Bursa Malaysia Daily Market Report - 13 July

Transcription

1. Thursday , 13 July, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. DiGi.Com Berhad: Revised Service Revenue Projections Downwards 2. Hup Seng Industries Berhad: Earnings to be Back-end Loaded 3. Malaysian Economy: IPI Surprise with a 4.6% Gain Technical Reports 1. Daily Technical Stock Picks 2. Daily Stock Screen 3. Foreign Technical Stock Watch (AUS, HK & FSSTI) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research
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Daily Note Daily Market Commentary Thursday , 13 July 2017 For Internal Circulation Only Value +/-chg -320.4 -0.9 21.9 -0.7 -0.01 23.1 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP July Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA 1,757.24 12,514.76 17,197.20 1,759.50 21,532.14 6,261.17 7,416.93 20,098.38 2,391.77 26,043.64 3,208.91 1,574.93 5,819.13 3,197.54 1,889.45 5,673.83 Off Market (mn) PTRANS 20.0 SIME 7.0 TOMYPAK-WA 6.3 ZECON 3.0 BIMB 2.0 GUNUNG 2.0 KYM 2.0 SMRT-WA 1.2 MEXTER 1.0 BJASSET 1.0 @ @ @ @ @ @ @ @ @ @ (RM) 0.29 9.54 0.28 0.50 4.50 0.55 0.70 0.01 0.25 1.30 Exchange Rate USD/MYR 4.2955 -0.0020 USD/JPY 113.50 -0.8300 EUR/USD 1.145 0.0057 2.21 25.82 55.37 3.00 Value/ Volume 1.50 0.10 0.23 0.21 1.12 0.99 1.97 Up Down 344 243 48 86 64 30 3 2 1 1 460 362 % chg % YTD chg 0.13 0.21 0.32 0.17 7.04 9.14 16.86 7.58 123.07 0.57 67.87 1.10 87.17 1.19 -97.10 -0.48 -4.23 -0.18 166.00 0.64 -9.89 -0.31 5.69 0.36 45.81 0.79 -5.49 -0.17 -2.15 -0.11 -55.10 -0.96 Top 10 KLCI Movers Mkt Cap. Counter Mkt Cap. (RM’mn) TENAGA 80,132 PBBANK 78,543 SIME 64,880 IHH 49,352 AXIATA 43,821 MAXIS 43,036 GENTING 34,560 GENM 32,140 IOICORP 28,215 HAPSENG 23,054 TA Research e-mail : taresearch@ta.com.my Review & Outlook KLSE Market Statistics (12.07.2017) Volume (mil) +/-chg (RMmn) Main Market 1,091.1 -2.2 1,633.5 Warrants 160.4 -12.0 16.2 ACE Market 503.2 78.3 114.0 Bond 31.7 -8.8 6.8 ETF 0.0 -0.01 0.0 Total 1,786.4 1,770.4 Off Market 48.1 26.7 94.5 (A Participating Organisation of Bursa Malaysia Securities Bhd) Menara TA One, 22 Jalan P Ramlee, 50250 Kuala Lumpur Tel : 603 - 2072 1277. Fax : 603 - 2032 5048 8.95 16.31 3.84 5.15 18.03 18.38 11.39 2.07 9.86 3.03 -4.05 0.14 Based on Chg (RM) 0.06 0.02 0.02 0.01 0.23 0.01 0.04 0.02 0.01 0.26 Vol. (mn) 7.47 3.70 4.05 2.74 3.77 2.65 5.52 2.02 2.50 0.26 Commodities Futures Palm Oil (RM/mt) 2,565.00 0.00 Crude Oil ($/Barrel) 45.46 -0.30 Gold ($/tr.oz.) 1,219.70 2.70 Important Dates ORION - 7:2 Rights Issue - RI of up to 465.9m shares together with up to 232.9m free detachable warrants. 7 rights shares together every 2 existing shares held, at an issue price of RM0.17 per rights share, with 1 free warrants for every 2 rights shares subscribed. Application Closed: 19/07/2017. LISTING ON: 02/08/2017. Listless sideways trade persisted on local stocks Wednesday despite a late bounce, with investors mostly sidelined on the lack of positive domestic market leads. The KLCI ended up 2.21 points at the day's high of 1,757.24, off an intra-day low of 1,751.59, as gainers edged losers 460 to 362 on total turnover of 1.78bn shares worth RM1.77bn. While yesterday's late bounce looks positive, weak buying momentum and caution ahead of the Fed chief's testimony on US monetary policy should keep stock prices in check. Immediate support stays at the 100day moving average at 1,752, with stronger support at 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,704. Immediate resistance for the index stays at the 50-day moving average (1,773), next 1,782, followed by the recent peak of 1,796. Affin shares should slide further due to weak momentum and profit-taking interest towards the 50%FR (RM2.54), matching the 200-day ma level, with better support from the 38.2%FR (RM2.43) and overhead resistance at the 76.4%FR (RM2.78) reinforced by the 100-day ma. Axiata should meet strong profit-taking resistance on any further rise towards the 50day ma (RM5.04), upper Bollinger band (RM5.11), and the 38.2%FR (RM5.15), while better support is seen near RM4.50. News Bites • Malaysia's Industrial Production Index rose by 4.6% YoY to 131.6 points in May 2017, as compared with consensus estimate of 4.1% YoY and April's 4.2% YoY gain. • According to sources, Edra Power Holdings Sdn Bhd, the electricity generator formerly owned by state investment fund 1Malaysia Development Bhd is said to have selected arrangers for its RM4.3bn initial public offering. • Axiata Group Bhd clarified that it has not received any official communication or direction from Nepal's Central Bank or relevant Nepali authorities on barring it from repatriating its dividends. • Digi.Com Bhd's reported a net profit of RM732mn (-3.8% QoQ, -10.7% YoY) in 1HFY17, which was within ours and consensus forecasts of 45.2% and 45.3%, albeit at the lower end. • Felda Global Ventures Holdings Bhd has appointed three new directors, all of whom hold office with parent Federal Land Development Authority. • Alliance Financial Group Bhd, which has dismissed speculation that it is the subject of a merger, has received shareholder approval for its listing status to be assumed by its wholly-owned core subsidiary, Alliance Bank Malaysia Bhd. • WCT Holdings Bhd believes it has good ground to oppose the 181.6mn riyals (RM214.1mn) claim recently filed by three companies over a sub-contract in Qatar. • Star Media Group Bhd announced that its wholly-owned subsidiary, Li TV Holdings Limited will cease business operations with effect from 7 October 2017. • Reach Energy Bhd has inked a MoU with Akimat, the regional government of Mangystau, southwestern region of Kazakhstan. • Prestar Resources Bhd is considering the pursuit of listing its 51%owned subsidiary, Tashin Steel Sdn Bhd on the ACE Market of Bursa Malaysia Securities Bhd. • Ivory Properties Group Bhd has entered into a MoU with Taman Segar Management Corporation and Upper Label Sdn Bhd for the establishment of a strategic alliance to jointly re-develop/develop a piece of land in Kuala Lumpur. • The Federal Reserve will need to keep gradually raising its benchmark interest rate over the next few years, but that rate won't need to rise to levels seen in previous cycles, Fed Chairwoman Janet Yellen said in congressional testimony. DISCLAIMER The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD Kaladher Govindan, Head of Research
