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)

HLIB Research Summary - 24 Nov 2014

Lafarge (BUY é)

3Q14 Analyst Briefing

• Disappointing 3QFY14 performance. To recap, Lafarge’s 3QFY14 net profit declined due to higher input cost and pricing pressure from the market arising from Lafarge’s stance to regain and reposition itself as the market leader.
• Mitigating higher electricity and fuel costs via efficiency. Energy and fuel costs now consist of 50% of total cost and the only strategy to mitigate the rising price of electricity and fuel is by being more efficient.
• Coal prices for FY15. The company recently finalised the terms for the supply of coal for next year and has hinted that the prices for next year is marginally lower compared to FY14.
• Outlook for 2015. Price volatility is expected to continue and industry cement demand will continue to sustain into next year, with a projected mid-single digit demand growth of 3-5% in 2015, similar pace for 2014.
• We slashed FY14 by 6.1% to impute the weak 9MFY14 results. However, we have revised upwards our FY15-FY16 earnings by 7.4% and 11.6% due to (1) lower coal price; and (2) higher domestic net selling prices.
• Despite the disappointing 3QFY14, our TP is raised to RM10.72 based on 22.5x 2016 EPS of 47.7 sen. We have raised our P/E on the stock to 22.5x, one standard deviation above its 1-year forward average P/E of the last 3 years.  We upgrade our rating from Hold to BUY.

Star Publications (BUY é)

A sweet dividend for the ride

• We attended Star’s 9MFY14 briefing, chaired by its Managing Director/CEO, Datuk Seri Wong Chun Wai and the management team.
• A pretty good cost management… Star will continue to keep its costs well controlled. Will also benefit from low newsprint prices which have been on a downtrend (see Figure #1).
• Appealing dividends… It is likely to retain the dividend payment of 15 – 18 sen/share, translating to a dividend yield of 6.6% - 7.9%.
• FY14, FY15 and FY16 earnings trimmed by 1%-3%, as we assume weaker macro environment which contributes to a poorer consumer and business sentiment.
• Despite the soft adex environment, we see better prospect for Star based on their prudent cost management, strong balance sheet with net cash position and attractive dividend yield. Also, its share price has, since the beginning of November, declined by 12%. Thus, we upgrade Star to a BUY call, TP revised upwards by 7% to RM2.73 based on an unchanged dividend yield of 5.5% as we increase our dividend forecasts from 14.0 to 15.0 sen/share. 

ViTrox (BUY çè)

Deliver as Promised

• Again, achieved new highs in revenue and profit merely with 9 months results. FY14 top line is forecasted grow 55.7% yoy reaching ~RM165m.
• MVS-S: resilient 3Q14 order despite seasonality weakness. 4Q14 revenue is forecasted to be ranging RM9-10m. Demand is expected to pick up from 2Q15 onwards.
• MVS-T: YTD 9M14 sales more than doubled (+173.7%) yoy and 4Q14 sales expected to be between RM6-8m.
• ABI: 3Q14 fell dragged by disappointment in PCB. 4Q14 revenue forecast is estimated to be RM20m while carry forward backlog into 1Q15 will be higher than in 2H14.
• By summing the mid-points of those guidance, 4Q14 sales could potentially grow 30.4% yoy to RM36.5m.
• Confident to extend its pioneer status / tax exemptions which will end in 1Q15.
• Reiterate BUY with unchanged TP of RM3.17, pegged to 1SD above 5-year historical average P/E multiple of 16.2x.

Genting Bhd (BUY çè)

9MFY14: Below Expectations

• Reported 9MFY14 core PATAMI of RM1.3bn came in below expectations due to weaker-than-expected performance from Genting Singapore .
• We imputed the latest earnings revision from GenS and GenM and as such, FY14-16 EPS are cut by 12.7%, 2.6% and 4.9% respectively.
• Post-earnings revisions, TP is cut slightly to RM10.64 (from RM10.81) based on SOP valuations. Maintain BUY.

Genting Malaysia (HOLD çè)

9MFY14 Slightly Below Expectations

• GenM reported 9MFY14 core PATAMI of RM949.8m came in below expectations from higher-than-expected tax rate.
• Following the higher-than-expected effective tax rate in 3Q, we increase FY14’s tax rate assumptions. As such, FY14-16 earnings are reduced marginally by 0.4-3.9%.
• Given that the downgrade in forecasts is for FY14, our TP of RM4.16 is unchanged based on FY15’s SOP valuations. Maintain HOLD.

