DiGi.com - Offering fair risk-reward
Among Malaysian telcos, DiGi is the biggest beneficiary of GST when it is rolled out in Apr 2015. But we think that more intense rivalry is likely to shave off part of its service revenue growth in FY15. DiGi’s capex may also stay high as peers are looking to accelerate 4G rollouts. We lower our FY15-16 EBITDA by 2.6-3.8% to factor in slower service revenue growth and lower margins due to more intense competition. At the core net profit level, we cut our forecasts by 3.5-5.2%. Coupled with higher capex in FY14-15, we lower our target price by 7.9% to RM5.80, which is based on the fair valuation of its potential business trust and return of excess cash. We downgrade DiGi from an Add to a Hold. For Malaysian telcos, we prefer Axiata Group.
Hartalega Holdings - Impacted by high operating cost
Hartalega’s 1HFY3/15 core earnings were below our (45.4% of our FY15 forecast) and consensus expectations (44%). Revenue was flat yoy due to lower selling prices, while the drop in net profit was due to higher operating costs. Given the earnings miss, we cut our FY15-17 EPS forecast by 5-11%. However, our target price (pegged at 17.7x, unchanged 10% premium to the target market P/E of 16.3x) goes up as we roll over our valuation to CY16. Maintain Hold. It declared an interim 3 sen DPS, lower than our expectation which we believe was due to the weaker earnings outlook. We prefer Kossan.
Sunway Bhd - Steady margin growth
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.
Benalec Holdings - 1Q15 boosted by land sale gains
Dialog Group - Coming up(stream) roses
Lafarge Malaysia Bhd - Stiffer competition in 3Q
Malaysian Resources Corp - Brighter job prospects
Tune Ins Holdings Bhd - Travelling past the headwinds
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