Kenanga: 19 Nov 2014

IDEAS OF THE DAY

l  Sector Update: Media

l  Results Note: BENALEC, CIMB, DIALOG, HARTA, LAFMSIA, MBMR, MRCB, SEG, SUNWAY, SURIA, TSH

l  Company Update: MATRIX, MUHIBAH

l  Quick Bites: TM

l  On Our Technical Watch: CANONE, GTRONIC

NEWS HIGHLIGHTS

l  MBSB eyes second structured covered sukuk

l  Maybank eyes RM1.0b remittances

l  Time dotCom buys land

l  FGV unit set to ride on rising biodiesel demand

l  Kronologi Asia seals underwriting agreement with Bank Islam for IPO

FOREIGN NEWS HIGHLIGHTS

l  Blackstone in USD2.3b deal to sell tower to Ivanhoe

l  KKR, CD&R prepare joint bid for PetSmart

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  Malaysia's October Vehicles Sales Slip To 54,187 Units On-Year

l  Zeti: 3pc Surplus ‘Good Sign’

Asia

l  Japan PM To Seek Fresh Mandate For 'Abenomics' With Snap Poll

l  Japan's Aso Signals Tax Hike Delay, Says Must Not Happen Again

l  China Home Price Fall Deepens Despite Policy Support

l  China's FDI Slows Again In October, Services Sector In Favour

l  Bank Indonesia Raises Key Interest Rate As Fuel Prices Increase

USA

l  U.S. Producer Inflation Up, But Underlying Trend Muted

l  U.S. Has Record Inflow Of Portfolio Investments In September

l  Homebuilder Confidence Rebounds As U.S. Buyers More Enthusiastic

Europe

l  German Investor Confidence Rebounds As Recession Averted

l  UK Inflation Rate Rises To 1.3% In October

Currencies

l  Dollar Recovers Against Yen On Abe’s Election Plans

Commodities

l  Brent Slips Below $79 As Rhetoric Heats Up Before OPEC Meeting

l  Gold Rises, Briefly Breaks $1,200/Oz As Dollar Drops

CIMB Research Summary - 19 Nov 2014

DiGi.com - Offering fair risk-reward
Among Malaysian telcos, DiGi is the biggest beneficiary of GST when it is rolled out in Apr 2015. But we think that more intense rivalry is likely to shave off part of its service revenue growth in FY15. DiGi’s capex may also stay high as peers are looking to accelerate 4G rollouts. We lower our FY15-16 EBITDA by 2.6-3.8% to factor in slower service revenue growth and lower margins due to more intense competition. At the core net profit level, we cut our forecasts by 3.5-5.2%. Coupled with higher capex in FY14-15, we lower our target price by 7.9% to RM5.80, which is based on the fair valuation of its potential business trust and return of excess cash. We downgrade DiGi from an Add to a Hold. For Malaysian telcos, we prefer Axiata Group.


Hartalega Holdings - Impacted by high operating cost
Hartalega’s 1HFY3/15 core earnings were below our (45.4% of our FY15 forecast) and consensus expectations (44%). Revenue was flat yoy due to lower selling prices, while the drop in net profit was due to higher operating costs. Given the earnings miss, we cut our FY15-17 EPS forecast by 5-11%. However, our target price (pegged at 17.7x, unchanged 10% premium to the target market P/E of 16.3x) goes up as we roll over our valuation to CY16. Maintain Hold. It declared an interim 3 sen DPS, lower than our expectation which we believe was due to the weaker earnings outlook. We prefer Kossan.


Sunway Bhd - Steady margin growth
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.

Benalec Holdings - 1Q15 boosted by land sale gains

Dialog Group - Coming up(stream) roses

Lafarge Malaysia Bhd - Stiffer competition in 3Q

Malaysian Resources Corp - Brighter job prospects

Tune Ins Holdings Bhd - Travelling past the headwinds