RHB Research Summary - 24 Nov 2014

Genting Malaysia (GENM MK, NEUTRAL, TP: MYR4.21)
Blame It On The Luck Factor
9MFY14 Results Review
Genting Malaysia’s 9M14 core earnings of MYR950.5m fell below expectations due to subpar VIP holds in Malaysia, while its US segment continued to face headwinds from Bimini losses. Maintain NEUTRAL with our SOP-based TP reduced to MYR4.21 (3% upside). We lower our FY14 EPS by 5.6% and reduce our FY15-16 EPS forecasts by 7.1- 9.2% to factor in the impact from the GST implementation come Apr 2015.

IOI Properties Group (IOIPG MK, BUY, TP: MYR3.10)
Earnings On Track
Results Review
IOIPG’s 1QFY15 (Jun) results came in below expectations. Maintain BUY and MYR3.10 TP (26.5% upside). We expect 2H earnings to come in stronger as new projects are progressively rolled out in the coming months. New sales in 1QFY15 reached MYR370m, of which 85% were contributed by projects in Malaysia. Meanwhile, we expect IOI City Mall, which had a soft launch last weekend, to boost FY16 earnings.
Coastal Contracts (COCO MK, BUY, TP: MYR4.80)
Increased Sales of Premium OSVs
Results Review
9M14 MYR153m core profit was in line (met 79% of our/street estimates), buoyed by 14 vessel deliveries (9M13: 13 vessels). We retain our earnings forecast and BUY call, with our new TP at MYR4.80 (implied 13x P/E, 39% upside) after adjusting its shipbuilding valuations. Its MYR2.5bn orderbook is underpinned by vessel deliveries up to 2015 and GCSU long-term contract, while it expects JU rig delivery by 1H15.
Allianz Malaysia (ALLZ MK, BUY, TP: MYR13.50) (Upgraded)
Consistent Track Record
Results Review
Allianz’s 9M14 earnings of MYR225m was in line and met 76% of our FY14F forecasts, buoyed by AGIC’s double digit earned premium growth and underwriting margin of 16% (above industry’s 13%), ALIM’s strong investment performance and higher renewal premium. We upgrade to BUY with an unchanged SOP TP of MYR13.50 (13% upside). Valuations appear attractive again due to the recent retracement.

Genting (GENT MK, NEUTRAL, TP: MYR9.67) (Downgraded)
Lifted By Non-Gaming Divisions
9MFY14 Results Review
Genting’s 9MFY14 core earnings of MYR1.66bn were within our expectations as weakness in its gaming segments was offset by an improved showing from its plantation and O&G divisions. That said, we downgrade our TP to MYR9.67 (from MYR10.96) (a 2.8% upside) following our valuation revision on its listed subsidiaries in view of potential earnings headwinds ahead. Downgrade our call to NEUTRAL.

SKP Resources (SKP MK, BUY, TP: MYR0.85)
A Stronger 2HFY15 Awaits
Results Review
We deem SKP’s 1HFY15 (Mar) earnings of MYR20.2m in line despite reaching only 42.1% of our full-year estimate. Maintain BUY and MYR0.85 TP, a 17.2% upside. We expect 2HFY15 earnings to accelerate on the production of two new Dyson models, which started in early Nov 2014. No dividend was declared for the quarter under review. We make no changes to our earnings forecasts.

Petra Energy (PENB MK, NEUTRAL, TP:MYR2.08)
Results Review
Keeping Up The Pace
Petra Energy’s 9MFY14 core earnings of MYR17.4m came in above our expectations at 85% but missed consensus at only 50%. We maintain our NEUTRAL with a lower SOP-based TP of MYR2.08 (from MYR3.02). We raise our FY14 estimates by 10% on the back of higher work orders from its marine services segment but keep our FY15
numbers unchanged.

7-Eleven Malaysia (SEM MK, BUY, TP: MYR2.00)
Stronger Performance
Results Review
7-Eleven’s 3Q14 results were broadly in line, with net profit improving 109% YoY to MYR17.1m, partly contributed by an increase in ASP and stronger other operating income. We maintain our BUY call and MYR2.00 TP, derived from 28x FY15F P/E, offering a 21.2% upside. Its 9M14 net profit makes up 70% of consensus’ FY14 net profit. We are confident that its business expansion plans are progressing well.

Pintaras Jaya (PINT MK, BUY, TP: MYR4.92)
1QFY15 Net Profit Grows 9% YoY
Results Review
Pintaras Jaya’s 1QFY15 (Jun) results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR4.92 (implying a 13% upside). Being a dominant player, Pintaras Jaya is well-positioned to capitalise on the strong prospects of the piling segment, backed by the Klang Valley MRT project, a proliferation of high-rise developments and capacity shortage – which should boost piling rates.
Southern Steel (SSB MK, NEUTRAL, TP: MYR1.46)
In Red At The Start Of FY15
Results Review
Southern Steel’s 1QFY15 (Jun) results (MYR21.7m net loss) were below consensus and our estimates due to stiff competition from imported steel, a drop in steel prices and deeper losses from its associates. We maintain our NEUTRAL call, but cut our earnings forecasts for the next two years. Therefore, our book-based TP of 0.7x FY15F P/BV (-1 SD) is trimmed accordingly to MYR1.46 (from MYR1.49) (4.2% upside).

Sarawak Oil Palms (SOP MK, BUY, TP: MYR6.60)
Decent 3Q Earnings
Results Review
We continue to like SOP for its better production growth outlook and as the sole biodiesel supplier in Sarawak. Maintain BUY and MYR6.60 TP (11.9% upside). SOP’s production should benefit from drier conditions in Sarawak compared to its typically excessive rainfall. We trim our FY14 earnings forecast slightly although SOP’s 9M14 core earnings were in line, making up only 72% of our full-year forecast.

Economic Highlights - Inflation Inched Higher In October, BNM Could Revisit Raising Rates In March 2015
(Published 24 Nov 2014)
The headline inflation rate inched higher to 2.8% YoY in October (Sep: +2.6%). The fuel price hike on 2 Oct exerted some pressure on inflation but was mitigated by the higher base effect when the fuel prices were raised in Sep 2013. This was reflected in a faster increase in the core inflation rate, largely due to a sharp pick-up in transportation cost. In contrast, the prices of food & non-alcoholic beverages inched lower in September.

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: 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