3. Technical Comments : Take Profit on AFFIN & AXIATA Affin shares should slide further due to weak momentum and profit-taking interest towards the 50%FR (RM2.54), matching the 200day ma level, with better support from the 38.2%FR (RM2.43) and overhead resistance at the 76.4%FR (RM2.78) reinforced by the 100-day ma. Axiata should meet strong profit-taking resistance on any further rise towards the 50-day ma (RM5.04), upper Bollinger band (RM5.11), and the 38.2%FR (RM5.15), while better support is seen near RM4.50. AFFIN Upper Middle RM2.61 (-0.04) BOLLINGER BANDS RM RM 2.72 2.67 10-day 30-day RM 2.62 50-day Lower DMI Recent Signal SELL 2.77 Recent Signal BUY Signal Change AXIATA Recent Signal Signal Change RM DAILY MACD Signal Change Upper Middle Lower SIMPLE MOVING AVERAGES RM 2.66 RM 2.68 BOLLINGER BANDS RM RM RM DMI RM4.87 (+0.23) 5.11 4.88 4.64 SELL SIMPLE MOVING AVERAGES RM 4.77 RM 4.92 RM 5.04 DAILY MACD Recent Signal SELL Signal Change 10-day 30-day 50-day Page 2 of 2
4. TA Securities Thursday , July 13, 2017 FBMKLCI: 1,757.24 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Market View Tel: +603-2072 1277 taresearch@ta.com.my www.taonline.com.my Weak Momentum to Cap Recovery Upside Listless sideways trade persisted on local stocks Wednesday despite a late bounce, with investors mostly sidelined on the lack of positive domestic market leads. The KLCI ended up 2.21 points at the day’s high of 1,757.24, off an intra-day low of 1,751.59, as gainers edged losers 460 to 362 on total turnover of 1.78bn shares worth RM1.77bn. Key Supports at 1,752/1,729 While dovish comments from the US Fed chief on a gradual pace of balance sheet reduction and interest rate increases could somewhat improve local sentiment, the present weak technical momentum and investor participation should restrict recovery upside. Immediate support stays at the 100-day moving average at 1,752, with stronger support at 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,704. Immediate resistance for the index stays at the 50-day moving average (1,773), next 1,782, followed by the recent peak of 1,796. Take Profit on AFFIN & AXIATA Affin shares should slide further due to weak momentum and profit-taking interest towards the 50%FR (RM2.54), matching the 200-day ma level, with better support from the 38.2%FR (RM2.43) and overhead resistance at the 76.4%FR (RM2.78) reinforced by the 100-day ma. Axiata should meet strong profit-taking resistance on any further rise towards the 50-day ma (RM5.04), upper Bollinger band (RM5.11), and the 38.2%FR (RM5.15), while better support is seen near RM4.50. Asian Markets Lower Amid Cautious Trade Asian stock markets traded lower on Wednesday as investors digested the release of a series of emails from the son of President Donald Trump. Investors were refraining from making big moves ahead of Federal Reserve chair Janet Yellen's testimony before the U.S Congress on Wednesday and Thursday. Traders are watching for cues on the outlook for U.S. monetary policy and the Fed's plans to cut its balance sheet. The Nikkei shares average fell 0.48 percent to 20,098.38, while Korean Kospi ended 0.18 percent lower to close at 2,391.77. In down under, the benchmark ASX200 ended lower by 0.96 percent to close at 5,673.80, driven lower by weakness in the financials and health care sub-indexes. China stocks slip as blue-chip counters reverse recent gains. The blue-chip CSI300 index fell 0.33 percent to 3,658.82 points, while the Shanghai Composite Index lost 0.17 percent to 3,197.54 points. Wall Street Higher after Yellen Signals Gradual Rate Hikes U.S stock markets traded higher on Wednesday with the Dow setting a record closing high following Federal Reserve Chair Janet Yellen's congressional testimony. Fed Chair Janet Yellen said the central bank is likely to start reducing its massive USD4.5 trillion portfolio later this year. She also said the balance sheet reduction and rate increases would be gradual. Yellen also noted rates won't have to rise as much to get to neutral, as in previous decades. The rate-sensitive S&P 500 real estate index posted a 1.3 percent gain. Tech stocks rose sharply, with the tech index also up 1.3 percent. Meanwhile, several airlines shares rose after American Airlines Group and United Continental reported solid results for June. Page 1 of 7
5. TA Securities 13-Jul-17 A Member of the TA Group American Airlines gained 4 .2 percent, while United Continental added 4.7 percent. The Fed also released its latest edition of the Beige Book, where it sees the U.S economy growing at a "slight to moderate" pace. The Dow Jones Industrial Average rose 123.07 points, or 0.57 percent, to 21,532.14, the S&P 500 added 17.72 points to 2,443.25 and the Nasdaq Composite gained 67.87 points, or 1.10 percent, to 6,261.17. Page 2 of 7
6. TA Securities 13-Jul-17 A Member of the TA Group News In Brief Corporate According to sources , Edra Power Holdings Sdn Bhd, the electricity generator formerly owned by state investment fund 1Malaysia Development Bhd is said to have selected arrangers for its RM4.3bn initial public offering. The group is purported to list on Bursa Malaysia as soon as the end of this year. (The Star) Responding to media reports that Nepal’s central bank has barred Axiata Group Bhd (Axiata) from repatriating its dividends until the issue of capital gains tax (CGT) related to the Ncell Private Ltd (Ncell) deal is settled, Axiata clarified that it has not received any official communication or direction from Nepal’s Central Bank or relevant Nepali authorities on the matter. The group reiterated that Nepal’s Large Taxpayers Office (LTPO) in its confirmation letter to Ncell, conclusively certified and acknowledged that Ncell is fully cleared of CGT payment with the further advance deposit of approximately NPR13.6bn paid to the LTPO as directed by the agency. (Bursa Malaysia) Digi.Com Bhd’s PBT declined by 16.1% YoY to RM483.2mn mainly on higher depreciation and finance cost from the issuance of RM900mn Islamic bond in April 2017. Revenue declined by 6.2% to RM1.5bn. A second interim dividend of 4.6sen per share was declared. (Bursa Malaysia) Felda Global Ventures Holdings Bhd (FGV) has appointed three new directors, all of whom hold office with parent Federal Land Development Authority. The group had appointed Datuk Abu Bakar Harun and Ab Ghani Mohd Ali as non-independent and nonexecutive directors, while Datuk Muzzammil Mohd Nor was named non-independent and non-executive alternate director. (The Star) Alliance Financial Group Bhd, the smallest financial institution in terms of asset size, has dismissed speculation that it is the subject of a merger. On another note, the group has received shareholder approval for the proposed corporate reorganisation exercise whereby its listing status will be assumed by its wholly-owned core subsidiary, Alliance Bank Malaysia Bhd. (The Star/Bernama) WCT Holdings Bhd believes it has good ground to oppose the 181.6mn riyals (RM214.1mn) claim recently filed by three companies over a sub-contract in Qatar. (The Star) Star Media Group Bhd announced that its wholly-owned subsidiary, Li TV Holdings Limited (Li TV) will cease business operations with effect from 7 