| | | FEATURED
CALLS | Malaysia | AirAsia X Bhd
Better operational performance; U/G to BUY
Mohshin Aziz | | | | |
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| | | | | | | | | | | | | | Share Price: | MYR5.07 | Target Price: | MYR5.50 | Recommendation: | Hold | | |
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| | | A slow start as expected | | Axiata got off to a slow start as expected, with management having previously cautioned against currency headwinds and pricing pressures. Nevertheless, earnings can still catch up in our view, particularly if XL's dynamics improve, and Idea ceases being equity-accounted post-merger completion. Maintain HOLD with an unchanged MYR5.50 TP. We see risk-reward as being merely balanced for now. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 21,565.4 | 24,402.4 | 24,378.3 | 25,461.7 | EBITDA | 8,012.6 | 9,230.1 | 9,338.8 | 9,945.3 | Core net profit | 1,418.0 | 1,205.0 | 1,396.9 | 1,696.2 | Core EPS (sen) | 16.0 | 13.4 | 15.4 | 18.7 | Core EPS growth (%) | (33.1) | (16.1) | 15.2 | 21.4 | Net DPS (sen) | 8.0 | 8.5 | 13.1 | 15.9 | Core P/E (x) | 31.7 | 37.8 | 32.8 | 27.0 | P/BV (x) | 1.9 | 1.9 | 1.8 | 1.8 | Net dividend yield (%) | 1.6 | 1.7 | 2.6 | 3.1 | ROAE (%) | 2.1 | 3.8 | 5.6 | 6.8 | ROAA (%) | 2.2 | 1.7 | 2.0 | 2.4 | EV/EBITDA (x) | 8.0 | 7.3 | 6.9 | 6.5 | Net debt/equity (%) | 59.1 | 40.6 | 40.8 | 40.2 |
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| | | | | | | | | | | | Share Price: | MYR2.16 | Target Price: | MYR2.42 | Recommendation: | Buy | | |
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| | | Still our Top Pick in the sector | | Inari's 9MFY6/18 core net profit of MYR232m (+48% YoY) beats consensus' expectations at 84% of FY18E but was slightly below ours at 72%, with the slight shortfall from lower-than-expected volume loading from IR LED shipment and USDMYR forex volatility. We lower our FY18-20E earnings by 7%-9%. Together with the recent 1-for-2 bonus issue and ESOS, our TP is now adjusted to MYR2.42 (from MYR4.20), pegged to an unchanged 20x CY19 EPS. Maintain BUY. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,043.1 | 1,176.7 | 1,429.8 | 1,611.0 | EBITDA | 203.7 | 303.7 | 408.9 | 478.0 | Core net profit | 155.8 | 206.4 | 303.3 | 352.1 | Core EPS (sen) | 5.2 | 6.6 | 9.1 | 10.6 | Core EPS growth (%) | 8.2 | 27.4 | 38.6 | 16.1 | Net DPS (sen) | 2.8 | 5.5 | 6.8 | 7.9 | Core P/E (x) | 41.8 | 32.8 | 23.7 | 20.4 | P/BV (x) | 9.5 | 7.7 | 7.4 | 6.7 | Net dividend yield (%) | 1.3 | 2.6 | 3.2 | 3.7 | ROAE (%) | 24.3 | 29.2 | 32.9 | 34.6 | ROAA (%) | 18.2 | 19.9 | 24.1 | 25.6 | EV/EBITDA (x) | 13.8 | 13.2 | 16.4 | 14.0 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | Share Price: | MYR0.38 | Target Price: | MYR0.47 | Recommendation: | Buy | | |
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| | | Better operational performance; U/G to BUY | | 1Q18's core net profit of MYR65.4m was above expectations at 49% of FY18 forecast. The Thai associate outperformed, profits tripled YoY and is churning 56% higher profits than the Malaysia's operations. Demand outlook remains buoyant but the rising jet fuel price is a challenge. We raise our FY18-20 earnings forecast by 34%/11%/11% to factor in higher associate contribution and other revenue and cost variables. Our new TP raised to MYR0.47 (+8 sen) based on a lower 10.9x 2018 PER. U/G BUY. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 4,006.5 | 4,562.0 | 4,868.6 | 5,389.5 | EBITDAR | 1,235.6 | 1,196.9 | 1,345.2 | 1,479.9 | Core net profit | 205.5 | 85.5 | 179.1 | 221.6 | Core EPS (sen) | 5.0 | 2.1 | 4.3 | 5.3 | Core EPS growth (%) | nm | (58.4) | 109.5 | 23.7 | Net DPS (sen) | 0.0 | 0.0 | 0.0 | 0.0 | Core P/E (x) | 7.7 | 18.4 | 8.8 | 7.1 | P/BV (x) | 1.5 | 1.6 | 1.3 | 1.1 | Net dividend yield (%) | 0.0 | 0.0 | 0.0 | 0.0 | ROAE (%) | 29.3 | 10.2 | 18.3 | 18.4 | ROAA (%) | 4.8 | 1.9 | 3.7 | 3.6 | EV/EBITDAR (x) | 1.8 | 1.5 | 1.8 | 2.6 | Net debt/equity (%) | 68.5 | 39.4 | 68.1 | 161.6 |
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| | | | | | | | | | | | Share Price: | MYR0.85 | Target Price: | MYR1.25 | Recommendation: | Buy | | |
