Auto (NEUTRAL)
Auto Sales Rebound
Sector Update
October auto sales rebounded +13.4% MoM to 54,187 units from a 6.6% MoM contraction in September as deliveries of the Perodua Axia gathered pace. However, cumulative 10M14 TIV sales continued to slow to +0.6% YoY from a higher base, in addition to consumers’ anticipation of year-end discounts and some choosing to defer their purchases until the GST impact on car prices becomes clearer. Maintain NEUTRAL.
Mah Sing (MSGB MK, NEUTRAL, TP: MYR2.41)
Rights Issue To Pay Off Landbank
Results Review
Mah Sing’s 3Q14 results met expectations. 3Q new sales hit MYR900m, up from MYR780m in 2Q, on track to hit its MYR3.6bn sales target. In conjunction with the results, the company has called for a rights issue exercise to raise about MYR630m. The proceeds will largely be utilised for landbanking. Assuming a 3-for-10 entitlement basis for the rights, our TP is lowered to MYR2.41 (4.3% upside). Maintain NEUTRAL
Genting Plantations (GENP MK, BUY, TP: MYR11.60)
Indonesia The Growth Catalyst
Results Review
GP’s 9M14 earnings were in line, with continued strength seen from its Indonesian plantations. Maintain BUY and SOP-based TP of MYR11.60 (11% upside), as we believe GP’s strong FFB production growth would help offset the lower CPO prices somewhat. We also highlight that stripping out the RNAV of the company’s property landbank from its current market capitalisation would bring its P/E down by 5-6x.
CB Industrial Products (CBP MK, NEUTRAL, TP: MYR2.10) (Upgraded from Take Profit)
Upgrade To NEUTRAL
Results Review
CBIP’s 9M14 results were within expectations, with no major surprises. Given the relatively smaller downside risk to our TP now, we upgrade the stock to NEUTRAL. We adjust our SOP-based TP to MYR2.10 (from MYR4.10, 3.7% downside), after taking into account the bonus issue and CBIP’s latest net cash. We await the next earnings catalyst, ie the patent approval and commercialisation of its zero-discharge mill.
YTL Power (YTLP MK, NEUTRAL, TP: MYR1.68)
1QFY15 Operating Profit Declines 16% YoY
Results Review
YTL Power (YTLP)’s 1QFY15 (June) results missed expectations. We cut our FY15 forecast by 27% but raise our TP by 9% to MYR1.68 (implying a 2% upside) after we update our WACC assumptions. We maintain our NEUTRAL call. YTLP lacks a strong appeal to investors as it has yet to secure any new power plant project in Malaysia, while its existing ones are pending retirement.
Pos Malaysia (POSM MK, BUY, TP: MYR5.60)
Higher Expenses For Future Growth
POS Malaysia’s 1HFY15 (Mar) results were in line with our estimate, as we expect higher operating expenses due to its transformation plans while 2H is normally a stronger period. We maintain BUY with a new TP of MYR5.60 (12% upside, 17x FY16F PE) vs MYR5.60 previously. Future growth would continue to be driven by its courier division while the potential development of its Brickfields land remains a rerating catalyst.
Kossan Rubber Industries (KRI MK, BUY, TP: MYR5.12)
Outlook Remains Bright
Results Review
We keep our BUY recommendation and TP of MYR5.12 (12.8% upside, 17x FY15F P/E). 9M14 earnings came in weaker than expected due to lower contributions from all divisions, but we see a bright outlook for FY15 when its new lines commence operations. Kossan declared a dividend of 3.5 sen in the quarter under review. We remain positive on the company’s future growth prospects.
QL Resources (QLG MK, BUY, TP: MYR3.90)
All On Track
Results Review
QL’s 1HFY15 (Mar) core earnings of MYR88.2m made up 44.5%/45.4% of our/consensus estimates. We deem the results in line, as 1H typically contributes 44-46% of its full-year earnings. Maintain BUY and a MYR3.90 TP (12.8% upside), as we remain upbeat on QL’s outlook. 1HFY15 revenue and earnings improved by 10.6% and 14.3% YoY respectively, driven by better performances from all its business segments.
AEON (AEON MK, NEUTRAL, TP: MYR3.67)
Affected By Higher Operating Costs
Results Review
AEON’s 9M14 core earnings of MYR137.4m missed expectations, at 54.3%/57.5% of our/consensus full-year estimates. We attribute this to higher utilities and promotional expenses, as well as initial start-up costs for new stores. Maintain NEUTRAL with a revised DCF-based TP of MYR3.67 (4.6% upside). We cut our FY14/FY15 earnings forecasts by 20.5%/19.2% respectively.
Faber Group (FAB MK, NEUTRAL, TP: MYR2.97)
Down But Not Out
Results Review
9M14 earnings came in below our and consensus estimates. Maintain NEUTRAL, with a SOP-based MYR2.97 TP (from MYR3.20, 1% upside). Core profit fell by 8.4% YoY on lower IFM concession and non-concession contributions. We slash our FY14-15 earnings forecasts by 25.3-40.5% to incorporate the challenging operating environment and lower revenue from IFM concession and non-concession businesses.
Bumi Armada (BAB MK, NEUTRAL, MYR1.49) (Downgraded from BUY)
Another Quarter Of Disappointment
Results Review
Bumi Armada’s 9MFY14 core earnings came in at MYR249.4m, missing our and street estimates by 22%/27%. We downgrade Bumi Armada to NEUTRAL with a lower SOP-based TP of MYR1.49, representing only an 8% upside, from MYR2.25. We also cut our earnings FY14F/FY15F earnings by 21%/13%, adjusting for a lower contribution from its FPSO as well as OSV segments.
SapuraKencana Petroleum (SAKP MK, BUY, TP: MYR4.02)
Boosting E&P Portfolio With Sabah and Vietnam
Company Update
SapuraKencana has added Vietnam and Sabah blocks to its E&P assets – part of its long-term plan to have a balanced and fast-growing E&P portfolio. Maintain BUY. While we factored it in our SOP, we also rationalised its valuations to reflect a moderated global O&G outlook and, despite this conservatism, our adjusted MYR4.02 TP (from MYR5.33, 30% upside) implies that most downside risks are priced in.
Alam Maritim (AMRB MK, NEUTRAL, TP: MYR0.85)
Weak Results Widely Anticipated
Results Review
Alam Maritim’s 9M14 core profit of MYR55m was in line with our but below consensus estimates from lower vessel utilization rates and lower revenue recognition in subsea. Maintain NEUTRAL with a lower TP of MYR0.85 (9x P/E, 5% upside). We view its share price downtrend as an effect of the sector’s derating, and do not recommend a strong upside at this juncture given the earnings volatility and execution risks.
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