Green Light For Pengerang LNG
Corporate News Flash
We are positive on the green light received by Dialog to develop a key phase of its mega Pengerang Terminal project - dedicated for LNG storage, trading and supply to the requirements of the Pengerang Integrated Complex. We don’t expect any impact to our 3-year earnings forecast, given its long development period. Maintain BUY, with a revised MYR2.00 TP (28.2% upside) to account for our new oil price forecast.
Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98)
Embarking On Pengerang Regasification Project
Corporate News Flash
Petronas Gas is embarking on the MYR2.7bn Pengerang regasification terminal project. While we are positive on the news, we maintain our NEUTRAL call, earnings forecasts and TP of MYR21.98 (1.5% upside), as the project will only start contributing from FY18. We believe the market has priced in near-term earnings catalysts, ie contributions from a new power plant in Sabah and a regasification terminal in Melaka.
KKB Engineering (KKB MK, SELL, TP: MYR1.38)
Waning Hope On O&G Contract Wins
Results Review
KKB’s 9M14 results were way below our and street expectations. We downgrade our rating to SELL (from Trading Buy) as we trim our target P/E to 12x FY15 and cut our TP to MYR1.38 (-29.5% downside). Due to the waning hope on its associate unit winning more O&G contracts in the near future (on weakening oil prices) and poor contract wins for other divisions to-date, we are slashing our FY14/15 earnings numbers.
Guinness Anchor (GUIN MK, NEUTRAL, TP: MYR13.10)
Earnings Up QoQ on Lower Opex
Results Review
Guinness’s 1QFY15 earnings of MYR54.6m (+10% YoY, +16.3% QoQ) were broadly in line with our expectations. Although revenue declined 4.8% QoQ due to seasonal factors, earnings rose 16.3% on the back of strategic cost management as well as lower commercial spending. No dividend declared for the quarter under review. Maintain NEUTRAL and a DCF-based TP of MYR13.10 (0.8% downside).
Economic Highlights - Real GDP Growth Weakened In The 3Q, Dragged By Slower Export Growth (Published 14 Nov 2014)
Real GDP growth moderated to 5.6% YoY in 3Q14 (2Q: +6.4%). The reading was higher than our expectation of 5.2%, due to stronger-than-expected growth in consumption demand. This was attributed to much weaker export growth on account of a higher base effect and weak regional trade. External demand was also dragged down by slower growth in global semiconductor sales and falling commodity prices amid a moderate and uneven global economic recovery. Domestic demand also weakened in 3Q, but it helped to cushion sluggish external demand during the quarter. Full-year economic growth is 5.8% in 2014 (2013: +4.7%).
Economic Highlights - Current Account Surplus Narrowed Further In 3Q (Published 17 Nov 2014)
The current account surplus in the balance of payments dropped by 52.6% to MYR7.6bn in 3Q (2Q: +MYR16.0bn). This was due to a smaller surplus in the goods account and a bigger deficit in the services, income and transfer accounts during the quarter. The financial account, on the other hand, recorded a smaller outflow of MYR2.8bn in 3Q (2Q: -MYR11.8bn). We expect the current account surplus of the balance of payments to widen to MYR58.0bn or 5.8% of GNI in 2014 (2013: RM39.9bn or 4.2% of GNI).
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