October 2017. All broadcasting companies globally are facing headwinds and with digital disruption within the media industry, the group does not expect a turnaround of this segment. In view thereof, it has decided to cease the business operations of Li TV Group to mitigate further losses. (Bursa Malaysia) Comments: We are positive on the news. Li TV currently operates the lifestyle television channel ‘Life Inspired’ that broadcasts pan-regionally across Asia. Partnering Juita Viden, Star invested RM35mn for a 51% stake in Li TV back in 2011. Assuming full control, it subsequently purchased the remaining 49% stake for US$1.5mn (RM6.4mn) from Juita Viden in 2015. Since inception, its television operations have not been profitable. In FY16, it incurred a LBT of US$1.6mn (RM6.9mn). As we have assumed more optimistic breakeven projections into our model, the disposal will impact our earnings by <1.0%. We leave our earnings and TP unchanged for Star at RM1.40/share. SELL. Zhulian Corporation Bhd’s 2QFY17 PBT increased by 43.9% YoY to RM16.1mn mainly on improved margin for some subsidiaries and lower expenses. Revenue increased by 2.8% YoY to RM48.5mn. A second interim dividend of 1.5sen per share was declared. (Bursa Malaysia) Page 3 of 7
7. TA Securities 13-Jul-17 A Member of the TA Group Reach Energy Bhd has inked a memorandum of understanding (MoU) with Akimat, the regional government of Mangystau, southwestern region of Kazakhstan. Under the MoU, the group will assist in attracting Malaysian companies to invest in priority industries in the region such as oil and gas, infrastructure, construction, electricity and water supply, as well as tourism projects, targeting an investment of US$500mn to US$1bn (RM2.1bn to RM4.3bn) over three years. (The Star) Prestar Resources Bhd is considering the pursuit of listing its 51%-owned subsidiary, Tashin Steel Sdn Bhd on the ACE Market of Bursa Malaysia Securities Bhd. (Bursa Malaysia) Ivory Properties Group Bhd has entered into a memorandum of understanding with Taman Segar Management Corporation and Upper Label Sdn Bhd for the establishment of a strategic alliance to jointly re-develop/develop a piece of land in Kuala Lumpur. (Bursa Malaysia) Integrated engineering solutions provider Kelington Group Bhd has been awarded RM4.6mn, after it obtained an adjudication decision in favour of its case against former customer Biocon Sdn Bhd. (The Edge) Page 4 of 7
8. TA Securities 13-Jul-17 A Member of the TA Group News In Brief Economy Asia Malaysia Manufacturing Records Strong Growth in May , IPI Exceeds Forecast Malaysia's manufacturing sector, especially the electrical and electronic sector, underpinned the May industrial production index's (IPI) strong growth of 4.6% from a year ago. According to the Statistics Department, the IPI exceeded a survey of a 4.1% growth. The manufacturing index expanded 7.3% – after expanding 6.7% in April – while the electricity index rose 2.5%. However, the mining index declined by 2.3%. The major subsectors which expanded in May were: electrical and electronics products (11.6%); food, beverages and tobacco (12.9%); and petroleum, chemical, rubber and plastic products (3.1%). The mining sector output contracted by 2.3% in May 2017 (April 2017: -2.0%) due to the decrease of 5.4% in crude oil index. However, the natural gas index rose 1.5%. The electricity sector output increased by 2.5% in May after a decrease of 1.5% recorded in April. Also, Malaysia's manufacturing sales grew strongly by 19.5% in May 2017 to RM61.9bil as compared to RM51.8bil in the same month of 2016, due to increases recorded in its three major sub-sectors. (Department of Statistics) Malaysia Fuel Prices Up for Third Week of July Fuel prices are up further across the board for the third week of July, with a four sen hike for RON95 and three sen hike for RON97. RON95 petrol stood at RM1.97 per litre (from RM1.93), while RON97 priced at RM2.22 per litre (from RM2.19). Meanwhile, the price of diesel at RM1.96 per litre, up five sen from RM1.91 last week. The new prices, which were announced on RTM1, are for the period beginning July 13 until July 19. The weekly fuel pricing mechanism came into effect from April this year. Prices of petrol and diesel had been placed on a managed monthly float system since Dec 1, 2014, following the removal of fuel subsidies. (The Star) Singapore Retail Sales Up 0.9% in May A surge in takings at petrol pump stations lifted retail sales in May, though a broad fall in sales by food retailers and other consumer goods sellers has left shops and restaurants here worried. Total retail turnover in May was S$3.7 billion, up 0.9 per cent from May last year, according to Department of Statistics data out on Wednesday (July 12). This was due mainly to a 11.3% jump in sales at petrol service stations, a 4.5% rise in sales of medical goods and toiletries, as a well as a 2% rise in motor vehicle sales. Excluding motor vehicles, retail sales rose 0.6% from May last year. On a month-on-month, seasonally adjusted basis, retail sales dropped 1% in May over the previous month. Excluding motor vehicles, takings were down by a bigger margin of 3%. (The Straits Times) Japan's Tertiary Industry Activity Weakens in May Japan's tertiary industry activity dropped in May after recovering in April, data from the Ministry of Economy, Trade and Industry showed. The tertiary industry activity dropped 0.1% month-on-month in May, reversing a 1.4% rise in April. However, the pace of decrease was slower than the expected 0.5% fall. Broad-ranging personal services declined 0.4% and broad-ranging essential personal services slid 0.1%. While non-essential personal services decreased 0.2%, business services rose 0.1%. On a yearly basis, tertiary industry activity climbed 1.9% in May, faster than April's 0.8% increase. (RTT News) Australia Consumer Mood Stays Dark Despite Brighter Signs: Survey A measure of Australian consumer sentiment edged barely higher in July after three months of falls and as pessimists continued to dominate despite signs elsewhere that economic conditions had turned for the better. The survey of 1,200 people by the Melbourne Institute and Westpac Bank found consumer sentiment rose 0.4% in July, from June when it dropped 1.8%. The index reading of 96.6 was 2.5% lower than in July last year and meant pessimists outnumbered optimists. That was a significance divergence from increasingly upbeat polls of businesses. A NAB survey showed firms felt conditions were the best since early 2008 with sales, profits and employment all strong. (The Business Times) Page 5 of 7
