MIB Research Summary - 4 Nov 2014

Berjaya Auto: Maintain Buy A play on weaker yen  Shariah-compliant

BAuto is a direct beneficiary of a weaker JPY with 60-65% of COGS denoted in that currency. Having imputed a weaker JPY/MYR, our FY15/16/17 forecast is lifted by 11%/16%/17%. Reiterate BUY with higher TP of MYR4.35 (+24%), pegged to higher CY15 PER target of 13x (from 12x) given its superior growth (37% 3-year earnings CAGR) and low PEG of 0.4x. Technical: Some profit-taking is setting in The FBMKLCI inched down 1.81 points to 1,853.34 yesterday and the FBMEMAS and FBM100 lost 4.79 points and 4.62 points respectively. In terms of market breadth, the gainer-to-loser ratio was 424-to-447 while 288 counters were unchanged. 1.86b shares were traded, valued at MYR1.90b. Today's trading idea is a Short-Term BUY on SKP Resources with a target price MYR0.765, MYR0.0.87 and MYR1.07.

RHB Research Summary - 4 Nov 2014

Malaysia Airports Holdings (MAHB MK, BUY, TP: MYR8.04)

The Worst May Be Over

Results Review

MAHB’s 3QFY14 core losses reduced QoQ to MYR2.7m from MYR25m. We deem this in line with our expectation as 4Q could be soft in view of the anticipated flight cancellations in the peak season post MH17 and MH370. The worst may be nearing its tail-end as FY15 earnings growth for domestic operations could be robust on KLIA 2’s full-year contribution. Maintain BUY, at a lower MYR8.04 TP (11% upside).

 

 

Alam Maritim (AMRB MK, NEUTRAL, TP: MYR1.12)

Secures MYR31.7m Demobilisation Contract

Corporate News Flash

Alam Maritim has received a USD9.56m (MYR31.7m) letter of award (LOA) to demobilise a floating storage facility. Maintain NEUTRAL, with our TP trimmed to MYR1.12 (from MYR1.35), implying a 4.7% upside. Although this LOA and a possible short-term contract for 1MAS-300 are positive surprises to us, we believe they are insufficient to lift the sentiment on the stock amid the current cautious outlook.

 

 

Malaysia Building Society (MBS MK, NR)

Higher Impairment Allowances In 3Q14

Results Review

Malaysia Building Society’s (MBSB) 3Q14 net profit of MYR192.4m fell 17.4% QoQ (+63.4% YoY) due to higher impairment allowances on loans, rising operating expenses as well as lower non-interest income. 3Q14 loan growth remained muted while NIM was stable QoQ at 3.86% (2Q14: 3.83%). Management updated that efforts to close the gap towards a full-fledged banking institution have been completed in 3Q14.

CIMB Research Summary - 4 Nov 2014

Plantations - Preview of Oct palm oil stocks

A survey conducted by our futures team revealed that palm oil output was marginally lower in Oct, falling by an estimated 0.7% mom to 1.88m tonnes due to weaker yields from Peninsular Malaysia estates. Palm oil exports fell by c.2% mom due to lower demand from India. Overall, we project Malaysian palm oil inventory to rise by 3% mom to 2.15m tonnes in Oct 14. The CPO futures price has recently breached the top end of our near-term price range of RM2,300 per tonne due to higher soybean oil prices, concerns of dry weather in some key planting areas in Indonesia and the lagged impact of drought in Peninsular Malaysia on palm oil output. We maintain our Neutral sector rating and preference for First Resources, Astra Agro and SIMP.


Aviation - overall - Capacity cuts still not happening

OAG six-month forward schedules, as well as our checks and discussions with industry executives, strongly suggest that near-term capacity restructuring in Malaysia’s aviation industry will not happen as quickly as we had originally anticipated, despite the urgent tone in Khazanah’s recent document. The continuation of the low-yield environment and the delay in airlines’ capacity cuts will disadvantage AirAsia and AAX, but benefit MAHB. We retain our Neutral call for the sector. We currently have an Add call on AirAsia, but acknowledge that our target price of RM3.25 will need a longer time frame to realise. We have a Hold call on MAHB (target price of RM7.20), and a Reduce call on AAX (target price of RM0.72).


Malaysia Airports Holdings - Marginally profitable

At RM94m, MAHB's 9M14 earnings beat our expectation at 278% of our forecast but were below consensus at just 60% of consensus. Earnings fell by 98% yoy as traffic declined and costs escalated. We raise our FY14-16 forecasts, largely due to lower depreciation charges, resulting in a slightly higher DCF-based target price. While share price downside risk appears limited, we maintain Hold as weak traffic growth and KLIA2-related costs could lead to uninspiring results in the coming quarters.


