MIB Research Summary - 26 Nov 2014

WCT Holdings: Upgrade to Buy Unlocking values; uplift to BUY  Shariah-compliant

Accelerating the REIT-ing of its malls with MYR2b asset value; positive in unlocking the values of its property investments. Negatives on property and construction priced in after the share price fell 17% since Aug 2014. Lowering earnings forecasts, but upgrade the stock to BUY with a shaved TP of MYR2.20 (-2%). UMW Oil & Gas Corporation: Maintain Buy Cautiously optimistic on outlook  Shariah-compliant 70 newbuilds to enter market in 2015; expects softer DCRs. Cost/safety aspects, not DCR, to accelerate scrapping policy. Healthy tenders pipeline (6-to-1 bid-to-JU ratio), committed to grow JU fleet beyond 7 units; not ruling out M&A. Maintain BUY with an unchanged SOP-based MYR3.90 TP. 7-Eleven Malaysia Holdings: Maintain Hold Trimming earnings for one-off 9M14 results included a one-off provision write-back of MYR3.8m. Trimming FY14/15 earnings by 3%/2%. Positively, 7EM has tied up with 2 service providers. Maintain HOLD with lower a TP of MYR1.73 (from MYR1.78). Hong Leong Bank: Maintain Buy Title of report 1QFY15 results within expectations at 25% of our full-year forecast and consensus. As highlighted before, future fund raising cannot be ruled out; we are factoring this into our valuations. Forecasts and BUY maintained, TP raised to MYR16.50 from MYR16.20 on rolling forward valuations (CY15 P/BV of 1.8x). Hong Leong Financial Group: Downgrade to Hold Insurance earnings lowered 1QFY15 earnings lagged due to lower insurance contributions; cut FY15/16 earnings by 10%. RNAV based TP however raised to MYR19.45 from MYR19.10 on rolling forward HL Bank’s valuations. Share price has risen 17% YTD, outperforming peers. Cut to HOLD, prefer HL Bank (TP: MYR16.50) for exposure. BIMB Holdings: Maintain Hold Weaker takaful contributions  Shariah-compliant 3Q14 results within expectations; Takaful earnings weaker QoQ. FY15/16 forecasts trimmed by 4% to factor in lower NIM. HOLD maintained with an unchanged SOP TP of MYR4.40. IJM Corporation: Maintain Buy Orderbook to chalk new high  Shariah-compliant 1HFY3/15 results fall short mainly due to higher tax rates. Construction outstanding orderbook could reach a new high of MYR6.6b while property sales would remain robust. Earnings forecasts are unchanged. Reiterate BUY at an unchanged RNAV-based TP of MYR7.40. Ta Ann Holdings: Maintain Buy Earnings outperformed, TP raised  Shariah-compliant 3Q14 core PATMI beat expectations. FY14-15 EPS raised by 6%/5% on stronger timber earnings outlook but partly offset by weaker plantation earnings. Maintain BUY with a higher TP of MYR5.00 (+5%). Inari Amertron: Maintain Buy Accelerating onto the fast lane  Shariah-compliant 1QFY6/15 net profit within expectations. Inari is Shariah compliant, offering exposure to the growing smart devices market via its partnership with Avago. Reiterate BUY with an unchanged MYR4.20 cum-rights TP (17x CY15 PER), offering a 46% upside. Perdana Petroleum: Maintain Buy Results on track; pursuing growth  Shariah-compliant 9M14 earnings in line; 77% of ours/consensus 12M forecasts. Majority of contracts are long term. OSVs are new (4 years average) and utilisation level is the highest among peers. BUY with an unchanged MYR2.40 TP (12x 2016 PER). Barakah Offshore Petroleum: Maintain Hold Overshot expectations  Shariah-compliant 12MFY14 core net profit made up 84% of ours and consensus’15MFY14 forecasts. Raise 15MFY14 earnings by 16% for the strong 4QFY14 results. Maintain HOLD with an unchanged MYR1.35 TP (10x 2016 PER). TIME dotCom: Maintain Hold Sequentially weaker core showing  Shariah-compliant 9M14 EBITDA and net profit were in line with our expectation at 73% and 71% of our full-year forecasts respectively. Near-term risk-reward remains uncompelling, given the stock’s 48% YTD rally. Maintain HOLD, TP unchanged at MYR5.00. IHH Healthcare: Maintain Hold Seasonal weakness  Shariah-compliant 9M14 core roughly in line, at 69% of our FY14E & 70% of consensus. 