9. TA Securities 13-Jul-17 A Member of the TA Group United States Yellen : ‘Gradual’ Rate Increases Will Be Needed to Sustain Economic Expansion The Federal Reserve will need to keep gradually raising its benchmark interest rate over the next few years, but that rate won’t need to rise to levels seen in previous cycles, Fed Chairwoman Janet Yellen said in congressional testimony. Ms. Yellen also updated lawmakers on the Fed’s plans to start slowly shrinking its $4.5 trillion portfolio of bonds and other assets acquired during and after the 2008 financial crisis. Ms. Yellen said officials expected to set those plans into motion this year, but she wasn’t more specific about the timing. “The committee currently expects that, provided the economy evolves broadly as anticipated, it will likely begin to implement the program this year,” Ms. Yellen said in five pages of prepared testimony. Fed officials next meet July 25-26. At their meeting last month, officials raised rates for the third time in as many quarters to a range between 1% and 1.25% and penciled in one more rate increase this year. Ms. Yellen gave no indication about the timing of its next increase in her testimony Wednesday. (The Wall Street Journal) Fed Beige Book: Labour Markets Tighter, Price Pressures Modest Labour markets tightened further, but price pressures were largely held in check, according to a new report from the Federal Reserve. “Labour markets tightened further for both lowand high-skilled positions, particularly in the construction and IT sectors,” the Fed said Wednesday in its latest roundup of anecdotal information about regional economic conditions, known as the beige book. But price pressures had “eased slightly” in some districts as gasoline prices and dairy and crop costs fell. The report was based on information collected in June across the central bank’s 12 districts. Broadly, the Fed said economic activity expanded at a slight to moderate pace in June. The Fed reported economic growth was modest in six districts, moderate in four districts and slight in two districts. Looking forward, many districts expect modest to moderate gains in the months ahead. The report found that “wage pressures generally trended with employment conditions.” A broad range of industries reported a shortage of qualified workers. But wage pressure didn’t appear to translate into stronger inflation. “Prices continued to rise modestly” across districts, with several reporting higher construction materials costs and increased home prices. Still, highway construction costs were lower than expected in Minnesota, the Federal Reserve Bank of Minneapolis reported. Elsewhere, restaurants and manufacturers reported price declines. (The Wall Street Journal) Europe and United Kingdom UK Unemployment Rate Falls to Fresh 1975-Low The squeeze on British households eased a little in May as wage growth performed better than expected and the unemployment rate fell to the lowest since 1975. Official figures from the Office for National Statistics show weekly wages, excluding bonuses, grew 2% in the three months to May, picking up from 1.7% growth in April and beating a forecast of 1.9%. Real wage growth in the UK economy, which strips out inflation, has turned negative this year on the back of accelerating consumer price growth. The ONS said inflationadjusted wages (excluding bonuses) contracted 0.5% in the three months to May – the worst performance since 2014. In better news, the unemployment rate dipped from 4.6% to 4.5% in the three months to May, defying a forecast of no change and hitting a 42-year low. It means the UK is now at its “natural rate” of unemployment according to forecasts from the Bank of England. (Financial Times) Eurozone Industrial Output Rises at Fastest Rate in Nearly Six Years Output at the Eurozone’s factories, mines and utilities rose at the fastest annual pace in more than five years in May, a fresh indication that the Eurozone’s economic recovery picked up in the second quarter. The Eurozone economy grew at the fastest rate in two years during the first three months of 2017, outpacing the U.S., the U.K. and Japan. Business surveys suggest that the more rapid pace of growth has continued, and figures for industrial production back them up. The European Union’s official statistics agency said output was up 1.3% from April, and 4% from May 2016. The annual rate of increase was the fastest since August 2011. That performance was stronger than expected, with Page 6 of 7
10. TA Securities 13-Jul-17 A Member of the TA Group economists surveyed by The Wall Street Journal last week expecting a rise of 0 .8% on the month and 3.6% on the year. (The Wall Street Journal) Germany's Wholesale Price Inflation at 7-Month Low Germany's wholesale price inflation eased to the weakest in seven months in June, Destatis reported. Wholesale prices climbed 2.5% year-on-year in June, slower than the 3.1% increase seen in May. This was the weakest since November 2016, when prices gained 0.8%. Wholesale prices of ores and metals increased 6.8% and prices of waste and residuals surged 21%. Meanwhile, fruits and vegetable prices dropped 3%. Month-on-month, wholesale prices remained flat after falling 0.7% in May. (RTT News) Commodity OPEC Figures Show June Oil Output Rise Led by Exempt Nations OPEC oil output has risen in June by more than 300,000 barrels per day, (bpd) according to figures the exporter group uses to monitor its supply, as a recovery in two nations exempt from a supply cut deal countered high compliance by many others. The Organization of the Petroleum Exporting Countries agreed to cut output by about 1.2 million bpd from Jan. 1 to reduce a glut and support prices. Russia and 10 other non-OPEC states agreed to cut half as much. Including Nigeria and Libya, which are exempt from the deal, output by all 13 OPEC members in June rose to about 32.47 million bpd, according to the average assessments of secondary sources OPEC uses to monitor its output. The figures were seen by Reuters. That would be up 330,000 bpd from OPEC's published May figure. A jump in output in Nigeria and Libya, where output had been limited by conflict, has weighed on oil price. The recovery has prompted more talk among producers about asking them to join the supply cut deal. Production from the 11 OPEC members with output targets under the agreement has averaged 29.840 million bpd in June, according to the secondary sources. Reuters also saw these figures. (The Star/Reuters) Share Buy-Back: 12 July 2017 Company FITTERS GLBHD SALCON TROP UNIMECH Bought Back Price (RM) Hi/Lo (RM) 250,000 25,000 120,000 29,000 29,000 0.41 0.60 0.53/0.525 0.96/0.955 1.08/1.03 0.41/0.405 0.605/0.595 0.53/0.52 0.96/0.95 1.08/1.03 Total Treasury Shares 22,067,800 7,489,800 1,347,762 3,137,942 5,209,210 Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 7 of 7
