Netflix shares fell more than 8% in after-hours trading , as a disappointing second-quarter outlook and leadership changes outweighed otherwise solid first-quarter results. Weak Guidance Sparks Sell-Off Netflix forecast Q2 earnings of US$0.78 per share , below analyst expectations of US$0.84 , while revenue is projected at US$12.57 billion , missing the US$12.64 billion consensus . The weaker guidance raised concerns over near-term growth momentum , triggering a sharp negative market reaction. Strong Q1 Performance Fails to Impress For the first quarter: Revenue rose 16% YoY to US$12.25 billion (above estimates) Earnings surged 86% to US$1.23 per share However, earnings were boosted by a US$2.8 billion one-off termination fee , reducing the quality of underlying growth. Operating margin improved to 32.3% , but still came in below expectations (32.4%) , further dampening sentiment. Rising Costs and Strategic Sh...
Retain HOLD with a target price (TP) of RM2.62
Press Metal Bhd
(April 19, RM2.79)
Maintain hold with a fair value of RM2.62: The global demand for aluminium is expected to grow modestly at 5% annually from financial year 2017 (FY17) to forecasted FY19 (FY19F), largely attributed to the transportation and construction segments which account for half of the global primary demand, while supply is expected to remain flat at 60 million tonnes. Currently, demand for aluminium stands at 59 million tonnes with supply at 59 million tonnes. The slow supply growth is mainly due to the curb on aluminium production in China where the government has issued a policy draft to cut down production during the winter season.
The curb is to tackle pollution which worsens in winter. Experts reckoned that if the China policy kicks in, they forecast a reduction of 1.3 million tonnes of aluminium production (4% of total production in China).
The positive outlook for aluminium is a boost to Press Metal Bhd’s (PMB) earnings outlook. Earnings is expected to improve by 47%/28%/27% respectively from FY17 to FY19F mainly driven by: (i) Ramped up annual production to full capacity in the fourth quarter of 2016 to 760 million tonnes annually from 705 million tonnes previously, and 120 million tonnes annually downstream at 75% utilisation rate.
We forecast higher average aluminium prices per tonne realised at US$1,785 (RM7,854), US$1,910 and US$2,100, up by 5%/7%/10% for FY17 to FY19F respectively, due to strong demand from the construction and transportation segments globally and the aluminium production cut in China.
(ii) The low production cost, helped by the competitive electricity tariff from hydroelectric power. Cost savings in logistics from the belt conveyer system in the Samalaju Port, which will be ready by the second half of 2017, will give PMB’s savings of US$50 to US$70 per tonne. Together with the low effective corporate tax rate mainly due to tax exemptions from its pioneer status and investment tax incentives, these make PMB the lowest cost aluminium producer in the region. — AmInvestment Bank Research, April 19
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