MIB Research Summary - 25 Nov 2014

Axiata Group: Maintain BUY Celcom weak as guided  Shariah-compliant

9M14 net profit and EBITDA were below both ours and consensus forecasts; Celcom was weak as guided. Celcom’s IT issues have been well-flagged and are largely resolved; revenue should trend higher going forward. Cut FY14 net profit by 10%; BUY rating and MYR7.60 TP unchanged UMW Oil & Gas Corporation: Maintain Buy No surprises  Shariah-compliant 9M14 results within our and consensus expectations. UMWOG is Shariah compliant, has strong earnings growth prospects with quality assets to capitalise on new JUs in Asia. Maintain BUY with an unchanged SOP-based MYR3.90 TP. WCT Holdings: Maintain Hold 3Q14: Dragged by property  Shariah-compliant Results disappointed; both property progress billings and margins were weak. Lower FY14-16 net profit forecasts by 3%-8%. Potential downside to FY15-16 forecasts. Maintain HOLD. Petronas Gas: Maintain Hold More colour on Pengerang ventures  Shariah-compliant Raising FY18 net profit by 6% to account for the Pengerang re-gas plant. Further earnings accretion in FY19 from the Pengerang air separation JV with Linde. TP raised to MYR24.00 (+50sen), maintain HOLD. NCB Holdings: Upgrade to Hold MMC eyeing a stake in NCB?  Shariah-compliant The potential emergence of MMC as a substantial shareholder (if true) should shore up interests in NCB. NCB now trades at a multi-year low and a re-rating to 1x P/BV indicates a 28% upside. Upgrade to HOLD (from SELL); share price has since trended down to our unchanged DCF-derived TP of MYR2.25. Singapore CPI, October 2014 Dis-inflationary pressure continues Headline inflation eased further to +0.1% YoY in Oct 2014 (Sep 2014: +0.6% YoY), mainly on lower costs on COE, accommodation and oil-related items. Core inflation rate (CPI ex-accommodation and private road transport) remains sub-2.0% (Oct 14: +1.7% YoY; Sep 14: +1.9% YoY). Cut 2014 CPI estimate to +1.0% (YTD 2014: +1.3%; previous 2014: +1.3%) and expect 2015 inflation rate to stay subdue at 1.0%-1.5% TECHNICAL: Temporary low of 1,805.35 in place The FBMKLCI rose 24.64 points to 1,833.77 yesterday, while the FBMEMAS and FBM100 also closed higher by 170.11 points and 167.62 points, respectively. We recommend a “Buy on Dips” stance for the index. Trading idea is a short-term buy on MAXIS with upside target areas at MYR7.46 & MYR7.70. Stop loss is at MYR6.68. NEWS  IPO: Weststar valued at up to MYR4.8b. The long-awaited listing of Weststar Aviation Services is set to proceed with Tan Sri Syed Azman Syed Ibrahim aiming to raise about MYR1.4b from the exercise. Sources indicate that the company was valued by investment banks at between MYR4.2b and MYR4.8b. The firm is raising funds to pare debts. (Source: The Star) IHH Healthcare: Unit awards MYR1.07b for HK hospital job. IHH Healthcare, via its indirect 60%-owned subsidiary GHK Hospital Ltd, has awarded the main contract for superstructure works on a private hospital to Hip Hung-Chun Woo Joint Venture (HHCW) for HKD 2.48b (MYR1.07b). Under the contract, HHCW will