CIMB Research Summary - 28 Oct 2014

Plantations - Hit by several speed bumps
We are cutting our average CPO price forecasts by 5-11% for 2014-16 to reflect larger-than-expected global edible oil supplies as well as weaker demand for biodiesel usage in Indonesia. The CPO price declines in 3Q14 were sharper than what we had previously expected, no thanks to stronger soybean supplies and weaker Chinese demand. These factors, coupled with the recent sharp drop in crude oil prices, are likely to put a lid on near-term CPO prices. We cut our EPS forecasts for regional planters by up to 41% to reflect our CPO price downgrade. This lowers our target prices by up to 23% across the board. But we have upgraded six stocks as their valuations have improved. Our sector rating remains Neutral, with First Resources as our key pick.

Nestle (Malaysia) - Better 3Q results
Nestle’s 9M14 earnings met consensus as well as our expectations at 76% of our full-year forecast. Although Nestle’s 9M net profit usually accounts for c.80% of its full-year, we deem the 9M14 performance in line as we expect easing raw material prices and lower A&P spend in 4Q14 to make up for the shortfall. 9M14’s topline was driven by domestic sales, but the bottom line was dragged down somewhat by 1H’s higher raw material costs and A&P expenses. We maintain our FY14-16 earnings forecasts, Add recommendation and DCF-based target price. As usual, no dividend was declared for the quarter. Key rerating catalysts include positive impact from cost pass-through and lower raw material prices.

MIB Research Summary - 28 Oct 2014

Nestle Malaysia: Maintain Hold 3Q results broadly in line  Shariah-compliant

9M14 results were largely in line. 3Q14 topline down 4% YoY on lower export sales but bottomline up 9% YoY on (i) more favourable raw material costs, and (ii) stronger MYR against USD. Maintain HOLD with a lower TP of MYR63.60 (MYR64 previously. NCB Holdings: Maintain Sell Long road to recovery  Shariah-compliant 3Q14 results substantially below our and street's estimates. Near-term anaemic earnings growth and unattractive DY. Maintain SELL with a lower DCF-derived TP of MYR2.25. Technicals: The short-term rebound may persist The FBMKLCI rose 4.29 points to 1,823.15 yesterday, while the FBMEMAS and FBM100 also closed higher by 51.07 points and 43.62 points, respectively. In terms of market breadth, the gainer-to-loser ratio was 637-to-226 while 255 counters were unchanged. A total of 2.29b shares were traded valued at MYR1.86b. Today's trading idea is a Short-Term BUY CALL on MAXIS with target price of RM7.01 and RM7.20.

RHB Research Summary - 28 Oct 2014

7-Eleven Malaysia Holdings (SEM MK, BUY, TP: MYR2.00)

In Seventh Heaven

Initiating Coverage

We initiate coverage on 7-Eleven Malaysia with BUY and a TP of MYR2.00, representing a 19% potential upside return. Our TP is based on a 28x FY15F P/E multiple which is a 17% premium over its regionally-listed peers’ average P/E of 24x. We are positive on its well-planned growth strategy and promising outlook for the convenience store industry in Malaysia and estimate a 3-year earnings CAGR of 29.1% over 2013-2016F.

 

 

 

Nestle (NESZ MK, NEUTRAL, TP: MYR67.00)

Moving Steadily Along

Results Review

Nestle’s 9M14 results were broadly in line, as its earnings comprised 76.2% and 75.9% of our and consensus estimates respectively. Maintain NEUTRAL and our DCF-based MYR67.00 TP, a 1.5% downside. Revenue ticked up by 1.4% YoY only, as weaker consumer sentiment affected domestic demand. At the same time, net profit slid down 2.0% YoY on higher marketing expenses.

 

HLIB Research Summary - 28 Oct 2014

Media (NEUTRAL  çè)

Times are changing the future of TV

• Internet has transformed the way we consume content. Online streaming has been gaining traction amongst consumers. Hence, we believe smart TV will be the main channel for content owners to forward integrate into the market.
• According to research done by Technavio, Global Smart TV market is forecasted to reach US$219.4bn by 2015, growing at CAGR of 20.6% from year 2011 to 2015 (See Figure #2).
• Ultimately, it all boils down to content. Therefore, content producers and providers need to deliver an exceptional entertainment content and experience to feed the vernacular demands of Malaysians.
• Media Prima could be the potential winner. Despite the change in the media landscape, we believe Astro’s position as a content aggregator would be least impacted due to its position as a market leader on top of their efforts in localising and developing their own content & keeping abreast of the technology trends.
• Maintain our NEUTRAL outlook on the sector given the lack of rerating catalyst(s) and cautious adex spending by consumers and businesses with Astro being our top pick for sector exposure.

Nestlé (HOLD çè)

9MFY14 Results In-Line

• 9MFY14 PAT of RM452.1m came in within expectations.
• Nestlé ‘s YTD topline grew marginally by 1.4% yoy from the group’s effective marketing and promotional activities despite the dampened consumer sentiment
• Exports remained on the declining trend on the back of increasingly challenging global economic environment.
• Despite the slightly higher revenue, bottomline contracted by 2% attributable to the higher costs of investments under marketing and promotional activities.
• HOLD recommendation and TP of RM66.52 based on DDM remained unchanged.

