CIMB Research Summary - 30 Oct 2014

Gamuda - More traction on MRT 2

Gamuda announced that it has received a letter from MRT Corp appointing the MMC-Gamuda JV as project development partner (PDP) for MRT 2. This news is a big positive and solidifies Gamuda’s position as the biggest beneficiary of the project, with a stronger chance of bagging the underground works. Imputing the DCF value of the PDP agreement may raise our RNAV by 3-4% but we retain our numbers pending formalisation of the PDP terms in the next 3-4 months. Our RNAV-based target price remains pegged to a 10% discount. We expect the share price to continue its steady rerating on the back of this news and positive expectations for a recovery in the water takeover talks. Maintain Add. Gamuda remains our top sector pick for the big caps.


Gas Malaysia Berhad - Gas prices raised by 2.3%

Despite the small quantum, Gas Malaysia's revision of the non-power gas tariff is positive as it implies that the government is sticking to its 6-month gas price revision plan. The new gas tariff will take effect by the beginning of November while we anticipate another revision by Apr/May 2015. We maintain our Add call on Gas Malaysia, with a revised target price of RM3.95, still based on 24x FY15 P/E, after trimming FY14-16 EPS by 0.2-0.4% p.a. given the new selling prices.


Taliworks Corporation - A value-accretive M&A play

Taliworks's main appeal is that after several years of operations since it acquired a highway and secured two water concessions, it is now back in M&A mode. Value-accretive acquisitions, local and domestic, are in the pipeline, backed by its rising post-restructuring cash hoard It is also a beneficiary in Selangor’s post-water restructuring landscape as its O&M contract is likely intact. We expect further re-rating of the stock to be event-driven (M&A, new jobs and asset divestment). Based on a 10-20% discount to our RNAV/share of RM3.29, the stock could offer 38-56% upside. The new 75% payout policy could imply 5-6% dividend yield.


Strategy Note - Implications of lower oil prices
 

Plantations - CPO price predictions at POTS
 

Rubber Gloves - Minimal impact from price hike
 

IGB REIT - Continues to deliver

RHB Research Summary - 30 Oct 2014

Gamuda (GAM MK, BUY, TP: MYR5.61)

MRT Line 2 Is Good To Go                            

Corporate News Flash

Gamuda has finally obtained the green light from the Government to embark on the MYR25bn Line 2 of the Klang Valley MRT project. With this, we believe it is on track to start work by mid-2016. Gamuda is the best proxy to the buoyant construction sector, given its dominant role in Malaysia’s largest public infrastructure project. We maintain our BUY call, forecasts and SOP-based TP of MYR5.61, implying a 12.4% upside.

 

 

CIMB (CIMB MK, NR)

CIMB Niaga 3Q14 Results: Credit Cost Dampener

Company Update

CIMB Niaga’s (Niaga) 3Q14 net profit fell 68% YoY and 60% QoQ to IDR343bn due to a combination of weaker non-interest income (-48% YoY/-28% QoQ) and a spike in credit cost (3Q14: +137bps QoQ/+128bps YoY to 229bps) as its coal-related portfolio deteriorated. However, NIM held up well. Looking ahead, Niaga thinks its impaired loan levels could be close to the peak but expects credit cost to remain elevated in 4Q.

 

 

IGB REIT (IGBREIT MK, NEUTRAL, TP: MYR1.35)

Positive Earnings Assessment

Results Review

IGB REIT’s 9M14 earnings were above expectations, at 81/80% of our/consensus estimates, and mainly attributed to the writebacks in assessment expenses. The Gardens Mall will likely continue to be the main growth driver going forward. We revise up our FY14/15 earnings by about 7%, given the higher numbers. Maintain NEUTRAL, as we lift our DDM-based TP to MYR1.35 (3.5% upside) from MYR1.27).

