MIB Research Summary - 3 Nov 2014

Tenaga Nasional: Maintain Buy A strong finish indeed  Shariah-compliant

FY14 core net profit of MYR5.4b (a record-high) was in line with ours and consensus expectations. Positive earnings outlook as 1) coal generation trends up, 2) coal prices remain suppressed and 3) tax rate stays low. Raising FY15/16 earnings by 11%/13%, and TP to MYR16.00 (+14%); reiterate BUY. MY Banking: Maintain Neutral Loan growth ticks up in September Industry loan growth ticked up to 9% YoY in Sep 2014 (8.6% YoY in Aug) supported by non-HH loan growth (+6.7% YoY); Positively, interest spreads continue to expand; keeping an eye on liquidity and consumer asset quality. Our 2014 loan growth forecast of 8.7% maintained. NEUTRAL on sector; BUY RHB, AFG, HL Bank, and HLFG Felda Global Ventures: Maintain Hold Bigger downstream plans in China?  Shariah-compliant FGV proposal to gain a 100%-control (presently 50%) of its downstream business in China is positive for the long term. Due to insufficient details, we are unable to assess its financial impact but we believe it is likely to be marginal. Maintain HOLD with unchanged SOP-based TP of MYR3.97. Technical: Autumn correction is over The FBM KLCI rose 36.29 points WoW to close at 1,855.15, as some consistent buying activities led the index up above the 1,850-mark. Volume rose from 1.58b to 2.75b shares. The index traded from 801.27 to 936.63 from Oct 2008 to Apr 2009, but broke above 936.63 (Wave a/B) in Apr 2009. Its Wave b/B low was 836.51. We traced out a Wave C/B (of a 3-3-5 Flat) rebound phase, and the extended Fifth Elliott Wave (EW) of the major Flat v/C/B-leg correction from 801.27 stalled at 1,896.23 (8 Jul 2014 all-time high). Today's trading idea is a Short-Term BUY on Hap Seng Consolidated with target price of MYR4.62, MYR4.78, MYR5.00 and MYR5.85

HLIB Research Summary - 3 Nov 2014

Banking (NEUTRAL  çè)

Sep Stats – Business Segment Strike Back

• Loans growth accelerated to 9% yoy on faster business but partly offset by slower household.
• Leading indicators higher with strong numbers from business.  Approval rate now higher at 49.9%.  Deposits yoy growth also accelerated with ample liquidity.
• Reaffirm view revival in business loans growth to mitigate slowdown in household.  Maintain 2014 projection at 9%.
• ALR higher 4^th consecutive month and qoq.  Results in 3QCY14 to show more stable NIMs. Positive but reiterate that boost from OPR hike temporary.
• Asset quality slightly lower but still near strongest level.  Construction spike, on watch.  Qoq improvement, thus, unlikely to significantly impact earnings in 3QFY14. 
• Capital ratios improved for second consecutive month, will support active capital management.
• Maintain NEUTRAL and top picks (Maybank, RHB Cap and AFG).  CIMB rated Trading Buy. 

TNB (BUY çè)

Improved Outlook in FY15-16

• Reported core profit for 4Q14 at RM1.3bn and FY14 at RM5.4bn, above HLIB’s RM5bn expectation, due to lower than expected operational cost (fuel costs), depreciation and net interest expenses.
• Despite the lower coal price situation, TNB still suffered from cost under-recovery of ~RM600m due to higher utilization of gas and alternative fuels and high LNG price. TNB is suggesting the government to offset the cost with the capacity payment savings from PPA extension.
• TNB guided for higher mix of coal power generation in FY15-16 from the recovery of Tg Bin and Jimah, as well as new commencement of Tg Bin extension and Manjung 4.
• Not overly concern on delay in tariff adjustments, as we expect the low coal price to maintain and improved coal power generation mix to work in TNB’s favour.
• Maintained BUY with higher TP of RM15.00 (from RM13.80), after we revised up our earnings by 9-10% and roll-forward our valuation into FY08/16.

