CIMB Research Summary - 19 Nov 2014

DiGi.com - Offering fair risk-reward
Among Malaysian telcos, DiGi is the biggest beneficiary of GST when it is rolled out in Apr 2015. But we think that more intense rivalry is likely to shave off part of its service revenue growth in FY15. DiGi’s capex may also stay high as peers are looking to accelerate 4G rollouts. We lower our FY15-16 EBITDA by 2.6-3.8% to factor in slower service revenue growth and lower margins due to more intense competition. At the core net profit level, we cut our forecasts by 3.5-5.2%. Coupled with higher capex in FY14-15, we lower our target price by 7.9% to RM5.80, which is based on the fair valuation of its potential business trust and return of excess cash. We downgrade DiGi from an Add to a Hold. For Malaysian telcos, we prefer Axiata Group.


Hartalega Holdings - Impacted by high operating cost
Hartalega’s 1HFY3/15 core earnings were below our (45.4% of our FY15 forecast) and consensus expectations (44%). Revenue was flat yoy due to lower selling prices, while the drop in net profit was due to higher operating costs. Given the earnings miss, we cut our FY15-17 EPS forecast by 5-11%. However, our target price (pegged at 17.7x, unchanged 10% premium to the target market P/E of 16.3x) goes up as we roll over our valuation to CY16. Maintain Hold. It declared an interim 3 sen DPS, lower than our expectation which we believe was due to the weaker earnings outlook. We prefer Kossan.


Sunway Bhd - Steady margin growth
Sunway's annualised 9M14 core net profit was 3% above our full-year forecast and 6% above consensus. We consider the results to be broadly in line as tax rates should normalise to a higher level in 4Q. Operationally, segmental performance shows steady growth in construction margins while property development benefited from a higher-margin sales mix despite weaker billings. We continue to expect strong order book growth in the medium term, with Sunway potentially winning a sizeable building project. We maintain our EPS forecasts, but our target price (still based on a 20% RNAV discount) increases as we roll it over to end-2015. Positive news on contract wins and potential special dividends from the listing of SunCon support our Add call.

Benalec Holdings - 1Q15 boosted by land sale gains

Dialog Group - Coming up(stream) roses

Lafarge Malaysia Bhd - Stiffer competition in 3Q

Malaysian Resources Corp - Brighter job prospects

Tune Ins Holdings Bhd - Travelling past the headwinds

RHB Research Summary - 19 Nov 2014

Berjaya Food (BFD MK, BUY, TP: MYR4.00)

From Grande To Venti

Initiation

We initiate coverage on Berjaya Food with a BUY recommendation and MYR4.00 TP, implying a 24.6x FY16 (Apr) P/E and offering a 30.7% upside. Its recently-completed acquisition of the remaining 50% stake in BStarbucks could propel its 3-year-earnings CAGR to 47.7%. Starbucks Coffee, Malaysia’s largest coffee chain with 175 outlets YTD, is set to aggressively expand its number of outlets over the next few years.

 

 

Hartalega (HART MK, BUY, TP: MYR7.50)

Consolidation Phase

Results Review

1HFY15 (Mar) earnings came in broadly within expectations. We maintain our BUY recommendation on Hartalega with a lower TP of MYR7.50 (21x CY15 P/E, 10.3% upside). Declining ASPs, heightened operating expenses and intensified competition have offset its higher sales volume. Nonetheless, we remain positive on its outlook in view of new capacity from the NGC and resilient demand.

 

 

Tasco (TASCO MK, BUY, TP: MYR3.90)

Within Expectations

Results Review

We maintain our BUY call on Tasco with an unchanged TP of MYR3.90 (11.3x FY15F P/E, 27.5% upside). 1HFY15 (Mar) results came in within expectations, with both international business solutions (IBS) and domestic business solutions (DBS) divisions contributing positively to the group. Contract logistics unit reported the strongest growth and we believe this could be the main earnings growth driver moving forward.