 

 

Caring Pharmacy (CARING MK, SELL, TP: MYR1.27) (Downgraded)

In Need Of Stronger Dosage

Results Review

Caring’s 1QFY15 core earnings missed estimates for the second consecutive quarter as margins fell to their lowest level since its listing. We downgrade to SELL (from Neutral) and trim TP to MYR1.27 (from MYR1.70), a 17.5% downside, pegged to 16x FY15F P/E as we cut our FY15F/FY16F earnings further by 13.5%/17.4% respectively. This is in view of the increasingly challenging operating environment.

 

 

WCT (WCTHG MK, NEUTRAL, TP: MYR2.31)

Bags MYR652m Ikano Cochrane Job                            

Corporate News Flash

WCT has bagged a MYR652m building job for a new Ikano mall in KL. Nonetheless, we still think WCT is not an ideal proxy to the buoyant construction sector as it is not involved in the Klang Valley MRT project. Also, its property business is facing headwinds on the back of the various sector cooling measures. We maintain our NEUTRAL call, forecasts and TP of MYR2.31 (16x FY15F EPS, 10% upside).

 

 

Karex (KAREX MK, BUY, TP: MYR3.43)

Poised For The Next Growth Phase

Company Update

We maintain our BUY recommendation on Karex, with a slightly-raised TP of MYR3.43 (20x CY15 P/E, 19.5% upside). The company’s expansion plans remain intact and it is operating in a favourable environment. Its capacity expansion could drive organic growth while its acquisition of Global Protection may elevate group earnings higher via the own brand manufacturing (OBM) segment. 

 

MIB Research Summary - 30 Oct 2014

Gamuda: Maintain Buy Wins PDP for KVMRT 2, TP raised  Shariah-compliant

Clinching the PDP role for KVMRT 2 significantly enhances its construction orderbook. Further major infrastructure job wins would further elevate its construction orderbook size. We raise our sustainable construction orderbook assumption and revise our RNAV-based TP to MYR6.00 (+13%). Gas Malaysia: Maintain Hold A milder than expected hike?  Shariah-compliant The 2.3% selling price hike appears to be insufficient for a full pass-through of a MYR1.50/mmBTU hike in the purchase price of subsidised gas. Our forecasts are unchanged pending further clarifications from the company. Maintain HOLD with an unchanged TP of MYR3.80. WCT Holdings: Maintain Hold Clinches MYR652m job  Shariah-compliant New MYR652m building construction works lifts outstanding external construction orderbook by 35%. Eyeing more jobs from TRX, RAPID, WCE and Qatar. Positive, but not re-rating our call yet; maintain HOLD with an unchanged TP of MYR2.30. Perdana Petroleum: Maintain Buy Sells Superior, gains MYR1m  Shariah-compliant A decent sale price, MYR1m gain. Proceeds to help part-finance fleet rejuvenation. Lowering 2015-16 earnings forecasts by 2-3%, taking into account this deal. Maintain BUY, but TP adjusted to MYR2.48 (unchanged 15x 2015 PER) from MYR2.55 post earnings revision. Axiata Group: Maintain Buy XL: Weak revenue trends  Shariah-compliant XL’s 9M14 EBITDA was in line at 72% of ours and 71% of consensus full year forecasts; net profit was below. The integration of Axis has been completed; Axis to be EBITDA-neutral by 1Q15. XL’s FY14 earnings are significantly distorted; our BUY rating and MYR7.60 TP for Axiata are unchanged. CIMB Group: Maintain Hold Provisions higher at CIMB Niaga CIMB Niaga’s results below expectations; FY14/15 net profit cut by 34%/20%. CIMB Group earnings trimmed by 8%/6%. TP trimmed to MYR7.40 from MYR7.60 for CIMB Group, to MYR10.20 from MYR10.45 for RHB – still 15% upside for both. BUY RHB for exposure to the merger, HOLD CIMB. IGB REIT: Maintain Hold Earnings on track 9M14 core net profit of MYR176.4m was in line. Maintain our earnings forecasts, MYR1.29 DCF-based TP. Lacks strong asset pipeline to re-rate over the short term; maintain HOLD. Technicals: Index may head to 1,840 and higher The FBMKLCI rose 13.87 points to 1,839.55 yesterday and the FBMEMAS and FBM100 gained 82.22 points and 78.41 points respectively. In terms of market breadth, the gainer-to-loser ratio was 587-to-231 while 280 counters were unchanged. 2.01b shares were traded, valued at MYR2.11b. Today's trading idea is a Short-Term BUY CALL on MMSV with target price of MYR0.59, MYR0.64 and MYR0.81.

