Capacity To Surge With New Power Deal
Company Update
We applaud Press Metal’s plan to double its Samalaju plant’s capacity, which would lift total smelting capacity to 760,000 tpa (~1.5% of global primary aluminium consumption). Maintain BUY, with a higher TP of MYR5.75 (68.1% upside) – at a 10% discount from our fully-diluted DCF valuation. We also lift FY16F earnings by 27.7% as the new plant will most probably replicate its low-cost model, which is in the first quartile of the global cost curve.
AMMB (AMM MK, BUY, TP: MYR7.45)
Underlying Trends Generally Positive
Results Rev,iew
AMMB’s 2QFY15 (Mar) results met our and consensus expectations. A much improved set of results together with low valuations means we retain our BUY call, albeit with a revised TP of MYR7.45 (14% upside). Underlying trends were generally positive this quarter, with 2QFY15 net profit up 35% QoQ (underlying basis), driven by a combination of NIM expansion, tight cost control and lower credit cost.
Kuala Lumpur Kepong (KLK MK, NEUTRAL, TP: MYR20.70)
Weaker Manufacturing Contributions
Results Review
KLK’s FY14 (Sep) results were within our expectations but below consensus. Stronger profits from the plantation division offset weaker contributions from the manufacturing and property divisions. While we like the company’s strong management and steady growth strategy, we keep our NEUTRAL call with a revised SOP-based TP of MYR20.70 from MYR21.30 (10% downside), as valuations remain fair at current levels.
TH Plantations (THP MK, SELL, TP: MYR1.22)
Hit By Delayed Impact Of Dry Weather In Sarawak
Results Review
THP’s 9M14 results were below expectations, due to weaker-than-expected FFB production resulting in lower cost efficiency. We maintain our SELL recommendation with a lower TP of MYR1.22 (from MYR1.40) a 25% downside. Despite THP’s decent annual FFB expected production growth of 10-15% over the next few years, we believe this may not be enough to offset the impact of lower CPO prices.
MSM Malaysia (MSM MK, BUY, TP: MYR5.74) (Upgraded)
To Benefit From Low Raw Sugar Prices
Results Review/Briefing Note
We consider MSM’s 9M14 earnings to be in line, as 4Q14 could see a recovery in EBIT margins. While MSM still faces potentially declining domestic volumes, we believe the absence of an LTC come 2015 and the current low raw sugar prices would bode well for margins. We raise our TP to MYR5.74 from MYR5.23 (17% upside) and upgrade to BUY. We highlight MSM’s decent dividend yield of 4-5.5% per annum.
AirAsia X (AAX MK, SELL, TP: MYR0.57)
Still In Turbulence
Results Review
As AirAsia X’s 9M14 earnings were below expectations, we maintain SELL with a lower TP of MYR0.57 (from MYR0.68, 1.5x FY15F P/BV, 11.6% downside). Earnings continued to come under pressure due to weakening passenger yields and escalation of costs. Airline incidents compounded the already intense operating environment but management is confident that the situation will improve.
Esthetics International Group (EIG MK, BUY, TP: MYR1.40)
Lifted By Favourable Tax Rate
Results Review
Esthetics’ 1HFY15 (Mar) core earnings of MYR9.3m were above our expectations due to a favourable tax rate. Core PBT of MYR11.5m was largely in line at 53.8% of our full-year estimate. Following the recent share price weakness, we upgrade our call to BUY and nudge up our SOP-based TP to MYR1.40 (from MYR1.35). This implies a 27.3% upside. Management declared its first interim DPS of 1.5 sen.
AirAsia (AIRA MK, BUY, TP: MYR3.11)
At a Yield Inflection Point
Results Review
9M14 earnings came in better than expected, prompting us to adjust our FY14/FY15/FY16 earnings upwards by 104%/14%/17%. Maintain BUY with a higher MYR3.11 TP (from MYR2.73, a 26.4% upside). Better-than-expected 3Q14 net profit was largely attributed to the lower average jet fuel cost incurred. The upward pricing rationalisation of airfares is expected kick-in on a stronger note next year.
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