Economics

Highlights of BNM Statistics (Sep 2014)

• Broad money (M3) growth rebounded to 5.2% yoy after hitting a 12½-year low of 4.8% yoy in August. Narrow money (M1) growth fell further to a 5-year low of 6.7% yoy (Aug: +7.7% yoy).
• Despite a mild improvement, subdued monetary expansion reaffirms our view that economic activity had slowed down in 3Q14 after posting a robust growth of 6.3% in 1H14. We maintain our 2014 full year GDP growth estimate at 6.0%.
• Notwithstanding the policy rate pause in September, household loan-deposit growth gap narrowed slightly in the month. Household loan growth inched lower to 10.7% yoy (Aug: +11.0% yoy) while that of household deposits held steady at 6.3% yoy.
• The subdued financial activities in September pointed to moderate domestic economy expansion. Together with cautious outlook in selected major economies, we believe BNM’s current priority is to safeguard growth momentum. We expect BMM to keep OPR unchanged at 3.25% in the upcoming MPC meeting on 6 Nov.

Traders Brief

Some more legs to go but faces stiff resistances at 1860-1870 zones

• On the back of record highs on Wall St last Friday and the spillover effect from BOJ’s surprised stimulus measures, KLCI may witness further rebound in the early part of this week. Nevertheless, profit taking activities are likely to emerge following a sharp 5% rally from recent low of 1766 (FIG2) ahead of the BNM policy meeting on 6 Nov and the start of Nov reporting season, given the grossly overbought slow stochastics. Weekly resistances are near 1860-1870 zones whilst supports fall on 1840-1850 levels.

CIMB Research Summary - 3 Nov 2014

Tenaga Nasional - Positive 4Q14 results
Tenaga's FY8/14 core net profit of RM4.7bn was in line with expectations, at 103% and 101% of our and consensus FY14 estimates, respectively. We expected Tenaga to post positive net profit growth in FY14, given that less LNG was burned in 4Q14 and there was gradual recovery in the IPP coal power plants. We lower FY15-16 EPS by 1.0-1.1% after we updated our FY14 numbers and introduce our FY17 estimates. Our target price is raised to RM13.62, as we roll over to 12.8x FY16 P/E (still at 20% discount to the market P/E). We maintain our Hold call on Tenaga as there is lack of clarity on the fuel cost pass-through (FCPT) mechanism.

SapuraKencana Petroleum - Shine bright like a Diamante
We have learned from management that it is business as usual in post-election Brazil and rig utilisation has improved. Sapura Diamante has been dispatched to work for Petrobras in Brazilian waters. Meanwhile, management has secured contracts for the four rigs that were unemployed in 2Q. We roll over valuations and our target price falls as we now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E), a 30% premium over our target market P/E of 16.3x. We cut our premium from 40% to 30% to reflect the current weak oil price sentiment. We maintain our Add rating, with strong order book momentum and a successful E&P venture as potential re-rating catalysts. SapuraKencana remains our top pick among the O&G big caps.

Banks - Sep 14 tracker – Loan growth “back in business”
Loan growth recovered from 8.6% yoy in Aug 14 to 9% yoy in Sep 14, the first material improvement since Jan 14. We are encouraged by the rebound in business loan growth (from 5.6% yoy in Aug 14 to 6.7% yoy in Sep 14), but not surprised by the weaker consumer loan momentum. Even if loan growth recovers to our projected 9-10% in 2014, it would still be slower than the 10.6% achieved in 2013. Other concerns for banks are margin compression and the upturn in credit costs. All these numbers point to a bleak earnings outlook that underpins our Underweight rating on the sector. Maybank remains our top pick.

MY E.G. Services - Bonus issue is pleasant surprise
MyEG’s announcement on its proposed 1-for-1 bonus issue was a positive surprise to us. The company last proposed a bonus issue six years ago. We maintain our FY15-17 EPS forecasts and target price of RM5.28, based on an unchanged 21x CY16 P/E (on par with its peer average). We maintain our Add recommendation, with the government’s final approval for the CSTM project and further developments on the road safety diagnostic system project as potential re-rating catalysts.

Perisai Petroleum - Down but not out

SBC Corp - 1:2 bonus issue nailed down

Economic Update - Oct loans growth edges up

RHB Research Summary - 3 Nov 2014

Tenaga Nasional (TNB MK, BUY, TP: MYR15.50)

FY14 Core Net Profit Grows 15.8%

Results Review

TNB’s FY14 (Aug) results met our forecast. We raise our FY15 net profit forecast by 13% on lower coal costs. Correspondingly, we raise our TP by 13% to MYR15.50, implying a 16% upside. We maintain our BUY call. We continue to advocate owning TNB as a proxy to the economy and stock market. We also like the “renaissance” in TNB’s involvement in the more lucrative power generation business.

