RHB Research Summary - 14 Nov 2014

HeveaBoard (HAVE MK, NR)

An Undiscovered Gem At Attractive Valuations

Trading Idea

As HeveaBoard has a good earnings track record and prudent management, we think that at a target P/E of 6x FY15F, the stock should be worth MYR2.15 (a 22% upside). We expect the company to continue focusing on enhancing its production efficiency to improve earnings. HeveaBoard reported a YoY earnings increase of 119% in 1H14 and management is confident that it can maintain this pace of growth in 2H. 

 

 

Oil & Gas (O&G)   (NEUTRAL) 

Something Has Got To Give

Sector Update

As a result of the fundamental change in the crude oil landscape, this report addresses the impact of the lower crude oil price environment on the companies under our coverage. For our Top Picks, we have chosen companies that are not materially affected by the lower crude oil price environment. Our top BUYs are Dialog, SapuraKencana and Bumi Armada.

 

 

Maxis (MAXIS MK, NEUTRAL, TP: MYR6.35)

Slow Road To Recovery

Results Review

Maxis’ 9M14 results came in line, at 71%/76% of our/consensus estimates. Maintain NEUTRAL, with a higher DCF-based TP of MYR6.35 (8% downside) after revising our key assumptions. Management continues to guide for lower services revenue for FY14, given the decline in voice and messaging revenue. That said, we believe 4Q revenue could see a pickup from recent smartphone launches.

 

 

GD Express Courier (GDX MK, BUY, TP: MYR2.42)

Good Start To The Year

Results Review

We maintain our BUY recommendation on GDEX, with an unchanged TP of MYR2.42 (14% upside). Its 1QFY15 earnings came in within expectations. Both courier and logistics segments grew positively but incurred higher expenses for expansion. GDEX also proposed 1-for-3 bonus issue as well as 1-for-5 free warrants. We keep our positive view on GDEX’s growth prospects.

 

CIMB Research Summary - 21 Oct 2014

Oil & Gas - overall - Contractually committed
In light of the oil price weakness, we checked with the companies in our oil & gas portfolio on the stability of their order books. The feedback is all-around positive, with the managements assuring us that their companies' contractual terms and rates are intact, and that they are not tied to the oil price. The sector remains an Overweight given its importance in the government's Economic Transformation Programme (ETP) and the contract pipeline arising from Petronas’s capex. Our top picks are SapuraKencana among the big caps and TH Heavy among the small caps.

DiGi.com - Executing well in a tough market
9M14’s core net profit was largely in-line at 73.3% of CIMB’s and 75.5% of the consensus full-year estimates. Service revenue growth slowed further in 3Q14 due to the more competitive market, but the strong prepaid subscriber growth suggests a healthier growth trajectory in 4Q14. A 6.2sen DPS was declared, or a 99% payout, bringing YTD DPS to 18.8sen, in-line with our estimates. We maintain our earnings forecast and DCF-based target price, which is based on the fair valuation of its potential business trust and return of excess cash. DiGi remains an Add and our top Malaysian telco pick, with likely rerating catalysts being stronger-than-peers earnings growth over the next three years, and potential set-up of a business trust structure.

Bursa Malaysia - Decent 3Q14 earnings
Although Bursa’s 9M14 net profit accounted for 76% of our and consensus full-year forecasts, we regard the results as being in line since 4Q revenue is seasonally the weakest. We retain our EPS forecasts. Though we roll forward our target price to end-2015, it is reduced because we lower our target FY16 P/E from 26.5x to 21.5x, on par with the 3-year average given the sliding P/E multiple in the past 2-3 years. However, Bursa remains an Add given (1) its above-market dividend yield of 4-5%, and (2) the positive outlook for the derivative business.

Axis REIT - A decent quarter
Axis REIT's (Axis) 3QFY14 core net profit of RM19.2m brings its 9MFY14 core net profit to RM61.9m, which makes up 62% and 64% of our and consensus full-year estimates, respectively. We consider this as in line as we anticipate stronger earnings in the 4Q as Axis completes its acquisition of a few properties, which will contribute to earnings. We finetune our earnings forecasts for housekeeping purposes while our DDM-based target price is raised slightly to RM3.86 (from RM3.82 previously) after we roll forward our valuation base year. We maintain our Add call on the stock. We think more newsflow on new acquisitions will catalyse the stock.