 

 

 

TSH Resources (TSH MK, NEUTRAL, TP: MYR2.28)

Poor Downstream Drag Earnings

Results Review

TSH Resources’ 9M14 results were below expectations due to continuing losses at its 50%-owned refinery, although losses narrowed due to higher utilisation. Maintain NEUTRAL on fair valuations at current levels but our SOP-derived TP is reduced to MYR2.28 (from MYR2.47) a 1.3% upside. We also reduce our FY14/FY15 earnings forecast by 11%/8% to account for weaker refining performance. 

 

 

 

Suria Capital (SURIA MK, BUY, TP: MYR3.50)

Results Largely In Line

Results Review

Suria Capital’s 9M14 numbers came in largely within expectations and we believe 4Q14 may be better. We keep our BUY recommendation with an unchanged DCF-based MYR3.50 TP, a 35.7% upside. Heightened operating expenses have offset the growth in revenue and the Jesselton Quay project may need more time to realised. However, we understand that it is still in progress. 

 

 

 

MBM Resources (MBM MK, BUY, TP: MYR3.55) (Upgraded)

On The Rebound

Results Review

MBMR’s 9M14 results were broadly in line. Upgrade to BUY with a new MYR3.55 TP (25.9% upside) as we expect recurring net profit to rebound 39.2% in 2015 from the alloy wheel business breaking even in 2015 and associates Perodua and Hino enjoying more favourable JPY exchange rates. The stock’s undemanding valuations suggest that the recovery is not yet priced in by the market.

 

 

 

Apex Healthcare (APEX MK, NEUTRAL, TP: MYR3.75)

Anchored By Stronger Exports

Results Review

Apex’s 9M14 results were slightly below our expectation, as its core net profit of MYR24m (+14% YoY) accounted for about 71% of our FY14 full-year target.  As such, we maintain NEUTRAL with our TP still at MYR3.75 (1.4% upside), pegged to an unchanged target 12x FY15F P/E. We also pare our FY14F revenue and net profit by 2% and 6% respectively but are maintaining our FY15F and FY16F numbers.

 

 

 

Wing Tai Malaysia (WING MK, SELL, TP: MYR1.76)

Double Whammy

Results Review

1QFY15 results were below our expectations. Downgrade to SELL (from Neutral) with a lower SOP-based MYR1.76 TP (from MYR2.10, a 12.9% downside). Its MYR11m core net profit – accounting for around 15% of our full-year target – fell 29% YoY on lower contribution from property development and apparel retailing. We are lowering our FY15 revenue and net profit forecasts by 12% and 19% respectively.

 

 

 

Malaysian Resources Corp (MRC MK, BUY, TP: MYR2.05)

Coming Along Nicely

Results Review

MRCB’s 3Q14 earnings came in above expectations, driven by earlier-than-expected contributions from one of its projects. We maintain our BUY call and RNAV-derived TP of MYR2.05 (37.7% upside). We raise our FY14/FY15 net profit estimates by 50%/8% after revising our revenue assumptions. MRCB’s near-term prospects remain positive, underpinned by total unbilled property sales of MYR2.9bn.

 

 

 

Lafarge Malayan Cement (LMC MK, BUY, TP: MYR11.27)                                                                                        

Stiff Competition May Dampen Short-Term Outlook

Result Review

As Lafarge’s 9M14 profit of MYR206.1m represented only 47.9/52.5% of our/street’s full-year estimates, we downgrade the stock to NEUTRAL and pare our TP to MYR10.00 (1.4% downside) from MYR11.27. We cut our FY14F/FY15F earnings by 29.1%/11.1% respectively, but keep our target P/E at +2SD from its historical trading range or at 21.6x FY15 EPS as it is still the best proxy to government infrastructure spending. 