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 12-Jul-17 1.94 2.20 5.55 Target Price BETA (RM) EPS (sen) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 2.37 2.28 5.04 0.94 0.61 1.26 10.3 24.1 19.8 15.8 25.3 30.6 18.8 9.1 28.1 12.3 8.7 18.1 6.0 4.1 2.3 8.1 4.1 3.6 2.44 2.70 6.47 -20.5 -18.5 -14.2 1.88 1.96 4.09 3.2 12.2 35.6 -8.9 2.8 31.4 4.80 3.70 5.70 8.00 17.50 11.00 23.60 5.80 10.00 1.29 0.96 1.33 1.38 0.66 0.96 0.79 1.32 0.69 33.6 29.4 43.9 49.6 105.2 73.4 137.2 50.7 40.3 30.5 33.6 48.4 55.2 115.5 82.9 142.4 54.5 39.0 11.5 8.9 11.4 12.7 15.1 13.1 14.8 10.0 25.8 12.7 7.8 10.3 11.4 13.8 11.6 14.3 9.3 26.6 4.1 3.1 3.5 3.2 2.6 5.2 2.8 2.4 3.3 4.1 3.1 3.6 3.6 2.6 5.2 2.9 2.4 3.3 4.49 3.00 5.70 6.87 16.30 9.68 20.66 5.59 11.14 -13.8 -13.0 -12.1 -8.2 -2.5 -0.5 -1.5 -9.7 -6.6 3.60 2.08 3.90 4.11 12.70 7.50 19.26 4.53 8.20 7.5 25.5 28.5 53.4 25.2 28.4 5.6 11.5 26.8 4.0 9.2 16.2 39.9 17.8 17.4 3.1 7.2 17.5 0.40 1.30 5.41 3.46 0.65 1.17 2.02 1.98 5.88 0.45 1.57 6.00 3.50 0.78 0.58 2.26 1.49 6.26 0.79 0.63 1.05 1.09 1.01 1.27 na 1.09 0.10 5.6 14.6 28.1 15.3 4.9 8.3 12.6 11.9 42.0 5.6 13.5 34.8 20.3 5.7 9.6 12.5 12.0 45.8 7.0 8.9 19.3 22.6 13.1 14.1 16.0 16.6 14.0 7.1 9.6 15.5 17.0 11.4 12.1 16.1 16.5 12.9 0.0 2.2 2.2 2.2 3.8 0.9 2.7 1.5 4.3 0.0 2.2 2.2 2.7 3.8 0.9 2.7 1.5 4.3 0.51 1.37 5.52 3.61 0.74 1.39 2.15 2.48 6.15 -22.5 -5.1 -2.0 -4.2 -11.6 -15.8 -6.0 -20.0 -4.4 0.37 0.89 4.65 3.07 0.37 0.41 1.56 1.48 5.57 6.8 46.9 16.3 12.7 78.1 188.9 29.5 33.7 5.6 -9.2 23.8 13.2 8.1 7.4 103.5 18.8 15.1 0.0 1.98 2.00 0.49 11.0 11.5 18.0 17.2 5.1 5.1 2.19 -9.6 1.93 2.6 -1.5 15.10 18.04 17.84 21.08 0.50 0.59 74.8 93.1 81.3 20.2 101.9 19.4 18.6 17.7 4.9 4.6 5.4 5.1 15.30 19.10 -1.3 -5.5 13.72 15.56 10.1 15.9 8.5 10.1 2.20 7.36 25.38 1.20 83.50 3.64 1.95 4.90 0.91 2.23 8.62 27.41 1.50 88.66 4.10 2.46 4.41 1.23 0.49 0.35 0.32 0.46 0.36 0.48 0.64 0.43 0.56 6.7 26.4 121.1 6.5 290.1 22.3 27.5 15.7 8.1 7.9 40.6 151.0 6.6 327.7 24.7 27.0 16.6 11.6 32.7 27.9 21.0 18.4 28.8 16.3 7.1 31.2 11.2 27.9 18.1 16.8 18.1 25.5 14.7 7.2 29.4 7.8 1.8 1.4 2.8 5.0 3.3 4.1 3.1 0.9 2.8 2.2 2.0 3.0 5.0 3.4 4.7 4.1 1.0 3.9 3.00 8.89 26.52 1.33 85.20 3.66 2.04 5.00 1.07 -26.7 -17.2 -4.3 -9.6 -2.0 -0.4 -4.4 -2.0 -15.4 2.11 7.30 22.44 1.13 74.12 2.26 1.47 4.14 0.78 4.3 0.8 13.1 6.1 12.7 61.0 32.7 18.3 16.0 -14.4 0.4 8.1 4.3 6.8 43.3 12.7 13.1 13.8 42.58 52.08 1.01 198.6 187.4 21.4 22.7 4.7 4.7 55.64 -23.5 40.61 4.9 -3.6 9.12 5.67 11.51 6.54 1.35 1.29 49.3 25.7 54.7 27.7 18.5 22.1 16.7 20.4 0.5 1.4 0.6 1.6 10.00 6.38 -8.8 -11.1 7.50 4.22 21.6 34.3 14.8 25.5 2.41 0.12 3.34 0.13 0.75 1.25 19.3 0.4 23.2 0.4 12.5 33.1 10.4 33.3 5.8 0.0 6.6 0.0 3.42 0.16 -29.5 -25.0 2.38 0.05 1.3 140.0 -18.6 140.0 5.99 4.24 6.39 4.70 0.77 0.51 9.5 13.3 15.0 16.5 62.8 31.8 40.1 25.7 0.6 1.4 0.6 1.8 6.73 4.37 -11.0 -3.0 5.54 3.85 8.1 10.1 -5.7 1.4 6.95 7.00 1.93 5.64 1.56 6.80 7.60 1.80 6.05 2.20 0.58 0.16 0.33 -0.20 0.29 17.2 35.8 12.3 26.4 3.7 24.4 40.0 15.1 29.8 5.5 40.4 19.5 15.6 21.3 41.8 28.4 17.5 12.8 18.9 28.4 1.1 2.6 1.9 2.4 0.6 1.6 2.9 2.3 2.7 0.9 7.40 7.07 2.38 5.94 2.64 -6.1 -1.0 -18.9 -5.1 -40.9 4.06 5.62 1.88 4.20 1.51 71.2 24.6 2.7 34.3 3.3 43.9 6.2 -8.5 5.4 -33.9 INDUSTRIAL SCIENTX SKPRES 8.51 1.27 9.71 1.80 0.53 0.50 54.5 8.6 66.3 10.6 15.6 14.8 12.8 11.9 2.1 3.3 2.4 4.1 8.99 1.44 -5.3 -11.8 6.01 1.15 41.6 10.4 27.0 -1.6 MEDIA ASTRO MEDIA PRIMA STAR 2.60 0.89 2.37 3.45 0.60 1.40 1.06 0.65 0.64 13.2 1.7 7.1 14.5 2.8 6.5 19.6 52.1 33.4 18.0 31.5 36.5 4.8 1.5 7.6 5.0 2.5 7.6 3.01 1.52 2.67 -13.6 -41.4 -11.2 2.51 0.87 2.19 3.6 2.9 8.2 0.0 -22.6 5.8 -14.5 -0.8 -31.9 -6.8 -10.5 -11.5 -21.4 -67.8 0.20 6.33 0.78 7.03 0.44 6.43 1.33 0.34 202.6 2.4 1.3 4.7 36.8 7.3 24.1 0.0 131.4 -0.3 -13.7 0.1 33.7 -1.1 1.9 -61.7 -22.2 1.30 18.5 -9.4 BANKS & FINANCIAL SERVICES AFG 3.87 AFFIN 2.61 AMBANK 5.01 CIMB 6.31 HLBANK 15.90 MAYBANK 9.63 PBBANK 20.34 5.05 RHBBANK BURSA 10.40 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N HUPSENG NESTLE PADINI POHUAT QL SIGN Tobacco BAT GAMING Casino GENTING GENM NFO BJTOTO LUSTER HEALTHCARE Hospitals IHH KPJ Rubber Gloves HARTA KOSSAN SUPERMX TOPGLOV KAREX OIL & GAS DNEX 0.59 0.76 1.02 3.7 4.6 16.1 12.9 1.7 1.7 0.69 LCTITAN 6.48 7.41 na 60.3 71.5 10.7 9.1 4.0 5.4 6.53 MHB 0.79 0.87 1.83 -1.2 1.3 na 60.3 0.0 0.0 1.16 MISC 7.36 6.85 0.79 56.4 48.9 13.0 15.0 4.1 4.1 7.90 PANTECH 0.60 0.69 1.27 4.1 4.9 14.3 12.1 3.0 3.3 0.67 PCHEM 6.90 7.74 1.06 39.2 40.5 17.6 17.1 3.0 3.2 7.80 SENERGY 1.65 1.71 2.49 6.6 4.0 25.0 41.6 0.6 0.6 2.10 UMWOG 0.34 0.80 2.06 -11.7 -3.5 na na 0.0 0.0 1.04 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.54 1.55 1.48 12.0 12.6 12.9 12.2 0.0 0.0 1.98
12. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.63 2.99 4.49 24.76 9.54 6.45 Target Price BETA (RM) 1.55 3.88 4.15 26.19 10.02 7.52 1.78 0.46 1.07 0.86 1.23 0.43 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.7 111.8 34.0 37.6 8.5 15.7 21.0 119.1 37.5 34.5 38.6 24.3 24.0 22.2 28.0 17.2 19.2 19.0 21.4 20.8 25.4 18.7 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 3.1 2.3 2.2 2.2 2.6 3.6 3.1 2.7 2.7 2.4 3.2 2.6 2.52 3.70 4.81 25.50 9.70 6.58 -35.3 -19.2 -6.7 -2.9 -1.6 -2.0 1.42 2.99 4.21 22.92 7.42 5.53 PROPERTY GLOMAC 0.63 0.70 0.57 1.6 6.3 39.5 10.0 4.8 4.8 0.83 -23.6 0.63 HUAYANG 1.01 1.07 0.66 17.3 17.4 5.9 5.8 4.0 3.5 1.43 -29.5 1.01 IBRACO 0.80 0.92 0.36 4.9 10.2 16.4 7.8 4.4 5.0 1.05 -23.8 0.77 IOIPG 2.16 2.25 0.86 17.4 17.4 12.4 12.4 3.2 3.5 2.46 -12.2 1.85 MAHSING 1.58 1.76 0.73 14.3 13.5 11.0 11.7 4.1 4.1 1.70 -7.1 1.34 SNTORIA 0.86 0.98 0.27 6.2 10.3 13.9 8.3 1.2 1.2 1.00 -14.5 0.69 SPB 4.85 5.98 0.59 25.6 22.8 12.7 14.3 2.5 2.5 5.19 -6.6 4.32 SPSETIA 3.25 4.10 0.67 27.3 29.4 14.4 13.4 4.3 4.3 4.50 -27.8 2.80 SUNWAY 3.93 3.95 0.47 18.3 18.6 13.1 12.8 3.1 3.1 4.05 -3.0 2.84 Note: SUNWAY proposed bonus issue of shares and warrants. Ex-Target price RM1.69. For more details please refer to 15.06.17 report. REIT SUNREIT 1.70 1.86 0.51 8.9 10.1 19.2 16.8 5.2 5.9 1.84 -7.6 1.63 CMMT 1.55 1.72 0.58 8.1 8.6 19.2 18.0 5.4 5.8 1.72 -9.9 1.45 % Chg YTD 14.8 0.0 6.7 8.0 28.6 16.6 5.2 -12.1 2.0 3.2 17.8 7.5 0.0 0.0 4.6 16.9 17.9 23.9 12.2 16.1 38.3 -9.4 -10.6 -20.0 10.8 10.5 6.9 9.7 3.8 31.0 4.3 6.9 -1.2 1.3 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.03 23.60 18.80 14.16 1.42 1.13 21.47 19.60 17.37 1.90 0.76 0.76 0.77 1.02 0.53 7.1 98.4 88.2 131.9 8.2 6.4 102.3 101.3 130.8 10.7 14.5 24.0 21.3 10.7 17.3 16.1 23.1 18.6 10.8 13.3 6.8 3.1 3.3 3.1 7.0 6.8 3.2 3.8 3.2 7.0 1.80 25.70 22.50 14.90 1.64 -42.8 -8.2 -16.4 -5.0 -13.4 1.01 22.92 18.10 13.00 1.39 2.0 3.0 3.9 8.9 2.2 -24.8 -0.8 -11.7 1.9 -4.7 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.87 4.90 5.51 6.47 5.25 4.90 5.70 7.50 1.31 0.93 0.71 0.66 14.6 20.0 24.8 21.4 16.0 20.4 25.0 22.3 33.4 24.5 22.2 30.2 30.5 24.0 22.0 29.0 1.5 4.1 3.6 3.0 1.6 4.2 3.6 3.1 5.99 5.19 6.60 6.90 -18.7 -5.6 -16.5 -6.2 4.11 4.73 5.48 5.81 18.5 3.6 0.5 11.4 3.2 1.4 -7.9 8.7 TECHNOLOGY Semiconductor & Electronics IRIS 0.17 INARI 2.32 MPI 13.12 UNISEM 3.60 0.28 2.30 15.60 3.95 1.31 0.80 0.51 0.82 -2.6 10.3 94.2 26.9 -0.3 na 12.4 22.5 112.9 13.9 27.1 13.4 na 18.8 11.6 13.3 0.0 3.4 2.1 3.3 0.0 2.1 2.1 3.3 0.24 2.32 13.58 3.70 -31.3 0.0 -3.4 -2.7 0.10 1.45 7.20 2.27 65.0 60.3 82.2 58.6 50.0 39.8 77.1 52.5 3.14 8.55 3.34 8.10 1.10 1.44 37.6 17.2 37.1 17.5 8.3 49.6 8.5 48.9 1.3 1.2 1.6 1.2 3.59 9.45 -12.5 -9.5 2.16 5.76 45.4 48.4 37.1 41.1 1.73 3.70 2.05 4.05 0.75 0.67 14.3 17.1 22.7 15.1 12.1 21.6 7.6 24.5 2.5 3.5 4.0 3.1 1.87 4.59 -7.5 -19.4 1.47 3.61 17.7 2.5 8.8 -14.0 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 20.60 OCBC 10.83 UOB 23.25 PLANTATIONS WILMAR IFAR 3.31 0.47 Target Price Beta (S$) EPS (cent) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52week 52week FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 23.30 12.00 25.40 1.23 1.14 1.08 173.8 87.7 195.6 190.2 11.9 92.4 12.3 209.3 11.9 10.8 11.7 11.1 2.9 5.7 3.0 2.9 6.7 3.0 21.2 11.0 24.0 -2.7 -1.1 -3.2 14.72 8.84 17.51 39.9 31.0 32.8 18.8 21.4 14.0 3.72 0.53 0.91 1.13 28.9 4.9 31.1 5.2 10.6 9.1 2.4 2.5 2.7 2.7 4.0 0.6 -17.3 -21.0 2.96 0.44 11.8 6.8 -7.8 -10.5 11.4 9.7 BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
13. RESULTS UPDATE TA Securities Thursday , July 13, 2017 FBMKLCI: 1,757.24 Sector: Telco A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 DiGi.Com Berhad TP: RM4.90 (+0.0%) Last Traded: RM4.90 Revised Service Revenue Projections Downwards SELL THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Paul Yap, CFA Tel: 603-2167 9603 paulyap@ta.com.my Review Digi released its 1HFY17 results, reporting a net profit of RM732mn (-3.8% QoQ, -10.7% YoY). Albeit at the lower end, this was within ours and consensus forecasts of 45.2% and 45.3%. Keeping close to its 100% payout ratio, a second interim dividend of 4.6sen/share (YTD: 9.3sen/share) was declared. Once again, strong postpaid momentum was overshadowed by prepaid weakness. Aided by entry level plans, postpaid subscribers reported its 13th consecutive quarter of net adds at 103k subscribers. Below our expectations, prepaid revenues fell 3.7% QoQ. However, with strategic initiatives to stray away from low margin segments implemented in the first quarter, we are seeing initial signs of stabilisation. Prepaid subscriber trends reversed (+151k QoQ net adds), amid a larger prepaid internet subscriber base (64.4%). Although EBITDA was stable, this was due to oneoff network and regulatory related cost savings, which are unlikely to repeat in the 3Q. YoY. Service revenue fell 6.2% YoY. Prepaid revenues fell 13.5% YoY, but was cushioned by a 10.5% YoY increase in postpaid revenues. EBITDA, however, stood relatively stable on improved margins (+2.2pp). Traffic costs decreased 25.8% YoY, underpinned by lower IDD traffic and rate renegotiations. Net profit decline 10.7% YoY, due to higher depreciation and finance costs. Analysing by segments, postpaid trends remained positive. With 13th consecutive quarters of net adds, prepaid subscribers grew by 338k individuals. Driven by a take up of entry level plans, postpaid ARPU fell 4.9% YoY to RM78. The segment also benefitted from sim only plans, affordable device bundles and prepaid to postpaid conversions. It has activated its LTE 900MHz network in July 2017. We believe the improved indoor coverage and capacity will help sustain postpaid growth in the foreseeable future. Shirking away from low margin segment, prepaid revenues decreased 13.5% YoY. Prepaid subscribers declined by 655k individuals, while ARPU moderated to RM32. This was mainly attributed to its legacy services, which includes IDD services, 3rd party contents and pay per use internet services. That said, we have begun to see signs of stabilisation, as prepaid net adds and stable ARPU was recorded in 2Q2017. Impact Imputing a lower prepaid subscriber and ARPU assumption, we reduce our service revenue by 4.8%. Coupled with higher depreciation expenses, we lower our FY17/FY18/FY19 earnings by 3.9%/3.2%/2.7% to RM1,558mn/RM1,586mn/RM1,631mn. Keeping our 100% payout ratio unchanged, our FY17/FY18/FY19 DPS is decreased to 20.0sen/20.4sen/ 21.0sen. This translates into a dividend yield of 4.1-4.3%. Page 1 of 5 T H www.taonline.com.my Share Information Bloomberg Code Stock Code Listing Share Cap (m) Market Cap (RMm) 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol (shrs) Estimated Free Float (%) Beta Major Shareholders (%) DIGI MK 6947 Main Market 7,775.0 38,097.5 5.19/4.73 5,959.1 10.2 0.93 Telenor - 49.0 EPF - 13.5 Amanah Saham Bumiputera - 8.1 Skim Amanah Saham Bumiputera - 7.3 Kumpulan Wang Persaraan - 5.3 Forecast Revision (%) Forecast Revision (%) Net Profit (RMmn) Consensus TA/Consensus (%) Previous Rating FY17 FY18 (3.9) (3.2) 1,558 1,586 1,623 1,635 96.0 97.0 SELL (Maintained) Financial Indicators Net debt/EBITDA (x) CFPS (sen) P/CFPS (x) ROE (%) ROA (%) NTA/Share (RM) P/NTA (x) FY17 0.6 39.6 12.4 310.0 27.4 0.02 306.6 FY18 0.6 29.6 16.6 321.9 26.0 0.03 179.8 % of FY 45.2 45.3 Within Within DiGi (1.0) (3.9) (0.2) 0.6 FBM KLCI (1.5) 1.1 5.1 5.8 Scorecard vs TA vs Consensus Share Performance Price chg (%) 1 mth 3 mth 6 mth 12 mth (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
14. TA Securities 13-Jul-17 A Member of the TA Group Outlook Lowering its guidance , a low to mid-single digit decline is now expected for service revenue (previously flattish). EBITDA margin is indicated to be at 2016 levels. Capex guidance is similar at 11-13% of service revenue. One of Digi’s challenges is its migrant segment, which is facing issues such as: 1) Clamp down of illegal foreign workers; 2) Supressed migrant spending from weaker ringgit and 3) Ongoing shift to VoIP calls. Coupled with aggressive competition, margins in the IDD segment are now very thin. As such, the group has made a decision to step away from low margin segments. Priorities will be to drive an increasing proportion of internet users onto its subscriber base. There are also opportunities within the postpaid segment, from an increased exposure to lower band spectrum. Improved indoor coverage will help with efforts to penetrate the enterprise segment. There are still limited updates on reviews of the 700MHz, 2100MHz, 2300MHz and 2600MHz spectrum. Based on market expectations, reviews are speculated to be conducted towards the year-end or early-2018. That said, we believe the group is well positioned to sustain the impact due to its relatively low Net debt/EBITDA of 0.7x. Dividend risks, however, could occur as a result of lower earnings. Valuation We lower our TP for Digi to RM4.90/share – based on a DCF valuation with unchanged WACC at 7.7% and long term growth rate of 1.0%. We retain our SELL call on the stock. This is premised on a prepaid led decline in its earnings. Valuations are fair as it trades close to its historical average EV/EBITDA at 14.0x. Although it offers the best dividend yield among its peers, further upsides are capped by existing earnings unless plans for its business trust structure fruitions. Figure 1 : Forward PE Figure 2 : EV/EBITDA x x 30.0 18.0 28.0 +1sd: 16.6x 16.0 +1sd: 26.4x 26.0 14.0 24.0 Mean: 13.7x Mean: 23.6x 22.0 20.0 12.0 -1sd: 20.9x -1sd: 10.8x 10.0 18.0 8.0 16.0 14.0 Source: Bloomberg, TA Securities Source: Bloomberg, TA Securities Page 2 of 5 Jul-17 Jan-17 Apr-17 Jul-16 Oct-16 Jan-16 Apr-16 Jul-15 Oct-15 Jan-15 Apr-15 Jul-14 Oct-14 Jan-14 Apr-14 Jul-13 Oct-13 Jan-13 Apr-13 Jul-12 Oct-12 Jul-17 Jan-17 Apr-17 Jul-16 Oct-16 Jan-16 Apr-16 Jul-15 Oct-15 Jan-15 Apr-15 Jul-14 Oct-14 Jan-14 Apr-14 Jul-13 Oct-13 Jan-13 Apr-13 Jul-12 Oct-12 6.0
