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EU Concerns Over U.S. Embrace of Crypto Assets and Its Potential Impact on Europe's Financial Stability

Eurozone finance ministers  expressed concerns that the  U.S. government’s embrace of cryptocurrencies  could pose risks to  Europe's monetary sovereignty  and  financial stability . Their worries come after  President Trump  signed an executive order to create a  strategic reserve of cryptocurrencies  using tokens already owned by the U.S. government, signaling a shift in policy from the previous administration. Key Takeaways: Policy Shift in the U.S. : The U.S. administration’s new stance on  cryptocurrencies , especially  dollar-denominated stablecoins , has sparked concerns in Europe. Trump’s move to embrace cryptocurrencies as part of the U.S. financial system contrasts with past U.S. policies, raising alarms about the impact on European financial stability. Impact on Europe’s Monetary Sovereignty :  Paschal Donohoe , Chairman of the Eurogroup, highlighted that such developments in the U.S. could directly affect ...

Market Daily Report: KLCI falls with Petronas shares ahead of OPEC decision

KUALA LUMPUR (Nov 30): The FBM KLCI declined 7.81 points or 0.48% as late selling of Petronas Dagangan Bhd and Petronas Gas Bhd shares led to a sudden drop in the KLCI. The Petronas-linked shares fell as the Organization of Petroleum Exporting Countries (OPEC) deliberate over a potential output cut. At 5pm, the KLCI closed at 1,619.12 points. Petronas Dagangan shares fell 52 sen to RM23 while Petronas Gas dropped 38 sen to RM20.98. KLCI-linked Petronas Dagangan and Petronas Gas were the third and fourth largest decliners respectively across Bursa Malaysia. JF Apex Securities Bhd senior analyst Lee Cherng Wee said: "The decision by OPEC could impact oil prices, which could hopefully support the market, but the KLCI doesn't seem to follow oil price trends closely anymore as compared to before." Bursa Malaysia saw 1.88 billion shares worth RM3.23 billion exchanged. There were 526 decliners and 276 gainers. Reuters reported that OPEC began on Wedne...

Brokers Report: Kimlun Corporation - Strong showing continues

Maintain BUY with higher target price (TP) of RM2.66 Results Kimlun reported 3QFY16 results with revenue coming in at RM224.2m (-9% QoQ, -7% YoY) and earnings of RM16.5m (-32% QoQ, -16% YoY). Cumulative 9M earnings totalled RM57.7m, increasing +17% YoY. Deviation 9M earnings made up 84% of our full year forecast (77% of consensus) which is above expectations. The stronger than expected results was attributed to the manufacturing division which enjoyed superior gross margins of 32% for the 9M period vs 24.8% last year. This was due to (i) stronger SGD against MYR and (ii) higher proportion of MRT deliveries last year which generally commands a lower margin. Dividends None declared. Highlights Orderbook remains healthy. Kimlun’s orderbook currently stands at RM2.1bn comprising RM1.8bn for construction and RM280m for manufacturing. Overall, this translates to a healthy cover ratio of 2x on FY15 revenue. Bags MRT2 TLS contract. Kimlun announced t...

Brokers Report: Muhibbah Engineering (M) - 9M16 Below Expectations

Retain outperform with lower target price (TP) of RM2.48 9M16 CNP of RM62.1m was below expectations, accounting for 68%/59% of our/streets? full-year estimates, respectively. The negative deviation was due to lower-than- expected operating margin stemming from the provisioning on its crane division coupled with a higher- than-expected contribution to its non-controlling interest. No dividend declared as expected. FY16-17E CNP was lowered by 7%-6%. No changes in call OUTPERFORM but lowered TP to RM2.48 (previously, RM2.53). Below expectations.  9M16 CNP of RM62.1m came in below expectations, making up only 68% and 59% of our and streets? full- year estimates, respectively. We believe the negative deviation was due to lower-than-expected operating margins mainly driven by the provisioning incurred on its crane division coupled with a higher-than- expected contribution to its non-controlling interest. No dividend was declared, as expected. Result highlights. YoY-Y...

