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| | | | | | | | | | | | | | Share Price: | MYR8.75 | Target Price: | MYR9.00 | Recommendation: | Hold | | |
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| | | CEO leaves MAHB | | Datuk Badlisham Ghazali's contract expired on 22 Jun and his role has been taken over by CFO Raja Azmi until a successor is identified. This news is no surprise given the numerous media inference over the past week. We believe that MAHB's second line of management is capable to handle the situation and there is no change to our business outlook. No change to our earnings forecast, HOLD call and TP of MYR9.00 – pegged to mean of 10.5x 2018 EV/EBITDA. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 4,172.8 | 4,652.3 | 5,576.5 | 5,476.9 | EBITDA | 1,488.9 | 1,679.9 | 2,366.6 | 2,092.0 | Core net profit | 48.2 | 143.2 | 443.1 | 527.6 | Core EPS (sen) | 2.9 | 8.6 | 26.3 | 30.6 | Core EPS growth (%) | nm | 197.2 | 204.6 | 16.5 | Net DPS (sen) | 0.0 | 9.8 | 9.0 | 12.0 | Core P/E (x) | 216.7 | 92.1 | 33.3 | 28.6 | P/BV (x) | 1.2 | 1.5 | 1.6 | 1.5 | Net dividend yield (%) | 0.0 | 1.2 | 1.0 | 1.4 | ROAE (%) | 0.8 | 2.7 | 8.7 | 6.1 | ROAA (%) | 0.2 | 0.7 | 2.0 | 2.4 | EV/EBITDA (x) | 9.4 | 10.5 | 7.4 | 7.8 | Net debt/equity (%) | 46.1 | 35.4 | 30.6 | 17.4 |
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| | SECTOR RESEARCH | | | | | | OPEC: Outcome & assessment
by Thong Jung Liaw |
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| | | | | | OPEC's decision to lower over-compliance and adjust to 100% compliance is better than the market's initial expectation. It reflects a tighter control of additional crude oil supply entering into the market, the flexibility to adjust output while still capping a floor price of USD70/bbl. The next meet is scheduled in Vienna, on 4 Dec 2018. We remain POSITIVE on the sector. Our in-house crude oil price estimate is USD70-75/bbl for 2018-19. Our key BUYs are Yinson, Bumi Armada and SAPE. | |
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| | | | | | Taking a FIFA World Cup breather D/G NEUTRAL
by Samuel Yin Shao Yang |
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| | | | | | We opine that the 2018 FIFA World Cup will negatively impact near-term NFO revenues. Thus, we expect not much upside potential to our 2018 NFO revenue growth forecast of +2% YoY. This is one of the reasons for our downgrade of BST to HOLD post-4QFY4/18 results and MAG to HOLD in this report; the other is narrowing upside to our unchanged TPs (BST: MYR2.65, MAG: MYR2.25) after the share prices of BST and MAG have risen 10% and 24% respectively YTD. The NFO sector is now a NEUTRAL. | |
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| | MACRO RESEARCH | | | | | | ASEAN Equities: Short-term Rebound in the Making
by Nik Ihsan Raja Abdullah |
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| | | | | | We had earlier expected MSCI AC ASEAN (PR) USD Index (MXSO) rebound to be capped at 842.60 (refers to Regional Traders' Almanac dated 28 May 2018). True enough, the index bounced to a high of 840.09 on 7th Jun 2018 before plunging to a new low of 764.83 last week, violating the 800.00 psychological level in the process. That said, another short-term rebound could be taking place soon. | |
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| NEWS | | | Outside Malaysia:
U.S: Plans curbs on Chinese investment, citing security risks. The Treasury Department is planning to heighten scrutiny of Chinese investments in sensitive U.S. industries under an emergency law, putting Washington's trade war with Beijing on a potentially irreversible course. Under the plan, the White House would use one of the most significant legal measures available to declare China's investment in U.S. companies involved in technologies such as new-energy vehicles, robotics and aerospace a threat to economic and national security, according to eight people familiar with the plans. Treasury Secretary Steven Mnuchin, in a report scheduled to be released on June 29, will suggest administering that law through an inter-agency government panel called the Committee on Foreign Investments in the U.S., or CFIUS, the people said, requesting anonymity to discuss the plans. (Source: Bloomberg)
