MIB Research Summary - 26 Nov 2014

WCT Holdings: Upgrade to Buy Unlocking values; uplift to BUY  Shariah-compliant

Accelerating the REIT-ing of its malls with MYR2b asset value; positive in unlocking the values of its property investments. Negatives on property and construction priced in after the share price fell 17% since Aug 2014. Lowering earnings forecasts, but upgrade the stock to BUY with a shaved TP of MYR2.20 (-2%). UMW Oil & Gas Corporation: Maintain Buy Cautiously optimistic on outlook  Shariah-compliant 70 newbuilds to enter market in 2015; expects softer DCRs. Cost/safety aspects, not DCR, to accelerate scrapping policy. Healthy tenders pipeline (6-to-1 bid-to-JU ratio), committed to grow JU fleet beyond 7 units; not ruling out M&A. Maintain BUY with an unchanged SOP-based MYR3.90 TP. 7-Eleven Malaysia Holdings: Maintain Hold Trimming earnings for one-off 9M14 results included a one-off provision write-back of MYR3.8m. Trimming FY14/15 earnings by 3%/2%. Positively, 7EM has tied up with 2 service providers. Maintain HOLD with lower a TP of MYR1.73 (from MYR1.78). Hong Leong Bank: Maintain Buy Title of report 1QFY15 results within expectations at 25% of our full-year forecast and consensus. As highlighted before, future fund raising cannot be ruled out; we are factoring this into our valuations. Forecasts and BUY maintained, TP raised to MYR16.50 from MYR16.20 on rolling forward valuations (CY15 P/BV of 1.8x). Hong Leong Financial Group: Downgrade to Hold Insurance earnings lowered 1QFY15 earnings lagged due to lower insurance contributions; cut FY15/16 earnings by 10%. RNAV based TP however raised to MYR19.45 from MYR19.10 on rolling forward HL Bank’s valuations. Share price has risen 17% YTD, outperforming peers. Cut to HOLD, prefer HL Bank (TP: MYR16.50) for exposure. BIMB Holdings: Maintain Hold Weaker takaful contributions  Shariah-compliant 3Q14 results within expectations; Takaful earnings weaker QoQ. FY15/16 forecasts trimmed by 4% to factor in lower NIM. HOLD maintained with an unchanged SOP TP of MYR4.40. IJM Corporation: Maintain Buy Orderbook to chalk new high  Shariah-compliant 1HFY3/15 results fall short mainly due to higher tax rates. Construction outstanding orderbook could reach a new high of MYR6.6b while property sales would remain robust. Earnings forecasts are unchanged. Reiterate BUY at an unchanged RNAV-based TP of MYR7.40. Ta Ann Holdings: Maintain Buy Earnings outperformed, TP raised  Shariah-compliant 3Q14 core PATMI beat expectations. FY14-15 EPS raised by 6%/5% on stronger timber earnings outlook but partly offset by weaker plantation earnings. Maintain BUY with a higher TP of MYR5.00 (+5%). Inari Amertron: Maintain Buy Accelerating onto the fast lane  Shariah-compliant 1QFY6/15 net profit within expectations. Inari is Shariah compliant, offering exposure to the growing smart devices market via its partnership with Avago. Reiterate BUY with an unchanged MYR4.20 cum-rights TP (17x CY15 PER), offering a 46% upside. Perdana Petroleum: Maintain Buy Results on track; pursuing growth  Shariah-compliant 9M14 earnings in line; 77% of ours/consensus 12M forecasts. Majority of contracts are long term. OSVs are new (4 years average) and utilisation level is the highest among peers. BUY with an unchanged MYR2.40 TP (12x 2016 PER). Barakah Offshore Petroleum: Maintain Hold Overshot expectations  Shariah-compliant 12MFY14 core net profit made up 84% of ours and consensus’15MFY14 forecasts. Raise 15MFY14 earnings by 16% for the strong 4QFY14 results. Maintain HOLD with an unchanged MYR1.35 TP (10x 2016 PER). TIME dotCom: Maintain Hold Sequentially weaker core showing  Shariah-compliant 9M14 EBITDA and net profit were in line with our expectation at 73% and 71% of our full-year forecasts respectively. Near-term risk-reward remains uncompelling, given the stock’s 48% YTD rally. Maintain HOLD, TP unchanged at MYR5.00. IHH Healthcare: Maintain Hold Seasonal weakness  Shariah-compliant 9M14 core roughly in line, at 69% of our FY14E & 70% of consensus. 