From Grande To Venti
Initiation
We initiate coverage on Berjaya Food with a BUY recommendation and MYR4.00 TP, implying a 24.6x FY16 (Apr) P/E and offering a 30.7% upside. Its recently-completed acquisition of the remaining 50% stake in BStarbucks could propel its 3-year-earnings CAGR to 47.7%. Starbucks Coffee, Malaysia’s largest coffee chain with 175 outlets YTD, is set to aggressively expand its number of outlets over the next few years.
Hartalega (HART MK, BUY, TP: MYR7.50)
Consolidation Phase
Results Review
1HFY15 (Mar) earnings came in broadly within expectations. We maintain our BUY recommendation on Hartalega with a lower TP of MYR7.50 (21x CY15 P/E, 10.3% upside). Declining ASPs, heightened operating expenses and intensified competition have offset its higher sales volume. Nonetheless, we remain positive on its outlook in view of new capacity from the NGC and resilient demand.
Tasco (TASCO MK, BUY, TP: MYR3.90)
Within Expectations
Results Review
We maintain our BUY call on Tasco with an unchanged TP of MYR3.90 (11.3x FY15F P/E, 27.5% upside). 1HFY15 (Mar) results came in within expectations, with both international business solutions (IBS) and domestic business solutions (DBS) divisions contributing positively to the group. Contract logistics unit reported the strongest growth and we believe this could be the main earnings growth driver moving forward.
TSH Resources (TSH MK, NEUTRAL, TP: MYR2.28)
Poor Downstream Drag Earnings
Results Review
TSH Resources’ 9M14 results were below expectations due to continuing losses at its 50%-owned refinery, although losses narrowed due to higher utilisation. Maintain NEUTRAL on fair valuations at current levels but our SOP-derived TP is reduced to MYR2.28 (from MYR2.47) a 1.3% upside. We also reduce our FY14/FY15 earnings forecast by 11%/8% to account for weaker refining performance.
Suria Capital (SURIA MK, BUY, TP: MYR3.50)
Results Largely In Line
Results Review
Suria Capital’s 9M14 numbers came in largely within expectations and we believe 4Q14 may be better. We keep our BUY recommendation with an unchanged DCF-based MYR3.50 TP, a 35.7% upside. Heightened operating expenses have offset the growth in revenue and the Jesselton Quay project may need more time to realised. However, we understand that it is still in progress.
MBM Resources (MBM MK, BUY, TP: MYR3.55) (Upgraded)
On The Rebound
Results Review
MBMR’s 9M14 results were broadly in line. Upgrade to BUY with a new MYR3.55 TP (25.9% upside) as we expect recurring net profit to rebound 39.2% in 2015 from the alloy wheel business breaking even in 2015 and associates Perodua and Hino enjoying more favourable JPY exchange rates. The stock’s undemanding valuations suggest that the recovery is not yet priced in by the market.
Apex Healthcare (APEX MK, NEUTRAL, TP: MYR3.75)
Anchored By Stronger Exports
Results Review
Apex’s 9M14 results were slightly below our expectation, as its core net profit of MYR24m (+14% YoY) accounted for about 71% of our FY14 full-year target. As such, we maintain NEUTRAL with our TP still at MYR3.75 (1.4% upside), pegged to an unchanged target 12x FY15F P/E. We also pare our FY14F revenue and net profit by 2% and 6% respectively but are maintaining our FY15F and FY16F numbers.
Wing Tai Malaysia (WING MK, SELL, TP: MYR1.76)
Double Whammy
Results Review
1QFY15 results were below our expectations. Downgrade to SELL (from Neutral) with a lower SOP-based MYR1.76 TP (from MYR2.10, a 12.9% downside). Its MYR11m core net profit – accounting for around 15% of our full-year target – fell 29% YoY on lower contribution from property development and apparel retailing. We are lowering our FY15 revenue and net profit forecasts by 12% and 19% respectively.