IOIPG (HOLD ê)

Disappointing 1QFY15

• Reported 1QFY15 PATAMI of RM101.0m came in below expectations, mainly due to higher-than-expected expenses and effective tax rate.
• YTD unbilled sales stood at RM1.43bn, representing 0.95x of IOIPG’s FY14 revenue.
• We trimmed our FY15-17 EPS by approximately 22-25% as we turn more conservative on the group’s prospects.
• TP is lowered to RM2.65 (from RM3.94) after taking into account earnings revision and higher discount to RNAV of 30% (vs. 20% previously). Our TP of RM2.65 valued IOIPG at 18.5x FY15 P/E, vs. 18.7x FY15 P/E which UEM Sunrise is currently trading at.
• We also downgraded our recommendation to HOLD in view of persistent earnings disappointment.

Scomi Energy (BUY çè)

2Q Analyst Briefing…

• Despite declining oil price, drilling campaign from Petronas has picked up with rig count increased from 4 rigs in Jun 14 to 6 rigs in Sep 14 and further increase to 12 rigs in Nov 14.
• Given this, it expects gross margin for oilfield services to gradually improve from 24% in 2QFY15 to 26% in subsequent quarters.
• Marine business swung from profit to losses mainly due to lower coal tonnage carried arising from new tax rules imposed by Indonesian government which resulted in production halt of a customer. After the election, it expects the operation to improve.
• We also understand that national oil companies (NOCs) comprise around 65% of SES’ revenue. NOCs have traditionally been able to better withstand the impact of declining oil price with long term capex plan.
• We maintained our BUY call with TP reduced from RM1.07 to RM0.93.

Pharmaniaga (BUY çè)

9M14 Results – In Line

• 9M14 core net profit of RM71.9m, came in within our expectations but slightly ahead of consensus’ estimates, accounting for 77% and 83% of HLIB and consensus full year estimates, respectively.
• Declared 3^rd single tier dividend of 8.0 sen per share (3Q13: 3.0 sen) with ex-date on 5^th Dec.
• 3Q14 revenue gained 13.9% yoy to RM502.1m contributed by the entire core business operations. However, qoq sales contracted 4.4% due to seasonally lower demand.
• Logistics and Distribution Division posted more than three-fold increase in PBT qoq, boosted by higher ASP coupled with higher sales volume. Manufacturing Division’s PBT slipped due to lower off-take for in-house products from government hospitals as well as higher R&D expenses.
• Moving forward, Pharmaniaga remains positive as the pharmaceutical sector in Malaysia is showing improved prospects.
• Reiterate BUY with unchanged fair value of RM5.30 based on FY15 P/E multiple of 14.5x, 10% discount to US peers.

CSC (HOLD çè)

3Q Losses Again

• Another disappointing quarter. 9MFY14 performance came in weaker than our expectation, with a reported net loss of RM12.3m vs. our full-year net profit forecast of RM5.1m. 
• YoY. 3QFY14 revenue decreased by 1.2% to RM254.4m and turned into a net loss of RM3.1m from a net profit of RM2.9m, a staggering declining of 206.4%. This is due to lower selling prices.
• QoQ. 3QFY14 net loss narrowed to RM3.1m (from RM8.8m in the previous quarter) mainly on the back of lower raw material costs.
• We belief that 4QFY14 looks bleak, thus, we have cut our FY14 forecast to a net loss of RM15.2m. For FY15, we have slashed our earnings by 2.2% and for FY16, we cut by 17.5%.
• SOP-derived TP lowered by 5.1% to RM1.06 to reflect the roll forward of our base year from FY14 to FY15 (for valuation purpose) and lower earnings forecasts. Maintain HOLD recommendation.

