Oil & Gas - overall - Contractually committed
In light of the oil price weakness, we checked with the companies in our oil & gas portfolio on the stability of their order books. The feedback is all-around positive, with the managements assuring us that their companies' contractual terms and rates are intact, and that they are not tied to the oil price. The sector remains an Overweight given its importance in the government's Economic Transformation Programme (ETP) and the contract pipeline arising from Petronas’s capex. Our top picks are SapuraKencana among the big caps and TH Heavy among the small caps.
DiGi.com - Executing well in a tough market
9M14’s core net profit was largely in-line at 73.3% of CIMB’s and 75.5% of the consensus full-year estimates. Service revenue growth slowed further in 3Q14 due to the more competitive market, but the strong prepaid subscriber growth suggests a healthier growth trajectory in 4Q14. A 6.2sen DPS was declared, or a 99% payout, bringing YTD DPS to 18.8sen, in-line with our estimates. We maintain our earnings forecast and DCF-based target price, which is based on the fair valuation of its potential business trust and return of excess cash. DiGi remains an Add and our top Malaysian telco pick, with likely rerating catalysts being stronger-than-peers earnings growth over the next three years, and potential set-up of a business trust structure.
Bursa Malaysia - Decent 3Q14 earnings
Although Bursa’s 9M14 net profit accounted for 76% of our and consensus full-year forecasts, we regard the results as being in line since 4Q revenue is seasonally the weakest. We retain our EPS forecasts. Though we roll forward our target price to end-2015, it is reduced because we lower our target FY16 P/E from 26.5x to 21.5x, on par with the 3-year average given the sliding P/E multiple in the past 2-3 years. However, Bursa remains an Add given (1) its above-market dividend yield of 4-5%, and (2) the positive outlook for the derivative business.
Axis REIT - A decent quarter
Axis REIT's (Axis) 3QFY14 core net profit of RM19.2m brings its 9MFY14 core net profit to RM61.9m, which makes up 62% and 64% of our and consensus full-year estimates, respectively. We consider this as in line as we anticipate stronger earnings in the 4Q as Axis completes its acquisition of a few properties, which will contribute to earnings. We finetune our earnings forecasts for housekeeping purposes while our DDM-based target price is raised slightly to RM3.86 (from RM3.82 previously) after we roll forward our valuation base year. We maintain our Add call on the stock. We think more newsflow on new acquisitions will catalyse the stock.
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