HLIB Research Summary - 21 Nov 2014

Automotive (NEUTRAL  çè)

Rebound in Oct, Driven by Perodua

• Oct TIV rebounded mom to 54.3k units (-1.6% yoy; +13.4% mom) from maiden contribution of Perodua Axia. YTD, TIV was 546.5k units (+0.6% yoy). We expect stronger sales in Nov & Dec, driven by Perodua Axia and Proton Iriz, as well as aggressive campaigns by foreign OEMs.
• Perodua reported strong sales of 17.7k units (+13.8% yoy; +46.0% mom) due to deliveries of newly launched Axia.
• Proton sales disappointing at 8.1k units (-37.2% yoy; +1.0%mom), due to mass production hiccups.
• YTD, Toyota and Nissan sales was relatively weak, behind FY14 sales target, while Honda is on track to achieve its FY14 target.
• Maintained NEUTRAL on automotive sector with top picks: MBM (TP: RM4.00) and DRB (TP: RM3.00).

SapuraKencana (BUY çè)

Expanding Reserves..

• SKP announced to acquire three blocks of oil assets from Petronas Carigali in Vietnam with total purchase consideration of US$400m.
• SKP also awarded PSC for Block SB331 and SB332 onshore Sabah with participating interest of 70%
• We expect the Vietnam acquisitions to increase 2P oil reserves by 80% to 39mm boe.
• Assuming net production of 11k bbl/d from Vietnam asset with oil price at US$80/bbl, we estimate it to contribute ~13% to FY01/16 bottomline.
• Maintain BUY call with an unchanged TP of RM4.26 based on unchanged 16x FY01/16 EPS of 26.6 sen/share.  

RHB Cap (BUY çè)

Growth Traction Gained Momentum

• 9MFY14 results in line with HLIB and consensus.
• Strong 3Q on sustained double-digit loans growth, stronger non-interest income (+24% qoq) and wider sequential JAW. 
• 9MFY14 ROE slightly below KPI but it is not changing as momentum in 3Q to sustain into 4Q, absence of additional provision and lower credit charge vis-à-vis earlier guidance.
• RHB-OSK integration on track to exceed initial synergy projection.  Coupled with new transformation (IGNITE 2017) progressing well, both has already contributed to the traction in Islamic and non-interest income growth.
• M&A with CIMB and MBSB to benefit the group and its shareholders.  Dedicated team to deal with integration to ensure BAU momentum is sustained
• Asset quality continued to improve with comfortable capital ratios.           
• Target price maintained at RM10.00 or 1.4x merger P/B (vs. RM10.028 merger valuation).  Maintain BUY.

YTLP (SELL ê)

1Q15 Within Expectations

• Within Expectations - Reported 1QFY06/15 core earnings of RM254.6m, accounting for 27.9% of HLIB and 24.0% of consensus.
• Main concern on the margin compression for Singapore Seraya Power (due to market overcapacity) and UK Wessex Water (regulatory reform to cut return on WACC).
• We believe the possibility of concession extension of domestic power plants relatively low.
• Given the continued earnings risk and lack of catalyst, we downgrade YTLP to SELL (from Hold) with unchanged Target Price of RM1.44, based on 10% discount to SOP.

Bumi Armada (BUY çè)

• Slightly Below mainly due to slower progress recognition of Kraken and Angola projects.
• Currently, Bumi is targeting 3 major FPSO bids in Ghana , Nigeria and Namibia and expects the result of tenders to be known by 1QFY15.
• FY14 earnings adjusted downward by 7% to reflect slower earnings recognition for Kraken and Angola projects under finance lease and lower margin for T&I.
• We maintain our BUY call with TP reduced from RM2.06 to RM1.74 based on SOP valuation method following adjustment to the group net debt position and lower value from T&I segment.

Genting Plantations (HOLD çè)

Within our expectation

• 9MFY14 core net profit of RM235m (+21.9%) came in within our expectation, accounted for 75.7% of our full-year forecast.
• We nudged up our FY15-16 net profit forecasts by 2.1-2.5%, largely to account for earnings contribution from the biodiesel production.
• SOP-derived TP raised by 10.4% to RM10.50 to reflect higher net profit forecasts and its latest net cash position. Maintain HOLD recommendation.  

Aeon (HOLD çè)

3QFY14: Well below expectations

• Below expectations – Aeon’s revenue of RM2733.8m (+6% yoy) translated into core earnings of RM123.3m (excluding RM14.2m exceptional gain occurred in previous quarter) came in well below our expectations, accounting for 53% of ours and 52% of streets’ full year estimates.
• YTD core net profit was depressed by 21% yoy, largely due to (1) higher utilities costs resulting from the electricity tariff hike; (2) greater initial start-up costs from the opening of new stores; (3) Aeon’s 30th anniversary promotional costs; and (4) higher marketing costs that was needed to boost consumer spending.
• Cut FY14, FY15, FY16 earnings by 25%, 12% and 10%, respectively, to reflect the short term macro headwinds, weak business and consumer sentiment as well as higher than expected operating costs.
• As a result, TP slashed by ~12% to RM3.42 pegged to unchanged 21.9x P/E FY15 EPS of 15.6 sen, based on 1 SD above 3-year historical average. Maintain HOLD.

