HLIB Research Summary - 17 Nov 2014

Genting Plantations (HOLD çè)

On track to deliver FFB Output Growth

• GENP is on track to deliver its FFB output growth guidance of 10% for 2014, underpinned mainly by an estimated additional 34k ha of planted land bank in Indonesia contributing to GENP’s FFB by end of this year. Moving forward, GENP’s planted land bank in Indonesia will continue to drive its overall FFB output growth, thanks to its relatively young age profile. We gathered that Indonesia ’s contribution to its total FFB output will increase to 30% by 2015 (from 13.5% in 1H 2014).
• The implementation of B7 biodiesel in East Malaysia (effective Dec 2014) is positive for GENP, as: (1) GENP is one of the only two biodiesel producers in Sabah; (2) The pricing formula for palm-based biodiesel set by the Government indicates that biodiesel producers will be profitable from producing biodiesel.
• We believe new planting works will likely remain slow (and will unlikely return back to GENP’s previous new planting of 10,000 ha p.s. previously), given the increasingly stringent regulations, rising pressure from environmentalists, as well as the uncertainties on foreign shareholding cap on plantation assets in Indonesia.
• Maintained earnings forecasts, SOP-derived TP of RM9.51, as well as our HOLD call on the stock. 

DRB-Hicom (BUY çè)

On Going Internal Restructuring

• Internal Restructuring - DRB and Isuzu is selling their stakes of 25.57% and 25.43% in Isuzu Malaysia to Isuzu HICOM Malaysia (Owned by Isuzu 51% and DRB 49%).
• Based on FY03/14 earnings of RM11m and NAV of RM77.5m, the price of RM40.8m is fairly valued at Trailing P/E of 7.3x and P/NAV of 1.03x.
• We are positive on the long term restructuring plan of DRB.
• Maintained BUY with unchanged Target Price of RM3.00, based on 20% discount to SOP.

GAB (HOLD çè)

1QFY15: Within Expectations

• 1QFY15 net profit of RM54.6m came in within expectations.
• 1QFY15 revenue grew by 20.7% yoy thanks to improved pricing and brand mix. Qoq, sales decline mainly due to seasonality as 1Q is usually weaker than 4Q.
• Net profit, however, experienced a slower growth yoy resulted from higher operating expenses such as higher payments on excise duty and sales taxes. Qoq net profit grew further from lower production costs and commercial spent.
• No changes to our HOLD recommendation and target price of RM14.39 based on DCF valuation.

Economics

3Q14 GDP: Beginning of Slower Growth

• Malaysia's real GDP growth moderated to 5.6% yoy in 3Q14 (2Q14: +6.5% yoy), broadly in line with our (+5.7%) and market expectations (+5.6%). The slower growth was on account of moderation in both domestic demand and exports. All industries recorded softer growth in 3Q14.
• Current account surplus, as expected, narrowed further to RM7.6bn or 2.8% of GDP in 3Q14 (2Q14: +RM16.0bn or 6.1% of GDP).
• We maintain our 2014 full-year growth estimate at 6.0%, as 3Q14 GDP growth came in line with our expectations. 4Q14 GDP is expected to grow by ~5.6% yoy, hence averaging 6.0% growth for the year.
• Moving into 2015, we expect GDP growth to moderate to 5.0% (2014f: +6.0%), pulled down by smaller export gain and more cautious domestic consumer spending. Sectoral wise, all sectors are expected to pencil in slower expansion, except the mining sector.
• On inflation, we expect the headline inflation to nudge up to ~3.2% in 4Q14 from +3.0% in 3Q14 following the 20 sen cut in fuel subsidy and increase in cigarette prices by RM1.50 per 20-stick pack. This upward trend would continue going into 2015, taking the full-year inflation forecast to 4.0% from an estimated 3.2% in 2014.
• Given the uneven global recovery, slower domestic financial activities, waning enthusiasm on property speculation and contained demand-driven inflation risk, we expect BNM to keep its OPR unchanged at 3.25% throughout 2015.

Traders brief

Potential mild rebound this week

• Technically, the sharp selldown from monthly high of 1858 (3 Nov) to a low of 1808 last Friday has pushed the KLCI into an oversold position, reflected by the daily slow stochastic indicator. We see potential of mild technical rebound this week from an oversold trajectory, driven by a hammer candlestick formation and bottoming up hourly chart, a more sustainable recovery in crude oil prices as well as the traditional Nov/Dec year-end window dressings activities. Short term resistances are 1820-1836 whilst supports fall on 1778-1800
• Today’s recommendation: Impulse BUY on SILK; Trading Buys on MITRA and PERISAI.

Trading Idea - MITRA

Poised to surpass 52-week high at RM1.04 towards RM1.10-1.18

• Positive breakout to spur greater upside towards. In the wake of a positive breakout above the key support-turned-resistance at RM0.98 (daily chart) and the bullish “Flag” pattern (hourly chart) last Friday, Mitra near term outlook has turned increasingly bullish. Hence, our target prices’ projections are pegged at RM1.04 and RM1.10 (flag breakout price objective). A decisive breakout above RM1.10 will spur prices higher to RM1.18 (price target for V-shaped breakout). Immediate supports are RM0.98 (30-h SMA) and RM0.95 (38.2% FR). Cut loss below RM0.94.

Trading Idea - PERISAI

PERISAI - Potential relief rally amid oil price recovery

• Deep-sea fishing amid oversold position. Recent sharp drop in share price had triggered extremely oversold positions, as indicated by daily and weekly oscillators. Reversal signal was induced by the “Bullish Harami” and doji candlesticks pattern at bottom territory. This is also consistent with the improving volume as well as “Bottom-out” reading in all indicators (MACD, RSI & Slow Stochastic). Key resistances are RM0.74-0.855 whilst supports fall on RM0.67-0.70. Cut loss at RM0.66

Impulse Trading - SILKHLD

SILKHLD: Poised for Double Bottom Breakout amid bullish indicators

• SILKHLD’s share price movement has caught our attention as we see potential breakout on “Double Bottom” pattern after downtrend is broken. Its downtrend line was taken out by last Friday’s white candlestick. Moreover, hourly chart “Bullish Pennant” pattern breakout on heavy volume also suggests strong buying momentum.
• Hence, our target price projection is pegged at RM0.87, RM0.915 (38.2% FR) and RM1.03 (price target for Double Bottom breakout). However, always prepared to set cut loss if situation changes. Support at RM0.82 with cut loss below RM0.79 (30-d SMA).