MIB Research Summary - 20 Nov 2014

AirAsia X Bhd: Maintain Sell Fighting for survival

3Q14 core net loss of MYR185m (vs. profit MYR16m in 3Q13) was greater than forecast on weak yields and higher cost. All sectors were loss making with the exception of Nepal. Maintain SELL with a lower TP of MYR0.57 (from MYR0.63). AirAsia Bhd: Maintain Hold Losing the low cost advantage 3Q14 core net income of MYR112.4m (-28% YoY, +342% QoQ) was within expectations. Credible signs that market has bottomed, but expect slow yield recovery. Earnings growth driven by lower fuel cost. Maintain HOLD, target price raised to MYR2.60 (from MYR2.30) due to positive earnings revision. AMMB Holdings: Maintain Hold Better, on lower provisions 2QFY15 core net profit rebounded 35% QoQ, but 1HFY15 core earnings still down 14% YoY. FY15 forecast maintained, trimming FY16-17 by 5% p.a. to factor in slower loans growth and lower NIMs. HOLD maintained, lowering TP to MYR6.90 from MYR7.70 on a lower CY15 P/BV peg of 1.5x (1.7x previously). Kuala Lumpur Kepong: Maintain Hold Set back by oleochemicals business  Shariah-compliant FY9/14 results hurt by weak downstream earnings. Muted earnings outlook in FY9/15 as oleo-chemical, refinery and property businesses remain challenging. Maintain HOLD on unchanged TP of MYR23.20 after rolling forward our valuation on unchanged 23x PER target. Boustead Plantations: Maintain Buy Rich land value caps downside  Shariah-compliant 3Q14 results disappointed due to low CPO ASP achieved and lower-than-expected FFB output. Share price downside limited, backed by strategic land that has development potential, offering a RNAV of e.MYR2.96/sh. Maintain BUY with a revised SOP-TP of MYR2.03 (previously MYR2.16). TH Plantations: Maintain Hold Hit by dry spell  Shariah-compliant Results below our and consensus forecasts. Cut FY14 net profit by 9% on lower production and CPO ASP. FY15-16 forecasts unchanged but have downside potential. Maintain HOLD and TP of MYR1.65 on 15x 2015 PER. Star Publications: Maintain Buy Dividend yields look enticing  Shariah-compliant 3Q14 results slightly below; trim estimates by 6-11%. 18sen p.a. DPS may still hold; yields very attractive at 7.8%. Trim TP from MYR2.89 to MYR2.65 but upgrade to BUY. MSM Malaysia: Maintain Buy Expect a pickup in 4Q14  Shariah-compliant 9M14 results were above expectations at 80%/77% of our and consensus full-year forecasts. Anticipating a better 4Q14 on higher margin assumption, FY14 net profit forecast raised 5%. Upgrade to BUY with a higher TP of MYR5.50 (14x FY15 PER). Inari Amertron: Maintain Buy 1QFY6/15: Expect a strong start Expect net profit of MYR32-35m (+4-13% QoQ), supported by strong growth in overall smartphone demand. Inari is a beneficiary of the stronger USD, providing upside to our earnings forecasts. Reiterate BUY with a Street-high cum-rights TP of MYR4.20 (on unchanged 17x CY15 PER peg). Plantations: Maintain Neutral El Nino Alert! The Australia Bureau of Meteorology (ABM) upgraded the threat of an upcoming El Nino; with at least 70% probability. The new El Nino threat may boost sentiment and drive CPO price higher, aided by seasonal price recovery in 1Q15. Investors should position for a short term trade. BUY First Resources, Bumitama Agri, Sime Darby, Sarawak Oil Palms, Ta Ann and TSH Resources for earnings recovery play. TECHNICAL: Low of 1,805 with rebound confirmation The FBMKLCI advanced 6.01 points to 1,824.39 yesterday, while the FBMEMAS and FBM100 also closed higher by 32.19 points and 34.44 points, respectively. We recommend a “Nibble on Dips” stance for the index. Trading idea is a Short-Term Buy on GAB with upside target areas at MYR13.94 & MYR14.17. Stop loss is at MYR12.48. NEWS MSM: MSM plans to expand through acquisitions. MSM Malaysia Holdings, the sugar refiner remains focused on growing through acquisitions, having set its sight on its only local competitor, Central Sugars Refinery Sdn Bhd, that is owned by Tradewinds (M). MSM is already in talks to acquire an Asian upstream company and is also in discussions with a foreign partner to buy over a sugar plantation company in the region. (Source: The Star) Bina Puri: Bina Puri eyes listing of Indonesian power assets. Bina Puri Holdings plans to list its Indonesian power assets, possible as early as next year, saide group executive director Matthew Tee Kai Woon. The group has seven micro diesel-generated power plants across Indonesia, with a total capacity of 25MW. (Source: The Edge Financial Daily) U.S: Housing starts fall on multifamily as permits climb. Residential-construction permits in the U.S. climbed in October to a six-year high, pointing to a pickup in homebuilding after a slowdown in multifamily projects led to a drop in activity. Groundbreakings for single-family homes, condominiums and apartments fell 2.8 %to a 1.01 million annualized rate following September's 1.04 million pace, which was stronger than previously reported, the Commerce Department reported. Permits for future projects rose to the highest level since June 2008. (Source: Bloomberg) U.S: Fed officials saw need to watch for price expectations drop. Many Federal Reserve policy makers last month said they should be on the lookout for signs of a decline in expectations for inflation, minutes of their meeting show. "Many participants observed the committee should remain attentive to evidence of a possible downward shift in longer- term inflation expectations," according to a record of the Oct. 28-29 Federal Open Market Committee meeting released in Washington. "Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered." (Source: Bloomberg)