carry out the superstructure works comprising the design completion and maintenance of the main contract works for the development of a private hospital at Aberdeen Inland in Hong Kong. The contract is for 24 months. (The Edge Financial Daily) Sona Petroleum: Remains committed to Thai deal. Sona Petroleum's nearly MYR1b deal to buy oil and gas assets in Thailand owned by UK-listed Salamander Energy plc appears to be all but over after the latter accepted the takeover offer by Ophir Energy plc. Salamander yesterday announced it had agreed to Ophir's firm offer to buy the entire stake in the company. The offer was on the condition that Salamander cancels its deal with Sona. (The Star) Infrastructure: IJM, Silk abort MYR395m Kajang highway deal. IJM Corp unit Road Builder (M) Holdings and Silk Holdings have mutually decided to abort the MYR395m acquisition of 100% equity interest in Sistem Lingkara--Lebuhraya Kajang Sdn Bhd. It was called off following the non-fulfillment of certain conditions precedent within the agreed timeline. (Source: The Star) The leading index (LI) in Sep 2014 rose at the same pace as in Aug 2014 i.e. +1.6% YoY as the increases in some of its components like "Real Money Supply" (Sep 2014: +0.6% YoY; Aug 2014: -0.5% YoY) and "Real Imports of Semiconductors" (Sep 2014: +0.3% YoY; Aug 2014: -0.3% YoY) were offset by declines other components such as "Housing Permits Approved" (Sep 2014: -0.2% YoY; Aug 2014: -0.6% YoY) and "Expected Manufacturing Sales Value" (Sep 2014: -0.1% YoY; Aug 2014: -0.3% YoY). The stable but moderate rise in LI - a gauge on economic growth in the next 3 months at least - suggests that the real GDP growth momentum is positive albeit moderate in 4Q 2014. This is amid a challenging external demand situation given the lack of breadth and depth in global economic and trade growth on top of the soft commodity prices. In addition, there are moderations in certain areas within the domestic economy like property as well as consumer and Government spending due to property-cooling and fiscal consolidation measures, although investment activities will be key in supporting domestic demand. (Source: BNM, MKE) Germany: Business confidence unexpectedly rose for the first time in seven months after the country's economy returned to growth and the European Central Bank added stimulus to the euro area. The Ifo institute's business climate index, based on a survey of 7,000 executives, advanced to 104.7 in November from 103.2 in October. (Source: Bloomberg) Russia: Sees USD 140b annual loss from oil plunge, sanctions. Russia stands to lose as much as USD 140b a year as a result of lower oil prices and U.S. and European sanctions, Finance Minister Anton Siluanov said, underlining the risks of a prolonged stalemate over Ukraine. "We've seen a contraction of capital inflows into the country," Siluanov said at conference in Moscow. "We're losing about USD 40b a year because of geopolitical sanctions, and we're losing about USD 90b to USD 100b on the basis of a 30% decline in oil prices." (Source: Bloomberg)

