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.

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)