RHB Research Summary - 20 Nov 2014

Press Metal (PRESS MK, BUY, TP: MYR5.75)

Capacity To Surge With New Power Deal

Company Update

We applaud Press Metal’s plan to double its Samalaju plant’s capacity, which would lift total smelting capacity to 760,000 tpa (~1.5% of global primary aluminium consumption). Maintain BUY, with a higher TP of MYR5.75 (68.1% upside) – at a 10% discount from our fully-diluted DCF valuation. We also lift FY16F earnings by 27.7% as the new plant will most probably replicate its low-cost model, which is in the first quartile of the global cost curve. 

 

 

AMMB (AMM MK, BUY, TP: MYR7.45)

Underlying Trends Generally Positive

Results Rev,iew

AMMB’s 2QFY15 (Mar) results met our and consensus expectations. A much improved set of results together with low valuations means we retain our BUY call, albeit with a revised TP of MYR7.45 (14% upside). Underlying trends were generally positive this quarter, with 2QFY15 net profit up 35% QoQ (underlying basis), driven by a combination of NIM expansion, tight cost control and lower credit cost.

 

 

Kuala Lumpur Kepong (KLK MK, NEUTRAL, TP: MYR20.70) 

Weaker Manufacturing Contributions

Results Review

KLK’s FY14 (Sep) results were within our expectations but below consensus. Stronger profits from the plantation division offset weaker contributions from the manufacturing and property divisions. While we like the company’s strong management and steady growth strategy, we keep our NEUTRAL call with a revised SOP-based TP of MYR20.70 from MYR21.30 (10% downside), as valuations remain fair at current levels.

 

 

TH Plantations (THP MK, SELL, TP: MYR1.22)

Hit By Delayed Impact Of Dry Weather In Sarawak

Results Review

THP’s 9M14 results were below expectations, due to weaker-than-expected FFB production resulting in lower cost efficiency. We maintain our SELL recommendation with a lower TP of MYR1.22 (from MYR1.40)  a 25% downside. Despite THP’s decent annual FFB expected production growth of 10-15% over the next few years, we believe this may not be enough to offset the impact of lower CPO prices.

 

 

MSM Malaysia (MSM MK, BUY, TP: MYR5.74) (Upgraded)

To Benefit From Low Raw Sugar Prices

Results Review/Briefing Note

We consider MSM’s 9M14 earnings to be in line, as 4Q14 could see a recovery in EBIT margins. While MSM still faces potentially declining domestic volumes, we believe the absence of an LTC come 2015 and the current low raw sugar prices would bode well for margins. We raise our TP to MYR5.74 from MYR5.23 (17% upside) and upgrade to BUY. We highlight MSM’s decent dividend yield of 4-5.5% per annum.

