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| | | | | | | | | | | | | | | | Share Price: | MYR6.33 | Target Price: | MYR6.20 | Recommendation: | Hold | | |
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| | | Awaiting material acquisition | | While the operating environment remains sound, Top Glove's sequential 1QFY18E bottomline could be weaker QoQ due to a higher tax rate (4QFY17: 1%). Separately, Top Glove is close to securing a sizable acquisition target but there is risk of earnings dilution as the valuation may not be cheap. Maintain our earnings forecasts, HOLD call and TP of MYR6.20 (20x 2018 PER; +1SD to mean). | | |
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| | FYE Aug (MYR m) | FY16A | FY17A | FY18E | FY19E | Revenue | 2,888.5 | 3,409.2 | 3,746.6 | 4,036.4 | EBITDA | 523.3 | 485.0 | 567.1 | 614.1 | Core net profit | 361.1 | 332.7 | 370.4 | 403.9 | Core EPS (sen) | 29.1 | 26.8 | 29.9 | 32.6 | Core EPS growth (%) | 29.0 | (7.9) | 11.3 | 9.0 | Net DPS (sen) | 14.5 | 14.5 | 14.9 | 16.3 | Core P/E (x) | 21.7 | 23.6 | 21.2 | 19.4 | P/BV (x) | 4.3 | 3.9 | 3.6 | 3.3 | Net dividend yield (%) | 2.3 | 2.3 | 2.4 | 2.6 | ROAE (%) | 21.1 | 17.4 | 17.6 | 17.6 | ROAA (%) | 13.5 | 11.9 | 12.1 | 12.3 | EV/EBITDA (x) | 9.5 | 14.2 | 13.7 | 12.5 | Net debt/equity (%) | net cash | net cash | net cash | net cash |
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| | | | | | | | | | | | | | Share Price: | MYR4.89 | Target Price: | MYR4.80 | Recommendation: | Hold | | |
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| | | Merely stable | | 9M17 results were below our expectation, with the prepaid segment merely stabilising instead of growing sequentially. Maintain HOLD with a lower MYR4.80 TP (from MYR4.90 previously) as we lower earnings forecasts slightly to reflect weaker prepaid contribution. Risk-reward remains relatively balanced at present. | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Revenue | 6,914.0 | 6,597.1 | 6,385.0 | 6,616.4 | EBITDA | 2,982.3 | 2,954.9 | 2,873.2 | 2,977.4 | Core net profit | 1,722.6 | 1,632.7 | 1,512.8 | 1,558.5 | Core EPS (sen) | 22.2 | 21.0 | 19.5 | 20.0 | Core EPS growth (%) | (15.2) | (5.2) | (7.3) | 3.0 | Net DPS (sen) | 22.0 | 20.9 | 19.5 | 20.0 | Core P/E (x) | 22.1 | 23.3 | 25.1 | 24.4 | P/BV (x) | 73.2 | 73.2 | 73.2 | 73.2 | Net dividend yield (%) | 4.5 | 4.3 | 4.0 | 4.1 | ROAE (%) | 285.8 | 314.4 | 291.3 | 300.1 | ROAA (%) | 38.4 | 32.1 | 27.7 | 28.4 | EV/EBITDA (x) | 14.4 | 13.4 | 14.0 | 13.5 | Net debt/equity (%) | 204.2 | 366.9 | 406.3 | 409.0 |
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| | | | | SECTOR RESEARCH | | | | | | | Long term trend analysis
by Chee Ting Ong |
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| | | | | | The industry's productivity has stagnated over the past 42 years but this was made up by new area expansion, boosting supply. Cost has been on the rise, but so has selling prices. Meanwhile, operating margins (using IOI Corp as case study) has ranged between 35%-67% over the past 23 years. We forecast the region's production growth rate to slow from 2020 due to the lack of new expansion in recent years, which in turn should be positive for CPO prices in the long run. NEUTRAL. | |
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| | | | | | | | Surprises on the downside
by Ivan Yap |
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| | | | | | Sep 2017 TIV hit a year low of 41.0k units (-21% MoM) and took 9M17 TIV to only 425.7k units (+2% YoY), below our 2017 forecast of 610k units (+5% YoY). We lower our 2017 TIV expectation by 2% to 590k and introduce our 2018 TIV forecast of 610k units, based on our in-house 2018 real GDP growth forecast of +5.1%. Still POSITIVE in anticipation of a gradual earnings recovery from improving sector fundamentals i.e. TIV recovery, rising auto loans approval, stronger MYR. BUY BAuto, MBM & TCM. | |
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| | | | MACRO RESEARCH | | | | | | | Jobless rate drifting in "now-normal" range
by Suhaimi Ilias |
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| | | | | | Unemployment rate edged down to 3.4% in Aug 2017 (Jul 2017: 3.5%), but in essence have been drifting in the 3.4%-3.5% range since Dec 2015. Year-to-date average is 3.4%, in line with our forecast of 3.4% full-year average (2016: 3.5%). | |
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| | | | | | | | BM TRAD/SVC INDEX – A Base is Formed
by Nik Ihsan Raja Abdullah |
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| | | | | | Last minute selldown in blue chip stocks like KLK, Telekom and Maxis dragged the FBMKLCI 5.38pts lower at 1,748.99 on Tuesday. Market breadth was negative, with losers outpacing advancers by 468 to 395. A total of 2.9b shares worth MYR2.3b changed hands. Despite the negative tone, market may stage a rebound today after falling for two consecutive days, led by gains in overnight US markets. | |
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| | NEWS | | | Outside Malaysia:
U.S: Fed sees economy advancing amid `widespread labor tightness'. The U.S. economy picked up steam with only modest inflation from September through early October, as some companies expected a tight labor market would exacerbate hurricane rebuilding efforts, a Federal Reserve survey showed. The central bank's Beige Book economic report, based on anecdotal information collected by the 12 regional Fed banks through Oct. 6, said economic activity increased even amid "major disruptions" across the South from hurricanes Harvey and Irma. Still, price pressures were described as "modest." "Labor markets were widely described as tight" and worker shortages in certain sectors "were also restraining business growth," the report showed. (Source: Bloomberg)
