FW: AmBank Research - Denko Industrial: Expansions on track BUY, 6 Jun 2018

 

 

STOCK FOCUS OF THE DAY

Denko Industrial: Expansions on track                                                                    BUY

 

We maintain our BUY recommendation on Denko Industrial Corporation (Denko) with unchanged forecasts and fair value of RM1.76/share, based on a CY19F PE of 13x. We came away from Denko’s analyst briefing reassured of its positive earnings prospects.

 

Denko is in the midst of renegotiating pricing terms with its key customer. At the top of its agenda is to pass on rising raw material costs and foreign workers levy. This is expected to improve GPM going forward, consistent with our assumption. Denko is also striving to secure additional jobs from its key customer for an upcoming 187K sq ft plant in Jalan Hasil, Johor Bahru, which is slated for completion in September 2018.

 

The original Denko operations (ex-IMS) broke even in FY18, and only 2 months of financial results were consolidated. Moving forward, the group will consolidate full financial results of the original Denko operations. Two assembly lines for a new floor-care product have already been commissioned in its Jalan Dewani factory, Johor Bahru, Another two assembly lines for a new healthy lifestyle product are scheduled to commence in July-Aug 2018. These are expected to give Denko a significant earnings boost in FY19.

 

Others :

Plantation Sector: 1Q2018 Earnings Review: Poor showing all-around      NEUTRAL

Telco Sector: Mixed 1Q2018 report card amid rising pricing pressure        NEUTRAL

 

 

RETAIL RESEARCH

Stocks On Radar: Yinson Holdings, Borneo Aqua Harvest, PUC, Astro Malaysia   

 

ECONOMIC HIGHLIGHTS

Malaysia: Favourable business sentiment

Australia: Forward indicator points to sustainable growth

 

 

NEWS HIGHLIGHTS

Construction Sector: Ekovest-Samling JV for RM2.1b highway job void

Kerjaya Prospek Group: Bags RM139m contract to build STP2 bridge

AWC: Postpones plan to buy 60% stake in TWS

Scomi: Moots private placement

 

 

 

DISCLAIMER:

The information and opinions in this report are prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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