15. TA Securities 13-Jul-17 A Member of the TA Group Table 1 : Earnings Summary (RMmn) FYE Dec Revenue EBITDA EBITDA margin (%) Depreciation and amortisation EBIT Net finance costs Others Profit before tax Taxation MI Profit after tax Core net profit EPS (sen) EPS growth (%) PER (x) EV/EBITDA (x) DPS (sen) Dividend yield (%) FY15 6,914 2,996 43.3 (642) 2,354 (46) 0 2,309 (586) 0 1,723 1,710 22.0 (15.7) 22.3 13.4 22.0 4.5 FY16 6,597 2,955 44.8 (651) 2,304 (66) 0 2,238 (606) 0 1,633 1,635 21.0 (4.4) 23.3 13.6 20.9 4.3 Figure 3 : Voice Revenue RMmn 1,000 180 FY19F 6,524 2,973 45.6 (766) 2,207 (61) 0 2,147 (515) 0 1,631 1,631 21.0 2.9 23.4 13.5 21.0 4.3 Postpaid Prepaid RMmn Postpaid 900 891 866 900 800 FY18F 6,382 2,904 45.5 (754) 2,150 (63) 0 2,087 (501) 0 1,586 1,586 20.4 1.8 24.0 13.8 20.4 4.2 Figure 4 : Data Revenue Prepaid 893 FY17F 6,242 2,835 45.4 (724) 2,112 (62) 0 2,050 (492) 0 1,558 1,558 20.0 (4.7) 24.5 14.2 20.0 4.1 183 849 186 801 188 188 800 721 194 700 819 754 751 764 301 323 340 358 410 434 431 411 406 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 696 694 708 263 267 278 298 428 429 416 3QFY15 4QFY15 1QFY16 700 689 600 180 600 735 691 178 500 500 400 400 713 708 680 300 655 631 300 613 541 511 200 200 100 100 0 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 0 2QFY17 Source: Companies, TA Securities Source: Companies, TA Securities Figure 5 : Postpaid Figure 6 : Prepaid Internet '000 3,000 81 80 Non-internet 82 80 80 ARPU 81 RM '000 90 79 38 38 78 Internet 80 2,500 2,000 1,500 1,776 1,840 1,902 376 398 375 1,954 358 1,994 337 2,099 278 2,189 266 1,400 1,442 1,527 1,657 1,821 1,923 2,038 0 8,000 6,000 20 4,000 0 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 34 34 2QFY17 Source: Companies, TA Securities 9,899 10,285 4,275 4,225 10,434 2,000 4,044 32 32 9,587 9,738 3,454 3,465 35 10,255 10,200 3,997 3,951 3,933 25 20 15 10 5,624 6,060 3QFY15 4QFY15 6,390 6,396 6,304 6,267 6,133 6,273 5 0 0 1QFY16 Source: Companies, TA Securities Page 3 of 5 10,393 10,000 30 10 4QFY15 34 30 12,000 60 500 3QFY15 RM 70 254 40 1,596 ARPU 14,000 2,292 50 1,000 Non-internet 40 35 16,000 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
16. TA Securities 13-Jul-17 A Member of the TA Group Table 2 : 1HFY17 Results Analysis (RMmn) FYE Dec Revenue Service revenue Postpaid Data Voice Prepaid Data Voice Device & other revenue EBITDA Depreciation and amortisation EBIT Net finance costs Others Profit before tax Taxation MI Net profit Core net profit Capex 2QFY16 1,655 1,557 492 298 194 1,065 410 655 98 735 (144) 592 (16) 0 576 (155) 0 421 421 167 1QFY17 1,574 1,472 520 340 180 952 411 541 102 711 (176) 534 (25) 0 510 (137) 0 373 373 197 2QFY17 1,552 1,453 536 358 178 917 406 511 99 717 (194) 523 (40) 0 483 (124) 0 359 359 229 QoQ (%) (1.4) (1.3) 3.1 5.3 (1.1) (3.7) (1.2) (5.5) (2.9) 0.9 10.3 (2.2) 60.2 n/a (5.2) (9.0) n/a (3.8) (3.8) 16.2 YoY (%) (6.2) (6.7) 8.9 20.1 (8.2) (13.9) (1.0) (22.0) 1.0 (2.5) 35.3 (11.6) 146.9 n/a (16.1) (19.8) n/a (14.7) (14.7) 37.1 1HFY16 3,308 3,117 956 576 380 2,161 826 1,335 191 1,439 (299) 1,140 (31) 0 1,109 (290) 0 820 820 338 1HFY17 3,127 2,925 1,056 698 358 1,869 817 1,052 201 1,428 (370) 1,057 (64) 0 993 (261) 0 732 732 426 YoY (%) (5.5) (6.2) 10.5 21.2 (5.8) (13.5) (1.1) (21.2) 5.2 (0.8) 23.8 (7.3) 108.9 n/a (10.5) (9.9) n/a (10.7) (10.7) 26.0 5.4 5.4 4.8 4.7 4.6 4.6 (3.8) (2.1) (14.6) (14.8) 10.5 10.5 9.4 9.3 (10.6) (11.4) Profitability ratios (%) EBITDA margin EBIT margin PBT margin Net profit margin Tax rate 44.4 35.7 34.8 25.4 26.9 45.1 34.0 32.4 23.7 26.8 46.2 33.7 31.1 23.1 25.7 pp 1.0 (0.3) (1.3) (0.6) (1.1) pp 1.8 (2.1) (3.6) (2.3) (1.2) 43.5 34.5 33.5 24.8 26.1 45.7 33.8 31.8 23.4 26.3 pp 2.2 (0.6) (1.8) (1.4) 0.2 COGS and Opex COGS Cost of materials Traffic charges OPEX Sales and marketing Staff costs Operations and maintenance Other expenses USP fund and license fees Credit loss allowances Others 403 91 312 509 134 72 124 179 116 13 50 373 116 257 494 145 61 127 161 97 10 54 375 120 255 464 149 63 128 124 59 9 56 0.5 3.4 (0.8) (6.1) 2.8 3.3 0.8 (23.0) (39.2) (10.0) 3.7 (6.9) 31.9 (18.3) (8.8) 11.2 (12.5) 3.2 (30.7) (49.1) (30.8) 12.0 884 194 690 991 278 136 220 357 232 27 98 748 236 512 958 294 124 255 285 156 19 110 (15.4) 21.6 (25.8) (3.3) 5.8 (8.8) 15.9 (20.2) (32.8) (29.6) 12.2 12,347 10,393 1,954 11,776 9,587 2,189 12,030 9,738 2,292 Net adds 254 151 103 Net adds (317) (655) 338 42 34 82 40 32 79 41 32 78 2.5 0.0 (1.3) (2.4) (5.9) (4.9) EPS (sen) DPS (sen) Operational metrics Subscriber base ('000) Prepaid Postpaid ARPU (RM) Prepaid Postpaid Page 4 of 5
17. TA Securities 13-Jul-17 A Member of the TA Group ( T HI S P AGE I S I NT E N T I ON AL L Y L E FT B L ANK) Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD(14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 5 of 5
18. COMPANY UPDATE TA Securities A Member of the TA Group www .bursamids.com Thursday, July 13, 2017 Sector: Consumer MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 + Hup Seng Industries Berhad TP: RM1.50 (+25.0%) Last traded: RM1.20 Earnings to be Back-end Loaded BUY THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY Damia Othman Tel: +603-2167 9602 damia@ta.com.my Key takeaways from our recent meeting with management are: i. Favourable commodity price trends; ii. Expanding capacity and enhancing efficiency; and iii. Diverting to Below-The-Line marketing strategy. www.taonline.com.my Stock Return Information KLCI 1,757.24 Expected Sha re Pri ce Return (%) 4.0 Expected Tota l Return (%) We adjust our FY17 - FY19 earnings projections higher by 5.0% - 7.2% respectively. Upgrade to Buy (from hold) with higher target price of RM1.50/share. 