E.U: ECB bond program survives another challenge at German court. Germany's top court rejected requests to stop the Bundesbank from taking part in the European Central Bank's quantitative-easing program while lawsuits challenging the bond-buying plan are pending. The Federal Constitutional Court said granting the request would give plaintiffs what they want before the case has been fully resolved. While the judges in Karlsruhe, Germany, could eventually rule against the Bundesbank's participation in QE, a final decision is likely months, or even years, off. "Because of the high volume of purchases by the Bundesbank, disrupting bond purchases would endanger or even thwart the program's goal to raise inflation to about 2%," the court said. "Granting the interim bid now would be more than just conserving the status quo, it would be identical with granting the lawsuit." The decision is part of litigation pending over the ECB's policy in Germany, where the EUR2.3tr (USD2.7t) bond-buying program faces widespread opposition. In July, the German court put the program in doubt, asking the Luxembourg- based European Court of Justice for an interim ruling on whether it's legal. The judges argued that QE violates the ECB's mandate under the treaties of the European Union and the ECJ should rule against it. (Source: Bloomberg)
U.K: Inflation climbed to its highest rate in more than five years in September, boosted by the cost of food and transport. Consumer prices rose 3% from a year earlier, the fastest pace since April 2012 and up from 2.9% in August, the Office for National Statistics said. The increase intensifies the squeeze on British households and may embolden Bank of England policy makers to raise interest rates for the first time in over a decade next month. (Source: Bloomberg)
U.K: Jobless rate held at a 42-year low in the three months through August as Britain enjoyed near-record employment, according to figures published. The latest snapshot of the labor market from the Office for National Statistics may help to explain why the Bank of England appears to be edging toward its first interest-rate increase for a decade. Wage growth was little changed at just over 2% well behind the rate of inflation -- but officials are signalling they are no longer prepared to wait for a pickup before tightening policy. The jobless rate stood at 4.3% in the latest period, staying below the BOE's 4.5% "equilibrium" rate below which inflationary pressures start to build. The number of people looking for work fell 52,000 to 1.44 million, the lowest since 2005. (Source: Bloomberg)
Japan: Exports grew by double digits for a third straight month in September, as a trade recovery underway this year showed no signs of letting up. Exports rose 14.1% from a year earlier, while Imports increased 12%. The trade surplus was JPY670.2b (USD5.9b). Recovering global demand has driven growth in Japan's exports, supporting the nation's domestic economy. But Japan's trade surplus with the U.S. continues to irritate the Trump administration. In a report on foreign-exchange policies released on Oct. 17, the U.S. Treasury kept Japan on its monitoring list due in part to its goods surplus with the U.S.,which Treasury said was USD69b over the four quarters through June. (Source: Bloomberg) | |
| | | | | Other News:
Seacera: Wins MYR216m contract from Rubber Research Institute of Malaya. The group has won a contract worth MYR216m to build the Rubber Research Institute of Malaya's centre of excellence in Selangor. Seacera said it accepted the letter of award from Koridor Padu S/B pertaining to the sub-contract works for the construction of the centre, which will be located in Sungai Buloh. The project is expected to be completed in 24 months i.e. by October 2019. (Source: The Edge Financial Daily)
YFG: Awarded MYR200m construction job in Taiping. Its wholly owned subsidiary YFG Engineering S/B has bagged a MYR200m contract for the construction of apartments in Taiping, Perak. The project involves the building, infrastructure and landscaping works of the proposed development.It is expected to commence on a date to be notified later and to be completed within 36 months from the commencement date. (Source: The Sun Daily)
Heitech Padu: Bags MYR75.2m contracts for three solar power plants. The group has secured three contracts to establish high voltage interconnection facilities for three solar power plants for a sum of MYR75.16m. The group said its subsidiary Duta Technic S/B received the letters of award from Scatec Solar Solutions Malaysia S/B — a unit of Scatec Solar ASA Norway — for the projects, which are located in Kedah, Melaka, and Terengganu. (Source: The Edge Financial Daily)
T7 Global: To sell Birmingham office block for GBP5.75m.T7 Global , formerly Tanjung Offshore, is selling its entire equity stake in 7 New Market Street Holdings Ltd (7NMSH), which owns a 10-storey office block with 18 car park spaces in Birmingham, UK, for GBP5.75m (MYR32.24m). According to T7, the disposal is expected to net it a gain of GBP1.73m (MYR9.69m).The property, which is currently vacant, is located on 0.19 acres of freehold land at the corner of New Market Street and Great Charles Street Queensway, which is at the edge of the Birmingham Central Business District. (Source: The Edge Financial Daily | |
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