CIMB Research Summary - 25 Nov 2014

Westports Holdings - Explosive catalysts on the horizon
Westports’ share price may be driven up in the months ahead by three potential catalysts: the start of the Ocean Three alliance, the renewal of the Investment Tax Allowance, and government approval to raise port tariffs. Westports is our top pick in the Malaysian transport space. We initiate Westports with an Add call and a probability-weighted DCF target price of RM4.57, incorporating different scenarios of the timing and quantum of the tariff hike. We expect the core EBIT 3-year CAGR of 10% to rise to 17% if port tariffs are raised 30% on 1 January 2016.

Petronas Dagangan - Fuel up!
Contrary to what the market thinks, the government’s decision to put RON95 petrol and diesel on a managed float system is positive for petroleum retailers, including PetDag. The managed float system will lead to the removal of subsidy receivables, thus potentially improving PetDag’s cash flow. Also, the automatic pricing mechanism (APM) remains in place, ensuring PetDag a fixed company margin of 5 sen/litre. In view of the sharp share price fall since the managed float system was announced on 21 Nov, we upgrade our call from Hold to a trading-oriented, non-consensus Add while maintaining our forecasts and target price. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x.

Axiata Group - Celcom yet to regain footing
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.

Affin Holdings - Not taking full advantage of rate hike

Petronas Gas - Pengerang to drive excitement

Signature International - Gaining momentum

Uchi Technologies - A stronger brew

UMW Oil & Gas - Bigger fleet oils the way to record quarter and maiden dividend
WCT Holdings - Weighed down by property

Economic Update - Sep leading index holds steady

CIMB Research Summary - 17 Nov 2014

Economic Update - 3Q14 GDP – Slower but still looking good
Real GDP growth moderated from 6.5% yoy in 2Q14 to 5.6% yoy in 3Q14, higher than our 5.2% estimate but in line with market consensus. The moderation was expected given last year's high base as well as slower exports and industrial output in the last quarter. Noteworthy are the resilient growth of household consumption (6.7%) and the sharp slowdown of investment growth to 1.1%. Still, the building blocks are in place to support average real GDP growth of 6.0% in 2014 and 5.0% in 2015.


Petronas Gas - Pengerang regas terminal is on
PetGas announced that it will undertake the Pengerang regasification terminal project with Dialog and the Johor state government. The total project would cost RM2.7bn, of which PetGas’s portion would be approximately RM2bn. The new regasification terminal will be completed in 4QFY17 and we expect stable earnings contribution from the terminal to start in FY18. While we make no changes to FY14-16 earnings forecast, we raise our SOP-based target price to RM27.11 (from RM26.44 previously) as we imputed the contribution of the regasification terminal towards the earnings and cashflow for FY18 onwards. We maintain our Add call on the stock.


Dialog Group - All gassed up and ready to go
With Phase 1 of the Pengerang tank terminal complex nearing completion, Dialog is stepping on the gas with Phase 2 where it will develop LNG regasification facilities with Petronas Gas and the Johor state government in a project that will cost an estimated RM2.7bn, the company said in an announcement today. We understand that Dialog will also be involved in the construction of selected structures. Pending further details, we maintain our forecasts and continue to value the stock at 21.2x CY16 P/E, a 30% premium over our target market P/E of 16.3x. Pengerang’s attractive outlook is the potential re-rating catalyst that supports our Add call.


Tomypak Holdings - Slow road to recovery?
Tomypak’s 3Q14 results were in line with our expectation, with the annualised 9MFY14 net profit coming in at 101% of our full-year forecast. We maintain our EPS forecasts but until Tomypak’s quarterly earnings show continued signs of recovery, we are switching our valuation basis from earnings (previously 7.8x P/E, 30% discount to Daibochi P/E target ) to asset-based. As a result, our target price rises to RM1.37, now pegged at 1.3x 12-months average P/BV. We upgrade the stock from Reduce to Hold as share price downside looks limited with floor support at RM1.30, which is the acquisition cost price of the new major shareholder. For exposure in the packaging sector, we prefer Thong Guan Industries.


Guinness Anchor - Low base effect boosts top line

Economic Update - 3Q14 BOP: current account surplus narrows further

RHB Research Summary - 17 Nov 2014

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

Green Light For Pengerang LNG

Corporate News Flash

We are positive on the green light received by Dialog to develop a key phase of its mega Pengerang Terminal project - dedicated for LNG storage, trading and supply to the requirements of the Pengerang Integrated Complex. We don’t expect any impact to our 3-year earnings forecast, given its long development period. Maintain BUY, with a revised MYR2.00 TP (28.2% upside) to account for our new oil price forecast.

 

 

Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98)

Embarking On Pengerang Regasification Project

Corporate News Flash

Petronas Gas is embarking on the MYR2.7bn Pengerang regasification terminal project. While we are positive on the news, we maintain our NEUTRAL call, earnings forecasts and TP of MYR21.98 (1.5% upside), as the project will only start contributing from FY18. We believe the market has priced in near-term earnings catalysts, ie contributions from a new power plant in Sabah and a regasification terminal in Melaka.

 

 

KKB Engineering (KKB MK, SELL, TP: MYR1.38)

Waning Hope On O&G Contract Wins

Results Review

KKB’s 9M14 results were way below our and street expectations. We downgrade our rating to SELL (from Trading Buy) as we trim our target P/E to 12x FY15 and cut our TP to MYR1.38 (-29.5% downside). Due to the waning hope on its associate unit winning more O&G contracts in the near future (on weakening oil prices) and poor contract wins for other divisions to-date, we are slashing our FY14/15 earnings numbers.

