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| | | | | | | | | | | | | | Share Price: | MYR5.92 | Target Price: | MYR6.30 | Recommendation: | Hold | | |
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| | | Secures new FSO contract | | The FSO job win is MISC's first offshore job win this year. However, impact to earnings is minimal and unlikely to excite the market. Maintain our earnings forecasts as we have already imputed for this FSO. Our HOLD call and SOP-based TP of MYR6.30 are also retained. We think the poor share price performance has already priced in the weak 2Q18 and DY of 5.1% should provide some support to the share price. The stock now trades about in line with its 12M rolling forward PER of 16x (mean). | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 9,597.2 | 10,037.7 | 8,709.5 | 9,141.9 | EBITDA | 3,898.8 | 4,074.3 | 3,717.4 | 4,098.5 | Core net profit | 1,914.0 | 2,027.7 | 1,568.6 | 1,761.9 | Core EPS (sen) | 42.9 | 45.4 | 35.1 | 39.5 | Core EPS growth (%) | (31.2) | 5.9 | (22.6) | 12.3 | Net DPS (sen) | 30.0 | 30.0 | 30.0 | 30.0 | Core P/E (x) | 18.5 | 16.2 | 16.8 | 15.0 | P/BV (x) | 0.9 | 0.9 | 0.8 | 0.7 | Net dividend yield (%) | 3.8 | 4.1 | 5.1 | 5.1 | ROAE (%) | na | na | na | na | ROAA (%) | 3.7 | 3.8 | 3.1 | 3.5 | EV/EBITDA (x) | 10.3 | 9.8 | 9.4 | 8.8 | Net debt/equity (%) | 15.4 | 16.1 | 20.8 | 23.5 |
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| | | | | | | | | | | | Share Price: | MYR12.10 | Target Price: | MYR12.90 | Recommendation: | Hold | | |
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| | | Material acquisition hits a snag | | It is unclear at this stage what issues have prompted Top Glove's legal action against the vendors of Aspion. Stripping out the profit guarantees would affect our FY18-19 EPS forecasts by 8/20% respectively. We maintain our earnings forecasts and TP of MYR12.90 (30x 2019 PER; 10% discount to our target PER for Hartalega), pending more clarity from the management. Nevertheless, we downgrade the stock to HOLD given the reduced upside to our fair value and the uncertainties surrounding Aspion. | | |
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| | FYE Aug (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,888.5 | 3,409.2 | 4,090.9 | 5,070.2 | EBITDA | 523.3 | 485.0 | 666.8 | 842.8 | Core net profit | 361.1 | 332.7 | 447.2 | 533.1 | Core EPS (sen) | 28.9 | 26.5 | 35.5 | 41.7 | Core EPS growth (%) | 27.9 | (8.0) | 33.6 | 17.5 | Net DPS (sen) | 14.5 | 14.5 | 17.7 | 20.8 | Core P/E (x) | 17.5 | 19.6 | 34.1 | 29.0 | P/BV (x) | 3.5 | 3.2 | 6.8 | 6.2 | Net dividend yield (%) | 2.9 | 2.8 | 1.5 | 1.7 | ROAE (%) | 21.1 | 17.4 | 21.1 | 22.5 | ROAA (%) | 13.5 | 11.9 | 11.6 | 10.8 | EV/EBITDA (x) | 9.6 | 14.4 | 25.2 | 20.2 | Net debt/equity (%) | net cash | net cash | 67.8 | 59.8 |
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| | | | | | | | | | | | Share Price: | MYR1.37 | Target Price: | MYR1.45 | Recommendation: | Hold | | |
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| | | Precast recovery in 2H18 | | Construction would support earnings in FY18, with recovery at the manufacturing segment only expected in 2H18. YTD FY18 job wins for both construction and manufacturing stand at MYR310m and MYR150m respectively. We make no change to our earnings forecasts for now, but given uncertainties in the sector, we re-peg our valuation for Kimlun at a lower 6x FY18 PER (-1 SD, 7x previously or -0.5 SD) deriving a new TP of MYR1.45 (rounded) (-25 sen). Kimlun remains a HOLD. | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 940.7 | 985.2 | 1,286.2 | 1,289.2 | EBITDA | 130.9 | 121.8 | 124.4 | 133.8 | Core net profit | 80.7 | 80.1 | 74.4 | 80.8 | Core EPS (sen) | 26.4 | 26.2 | 24.3 | 26.4 | Core EPS growth (%) | 23.0 | (0.7) | (7.2) | 8.6 | Net DPS (sen) | 6.5 | 5.5 | 6.6 | 7.1 | Core P/E (x) | 7.1 | 8.6 | 5.6 | 5.2 | P/BV (x) | 1.1 | 1.1 | 0.6 | 0.6 | Net dividend yield (%) | 3.5 | 2.5 | 4.8 | 5.2 | ROAE (%) | na | na | na | na | ROAA (%) | 8.2 | 7.4 | 5.9 | 5.9 | EV/EBITDA (x) | 5.1 | 5.9 | 3.7 | 3.3 | Net debt/equity (%) | 6.7 | 7.1 | 7.1 | 3.7 |
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| | MACRO RESEARCH | | | | | | Second month of decline in external reserves
by Suhaimi Ilias |
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| | | | | | External reserves fell for the second month by –USD3.5b to USD104.7b at end-Jun 2018 from USD108.5b at end-May 2018 amid continued net foreign sells in Malaysian equities and bonds (June 2018: -MYR11.6b; May 2018: -MYR18.5b). The latest external reserves figure is equivalent to 7.5 months of retained imports and 1.1 times of short-term external debt (inclusive of foreign holdings of Ringgit bonds and deposits). | |
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| | | | | | S&P 500 Index Set to Rally Higher as Trade Wars Impact has been Price-in
by Nik Ihsan Raja Abdullah |
