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| | | | | | | | | | | | | | Share Price: | MYR1.10 | Target Price: | MYR1.08 | Recommendation: | Hold | | |
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| | | Valuations are fair (KPJ MK, CP MYR1.10, HOLD, TP MYR1.08, Healthcare) | | We expect KPJ's patient growth to continue with the opening of its new greenfield and brownfield hospitals. Its older greenfield hospitals such as Rawang and Sabah could also be profitable/breakeven in FY18. However, earnings accretion from these newly breakeven hospitals could be offset by start-up costs from both Perlis and BDO. We keep our earnings forecasts unchanged. Current valuations are fair, with the stock trading at 28.9x FY18 PER (5Y-mean). | | |
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| | FYE Dec (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 3,021.1 | 3,180.0 | 3,463.5 | 3,731.7 | EBITDA | 351.6 | 391.1 | 443.4 | 461.7 | Core net profit | 125.4 | 161.9 | 163.2 | 170.3 | Core EPS (sen) | 2.9 | 3.7 | 3.8 | 4.0 | Core EPS growth (%) | (17.4) | 28.5 | 3.1 | 4.4 | Net DPS (sen) | 1.2 | 1.8 | 1.9 | 2.0 | Core P/E (x) | 37.0 | 27.7 | 28.9 | 27.7 | P/BV (x) | 2.9 | 2.6 | 2.6 | 2.5 | Net dividend yield (%) | 1.1 | 1.7 | 1.7 | 1.8 | ROAE (%) | 9.8 | 10.0 | 9.2 | 9.2 | ROAA (%) | 3.2 | 4.1 | 3.8 | 3.6 | EV/EBITDA (x) | 16.7 | 14.6 | 13.8 | 13.4 | Net debt/equity (%) | 72.2 | 76.7 | 69.4 | 68.7 |
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| | MACRO RESEARCH | | | | | | KL Property Index: Staging a Pullback Ahead
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI tumbled lower yesterday after the index fell 10.18pts underpinned by regional weakness and profit-taking activity in index-linked stocks. The benchmark index closed at 1,778.13 led by a decline in NESZ, HLFG and PETGAS. Market breadth turned negative with losers outpacing gainers by 658 to 246. A total of 2.33b shares worth MYR2.05b changed hands. Mixed performance in overnight US market saw Apple shares hit $1 trillion market cap while Dow holds off its gain. | |
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| NEWS | | | Outside Malaysia:
U.S: Record share of small businesses report hiring difficulties. Share of survey respondents reporting job openings they couldn't fill rose to a record 37% in July from 36% in June, according to National Federation of Independent Business. Net 22% say they plan to raise compensation, up from 21%. Net 32% report increasing compensation, up from 31%. Job openings most frequent in construction, manufacturing, wholesale trades. (Source: Bloomberg)
U.K: BOE lifts key interest rate in what may be final pre-Brexit push. The Bank of England raised its benchmark interest rate to the highest level since 2009 in what may be its final blow against inflation before the U.K. leaves the European Union. Governor Mark Carney played down concerns that Brexit may be disorderly and said mounting price pressures warranted the quarter-point increase to 0.75%. At the same time, he gave no indication that policy makers see a need to accelerate the path of rate hikes. BOE policy makers are trying to strike a balance between taming inflation as the economy runs out of slack, and protecting against the risk that the nation's Brexit talks will end in a hard rupture that hits growth. Carney himself noted that the negotiations are entering a "critical period" and that the BOE is prepared for all scenarios. (Source: Bloomberg)
China: Said it was ready to retaliate against the latest threat by the U.S. to raise tariffs on its goods. "China has made full preparation for the U.S. threats to escalate the trade war, and will have to retaliate to defend national pride and the people's interests," China's Ministry of Commerce said in a statement on its website. The Trump administration said this week that it's considering increasing the proposed tariff on USD200b in Chinese imports to 25% from 10%. President Donald Trump has asked U.S. Trade Representative Robert Lighthizer to consider hiking the duties, which could be implemented as early as next month. At the same time, the U.S. indicated it is open to restarting formal negotiations with China, though Beijing must agree to open its markets to more competition and stop retaliating against U.S. trade measures. "The U.S. is playing a carrot-and-stick tactic on China, but this approach is not going to work on China," the ministry said. (Source: Bloomberg)
Brazil: Industry posts record June surge in rebound from strike. Brazil's industrial production recorded its biggest-ever increase in June, rebounding from a trucker strike that torpedoed activity the month before. Production rose 13.1% in the month -- more than triple its biggest jump on record -- after falling by a revised 11% in May, the national statistics agency reported. Industrial output rose 3.5% YoY. (Source: Bloomberg) | |
| | | | | Other News:
Construction: Pan Borneo highway review to be finalized by September. "We will consult with the ministry of finance to appoint an independent consultant firm to study the contracts' overall scope and costing." Works Minister Baru Blan told the reporters. Nevertheless, he stands firm on his stance that there will be no change in contractors. (Source: The Edge Markets)
Malakoff Corp: Malakoff under selling pressure over Alam Flora deal. The market has judged the proposed stake acquisition as more beneficial to seller DRB-Hicom. According to Bursa Malaysia, a fair value ranging from RM875m to RM1.05b was arrived by Deloitte Corporate Advisory which implies a PER of 9 to 11 times. However, most analysts noted that Alam Flora will not be able to receive the tax incentive upon acquisition and thus, the acquisition will be valued at 12.8 times. (Source: The Edge Markets)
Khazanah Nasional Bhd: Khazanah's investment playbook set for revamp under Dr Mahathir. Khazanah will likely cut stakes in some top-state linked firms as the government overhauls the fund's investment strategy. Tun Dr Mahathir Mohamad is keen to make the fund leaner and use the sale proceeds to cut massive debt piled up by 1MDB. (Source: The Edge Markets) | |
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