 

 

Guinness Anchor (GUIN MK, NEUTRAL, TP: MYR13.10)

Earnings Up QoQ on Lower Opex

Results Review

Guinness’s 1QFY15 earnings of MYR54.6m (+10% YoY, +16.3% QoQ) were broadly in line with our expectations. Although revenue declined 4.8% QoQ due to seasonal factors, earnings rose 16.3% on the back of strategic cost management as well as lower commercial spending. No dividend declared for the quarter under review. Maintain NEUTRAL and a DCF-based TP of MYR13.10 (0.8% downside). 

 

 

Economic Highlights - Real GDP Growth Weakened In The 3Q, Dragged By Slower Export Growth (Published 14 Nov 2014)

Real GDP growth moderated to 5.6% YoY in 3Q14 (2Q: +6.4%). The reading was higher than our expectation of 5.2%, due to stronger-than-expected growth in consumption demand. This was attributed to much weaker export growth on account of a higher base effect and weak regional trade. External demand was also dragged down by slower growth in global semiconductor sales and falling commodity prices amid a moderate and uneven global economic recovery. Domestic demand also weakened in 3Q, but it helped to cushion sluggish external demand during the quarter. Full-year economic growth is 5.8% in 2014 (2013: +4.7%).

  

 

Economic Highlights - Current Account Surplus Narrowed Further In 3Q (Published 17 Nov 2014)

The current account surplus in the balance of payments dropped by 52.6% to MYR7.6bn in 3Q (2Q: +MYR16.0bn). This was due to a smaller surplus in the goods account and a bigger deficit in the services, income and transfer accounts during the quarter. The financial account, on the other hand, recorded a smaller outflow of MYR2.8bn in 3Q (2Q: -MYR11.8bn). We expect the current account surplus of the balance of payments to widen to MYR58.0bn or 5.8% of GNI in 2014 (2013: RM39.9bn or 4.2% of GNI).

MIB Research Summary - 17 Nov 2014

3Q 2014 Real GDP Growth Taper...

