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| | | | | | | | | | | | | | Share Price: | MYR3.43 | Target Price: | MYR3.11 | Recommendation: | Hold | | |
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| | | Challenging but priced in; U/G to HOLD | | 2Q18 results could be disappointing given rampant competition and softer demand. Our FY18E net loss is raised and we now project for net losses to continue into FY19E. Our FY20E earnings are cut by 86%. That said, while the outlook remains challenging, we believe that the negatives have been priced in following a 45% fall in share price YTD. Hence we U/G LMC to HOLD for with a lower TP of MYR3.11 (MYR3.25 previously) based on an unchanged 1.0x P/B peg (-3SD to mean). | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,552.2 | 2,248.8 | 2,150.5 | 2,394.5 | EBITDA | 302.1 | (44.7) | (31.7) | 138.1 | Core net profit | 84.9 | (215.2) | (204.8) | (81.4) | Core EPS (sen) | 10.0 | (25.3) | (24.1) | (9.6) | Core EPS growth (%) | (66.3) | nm | nm | nm | Net DPS (sen) | 5.0 | 0.0 | 0.0 | 0.0 | Core P/E (x) | 82.6 | nm | nm | nm | P/BV (x) | 2.3 | 1.9 | 1.1 | 1.1 | Net dividend yield (%) | 0.6 | 0.0 | 0.0 | 0.0 | ROAE (%) | 2.5 | (7.3) | (7.5) | (3.1) | ROAA (%) | 2.0 | (5.0) | (4.8) | (1.9) | EV/EBITDA (x) | 20.7 | nm | nm | 25.1 | Net debt/equity (%) | 4.6 | 13.5 | 19.9 | 21.3 |
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| | MACRO RESEARCH | | | | | | Signs of slower YoY growth in 2Q-3Q 2018 GDP
by Suhaimi Ilias |
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| | | | | | Index of leading economic indicators fell -0.7% YoY in May 2018 (Apr 2018: +1.4% YoY). Growth-wise, the index has been on a soft patch since Dec 2017. Given that the index growth leads GDP growth by 2-3 months, it signals further slowing in real GDP growth in 2Q 2018 and 3Q 2018 after the deceleration in 4Q 2017 and 1Q 2018. | |
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| | | | | | Dow Jones Index: Trapped in a Consolidation Mode
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI started the week on a positive note, closing 3.29pts higher at 1,757.96 yesterday. Market sentiment improved in the afternoon session thanks to rotational buying on selected blue chips. Advancers were led by KLCC, AXIATA and IHH. Market breadth was positive with gainers outpacing losers by 551 to 354. A total of 3.13b shares worth MYR2.24b changed hands. | |
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| NEWS | | | Outside Malaysia:
U.S: Sales of previously owned homes decline for third month in June, indicating a shortage of affordable listings and rising prices continue to limit demand, a National Association of Realtors report showed. Contract closings fell 0.6% MoM to a 5.38m annual rate, a third straight decline, after a revised 5.41m. Median sales price increased 5.2% YoY to a record USD276,900. Inventory of available properties rose 0.5% YoY to 1.95m for first increase since mid-2015. (Source: Bloomberg)
China: Unveils a package of targeted policies to boost domestic demand as simmering trade tensions threaten to worsen the nation's economic slowdown. From a tax cut aimed at fostering research spending to special bonds for infrastructure investment, the measures announced following a meeting of the State Council in Beijing are intended to form a more flexible response to "external uncertainties" than had been implied by budget tightening already in place for this year. Fiscal policy should now be "more proactive" and better coordinated with financial policy, according to the statement -- a signal that the finance ministry will step up its contribution to supporting growth alongside the central bank. The People's Bank of China has cut reserve ratios three times this year and unveiled a range of measures for the private sector and small business. (Source: Bloomberg)
