Bursa Malaysia Daily Market Report - 18 August

Transcription

1. Friday , 18 August, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. 2. 3. 4. Carlsberg (M) Berhad: Higher Margins Driven by Premium Brands Malaysian Pacific Industries Berhad: Automotive to Drive Future Growth Serba Dinamik Holdings Bhd: Leveraging on Pengerang Integrated Complex SP Setia Berhad: Anticipate Stronger Profits in 3Q 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
2. Daily Note Daily Market Commentary Friday , 18 August 2017 (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 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only KLSE Market Statistics (17.08.2017) Volume (mil) +/-chg (RMmn) Main Market 1,019.1 59.7 1,705.0 Warrants 314.8 91.2 49.8 ACE Market 448.9 -55.6 119.1 Bond 21.9 -10.5 4.3 ETF 0.0 0.03 0.0 Total 1,804.7 1,878.2 Off Market 65.4 4.9 61.6 Value +/-chg 128.5 25.8 -74.9 -2.0 0.03 -109.5 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP August 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 Review & Outlook Value/ Volume 1.67 0.16 0.27 0.20 1.06 1.04 0.94 Up Down 348 239 101 49 40 43 7 0 1 1 497 332 % chg % YTD chg 1,776.31 12,626.14 17,073.93 1,772.00 2.56 28.08 123.33 -0.50 0.14 0.22 0.73 -0.03 8.20 10.11 16.03 8.35 21,750.73 6,221.92 7,387.87 19,702.63 2,361.67 27,344.22 3,268.88 1,568.95 5,891.95 3,268.43 1,909.39 5,779.21 -274.14 -123.19 -45.16 -26.65 13.41 -64.85 -10.07 1.43 0.00 21.98 11.00 -5.89 -1.24 -1.94 -0.61 -0.14 0.57 -0.24 -0.31 0.09 0.00 0.68 0.58 -0.10 10.06 15.58 3.43 3.08 16.54 24.29 13.47 1.69 11.24 5.31 -3.03 2.00 The local benchmark index recovered further Thursday on mild local fund buying support while construction related stocks climbed on positive news flow. The KLCI rose 2.56 points to close at the day's high of 1,776.31, off an intra-day low of 1,773.24, as gainers led losers 497 to 332 on moderate turnover totaling 1.8bn shares worth RM1.88bn. The local market should slip into correction mode in line with the region following the overnight US correction due to the political fallout from key business advisors with the U.S president. Immediate overhead resistance for the index is still at 1,783, the upper Bollinger band, followed by the 16 June peak of 1,796. Immediate support will be the 100-day moving average level at 1,764, with next major support at 1,729, a key support in April. Positive technical momentum on HSL should assist recovery towards the 76.4%FR (RM1.57), with next resistance seen from the 61.8%FR (RM1.63), while crucial support will be from the recent low of RM1.48. Extreme oversold momentum on KKB Engineering shares enhance rebound potential towards RM1.00, with next upside hurdles from the 23.6%FR (RM1.08) and 38.2%FR (RM1.20), and crucial support from the recent low of 89sen. News Bites SLP - 1:5 Bonus Issue - BI of up to 52.8m shares. 1 bonus share for every 5 existing shares. Ex-Date: 18/08/2017. Entitlement Date: 22/08/2017. LISTING ON: 23/08/2017. • Kerjaya Prospek Group Bhd has been awarded a RM442mn contract for the main building works of the proposed development project known as "Vertu Resort" in Penang from Aspen Vision City Sdn Bhd. • Tex Cycle Technology Bhd has proposed Bonus Issue of up to 85.40mn new ordinary shares on the basis of 1 bonus share for every 2 existing ordinary shares in Tex Cycle, ESOS of up to 10% and Special Bumiputera Issue of up to 12.5% of the enlarged total number of shares. • Glomac Bhd has received an amended writ and amendment statement of claim from Score Option Sdn Bhd totaling RM154.80mn. • Crest Builder Holdings Bhd has been awarded a contract worth RM16.3mn by China State Construction Engineering (M) Sdn Bhd for air conditioning and mechanical ventilation services for Proposed Media City Angkasapuri, Kuala Lumpur. • Seacera Group Bhd intends to develop some RM10bn worth of properties within its 200.6ha land in Semenyih, Selangor. • Gamuda Bhd expects its annual manufacturing capacity of industrialized building system component to become more than double