Growth slowed to +5.6% YoY (2Q 2014: +6.4% YoY), +2.9% QoQ (2Q 2014: +3.6%) and +0.9% seasonally-adjusted QoQ (2Q 2014: 1.9%). Both domestic demand and net external demand eased to +4.8% YoY (2Q 2014: +5.8% YoY) and +11.4% YoY (2Q 2014: +91.0% YoY). Adjusted our 2014 and 2015 real GDP growth forecasts to +5.9% (+6.0% previously; 2014 YTD: +6.1%) and +5.2% (+5.0% previously). Balance of Payments 3Q 2014 Smaller current account surplus Current account surplus in 3Q 2014 was smaller as trade surplus narrowed while services and income account deficits widened. Financial account deficit remain amid portfolio investment net outflows, but narrowed thanks to the net inflows of direct and other investments. Revised our full-year 2014-2015 current account balance forecasts to smaller surpluses. Dialog Group: Maintain Buy Clinches Johor regas project  Shariah-compliant New Johor regas (25% stake) to add MYR45m in profits from FY18, 4sen to TP. Though not unexpected, we are positive and do not discount more RAPID gas-related projects. Reiterate BUY; our SOP-based MYR1.90 TP has yet to incorporate this new project pending further clarity. Petronas Gas: Maintain Hold Pengerang announced  Shariah-compliant PTG’s 65% stake in the MYR2.7b Pengerang regasification plant is positive. Pengerang could contribute an incremental c.MYR300m of EBIT in 2018 through reservation charges alone. Maintain HOLD, TP unchanged at MYR23.50 for now pending further clarity from management. Guinness Anchor: Maintain Hold 1QFY15: In line 1QFY15 results are in line with expectations at 27% of our and consensus full year forecasts. We expect 2Q and 3Q earnings to come in steady, backed by festivities and pre-stocking activities, prior to GST. Maintain HOLD with unchanged DCF-based TP of MYR13.20. Dividend yield of ~5% provides support. TECHNICAL: Dow inches up, but FBMKLCI falls The FBM KLCI fell 10.40 points WoW to close at 1,813.79, as persistent foreign activities caused the drop. A poor Malaysia 3Q14 GDP growth of 5.6% led the index down. Volume fell from 2.66b to 1.65b shares. Trading idea is a Take profit call on ALAM with downside target areas at MYR0.765 & MYR0.65.   NEWS Construction: SCORE attracts over MYR7b FDI in first seven months. The Sarawak Corridor Renewable Energy (SCORE) has secured approved foreign direct investment (FDI) of more than MYR7b in the first seven months of this year. Malaysian Investment Development Authority (Mida) deputy chief executive officer II Datuk N. Rajendran said "there is (additional) potential investment of MYR6.7b in Sarawak that can be approved this year". (Source: The Star) Globetronics Technology: Globetronics set to release 3D sensors. Globetronics Technology plans to release three-dimensional sensors in mid-2015 to tap into the market that is projected to be worth about MYR11.4b in 2020. The sensors will be used for 3D motion control in smart devices and electronic systems said group chief executive officer Heng Huck Lee. (Source: The Star) U.S: Consumer sentiment increases more than forecast in November, reaching a seven-year high and indicating Americans will be in the mood to step up holiday spending. The Thomson Reuters/University of Michigan preliminary sentiment index increased to 89.4, exceeding the highest estimate in a Bloomberg survey and the strongest since July 2007, from a final reading of 86.9 in October. (Source: Bloomberg) China: Bad loans jump most since ’05 in threat to economic growth. Nonperforming loans rose CNY 72.5b (USD 11.8b) from the previous quarter to CNY 766.9b, the China Banking Regulatory Commission said in a statement on Nov. 15. Soured credit accounted for 1.16% of lending, up from 1.08% three months earlier. (Source: Bloomberg) China: Slowdown deepens as targeted stimulus fails to spur loans. Aggregate financing in October was CNY 662.7b (USD 108b), the People's Bank of China's said down from CNY 1.05tr in September. Earlier this week, reports showed deceleration in industrial output and fixed-asset investment. (Source: Bloomberg) Japan: Economy unexpectedly contracts as Abe weighs tax delay. Gross domestic product shrank an annualized 1.6% in the three months through September, the Cabinet Office said. Unadjusted for price changes, the economy contracted an annualized 3%. Abe's administration is seeking to shore up public support after April's levy increase triggered the deepest contraction in more than five years. Etsuro Honda, an adviser to the prime minister, said last week a tax increase is out of the question if growth is less than 3.8%. (Source: Bloomberg) Indonesia: Fuel-price rise to be less than IDR 3,000 a liter. Indonesia will raise fuel prices by less than IDR 3,000 (USD 0.25) a liter in the coming weeks, a move that will save the government more than USD 8b in the 2015 budget, its finance minister said. The government is "watching closely" what happens with international oil prices, "because most of our fuel is imported," he said. (Source: Bloomberg)