HLIB Research Summary - 20 Oct 2014

Automotive (NEUTRAL  çè)

Weak September; Expect Strong 4Q14

• As expected, MAA reported weak September TIV at 47.8k units (-13.1% yoy; -6.6% mom), mainly dragged down by national OEMs. However, we expect strong TIV in 4Q14 driven by newly launched Perodua Axia and Proton Iriz.
• Perodua (UMW and MBM) sales dropped to 12.1k units (-30.8% yoy; -16.9% mom) and Proton (DRB) reported 8.1k sales (-45.7% yoy; -6.5% mom).
• We expect foreign OEMs to maintain their sales campaigns into 4Q14, in order to achieve their respective sales target for 2014 and defend their market share ahead of GST implementations.
• Market Down-Trading remained intact, as higher cost of living take effects. OEMs focusing on A-B segment cars will be the major beneficiary.
• Top Picks: MBM (TP: RM4.00) and DRB (TP: RM3.00).

oil and gas (OVERWEIGHT  çè)

Music Stop?”Encore?Encore??”

• Red October to O&G sector… On average, O&G companies fell by 17-18% (despite last Friday’s rebound). Some small to mid-cap were hit harder by falling 20-25%.
• How low could oil price go? In our view, Brent crude could settled around US$80-90 level in the midterm instead of >US$100 previously given rising supply from US. we believe near term oil price is close to the floor as any extended price below US$80 level (Brent) will slow down the production growth from US shale.
• Premium valuation for O&G no longer…We reduced target P/E for big cap from 20x to 16x with small and mid-cap reduced from 14-16x to 12-14x.
• Despite P/E De-Rating, valuation still compelling with average potential upside of ~27%. Most companies trading close to 1SD below average or near trough of P/E and P/B bands.
• Alpha can be discovered in selective areas like RAPID and brownfield development.

Top picks: Big Cap: Dayang Mid to Small cap: KNM and Scomi Energy.

KNM (BUY çè)

Too cheap to Ignore!

• To proposed a renounceable rights issue of up to 430.5m shares on the basis of 1 right shares for every 5 existing shares together with up to 215m free warrants on 1 free warrant  for every 2 rights subscribed.
• We are positive but not surprise about this exercise as it strengthens the balance sheet in order to finance potential more contract wins from RAPID and well prepare for Peterborough project.
• To note, the proposed right will be fully underwritten by its major shareholders and investment banks.
• Its owner Ir Lee Swee Eng also shows his confident on the company by progressively increased its share stake in open market with price ranging from RM0.69 - RM0.815.
• We maintained our BUY call with unchanged target price of RM1.35 based on 16x FY15 P/E. Our TP have not factored in value from EnergyPark Peterborough yet.

Economics

September Inflation Report

• Headline inflation declined to 12-month low of 2.6% yoy in September (Aug: +3.3% yoy), in line with our (+2.5%) and market expectations (+2.6%).
• Demand-driven price pressures are largely contained with core inflation slowing to 2.0% yoy in September (Aug: +2.6% yoy) and mom growth CPI ≤ 0.2%.
• We maintain our 2014 full-year inflation estimate at 3.2% as we had earlier on factored in impact of fuel price hike either in the form of direct subsidy cut or via a multi-tiered fuel subsidy mechanism in 4Q14.
• Inflation is expected to trend higher to ~4% in 2015, driven by cost factors i.e. (i) GST implementation in April; (ii) potential new fuel subsidy scheme in early 2015; and (iii) school bus fares hike in Jan-15.
• We expect BNM to pause at 3.25% on 6 Nov, as growth concerns outweigh inflation risks. BNM Governor Zeti also recently highlighted the need to maintain policy accommodation given recent weakness in the global economy.