Indonesia: Plans to draw more loans from multilateral agencies as a currency rout and soaring bond yields threaten to derail its borrowing program. Loans from multilateral agencies including the World Bank and the International Monetary Fund to finance government programs instead of selling rupiah bonds will also help the government bolster its foreign-exchange reserves, according to Loto Srinaita Ginting, director of budget financing and risk management at the Finance Ministry. The ministry is also mulling private placement of sovereign bonds and increasing the frequency of retail sales, she said. Benchmark bond yields are near their highest since January 2017 as rising U.S. interest rates and a stronger dollar fuel a selloff across global emerging markets. While the surging yield has prompted Southeast Asia's largest economy to trim it borrowing plans, the central bank has used billions of dollars from its reserves to protect the currency, among the worst performers in Asia. (Source: Bloomberg)
Venezuela: Inflation to reach 1 million percent, IMF forecasts. Venezuela's inflation will skyrocket to 1 million percent by the end of the year as the government continues to print money to cover a growing budget hole, the International Monetary Fund predicted. The crisis is comparable to that of Germany in 1923 or Zimbabwe in the late 2000s, said Alejandro Werner, head of the IMF's Western Hemisphere department. He forecast the economy to shrink 18% in 2018 -- the third consecutive year of double-digit contractions -- as oil production falls significantly. "The collapse in economic activity, hyperinflation, and increasing deterioration in the provision of public goods as well as shortages of food at subsidized prices have resulted in large migration flows, which will lead to intensifying spillover effects on neighboring countries," Werner wrote. Venezuela has been suffering a dramatic economic collapse since crude prices nosedived nearly four years ago and authorities have refused to enact economic adjustments. A number of price and exchange controls only added to the distortions. (Source: Bloomberg) | |
| | | | | Other News:
Telecommunication: TM, TNB Terminate MoU on Nationwide Fiberisation Plan. The MoU signed on Jan 16 by TM's former managing director and group executive officer Datuk Seri Mohammed Shazalli Ramly and TNB president and CEO Datuk Seri Azman Mohd to jointly develop an implementation plan to deliver on the government's Nationwide Fiberisation Plan (NFP) have been terminated by the two groups. The decision to discontinue the MoU was mutual and with immediate effect, they said in their respective statements, without however stating the reason for the termination. Communications and Multimedia Minister Gobind Singh Deo said the new government will replace the NFP with the National Connectivity Plan this weekend. (Source: The Edge Financial Daily)
Malaysia Airports Holdings Bhd: "We did not force AirAsia to move". MAHB released a statement yesterday, claiming that it did not force AirAsia Group to move to Terminal 1 (T1) of Kota Kinabalu international Airport from T2. In its defense against Tan Sri Tony Fernandez claims regarding AirAsia's flat growth since relocation, MAHB stated that in contrary, AirAsia's passenger traffic growth jumped significantly in T1 and the trend was not unique to AirAsia alone. MAHB went on to say that consolidation of all airport and flight operations at T1 increased Sabah's international tourists by 9.4% to 1.2 million last year versus 2016. (Source: The Edge Financial Daily)
IHH: Audit committee head opposes the acquisition of Fortis. Annizah Ahmad Rashid, an independent director on the board and also the chairman of audit and risk management, made her dissent in the meeting that approved the deal. A report said that she was not comfortable with the structure of the proposal upon consideration of the risk factors and the qualified opinion issued by Fortis's external auditors, Deloitte Haskins and Sells LLP, in the audited financial statements of Fortis for the year ended March 31. (Source: The Edge Financial Daily)
Sime Darby Property: Zeti is the new chairman. Zeti will be taking over from Tan Sri Abdul Wahi Omar who retired from the position at the end of June. Datuk Seri Amrin Awaluddin stated that her presence reaffirms PNB's commitment to Sime Darby Property and its transformation journey. Following Zeti's appointment, Rizzal Rickman Ramli will cease to be the acting chairman. (Source: The Edge Financial Daily) | |
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