Kenanga: 17 Nov 2014

IDEAS OF THE DAY

l  Results Note: GAB

l  Quick Bites: DIALOG, PETGAS

l  On Our Portfolio: Extended Consolidation

l  Economic Viewpoint: Malaysia 3Q14 BOP, Malaysia 3Q14 GDP

NEWS HIGHLIGHTS

l  Globetronics set to release 3D sensors

l  Brahim’s helps Japan tap Muslim mart

l  Censof plans private placement

l  Melati Ehsan in road project talks with govt

l  DRB-Hicom in shares sales and purchase agreement with Isuzu Hicom Malaysia

FOREIGN NEWS HIGHLIGHTS

l  Actavis said near USD62.5b deal for Allergan

l  Australian tycoon to build giant dairy farm for exports to China

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Malaysia

l  GDP expanded by 5.6%

l  Zeti Upbeat On 5.5-6pc Growth

l  Current Account Surplus Narrowed in 3Q14

Global

l  G-20 Plans $2 Trillion Growth Boost to Uneven Global Economy

Asia Pacific

l  China Lending Drops Sharply, Fuels Calls For Bolder Stimulus Moves

l  China Bad Loans Jump Most Since 2005 As Economy Cools

l  China's Fiscal Spending Falls In October From Year Earlier

l  Indonesia Gives First Indication On Size Of Fuel Increase

l  Australia-China Trade Deal To Drive Exports Beyond Mining

USA

l  U.S. Consumer Sentiment At More Than Seven-Year High

l  Strong Dollar, Weak Oil Helping Americans Get Cheaper Imports

l  U.S. Mortgage Delinquencies Fall To Lowest Since 2007: MBA

Europe

l  Improvement In Eurozone As Germany, France Skirt Recession

l  Greece's Economy Emerged From Recession In First Quarter

Currencies

l  U.S. Dollar Sinks Vs. Euro On Falling Inflation Expectations

Commodities

l  IEA: Oil ‘Price Rout’ Not Over

l  Oil Surges A Day After Brent Crash; Supply Fears Linger

l  Gold Soars On Short-Covering, New Fund Buying

CIMB Research Summary - 6 Nov 2014

IFCA MSC - Best quarter ever

3Q14 net profit was a record high for IFCA. At 178% annualized 9M14 net profit, IFCA’s 3Q results was above our (no consensus) expectations due to higher-than-expected top-line growth. We raise our FY14-16 EPS by 36%-100% to reflect stronger top-line growth and target price also rises based on unchanged 21x 2016 P/E(in line with domestic peers). The stock remains an Add with potential catalysts such as record 3Q14 net profit and move to Main Board in 2015.


Perisai Petroleum - In recovery mode

Perisai reduced its core net loss to RM3m as at end-Sep 2014 as the company returned to profitability in 3Q14, thanks to early profits from PP101 that started work in mid-Aug. We deem the performance broadly in line as we expect a stronger earnings recovery in 4Q14 given the first full-quarter of contribution from PP101, mitigating the loss of income from the unemployment of Rubicone and E3. We continue to value the stock based on CY16 P/E of 14.8x with an unchanged 30% discount to the P/E of the oil & gas big caps. We maintain our Add recommendation, with the full deployment of the assets as the potential re-rating catalyst.


Malaysia Marine & Heavy Eng - Running dry

MMHE's 9M14 net profit undershot expectations, forming only 70% of our and consensus full-year forecasts due to project delays. More worryingly, the company's dry spell, which resulted in the order book shrinking to a record low of RM1.7bn, ran counter to the positive outlook of its peers. Despite a rollover, our target price falls as we cut FY14-16 EPS for lower contract win assumptions. We now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E) as we lower the target premium from 40% to 30% over our 16.3x target market P/E to reflect the current weak oil price sentiment. We maintain our Reduce call, with the potential de-rating catalysts of slower order book momentum and extended project delays. Switch to SapuraKencana.


Petronas Gas - More gas coming

We were pleasantly surprised that the Pengerang regasification terminal is expected to start soon, according to the conference call with PetGas yesterday. Once the terminal is completed in three years, PetGas's EBIT could be boosted by another 10-11%. We make no changes to our earnings forecasts and SOP-based target price of RM26.44. We remain optimistic on PetGas's earnings outlook, underpinned by its gas processing and transportation agreements which could see it continue to enjoy stable earnings and cashflow. We maintain our Add call on the stock. We expect the announcement of the Pengerang regasification terminal to act as a re-rating catalyst.

RHB Research Summary - 5 Nov 2014

Malaysia Strategy

Shariah-Compliant Securities Semi-Annual Review

Islamic Capital Markets Strategy

The Securities Commission (SC) is expected to publish its semi-annual review of Shariah-compliant securities at the end of November. Of the 169 stocks under our coverage universe, 121 are currently designated as Shariah-compliant. We have identified three stocks that we believe will be designated as non-compliant in the coming review. They are IOI Corp, Perdana Petroleum and SapuraKencana Petroleum.