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| | | A good start | | UEMS' 1Q18 net profit of MYR25m (+9% YoY) was in line as we expect earnings to pick up strongly in 2H18 on the completion of land disposals and lumpy earnings recognition from its Melbourne projects. Property sales were surprisingly strong at MYR434m in 1Q18 - above expectation, thanks to overseas projects. We maintain our earnings forecasts and MYR1.25 TP (on an unchanged 0.45x P/RNAV peg). UEMS is a tactical BUY. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,841.5 | 2,903.4 | 1,811.4 | 2,034.0 | EBITDA | 221.9 | 507.4 | 502.1 | 504.3 | Core net profit | 144.8 | 278.2 | 222.2 | 277.9 | Core FDEPS (sen) | 2.8 | 5.4 | 4.3 | 5.4 | Core FDEPS growth(%) | (45.8) | 92.1 | (20.1) | 25.1 | Net DPS (sen) | 0.0 | 1.0 | 1.0 | 1.1 | Core FD P/E (x) | 30.3 | 15.8 | 19.7 | 15.8 | P/BV (x) | 0.6 | 0.5 | 0.5 | 0.5 | Net dividend yield (%) | 0.0 | 1.2 | 1.2 | 1.3 | ROAE (%) | na | na | na | na | ROAA (%) | 1.1 | 2.0 | 1.5 | 1.8 | EV/EBITDA (x) | 36.3 | 16.7 | 17.3 | 17.6 | Net debt/equity (%) | 40.7 | 45.9 | 58.5 | 59.1 |
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| | | | | | | | | | | | Share Price: | MYR4.20 | Target Price: | MYR4.60 | Recommendation: | Hold | | |
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| | | An untimely miss | | 1Q18 results were below expectations, with the miss arising from a combination of revenue weakness and higher-than-expected taxes. With TM already facing uncertainty over broadband pricing, the revenue softness is untimely and creates an additional overhang for the stock, which has corrected 33% YTD. Maintain HOLD with a lower TP of MYR4.60 (-23%) post our earnings revisions. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 12,060.9 | 12,085.1 | 12,193.7 | 12,533.2 | EBITDA | 3,820.0 | 3,671.1 | 3,353.3 | 3,609.6 | Core net profit | 847.9 | 863.3 | 638.7 | 700.7 | Core EPS (sen) | 22.6 | 23.0 | 17.0 | 18.6 | Core EPS growth (%) | (5.3) | 1.8 | (26.0) | 9.7 | Net DPS (sen) | 21.5 | 21.5 | 18.6 | 18.6 | Core P/E (x) | 18.6 | 18.3 | 24.7 | 22.5 | P/BV (x) | 2.1 | 2.0 | 2.0 | 2.0 | Net dividend yield (%) | 5.1 | 5.1 | 4.4 | 4.4 | ROAE (%) | 10.0 | 12.0 | 8.2 | 9.0 | ROAA (%) | 3.4 | 3.5 | 2.6 | 2.8 | EV/EBITDA (x) | 7.1 | 8.1 | 6.8 | 6.6 | Net debt/equity (%) | 64.0 | 77.3 | 91.4 | 102.8 |
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| | | | | | | | | | | | Share Price: | MYR3.90 | Target Price: | MYR3.25 | Recommendation: | Sell | | |
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| | | 1Q18: Below expectations | | 1Q18 net loss of MYR69m overshot our and consensus loss forecasts. Cement ASPs have yet to show signs of recovery. Also, 2018 industry cement demand may not significantly improve if the new government's review of mega infrastructure projects results in delays. Hence, with more cloudy industry dynamics, we lower our TP to MYR3.25 (-36%), based on a lower P/B peg of 1.0x (-3.0SD to mean; previously 1.5x P/B at -2SD). Maintain our EPS forecasts for now, pending a briefing this Friday. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,552.2 | 2,248.8 | 2,518.8 | 2,928.6 | EBITDA | 302.1 | (44.7) | 120.7 | 367.3 | Core net profit | 84.9 | (215.2) | (87.4) | 99.1 | Core EPS (sen) | 10.0 | (25.3) | (10.3) | 11.7 | Core EPS growth (%) | (66.3) | nm | nm | nm | Net DPS (sen) | 5.0 | 0.0 | 0.0 | 10.5 | Core P/E (x) | 39.0 | nm | nm | 33.4 | P/BV (x) | 1.1 | 1.2 | 1.2 | 1.2 | Net dividend yield (%) | 1.3 | 0.0 | 0.0 | 2.7 | ROAE (%) | 2.5 | (7.3) | (3.1) | 3.6 | ROAA (%) | 2.0 | (5.0) | (2.0) | 2.2 | EV/EBITDA (x) | 20.7 | nm | 31.0 | 10.0 | Net debt/equity (%) | 4.6 | 13.5 | 15.0 | 12.5 |
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| | MACRO RESEARCH | | | | | | Reserves stalled after surge
by Suhaimi Ilias |
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| | | | | | External reserves fell marginally by -USD0.1b to USD109.4b as at 15 May 2018 from USD109.5b as at 30 Apr 2018 amid indication of net portfolio outflows before and after GE14, following the +USD6.3b surge between end-Feb 2018 and mid-Apr 2018. The latest tally is equivalent to 7.6 months of retained imports and 1.1 times of short-term external debt. | |
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| | | | | | KLCON Index: Current Sell-off Could Take a Break
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI fell for second day as key heavyweights like TM, ASTRO and PCHEM were sold down. At day's end, the benchmark fell 8.55pts to 1,845.03. Market breadth was weak with losers outpacing gainers by 624 to 356. A total of 2.35b shares worth MYR2.74b changed hands. Taking cue from the weak overnight US markets and disappointing corporate earnings, market will continue to trend lower. O&G stocks, however, could hog the limelight as oil price headed higher. | |
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| NEWS | | | Outside Malaysia:
U.S: There's a big gender gap in retirement investing confidence. Women are a lot less confident than men when it comes to retirement investing, a divide that could perpetuate America's gender savings gap. Among college-educated, not-yet-retired men with self- directed retirement accounts, such as 401(k)s and IRAs, 60% say they're comfortable in managing their investments, according to a Federal Reserve survey. That compares with 35% of female bachelor's degree holders -- a smaller share than the 41% of men with a high school degree or less who are comfortable managing their accounts. (Source: Bloomberg)
U.S: Fed poll shows many Americans missing solid job market's bounty. Many U.S. households remain in a precarious financial position despite unemployment falling to the lowest level in years, a new Federal Reserve survey shows. The results of the Fed's 2017 report on the economic well-being of U.S. households, found that conditions have generally improved but many groups continue to struggle. Based on a survey of more than 12,000 people in November and December 2017, the report showed two in five Americans don't have enough savings to cover a USD400 emergency expense, and one in four don't feel they are "at least doing OK" financially. In December, the unemployment rate was 4.1%, and fell further to 3.9% in April, marking the lowest level since 2000. "This year's survey finds that rising levels of employment are translating into improved financial conditions for many but not all Americans," (Source: Bloomberg)
E.U: Most mobile workforce is now staying home in record numbers. A record share of Poles, once among the most mobile workers in the European Union, has decided against emigration, choosing instead to ride a domestic jobs boom as labor shortages mount from Germany to the U.K. With unemployment near the lowest ever and about every second company reporting greater difficulty in finding staff at home, almost 76% of Poles are "completely" ruling out the option of seeking employment abroad, according to a survey released by Work Service SA. That's the most since the Warsaw-based recruiting and human services provider began to monitor migration preferences in Poland four years ago, when half the respondents planned to stay home. (Source: Bloomberg)
China: Will cut the import duty on passenger cars to 15%, further opening up a market that's been a chief target of the U.S. in its trade fight with the world's second-largest economy. The Finance Ministry said the levy will be lowered effective July 1 from the current 25% that has been in place for more than a decade, boosting shares of automakers from India to Europe. A reduction in the import duty follows a truce between President Donald Trump's administration and Chinese officials as they seek to defuse tensions and avert an all-out trade war. (Source: Bloomberg) | |
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Destini: Secures MYR32m Pakistan tubular services job. The group has clinched a two-year oil and gas contract to provide a tubular running services in Pakistan, worth USD8m or MYR31.76m. The contract — awarded by Lyallpur Oil Tool Pvt Ltd (LOT) to its wholly-owned Destini Oil Services S/B — spans from July 1, 2018 to June 30, 2020 and comes with a one-year extension option. Destini will provide specialised oilfield equipment and experienced expatriate personnel for LOT to execute tubular running services. (Source: The Edge Financial Daily)
Serba Dinamik: Records stronger 1Q profit, pays 1.9sen dividend. The group posted a stronger net profit in the first quarter ended March 31, 2018 — in tandem with higher revenue — and declared a first interim dividend of 1.9sen/sh. Net profit grew 18.2% to MYR92.65m from MYR78.33m a year earlier. Revenue was up 19.3% to MYR730.83m from MYR612.42m, due to stronger contribution from its operations and maintenance segment, which comprised about 86.8% of the group's quarterly revenue. (Source: The Edge Financial Daily)
Tropicana: 1Q net profit surges 71% on cost savings, advanced progress of projects. The group's net profit surged 71.49% YoY to MYR46.4m in its first quarter ended March 31, 2018 from MYR27.06m due to cost savings and advanced progress of projects. Quarterly revenue went up 21.22% to MYR453m from MYR373.68m on higher progress billings from advanced stages of construction work for many of the group's ongoing projects. Moving forward, the group plans to introduce new phases across its signature developments, namely Tropicana Heights, Tropicana Aman, Tropicana Metropark and Tropicana Danga Cove, which are expected to continue to contribute positively to its earnings. (Source: The Edge Financial Daily) | |
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