3Q seasonally weaker, 4Q the strongest. Ramp-up of hospitals & new beds to spur growth. Lower EPS by 2% for higher tax rate. SOTP TP raised to MYR4.82 from MYR4.81 for marked-to-market stakes. Maintain HOLD given high valuation vs. peer. Singapore GDP 3Q 2014 Stabilising after slowdown 3Q 2014 real GDP growth revised up to +2.8% YoY from +2.4% YoY reported earlier as manufacturing and services expanded to offset weak construction. Adjust our 2014 growth estimate to +3.2% (2014 YTD: +3.3% YoY; 2014 previous: +3.3%). For 2015, we expect growth to moderate slightly to +3.0%. MTI estimates real GDP growth of around +3.0% for 2014 and +2.5-4.0% for 2015. TECHNICAL: Re-testing 1,843 and 1,858 The FBMKLCI gained 4.79 points to 1,838.56 yesterday, while the FBMEMAS and FBM100 also closed higher by 14.65 points and 16.47 points, respectively. We recommend a “Buy on Dips” stance for the index. Trading idea is a Short-Term Buy on TM with upside target areas at MYR7.87 & MYR8.44. Stop loss MYR6.97. NEWS Aviation: PAC lambasts MAHB for ignoring AirAsia's concerns. The Public Accounts Committee (PAC) yesterday slammed Malaysia Airports Holdings (MAHB) for ignoring the needs of stakeholders such as AirAsia when constructing klia2 in Sepang. PAC also called for the Auditor – General (AG) to audit MAHB's performance since it was first established. (Source: The Edge Financial Daily) Sona Petroleum: Gets SC approval, faces task to secure Salamander Energy asset. Sona Petroleum may have received approval from the Securities Commission (SC) but it faces a testing time to secure the asset it is eyeing which is owned by UK-listed Salamander Energy Plc. SC has approved the acquisition of a 40% stake in Salamander Energy's Thai unit Salamander Energy (Bualang Holdings) Ltd for USD282.2m (MYR912m). (Source: The Star) Berjaya Auto: MYR192m BAuto share placement. Berjaya Corp unit Berjaya Group (BGroup) has placed out 60 million ordinary shares of Berjaya Auto (BAuto) for MYR192m. This represented about 7.42% of BAuto’s existing issued and paid-up share capital. Following the completion of the placement, BGroup's shareholdings in BAuto will be reduced to 36.74% from 44.16% previously. (Source: The Star) Malaysia's September 2014 unemployment rate was stable at 2.7% as it dropped -0.4% YoY and -0.7% MoM to 377,200. Unemployment rate has been below 3% since April 2014, indicating a robust job market conditions and virtually a full-employment situation. Employment increased by +1.4% YoY and +1.3% YoY to 13.7m, while total labour force in September 2014 expanded by +0.9% YoY and +1.3% MoM to 14.1 million people, especially those in the 30-34 years age group. As labour force and employment rose and unemployment rate fell, the labour force participation rate (LFPR) increased to 67.9% in September (Aug 2014: 67.1%). (Source: Department of Statistics Malaysia) U.S: Consumer confidence unexpectedly dropped in November as Americans became less upbeat about the economy and labor market. The Conference Board's index fell to 88.7 this month from an October reading of 94.1 that was the strongest since October 2007, the New York-based private research group said. (Source: Bloomberg) U.S: Economy expands more than previously estimated reflecting bigger gains in consumer spending and business investment and capping the strongest six months of growth in a decade. Gross domestic product, the value of all goods and services produced, rose at a 3.9% annualized rate, up from an initial estimate of 3.5%, Commerce Department figures showed. After the 4.6% increase in the second quarter, it marked the biggest back-to-back advance since late 2003. (Source: Bloomberg) Germany: GDP gained by 0.1% QoQ in 3Q 2014, the Federal Statistics Office said. Germany relied on domestic consumers for economic growth last quarter as investment fell, putting the strength of the nation's recovery at risk. Private consumption climbed 0.7% QoQ, while capital investment sank 0.9% QoQ. (Source: Bloomberg) Vietnam: Expands foreign property ownership to boost economy. Vietnamese lawmakers approved a law allowing broad foreign ownership of property, as the government seeks to boost an ailing real-estate market and accelerate economic growth. Foreigners with a valid visa as well as foreign companies and international organizations operating in Vietnam now will be permitted to purchase houses and apartments. Current laws restrict ownership to foreigners married to Vietnamese and those foreigners deemed to make significant contributions to the nation's development. (Source: Bloomberg)