Traders Brief

Short term relief rally target at 1820-1830 levels     

• Technically, after tumbling 6.9% from all time high of 1896 to a low of 1766 on 17 Oct, an “Exhaustion gap” emerged (FIG2) following “Breakaway & Runaway gap”, suggesting end of the retracement. Moreover, “Bullish Engulfing” pattern in oversold zone indicated impending technical rebound. Coupled with the “Bottom-out” oscillators, especially when RSI reached near 16%, KLIC is expected to trigger technical rebound to close Runaway gap of 1825 and Breakaway gap of 1834 and eventually resume its long term uptrend line if the long term 200-d SMA resistance at 1850 is taken out decisively. Immediate support are 1766-1778 levels
• Today’s recommendation: Trading BUY on UNISEM.

Trading idea - UNISEM

UNISEM: Anticipate a strong 3Q results

• Likely to rerate higher. Despite a 10% rebound last Friday, we remain optimistic of further share price recovery in the short term in anticipation of  stronger 2H14 results, driven by its strong turnaround story after a successful restructuring and its relentless focus towards high-margin-packages for smartphone/tablets and automotive segments; a resilient semiconductor industry coupled with cheap valuation.
• Bottoming up from grossly oversold levels. Further decisive breakout above RM1.37 (50% FR) will push prices higher towards RM1.42 (10-d SMA) and RM1.49 (38.2% FR), respectively. Our long term target price is RM1.58 (200-h SMA and 30-d SMA). Immediate supports are RM1.27 (10-h SMA) and RM1.20 levels. Cut loss at RM1.19.

MIB Research Summary 2 Oct 2014

Regional O&G Services: Key takeaways from Corporate Day

Positive investors’ traction on 13 ASEAN O&G corporates at our one-day event last week. Perdana and Ezion are our picks for OSV play while Yinson is for FPSO. KNM is an emerging renewable energy play. The AusGroup angle, on the supply base operations in Australia, is an interesting prospect, if executed well. AXIATA GROUP: XL finalising its tower sale  Shariah-compliant Positive on XL’s sale of 3,500 towers for IDR5,600b, or USD132k per tower. Proceeds to pare down USD500m shareholder loan extended by Axiata for Axis acquisition. Bumper dividend unlikely at Axiata, but a YoY increase in DPS is highly probable. Reiterate BUY. ECONOMICS/Fuel Subsidy Rationalisation: Another 20 sen per litre hike RON95 petrol and diesel prices raised by 20 sen to MYR2.30 per litre and MYR2.20 per litre respectively effective today. Maintain our 2014 inflation rate forecast of 3.5%, but adjust 2015 inflation rate projection to 4.5%-5.0% from 4.0%-4.5%. The move sends a clear message of the Government's commitment to fiscal reform. TECHNICAL: A very unstable index tone today The FBMKLCI inched down by 0.99 points to 1,845.32 yesterday, while the FBMEMAS and FBM100 also closed lower by 19.75 points and 17.79 points, respectively. We expect weaker buying interest at the supports of 1,830 to 1,843, whilst heavy liquidation would be at the resistances of 1,845 and 1,870. Trading idea is a Take Profit call on OLDTOWN with downside target areas at MYR1.65 & MYR1.51.

RHB 1 Oct 2014

Oil & Gas Sector (NEUTRAL) (Downgraded)

Not All Paradigm Shifts Are Exciting

Sector Update

We are turning more cautious on the implementation and execution risks of the stocks under our coverage, going forward. We believe the sector’s current premium valuation is unsustainable, as many local O&G players venture overseas and move up the value chain. We see this resulting in a narrowing of the gap between local and global valuations. We downgrade this sector to NEUTRAL from Overweight.

 

 

VS Industry (VSI MK, BUY, FV: MYR2.92) (Upgraded)

A Grand Finale

Results Review

VS Industry’s (VSI) FY14 earnings of MYR53.6m were above our and consensus expectations. 4QFY14 was a record quarter with earnings of MYR36.5m (+0.8% y-o-y, +855.4% q-o-q), helped by sales of the new coffee machine model from end-May and tax incentives for its exports. We raise our earnings forecasts and lift our FV to MYR2.92 (from MYR2.00), based on a 9.5x CY15F P/E (from MYR2.00) and implying a 12.7% upside. Upgrade to BUY.

