Tenaga Nasional - Positive 4Q14 results
Tenaga's FY8/14 core net profit of RM4.7bn was in line with expectations, at 103% and 101% of our and consensus FY14 estimates, respectively. We expected Tenaga to post positive net profit growth in FY14, given that less LNG was burned in 4Q14 and there was gradual recovery in the IPP coal power plants. We lower FY15-16 EPS by 1.0-1.1% after we updated our FY14 numbers and introduce our FY17 estimates. Our target price is raised to RM13.62, as we roll over to 12.8x FY16 P/E (still at 20% discount to the market P/E). We maintain our Hold call on Tenaga as there is lack of clarity on the fuel cost pass-through (FCPT) mechanism.
SapuraKencana Petroleum - Shine bright like a Diamante
We have learned from management that it is business as usual in post-election Brazil and rig utilisation has improved. Sapura Diamante has been dispatched to work for Petrobras in Brazilian waters. Meanwhile, management has secured contracts for the four rigs that were unemployed in 2Q. We roll over valuations and our target price falls as we now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E), a 30% premium over our target market P/E of 16.3x. We cut our premium from 40% to 30% to reflect the current weak oil price sentiment. We maintain our Add rating, with strong order book momentum and a successful E&P venture as potential re-rating catalysts. SapuraKencana remains our top pick among the O&G big caps.
Banks - Sep 14 tracker – Loan growth “back in business”
Loan growth recovered from 8.6% yoy in Aug 14 to 9% yoy in Sep 14, the first material improvement since Jan 14. We are encouraged by the rebound in business loan growth (from 5.6% yoy in Aug 14 to 6.7% yoy in Sep 14), but not surprised by the weaker consumer loan momentum. Even if loan growth recovers to our projected 9-10% in 2014, it would still be slower than the 10.6% achieved in 2013. Other concerns for banks are margin compression and the upturn in credit costs. All these numbers point to a bleak earnings outlook that underpins our Underweight rating on the sector. Maybank remains our top pick.
MY E.G. Services - Bonus issue is pleasant surprise
MyEG’s announcement on its proposed 1-for-1 bonus issue was a positive surprise to us. The company last proposed a bonus issue six years ago. We maintain our FY15-17 EPS forecasts and target price of RM5.28, based on an unchanged 21x CY16 P/E (on par with its peer average). We maintain our Add recommendation, with the government’s final approval for the CSTM project and further developments on the road safety diagnostic system project as potential re-rating catalysts.
Perisai Petroleum - Down but not out
SBC Corp - 1:2 bonus issue nailed down
Economic Update - Oct loans growth edges up
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