Brokers Report: Dutch Lady - Earnings hit by rising costs

Maintain HOLD with new target price (TP) of RM56.20 Dutch Lady’s 9M16 earnings of RM111.3m came in below expectation, making up only 68% of our full year forecast. Earnings fell 3.9% YTD mainly due to higher cost of sales and continued investments in support of the brand. Uptrend in milk prices putting pressure on company bottom line. We revised our FY16 and FY17 earnings forecast downwards to RM150.4m and RM163.7m respectively. Hold call retained with new target price of RM56.20. YTD earnings drop. Dutch Lady recorded a 9M16 revenue growth of 6.2% to RM776.1m due mainly to launch of the newly improved formula for Friso powdered milk which is specially targeted for children and introduction of Ready to Drink (RTD) UHT 125ml milk with Disney Marvel and Frozen character packaging. However, earnings dropped 3.9% YTD to RM111.3m from RM115.8m driven by i) higher costs of sales, and ii) greater advertising and promotion expenses in support of the brand as well as ...

Brokers Report: DRB-Hicom - Improved QoQ Volume in Proton

Upgrade outperform with an unchanged target price (TP) of RM1.31 DRB-Hicom (DRB) reported a net loss of RM309.6m in 2QFY17 (2QFY16: net profit of RM3.9m). Cumulatively, its 1HFY17 net loss was RM478.9m. Excluding one-off loss on re-measurement of previously held equity interest in Pos Malaysia of RM130.2m as well as forex loss on borrowings and payables of RM98.3m, the core net loss for 1HFY17 was RM250.4m. It was below our and market expectations, making up 57% and more than 100% of full-year loss estimates. Its revenue for 2QFY17 increased by 5.7% QoQ to RM2.6bn, on the back of higher sales volume for Proton (+5.1%). Given a sharp fall of 27% in DRB’s share price since October, our unchanged TP of  RM1.31  suggests a potential upside of 34%. We see the completion of its foreign strategic partner exercise as near term catalyst. Hence, we upgrade our call on DRB to  Outperform . Automotive division.  DRB’s automotive division recorded 2Q17 pre-tax ...

Brokers Report: Wah Seong - Better Year Ahead

Retain outperform with target price (TP) of RM1.00 Wah Seong’s 9MFY16 performance continues to be affected by the lack of projects in the O&G segment fueled by the deferment of capital expenditure activities by oil majors. Revenue subsequently recorded RM946.4m (-32.0% YoY), and with a core loss of RM30.0m (->100.0% YoY). This was further hampered by the softer market in Malaysia and thus saw a reduction in renewable energy (RE) activities. Wah Seong’s results missed both ours and consensus’ estimates by >100.0%. On a positive note, the Group’s orderbook was boosted to RM3.6bn (2QFY16 - RM795m) to include the Nord Stream 2 award which affirms Wah Seong’s recovery going forward as the prevailing weaker performance is due to the depleting orderbook, and not from its execution capabilities. Our Outperform view on Wah Seong, is retained but with an adjusted TP of RM1.00 pegged to 8x PE and FY17F EPS of 12.5sen. Our adjustment is due to our lowered estimates from t...

Brokers Report: LBS Bina - Going Strong

Maintain outperform with an unchanged target price (TP) of RM2.23 The Group’s 9MFY16 net profit of RM57.5m (+8.4% YoY) came in within expectations, at 73% of our and 74% of consensus full-year estimates. With the group currently undertaking 16 on-going projects against the backdrop of a record-high unbilled sales amount of RM1.46bn, the company remains primed for sustained growth in the coming few financial years, particularly owing to its predominant focus on affordably-priced properties which stand it in better stead. Recent corporate exercises in which 1) the construction division was spun off into ML Global and 2) land acquisitions in Dengkil and Alam Perdana, are positive and underscores management’s focus on long-term shareholder value creation. While we leave FY16 estimates unchanged, we are lifting FY17 and FY18 net profits by 15.1% and 22.2% respectively, scaling back on our previously-conservative sales assumptions. Our  Outperform  call is affirmed with an...

Brokers Report: OCK Group - Final Quarter Push

Maintain outperform with unchanged target price (TP) of RM0.93 9M16 PATAMI of RM14.6m came in largely within expectation. No dividend was declared, as expected. Moving forward, we expect the group to record a strong sequential quarter, in tandem with the telecom operators’ tendencies to ramp up capex in the 4Q of each financial year. We made no changes to our FY16E/FY17E earnings forecasts for now, pending today’s briefing. Maintained OUTPERFORM call with an unchanged TP of RM0.93 based on DCF valuation (WACC: 9.1%, TG: 1.5%). Broadly in line.  9M16 PATAMI of RM14.6m (+12% YoY) came in largely within expectations at 53.2%/51.7% of our/market consensus’ full-year estimates (vs. the historical 9M contribution of 53%-58% range of full-year results for the past three years). Despite the 9M16 merely accounting for about half of our full-year estimate, we expect the group to record a strong 4Q underpinned by telecom operators, who tend to ramp up capex during the last ...