 

 

 

CIMB (CIMB MK, NR)

Dampened By Higher Loan Impairment Allowances

Results Review

CIMB’s 3Q14 net profit of MYR890m (-16% YoY, -6% QoQ) missed consensus expectations, with the QoQ and YoY drop in net profit mainly due to higher loan impairment allowances (+119% YoY, +62% QoQ) that CIMB Niaga booked in. 9M14 annualised ROE was 11.6% (vs underlying 9M13 ROE of 14.4%) and CIMB said it would not be able to meet its 13.5-14% ROE target for 2014.

 

 

 

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

Results Review

Dialog’s 1QFY15 core profit of MYR49m was deemed in line (but below consensus estimates), as a boost from Malaysian upstream and downstream activities offsets temporary slowdown in some of its international activities. Further phases of PIDT project is on schedule. Maintain BUY and TP MYR2.00 (33% upside), as we like Dialog’s continued growth in both offshore and onshore businesses.

 

 

 

Tune Ins Holdings (TIH MK, BUY,  TP: MYR3.00)

Rejuvenating Its Take-Up Rate

Company Update

The share price correction yesterday was likely due to temporary setbacks in 3Q results and a cancellation of agreement with Al Hai LLC, which management said to be non-material as it is still on the lookout for MENA and Indonesia partnerships. Maintain BUY and its MYR3.00 TP (24x FY15F P/E, 45% upside). We envision long-term value from its associates, potential partnerships and a recovery in travel demand.

 

 

 

OCK Group (OCK MK, BUY, TP : MYR1.59)

Rising Up The Ranks

Company Update

We believe OCK’s transfer to the Main Market (20 Nov) and the 1-for-2 bonus issue (ex-date: 24 Nov) would catalyse a re-rating of the stock. Maintain BUY with a revised TP of MYR1.59 (ex-bonus TP of MYR1.06) (12.8% upside). We lower our FY14 earnings forecast by 28% due to the delay in the USP contract award and recognition of PMT in 4Q14. The stock’s FY14-16 EPS CAGR remains a compelling 32%. 

 

 

 

Tambun Indah (TILB MK, BUY, TP: MYR2.50)

Unbilled Sales Underpin Resilient Earnings

Results Review

Tambun’s 3Q14 results were within expectations. Maintain BUY with a MYR2.50 TP (18.5% upside). Due to a lack of new launches in 3Q, new sales fell to MYR74m, from MYR149m in 2Q. We expect Tambun to end the year with MYR430m in sales (vs MYR500m in FY13). Although the recent land deal was called off, we remain confident of management’s ability and expect some new land parcels to be secured next year. 

 

 

 

Sunway (SWB MK, BUY, TP: MYR3.90)

Attractive Dividend Angle

Results Review

Sunway’s 3Q14 results came in within our expectation but below market consensus. New sales fell slightly to MYR393m from MYR459m in 2Q. The dividend angle for the stock may have been underappreciated by the market. With the listing of SCG, shareholders could potentially receive a cash dividend of 25-30 sen, on top of the normal dividend payout of 10 sen. Maintain BUY with MYR3.90 TP (20.7% upside).

 

RHB Research Summary - 18 Nov 2014

IOI Corporation (IOI MK, NEUTRAL, TP: MYR4.35)

Pulled Down Again By Manufacturing Division

Results Review

IOIC’s 1QFY15 (Jun) results disappointed, due to weaker manufacturing contributions and higher tax rates. We maintain our NEUTRAL recommendation as valuations remain fair at current levels, with no significant share price catalyst in sight, while the impending exclusion from the Shariah Index could result in some overhang. We reduce our SOP-based TP to MYR4.35 (from MYR4.50), implying a 7.5% downside.