HLIB Research Summary - 30 Oct 2014

Building Materials (NEUTRAL  çè)

Higher natural gas cost effective Nov 2014

• Higher natural gas tariff effective November 2014. Gas Malaysia will raise natural gas tariff for non-power sector in Peninsular Malaysia by 2.3% to RM19.65-RM20.11/mmbtu (depending on usage). 
• Minimal impact. While the natural gas tariff hike announcement will have an impact on the local steel producers’ production cost (and hence earnings, as we believe the higher energy cost will unlikely be passed through entirely). We believe the impact is minimal.
• Based on our estimates, the natural gas hike will reduce our FY15 net profit forecasts for the steel players (under HLIB’s coverage) by less than 1% of their bottom lines, assuming: (1) The natural gas tariff will be raised by 2.34% across the board (i.e. users consume >750k mmbtu per year); and (2) The higher energy cost is to be absorbed by the players.
• Maintain our NEUTRAL stance on the sector.

Rubber Gloves (NEUTRAL  çè)

Natural Gas Tariff Revision

• Effective 1 Nov 2014, Gas Malaysia will raise natural gas tariff from an average of RM19.32/MMBtu to RM19.77/MMBtu (+2.3%).
• Based on natural gas contribution of 6% to total cost, the increase in cost of production will be very minimal at less than 0.5%.
• Forecasts remain unchanged as we have already factored in this impact.
• Maintain NEUTRAL stance on the sector.

Gamuda (BUY çè)

Returns as PDP for Line 2

• MMC-Gamuda JV appointed as PDP for MRT Line 2
• Next milestones are signing of PDP agreement by year end/ early 2015 and tendering in 4Q15
• Positive for JV if PDP fees maintained at 6%
• JV a frontrunner for RM9bn Line 2 tunneling works
• Maintain BUY, RM5.74 TP based on SOP 

WCT Holdings (HOLD çè)

Secures Ikano mall contract

• Secures RM652m Ikano mall job
• YTD job wins of RM994m surpasses our RM700m target
• Orderbook at RM2.5bn, implying 2.3x cover
• Maintain HOLD, RM2.34 TP, cautious on intense tendering competition and weak property sales 

Perdana Petroleum (BUY çè)

Take a breath and ready for FY16.

• Entered into MOA to dispose one unit of accommodation work barge (Petra Superior) to Hauston for a total consideration of US$28.5m or RM93.5m.
• We expect no impact to FY14 as the existing contract will expired in Nov 14 and contributes about RM6m or ~5% on FY15’s PAT. However, the proceeds raise will be used to fund new acquisition of assets which will help to mitigate the impact.
• We are positive on the disposal as it will be part of the fleet renewal plan to upgrade existing vessel to higher specification coupled with favourable selling price with RM1m gain.
• We also understand that by selling Petra Superior, it will save about US$2m on drydocking expenses which was supposed to take place by end of year after existing contract expire in Nov.
• We maintained our BUY call with unchanged TP of RM1.87 pegged at an unchanged 12x FY15 EPS of 15.5 sen/share.

Axiata (HOLD çè)

XL 9M14 Results

• XL recorded a core net loss of ID250.0bn, not comparable to consensus’ full year estimate of IDR448.6bn profit.
• Sales expanded 11% yoy as all product segment registered healthy growths led by data with and followed by VAS, voice and SMS.
• EBITDA margin declined from 40% to 36% due to bleeding Axis. Axis is expected to be EBITDA neutral by 1Q15.
• XL has yet to decide on the faith of the remaining 6.5k towers. Nonetheless, XL did not discount the possibility of disposal to further pare down debts.
• XL plans to return the block of 2100MHz spectrum which was acquired from Axis to regulator by next month upon successful network migration. This will result in cost savings going forward.
• Maintain HOLD with unchanged SOP-derived TP of RM6.92.