Brokers Report: UMW Holdings - Another Drag by Weak O&G Segment

Maintain UNDERPERFORM with lower target price (TP) of RM4.27 9M16 results came in below expectations. Negative deviation was largely in part due to greater losses in the O&G segment. No dividend was declared, as expected. Post-results, we forecast core NL for FY16 and cut FY17E core NP by 43% to account for greater losses assumption in the O&G segment. Maintain UNDERPERFORM with a lower TP of RM4.27 (from RM4.45, previously) based on SoP valuation. 9M16 results were below expectations,  as the group reported a 9M16 core LATAMI of RM125.6m which missed our/consensus’ full-year core NP estimates of RM94.3/RM103.9m. Negative deviations were mainly due to significantly higher losses arising from the oil & gas segment from lower rig utilisation rates as well as highly competitive charter rates alongside steep overhead costs. YoY,  9M16 revenue fell by 23% due to weakness across all segments. The auto segment saw a decline in total sales (-18%) as co...

Market Daily Report: KLCI falls with oil as OPEC decision looms

KUALA LUMPUR (Nov 29): The FBM KLCI fell 1.73 points or 0.1% with crude oil ahead of the crucial Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, tomorrow to deliberate over a potential output cut. At 5pm today, the KLCI closed at 1,626.93 points on losses in oil and gas-related shares like SapuraKencana Petroleum Bhd and Petronas Gas Bhd. "Although it might be true that (crude oil) markets will rebalance in 2017 whether a production cut is reached or not, oil bears are just waiting for a signal to push the sell button, and 15% decline towards US$40 (about RM178) looks very reasonable in case no significant deal was reached," FXTM chief market strategist Hussein Sayed wrote in a note today. "However, markets still believe that a production cut of 500,000 to 1 million barrels per day is achievable tomorrow and this explains Monday's price action where both major benchmarks rose by more than 2%," Hussei...

Brokers Report: KSL Holdings - 9M16 Results Within

Maintain UNDERPERFORM with an unchanged target price (TP) of RM0.99 9M16 core net profit of RM150.5m was within expectations, accounting for 76% of our full-year estimates. No property sales data was available. As expected, no dividend was declared. No changes to FY16-17E core earnings. Maintain UNDERPERFORM with an unchanged Target Price of RM0.99 based on 5.5x FY17E PER. Within expectation.  9M16 CNP of RM150.5m is in line with our expectation, accounting for 76% of our full-year estimate while there is no consensus available. No dividends declared as expected. Property sales data are not available, while we are expecting property sales of RM349.9m for FY16. Results review.  9M16 CNP saw sharp decline of 26% underpinned by 23% decrease in revenue as a result of lower progressive billings for its property project attributable to weak property sales due to the challenging market environment, especially in Johor. QoQ, its 3Q16 CNP picked up with an ...

Brokers Report: Carlsberg Brewery Malaysia - Dragged Down by Flood

Maintain PERFORM with lower target price (TP) of RM14.30 9M16 core net profit of RM157.9m (+2.6% YoY)   missed our (66%) and market (66%) expectations. As expected, no DPS was declared. Weakness in Sri Lanka is not a big concern as production has resumed and earnings contribution is not too high. Outlook remains challenging on the back soft of consumer sentiment. FY16E/FY17E earnings trimmed by 7%/3%. Maintain MARKET PERFORM on CARLSBG with lower TP of RM14.30 (from RM14.70). 9M16 below expectations.   9M16 core net profit of RM157.9m (+2.6% YoY) was below expectations, accounting for 66% of our in-house forecast and 65% of consensus. The negative deviation can be attributed to the weaker-than-expected performance in Sri Lankan operations. Note that 9M15 core net profit has been adjusted for impairment loss of RM12.5m arising from the divestment of Luen Heng F&B Sdn Bhd (LHFB) in May 2015. No DPS was declared, as expected. YoY,  the Group reported...