3Q seasonally weaker, 4Q the strongest. Ramp-up of hospitals & new beds to spur growth. Lower EPS by 2% for higher tax rate. SOTP TP raised to MYR4.82 from MYR4.81 for marked-to-market stakes. Maintain HOLD given high valuation vs. peer. Singapore GDP 3Q 2014 Stabilising after slowdown 3Q 2014 real GDP growth revised up to +2.8% YoY from +2.4% YoY reported earlier as manufacturing and services expanded to offset weak construction. Adjust our 2014 growth estimate to +3.2% (2014 YTD: +3.3% YoY; 2014 previous: +3.3%). For 2015, we expect growth to moderate slightly to +3.0%. MTI estimates real GDP growth of around +3.0% for 2014 and +2.5-4.0% for 2015. TECHNICAL: Re-testing 1,843 and 1,858 The FBMKLCI gained 4.79 points to 1,838.56 yesterday, while the FBMEMAS and FBM100 also closed higher by 14.65 points and 16.47 points, respectively. We recommend a “Buy on Dips” stance for the index. Trading idea is a Short-Term Buy on TM with upside target areas at MYR7.87 & MYR8.44. Stop loss MYR6.97. NEWS Aviation: PAC lambasts MAHB for ignoring AirAsia's concerns. The Public Accounts Committee (PAC) yesterday slammed Malaysia Airports Holdings (MAHB) for ignoring the needs of stakeholders such as AirAsia when constructing klia2 in Sepang. PAC also called for the Auditor – General (AG) to audit MAHB's performance since it was first established. (Source: The Edge Financial Daily) Sona Petroleum: Gets SC approval, faces task to secure Salamander Energy asset. Sona Petroleum may have received approval from the Securities Commission (SC) but it faces a testing time to secure the asset it is eyeing which is owned by UK-listed Salamander Energy Plc. SC has approved the acquisition of a 40% stake in Salamander Energy's Thai unit Salamander Energy (Bualang Holdings) Ltd for USD282.2m (MYR912m). (Source: The Star) Berjaya Auto: MYR192m BAuto share placement. Berjaya Corp unit Berjaya Group (BGroup) has placed out 60 million ordinary shares of Berjaya Auto (BAuto) for MYR192m. This represented about 7.42% of BAuto’s existing issued and paid-up share capital. Following the completion of the placement, BGroup's shareholdings in BAuto will be reduced to 36.74% from 44.16% previously. (Source: The Star) Malaysia's September 2014 unemployment rate was stable at 2.7% as it dropped -0.4% YoY and -0.7% MoM to 377,200. Unemployment rate has been below 3% since April 2014, indicating a robust job market conditions and virtually a full-employment situation. Employment increased by +1.4% YoY and +1.3% YoY to 13.7m, while total labour force in September 2014 expanded by +0.9% YoY and +1.3% MoM to 14.1 million people, especially those in the 30-34 years age group. As labour force and employment rose and unemployment rate fell, the labour force participation rate (LFPR) increased to 67.9% in September (Aug 2014: 67.1%). (Source: Department of Statistics Malaysia) U.S: Consumer confidence unexpectedly dropped in November as Americans became less upbeat about the economy and labor market. The Conference Board's index fell to 88.7 this month from an October reading of 94.1 that was the strongest since October 2007, the New York-based private research group said. (Source: Bloomberg) U.S: Economy expands more than previously estimated reflecting bigger gains in consumer spending and business investment and capping the strongest six months of growth in a decade. Gross domestic product, the value of all goods and services produced, rose at a 3.9% annualized rate, up from an initial estimate of 3.5%, Commerce Department figures showed. After the 4.6% increase in the second quarter, it marked the biggest back-to-back advance since late 2003. (Source: Bloomberg) Germany: GDP gained by 0.1% QoQ in 3Q 2014, the Federal Statistics Office said. Germany relied on domestic consumers for economic growth last quarter as investment fell, putting the strength of the nation's recovery at risk. Private consumption climbed 0.7% QoQ, while capital investment sank 0.9% QoQ. (Source: Bloomberg) Vietnam: Expands foreign property ownership to boost economy. Vietnamese lawmakers approved a law allowing broad foreign ownership of property, as the government seeks to boost an ailing real-estate market and accelerate economic growth. Foreigners with a valid visa as well as foreign companies and international organizations operating in Vietnam now will be permitted to purchase houses and apartments. Current laws restrict ownership to foreigners married to Vietnamese and those foreigners deemed to make significant contributions to the nation's development. (Source: Bloomberg)