to 8k units, with the completion of the second facilities in Banting by the end of 2018. • Scomi Group Bhd, Scomi Energy Services Bhd and Scomi Engineering Bhd will suspend trading of their shares from 3pm today until 5pm next Monday to release a material announcement that may entail the consolidation or restructuring of businesses. • Rex Industry Bhd plans to undertake a share split involving the subdivision of every one existing REX Share into four splits shares. • Serba Dinamik Holding Bhd intends to enter into a MOA with Izin Budi Sdn Bhd for a collaborative development of industrial and commercial projects on a piece of land measuring approximately 15.87 acres located at Pengerang, Johor. • Hong Leong Industries Bhd's FY17 net profit more than halve to RM103.09mn from RM247.22mn in FY16, mainly due to the impairment provision. • Pos Malaysia Bhd's net profit up 19.1% YoY to RM37.91mn for 1QFY18 due to higher contribution from its courier segment, international division, and its newly acquired logistics and aviation business. • Carlsberg Brewery Malaysia Bhd registered 18.6% YoY increase in net profit amounting to RM60.92mn. • SP Setia Bhd's net profit rose 8.38% YoY to RM136.32mn for 2QFY17 due to higher units of residential properties being completed and handed over for Battersea Power Station Phase 1. • Initial jobless claims in the U.S., declined by 12,000 to a seasonally adjusted 232,000 in the week ended Aug. 12. ELKDES A - 1:5 Rights Issue - RI of up to 51.6m shares. ELKDESA 1 rights share for every 5 existing shares held, at an issue price of RM1.16 per rights share. Application Closed: 23/08/2017. LISTING ON: 08/09/2017. Exchange Rate USD/MYR 4.2951 -0.0024 USD/JPY 110.15 -0.6700 EUR/USD 1.170 -0.0004 Top 10 KLCI Movers Based on Mkt Cap. Off Market BJASSET REACH G3 WZSATU (mn) 40.0 15.0 6.8 3.0 @ @ @ @ (RM) 1.05 0.38 1.20 1.09 Counter Mkt Cap. (RM’mn) MAYBANK 102,386 TENAGA 80,584 CIMB 58,240 PCHEM 49,682 AXIATA 44,989 MAXIS 43,641 DIGI 37,553 GENM 35,031 IOICORP 31,623 RHBBANK 19,770 Chg (RM) 0.01 0.02 0.12 0.01 0.01 0.01 0.01 0.12 0.06 0.06 Vol. (mn) 8.14 4.81 7.03 4.00 3.05 2.75 2.44 6.87 1.18 0.51 Important Dates Commodities Futures Palm Oil (RM/mt) 2,658.00 25.00 Crude Oil ($/Barrel) 46.93 0.16 Gold ($/tr.oz.) 1,290.30 4.80 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. TA Securities Friday , August 18, 2017 FBMKLCI: 1,776.31 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 Correction Mode in Line with Region The local benchmark index recovered further Thursday on mild local fund buying support while construction related stocks climbed on positive news flow. The KLCI rose 2.56 points to close at the day’s high of 1,776.31, off an intra-day low of 1,773.24, as gainers led losers 497 to 332 on moderate turnover totaling 1.8bn shares worth RM1.88bn. Resistance at 1,783, Support at 1,764 The local market should slip into correction mode in line with the region following the overnight US correction due to the political fallout from key business advisors with the U.S president. Immediate overhead resistance for the index is still at 1,783, the upper Bollinger band, followed by the 16 June peak of 1,796. Immediate support will be the 100-day moving average level at 1,764, with next major support at 1,729, a key support in April. Buy HSL & KKB for Rebound Positive technical momentum on HSL should assist recovery towards the 76.4%FR (RM1.57), with next resistance seen from the 61.8%FR (RM1.63), while crucial support will be from the recent low of RM1.48. Extreme oversold momentum on KKB Engineering shares enhance rebound potential towards RM1.00, with next upside hurdles from the 23.6%FR (RM1.08) and 38.2%FR (RM1.20), and crucial support from the recent low of 89sen. Asian Markets Mixed as US Politics Weigh Asian markets closed mixed on Thursday after a rally in the dollar was halted on political turbulence stateside while investors digested the Wednesday release of the Federal Reserve's minutes. Japan's Nikkei 225 edged down 0.14 percent, or 