Westports Holdings - Explosive catalysts on the horizon
Westports’ share price may be driven up in the months ahead by three potential catalysts: the start of the Ocean Three alliance, the renewal of the Investment Tax Allowance, and government approval to raise port tariffs. Westports is our top pick in the Malaysian transport space. We initiate Westports with an Add call and a probability-weighted DCF target price of RM4.57, incorporating different scenarios of the timing and quantum of the tariff hike. We expect the core EBIT 3-year CAGR of 10% to rise to 17% if port tariffs are raised 30% on 1 January 2016.
Petronas Dagangan - Fuel up!
Contrary to what the market thinks, the government’s decision to put RON95 petrol and diesel on a managed float system is positive for petroleum retailers, including PetDag. The managed float system will lead to the removal of subsidy receivables, thus potentially improving PetDag’s cash flow. Also, the automatic pricing mechanism (APM) remains in place, ensuring PetDag a fixed company margin of 5 sen/litre. In view of the sharp share price fall since the managed float system was announced on 21 Nov, we upgrade our call from Hold to a trading-oriented, non-consensus Add while maintaining our forecasts and target price. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x.
Axiata Group - Celcom yet to regain footing
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.
Affin Holdings - Not taking full advantage of rate hike
Petronas Gas - Pengerang to drive excitement
Signature International - Gaining momentum
Uchi Technologies - A stronger brew
UMW Oil & Gas - Bigger fleet oils the way to record quarter and maiden dividend
WCT Holdings - Weighed down by property
Economic Update - Sep leading index holds steady
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