 

Felda Global (FGV MK, NEUTRAL, TP: MYR3.68)

Proposes To Acquire Chinese Refining Facility

Company Update

FGV has proposed to acquire Felda IFFCO South China for MYR172m, a company with 630,000 tonnes of annual refining capacity. While the pricing seems reasonable on an EV/tonne basis, we are not too sure of the profitability of this facility. We make no changes to our earnings forecasts and TP of MYR3.68 (implying a 0.3% upside), until we get more clarity on the potential earnings impact. Maintain NEUTRAL.

 

Banking (NEUTRAL)

A Mixed Bag

Sector Update

System loan growth in September picked up pace to 9% YoY from 8.6% YoY in Aug due to a pickup in business loan disbursements. Business loan applications and approvals also strengthened in September, pointing to stronger business lending activities in 4Q14. However, asset quality deteriorated but impairment allowance data suggest that credit cost could remain fairly benign. Stay NEUTRAL.

 

 

Economic Highlights

Broad Monetary Aggregate And Loan Growth Picked Up In September

The broader money supply, M3, picked up to 5.2% YoY in September (Aug 2014: +4.8%). Loan growth also inched higher to 9.0% YoY in September (Aug 2014: +8.6%). A stronger growth in corporate loans mitigated the weaker growth in household loans during the month. We continue to expect the Overnight Policy Rate (OPR) to be kept at 3.25% for the rest of the year. However, the OPR could still be raised by another 25 bps in 1Q15.

 

MIB Research Summary - 27 Oct 2014

Tenaga Nasional: Maintain Buy Expect a strong finish  Shariah-compliant

We estimate TNB’s 4QFY14 core net profit at about MYR1.5b (+100% YoY, -4% QoQ), 29% of our FY14 forecast. The benefits from higher coal-fired generation (+22% QoQ) would more than offset seasonally higher costs and potentially higher taxes. Reiterate BUY with an unchanged MYR14.00 TP. Technicals: Diminished autumn selling pressures The FBM KLCI rebounded 30.55 points WoW to close at 1,818.66, as some consistent buying activities led the index up above the 1,800-mark. Volume fell from 2.05b to 1.25b shares. Trading idea is a Take Profit call on RSAWIT at MYR0.72 & MYR0.84.

Research Summary: 17 July 2014

Research Summary: 17 July 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
Maybank	Results review	Tenaga	Improving operational trends	Buy	RM14.00
Maybank	Company update	Public Bank	To fully own VID Public Bank	Sell	RM19.20
Maybank	Sector update	O&G, Property	Key takeaways from Corporate Day
Maybank	Eco highlights	Economics	CPI June 2014: Staying above 3%
Maybank	Technical	MMSV		Short-term buy
RHB	Results review	Tenaga	Another decent quarter	Buy	RM13.75
RHB	Results review	Hua Yang	Progress billings continue to drive earnings	Buy	RM2.70
RHB	Company update	SKP Resources	Positive surprises in store	Buy	RM0.75
RHB	Eco highlights	Economics	Inflation inched higher to 3.3% yoy in June, BNM could raise OPR again in 1H2015
CIMB	Results note	Tenaga	Time to fund another buzz	Hold	RM12.56
CIMB	Eco update	Economics	Inflation quickens to 3.3% in June
Kenanga	Company update	Redtone	Interesting tone ahead	Outperform	RM0.81
Kenanga	On radar	SCC	New premix catalyst	Not rated	RM1.68
Kenanga	Results note	Hua Yang	Steady results	Under review	Under review
Kenanga	Eco viewpoint	Economics	CPI: Increased by 3.3% in June
Kenanga	Results note	Zhulian	Still not the time	Market perform	RM3.08
Kenanga	Results note	Tenaga	9M14 results above expectations	Outperform	RM13.77

Research Summary: 14 July 2014

Research Summary: 14 July 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Initiate coverage	Hovid	Patent cliff to drive growth	Buy	RM0.46
RHB	Company update	Tambun Indah	Land deal sealed	Buy	RM3.00
RHB	News flash	Genting Plantation	Enters into agreement to produce specialty chemicals	Buy	RM13.25
CIMB	Flash note	Tenaga	More gas used in 3Q14	Add	RM14.14
Kenanga	Quick Bites	Genting Plantation	Downstream venture	Underperform	RM11.20
Kenanga	Visit Note	Ulicorp	A dividend stock with growth potential	Not rated	RM2.15