Economics

Managed Float for RON95 & Diesel Report

• Retail price of RON95 and diesel will be fixed according to a managed float system starting 1 Dec.
• We are positively surprised as the floating of fuel price will entirely eliminate the government ' s fuel subsidy bill in 2015. Fuel subsidies rose to as high as RM28.9bn in 2013 (13.7% of operating expenditure).
• The move is favourable to help the government achieving its target fiscal deficit of 3.0% GDP. We see slim chance of the proposed multi-tiered fuel subsidy scheme being implemented. We believe that the government may instead give special BR1M payouts should global crude oil price spikes up sharply in an unexpected manner.
• We estimate that RON95 and diesel would be retailed at RM2.30/litre and RM2.20/litre respectively in Dec 2014. We maintain our 2014 full-year inflation forecast at 3.2%.
• Based on our crude oil forecast of US$90/bbl for 2015, we expect RON95 retail price to average RM2.50/litre in 2015. Consequently, our CPI growth forecast for 2015 is raised to 4.3% (previously: 4.0% with multi-tiered fuel subsidy).
• The managed float fuel scheme is expected to bring greater uncertainty to consumer spending in 2015, which we had already factored in in our projection. We reiterate our projection that GDP growth will moderate to 5.0% in 2015 (2014f: +6.0%).
• We do not expect the switch to a managed float system for fuel price will alter the thinking of BNM. We maintain our view that BNM will leave its OPR unchanged at 3.25% throughout 2015.

Economics

October Inflation Report

• Malaysia ' s CPI growth climbed up to 2.8% yoy in October after recording a 12-month low of 2.6% in September, lower than our and market expectations (+3.0%).
• 20 sen fuel price hike was the sole reason behind the spike in October CPI growth. Price inflation of other components broadly held stable. Food & alcoholic beverages and tobacco witnessed slower price increases.
• Headline inflation is projected to creep up further in Nov-Dec 14 and 2015, driven by domestic cost factors. We maintain our full-year inflation estimate of 3.2% for 2014 but raise our 2015 forecast to 4.3% (previously: +4.0%) given the commencement of managed float system for fuel prices.
• We expect BNM to keep the OPR steady at 3.25% throughout 2015, backed by moderate domestic demand, softer global outlook, contained inflation risks and slower property speculative activities.

Traders Brief

Likely to consolidate sideway

• Last Friday’s black candlestick removed the reversal signal of “Bullish Engulfing” pattern on daily chart, turning KLCI into consolidation mode.
• The psychological level of 1800 would be a critical support zone after 50% Fibonacci level was penetrated last Friday. Next supports are at 1778 and 1760 if 1800 is broken.
• However, KLCI could stage a technical rebound during this week, which might be shortlived. Resistances are 1823 (38.2% FR), 1836 (23.6% FR) and 1850 (downtrend line and 200-d SMA).
• Took profit on ESCERAM last Friday as it hit beyond R1.