 

Tune Ins Holdings (TIH MK, BUY,  TP: MYR3.00)

Lumpy Claims a Temporary Setback

Results Review

9M14 profit of MYR50m, at 63% of our and street estimates, was below expectations due to lumpy claim items and lower earned travel policies from slow international travel growth. Maintain BUY and MYR3.00 TP(24x FY15F EPS, 44.9% upside). We lower our FY14 earnings forecast by 6%. However, we believe these are just temporary setbacks and should not hamper Tune Ins’ swift expansion into a global player.

 

CIMB Research Summary - 18 Nov 2014

IOI Corporation - Boost from higher FFB output
IOI Corp’s 1QFY6/15 core net profit, which excludes net forex translation losses, was broadly in line with our expectation (at 22% of full-year forecast) but fell short of consensus estimates (at only 19%). We expect better earnings in future quarters, driven by higher CPO prices and production. We keep our earnings forecasts and SOP-based target price intact. The stock remains a Reduce as we feel that the market has more than priced in the group's efficient plantation and downstream assets. There are also concerns that it may be removed from the Shariah list during the end-Nov review as it does not meet the conventional debt/total asset ratio of less than 33%.


Tune Ins Holdings Bhd - Flying at lower altitude amidst adverse weather conditions
Tune’s 9MFY14 net profit was below expectations at 64% of our full-year forecast and 65% of consensus. This was because we had under-projected the claims ratio; hence, we raise the ratio from 30% to 34% for FY14. This leads to a drop in our FY14 EPS forecasts and DDM-based target price (COE of 9.2%; LT growth of 5%). However, our FY15-16 numbers are unchanged. Despite the weaker-than-expected 9M results, we are unwavering on our Add recommendation on Tune, as the potential re-rating catalysts are intact, including 1) the swift expansion of its travel insurance business in the region, with the new market in the Middle East, 2) the growth prospects in the non-life insurance market in Thailand and 3) more tie-ups with other airlines.


Muhibbah Engineering - Don't touch the panic button
The award of the regas plant in Pengerang to Samsung should not be viewed as negative for Muhibbah given that it did not bid for it. Also, the risk of delays in oil & gas infra projects in Rapid has been overplayed, in our view. Lower oil prices are negative for upstream players but net positive for downstream contractors like Muhibbah as construction costs are lower. Our EPS forecasts are intact but we cut our target price (still based on a 20% RNAV discount) as we update for Favelle Favco's lower market cap. We view today’s 11% fall in Muhibbah’s share price as a buying opportunity. The stock now trades at an undemanding FY15-16 P/E of 9-10x. Muhibbah remains an Add and our preferred small/mid cap pick, with job wins as a catalyst.

RHB Research Summary - 12 Nov 2014

GD Express Courier (GDX MK, BUY, TP: MYR2.42)

Poised For a New Quantum Leap

Initiating Coverage

We initiate coverage on GDEX with a BUY call and DCF-derived MYR2.42 TP (a 20.4% upside), valuing the stock at an implied 81x FY15F P/E. It has seen 10 years of strong earnings growth, which is expected to remain resilient in the coming years on the capacity expansion of its express delivery service and logistics arm as the drivers. Opportunity in the AEC is a key catalyst to drive GDEX’s earnings higher.

 

 

Tambun Indah (TILB MK, BUY, TP: MYR2.50)

Land Deal Terminated

Company Update

Tambun has terminated the deal to acquire 209.5 acres of land, as certain terms were not met. Although this could disappoint the market, we still like Tambun for its solid management team and >500-acre land at Seberang Perai. Moving forward, management can still embark on other landbanking opportunities. For now, without the new land, we lower our TP to MYR2.50 (14.7% upside). Maintain BUY. 

 

 

Tune Ins Holdings (TIH MK, BUY,  TP: MYR3.00)

Rejuvenating Its Multi-Channel Growth

Results Preview

We expect no major surprises from Tune Ins’ 3Q14 results, as passengers carried by its airline partners are on track to meet our full-year forecast, which had factored in lower travel demand. Reiterate BUY and MYR3.00 TP (24x FY15F P/E, 42% upside). We see a long-term transformation in this growth stock, buoyed by its new leadership, a swift global expansion and sharpening of its multichannel capabilities.