CIMB (TRADING BUY çè)

Niaga 3QFY14 Results – Provision Again

• CIMB Niaga 3QFY14 results below street estimate mainly due to sharp rise in provision arising from higher NPLs and decision to impaired coal and coal-related loans.
• Guiding for likely higher provision in quarters ahead due to potential NPLs rise though impaired ratio close to peak.
• Weak results reflection of tough environment in Indonesia .  Only saving grace is NIM has improved sequentially for two consecutive quarters, after the sharp qoq decline in 1Q.
• Environment to remain challenging but it expects opportunities once new government set concrete policies.
• Target price maintained at RM7.22 (Gordon Growth with ROE of 12.1% and WACC of 9.8%). 
• After yesterday’s rebound, it is still trading at 1.44x FY14 book but now on par with RHB Cap as a proxy to the merged entity.  Maintain Trading BUY as values emerged despite merger and Indonesia uncertainties.   

IGBREITS (HOLD çè)

9MFY14 Results

• 9MFY14 core net profit came in within our expectation but aboveconsensus, accounting for 77.2%8% and 79.7% respectively.
• Declared distribution income per unit (DPU) of 2.01 sen per share (3QFY13: 1.83 sen). Included in the DPU are normalised profit of RM60.1m and non-cash item arising from Manager fee payable in unit of RM7.8m bringing the  YTD DPU to 5.9 sen.
• Maintain HOLD recommendation on the stock with TP of RM1.23. We maintain 5.7% targeted yield based on historical average yield spread between IGBREIT and 7-year MGS.

CARiNG (SELL ê)

1Q15 Results – Disappointing

• 1QFY15 core net profit of RM0.6m came in way below expectations, accounting for 2.4% of HLIB and consensus full year estimates.
• Deviations were due to lower profit margins dragged by selling and distribution expenses as well as slower-than-expected outlet expansion growth.
• Expansion slows down with only 2 new outlets this quarter (4Q14: 7 new outlets). To date, total 101 outlets.
• Updated model based on deviations mentioned. As a result, FY15, FY16 and FY17 EPS were reduced by around 30% to 35%.
• Due to the continuous disappointment in delivering earnings, we downgrade from HOLD to SELL with a lower fair value of RM1.20 (-38% from RM1.94).
• This is derived based on a lower multiple of 15.5x CY15 EPS, 2x discount to the average of other domestic market-oriented retail pharmacy chain operators in the region.

Sasbadi (BUY çè)

FY14 Results

• Sasbadi’s FY14 core PATAMI (excluding RM1.3m listing expenses) of RM13.6m accounted for 92% of HLIB and 91% of streets’ estimates. Hence, we consider it to be in line.
• FY14 revenue of RM79.5m is in line with ours and consensus estimates at 97% and 101%, with its educational print publishing arm, being the main contributor of about 87% of total revenue.
• In a separate announcement, Sasbadi announced that its wholly-owned subsidiary, Sasbadi Sdn Bhd will be acquiring Penerbitan Multimedia Sdn Bhd (PMSB) at RM1m to be funded through proceeds raised from IPO.
• We are positive on the acquisition for this will create a new revenue stream for Sasbadi as it venture into the teacher education segment which remains untapped for Sasbadi.
• Maintain BUY call with TP unchanged at RM2.15 based on P/E multiple valuation of 15x (implied PEG of 0.86x) CY15 EPS or circa 50% discount to average P/E of the education sector due to Sasbadi’s lower market capitalisation.  