26.65 points, to close at 19,702.63, with autos and financial stocks ending the session lower. Across the Korean strait, the Kospi advanced 0.57 percent, or 13.41 points, to end at 2,361.67, as steel stocks rose on optimism about third-quarter earnings. Posco finished up 4.71 percent and Hyundai Steel gained 2.81 percent. Australia's benchmark S&P/ASX 200 index slid 0.10 percent, or 5.902 points, to close at 5,779.200, as gains in the materials and health care sub-indexes were balanced by losses in the telecommunication services sub-index. Shares of Telstra contributed to the steep losses in the telco space: The company closed down 10.62 percent after it said it would reduce dividends. Hong Kong's Hang Seng Index slipped 0.30 percent as earnings reporting season continued. Mainland markets closed higher: The Shanghai Composite rose 0.68 percent, or 22.1670 points, to end at 3,268.6182 and the Shenzhen Composite added 0.579 percent, or 10.9981 points, to close at 1,909.3846. Wall Street Lower on Washington Worries U.S markets fell sharply on Thursday with the Dow and S&P 500 tumbling to its biggest decline in three months as escalating worries about the Trump administration's ability to push through its economic agenda rattled investors. All 30 companies in the Dow Jones Industrial Average fell, along with all 11 major sectors of the S&P 500. Tech sector was down Page 1 of 10
4. TA Securities 18-Aug-17 A Member of the TA Group 2 percent , while industrials and financial sectors both shed 1.7 percent. The index started falling earlier on fears that Gary Cohn, could resign his role as director of National Economic Council. Stocks extended declines following a terror attack in Barcelona that left at least 13 people dead and more than 50 others injured. Cisco Systems shed 4 percent a day after its results, while Wal-Mart was down 1.6 percent after reporting a drop in margins due to continued price cuts and e-commerce investments. The Dow Jones Industrial Average fell 274.14 points, or 1.24 percent, to 21,750.73, the S&P 500 lost 38.10 points or 1.54 percent, to 2,430.01 and the Nasdaq Composite fell 123.19 points or 1.94 percent at 6,221.91. Page 2 of 10
5. TA Securities 18-Aug-17 A Member of the TA Group News In Brief Corporate Kerjaya Prospek Group Bhd has been awarded a contract for the main building works of the proposed development project known as "Vertu Resort” in Penang from Aspen Vision City Sdn Bhd, a joint venture company of Aspen Group and IKEA Southeast Asia, for a total contract sum of RM442mn. The Project will comprise of 5 condominium blocks ranging from 20-storeys to 36-storeys consisting of 1,246 units of condominiums which are expected to be completed within 38 months starting from September 2017. (Bursa Malaysia) Tex Cycle Technology Bhd has proposed Bonus Issue of up to 85.40mn new ordinary shares on the basis of 1 bonus share for every 2 existing ordinary shares in Tex Cycle. In addition, the group also further proposed establishment of an Employees’ Share Scheme of up to 10% of the total number of shares and Special Bumiputera Issue of up to 40.26mn new shares representing 12.5% of the enlarged total number of shares to Bumiputera investors. The proceeds arising from employees’ share scheme will be used for working capital. Meanwhile, the proposed Special Bumiputra Issue is expected to raise gross proceeds of up to RM31mn which will be utilized for business expansion, working capital, and expenses in relation to the proposals. The proposals are expected to be completed in 1Q2018. (Bursa Malaysia) Glomac Bhd has received an amended writ and amendment statement of claim from Score Option Sdn Bhd totaling RM154.80mn. The suit was based on the joint venture agreement dated in year 2003 in which Score Option now is claiming for a compensation sum of RM107.80mn for the loss of land; an unspecified amount of loss of expenses of the project, and 2% of gross development value of the project or a minimum of RM47mn whichever the higher. The group said the