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

MIB Research Summary - 19 Nov 2014

CIMB Group Holdings: Maintain Hold Poor showing as expected

9M14 core net profit down 7% YoY mainly due to drag from CIMB Niaga and weak capital markets. Forecasts maintained but near term risk is to the downside with guidance for higher provisions out of Indonesia in 4Q14. Maintain HOLD on CIMB; BUY RHB for exposure to the merged entity. Dialog Group: Maintain Buy RAPID & Pengerang to fuel growth  Shariah-compliant 1QFY6/15 results within our expectation, below consensus. A steady stock with sound business model and management. Reiterate BUY and MYR1.90 TP (SOP-based) with upside bias. Lafarge Malaysia: Maintain Buy Waiting to raise ASPs  Shariah-compliant 3Q results were below ours and market’s expectations. Cut FY14 EPS by 25% to impute the weak results. TP unchanged at MYR10.75 (21x mid-2016 PER). Downgrade to HOLD on limited upside. Dividend yield of 4% is decent. Hartalega: Downgrade to Hold Near-term weakness  Shariah-compliant 2Q below expectations due to high start-up cost of its next generation glove manufacturing complex (NGC). Expect weakness in near-term earnings on start-up costs. Cut FY3/15-16 EPS by 7-8%; TP lowered to MYR7.00 (19x mid-2016 PER) and downgrade to HOLD (from BUY). TSH Resources: Maintain Buy 3Q14: In line  Shariah-compliant Results within our expectation but above consensus. Young tree age profile would drive strong production growth. BUY with an unchanged TP of MYR2.45 on 19x 2015 PER. MBM Resources: Maintain Buy Stronger ahead  Shariah-compliant 9M14 earnings within our forecast but below consensus. Cheapest exposure to our preferred small car segment, in light of higher cost of living, via 22.6%-owned Perodua. Our FY14/15/16 forecasts are raised by 2% p.a.. New TP of MYR3.50 (+2%) is based on unchanged 9x FY15 PER. BUY. Sunway: Maintain Hold Earnings on track  Shariah-compliant 9M14 core net profit of MYR386m (+19% YoY) is in line. Property sales on track to meet target, but construction job wins lagging behind. Maintain earnings forecasts, HOLD rating and MYR3.05 TP (on 0.59x P/RNAV target). Padini Holdings: Maintain Buy Stable growth, attractive yields Looking at moderate 6-7% YoY revenue growth in 1QFY6/15, but this should pick up as new stores are opened. Trimmed FY15-FY17 net profits by 2% per annum on lower sales growth and margin assumptions. BUY - TP unchanged at MYR2.20 on 14.8x FY15 PER, dividend yield attractive at 5.7%, providing support to share price. TECHNICAL: Index’s decline was arrested at 1,805 The FBMKLCI rose 11.90 points to 1,818.38 yesterday, while the FBMEMAS and FBM100 also closed higher by 72.10 points and 69.72 points, respectively. We recommend a “Range Trading” stance for the index. Trading idea is a Take profit call on PCHEM with downside target areas at MYR5.29 and MYR4.80.   NEWS KSK Group: KSK Land's 8 Conlay to offer branded residences. KSK Group, via property unit KSK Land Sdn Bhd, is set to fulfill the growing demand for branded residences with its MYR4b mixed development project in Jalan Conlay. The project on 1.60ha next to Prince Hotel & Residence will have two residence towers and one tower comprising a five-star hotel and serviced residence by Europe’s oldest luxury group, Kempinski Hotels S.A. (Source: The New Straits Times) Telekom: TM to provide DTT services worth MYR1b to MTVB. Telekom Malaysia (TM) has signed a framework agreement with MYTV Broadcasting Sdn Bhd (MTVB) to provide digital terrestrial television (DTT) infrastructure, network facilities and related services in Malaysia. The DTT service will be accorded to MTVB for a period of 15 years, with an annual contract value of MYR70.47m. (Source: The Edge Financial Daily) RON97 petrol down 20 sen per litre to MYR2.55 per litre from MYR2.75 per litre effective today. RON97 price is on managed float and thus is ultimately influenced by the global crude oil prices - which has fallen by around 30% from the recent high in June 2014 - on a lagged basis as the Government reset its price monthly. Meanwhile, the subsidies on RON95 and diesel prices has also been shrinking as a result of the 20 sen per litre price hikes in Oct 2014 and compounded by the falling crude oil prices. To note, the subsidy per litre on RON95 and diesel dropped from MYR0.47 per litre and MYR0.59 per litre in Sep 2014 to MYR0.28 per litre and MYR0.32 per litre in Oct 2014, and further to MYR0.13 per litre and MYR0.12 per litre this month. (Sources: TheSun, Maybank KE) U.S: Homebuilder confidence in November rebounds as buyers more enthusiastic as low interest rates and a strengthening job market helped boost sales. The National Association of Home Builders/Wells Fargo builder sentiment gauge advanced to 58, matching the second-highest level since 2005, from 54 in October, figures from the Washington-based group showed. (Source: Bloomberg) Germany: Investor confidence rose for the first time in 11 months after Europe's largest economy avoided relapsing into a recession. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 11.5 in November from minus 3.6 in October. (Source: Bloomberg) U.K: Inflation unexpectedly accelerated last month as transport prices fell less than a year earlier and the cost of toys rose in the run-up to Christmas. The rate of consumer-price growth increased to 1.3% YoY from 1.2% YoY in September, the Office for National Statistics said. (Source: Bloomberg) Indonesia: Bank Indonesia raises key interest rate as fuel prices increase. Indonesia's central bank raised its policy interest rate for the first time this year to guard against inflation after President Joko Widodo increased subsidized fuel prices. Bank Indonesia Governor Agus Martowardojo and his board raised the reference rate to 7.75% from 7.5%, the central bank said after an unscheduled meeting in Jakarta. The authority kept unchanged the rate it pays lenders on overnight deposits, known as the Fasbi, at 5.75%. (Source: Bloomberg)