 

 

Petra Energy (PENB MK, NEUTRAL, FV: MYR3.02)

Early Green Light For The TMM Portion

Corporate News Flash

Petra Energy announced that the topside major maintenance works for Petronas Carigali’s Sabah operation has been awarded an early activation. As the TMM portion is part of the MYR2.5bn umbrella contract running from 2013-2018, we make no changes to our estimates at this juncture. We keep our NEUTRAL recommendation for the stock with our SOP-based FV unchanged at MYR3.02. 

 

 

Banking Sector (NEUTRAL)

Expectations Of a Better 2H14 Already Priced In

Sector Update

1H14 was a challenge for the banks in terms of income growth but 2H14 should see things turn around, aided by July’s 25bps OPR hike. That said, we believe expectations of stronger earnings growth in 2H14 have largely been priced in. Meanwhile, August banking statistics saw stable loans growth but business loan leading indicators improved. We remain NEUTRAL on the sector, with Maybank, AMMB and BIMB as BUYs.

 

 

Economic Outlook

Slowing But Resilient Economic Growth In The 2H

After recording a strong growth of 6.3% y-o-y in the 1H, there are early signs to suggest that the spectacular growth will likely cool off in the 2H. This is on account of a slower increase in exports, on weaker external demand, made worse by a higher base effect in the 2H of 2013. Domestic demand will likely moderate as well in the 2H, dampened by rising cost of doing business and elevated inflation. The Government’s fiscal consolidation drive and curbs on the property market do not help either. As a result, we expect real GDP to grow at a slower pace of 5.3% y-o-y in 2H 2014, compared with +6.3% in the 1H.

 

 

Economic Highlights

Broad Monetary Aggregate Picked Up While Loan Growth Remained Stable In August

The broader money supply, M3, picked up to 5.5% y-o-y in August (July: +4.9%). Loan growth, on the other hand, remained stable at 8.6% y-o-y in August (July: +8.6%). A stronger growth in corporate loans mitigated the weaker growth in household loans during the month. We expect the banking system’s loans to sustain its expansion at 9-10% in 2014 (2013: +10.6%). We expect the OPR to be kept at 3.25% for the rest of the year, as the BNM appears to be cautious and focusing its stance on growth.

 

Research Summary: 7 August 2014

Research Summary: 7 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	News flash	Axiata	China Mobile reportedly eyeing 20% stake	Neutral	RM6.85
RHB	Sector update	Oil & Gas	Gas field developments the next frontier	Overweight
RHB	Results preview	Tune Ins	Breaking new barriers, away from AirAsia	Buy	RM3.00
RHB	Results review	Tasco	Strong start to the year	Buy	RM3.00
RHB	Results review	MISC	Tanker losses narrow in 1HFY14	Neutral	RM6.92
CIMB	Results note	MISC	Lower tanker losses in store	Add	RM7.56
CIMB	Results note	F&N	Whetting our appetite for growth	Add	RM21.17
CIMB	Flash note	MISC	Goodbye to chemical tankers	Add	RM7.66
CIMB	Eco update	Economic	Jun exports post slower gains
Maybank	Sector update	Banking	Merger stirs some interest	Neutral
Maybank	Results review	MISC	Financial muscle for growth	Buy	RM7.20
Maybank	Eco update	Economic	External Trade June 2014: Lost in translations…?
Maybank	Technical	Daiman		Take profit
Kenanga	On radar	Guocoland	Unlocking RNAV	Trading buy	RM2.95
Kenanga	Results note	MISC	2Q14 within expectations	Outperform	RM7.49
Kenanga	Quick bites	Axiata	A new partner from China?	Market perform	RM6.96
Kenanga	Quick bites	CBIP	RM41m Indonesian contract	Outperform	RM5.60
Kenanga	Eco viewpoint	Economic	External Trade: Unexpectedly lower on slower demand from major economies