 

Economic Highlights - Industrial Production And Manufacturing Sales Moderated In September, Pointing To More Moderate Real GDP Growth In 3Q (Published on 11 Nov 2014)

Industrial production moderated to 5.4% YoY in September, from 6.5% in August. The reading was slightly lower than the median estimate of a 5.5% gain as a modest increase in export demand dampened manufacturing activities. Along with a slower growth in electricity production, industrial activities experienced a more moderate growth during the month. These were, however, mitigated by a faster increase in the production from the mining sector. Cumulatively, the increase in industrial activities weakened to 4.1% YoY in 3Q (2Q: +5.9%).

 

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: 20 August 2014

Research Summary: 20 August 2014

Research House	Type	Company/Sector	Report Title	Rating/Call	Target
RHB	Company update	Tune Ins	Integrating its associate business in Thailand	Buy	RM3.00
RHB	Sector update	Auto	Non-national marques gain market share	Neutral
RHB	Results preview	AirAsia	Look beyond this 2QFY14 earnings	Buy	RM2.78
RHB	Results review	Matrix	Property sales pick up in 2Q	Buy	RM3.80
RHB	News flash	Bumi Armada	Nine FPSO and counting	Buy	RM4.54
RHB	Results review	Perdana Petroleum	Bright prospects ahead	Buy	RM2.20
RHB	Results review	Tambun Indah	High property demand in Pearl City	Buy	RM3.00
RHB	Results review	TH Plantations	Expect a stronger 2H2014	Neutral	RM2.06
RHB	Results review	MBM Resources	Light at the end of the tunnel?	Neutral	RM2.88
RHB	Results review	AirAsiaX	Going through a tough period	Sell	RM0.68
CIMB	Flash note	Tune Ins	Tuning up the volume in 2H14	Add	RM2.71
CIMB	Results note	Perdana Petroleum	Counting ship	Add	RM2.40
CIMB	Results note	Uchi Technologies	Weaker coffee brew	Hold	RM1.35
CIMB	Results note	AirAsiaX	Losses can’t get any worse but…	Reduce	RM0.72
Maybank	Results review	AirAsiaX	On a wing and a prayer	Sell	RM0.72
Maybank	Results review	Perdana Petroleum	1H14 results in line	Buy	RM2.55
Maybank	Results review	MBM Resources	2Q14: within radar	Buy	RM3.60
Maybank	Results review	TH Plantations	Bogged down by higher cost	Sell	RM1.65
Maybank	Sector	Automotive	Seasonally stronger 2H begins	Overweight
Maybank	Company update	Bumi Armada	Secures LOI for FPSO Madura	Buy	RM4.55
Maybank	Technical	IHH		Short-term buy
Kenanga	Sector update	Automotive	Slowing down	Neutral
Kenanga	Results note	Perdana Petroleum	Stable 2Q14 results	Outperform	RM2.47
Kenanga	Results note	MBM Resources	Within expectations	Underperform	RM2.92
Kenanga	Results note	Matrix	Steady performance	Under review	Under review
Kenanga	Quick bites	Parkson	Divestment of Festival City Mall for RM349m	Underperform	RM2.48
Kenanga	Company update	Maxis	Still transforming	Market perform	RM6.87
HL	Sector	Automotive	Continuous sales momentum in July	Overweight
HL	Results review	Tambun Indah	Sustainbale demand underpins healthy sales	Buy	RM2.60
HL	Results review	Matrix	Results on the rebound	Buy	RM3.74
HL	Results review	Perdana Petroleum	Sustainable growth	Buy	RM2.18
HL	Results review	MBM Resources	In line – expect stronger 2H14	Buy	RM4.00
HL	Newsbreak	Bumi Armada	Madura landed	Buy	RM4.70