Mah Sing (BUY çè)

9MFY14 Results & Corporate Exercises

• MSGB’s 9MFY14 PATAMI of RM254.7m came in within expectations.
• MSGB achieved property sales of circa RM2.45bn YTD. It has also grown its landbank by 1,134 acres, bringing the group’s undeveloped land bank to 3,658 acres with GDV of RM44.8bn. Unbilled sales stood at an outstanding RM5.1bn, representing 2.94x of FY13 property revenue.
• MSGB also proposed (1) renounceable rights issue with free detachable warrants to raise up to RM630m; and (2) a 1 for 4 bonus issue following the rights issue.
• Based on the indicative scenario of 3 rights for every 10 MSGB shares, there will be a total of 442.7m rights issued. This will result in dilution of FY14-15 EPS by 16.6% and 1101% while RNAV will be diluted by 13.8%.
• However, this is expected to be mitigated by the potential earnings from the launch of the development in Puchong (1HFY15) and Seremban (2HFY15).
• Gearing will be lowered significantly to 0.13x from 0.37x, allowing more room to gear up. The expected completion for the proposed rights issue with free warrants and bonus issue are by 1QFY15 and 3QFY15, respectively.
• BUY recommendation and TP of RM2.90 remained unchanged.

Kossan (HOLD é)

9M14 Results

• 9M14 core net profit accounted for 65.5% and 61.2% of HLIB and consensus full year estimates, respectively.
• We deem this to be in line as we are expecting a stronger quarter ahead from the contribution of new capacity.
• Declared 1^st interim dividend of 3.5 sen per share (9M13: 3.5 sen).
• QoQ: 3Q14 revenue grew (+8.1%) on the back of stronger sales from gloves and clean-room divisions, despite slower sales from TRP division, translating into higher core earnings (+7.4%).
• YoY: 9M14 revenue contracted (-4.5%) due to lower ASP in gloves division, offsetting the higher sales in clean-room division. Earnings turned positive thanks to improved margin.
• Upgrade from SELL to HOLD as we roll forward our valuation to CY16, leading to a higher TP of RM4.49.
• Our valuation is pegged to 12.8x of CY16 EPS, based on 1SD above 5-year historical average P/E.

PosM (SELL ê)

Weak 2Q15; Dragged by Mail and Retail

• Below - Reported 2QFY03/15 core earnings of RM8.2m and 1HFY03/15 of RM37.2m, which is 27.1% of HLIB and 22.9% of consensus.
• The weak performance was mainly due to higher than expected cost structures (related to staff and transportations).
• Recognized gain of RM25.5m from expired postal order in 2Q15.
• Cut earnings by 25-36% for FY03/15-17, after adjusting for the higher than expected cost structures.
• Downgrade PosM to SELL (from Hold) with lower Target Price of RM3.65 (from RM4.60), based on 18x P/E for FY03/16.

Scomi Energy (BUY çè)

Drag by marine segment.

• Below expectations due to lower margin as a result of change in product mix coupled with losses from marine segment.
• Marine segment under pressure with PAT swung from profit to losses. This was mainly due to lower utilisation of vessels and volume coal transported.
• We understand the company is still looking for opportunity in RSCs, brownfield and EOR businesses in the near future.
• We maintained our BUY call with a TP of RM1.07 (pending review of earnings forecasts).

CBIP (HOLD çè)

Within expectations

• 9MFY14 reported net profit of RM67m (+12.6%) accounted for 69.4% and 67.9% of our and consensus full-year forecasts. We consider the results within expectations, as we expect stronger 4Q (the special purpose vehicle division is seasonally stronger in 4Q). 
• Proposed a 2^nd interim DPS of 3 sen, bringing total DPS YTD to 5.5 sen.
• Maintain earnings forecasts, TP of RM2.13, as well as HOLD recommendation.  

ViTrox (BUY çè)

9M14 Results – Exceed Expectations

• 9M14 core net profit of RM35.4m was higher-than-expected, accounted for 84.6% of HLIB full year estimate.
• The sequential slowdown is very much guided and expected mainly due to industry’s seasonality. Even so, 3Q14 revenue of RM39.5m is another remarkable milestone as the second highest quarterly sales in its history.
• Gartner expects global semiconductor capital spending to be robust in 2015, growing 11.3% yoy to reach USD43.6bn.
• China’s enormous investment (Rmb1tr) into semiconductor industry may lead to potential multi-year high demand of ViTrox’s products.
• Reiterate BUY with unchanged TP of RM3.17, pegged to 1SD above 5-year historical average P/E multiple of 16.2x.

Traders Brief

Follow-through rebound still intact to retest 1836-1850 resistance zones

• The follow-through rebound remained intact as reversal pattern of “Bullish Engulfing” on 17 and 18 Nov is still in force and the traditional year-end Nov/Dec window dressing activities would spur some positive impacts. Further upside targets are 1836 (23.6% FR) and 1850 (downtrend line and 200- SMA) and 1860.
• However, near-term outlook for KLIC is not out of the woods yet since downtrend line has not been taken out yet. Thus, KLCI will continue to trap in range bound consolidation mode within 1800-1850, unless the 1850 resistance is taken out decisively.
• Short term supports are 1812 (50% FR) and 1800
• Took profit on PENTA yesterday as it hit R1.
• Today’s recommendation: Impulse Trading BUY on ESCERAM.

Impulse Trading - ESCERAM

ESCERAM: Resumption of uptrend on the card

• Share price movement has caught our attention as Downtrend Channel and Flag pattern on hourly and daily chart respectively have been taken out by a bullish candlestick, inducing sign of resumption of its uptrend.
• Our target price projection is pegged at RM0.255, RM0.27 and RM0.29. However, always prepared to set cut loss if situation changes. Support at RM0.23 with cut loss below RM0.22.