 

 

AirAsia X (AAX MK, SELL, TP: MYR0.57)

Still In Turbulence

Results Review

As AirAsia X’s 9M14 earnings were below expectations, we maintain SELL with a lower TP of MYR0.57 (from MYR0.68, 1.5x FY15F P/BV, 11.6% downside). Earnings continued to come under pressure due to weakening passenger yields and escalation of costs. Airline incidents compounded the already intense operating environment but management is confident that the situation will improve.

 

 

Esthetics International Group (EIG MK, BUY, TP: MYR1.40)

Lifted By Favourable Tax Rate

Results Review

Esthetics’ 1HFY15 (Mar) core earnings of MYR9.3m were above our expectations due to a favourable tax rate. Core PBT of MYR11.5m was largely in line at 53.8% of our full-year estimate. Following the recent share price weakness, we upgrade our call to BUY and nudge up our SOP-based TP to MYR1.40 (from MYR1.35). This implies a 27.3% upside. Management declared its first interim DPS of 1.5 sen.

 

 

AirAsia (AIRA MK, BUY, TP: MYR3.11)

At a Yield Inflection Point

Results Review

9M14 earnings came in better than expected, prompting us to adjust our FY14/FY15/FY16 earnings upwards by 104%/14%/17%. Maintain BUY with a higher MYR3.11 TP (from MYR2.73, a 26.4% upside). Better-than-expected 3Q14 net profit was largely attributed to the lower average jet fuel cost incurred. The upward pricing rationalisation of airfares is expected kick-in on a stronger note next year.

 

CIMB Research Summary - 20 Nov 2014

Telco - overall - 2015: A year to tread carefully
Competition is likely to be intense in two out of the four markets we cover. Capex should also stay high as telcos invest further in rolling out 3G/4G networks and improving the data experience. Strong mobile data revenue growth is a bright spot but this will be partly offset by SMS/voice revenue declines, especially in the more developed markets. ASEAN telcos’ share prices have also done fairly well, up 14.4% YTD and 52.2% since 2011 on average, reducing the odds of further sector-wide outperformance in 2015. We remain Overweight on Indonesia and Neutral on Singapore and Thailand while cutting Malaysia from neutral to Underweight. Our top picks are Telkom Indonesia, SingTel and Thaicom. We downgrade DiGi to Hold and upgrade Indosat to Add.


AirAsia Bhd - The inflection point is now
AirAsia’s 9M14 core earnings look 37% better than our previous numbers, as yields stabilised in the 3Q, instead of continuing the yoy weakening trend that was evident since 2Q13. We believe yields in Malaysia will strengthen yoy in 4Q14, leading to higher yoy core earnings for the first time in almost two years. This is the inflection point that will finally move the share price. Lower jet fuel prices literally add fuel to the fire, lowering costs dramatically and allowing us to raise our FY14 core EPS by 260% (from a low base), while our FY15-16 core EPS forecasts are raised 28-36%. We reiterate our Add call and raise our target price, still based on 1.7x P/BV (average since 2008).


AMMB Holdings - Not in the mood to lend
Excluding one-off divestment gains, AMMB’s annualised 1HFY3/15 net profit was 9.6% below our FY14 forecast, though it was in line with consensus (2.4% short). This was because we were over-optimistic on our forecasts for revenue and loan loss provisioning (LLP). The 12 sen net interim DPS was also below expectations. We are raising the projected LLP by 40-100% and trimming the assumed lending yield by 5bp. This brings down our EPS forecasts and DDM-based target price (COE of 10%; LT growth of 4%) despite the roll-over of valuation to end-15. Notwithstanding the below-sector valuations, AMMB remains a Hold in view of the concerns over (1) weak loan growth, (2) margin contractions, and (3) a rise in credit costs. We prefer Maybank.