RHB Research Summary - 26 Nov 2014

7-Eleven Malaysia (SEM MK, BUY, TP: MYR2.00)

Growth Intact

Company Update

We attended 7-Eleven’s 3Q14 briefing yesterday and received some updates on the drivers behind its recent quarterly performance as well as progress on its business expansion plan. Maintain BUY and a MYR2.00 TP, derived from a 28x FY15F P/E (25% upside). It remains confident over achieving 600 net store openings by 2016 and expanding its margin via an improved product mix.

 

 

UOA Development (UOAD MK, BUY, TP: MYR2.40)

New Sales Surged In 3Q

Results Review

3Q14 results came in within expectations. Maintain BUY with a revised MYR2.40 TP (from MYR2.45, 11.1% upside). New sales jumped to MYR672m in 3Q (2Q: MYR362m), bringing the 9M total to MYR1.37bn. A few new projects contributed to the sales while others, which did not do well previously, also showed improvements. Thus, we think it is possible for UOAD to end the year with about MYR1.7bn in sales.

 

 

IJM Land (IJMLD MK, BUY, FV: MYR3.97)

Hit By Unrealised Forex Loss

Results Review

IJMLD’s 2QFY15 results missed expectations. Maintain BUY with a revised TP of MYR3.97 (19.6% upside). New sales achieved MYR450m, same as last quarter’s, and projects in the Klang Valley region contributed 40-50% of 1H’s total sales of MYR900m. We expect sales to grow steadily in view of the healthy pipeline of launches. However, given the weaker 1H results, we cut our FY15-16 earnings by 10-11%.

 

 

IJM Plantations (IJMP MK, NEUTRAL , FV: MYR3.30)

Contributions From Indonesia The Saviour

Results Review

IJM Plantation’s 1HFY15 results were within expectations, registering core net profit growth of 64% YoY. We maintain our NEUTRAL recommendation, with an unchanged TP of MYR3.30. Although we continue to like the growth prospects of its Indonesian FFB, this was offset by its significant leverage to CPO price movements, which negatively affected valuations.

 

 

Affin (AHB MK, NEUTRAL, FV: MYR3.30)

Elevated Costs Dampens 3Q14 Results

Results review

Affin’s 3Q14 results were below our and consensus estimates due to higher-than-expected overheads and credit cost. That said, 3Q14 net profit surged 27% QoQ, underpinned by stronger operating income (NIM expansion, higher non-interest income) and lower credit cost. Overheads, however, stayed elevated, partly due to integration costs. Maintain Neutral with revised MYR3.30 TP (8% upside).

 

 

Ta Ann Holdings (TAH MK, BUY, FV: MYR4.40) (upgrade from Neutral)

Stronger Earnings, Surprisingly Large Dividend

Results Review

Ta Ann’s 9MFY14 results were above expectations, due to stronger timber earnings. Given the continued strength in log dynamics, smaller losses at its plywood division and stabilised CPO prices, we upgrade our recommendation on Ta Ann to BUY (from Neutral), with a higher TP of MYR4.40 (a 15.8% upside). The company declared a surprisingly large DPS of 10 sen, translating into a net payout of 73% and net yield of 5.3%.