Malaysian Resources Corp (MRC MK, BUY, TP: MYR2.05)
Coming Along Nicely
Results Review
MRCB’s 3Q14 earnings came in above expectations, driven by earlier-than-expected contributions from one of its projects. We maintain our BUY call and RNAV-derived TP of MYR2.05 (37.7% upside). We raise our FY14/FY15 net profit estimates by 50%/8% after revising our revenue assumptions. MRCB’s near-term prospects remain positive, underpinned by total unbilled property sales of MYR2.9bn.
Lafarge Malayan Cement (LMC MK, BUY, TP: MYR11.27)
Stiff Competition May Dampen Short-Term Outlook
Result Review
As Lafarge’s 9M14 profit of MYR206.1m represented only 47.9/52.5% of our/street’s full-year estimates, we downgrade the stock to NEUTRAL and pare our TP to MYR10.00 (1.4% downside) from MYR11.27. We cut our FY14F/FY15F earnings by 29.1%/11.1% respectively, but keep our target P/E at +2SD from its historical trading range or at 21.6x FY15 EPS as it is still the best proxy to government infrastructure spending.
CIMB (CIMB MK, NR)
Dampened By Higher Loan Impairment Allowances
Results Review
CIMB’s 3Q14 net profit of MYR890m (-16% YoY, -6% QoQ) missed consensus expectations, with the QoQ and YoY drop in net profit mainly due to higher loan impairment allowances (+119% YoY, +62% QoQ) that CIMB Niaga booked in. 9M14 annualised ROE was 11.6% (vs underlying 9M13 ROE of 14.4%) and CIMB said it would not be able to meet its 13.5-14% ROE target for 2014.
Dialog Group (DLG MK, BUY, TP: MYR2.00)
Results Review
Dialog’s 1QFY15 core profit of MYR49m was deemed in line (but below consensus estimates), as a boost from Malaysian upstream and downstream activities offsets temporary slowdown in some of its international activities. Further phases of PIDT project is on schedule. Maintain BUY and TP MYR2.00 (33% upside), as we like Dialog’s continued growth in both offshore and onshore businesses.
Tune Ins Holdings (TIH MK, BUY, TP: MYR3.00)
Rejuvenating Its Take-Up Rate
Company Update
The share price correction yesterday was likely due to temporary setbacks in 3Q results and a cancellation of agreement with Al Hai LLC, which management said to be non-material as it is still on the lookout for MENA and Indonesia partnerships. Maintain BUY and its MYR3.00 TP (24x FY15F P/E, 45% upside). We envision long-term value from its associates, potential partnerships and a recovery in travel demand.
OCK Group (OCK MK, BUY, TP : MYR1.59)
Rising Up The Ranks
Company Update
We believe OCK’s transfer to the Main Market (20 Nov) and the 1-for-2 bonus issue (ex-date: 24 Nov) would catalyse a re-rating of the stock. Maintain BUY with a revised TP of MYR1.59 (ex-bonus TP of MYR1.06) (12.8% upside). We lower our FY14 earnings forecast by 28% due to the delay in the USP contract award and recognition of PMT in 4Q14. The stock’s FY14-16 EPS CAGR remains a compelling 32%.
Tambun Indah (TILB MK, BUY, TP: MYR2.50)
Unbilled Sales Underpin Resilient Earnings
Results Review
Tambun’s 3Q14 results were within expectations. Maintain BUY with a MYR2.50 TP (18.5% upside). Due to a lack of new launches in 3Q, new sales fell to MYR74m, from MYR149m in 2Q. We expect Tambun to end the year with MYR430m in sales (vs MYR500m in FY13). Although the recent land deal was called off, we remain confident of management’s ability and expect some new land parcels to be secured next year.
Sunway (SWB MK, BUY, TP: MYR3.90)
Attractive Dividend Angle
Results Review
Sunway’s 3Q14 results came in within our expectation but below market consensus. New sales fell slightly to MYR393m from MYR459m in 2Q. The dividend angle for the stock may have been underappreciated by the market. With the listing of SCG, shareholders could potentially receive a cash dividend of 25-30 sen, on top of the normal dividend payout of 10 sen. Maintain BUY with MYR3.90 TP (20.7% upside).
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