Kuala Lumpur Kepong - 4Q losses from downstream

MSM Malaysia Holdings - Profit margins hit by new APs

Star Publications - Not so shiny

Economic Update - Malaysia to be a RMB hub

Research Summary: 22 August 2014

Research Summary: 22 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Company update	CBIP	Watch out for expiry of Pioneer Tax Status	Take profit	RM4.16
RHB	Results review	QL Resources	Remain optimistic	Neutral	RM3.60
RHB	Results review	POS	A normalized quarter	Buy	RM5.70
RHB	Results review	Dialog	Hold on for long-term upsides	Neutral	RM1.90
RHB	Results review	Alam Maritim	Still sailing through the storm	Neutral	RM1.35
RHB	Results review	Coastal Contracts	Stable results, awaiting updates on rig	Buy	RM5.90
RHB	Results review	GAB	No surprises in FY14	Neutral	RM12.80
RHB	Results review	Magnum	Decent yield play	Neutral	RM3.22
RHB	Results review	Puncak Niaga	Within expectations	Trading buy	RM4.01
RHB	Results review	Petra Energy	Temporary earnings setback	Neutral	RM3.02
RHB	Results review	WCT	1H14 core net profit only grows 3% y-o-y	Neutral	RM2.31
RHB	Results review	NAIM	1H14 core net profit jumps 60% y-o-y	Buy	RM5.06
RHB	Briefing	MSM	More positive outlook	Neutral	RM5.23
CIMB	Results note	Eco World	Looking beyond FY14	Add	RM7.60
CIMB	Results note	Dialog	Brick-and-mortar record year	Add	RM2.08
CIMB	Results note	Puncak Niaga	Still looking to close the deal	Add	RM4.28
CIMB	Results note	Pharmaniaga	Solid manufacturing earnings	Add	RM6.70
CIMB	Results note	WCT	Yet to really buck the trend	Hold	RM2.32
CIMB	Results note	Oriental	Better performance all-around	Hold	RM7.60
CIMB	Results note	QL	Looking forward to a better 2Q	Add	RM3.86
CIMB	Results note	GAB	Smoke yet to clear	Reduce	RM12.00
CIMB	Results note	Magnum	Deleveraging picking up pace	Add	RM3.65
CIMB	Flash note	MSM	Building its value chain	Hold	RM5.22
Maybank	Results review	Axiata	A full quarter of Axis	Buy	RM7.60
Maybank	Results review	Dialog	No surprises	Buy	RM1.95
Maybank	Results review	WCT	Lackluster 2Q14	Buy	RM2.55
Maybank	Results review	Magnum	Uneventful 2Q14	Hold	RM3.05
Maybank	Results review	Alam Maritim	1H14: Below expectations	Buy	RM1.60
Maybank	Results review	GAB	FY14: Matched expectations	Hold	RM13.20
Maybank	Results review	QL Resources	Decent start to the year	Hold	RM3.20
Maybank	Technical	OSKProp		Short-term buy
Kenanga	Results note	Axiata	Hit by Axis’ integration costs	Market perform	RM6.96
Kenanga	Results note	Alam Maritim	A muted 214; forecasts cut for now	Outperform	RM1.64
Kenanga	Results note	Coastal contracts	Coast is clear for 2Q14	Outperform	RM5.94
Kenanga	Results note	Dialog	Awaiting Pengerang Phase 2	Market perform	RM1.83
Kenanga	Results note	NAIM	Stable earnings driven by Dayang	Outperform	RM4.18
Kenanga	Results note	POS	1Q15 hit by higher operating expenses	Underperform	RM4.61
Kenanga	Results note	Puncak Niaga	Patience pays	Outperform	RM3.99
Kenanga	Results note	QL Resources	POA, the double-edged sword	Outperform	RM3.71
Kenanga	Results note	GAB	Bracing for tougher hurdles ahead	Underperform	RM12.93
Kenanga	Results note	Magnum	2Q14 in line despite poorer luck	Outperform	RM3.59
Kenanga	Results note	WCT	Lower construction revenue	Market perform	RM2.32
HL	Results review	GAB	FY14: Above expectations	Buy	RM15.77
HL	Results review	Axiata	XL 1H14 Results	Hold	RM6.92
HL	Results review	Pharmaniaga	1H14 Results – in line	Buy	RM5.30
HL	Results review	POS	Weak 1Q15 due to high operation costs	Hold	RM5.00
HL	Results review	Scomi Energy	Lower activities in Malaysia	Buy	RM1.24
HL	Results review	WCT	2Q results: slower property earnings	Hold	RM2.26
HL	Results review	Vitrox	2Q14 results – another outstanding recored	Buy	RM2.78