Economics

Fed Completes QE Tapering

• The FOMC decided to conclude its remaining asset purchase of US$15bn/mth under QE3. Meanwhile, the FOMC reiterated that current low Fed Fund Rate will be maintained for a considerable time.
• Comparing the current FOMC statement with the one issued last month, we sense that the Fed has turned slightly hawkish and is unfazed by the recent volatility in the financial markets.
• The FOMC brushed off market concerns about (i) disinflation risk due to lower energy prices and (ii) negative spillovers from weakness in other major economies (i.e. Euro area & China ).
• We expect the US economy to grow near its 3% par level in 2015, with a pick-up in consumer spending on the back of further labour market improvement and higher purchasing power (lower energy price & strong US$).
• We expect the Fed to stick to its rate hike plan, with first rise in Jul-2015.
• We expect US$ to maintain its strength into 2015, which will continue to pressure other major and EM currencies as well as global commodity pricing. In this regard, we expect MYR to remain weak, ranging RM3.25-3.30/US$ in 4Q14 and RM3.25-3.35/US$ in 2015. More moderate growth outlook, smaller current account surplus and a pause in the OPR will also curb upside of MYR.

Traders Brief

Profit taking activities will cap further rally beyond stiff resistances at 1850-1860 zones     

• Technically, KLCI could still appreciate further towards 1850-1860 zones amid yesterday’s bullish white Marubozu candlestick formation and bullish indicators. However, further rallies may attract profit taking consolidation amid slightly hawkish FOMC statement, getting overbought slow stochastic and the start of Nov reporting season next week.
• Immediate supports rest with 1825 (30-d SMA), 1816 (20-d SMA) and 1806 (38.2% FR).

Research Summary: 25 July 2014

Research Summary: 25 July 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Sector update	O&G	Storage, the preferred play over refineries	Overweight
RHB	Results review	Public Bank	Still tracking targets	Neutral	RM19.85
RHB	Company update	CIMB	CIMB Niaga 2Q14 results show muted numbers	Neutral	RM7.75
RHB	Results review	IGB REIT	Steady as expected	Neutral	RM1.27
RHB	Company update	MRCB	Taking up 100% stake in Penang Sentral	Buy	RM1.87
RHB	Company update	Sunway	Sales picked up strongly in 2Q	Buy	RM3.60
RHB	Company update	Dialog	Now neutral pending re-rating catalyst	Neutral	RM1.90
RHB	Results briefing	Daibochi	Fundamentals still intact	Neutral	RM4.10
RHB	Results review	Airport	Hit by higher depreciation and interest costs	Buy	RM8.51
RHB	Results review	Unisem	Finally back in the black	Buy	RM2.16
RHB	Eco highlights	Economics	Leading Index slowed in May, economic activities will likely grow at a moderate pace ahead
CIMB	Results note	Public Bank	Time to cash in on the price rally	Reduce	RM17.50
CIMB	Results note	IGB REIT	Stable Gardens and Valley	Hold	RM1.25
CIMB	Results note	Airport	Uncertainty is the enemy	Hold	RM7.50
CIMB	Results note	Unisem	Sequential improvement	Add	RM2.09
CIMB	Flash note	Daibochi	Stable raw material prices	Hold	RM4.38
CIMB	Eco update	Economics	May LI: Still favourable outlook
Maybank	Company update	Yinson	Sells Petroleo Nautipa for USD59m	Buy	M3.03
Maybank	Results review	Public Bank	Tepid growth in 1HFY14	Sell	RM19.20
Maybank	Results review	Airport	Surprise loss	Hold	RM6.90
Maybank	Results review	IGB REIT	Beat expectations	Hold	RM1.29
Maybank	Technical	FGV		Take profit
Kenanga	Results note	Unisem	Impressive turnaround	Market perform	RM1.64
Kenanga	Quick Bites	Yinson	Trading Petroleo Nautipa for longer-term plans	Underperform	RM2.31
Kenanga	Results note	Airport	Lower on KLIA2 opening	Market perform	RM8.06
Kenanga	Results note	CIMB	CIMB Niaga: weak showing	Market perform	RM8.00
Kenanga	Results note	IGB REIT	1H14 within expectations	Outperform	RM1.35
Kenanga	Results note	Public Bank	Looking to grow better yielding assets	Market perform	RM20.00