RHB Research Summary - 26 Nov 2014

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

Growth Intact

Company Update

We attended 7-Eleven’s 3Q14 briefing yesterday and received some updates on the drivers behind its recent quarterly performance as well as progress on its business expansion plan. Maintain BUY and a MYR2.00 TP, derived from a 28x FY15F P/E (25% upside). It remains confident over achieving 600 net store openings by 2016 and expanding its margin via an improved product mix.

 

 

UOA Development (UOAD MK, BUY, TP: MYR2.40)

New Sales Surged In 3Q

Results Review

3Q14 results came in within expectations. Maintain BUY with a revised MYR2.40 TP (from MYR2.45, 11.1% upside). New sales jumped to MYR672m in 3Q (2Q: MYR362m), bringing the 9M total to MYR1.37bn. A few new projects contributed to the sales while others, which did not do well previously, also showed improvements. Thus, we think it is possible for UOAD to end the year with about MYR1.7bn in sales.

 

 

IJM Land (IJMLD MK, BUY, FV: MYR3.97)

Hit By Unrealised Forex Loss

Results Review

IJMLD’s 2QFY15 results missed expectations. Maintain BUY with a revised TP of MYR3.97 (19.6% upside). New sales achieved MYR450m, same as last quarter’s, and projects in the Klang Valley region contributed 40-50% of 1H’s total sales of MYR900m. We expect sales to grow steadily in view of the healthy pipeline of launches. However, given the weaker 1H results, we cut our FY15-16 earnings by 10-11%.

 

 

IJM Plantations (IJMP MK, NEUTRAL , FV: MYR3.30)

Contributions From Indonesia The Saviour

Results Review

IJM Plantation’s 1HFY15 results were within expectations, registering core net profit growth of 64% YoY. We maintain our NEUTRAL recommendation, with an unchanged TP of MYR3.30. Although we continue to like the growth prospects of its Indonesian FFB, this was offset by its significant leverage to CPO price movements, which negatively affected valuations.

 

 

Affin (AHB MK, NEUTRAL, FV: MYR3.30)

Elevated Costs Dampens 3Q14 Results

Results review

Affin’s 3Q14 results were below our and consensus estimates due to higher-than-expected overheads and credit cost. That said, 3Q14 net profit surged 27% QoQ, underpinned by stronger operating income (NIM expansion, higher non-interest income) and lower credit cost. Overheads, however, stayed elevated, partly due to integration costs. Maintain Neutral with revised MYR3.30 TP (8% upside).

 

 

Ta Ann Holdings (TAH MK, BUY, FV: MYR4.40) (upgrade from Neutral)

Stronger Earnings, Surprisingly Large Dividend

Results Review

Ta Ann’s 9MFY14 results were above expectations, due to stronger timber earnings. Given the continued strength in log dynamics, smaller losses at its plywood division and stabilised CPO prices, we upgrade our recommendation on Ta Ann to BUY (from Neutral), with a higher TP of MYR4.40 (a 15.8% upside). The company declared a surprisingly large DPS of 10 sen, translating into a net payout of 73% and net yield of 5.3%.

 

 

Hong Leong Bank (HLBK MK, NEUTRAL, TP: MYR15.90)

Writebacks Helped Sustain Profitability

Results review

HL Bank’s 1QFY15 (Jun) results were in line. Maintain NEUTRAL with a revised TP of MYR15.90 (9.7% upside), mainly after rolling forward valuations. A mild NIM expansion QoQ coupled with writebacks in depreciation and loan impairment allowances boosted bottomline, but non-interest income and loan growth were both soft. Contribution from BoC also saw moderating growth. We keep our earnings forecasts.

 

 

BIMB Holdings  (BIMB MK, NEUTRAL, TP: MYR4.70)

No Surprise To Results And Dividends

Results Review

9M14’s MYR377m core profit is in line. Maintain NEUTRAL and SOP-based MYR4.70 TP (10.1% upside). BIMB’s results were supported by strong 21% financing growth and stable NIM of 2.7%. A 14.7 sen interim dividend was declared. Management’s key strategies remain unchanged and, while the near-term environment is challenging, long-term prospects remain good given its leading position in Islamic banking.

 

 

Daya Materials (DAYA MK, NEUTRAL,  TP: MYR0.23)

More To Be Done For Consistent Earnings Delivery

Results Review

Daya’s 9M14 MYR16m profit was within our/above consensus numbers, buoyed by North Sea subsea contracts and improved progress from technical services. Maintain NEUTRAL, with our TP lowered to MYR0.23 (8% upside) from MYR0.31. While long-term prospects are supported by subsea contracts, the share price upside may only be apparent once a consistent earnings delivery can offset dilution risks from fundraising.

 

 

Inari Amertron (INRI MK, BUY, TP: MYR3.82)

Decent Start To FY15

1QFY15 Results Review

Inari Amertron’s (Inari) 1QFY15 (Jun) core earnings soared 61.9% YoY to MYR30.8m, in line with expectations. We maintain our BUY call and keep our TP unchanged at MYR3.82, (or MYR3.10 fully-diluted ex-rights), based on a 17.5x CY15 P/E. This implies a 32.6% upside. Management declared its first interim DPS of 1.8 sen and a special DPS of 0.4 sen, translating into a payout ratio of 36.7% for the quarter.

