layer of doubt to an otherwise bright economic outlook, though it's premature to say what the fallout means for jobs, inflation or monetary policy. "It increases the uncertainty around the forecast," St. Louis Fed President James Bullard told reporters in Little Rock, Arkansas. "It does present some downside risk, but generally speaking it is too early to tell what the actual impact will be on the U.S. economy." (Source: Bloomberg)
U.S: Growth in service industries cools for a second month as orders settled back from the fastest pace in more than 12 years, a survey from the Institute for Supply Management showed. Non-manufacturing index fell to 58.8 from February's 59.5; readings above 50 indicate growth. New orders measure slid to 59.5 from 64.8, which was highest since Aug. 2005. Gauge of business activity dropped to 60.6 from 62.8. Employment index increased to 56.6 from 55. (Source: Bloomberg)
E.U: Euro-Area inflation ticks up as ECB prepares stimulus exit. Euro-area inflation accelerated last month, buttressing the arguments of policy makers keen to phase out unprecedented stimulus. The inflation rate rose to 1.4% in March, the highest level since the end of last year. The core rate remained unchanged. More than three years after the European Central Bank cut interest rates below zero and started its asset-purchase program, policy makers are finally confident inflation will return to their goal of below but close to 2%. That confidence has fuelled a debate over how and when to scale back support, with officials telling investors they're are broadly right in anticipating an end of bond buying by December and the first rate increase in the middle of next year. (Source: Bloomberg)
S. Korea: Worries it will be a victim of China-U.S. trade war. President Donald Trump's tariffs against China are making South Korea increasingly concerned about the collateral damage to its own exporters, which sell huge volumes of parts and components that go into China's final products. Korea sold USD142b of goods to China last year, its biggest export market, and 79% of those were intermediate products. Hyundai Research Institute estimates that Korean exports to China could drop by about half the amount of any decline in Chinese exports to the U.S. In addition, the chance of Korean companies benefiting by displacing Chinese competitors in the U.S. market is low, said Mun Byung-ki, a senior researcher at Institute for International Trade in Seoul, citing Trump's intention to foster American manufacturers. (Source: Bloomberg) | |
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Hiap Teck Venture: To pare stake in Eastern Steel, eyes ops resumption. The group is disposing of a 20% stake in Eastern Steel S/B to Shanxi Jianlong Industry Co Ltd for MYR139.3m, a move it said could potentially bring about a "successful turnaround". Eastern Steel is principally involved in manufacturing, selling, and dealing of steel products using blast furnace plant, but operations had halted since October 2015 to minimise losses due to difficult market conditions. It was a joint venture company in which Hiap Teck, Orient Steel Investment Pte Ltd and Chinaco Investment Pte Ltd held 55%, 40% and 5% equity shareholdings respectively. Today Hiap Teck said it is paring down its stake from 55% to 35% by way of equity and debt transfer, to China-based steel producer Jianlong. (Source: The Edge Financial Daily)
Datasonic: Unit gets extension of pioneer status. The pioneeer status of its wholly-owned unit, Datasonic Smart Solutions S/B, has been extended for another five years. The group's subsidiary's statutory income from approved activities is thus exempted from tax during the period which took effect on May 18, 2017 and ends on May 17, 2022. The extension is expected to contribute positively to the financial results of the group, said Datasonic. (Source: The Edge Financial Daily)
Bertam Alliance: Bid to waive PN17 classification rejected. The group has been classified as an affected listed issuer under Practice Note 17 (PN17) as Bursa Malaysia has rejected its application for a waiver. The company said the bourse made its decision after taking into consideration the winding-up order against its wholly-owned unit Bertam Development S?B (BDSB), which accounts for at least 50% of the company's total assets. Although BDSB had appealed against the winding-up order, it said there is no certainty that the order can be set aside in the near future. (Source: The Edge Financial Daily) | |
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