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| | | | | | Despite current uncertainties, such as US-China trade war and a rising interest rate environment, S&P 500 continues to hold on steady above its upward trajectory. Recent pullback is just a short-term hiccup, as the candles remain above its 50-day EMA line and the lower regression line. With RSI rising above its average line and the 50pts mark, we believe a stronger rebound is underway. We expect S&P 500 Index to challenge previous high within 2,802 in the near-term. | |
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| NEWS | | | Outside Malaysia:
U.S: Jobs report shows room to run as trade war threatens gains. Job gains of 213,000 in June topped projections, Labor Department figures showed. At the same time, more people entered the labor force to look for work, helping push the unemployment rate up for the first time in almost a year. Wages missed forecasts, with the relatively tepid pace remaining a puzzle for economists. Altogether, the data depicted a labor market that's not as tight as previously thought, easing any pressure on Federal Reserve policy makers to step up the pace of interest-rate hikes and potentially heartening employers who have had difficulty finding skilled workers. Yet the monthly figures landed the same day as President Donald Trump intensified a global trade war with U.S. levies on USD34b of Chinese goods, spurring retaliatory tariffs. That risks weighing on economic growth and the pace of hiring and investment. (Source: Bloomberg)
Germany: Factory output surges as growth sees long-awaited rebound. German industrial production picked up in May, signaling that the economy is beginning to stabilize after a stumble earlier in the year. The 2.6% increase was the best in six months. It follows data showing a surge in factory orders in May, the first increase this year. While the industrial numbers can be volatile month to month, they do provide signs for Europe's largest economy that the ongoing expansion isn't under threat. The composite PMI for the euro area, a broad measure of private-sector activity, has also stopped falling, and an economic surprise index has rebounded in recent weeks. (Source: Bloomberg)
U.K: Brexit Ministers Davis and Baker quit in major blow to May. U.K. Brexit Secretary David Davis and his deputy Steve Baker quit the government in what threatens to be a major blow to Prime Minister Theresa May's authority. The resignations comes just two days after May secured the backing of her cabinet for a plan to keep close ties to the European Union after leaving the bloc. Davis and Baker, both longstanding Eurosceptic, decided they could not support the policy, a person familiar with the matter said. May's office confirmed that Davis had resigned but had no comment yet on the reasons. Davis, Baker and other pro-Brexit members of May's Conservative party held deep concerns about her plans for keeping the U.K. tied to EU rules for goods and adopting a close customs arrangement with the other 27 member countries. They feel Britain should have a clean break from the bloc and be liberated to pursue new trade deals with other countries. (Source: Bloomberg)
Japan: Investment income supports current account surplus in May. Investment income and a smaller-than- expected decline in goods trade helped Japan to a current account surplus that beat forecasts in May, according to finance ministry data released. The current account surplus was JPY1.94tr in May. The deficit in goods trade was JPY303.9b. The primary income surplus was JPY2.4tr. (Source: Bloomberg) | |
| | | | | Other News:
Construction: MYR6.3b Penang project to start soon with undersea tunnel. Consortium Zenith Construction S/B (CZC), the contractor of Penang's MYR6.3b integrated infrastructure project, is confident that the project will continue with its original plan of an undersea tunnel to connect Penang Island with the mainland, instead of a bridge that has been proposed as an alternative. The tunnel will be built by China Railway Construction Co Ltd, which is CZC's engineering, procurement, commissioning and construction contractor. The tunnel is expected to be built in 2023. (Source: The Edge Markets)
TSH Resources: TSH Resources set to gain from Indonesia's biodiesel mandate. TSH Resources' large exposure to Indonesia puts it in good stead as the republic ramps up its biodiesel mandate to B25 in 2019. Indonesia has planned to increase its biodiesel mandate from its current rate of 20% to 25% from 2019. The B25 could double Indonesia's consumption of palm oil to between 5.5m and 6m kilolitres in 2019. TSH is unfazed by the near term pressure on crude palm oil prices. (Source: The Edge Markets)
KUB Malaysia: To dispose entire interest in A&W for MYR34m. Its wholly-owned subsidiary, Restoran Kualiti S/B, entered into a sale and purchase agreement today with Inter Mark Resources S/B for the disposal of its entire 100% interest in A&W S/B for MYR34m. The proposed disposal is expected to record a one-off estimated net gain of about MYR18.9m, including the reimbursement of intercompany balances of MYR4m. (Source: The Edge Markets) | |
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