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| | | | | | | | | | | | | | Share Price: | MYR3.42 | Target Price: | MYR4.10 | Recommendation: | Buy | | |
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| | | Seasonally weak quarter | | 1Q18 core earnings of MYR43m met just 15% of ours/consensus full-year forecasts. The shortfall largely came from its cement division as a result of the scheduled shutdown maintenance of its clinker plant. We lower earnings by 3%-5% for FY18E-FY20E to impute higher cost at the cement division. We also lower our PE multiple for cement and construction materials to reflect the potential extended timeline in works for Pan Borneo Sarawak. Maintain BUY with a lower RNAV-based TP of MYR4.10. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,551.3 | 1,606.7 | 2,098.7 | 2,244.1 | EBITDA | 418.9 | 404.2 | 404.2 | 423.3 | Core net profit | 212.4 | 263.2 | 283.1 | 310.2 | Core EPS (sen) | 19.8 | 24.5 | 26.3 | 28.9 | Core EPS growth (%) | (13.2) | 23.9 | 7.6 | 9.6 | Net DPS (sen) | 6.3 | 8.0 | 10.5 | 11.5 | Core P/E (x) | 17.3 | 14.0 | 13.0 | 11.8 | P/BV (x) | 1.7 | 1.6 | 1.5 | 1.4 | Net dividend yield (%) | 1.8 | 2.3 | 3.1 | 3.4 | ROAE (%) | 8.0 | 9.4 | 11.6 | 11.9 | ROAA (%) | 6.4 | 7.0 | 6.6 | 6.6 | EV/EBITDA (x) | 10.5 | 10.3 | 9.0 | 8.6 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | Share Price: | MYR6.00 | Target Price: | MYR4.90 | Recommendation: | Sell | | |
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| | | Expensive valuations | | 4QFY18 operating earnings were weaker QoQ, but bottomline was lifted by forex-related gains. Near-term earnings could be flattish QoQ, in the absence of capacity growth and rising NBR cost. Maintain our FY19-20E EPS and introduce FY21E. Our TP is now MYR4.90 (from MYR9.10) as we: (i) adjust for its recently completed 1-for-1 bonus issuance; (ii) raise our 2019 PER target to 31x (from 29x), being its latest +1SD to mean. Stock now trades at its 12M rolling fwd PER of 41x (+3SD: 43x). SELL. | | |
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| | FYE Mar (MYR m) | FY17A | FY18A | FY19E | FY20E | Revenue | 1,822.1 | 2,405.6 | 2,893.5 | 3,311.9 | EBITDA | 419.4 | 621.5 | 684.5 | 773.5 | Core net profit | 283.0 | 439.4 | 484.0 | 538.4 | Core FDEPS (sen) | 8.6 | 13.2 | 14.6 | 16.2 | Core FDEPS growth(%) | 9.8 | 54.0 | 10.2 | 11.2 | Net DPS (sen) | 4.3 | 8.0 | 8.8 | 9.8 | Core FD P/E (x) | 70.0 | 45.4 | 41.2 | 37.1 | P/BV (x) | 11.7 | 10.0 | 9.1 | 8.3 | Net dividend yield (%) | 0.7 | 1.3 | 1.5 | 1.6 | ROAE (%) | 17.8 | 23.9 | 23.1 | 23.4 | ROAA (%) | 13.3 | 17.9 | 17.6 | 17.7 | EV/EBITDA (x) | 19.9 | 32.5 | 29.4 | 26.1 | Net debt/equity (%) | 11.3 | 8.2 | 11.9 | 14.4 |
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| | MACRO RESEARCH | | | | | | Meeting with Council of Eminent Persons
by Suhaimi Ilias |
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| | | | | | We met Tun Daim Zainuddin and Tan Sri Dr Zeti Akhtar Aziz, members of the Council of Eminent Persons, who highlighted that the immediate policy objectives and priorities are people's well-being, review of mega projects and address governance issue. We expect comprehensive measures to be announced probably via a supplementary/mini budget amid on-going questions over Government finance. | |
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| | | | | | Remittances down on seasonal factor
by Suhaimi Ilias |
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| | | | | | Overseas Filipino Workers' Remittances (OFWR) fell -9.8% YoY in Mar 2018 (Feb 2018: +4.5 YoY), the first decline in five months, resulting in sluggish 1Q 2018 growth of just +0.8% YoY (4Q 2017: +5.9% YoY). | |
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| | | | | | KLTEC Index: On the Road to Recovery
by Nik Ihsan Raja Abdullah |
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| | | | | | Late profit taking dragged FBMKLCI 2.22pts lower at 1,848.20 yesterday. Decliners were led by YTL, ASTRO and PBBANK. Market breadth turned negative with losers outpacing gainers by 561 to 499. A total of 4.31b shares worth MYR4.45b changed hands. Post GE14, investors will likely shift focus to corporate earnings. Geopolitical worries as well as rising bond yields in the US could also weigh on the local stock market. | |
