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| | | | | | | | | | | | | | Share Price: | MYR | Target Price: | MYR2.80 | Recommendation: | Buy | | |
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| | | Trophies for its new cabinet? | | We are positive on Inari's aggressive floor space expansion to 1.35m sq ft (+34%) by end-2018. For this, we now impute job wins assumption for P21 and P34 worth MYR150m/300m for FY19/FY20. We also raise RF volumes in P13B-2 for the push for 5G cellular network in 2019. These translate into 10%/20% increase in our earnings forecasts. Our revised TP is MYR2.80 (+16%), on unchanged 22x CY19 PER (20% premium to average PER target for tech companies within our coverage). Maintain BUY. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 1,043.1 | 1,176.7 | 1,429.8 | 1,799.5 | EBITDA | 203.7 | 303.7 | 408.9 | 516.8 | Core net profit | 155.8 | 206.4 | 303.3 | 387.2 | Core EPS (sen) | 5.2 | 6.6 | 9.1 | 11.7 | Core EPS growth (%) | 8.2 | 27.4 | 38.6 | 27.7 | Net DPS (sen) | 2.8 | 5.5 | 6.8 | 8.7 | Core P/E (x) | 45.5 | 35.7 | 25.7 | 20.2 | P/BV (x) | 10.4 | 8.4 | 8.1 | 7.2 | Net dividend yield (%) | 1.2 | 2.4 | 2.9 | 3.7 | ROAE (%) | 24.3 | 29.2 | 32.9 | 37.8 | ROAA (%) | 18.2 | 19.9 | 24.1 | 27.9 | EV/EBITDA (x) | 13.8 | 13.2 | 17.9 | 14.2 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | Share Price: | MYR3.40 | Target Price: | MYR3.58 | Recommendation: | Hold | | |
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| | | Fully owns LGT 1 & 2 | | We laud Dialog's purchase of Puma Energy Asia Pacific B.V. (Puma)'s 20% stake at Langsat Terminal (One) and Langsat Terminal (Two) - LGT 1 & LGT 2 respectively, lifting its stake to 100%. The acquisition is earnings accretive and adds 2% to our earnings and TP respectively. That said, while we continue to like Dialog's business model, the positives have been largely priced in. Its share price has appreciated by 35% YTD. We downgrade the stock to a HOLD with a revised TP of MYR3.58. | | |
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| | FYE Jun (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,534.5 | 3,392.9 | 3,534.3 | 3,668.9 | EBITDA | 385.4 | 475.0 | 519.2 | 509.3 | Core net profit | 261.0 | 328.2 | 433.9 | 469.5 | Core EPS (sen) | 5.0 | 6.1 | 8.1 | 8.7 | Core EPS growth (%) | (0.9) | 20.8 | 32.2 | 8.2 | Net DPS (sen) | 2.2 | 2.6 | 3.5 | 3.7 | Core P/E (x) | 67.4 | 55.8 | 42.2 | 39.0 | P/BV (x) | 7.3 | 5.9 | 5.4 | 5.0 | Net dividend yield (%) | 0.6 | 0.8 | 1.0 | 1.1 | ROAE (%) | 13.4 | 13.4 | 13.3 | 13.2 | ROAA (%) | 6.7 | 6.6 | 7.3 | 7.6 | EV/EBITDA (x) | 20.7 | 21.9 | 36.8 | 37.5 | Net debt/equity (%) | net cash | net cash | 20.9 | 18.2 |
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| | | | | | | | | | | | Share Price: | MYR2.19 | Target Price: | MYR2.30 | Recommendation: | Hold | | |
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| | | Target met; D/G to HOLD | | Impact from a North American smartphone player's inventory rationalisation would be felt in 2Q18. As a result, we now expect GTB's 2Q18 earnings to be lower by 34%-54% QoQ. We cut FY18E earnings by 11% to reflect a weaker expectation for 2Q18, while our FY19/20 net profit forecasts are also trimmed by 2+% to reflect lower demand of the premium range of the North American smartphone brand. Our revised TP is MYR2.30 (-2%), on unchanged 18x CY19. Valuations are fair; GTB is now a HOLD. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 215.3 | 304.6 | 342.0 | 422.6 | EBITDA | 51.2 | 82.8 | 106.1 | 135.0 | Core net profit | 25.7 | 50.0 | 61.8 | 85.6 | Core EPS (sen) | 3.9 | 7.5 | 9.2 | 12.8 | Core EPS growth (%) | (64.2) | 92.8 | 23.7 | 38.4 | Net DPS (sen) | 6.9 | 7.3 | 6.5 | 9.0 | Core P/E (x) | 56.5 | 29.3 | 23.7 | 17.1 | P/BV (x) | 5.5 | 5.2 | 4.9 | 4.5 | Net dividend yield (%) | 3.1 | 3.3 | 3.0 | 4.1 | ROAE (%) | 9.1 | 18.8 | 21.3 | 27.4 | ROAA (%) | 7.7 | 14.1 | 15.2 | 19.8 | EV/EBITDA (x) | 16.1 | 22.1 | 13.2 | 10.3 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | SECTOR RESEARCH | | | | | | 1Q18 blew past expectations
by Mohshin Aziz |
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| | | | | | Aviation sector surprised positively in 1Q18 with a core net profit growth of 48% YoY on the back of 11.9% YoY revenue growth. Unit cost declined significantly as companies boosted asset utilization rate to derive scalability benefits. Outlook surpassed our expectations and the industry seems to be more adept in handling the rising fuel price environment. We upgrade the sector to POSITIVE after our upgraded BUY calls on AAGB and AAX during the recent results season. MAHB remains a HOLD. | |
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| | | | | | Apr 2018 adex: Positively impacted by GE14 | U/G NEUTRAL
by Jade Tam |
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| | | | | | Apr 2018 total gross adex was flat YoY but rose marginally by 4% MoM due to higher ad spend during the election campaigning period before GE14. We are hopeful that upcoming adex-friendly events will lift overall industry ad spend. Hence, we cautiously maintain our 2018 total gross adex forecast of +5% YoY for now. We have HOLD calls on all media stocks under our coverage with a sole BUY on Star Media. Given bottom-up upgrades in stock calls during 1Q18 results, the sector call is now a NEUTRAL. | |
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| | MACRO RESEARCH | | | | | | Worsening Trade Deficit
by Suhaimi Ilias |