 

 

Notion (NVB MK, NEUTRAL, TP: MYR0.45)

Disappointing End To FY14

FY14 Results Review

Notion’s FY14 (Sep) core loss of MYR19.6m was greater than our/consensus expectations on continued weakness in its overall utilisation rate due to subpar camera component sales. Given the lack of earnings visibility in the near term, we maintain our NEUTRAL call as we trim our TP to MYR0.45 (based on an average of 8x FY15 P/E and 0.6x FY15 P/NTA), implying an 8.2% downside.

 

 

Time dotCom (TDC MK, NEUTRAL, TP: MYR5.20)

Perfect Timing

Results Review

Time’s 9M14 results were broadly in line as 9M revenue grew strongly on the back of higher global bandwidth sales and better contribution from its data and data centre business. Maintain NEUTRAL and a DCF-based TP of MYR5.20 (1% downside). Time announced its land acquisition for a new data centre last week, in line with its future expansion plans. We keep our earnings forecasts unchanged for now.

 

 

Freight Management (FMH MK, NEUTRAL, TP: MYR1.64)

Invest And Restructure For Stronger Growth

Results Review

1QFY15 (Jun) earnings came in weaker than expected due to restructuring of its air freight division, cessation of a major 3PL contract as well as subpar performance from the tug & barge wing. We remain NEUTRAL on Freight Management with a lower TP of MYR1.64 (11.3x FY15F P/E, 6.3% downside).  We are still positive on its growth potential after the investment and restructuring are completed.

 

 

Favelle Favco (FFB MK, BUY, TP: MYR4.03)

Big Results From Heavy Lifting

Results Review

Favelle Favco’s 9MFY14 core profit jumped 15.6% YoY to MYR70.0m on the back of increased crane sales, smashing our expectations as it makes up 97% of our estimates. Maintain BUY with a higher TP of MYR4.03 (from MYR3.62), based on 10x FY15 P/E, implying a 27% upside with dividend yields of 5.0-5.3% going forward. In light of the strong earnings, we revise our FY14 and FY15 earnings upwards by 17% and 11% respectively.

 

 

Perdana Petroleum (PETR MK, BUY, TP: MYR1.62)

Sailing Along Smoothly

Results Review

Perdana Petroleum’s 9MFY14 core profit of MYR70.6m came in line with our and consensus estimates at 78%/74% respectively, driven by higher utilisation as well as maiden contributions from Perdana Resolute. We maintain our BUY recommendation with a TP of MYR1.62. We marginally adjust our earnings downwards by 1%/8% for FY14/FY15 to account for the sale of Perdana Superior.

 

 

Hovid (HOV MK, NEUTRAL, TP:MYR0.39)

An Upbeat Start To FY15

Results Review

Hovid’s 1QFY15 (Jun) earnings came in within our and street’s estimates at 26.4% of our FY forecast, attributable to higher sales volume and favourable foreign exchange rates. We maintain NEUTRAL with a MYR0.39 TP, a 2.6% upside. We expect Hovid’s earnings to gradually recover throughout the year, assisted by the new capacity injection next year. No changes were made to our earnings forecasts.

 

 

IHH Healthcare (IHH MK, NEUTRAL, TP:MYR4.63)

Growing Steadily

Results Review

IHH’s 9MFY14 earnings came in within our but above consensus estimates at 75.7% and 78.3% respectively. Maintain NEUTRAL and SOP-based TP of MYR4.61. This was mainly attributed to: i) an increase in complex cases and ii) an increase in inpatient admissions. Moving forward, we expect better earnings in 4Q as it is a traditionally stronger quarter for IHH. We make no changes to our forecasts.

 

 

KPJ Healthcare (KPJ MK, NEUTRAL, TP: MYR3.67)

Sailing Smoothly

Results Review

KPJ’s 9MFY14 earnings were within our and consensus expectations, at 72.0%/74.4% respectively. Maintain NEUTRAL and TP of MYR3.67 (6.0% downside) as KPJ is on track to meet our full year earnings forecasts. Revenue and core profit grew by 13.2% and 33.4% YoY respectively on the back of stronger contributions from Malaysian hospitals as well as its aged care facility in Australia.

 

 

WCT (WCTHG MK, NEUTRAL, TP: MYR2.02)

FY14 Property Sales Target Halved

Company Update

We maintain our NEUTRAL call, earnings forecasts and TP of MYR2.02 implying a 6% upside. During an analyst briefing yesterday, WCT reiterated its guidance for MYR2.0bn construction job wins in FY14 but  cut its property sales target by half. WCT is not an ideal proxy to the construction sector as it has yet to secure any Klang Valley MRT job. Its property business is facing headwinds amid various cooling measures.