25.0 Share Information Bl oomberg Code HSI MK Stock Code 5024 Li s ti ng Favourable Commodity Price Trends We estimate that 30% of Hup Seng’s total costs of production come from refined palm oil, thus the group’s profitability is highly dependent on the movement in CPO price. In the past, Hup Seng’s profit growth has been inversely correlated with the CPO price movement (see Figure 1). In our sensitivity analysis, we find that for every 1 percent decline in refined palm oil price, our projected earnings for Hup Seng will increase by 0.5% vice-versa. Is s ued Sha re (mn) 800.0 Ma rket Ca p (RMmn) 960.0 Pa r Va l ue (RM) 70% 3,000 50% 2,800 1.33/1.13 Es ti ma ted Free Fl oa t (%) 55.8 Beta (x) 0.5 3-Month Avera ge Vol ume ('000) 46.5 51.0 Norges Ba nk 3.0 Ceka p Ka pi ta l Sdn Bhd 2.5 Share Performance (%) HSI MK FBM KLCI 1 mth (3.2) (1.5) 3 mth 1.7 1.1 (8.3) 5.8 Price Change 2,600 10% 2,400 12 mth -10% 2,200 Financial Info -30% 2,000 Debt to Equi ty Ra ti o Adj Profit Growth - LHS 0.1 52-wk Hi /Lo (RM) HSB Group Sdn Bhd 3,200 30% Ma i n Ma rket Top 3 Shareholders (%) Figure 1: YoY Earnings Growth is Inversely Correlated to CPO Price 90% 25.0 Expected Di vi dend Return (%) CPO Price (RM/tonne) - RHS FY17 FY18 net ca s h net ca s h ROA (%) 21.1 20.9 ROE (%) 28.2 27.9 NTA/Sha re (RM) 0.2 0.2 Pri ce/NTA (x) 6.4 6.2 Source: Company & Bloomberg, TA Securities (12-Mth) Share Price relative to the FBM KLCI Considering our in-house average CPO price forecast of RM2,700/tonne for 2017, which is 1.9% YoY higher than 2016’s average of RM2,650/tonne, the cost of CPO is expected to drag Hup Seng’s FY17 results performance. In terms of quarterly results performance, FY17 earnings are expected to be back-end loaded as CPO price is expected to weaken to RM2,460/tonne in 2H17 versus RM2,940/tonne in 1H17. Note that Hup Seng’s 1Q17 earnings contracted by 15.7% YoY to RM11.7mn and one of the culprits was high refined palm oil price. As far as sugar is concerned, we understand from management that the sugar price has been on a downtrend. The group is currently paying RM2,600/tonne Page 1 of 4 Source: Bloomberg
19. TA Securities 13-Jul-17 A Member of the TA Group for its sugar consumptions . This is much lower than our assumption of RM2,780/tonne for FY17-FY19. As such, we tweak our sugar price assumption to RM2,600/tonne for FY17-FY19. Expanding Capacity and Enhancing Efficiency Hup Seng has 6 ovens with a production capacity of 39,000 tonnes/annum. It is looking to add another oven to expand the capacity to 45,500 tonnes/annum (+17%) to ease the production congestion issue faced by the company. Currently, management is in discussions with suppliers on the final specifications and we project the new oven to be commissioned by 2H18. Estimated costs for the new oven is approximately RM2.0mn. In the production process, each oven will require six workers to stack the biscuits, crackers and cookies. According to management, the group is exploring the idea of auto stacking system, which would cost approximately RM1.0mn per line, to improve productivity and increase efficiency. For a starter, Hup Seng will implement the auto stacking system onto 1 of the ovens. Currently, the system is undergoing a trial run. When completed, profit margins are expected to expand slightly due to reductions in labour costs and wastage. Given the net cash position of RM105.7mn as at FY16 and expected RM55.8mn and RM56.1mn cash flow from operation for FY17 and FY18 respectively, the estimated capex of RM3.0-4.0mn for each FY17 and FY18 can be financed via working capital. Importantly, it would not affect the group’s ability to pay dividend of 6.0sen/share for FY17 – FY19. Divert from Above-The-Line to Below-The-Line Marketing Strategy In the past, the company had been adopting the Above-The-Line (ATL) marketing strategy to reach out to its target customers. This include mass media advertising. Moving forward, Hup Seng would like to divert to Below-The-Line (BTL) strategy, i.e.: buying shelf space at supermarkets/hypermarkets with better visibility and ii) working closely with supermarkets/hypermarkets for sampling activities, which are more targeted to the intended recipients. We are positive on the adoption of BTL on the cost perspective as BTL method generally costs lesser than the ATL method. We tweak our sales and marketing (A&P) expenses lower by 1.8%-pts for FY17 and FY18. Figure 3: A&P Expenses % of Sales Estimated to Drop by 1.8%-pts 35.0 15.0 14.0 30.0 11.9 12.0 11.6 13.0 11.8 11.8 12.0 10.0 20.0 10.0 11.0 10.0 15.0 9.0 8.0 10.0 7.0 5.0 6.0 - 5.0 FY12 FY13 FY14 A&P Expenses - LHS FY15 FY16 FY17E FY18F % of A&P Expenses to Sales - RHS Source: Company, TA Securities Page 2 of 4 % RMmn 25.0
20. TA Securities 13-Jul-17 A Member of the TA Group Outlook All in , we are positive on Hup Seng’s earnings prospects on the back of i) efforts to meet growing demands, ii) initiative to improve efficiency through automated operations, iii) favorable commodity price trends and iii) opting for a more effective marketing strategy. Despite Hup Seng adopting a competitive strategy and has not increased product prices since 2011, we believe future topline growth would be driven by improving consumer sentiment and growing export sales. Forecast Given the expected reduction i) sugar costs and ii) sales and marketing expenses, we increase our earnings forecasts for FY17 – FY19 by 5.0% - 7.2%. Valuation We upgrade our call from hold to Buy with an increased target price to RM1.50/share (previously RM1.39/share) based on DDM valuation. Downside risks to our call are i) wild swing in commodity prices, and ii) weakening of ringgit against major currencies. Peers Comparison COMPANY F&B Hup Seng F&N QL Resources Nestle Dutch Lady Spritzer Cocoaland Power Root Kawan Food Brewery Carlsberg Heineken Retail Aeon Amway Padini Tobacco BAT Industrial Scientex Signature Poh Huat Recom. Price (RM) TP (RM) Market Cap (RMmn) PER (x) CY17 CY18 EPS Growth (%) CY17 CY18 ROE (%) CY17 CY18 Div Yield (%) CY17 CY18 Buy Hold Sell Hold Non Rated Non Rated Non Rated Non Rated Non Rated 1.20 25.38 4.90 83.50 58.0 2.38 3.08 2.33 4.74 1.50 27.41 4.41 88.66 NA NA NA NA NA 968.0 9,302.8 1,528.8 19,580.8 3,712.0 434.5 704.7 754.0 1,278.1 18.4 19.8 29.9 28.8 24.8 16.4 16.6 14.0 28.9 18.2 16.2 26.9 25.5 22.6 NA 15.8 13.0 23.1 5.3 17.2 5.7 14.0 0.5 (5.7) (3.1) 25.4 24.2 1.3 22.4 10.9 13.0 9.6 NA 5.4 7.2 25.0 28.1 10.4 5.5 25.3 97.0 8.2 16.6 20.5 14.4 27.9 11.4 5.6 27.6 108.7 9.7 16.1 20.5 17.4 5.0 2.8 1.0 3.3 4.3 2.3 3.2 4.6 1.5 5.1 3.2 1.0 3.4 4.5 NA 3.3 5.6 1.6 Buy Buy 15.10 18.04 17.84 21.08 2,308.4 2,724.9 20.1 19.4 18.5 17.7 12.2 (34.2) 8.8 9.4 67.2 63.6 69.8 65.2 4.9 4.6 5.4 5.1 Sell Hold Buy 2.20 7.36 3.64 2.23 8.62 4.10 1,544.4 1,209.9 2,394.8 32.7 27.9 16.3 27.9 18.1 14.7 34.4 (20.7) 6.8 17.3 54.0 10.8 4.9 21.2 15.2 5.6 31.2 15.1 1.8 1.4 2.2 2.2 2.0 2.5 Hold 42.58 52.08 6,078.9 21.4 22.7 (21.4) (5.6) 92.7 90.5 4.7 4.7 Buy Buy Buy 8.53 0.91 1.95 9.71 1.23 2.46 978.7 534.6 442.6 14.2 9.2 7.8 12.5 7.3 8.3 12.1 7.5 18.9 14.1 25.0 (5.3) 8.3 6.7 10.5 8.3 7.6 8.8 2.2 3.3 3.1 2.4 4.1 4.1 Page 3 of 4