FY14 Core Net Profit Grows 15.8%
Results Review
TNB’s FY14 (Aug) results met our forecast. We raise our FY15 net profit forecast by 13% on lower coal costs. Correspondingly, we raise our TP by 13% to MYR15.50, implying a 16% upside. We maintain our BUY call. We continue to advocate owning TNB as a proxy to the economy and stock market. We also like the “renaissance” in TNB’s involvement in the more lucrative power generation business.
Felda Global (FGV MK, NEUTRAL, TP: MYR3.68)
Proposes To Acquire Chinese Refining Facility
Company Update
FGV has proposed to acquire Felda IFFCO South China for MYR172m, a company with 630,000 tonnes of annual refining capacity. While the pricing seems reasonable on an EV/tonne basis, we are not too sure of the profitability of this facility. We make no changes to our earnings forecasts and TP of MYR3.68 (implying a 0.3% upside), until we get more clarity on the potential earnings impact. Maintain NEUTRAL.
Banking (NEUTRAL)
A Mixed Bag
Sector Update
System loan growth in September picked up pace to 9% YoY from 8.6% YoY in Aug due to a pickup in business loan disbursements. Business loan applications and approvals also strengthened in September, pointing to stronger business lending activities in 4Q14. However, asset quality deteriorated but impairment allowance data suggest that credit cost could remain fairly benign. Stay NEUTRAL.
Economic Highlights
Broad Monetary Aggregate And Loan Growth Picked Up In September
The broader money supply, M3, picked up to 5.2% YoY in September (Aug 2014: +4.8%). Loan growth also inched higher to 9.0% YoY in September (Aug 2014: +8.6%). A stronger growth in corporate loans mitigated the weaker growth in household loans during the month. We continue to expect the Overnight Policy Rate (OPR) to be kept at 3.25% for the rest of the year. However, the OPR could still be raised by another 25 bps in 1Q15.
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