 

 

Protasco (PRTA MK, BUY, TP: MYR2.43)

9M14 Core Net Profit Rises 29% YoY

Results Review

Protasco’s 9M14 results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR2.43 (implying a 47% upside). The company offers investors the best of both worlds – high earnings growth (driven by public housing contracts and a property development project De Centrum) and a high dividend yield of 6% (underpinned by strong cash flow from road maintenance concessions).

 

 

IJM Corp (IJM MK, BUY, TP: MYR7.50)

1HFY15 Core Profit Declines 7% YoY

Results Review

IJM Corp’s 1HFY15 (Mar) results disappointed. We cut our FY15/FY16 earnings forecasts by 20%/19% and TP by 5% to MYR7.50 (implying a 12% upside), but maintain our BUY call. Its construction division is poised for an “earnings renaissance” backed by a record order backlog. Prime locations of its new launches should buoy sales despite headwinds in the property sector.

CIMB Research Summary - 26 Nov 2014

UOA Development - Missed launch and sales targets
UOA Dev's 9MFY14 core net profit was broadly in line with expectations as it made up 69% of our full-year forecast and 75% of consensus estimates. 9M new sales amounted to RM1.37bn, of which nearly half came from 3Q. However, UOA Dev is unlikely to match 2013's record sales of around RM2bn due to launch delays. This is a disappointment. We cut our FY15-16 EPS forecasts by 5-10% and downgrade the stock from Add to Hold, after widening the target basis from 20% discount to RNAV to 30% as we factor in the missed launch and sales targets. The relatively high dividend yield of 5-6% remains the key reason to hold on to the stock. For exposure to the property sector, investors should switch to Mah Sing Group.

Hovid Bhd - Decent start to FY15
Hovid’s 1QFY6/15 core net profit was broadly in line, making up 27% of our and consensus full-year forecasts. Its sales and profit margin improved marginally due to higher selling prices and a favourable foreign exchange rate. As expected, no dividend was declared. We trim our FY15-17 EPS by 1-2% after updating our financial model with the latest numbers from its annual report. We keep our SOP-based target price at RM0.41, but upgrade it to Hold from Reduce as its share price has corrected by 18% since we downgraded it to Reduce in Aug 14. We prefer Pharmaniaga for its higher upside.

7-Eleven Malaysia Holdings Berhad - More to come

BIMB Holdings - Signs of weaknesses in underlying trend

Eksons Corporation - Backed by cash

Hong Leong Bank - Non-interest income dampener

IJM Corp Bhd - Construction piles up numbers

KPJ Healthcare - Hale and hearty in 3Q

Perdana Petroleum - Making waves with a record quarter and a surprise dividend

Ta Ann - Lifted by strong log earnings
UMW Oil & Gas - Middle East fuels future growth
Uzma - Fuelled by new acquisitions
WCT Holdings - Re-strategising for 2015

RHB Research Summary - 24 Nov 2014

Genting Malaysia (GENM MK, NEUTRAL, TP: MYR4.21)
Blame It On The Luck Factor
9MFY14 Results Review
Genting Malaysia’s 9M14 core earnings of MYR950.5m fell below expectations due to subpar VIP holds in Malaysia, while its US segment continued to face headwinds from Bimini losses. Maintain NEUTRAL with our SOP-based TP reduced to MYR4.21 (3% upside). We lower our FY14 EPS by 5.6% and reduce our FY15-16 EPS forecasts by 7.1- 9.2% to factor in the impact from the GST implementation come Apr 2015.

IOI Properties Group (IOIPG MK, BUY, TP: MYR3.10)
Earnings On Track
Results Review
IOIPG’s 1QFY15 (Jun) results came in below expectations. Maintain BUY and MYR3.10 TP (26.5% upside). We expect 2H earnings to come in stronger as new projects are progressively rolled out in the coming months. New sales in 1QFY15 reached MYR370m, of which 85% were contributed by projects in Malaysia. Meanwhile, we expect IOI City Mall, which had a soft launch last weekend, to boost FY16 earnings.
Coastal Contracts (COCO MK, BUY, TP: MYR4.80)
Increased Sales of Premium OSVs
Results Review
9M14 MYR153m core profit was in line (met 79% of our/street estimates), buoyed by 14 vessel deliveries (9M13: 13 vessels). We retain our earnings forecast and BUY call, with our new TP at MYR4.80 (implied 13x P/E, 39% upside) after adjusting its shipbuilding valuations. Its MYR2.5bn orderbook is underpinned by vessel deliveries up to 2015 and GCSU long-term contract, while it expects JU rig delivery by 1H15.
Allianz Malaysia (ALLZ MK, BUY, TP: MYR13.50) (Upgraded)
Consistent Track Record
Results Review
Allianz’s 9M14 earnings of MYR225m was in line and met 76% of our FY14F forecasts, buoyed by AGIC’s double digit earned premium growth and underwriting margin of 16% (above industry’s 13%), ALIM’s strong investment performance and higher renewal premium. We upgrade to BUY with an unchanged SOP TP of MYR13.50 (13% upside). Valuations appear attractive again due to the recent retracement.