 

 

Hong Leong Bank (HLBK MK, NEUTRAL, TP: MYR15.90)

Writebacks Helped Sustain Profitability

Results review

HL Bank’s 1QFY15 (Jun) results were in line. Maintain NEUTRAL with a revised TP of MYR15.90 (9.7% upside), mainly after rolling forward valuations. A mild NIM expansion QoQ coupled with writebacks in depreciation and loan impairment allowances boosted bottomline, but non-interest income and loan growth were both soft. Contribution from BoC also saw moderating growth. We keep our earnings forecasts.

 

 

BIMB Holdings  (BIMB MK, NEUTRAL, TP: MYR4.70)

No Surprise To Results And Dividends

Results Review

9M14’s MYR377m core profit is in line. Maintain NEUTRAL and SOP-based MYR4.70 TP (10.1% upside). BIMB’s results were supported by strong 21% financing growth and stable NIM of 2.7%. A 14.7 sen interim dividend was declared. Management’s key strategies remain unchanged and, while the near-term environment is challenging, long-term prospects remain good given its leading position in Islamic banking.

 

 

Daya Materials (DAYA MK, NEUTRAL,  TP: MYR0.23)

More To Be Done For Consistent Earnings Delivery

Results Review

Daya’s 9M14 MYR16m profit was within our/above consensus numbers, buoyed by North Sea subsea contracts and improved progress from technical services. Maintain NEUTRAL, with our TP lowered to MYR0.23 (8% upside) from MYR0.31. While long-term prospects are supported by subsea contracts, the share price upside may only be apparent once a consistent earnings delivery can offset dilution risks from fundraising.

 

 

Inari Amertron (INRI MK, BUY, TP: MYR3.82)

Decent Start To FY15

1QFY15 Results Review

Inari Amertron’s (Inari) 1QFY15 (Jun) core earnings soared 61.9% YoY to MYR30.8m, in line with expectations. We maintain our BUY call and keep our TP unchanged at MYR3.82, (or MYR3.10 fully-diluted ex-rights), based on a 17.5x CY15 P/E. This implies a 32.6% upside. Management declared its first interim DPS of 1.8 sen and a special DPS of 0.4 sen, translating into a payout ratio of 36.7% for the quarter.

 

 

Notion (NVB MK, NEUTRAL, TP: MYR0.45)

Disappointing End To FY14

FY14 Results Review

Notion’s FY14 (Sep) core loss of MYR19.6m was greater than our/consensus expectations on continued weakness in its overall utilisation rate due to subpar camera component sales. Given the lack of earnings visibility in the near term, we maintain our NEUTRAL call as we trim our TP to MYR0.45 (based on an average of 8x FY15 P/E and 0.6x FY15 P/NTA), implying an 8.2% downside.

 

 

Time dotCom (TDC MK, NEUTRAL, TP: MYR5.20)

Perfect Timing

Results Review

Time’s 9M14 results were broadly in line as 9M revenue grew strongly on the back of higher global bandwidth sales and better contribution from its data and data centre business. Maintain NEUTRAL and a DCF-based TP of MYR5.20 (1% downside). Time announced its land acquisition for a new data centre last week, in line with its future expansion plans. We keep our earnings forecasts unchanged for now.

 

 

Freight Management (FMH MK, NEUTRAL, TP: MYR1.64)

Invest And Restructure For Stronger Growth

Results Review

1QFY15 (Jun) earnings came in weaker than expected due to restructuring of its air freight division, cessation of a major 3PL contract as well as subpar performance from the tug & barge wing. We remain NEUTRAL on Freight Management with a lower TP of MYR1.64 (11.3x FY15F P/E, 6.3% downside).  We are still positive on its growth potential after the investment and restructuring are completed.