Traders Brief

Inching up towards our 1825-1834 relief rally targets      

• Technically, on the back of ongoing Dow’s rebound, expectations of dovish remarks by Fed on 29-30 Oct FOMC meeting and slightly improved Eurozone economic data and positive ECB’s banks stress test), KLCI is likely to retest our short term resistance near 1825-1834 levels this week. However, the path will not be smooth as other external headlines such as the Ebola outbreak, the sliding oil prices and geopolitical tensions will continue to remain wild cards affecting market gyrations. Short term technical resistances are 1825-1834 while supports fall on 1778-1800.
• Closed positions (FIG4): We had closed our positions on GENM  after hitting our R2 upside targets on 27 Oct.

CIMB Research Summary - 27 Oct 2014

Axiata Group - A better 2015 priced in

With rebounds at Celcom and XL, we see stronger earnings for Axiata in FY15 but consensus numbers appear to have factored this in. On the negative side, we believe Axiata is likely to keep its capex high in FY15 to improve its data network quality, which could surprise the market. We cut our FY14-16 core net profit forecasts by 1.8-11.0% for lower estimates for Celcom and XL. Despite this, our SOP-based target price stays at RM7.20 as we now factor in higher valuations for Idea, Robi and Smart. We maintain our Hold call. The key upside risk is stronger-than-expected earnings at Celcom and XL while the key downside risk is sustained high capex in the medium term. We prefer DiGi, our top Malaysian telco pick.


Malaysia Airports Holdings - Conference call highlights

Surprisingly, MAHB said that it was reconsidering its long-held objective of defending its AAA credit rating status, which suggests that it was possibly open to a wholly/majority debt-funded acquisition of another 40% of Istanbul Sabiha Gokcen (ISG). This is positive because it means that there will be less dilution from the issue of new ordinary shares, and the overall WACC can be lower. We maintain Hold rating and our DCF-based target price. Downside risk to the share price is limited, but weak traffic growth and KLIA2-related costs are likely to lead to uninspiring results in the coming quarters.


Economic Update - Aug leading index edges up

The leading index edged up 1.7% yoy in Aug (+1.6% yoy in Jul). The composite indicators painted a positive but more moderate outlook. Jul-Aug’s moderation of export and IP growth suggests that real GDP growth should ease to around 5.2% in 3Q14 (vs. 6.4% in 2Q). We still anticipate full-year growth of 6.0% for this year and 5.0% for 2015, mainly supported by the government’s recent measures to support domestic demand and a moderate but positive export performance.

MIB Research Summary - 27 Oct 2014

Tenaga Nasional: Maintain Buy Expect a strong finish  Shariah-compliant

We estimate TNB’s 4QFY14 core net profit at about MYR1.5b (+100% YoY, -4% QoQ), 29% of our FY14 forecast. The benefits from higher coal-fired generation (+22% QoQ) would more than offset seasonally higher costs and potentially higher taxes. Reiterate BUY with an unchanged MYR14.00 TP. Technicals: Diminished autumn selling pressures The FBM KLCI rebounded 30.55 points WoW to close at 1,818.66, as some consistent buying activities led the index up above the 1,800-mark. Volume fell from 2.05b to 1.25b shares. Trading idea is a Take Profit call on RSAWIT at MYR0.72 & MYR0.84.

RHB Research Summary - 27 Oct 2014

Notion (NVB MK, NEUTRAL, TP: MYR0.49) (Upgraded)

Fairly Valued Following Recent Selldown

Company Update

Notion’s share price corrected by >25% since our downgrade in February. Although we foresee earnings headwinds over the near term due to continued weakness in worldwide PC and camera sales, the downside has largely been priced in at current valuations. Hence, we upgrade our call to NEUTRAL with our TP still at MYR0.49 (based on an average of 8x FY15 P/E and 0.6x FY15 P/NTA), implying a 1% upside.

 

 

 

Hua Yang (HYB MK, BUY, TP: MYR2.74)

Landbank Replenishment Still The Main Priority

Company Update

Hua Yang’s management said in a briefing that it will continue to focus on landbanking activities in 2HFY15 (Mar), with the Penang mainland and Kota Kinabalu as potential new target markets. Interestingly, the company expects some buyers to hold off the purchase of new homes until after the GST is implemented.  Nonetheless, it is still targeting MYR1.1bn of new launches for FY15.  Maintain BUY, and a RNAV-based TP of MYR2.74 (15.0% upside).

 

 

 

MPI (MPI MK, BUY, TP: MYR6.34) (Upgraded)

Buy On Weakness

Company Update

Malaysian Pacific Industries’ (MPI) share price has retraced by >25% since August in tandem with the weakness in the local equity market. We think this as an opportunity to buy on weakness as we continue to see positives in the improving industry outlook. Upgrade to BUY, with our TP revised to MYR6.34 from MYR6.40 (15.8x 2015 P/E, 40.9% upside) as we updated our model following the release of its annual report.