SapuraKencana Petroleum - Fine gems sparkle in Brazil

In response to a media report on Petrobras’s failure to obtain auditor approval for its 3Q earnings, SapuraKencana’s management stated that its operations in Brazil are going smoothly and payments have been received on time. Sapura Diamante and Sapura Topazio have been deployed in Brazilian waters to work for Petrobras. We expect their early contributions to be reflected in SapuraKencana's 2HFY1/15 results. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x. We maintain our Add rating, with strong order book momentum and a successful E&P venture as potential re-rating c

MIB Research Summary - 3 Nov 2014

Tenaga Nasional: Maintain Buy A strong finish indeed  Shariah-compliant

FY14 core net profit of MYR5.4b (a record-high) was in line with ours and consensus expectations. Positive earnings outlook as 1) coal generation trends up, 2) coal prices remain suppressed and 3) tax rate stays low. Raising FY15/16 earnings by 11%/13%, and TP to MYR16.00 (+14%); reiterate BUY. MY Banking: Maintain Neutral Loan growth ticks up in September Industry loan growth ticked up to 9% YoY in Sep 2014 (8.6% YoY in Aug) supported by non-HH loan growth (+6.7% YoY); Positively, interest spreads continue to expand; keeping an eye on liquidity and consumer asset quality. Our 2014 loan growth forecast of 8.7% maintained. NEUTRAL on sector; BUY RHB, AFG, HL Bank, and HLFG Felda Global Ventures: Maintain Hold Bigger downstream plans in China?  Shariah-compliant FGV proposal to gain a 100%-control (presently 50%) of its downstream business in China is positive for the long term. Due to insufficient details, we are unable to assess its financial impact but we believe it is likely to be marginal. Maintain HOLD with unchanged SOP-based TP of MYR3.97. Technical: Autumn correction is over The FBM KLCI rose 36.29 points WoW to close at 1,855.15, as some consistent buying activities led the index up above the 1,850-mark. Volume rose from 1.58b to 2.75b shares. The index traded from 801.27 to 936.63 from Oct 2008 to Apr 2009, but broke above 936.63 (Wave a/B) in Apr 2009. Its Wave b/B low was 836.51. We traced out a Wave C/B (of a 3-3-5 Flat) rebound phase, and the extended Fifth Elliott Wave (EW) of the major Flat v/C/B-leg correction from 801.27 stalled at 1,896.23 (8 Jul 2014 all-time high). Today's trading idea is a Short-Term BUY on Hap Seng Consolidated with target price of MYR4.62, MYR4.78, MYR5.00 and MYR5.85

HLIB Research Summary - 3 Nov 2014

Banking (NEUTRAL  çè)

Sep Stats – Business Segment Strike Back

• Loans growth accelerated to 9% yoy on faster business but partly offset by slower household.
• Leading indicators higher with strong numbers from business.  Approval rate now higher at 49.9%.  Deposits yoy growth also accelerated with ample liquidity.
• Reaffirm view revival in business loans growth to mitigate slowdown in household.  Maintain 2014 projection at 9%.
• ALR higher 4^th consecutive month and qoq.  Results in 3QCY14 to show more stable NIMs. Positive but reiterate that boost from OPR hike temporary.
• Asset quality slightly lower but still near strongest level.  Construction spike, on watch.  Qoq improvement, thus, unlikely to significantly impact earnings in 3QFY14. 
• Capital ratios improved for second consecutive month, will support active capital management.
• Maintain NEUTRAL and top picks (Maybank, RHB Cap and AFG).  CIMB rated Trading Buy. 

TNB (BUY çè)

Improved Outlook in FY15-16

• Reported core profit for 4Q14 at RM1.3bn and FY14 at RM5.4bn, above HLIB’s RM5bn expectation, due to lower than expected operational cost (fuel costs), depreciation and net interest expenses.
• Despite the lower coal price situation, TNB still suffered from cost under-recovery of ~RM600m due to higher utilization of gas and alternative fuels and high LNG price. TNB is suggesting the government to offset the cost with the capacity payment savings from PPA extension.
• TNB guided for higher mix of coal power generation in FY15-16 from the recovery of Tg Bin and Jimah, as well as new commencement of Tg Bin extension and Manjung 4.
• Not overly concern on delay in tariff adjustments, as we expect the low coal price to maintain and improved coal power generation mix to work in TNB’s favour.
• Maintained BUY with higher TP of RM15.00 (from RM13.80), after we revised up our earnings by 9-10% and roll-forward our valuation into FY08/16.