Genting (GENT MK, NEUTRAL, TP: MYR9.67) (Downgraded)
Lifted By Non-Gaming Divisions
9MFY14 Results Review
Genting’s 9MFY14 core earnings of MYR1.66bn were within our expectations as weakness in its gaming segments was offset by an improved showing from its plantation and O&G divisions. That said, we downgrade our TP to MYR9.67 (from MYR10.96) (a 2.8% upside) following our valuation revision on its listed subsidiaries in view of potential earnings headwinds ahead. Downgrade our call to NEUTRAL.

SKP Resources (SKP MK, BUY, TP: MYR0.85)
A Stronger 2HFY15 Awaits
Results Review
We deem SKP’s 1HFY15 (Mar) earnings of MYR20.2m in line despite reaching only 42.1% of our full-year estimate. Maintain BUY and MYR0.85 TP, a 17.2% upside. We expect 2HFY15 earnings to accelerate on the production of two new Dyson models, which started in early Nov 2014. No dividend was declared for the quarter under review. We make no changes to our earnings forecasts.

Petra Energy (PENB MK, NEUTRAL, TP:MYR2.08)
Results Review
Keeping Up The Pace
Petra Energy’s 9MFY14 core earnings of MYR17.4m came in above our expectations at 85% but missed consensus at only 50%. We maintain our NEUTRAL with a lower SOP-based TP of MYR2.08 (from MYR3.02). We raise our FY14 estimates by 10% on the back of higher work orders from its marine services segment but keep our FY15
numbers unchanged.

7-Eleven Malaysia (SEM MK, BUY, TP: MYR2.00)
Stronger Performance
Results Review
7-Eleven’s 3Q14 results were broadly in line, with net profit improving 109% YoY to MYR17.1m, partly contributed by an increase in ASP and stronger other operating income. We maintain our BUY call and MYR2.00 TP, derived from 28x FY15F P/E, offering a 21.2% upside. Its 9M14 net profit makes up 70% of consensus’ FY14 net profit. We are confident that its business expansion plans are progressing well.

Pintaras Jaya (PINT MK, BUY, TP: MYR4.92)
1QFY15 Net Profit Grows 9% YoY
Results Review
Pintaras Jaya’s 1QFY15 (Jun) results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR4.92 (implying a 13% upside). Being a dominant player, Pintaras Jaya is well-positioned to capitalise on the strong prospects of the piling segment, backed by the Klang Valley MRT project, a proliferation of high-rise developments and capacity shortage – which should boost piling rates.
Southern Steel (SSB MK, NEUTRAL, TP: MYR1.46)
In Red At The Start Of FY15
Results Review
Southern Steel’s 1QFY15 (Jun) results (MYR21.7m net loss) were below consensus and our estimates due to stiff competition from imported steel, a drop in steel prices and deeper losses from its associates. We maintain our NEUTRAL call, but cut our earnings forecasts for the next two years. Therefore, our book-based TP of 0.7x FY15F P/BV (-1 SD) is trimmed accordingly to MYR1.46 (from MYR1.49) (4.2% upside).

Sarawak Oil Palms (SOP MK, BUY, TP: MYR6.60)
Decent 3Q Earnings
Results Review
We continue to like SOP for its better production growth outlook and as the sole biodiesel supplier in Sarawak. Maintain BUY and MYR6.60 TP (11.9% upside). SOP’s production should benefit from drier conditions in Sarawak compared to its typically excessive rainfall. We trim our FY14 earnings forecast slightly although SOP’s 9M14 core earnings were in line, making up only 72% of our full-year forecast.

Economic Highlights - Inflation Inched Higher In October, BNM Could Revisit Raising Rates In March 2015
(Published 24 Nov 2014)
The headline inflation rate inched higher to 2.8% YoY in October (Sep: +2.6%). The fuel price hike on 2 Oct exerted some pressure on inflation but was mitigated by the higher base effect when the fuel prices were raised in Sep 2013. This was reflected in a faster increase in the core inflation rate, largely due to a sharp pick-up in transportation cost. In contrast, the prices of food & non-alcoholic beverages inched lower in September.

CIMB Research Summary - 24 Nov 2014

Economic Update - Float on RON95 and diesel
Today, the government announced that subsidies for RON95 and diesel will be eliminated and the pricing for these two fuels will transition to a managed float similar to the one currently in place for RON97. This is in line with the government’s subsidy rationalisation agenda and a positive signal indicating that fiscal reforms are progressing in the right direction. The decision to float is timely as the switch should have a benign impact on inflation given that the average market price is close to the current fixed retail price. Moving forward, falling global oil prices put the possibility of lower inflation on the table, given a more direct pass-through of falling global oil prices to domestic pump prices. Furthermore, the government will now have more fiscal space and more control over the fiscal deficit. We understand that the government has earmarked about RM12bn for fuel subsidy spending in 2015, and is likely to channel the savings through BR1M handouts or other means of targeted assistance.