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

RHB Research Summary - 19 Nov 2014

Berjaya Food (BFD MK, BUY, TP: MYR4.00)

From Grande To Venti

Initiation

We initiate coverage on Berjaya Food with a BUY recommendation and MYR4.00 TP, implying a 24.6x FY16 (Apr) P/E and offering a 30.7% upside. Its recently-completed acquisition of the remaining 50% stake in BStarbucks could propel its 3-year-earnings CAGR to 47.7%. Starbucks Coffee, Malaysia’s largest coffee chain with 175 outlets YTD, is set to aggressively expand its number of outlets over the next few years.

 

 

Hartalega (HART MK, BUY, TP: MYR7.50)

Consolidation Phase

Results Review

1HFY15 (Mar) earnings came in broadly within expectations. We maintain our BUY recommendation on Hartalega with a lower TP of MYR7.50 (21x CY15 P/E, 10.3% upside). Declining ASPs, heightened operating expenses and intensified competition have offset its higher sales volume. Nonetheless, we remain positive on its outlook in view of new capacity from the NGC and resilient demand.

 

 

Tasco (TASCO MK, BUY, TP: MYR3.90)

Within Expectations

Results Review

We maintain our BUY call on Tasco with an unchanged TP of MYR3.90 (11.3x FY15F P/E, 27.5% upside). 1HFY15 (Mar) results came in within expectations, with both international business solutions (IBS) and domestic business solutions (DBS) divisions contributing positively to the group. Contract logistics unit reported the strongest growth and we believe this could be the main earnings growth driver moving forward.

 

 

 

TSH Resources (TSH MK, NEUTRAL, TP: MYR2.28)

Poor Downstream Drag Earnings

Results Review

TSH Resources’ 9M14 results were below expectations due to continuing losses at its 50%-owned refinery, although losses narrowed due to higher utilisation. Maintain NEUTRAL on fair valuations at current levels but our SOP-derived TP is reduced to MYR2.28 (from MYR2.47) a 1.3% upside. We also reduce our FY14/FY15 earnings forecast by 11%/8% to account for weaker refining performance. 

 

 

 

Suria Capital (SURIA MK, BUY, TP: MYR3.50)

Results Largely In Line

Results Review

Suria Capital’s 9M14 numbers came in largely within expectations and we believe 4Q14 may be better. We keep our BUY recommendation with an unchanged DCF-based MYR3.50 TP, a 35.7% upside. Heightened operating expenses have offset the growth in revenue and the Jesselton Quay project may need more time to realised. However, we understand that it is still in progress. 

 

 

 

MBM Resources (MBM MK, BUY, TP: MYR3.55) (Upgraded)

On The Rebound

Results Review

MBMR’s 9M14 results were broadly in line. Upgrade to BUY with a new MYR3.55 TP (25.9% upside) as we expect recurring net profit to rebound 39.2% in 2015 from the alloy wheel business breaking even in 2015 and associates Perodua and Hino enjoying more favourable JPY exchange rates. The stock’s undemanding valuations suggest that the recovery is not yet priced in by the market.

 

 

 

Apex Healthcare (APEX MK, NEUTRAL, TP: MYR3.75)

Anchored By Stronger Exports

Results Review

Apex’s 9M14 results were slightly below our expectation, as its core net profit of MYR24m (+14% YoY) accounted for about 71% of our FY14 full-year target.  As such, we maintain NEUTRAL with our TP still at MYR3.75 (1.4% upside), pegged to an unchanged target 12x FY15F P/E. We also pare our FY14F revenue and net profit by 2% and 6% respectively but are maintaining our FY15F and FY16F numbers.

 

 

 

Wing Tai Malaysia (WING MK, SELL, TP: MYR1.76)

Double Whammy

Results Review

1QFY15 results were below our expectations. Downgrade to SELL (from Neutral) with a lower SOP-based MYR1.76 TP (from MYR2.10, a 12.9% downside). Its MYR11m core net profit – accounting for around 15% of our full-year target – fell 29% YoY on lower contribution from property development and apparel retailing. We are lowering our FY15 revenue and net profit forecasts by 12% and 19% respectively.