 

 

Dayang Enterprise (DEHB MK, BUY, TP: MYR4.52)

Slowly Increasing Stake In Perdana

Company Update

Dayang has placed out the first tranche of 52.1m shares from the 82.1m proposed private placement. It has raised MYR175.6m in proceeds, which we believe will be used to buy more Perdana shares. Dayang currently owns 26.6% of Perdana’s shares, given the recent share price weakness. We trim our TP to MYR4.52 from MYR4.80 (a 53.7% upside) in light of the enlarged share base and a larger stake in Perdana. BUY.

 

 

Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98)

9M14 Core Net Profit Grows 10.4%                            

Results Review

Petronas Gas’ 9M14 results met expectations. We maintain our NEUTRAL call, forecasts and TP of MYR21.98 (a 0.8% upside). We believe the market has priced in near-term earnings catalysts of Petronas Gas, ie contributions from a new power plant in Sabah and a regasification terminal in Melaka. However, its long-term outlook remains favourable, backed by rising demand for gas.

 

 

Economic Highlights - Lower Oil Prices Unlikely To Derail 3.0% Fiscal Target In 2015 (Published 4 Nov 2014)

We estimate that for every USD10 per barrel fall in average crude oil prices, government revenues will be reduced by an estimate of MYR4.0bn. However, this will be mitigated by a corresponding reduction on the expenditure side through a lower fuel subsidy bill, with a potential reduction of MYR2.5bn in the fuel subsidy. We believe the Government will be able to adjust its expenditure to make up for any shortfall in oil revenue caused by a lower price of crude oil. As a result, we believe the Government’s fiscal deficit target of 3.0% of GDP in 2015 is unlikely to be derailed.

CIMB Research Summary - 5 Nov 2014

MISC Bhd - Restoring the relationship

As Petronas focuses its full attention on executing its existing O&G projects, we suspect that it may rethink the need to directly own LNG vessels. As such, MISC may be able to own and operate new LNG ships for Petronas, restoring the traditional father-son relationship. We keep our Add call and raise our SOP-based target price after factoring in DCF contribution from four LNG vessels now in Petronas’s orderbook, and other adjustments. Our forecasts have been tweaked for housekeeping items. The family reconciliation could excite investors and move the price.


British American Tobacco - Raising selling prices again!

Effective today, BAT has increased its cigarette selling prices by RM1.50/pack, to RM13.50/pack for premium cigarettes and RM12/pack for VFM sticks, due to the increase of 3 sen per stick in excise duty. While sales volume will most likely drop substantially in the immediate term, we believe that it will have a net positive impact on BAT’s FY15 earnings as long as the sales volume does not fall more than 16-17% which we think is unlikely. We cut our FY14-16 sales volume assumption by 2-4% pts factoring the potential fall in sales volume due to the higher selling prices. Our FY14-16 net profit was however raised by 1-10% as the higher selling price is more than sufficient to offset the decline in the potential drop in sales volume. We maintain Reduce on BAT with a higher DDM-based target price. We prefer Gudang Garam.


Petronas Gas - A steady flow of gas

At 75% of our and consensus full-year forecasts, Petronas Gas's (PetGas) 3Q14 core net profit of RM418.6m was in line with our expectations. Revenues grew by 9.8% yoy, underpinned by the new Gas Processing and Gas Transportation Agreements and higher utilities revenues. We retain our earnings forecasts and SOP-based target price of RM26.44. We remain optimistic on PetGas's earnings outlook, which we expect to be stable moving forward. We maintain our Add call on the stock, with the announcement of more regasification terminals being a potential re-rating catalyst. PetGas remains our top pick in the overall Malaysian utilities sector.


Tune Ins Holdings Bhd - No retuning by new maestro

Our meeting with the new CEO of Tune Ins, Mr. Junior N. Cho, reinforced our view that he is the right candidate to lead the company, given his experience in the insurance, e-commerce and airline sectors. We also draw comfort from the fact that the management team is intact despite the departure of the previous CEO. We do not expect the new CEO to change significantly the strategic direction of the company. Tune is still an Add, premised on the swift expansion of its travel insurance business in the region, with exposure to 30 countries. Our DDM-based target price (COE of 9.2%; LT growth of 5%) increases as we roll it over to end-2015.