Genting Bhd - No excitement
GENT’s 9M14 core net profit of RM1.4bn was below our expectations, at 62% of our previous full-year and consensus forecasts on poor performance across the board at GENM, GENP and GENS. No interim dividend was declared in 3Q, as expected. Upon transfer of coverage, our FY14-16 EPS forecasts are cut following our earnings cuts for GENP, GENM and GENS. We also introduce a new target price of RM9.90, still based on 20% holding company discount to our RNAV of RM12.40 (lowered from RNAV of RM14.34 after GENS’s target price was lowered from S$1.72 to S$1.22). With total return of only 6.2%, we downgrade our rating from add to Hold as continued operational headwinds faced by GENS and concerns about the competitive landscape at the Las Vegas strip will continue to weigh on investor sentiment. We advise investors to switch from GENT to GENM for exposure to the gaming sector.


SMRT Holdings Bhd - MEGB’s white knight

7-Eleven Malaysia Holdings Berhad - Growing but below expectations

Genting Malaysia - More bad luck in Genting

Lafarge Malaysia Bhd - Preventing cracks from volatility

Pharmaniaga Bhd - Dividend surprise in 3Q

SBC Corp - Jesselton Quay is the key…

Star Publications - Still cloudy skies

Thong Guan Industries - Feeling Japan’s blues

Economic Update - Oct inflation rises slightly

MIB Research Summary - 24 Nov 2014

Genting Malaysia: Maintain Buy Banishing the ghost of 2Q14

3Q14 core net profit was in-line and rebounded 28% QoQ; VIP and mass market volumes up YoY. Trim earnings estimates by 3-4%, imputing higher marketing and payroll costs. Maintain BUY on marginally lower TP of MYR5.05 (-2%). Genting Bhd: Maintain Hold Fair valuations 3Q14 results within expectations but wary of GENS’ outlook. Trim earnings estimates by 3-7%. Maintain HOLD with a trimmed TP of MYR10.00 (-19sen). Sarawak Oil Palms: Maintain Buy Long term prospects intact  Shariah-compliant 3Q14 core net profit was within expectation. We lower 2014 earnings by 7% to realign with our adjusted industry-wide CPO ASP forecast of MYR2,430/t (-3%). BUY with unchanged TP of MYR6.90 on 15x 2015 PER. Next catalyst is unlocking of estates for property development. 7-Eleven Malaysia Holdings: Maintain Hold Expect a decent finish 9M14 core net profit of MYR45m within expectations. Expect on-going margin improvement from better product mix and higher contribution from new/existing stores. Maintain HOLD with an unchanged TP of MYR1.78. Malaysia CPI, October 2014 Picks up but remains sub-3.0% Inflation rate quickened in Oct 2014 to +2.8% YoY on RON95 and diesel retail price hikes during the month. Tweaked our full-year 2014 inflation rate estimate to +3.2% (earlier +3.3%; YTD 2014: +3.2% YoY). Widen our inflation rate forecast range for 2015 to 4.0%-5.0% from 4.5%-5.0% as fuel prices will be "volatile" under "managed float" pricing mechanism effective 1 Dec 2014, besides GST introduction on 1 Apr 2015 Fuel Subsidy: Fuel Subsidy No More... Government announced RON 95 and diesel prices will be "managed floated" on 1 Dec 2014 Falling crude oil price has result in convergence between subsidised prices and market prices of fuels The move should allay concerns on 2015 budget deficit target of -3% of GDP as the Government will not be spending the MYR11b allocation. Lafarge Malaysia: Maintain Hold Seeking ASP stability  Shariah-compliant Expect earnings rebound in 4Q on seasonally strong volume. Future ASP volatility to be cushioned by savings in fuel cost. Cut FY14-16 EPS by 8%/18%/20%; TP lowered to MYR9.35 (22x 2016 PER). Maintain HOLD on decent DY of 3.2-3.8%. Kuala Lumpur Kepong: Maintain Hold Mulling Kalimantan downstream JV  Shariah-compliant KLK (63%), IJM Plant (32%) and an Indonesian partner (5%) plan a downstream JV to operate in East Kalimantan. Mutually beneficial to all parties, for the downstream facility will be assured of steady supply of CPO for the long term. Maintain HOLD with unchanged TP of MYR23.20 on 23x FY15E PER target. TECHNICAL: Dow rises, but FBMKLCI falls further The FBM KLCI fell 4.66 points WoW to close at 1,809.13, as persistent foreign activities caused the small decline. We advise clients to sell at the resistance areas of 1,809 to 1,896. The support levels of 1,766 and 1,805 will witness very weak nibbling activities. Trading idea is a Take Profit call on AAX with dwonside target areas at MYR0.61 & MYR0.56.   