 

 

Favelle Favco (FFB MK, BUY, TP: MYR4.03)

Big Results From Heavy Lifting

Results Review

Favelle Favco’s 9MFY14 core profit jumped 15.6% YoY to MYR70.0m on the back of increased crane sales, smashing our expectations as it makes up 97% of our estimates. Maintain BUY with a higher TP of MYR4.03 (from MYR3.62), based on 10x FY15 P/E, implying a 27% upside with dividend yields of 5.0-5.3% going forward. In light of the strong earnings, we revise our FY14 and FY15 earnings upwards by 17% and 11% respectively.

 

 

Perdana Petroleum (PETR MK, BUY, TP: MYR1.62)

Sailing Along Smoothly

Results Review

Perdana Petroleum’s 9MFY14 core profit of MYR70.6m came in line with our and consensus estimates at 78%/74% respectively, driven by higher utilisation as well as maiden contributions from Perdana Resolute. We maintain our BUY recommendation with a TP of MYR1.62. We marginally adjust our earnings downwards by 1%/8% for FY14/FY15 to account for the sale of Perdana Superior.

 

 

Hovid (HOV MK, NEUTRAL, TP:MYR0.39)

An Upbeat Start To FY15

Results Review

Hovid’s 1QFY15 (Jun) earnings came in within our and street’s estimates at 26.4% of our FY forecast, attributable to higher sales volume and favourable foreign exchange rates. We maintain NEUTRAL with a MYR0.39 TP, a 2.6% upside. We expect Hovid’s earnings to gradually recover throughout the year, assisted by the new capacity injection next year. No changes were made to our earnings forecasts.

 

 

IHH Healthcare (IHH MK, NEUTRAL, TP:MYR4.63)

Growing Steadily

Results Review

IHH’s 9MFY14 earnings came in within our but above consensus estimates at 75.7% and 78.3% respectively. Maintain NEUTRAL and SOP-based TP of MYR4.61. This was mainly attributed to: i) an increase in complex cases and ii) an increase in inpatient admissions. Moving forward, we expect better earnings in 4Q as it is a traditionally stronger quarter for IHH. We make no changes to our forecasts.

 

 

KPJ Healthcare (KPJ MK, NEUTRAL, TP: MYR3.67)

Sailing Smoothly

Results Review

KPJ’s 9MFY14 earnings were within our and consensus expectations, at 72.0%/74.4% respectively. Maintain NEUTRAL and TP of MYR3.67 (6.0% downside) as KPJ is on track to meet our full year earnings forecasts. Revenue and core profit grew by 13.2% and 33.4% YoY respectively on the back of stronger contributions from Malaysian hospitals as well as its aged care facility in Australia.

 

 

WCT (WCTHG MK, NEUTRAL, TP: MYR2.02)

FY14 Property Sales Target Halved

Company Update

We maintain our NEUTRAL call, earnings forecasts and TP of MYR2.02 implying a 6% upside. During an analyst briefing yesterday, WCT reiterated its guidance for MYR2.0bn construction job wins in FY14 but  cut its property sales target by half. WCT is not an ideal proxy to the construction sector as it has yet to secure any Klang Valley MRT job. Its property business is facing headwinds amid various cooling measures.

 

 

Protasco (PRTA MK, BUY, TP: MYR2.43)

9M14 Core Net Profit Rises 29% YoY

Results Review

Protasco’s 9M14 results met our forecast. We maintain our BUY call, earnings forecasts and TP of MYR2.43 (implying a 47% upside). The company offers investors the best of both worlds – high earnings growth (driven by public housing contracts and a property development project De Centrum) and a high dividend yield of 6% (underpinned by strong cash flow from road maintenance concessions).

 

 

IJM Corp (IJM MK, BUY, TP: MYR7.50)

1HFY15 Core Profit Declines 7% YoY

Results Review

IJM Corp’s 1HFY15 (Mar) results disappointed. We cut our FY15/FY16 earnings forecasts by 20%/19% and TP by 5% to MYR7.50 (implying a 12% upside), but maintain our BUY call. Its construction division is poised for an “earnings renaissance” backed by a record order backlog. Prime locations of its new launches should buoy sales despite headwinds in the property sector.