 

 

 

Malaysian Resources Corp (MRC MK, BUY, TP: MYR2.05)

Coming Along Nicely

Results Review

MRCB’s 3Q14 earnings came in above expectations, driven by earlier-than-expected contributions from one of its projects. We maintain our BUY call and RNAV-derived TP of MYR2.05 (37.7% upside). We raise our FY14/FY15 net profit estimates by 50%/8% after revising our revenue assumptions. MRCB’s near-term prospects remain positive, underpinned by total unbilled property sales of MYR2.9bn.

 

 

 

Lafarge Malayan Cement (LMC MK, BUY, TP: MYR11.27)                                                                                        

Stiff Competition May Dampen Short-Term Outlook

Result Review

As Lafarge’s 9M14 profit of MYR206.1m represented only 47.9/52.5% of our/street’s full-year estimates, we downgrade the stock to NEUTRAL and pare our TP to MYR10.00 (1.4% downside) from MYR11.27. We cut our FY14F/FY15F earnings by 29.1%/11.1% respectively, but keep our target P/E at +2SD from its historical trading range or at 21.6x FY15 EPS as it is still the best proxy to government infrastructure spending. 

 

 

 

CIMB (CIMB MK, NR)

Dampened By Higher Loan Impairment Allowances

Results Review

CIMB’s 3Q14 net profit of MYR890m (-16% YoY, -6% QoQ) missed consensus expectations, with the QoQ and YoY drop in net profit mainly due to higher loan impairment allowances (+119% YoY, +62% QoQ) that CIMB Niaga booked in. 9M14 annualised ROE was 11.6% (vs underlying 9M13 ROE of 14.4%) and CIMB said it would not be able to meet its 13.5-14% ROE target for 2014.

 

 

 

Dialog Group (DLG MK, BUY,  TP: MYR2.00)

Results Review

Dialog’s 1QFY15 core profit of MYR49m was deemed in line (but below consensus estimates), as a boost from Malaysian upstream and downstream activities offsets temporary slowdown in some of its international activities. Further phases of PIDT project is on schedule. Maintain BUY and TP MYR2.00 (33% upside), as we like Dialog’s continued growth in both offshore and onshore businesses.

 

 

 

Tune Ins Holdings (TIH MK, BUY,  TP: MYR3.00)

Rejuvenating Its Take-Up Rate

Company Update

The share price correction yesterday was likely due to temporary setbacks in 3Q results and a cancellation of agreement with Al Hai LLC, which management said to be non-material as it is still on the lookout for MENA and Indonesia partnerships. Maintain BUY and its MYR3.00 TP (24x FY15F P/E, 45% upside). We envision long-term value from its associates, potential partnerships and a recovery in travel demand.

 

 

 

OCK Group (OCK MK, BUY, TP : MYR1.59)

Rising Up The Ranks

Company Update

We believe OCK’s transfer to the Main Market (20 Nov) and the 1-for-2 bonus issue (ex-date: 24 Nov) would catalyse a re-rating of the stock. Maintain BUY with a revised TP of MYR1.59 (ex-bonus TP of MYR1.06) (12.8% upside). We lower our FY14 earnings forecast by 28% due to the delay in the USP contract award and recognition of PMT in 4Q14. The stock’s FY14-16 EPS CAGR remains a compelling 32%. 

 

 

 

Tambun Indah (TILB MK, BUY, TP: MYR2.50)

Unbilled Sales Underpin Resilient Earnings

Results Review

Tambun’s 3Q14 results were within expectations. Maintain BUY with a MYR2.50 TP (18.5% upside). Due to a lack of new launches in 3Q, new sales fell to MYR74m, from MYR149m in 2Q. We expect Tambun to end the year with MYR430m in sales (vs MYR500m in FY13). Although the recent land deal was called off, we remain confident of management’s ability and expect some new land parcels to be secured next year. 

 

 

 

Sunway (SWB MK, BUY, TP: MYR3.90)

Attractive Dividend Angle

Results Review

Sunway’s 3Q14 results came in within our expectation but below market consensus. New sales fell slightly to MYR393m from MYR459m in 2Q. The dividend angle for the stock may have been underappreciated by the market. With the listing of SCG, shareholders could potentially receive a cash dividend of 25-30 sen, on top of the normal dividend payout of 10 sen. Maintain BUY with MYR3.90 TP (20.7% upside).