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| NEWS | | | Outside Malaysia:
U.S: Retail sales gain points to healthier 2Q 2018. U.S. retail sales rose in broad fashion last month as bigger after-tax paychecks helped compensate for rising fuel costs, signaling consumer demand was off to a firm start this quarter. The value of sales increased 0.3% in April, after a 0.8% advance in the prior month that was stronger than initially reported. So-called retail-control group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations, improved 0.4% after an upwardly revised 0.5% gain. (Source: Bloomberg)
U.S: Businesses bash Trump tariffs as China talks intensify. U.S. companies and business groups are lining up to oppose the Trump administration's plan to slap tariffs on Chinese imports, as the two nations step up efforts to resolve their trade dispute. About 120 firms and industry groups are scheduled to testify at a hearing that began Tuesday on the administration's plan to impose tariffs on USD50 billion in Chinese goods. So many groups signed up that the U.S. Trade Representative's Office extended the hearing by two days until Thursday. The USTR has received more than 2,700 comments. (Source: Bloomberg)
U.S: China's holdings of treasuries rise to five-month high in March, underscoring the allure of U.S. government debt even amid trade tensions between the world's two largest economies. China's holdings of U.S. bonds, bills and notes increased by USD11b to USD1.19tr in March, according to Treasury Department data. China remained the largest foreign creditor to the U.S., followed by Japan, whose holdings dropped by USD16b to USD1.04tr, the lowest level since October 2011. (Source: Bloomberg)
E.U: Economic growth slowed across Europe at the start of the year, with Germany seeing its pace of expansion cut in half amid weaker trade. The 0.3% increase in Europe's largest economy was softer than forecast and the weakest in more than a year. Dutch and Portuguese growth also cooled more than expected in the first quarter, while a similar trend was seen across central and eastern Europe. A deceleration in euro-area momentum to 0.4% was confirmed, while investors' expectations for the outlook remained close to the lowest since 2016. That raises the question for the European Central Bank whether this is merely a soft patch or indicative of something more alarming. (Source: Bloomberg)
China: Data shows a hint of slowdown while factories still hum. China's economic momentum broadly held up in April with industrial production exceeding forecasts, though slowing investment signaled a moderation in the coming months. Industrial output rose 7% YoY in April, versus 6% YoY in March. Retail sales expanded 9.4% YoY while Fixed-asset investment rose 7% YoY in the first four months (Source: Bloomberg) | |
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KKB Engineering: Unit accepts LoA for sub-contract works in Sarawak. Its unit has accepted a letter of award for a sub-contract for a project in Sarawak, the amount for which was not disclosed. Its subsidiary OceanMight S/B signed an LoA from Sapura Fabrication S/B for the provision of procurement and construction for wellhead deck, piles and conductors. Meanwhile, KKB Engineering Bhd posted a net profit of MYR1.34 million in the first quarter ended March 31, 2018, compared with a loss of MYR1.47m a year ago. (Source: The Edge Financial Daily)
Matrix Concepts: Inks MoU with Indonesian consortium for Islamic financial district development. The group has entered into a memorandum of understanding with PT Bangun Kosambi Sukses and PT Nikko Sekuritas Indonesia for the joint development of an Islamic financial district in Pantai Indah Kapuk 2, Jakarta. (Source: The Sun Daily)
Prestariang: 1Q net profit doubles thanks to SKIN project. Prestariang's net profit doubled to MYR6.51m for the first quarter ended March 31, 2018 (1QFY18), from MYR3.22m. in the previous corresponding period.The sharp jump was attributed to contribution from the group's technology division, in particular the concession revenue recorded from the Sistem Kawalan Imigresen Nasional (SKIN) project.(Source: The Edge Financial Daily) | |
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