Brokers Report: CARLSBG - Net Profit Increased Propelled by Efficiencies

Upgrade from sell to HOLD with target price (TP) of RM15.52 Review Carlsberg reported its 9MFY16 net profit of RM157.9mn (+11.7% YoY). The results came within ours (71%) but below streets estimates (66%). No dividend was declared, similar to last corresponding period. YoY, the group revenue grew marginally by 0.6% to RM1.2bn. This was driven by positive contribution from Singapore segment. The segment recorded a double-digit growth of 10.6% to RM424.6mn supported by 1) stronger sales volume as well as 2) higher contribution from subsidiary company Maybev. Meanwhile, Malaysia segment logged a slight contraction of 3.9% to RM820.3mn underpinned by loss of contribution from Luen Heng business. Note that, Luen Heng is a distributor and supplier of wines and spirit and the disinvestment was completed last August 2015. For 9MFY16, the group’s operating profit expanded by 15.5% YoY to RM204.5mn owing to strong contribution from both segments. This was attributable t...

Brokers Report: TRC - Above Expectations

Maintain BUY recommendation with target price (TP) of RM0.50 TRC Synergy delivered a much improved earnings performance in 3QFY16, due to improved margins and FX translation gains which bolstered its net profit to RM15.1m (+77.6% YoY, +251.2 QoQ). YTD, it registered 9MFY16 net of RM20.7m (-3.7% YoY). Stripping out FX gains (of c.RM7m), it registered net profit of RM8.1m during the quarter, or YTD net profit of RM13.7m, slightly above expectations or constituting c.78% of our full year estimates. FY16 earnings were adjusted upwards by c.40%, to account primarily for FX gains. Outstanding orderbook is estimated at c.RM1bn, driven by jobs such as Pan Borneo Highway (30% stake: contract value is RM1.31bn). Maintain Trading  Buy  and  RM0.50  TP, pegged at PER multiple of c.10x of our FY17 EPS. Outstanding order book at estimated RM1bn.  With no new jobs secured in 3QFY16, the Group’s outstanding orderbook is estimated at c.RM1bn. To recap, key job wi...

Brokers Report: TDM - Seeing Stronger Earnings In 4Q

Maintain OUTPERFORM call with an unchanged target price (TP) of RM0.85 TDM 9MFY16 reported a core net profit of RM36.1m, making up 55% of our full year earnings forecasts after stripping out unrealized gain on the foreign exchange in fixed income securities amounting to RM8.4m and impairment loss on receivable, RM1.3m. Though it fell below our expectations, we think that it will be able to catch up in 4Q given the recovery in FFB production and sharp increase in CPO prices. Hence, our earnings forecasts remain unchanged. No dividend was declared for the quarter. We maintain our  Outperform  call with an unchanged TP of  RM0.85 . 3QFY16 revenue (QoQ: -0.3%, YoY: +4.3%).  3QFY16 revenue increased 4.2% YoY to RM102.8m, led by an improved revenue from healthcare segment while plantation sales remained steady. During the quarter, plantation sales fell slightly to RM57.9m as weaker FFB production (-26.7% YoY) was cushioned by stronger CPO prices (+25.2%...

Brokers Report: IJM Plantations - 2Q17 Within Expectations

Maintain PERFORM with unchanged target price (TP) of RM3.60 1H17 CNP at RM55m was within expectations at 46% of both consensus? RM118m and our RM119m forecasts. No dividend was declared, as expected. We maintain our FY17-18E CNP forecasts at RM119-142m. No change to our MARKET PERFORM call and TP of RM3.60. 2Q17 meets expectations.   IJM Plantations Berhad (IJMPLNT) 1H17 CNP at RM55m came in within expectations at 46% of both consensus? RM118m forecast and our expected RM119m. Group production at 424.1k MT was within our expectations as well, at 47% of full-year forecast. No dividend was announced, as expected. Price improvement.  YoY,  CNP rose 21% on flat FFB volume, driven by large increases in CPO prices in Malaysia (+23%), Indonesia (25%) and a sharp jump in PK prices (+74%) due to tight supply and rising demand for palm kernel oil as a coconut oil alternative. This led to a 57% improvement in Malaysian operations PBT, and a reversal in Indonesia...