E.U: Said to see nearing trade breakdown as it seeks rules revamp. The global trade war is about to get worse, as the rules-based system of international commerce is poised to revert to an environment where the strong impose their will upon the weak, according to an internal memo circulated among European Union governments. The disputes between the U.S. and its closest trading partners are set to escalate "in the coming months, as more unilateral measures are threatened and imposed, leading, in some cases, to countermeasures, or to mercantilist deals," according to the memo drafted by the European Commission, which manages trade policy for the entire bloc. Our world will go back "to a trading environment where rules are only enforced where convenient and where strength replaces rules as the basis for trade relations," according to the memo. The dire warnings come as the exports-based European economic model risks crumbling under pressure from President Donald Trump, who has sought to narrow the U.S. trade deficit at all costs, even if that means an unravelling of global rules. After imposing punitive tariffs on steel and aluminium imports from Europe, Trump now threatens a 20% levy on European cars, in a measure that would deal a massive blow to the EU's auto industry. (Source: Bloomberg)
China: To unleash USD108b in reserves cut for some banks. China's central bank will cut the amount of cash some lenders must hold as reserves, unlocking about CNY700b (USD108 billion) of liquidity, as it seeks to control leverage and support smaller companies. The required reserve ratio for some banks will drop by 0.5 percentage point, effective July 5, the People's Bank of China said on its website. That's the day before the U.S. and China are scheduled to impose tariffs on each other, and the cut should help companies affected by deteriorating relations between the world's two largest economies. Such a reduction had been widely expected, especially after China's cabinet said that it would use monetary policy tools, including cutting reserve ratios for some banks, to boost credit supply to smaller companies. (Source: Bloomberg)
China: Won't target U.S. companies in trade dispute, SCMP says. China has no plan to target U.S. companies operating in the nation amid escalating trade tensions, as that would run counter to Beijing's goal of attracting foreign investments, South China Morning Post reported, citing unidentified people. The policy makers sought to reassure foreign businesses in China amid fears that the Beijing government would retaliate for U.S. President Donald Trump's proposed tariffs on Chinese goods by harassing American firms or depriving them of commercial opportunities, the Hong Kong-based newspaper reported, citing "two Chinese government sources." The option of targeting these business "has never been on the cards," according to one of the people. (Source: Bloomberg) | |
| | | | | Other News:
Icon Offshore: Bags MYR23m contract to supply vessel. Its wholly-owned subsidiary Icon Offshore Group S/B has bagged a MYR23m contract to provide a utility vessel to Hess Exploration and Production Malaysia BV for its operations. Icon said the contract will commence from the date of the letter of award and will expire at the end of three years from the vessel's on-hire date, with two extension options of one year each. (Source: the Edge Markets)
Willowglen MSC: Awarded MYR8.62m data management job. The group has clinched contract worth MYR8.62m for the maintenance of 30 DMS PDM systems and upgrade of 22 PDM system workstations. The contract commenced on June 21, 2018 and will be completed by June 20, 2021. It is expected to contribute positively to the group's earnings and net assets per share for the financial years ending December 31, 2018 to 2021. (Source: The Sun Daily)
Green Packet: To raise up to MYR53m via rights issue with free warrants. The group plans to raise as much as MYR52.57m via a renounceable rights issue on the basis of one rights share for every five existing shares held, together with warrants on the basis of three warrants for every one rights share. Green Packet said the proposal will see 150.2m rights shares and 450.6m warrants issued. The group intends to add expenditure for future viable investments, working capital for media and digital services, and working capital for finance technology (fintech) solutions. (Source: The Edge Markets)
Fitters Diversified: The group has upped its stake in Molecor S/B to 72.27%, from 65%. Fitters said it had subscribed for an additional 60 million new shares in Molecor for 50 sen per share or MYR30m, by offsetting the amount owed by Molecor to the group as at April 30, 2018. Following the subscription, total number of issued shares of Fitters in Molecor stood at 79.5m shares. (Source: The Edge Markets) | |
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