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| | | | | | Exports fell for a fourth month in Apr 2018 by -8.5% YoY (Mar 2018: -6.8% YoY) while imports surged by +22.2% YoY (Mar 2018: +0.3% YoY) leading to a wider trade deficit of -USD3.61b or +133% YoY (Mar 2018: -USD2.53b or +24.6% YoY). Latest manufacturing PMI for May 2018 moved higher for a third month on stronger domestic based activities in contrast to subdued external demand. | |
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| | | | | | Brent Crude Oil: ST Hiccup but the Bull is Still "Alive"
by Nik Ihsan Raja Abdullah |
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| | | | | | Technical landscape for Brent Crude Oil remains bullish. Despite recent pullback, it is still treading above its major uptrend line and "Ichimoku Cloud". After hitting a low of USD61.80 in Feb 2018, Brent bounced to a high of USD80.50 in mid-May. Currently, it is in a consolidation mode with a short-term base formed near its 38.2% Fibonacci Retracement level at USD74.00. | |
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| NEWS | | | Outside Malaysia:
Germany: Merkel says Trump reneging on G-7 statement is 'depressing', though it isn't the end of the trans-Atlantic partnership. "It means that we as Europe have to stand up for our principles, potentially together with Japan and France," Merkel said in a German television interview after returning to Berlin from a G-7 summit in Canada. In her first takeaway from the contentious meeting, Merkel expressed consternation about the U.S. president's backtracking on the summit's final statement, while emphasizing that she'll keep talking with Trump. She renewed her call for Europe to take a more forceful role in global affairs and said the European Union won't be "take for a ride" in its trade conflict with the U.S. "Reneging in a tweet is sobering and a bit depressing," Merkel said in an interview with broadcaster ARD. "I don't think that inflammatory language makes things better. Sometimes it seems the American president thinks that only one side wins and everyone else loses." (Source: Bloomberg)
Italy: Finance Minister confirms commitment to Euro. There is no discussion of any proposal to leave the Euro. The government is determined to block in every way possible market conditions that would push toward an exit," Finance Minister Giovanni Tria tells Corriere della Sera in interview. "Not only do we not want to leave the Euro; we will act in such a way that there are no conditions approaching that could put into discussion our presence in the Euro". New government aims to boost economic growth and employment, not through deficit spending but with structural reforms and better conditions for investment, Tria says, adding that financial stability and cutting state debt are part of government's strategy. (Source: Bloomberg)
China: Factory inflation picks up on rising commodity prices. China's factory inflation accelerated faster than expected in May as the price of commodities such as crude oil and metals increased. The producer price index rose 4.1% YoY, compared with 3.4% YoY gain in April. The consumer price index climbed 1.8% YoY in May, the statistics bureau said. While accelerating PPI and milder consumer inflation may sustain margins for some of China's smokestack industries, there's no sign of a lasting rebound. The producer price gauge is forecast to ease to a 3.3% gain this year from the 6.3% increase last year that helped support global reflation. (Source: Bloomberg)
Crude Oil: Trades down as U.S. rig count increases to 3-year high. Drilling rigs targeting oil in the U.S. rose by 1 to 862 last week, the highest level since March 2015, according to Baker Hughes data. Hedge funds reduced their WTI net-long position by 3.3% to 313,450 futures and options during the week ended June 5, the lowest level since Oct. 2017, according to U.S. CFTC. Brent for August was USD76.30/bbl. (Source: Bloomberg) | |
| | | | | Other News:
Nova MSC: Lands MYR15m building information services contract in Singapore. The group has secured a 20-month contract from Singapore's Public Utilities Board to provide building information modelling services worth SGD5.17m (MYR15.4m). The group said the contract was awarded to its wholly-owned unit, novaCITYNETS Pte Ltd. The group said the contract will contribute positively to its overall results for the financial year ending March 31, 2019. (Source: The Edge Financial Daily)
UOA Real Estate Investment Trust: Sells Wisma UOA Pantai to CIMB Bank for MYR120m.The group is disposing of Wisma UOA Pantai to CIMB Bank Bhd for MYR120m. UOA REIT said UOA Asset Management has entered into a sale and purchase agreement with CIMB Bank for the proposed disposal. The disposal is expected to be completed by the second quarter of 2018. (Source: The Edge Financial Daily)
DNex: Sees demand for portable container systems for fuel in rural areas. Diversified business group Dagang Nexchange Bhd (DNex) sees demand for portable container systems (PCS) as a source of fuel supply in remote areas, especially among communities which rely on the pricey community drumming for fuel supplies. The PCS, a 20-feet self-contained modular fuel storage and dispensing unit, with a capacity of holding up to 30,000 litres of fuel, is targeted to be used for the supply of petrol at the fish landing jetty in Malaysia. DNex was awarded a contract worth between MYR50m and MYR75m by Petro Teguh S/B to design, engineer, procure, construct, install and commission of up to 105 units of PCS across the country, for two years.(Source: The Sun Daily) | |
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