Petronas Dagangan - Not pumping enough

Tasek Corporation - 50-year anniversary goodie bag

Research Summary: 12 August 2014

Research Summary: 12 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Sector update	Plantation	July inventory climbs marginally	Overweight
RHB	Results review	AFG	Stronger earnings ahead but likely priced in	Neutral	RM4.95
RHB	Results review	Petronas Chemical	A better 2H14 for all	Sell	RM6.11
RHB	Company update	Mah Sing	Anchoring presence in Rantau	Trading buy	RM2.58
RHB	News flash	KLK	Acquiring Belgian Surfactant manufacturer	Neutral	RM26.00
RHB	News flash	CBIP	Proposes bonus and free warrants issue	Neutral	RM4.95
RHB	Results review	Takaful	1HFY14 no surprises despite RBCT	Buy	RM15.00
RHB	Results review	SUNREIT	Looking ahead to FY15	Neutral	RM1.42
RHB	Results review	KLCC-SS	Still growing steadily	Neutral	RM6.96
RHB	Eco highlights	Economic	Stronger Industrial Porduction and real GDP growth in the 2Q, 2014 full-year GDP growth upgraded
RHB	Eco highlights	Economic	Manufacturing sales weakened further in June, as demand conditions softened
CIMB	Eco update	Economic	IP points to robust GDP growth in 2Q14
CIMB	Results note	KLCC-SS	A small miss	Hold	RM6.40
CIMB	Results note	AFG	Swift loan growth spoilt by lower non-interest income	Hold	RM4.88
CIMB	Results note	SUNREIT	Better outlook ahead	Hold	RM1.40
CIMB	Flash note	PetGas	More stable now	Add	RM24.73
CIMB	Flash note	Mah Sing	Expanding to Seremban	Add	RM3.07
CIMB	Results note	Petronas Chemical	Ready to run	Add	RM7.70
CIMB	Sector update	Semiconductor	Riding o the internet of things	Overweight
Maybank	Company update	Mah Sing	Strong into affordable housing	Buy	RM2.72
Maybank	Company update	PetGas	All is well	Hold	RM23.50
Maybank	Company update	KLK	Buys a small downstream player	Hold	RM24.00
Maybank	Company update	TSH Resources	Proposes a 1-for-2 bonus issue	Hold	RM3.40
Maybank	Company update	Time dotcom	Another Trans-Pacific cable	Hold	RM5.00
Maybank	Eco update	Economic	IPI June 2014: another knock-out quarter
Maybank	Eco update	Economic	Manufacturing sales June 2014: slowing growth but fundamentals intact
Maybank	Results review	AFG	Expect better NIMs ahead	Buy	RM5.50
Maybank	Results review	Petronas Chemical	2Q14 below expectations	Hold	RM6.90
Maybank	Results review	KLCC-SS	No earnings surprises	Hold	RM6.49
Maybank	Results review	SUNREIT	Above expectations	Hold	RM1.42
Maybank	Technical	KSL		Short-term buy
Kenanga	Eco viewpoint	Economic	IPI: Increased by 7.0%, on continued manufacturing expansion
Kenanga	Results note	KLCC-SS	Good as usual	Outperform	RM6.90
Kenanga	Quick bites	TSH Resources	1-for-2 bonus issue	Outperform	RM4.00
Kenanga	Results note	AFG	1Q15 broadly inline	Market perform	RM4.93
Kenanga	Quick bites	CBIP	Bonus issue and free warrants	Outperform	RM5.60
Kenanga	On radar	IWCity	Time to “reclaim” value!	Trading buy	RM3.39
Kenanga	Results note	Mah Sing	Maiden Seremban landbank	Outperform	RM2.71
Kenanga	Results note	Petronas Chemical	2Q14 below but a better 2H14 ahead	Outperform	RM7.19
Kenanga	Sector update	Plantation	Higher-than-expected July inventory	Neutral
Kenanga	Results note	SUNREIT	FY14 well within expectations	Outperform	RM1.56