Market Daily Report: KLCI rises as crude oil fall cuts U.S. rate hike bets

FBM KLCI close higher by 1.4 points or 0.1% at 1,628.66 pts The FBM KLCI gained 1.4 points or 0.1%, along with Asian share markets, as crude oil's price fall curbs inflation and U.S. interest rate hike prospects, according to a report by TheEdgeMarkets.  At 5 p.m., the KLCI closed at 1,628.66 points.  Across Asian stock markets, Hong Kong’s Hang Seng gained 0.47%. while South Korea’s Kospi rose 0.19%. Reuters reported oil prices fell on Monday, adding to Friday's steep losses as doubts re-emerged over the ability of major producers to agree on output cuts at a planned meeting on Wednesday aimed at reining in global oversupply. Brent crude futures fell 2% at one point, but regained ground to trade down 35 cents or 0.74% at US$46.89 per barrel at 0749 GMT. In Malaysia, Kenanga Investment Bank Bhd research head Chan Ken Yew said the KLCI was still trapped in a rangebound pattern, as investors eyed a potential interest rate hike by the U.S. Federal Reserve nex...

Market Daily Report: KLCI rise on local buying

KUALA LUMPUR (Nov 25): The FBM KLCI rose 3.05 points or 0.2% on late buying of index-linked plantation shares like Kuala Lumpur Kepong Bhd (KLK) and Sime Darby Bhd as the ringgit weakened to a new one-year level against the US dollar. Plantation shares could have taken the cue from a weaker ringgit, which bodes well for Malaysian crude palm oil (CPO) exports and prices. The ringgit depreciated to its new one-year level at 4.4690 against the US dollar today on expectation of a US interest rate hike next month. "Plantation counters' performance is better than other sectors as CPO prices climbed to more than RM3,000 a tonne," Malacca Securities Sdn Bhd analyst Kenneth Leong told theedgemarkets.com. At 5pm, the KLCI ended at 1,627.26 points. KLK shares climbed 36 sen to RM24.10 to become Bursa Malaysia's second-largest gainer while Sime Darby rose six sen to RM8.10. Reuters reported that Malaysian palm oil futures continued their uptrend, rising 0.73% in first-half tr...

Brokers Report: PROTASCO - Still Humming Along

Maintain BUY recommendation with higher target price (TP) of RM1.75 Protasco’s 3Q2016 net profit declined 7.0% Y.o.Y to RM14.3 mln,  dragged down by the weakness in the maintenance segment due to the non-renewal of two state roads maintenance contracts, coupled with lower contributions from its property development segment with the near completion of Phase 1 of De Centrum project. Revenue for the quarter fell marginally by 0.4% Y.o.Y to RM302.8 mln. Cumulative 9M2016 net profit slipped 9.1% Y.o.Y to RM42.0 mln.  Revenue for the period fell marginally, by 0.9% Y.o.Y to RM826.1 mln. Despite that, the reported earnings came slightly above our expectations, accounting to 77.2% of our previous full year net profit forecast of RM54.4 mln. The reported revenue, meanwhile, only amounted to 71.5% of our previous revenue forecast of RM1.16 bln. Segmentally,  the maintenance division’s 3Q2016 pretax profit slumped 66.7% Y.o.Y to RM8.9 mln on the non-renewal of t...

Brokers Report: OldTown Bhd-On the right path

Maintain BUY with unchanged target price (TP) of RM2.21 Results OldTown’s 2QFY17 net profit declined 9.0% q-o-q and 5.5% y-o-y to RM12.63mil. Meanwhile, quarterly revenue down 3.2% q-o-q while climbed 7.5% y-o-y to RM99.55mill. For 1HFY17, net profit was registered at RM26.51mill, up 16.1% y-o-y. Similarly, revenue up by 8.4% y-o-y to RM202.43mill. Within expectation- The Group’s 1HFY17 net profit was within expectations by accounting for 47% of our full year net profit forecast and market consensus mainly buoyed by positive performance in FMCG division coupled with slight recovery in F&B division in this quarter. We reckon that OldTown could achieve impressive earnings in 2HFY17, aided by better performance from both divisions in conjunction of Christmas and Chinese New Year celebrations. Comment Better earnings of 1HFY17. The Group’s 1HFY17 net profit posted a positive growth amid its higher topline as the resilient performance of FMCG segment was st...