NEWS Barakah Offshore Petroleum: Felda group a substantial Barakah shareholder. Felda Investment Corp Sdn Bhd (FIC) is believed to have bought a substantial equity stake of more than 10% in Barakah Offshore Petroleum last Friday, according to sources familiar with the matter. FIC was the buyer of some 85.5m shares, or an 11.4% equity stake through offshore transactions to pave the way for the Felda group to invest in the oil and gas sector. (Source: The Edge Financial Daily) IOI Properties Group: Plans to expand IOI City Mall in Putrajaya. IOI Properties Group said plans are already in the pipeline to add a further 1 million sq ft retail space at IOI City Mall in Putrajaya as occupancy rate at the newly-opened complex reached 85%. To boost customer traffic, the mall operator is lobbying for a mass rapid transit station to be open within its vicinity. (Source: The Star) External reserves as of 14 November 2014 amounted to MYR414.5b or USD126.6b - equivalent to 8.7 months of retained imports and 1.1 times of the country's short-term external debt. The reserve was down compared with MYR419.7b or USD128.1b at 30 October 2014. Latest trade and portfolio investment data showed narrowing surplus in external balance and capital outflows. The recent 3Q 2014 balance of payment data which showed smaller current account surplus and net outflow of portfolio investment. Foreigners were net sellers of Malaysian debt securities. Total domestic debt securities held by foreigners declined to MYR249.3b in September 2014 from MYR256.9b in August 2014. The MYR7.6b net selling of Malaysian debt securities in September 2014 was the largest since QE Taper began. Consequently, MYR depreciated significantly against the US Dollar i.e. - 4.2% between end-August 2014 and end-October 2014. The Ringgit eased further so far this month by -2%. (Source: BNM, MKE) E.U: Said to plan EUR 21b risk-sharing fund for investment. The new entity is designed to have an impact of about 15 times its size, making it the anchor of the EU’s EUR 300b investment program, said the officials, who asked not to be named because the plans aren't final. European Commission President Jean-Claude Juncker is due to announce the three-year initiative this week. (Source: Bloomberg) China: PBOC seen fueling old China as banks hold key to policy success. China's central bank said its surprise move to cut interest rates for the first time since 2012 is designed to help small firms and protect depositors instead of all-out monetary easing. The one-year lending rate was reduced by 0.4 ppts to 5.6%, while the one-year deposit rate was lowered by 0.25ppts to 2.75%. The bulk of bank debt in China is still concentrated on big borrowers, with outstanding credit to small firms less than a third of total loans. The People's Bank of China's rate cuts came after months of targeted measures failed to lower financing costs for smaller companies. (Source: Bloomberg) OPEC: Iran may seek OPEC cut of 1mbpd in Saudi talks. Iran may propose that OPEC cut its output target by as much as 1 million barrels a day to halt the slide in crude prices when the country's oil minister consults with his Saudi counterpart before the group gathers this week. Bijan Namdar Zanganeh and Saudi Arabia's Oil Minister Ali Al-Naimi will talk on the sidelines of the meeting in Vienna of the Organization of Petroleum Exporting Countries, seeking to define a common view among its 12 members for supporting prices, Iran's state-run Mehr News agency reported, without saying where it got the information. (Source: Bloomberg)

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.

 

Research Summary: 26 June 2014

Research Summary: 26 June 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	News flash	Datasonic	To partake in fuel subsidy project	Buy	RM2.50
RHB	News flash	Prestariang	Private placement to raise RM70m-80m	Buy	RM2.25
RHB	Results review	Hai-O	In transition	Neutral	RM2.73
RHB	Company update	7-Eleven	On an expansion spree	NR	N/A
RHB	Company update	Pintaras Jaya	Investability improves	Buy	RM4.88
RHB	Results review	VS Industry	Lacks re-rating catalyst	Neutral	RM1.75
CIMB	Company note	7-eleven	Strong growth but priced in	Hold	RM1.85
CIMB	Flash note	Prestariang	Private placement a positive surprise	Add	RM2.23
Maybank	Company update	Petronas Chemicals	Oil price kicker to ASP	Hold	RM6.85
Maybank	Technical	Titijaya		Short-term buy
Kenanga	Results note	Hai-O	FY14 within expectations	Market perform	RM2.47
Kenanga	On radar	SKP Resources	Bouncing back	Trading buy	RM0.57
Affin	Results note	Hai-O	Long-term prospects remain intact	Add	RM3.01