Kenanga - 26 Nov 2014

IDEAS OF THE DAY

l  Results Note: BARAKAH, BIMB, DLADY, HLBANK, IHH, IJM, IJMLAND, IJMPLNT, KPJ, NOTION, PERDANA, TAANN, UOADEV, UZMA

l  On Our Technical Watch: ASTRO, KAREX

NEWS HIGHLIGHTS

l  Sona gets SC approval, faces task to secure Salamander Energy asset

l  Contraves bags GBP3.9m job from Boustead Naval

l  KKB Engineering's unit bags RM43.9m contract

l  EEMSB wins RM79.0m MRT Corp job

l  RM192.0m BAuto share placement

FOREIGN NEWS HIGHLIGHTS

l  Apple tops USD700.0b valuation, fueled by new products

l  Ship broker Clarkson looks to acquire Norway's Platou for USD440.0m

l  United Technologies’ CEO leaves with USD172.0m package

l  Carlyle to buy tyre firm stake in maiden South Africa deal

 

ECONOMIC NEWS HIGHLIGHTS (MACRO BITS) 

Global

l  OECD Sees Gradual World Recovery, Urges ECB To Do More

 

Malaysia

l  IMF: Growth Prospects Still Strong

l  Malaysia’s September Unemployment Rate Stays At 2.7pc

 

Asia

l  China Cuts Key Short-Term Money Rate As Beijing Pushes Down Cash Costs

 

USA    

l  Consumer Confidence In U.S. Unexpectedly Dropped In November

l  Home Prices In 20 U.S. Cities Increase At A Slower Pace

l  US Economy Grows Faster Than First Forecast

 

Europe

l  UK Service Sector Grows Steadily In Three Months To November

l  Jump In Private Consumption Helps Germany Avoid Recession In Third Quarter

l  Italy Retail Sales Post Fifth Consecutive Monthly Fall In September

 

Currencies

l  Dollar Weakens Against Rivals After Consumer-Confidence Data

 

Commodities

l  Oil Down 2 Pct As Pre-Opec Talks Don't Lead To Output Cut

l  Gold Edges Higher As U.S. Dollar Eases; Swiss Vote Eyed

CIMB Research Summary - 26 Nov 2014

UOA Development - Missed launch and sales targets
UOA Dev's 9MFY14 core net profit was broadly in line with expectations as it made up 69% of our full-year forecast and 75% of consensus estimates. 9M new sales amounted to RM1.37bn, of which nearly half came from 3Q. However, UOA Dev is unlikely to match 2013's record sales of around RM2bn due to launch delays. This is a disappointment. We cut our FY15-16 EPS forecasts by 5-10% and downgrade the stock from Add to Hold, after widening the target basis from 20% discount to RNAV to 30% as we factor in the missed launch and sales targets. The relatively high dividend yield of 5-6% remains the key reason to hold on to the stock. For exposure to the property sector, investors should switch to Mah Sing Group.

Hovid Bhd - Decent start to FY15
Hovid’s 1QFY6/15 core net profit was broadly in line, making up 27% of our and consensus full-year forecasts. Its sales and profit margin improved marginally due to higher selling prices and a favourable foreign exchange rate. As expected, no dividend was declared. We trim our FY15-17 EPS by 1-2% after updating our financial model with the latest numbers from its annual report. We keep our SOP-based target price at RM0.41, but upgrade it to Hold from Reduce as its share price has corrected by 18% since we downgraded it to Reduce in Aug 14. We prefer Pharmaniaga for its higher upside.

7-Eleven Malaysia Holdings Berhad - More to come

BIMB Holdings - Signs of weaknesses in underlying trend

Eksons Corporation - Backed by cash

Hong Leong Bank - Non-interest income dampener

IJM Corp Bhd - Construction piles up numbers

KPJ Healthcare - Hale and hearty in 3Q

Perdana Petroleum - Making waves with a record quarter and a surprise dividend

Ta Ann - Lifted by strong log earnings
UMW Oil & Gas - Middle East fuels future growth
Uzma - Fuelled by new acquisitions
WCT Holdings - Re-strategising for 2015