Economics

Highlights of BNM Statistics (Sep 2014)

• Broad money (M3) growth rebounded to 5.2% yoy after hitting a 12½-year low of 4.8% yoy in August. Narrow money (M1) growth fell further to a 5-year low of 6.7% yoy (Aug: +7.7% yoy).
• Despite a mild improvement, subdued monetary expansion reaffirms our view that economic activity had slowed down in 3Q14 after posting a robust growth of 6.3% in 1H14. We maintain our 2014 full year GDP growth estimate at 6.0%.
• Notwithstanding the policy rate pause in September, household loan-deposit growth gap narrowed slightly in the month. Household loan growth inched lower to 10.7% yoy (Aug: +11.0% yoy) while that of household deposits held steady at 6.3% yoy.
• The subdued financial activities in September pointed to moderate domestic economy expansion. Together with cautious outlook in selected major economies, we believe BNM’s current priority is to safeguard growth momentum. We expect BMM to keep OPR unchanged at 3.25% in the upcoming MPC meeting on 6 Nov.

Traders Brief

Some more legs to go but faces stiff resistances at 1860-1870 zones

• On the back of record highs on Wall St last Friday and the spillover effect from BOJ’s surprised stimulus measures, KLCI may witness further rebound in the early part of this week. Nevertheless, profit taking activities are likely to emerge following a sharp 5% rally from recent low of 1766 (FIG2) ahead of the BNM policy meeting on 6 Nov and the start of Nov reporting season, given the grossly overbought slow stochastics. Weekly resistances are near 1860-1870 zones whilst supports fall on 1840-1850 levels.

CIMB Research Summary - 3 Nov 2014

Tenaga Nasional - Positive 4Q14 results
Tenaga's FY8/14 core net profit of RM4.7bn was in line with expectations, at 103% and 101% of our and consensus FY14 estimates, respectively. We expected Tenaga to post positive net profit growth in FY14, given that less LNG was burned in 4Q14 and there was gradual recovery in the IPP coal power plants. We lower FY15-16 EPS by 1.0-1.1% after we updated our FY14 numbers and introduce our FY17 estimates. Our target price is raised to RM13.62, as we roll over to 12.8x FY16 P/E (still at 20% discount to the market P/E). We maintain our Hold call on Tenaga as there is lack of clarity on the fuel cost pass-through (FCPT) mechanism.

SapuraKencana Petroleum - Shine bright like a Diamante
We have learned from management that it is business as usual in post-election Brazil and rig utilisation has improved. Sapura Diamante has been dispatched to work for Petrobras in Brazilian waters. Meanwhile, management has secured contracts for the four rigs that were unemployed in 2Q. We roll over valuations and our target price falls as we now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E), a 30% premium over our target market P/E of 16.3x. We cut our premium from 40% to 30% to reflect the current weak oil price sentiment. We maintain our Add rating, with strong order book momentum and a successful E&P venture as potential re-rating catalysts. SapuraKencana remains our top pick among the O&G big caps.

Banks - Sep 14 tracker – Loan growth “back in business”
Loan growth recovered from 8.6% yoy in Aug 14 to 9% yoy in Sep 14, the first material improvement since Jan 14. We are encouraged by the rebound in business loan growth (from 5.6% yoy in Aug 14 to 6.7% yoy in Sep 14), but not surprised by the weaker consumer loan momentum. Even if loan growth recovers to our projected 9-10% in 2014, it would still be slower than the 10.6% achieved in 2013. Other concerns for banks are margin compression and the upturn in credit costs. All these numbers point to a bleak earnings outlook that underpins our Underweight rating on the sector. Maybank remains our top pick.

MY E.G. Services - Bonus issue is pleasant surprise
MyEG’s announcement on its proposed 1-for-1 bonus issue was a positive surprise to us. The company last proposed a bonus issue six years ago. We maintain our FY15-17 EPS forecasts and target price of RM5.28, based on an unchanged 21x CY16 P/E (on par with its peer average). We maintain our Add recommendation, with the government’s final approval for the CSTM project and further developments on the road safety diagnostic system project as potential re-rating catalysts.

Perisai Petroleum - Down but not out

SBC Corp - 1:2 bonus issue nailed down

Economic Update - Oct loans growth edges up

RHB Research Summary - 3 Nov 2014

Tenaga Nasional (TNB MK, BUY, TP: MYR15.50)

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.