Nvidia CEO Jensen Huang expressed confidence that global collaboration in science and technology will persist, even amid potential tighter export controls from the incoming Trump administration. Huang on Global Cooperation Despite the Trump administration’s previous restrictions on exporting US technology to China, Huang believes international collaboration remains essential. “Open science and global cooperation across math and science have been the foundation of societal and scientific advancements for a very long time,” Huang stated during a media session in Hong Kong. He emphasized Nvidia's commitment to balancing compliance with laws and policies while continuing to advance technology and serve customers globally. The Age of AI During a speech at the Hong Kong University of Science and Technology (HKUST) , Huang declared, “The age of AI has started — a new computing era that will impact every industry and every field of science.” Highlighting Nvidia’s innovations, he describe
Retain HOLD with a higher target price (TP) of RM12.21
Highlights
- FFB output growth to mitigate lower palm prices… GENP registered FFB output growth of 28.5% yoy in 1Q17 , boosted by yield recovery (as lagged impact of El Nino subsided since end-FY16) and more areas moving into mature and higher yielding bracket (for its plantation estates in Indonesia). Management remains confident that the strong FFB output growth achieved in 1Q17 will sustain into the next few quarters (with output ratio of 45:55 in 1H and 2H), underpinned by young age profile for its plantation operations in Indonesia (with average age of only ~ 5 years as at end- FY16), which will in turn cushion lower palm product prices.
- The opening of GHPO to boost JV’s earnings from 2H… We expect the opening of Genting Highland Premium Outlet (GHPO, likely by end-2Q) to perform as well as Johor Premium Outlets (JPO), if not better, as it will be serving a more diverse group of shoppers vis-à-vis JPO, due to its close proximity to GITP and Klang Valley.
- Unexciting times remain for property division… We believe earnings at the property division will remain unexciting in FY17, due to the weak property sentiment and the absence of sizeable property land disposal (following AEON’s recent announcement to abort its property land acquisition deal with GENP).
Catalysts
- Higher-than-expected FFB output growth;
- Better-than-expected JV earnings (in particularly, the premium outlets); and
- Earlier-than-expected commission of metathesis plant.
Forecasts
- We raise our FY17-19 core net profit forecasts by 4.5%, 9.1% and 8.1% respectively, largely to account for: (1) Higher JV earnings assumptions (underpinned by the opening of GHPO); and (2) Lower depreciation charge assumption at biotechnology division (post RM80.2m write-off in 4Q16). Risks – downside
- Weaker-than-expected FFB output;
- Escalating labour cost, which will in turn result in higher production cost; and
- Weaker-than-expected recovery in edible oil demand and prices.
Rating
HOLD (↔)
- While we continue to like GENP for its young age profile (average age of ~10 years for its plantation assets) and healthy balance sheet (net gearing of 0.23x as at end-FY16), near-term upside is capped by recent downtrend in palm product prices and persistently weak property sentiment in Johor.
Valuation
- Maintain HOLD recommendation, with higher SOP-derived TP of RM12.21 (vs. RM12.02 previously) to reflect the upward adjustment in our core net profit forecasts.
Source: Hong Leong Investment Bank Research - 25 April 2017
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