HLIB Research Summary - 20 Nov 2014

KLK (HOLD çè)

Dragged by weaker downstream

• FY09/14 core net profit of RM985.8m (+10.2%) came in below expectations, accounted for only 88.8% and 92.7% of consensus and our forecasts, respectively.
• Key variance against our forecasts - weaker-than-expected margins at the manufacturing division, in particularly, the oleochemical sub-segment.
• Recommended a final NDPS of 40 sen, bringing total NDPS for FY09/14 to 55 sen.
• We tweaked our FY09/15-17 net profit forecasts lower by 0.6-1.9%, largely to account for a lower EBIT margin assumption for the manufacturing division.
• SOP-derived TP lowered by 0.4% to RM20.33 after taking into account of lower net profit forecasts. Maintain HOLD recommendation on the stock

AMMB Holdings (HOLD çè)

Better 2Q But Not Enough

• 1HFY15 core earnings below HLIB and consensus due to contraction in loan, lower NIM and weak non-int income.
• Despite stronger 2Q (lower overheads and provision), not sufficient to make up for 1Q disappointment.
• 12 sen interim dividend (vs. 7.2 sen).  No change in policy, merely altered payout proportion from 1/3 to 50% for 1H.
• Cut FY15-17 KPIs (lower profit growth and ROE).  Only positive change was lower FY15 credit charge from better 2H recovery and continued asset quality improvement.
• The latter from its efforts to only accept high quality loans (especially HP and commercial property) which mean forward loans growth to track behind industry average.
• Comfortable with capital position and working on IRB approach to improve capital efficiency but will take 3 years.
• Cut FY15-17 forecasts by 10.5-11.6%, forecasted ROE now lower than its KPI.
• Target price cut to RM6.72 (Gordon Growth with ROE of 12.8% and WACC of 10.9%).  Maintain HOLD.

AirAsia (TRADING BUY çè)

Expect Stronger Earnings in 4Q14

• Reported 3Q14 core earnings of RM85.4m and 9M14 of RM236.3m, which is 53.2% of HLIB and 47.4% of consensus. We expect stronger earnings in 4Q14 from seasonally strong demand, new ancillary income initiatives (WiFi and duty free business) and lower jet fuel price.
• Yields remained weak in 3Q14, mainly due to overcapacity combined with weak air travel demand. Management guided for yield improvement in 4Q14, as airlines slows down aircraft deliveries.
• Associates/JVs - TAA, PAA, AAI and JAA remained loss making, while IAA barely breakeven (due to seasonal strong demand quarter).
• The newly setup aircraft lease business will complete the takeover of the 43 leased-out A320s (to associates/JVs) by March 2015, and contribute positively to AirAsia bottomline.
• Maintained TRADING BUY with unchanged Target Price of RM2.57, based on 10% discount to SOP.

Star Publications (UNDER REVIEW )

3QFY14 – In line

• Star’s 9MFY14 core earnings inched up by 3% to RM101.4m (excluding VSS expense), accounting for 71% of both ours and the streets’ full year forecasts. 4Q tends to be the strongest quarter due to year-end festivities. Hence, we consider earnings to be relatively in line.
• 9MFY14 results review… Revenue declined by 0.4% to RM732.8m caused by lower sales from print and radio segments. However, the impact was moderated by event and TV segments which improved by 21% and 28%, respectively.
• 3QFY14 results review… The lower revenue of 10% caused by cautious adex spending translated into lower core earnings QoQ by 17% to RM34.3m.
• Event division increased 9% yoy. Other segments recorded lower revenues and segmental profits.
• Forecasts unchanged. Stock rating UNDER REVIEW with TP unchanged at RM2.55 based on required dividend yield of 5.5%. Subject to revision after analyst briefing on 21-Nov-2014.

Traders Brief

Follow-through rebound likely to retest 1836-1850 resistance zones

• Chart-wise, the follow-through rebound yesterday had induced more positive momentum to the market sentiment, supported by expectations of traditional year-end Nov/Dec window dressing activities and bottom-up technical oscillators. Further upside targets are 1836 (23.6% FR) and 1850 (downtrend line and 200-SMA) and 1860.
• Short term supports are 1812 (50% FR) and 1800.
• Today’s recommendation: Trading BUY on UNISEM.

Trading Idea - UNISEM

UNISEM: Imminent bullish momentum

• Share price is expected to move higher as a result of the completion of the “Cup & Handle” pattern on weekly chart. A strong signal of a resumption of the prior uptrend is given by the “Handle” breakout which is also supported by long-term downtrend breakout.
• Upsides are targeted at RM1.82 and RM1.92, with long term target price of RM2.41. Immediate supports are located at RM1.68 and RM1.64. Cut loss at RM1.61.