financial and operational impact of the pending litigation is depending on the outcome as the group will file a memorandum of appearance in due course and apply to strike out the suit. (Bursa Malaysia/The Star) Comment: The claimant is claiming more than RM100mn, for the compensation of a property project in Puchong. Limited details were disclosed in the announcement. In 2011, similar issues were brought up in a civil suit where it has been struck off by the high court and court of appeal. The Plaintiff and its directors have been declared insolvent. The case is fixed for case management on 21 August 2017. While it may take some time to conclude the dispute, the negative development may affect the sentiment on the stock as the amount claimed is substantial and exceeds our FY18 to FY20 net profit forecasts of between RM46mn and RM74mn. Pending the outcome of the case, we make no changes to our earnings forecasts. Maintain our HOLD recommendation on the stock with an unchanged TP of RM0.70/share. Crest Builder Holdings Bhd has been awarded a contract by China State Construction Engineering (M) Sdn Bhd for the supply, delivery, installation and commissioning of air conditioning and mechanical ventilation services for Proposed Media City Angkasapuri, Kuala Lumpur, for a contract sum of RM16.28mn. The duration of the contract is about 23 months effective from end of July 2017. (Bursa Malaysia) Seacera Group Bhd intends to develop some RM10bn worth of properties within its 200.6ha land in Semenyih, Selangor, as part of its diversification from tile manufacturing. The group is considering to work with a prominent property developer to undertake a mixed project on the tract located about 8km from the Semenyih and Kajang town centres. (The Edge) Gamuda Bhd expects its annual manufacturing capacity of industrialized building system component to become more than double to 8k units, with the completion of the second facilities in Banting by the end of 2018. (The Edge) Scomi Group Bhd and its related companies, Scomi Energy Services Bhd and Scomi Engineering Bhd, have obtained the approval from Bursa Malaysia to suspend the trading Page 3 of 10
6. TA Securities 18-Aug-17 A Member of the TA Group of the companies ’ shares with effect from 3.00 p.m., Thursday, 17 August 2017 to 5.00 p.m., Monday, 21 August 2017 due to release of material announcement. The group could announce a plan that may entail the consolidation and possible restructuring of businesses. (Bursa Malaysia/The Edge) Rex Industry Bhd (REX) plans to undertake a share split involving the subdivision of every one existing REX Share into four splits shares. The Proposed Share Split is expected to enhance the marketability and trading liquidity as well as offering a more affordable entry price which might appeal to a wider group of investors to participate in the growth of the company. The Proposed Share Split should be completed by 4Q2017. (Bursa Malaysia) Serba Dinamik Holding Bhd intends to enter into a Memorandum of Agreement (MOA) with Izin Budi Sdn Bhd for a collaborative development of industrial and commercial projects on a piece of land measuring approximately 15.87 acres located at Bukit Pelali, Mukim Pengerang, Daerah Pengerang, Johor. The group aims to establish Malaysia’ first oil and gas maintenance, inspection, repair, and overhaul global centre in Pengerang. In addition, the group also plans to enter into MOA with Aimurisi Holding Sdn Bhd to participate in the construction work of a 70-acre mixed residential and commercial development area on a piece of contiguous land located at Mukim Pantai Timur, Daerah Kota Tinggi, Johor. (Bursa Malaysia) Fajarbaru Builder Group Bhd has a good chance of getting its hands on the anticipated 37km LRT3 project that connects Bandar Utama to Klang as the group positions itself as full-fledged rail infrastructure company, according to its group managing director Eric Kuan Khian Leng. (The Edge) Hong Leong Industries Bhd plunged into the red for 4QFY17 with a net loss of RM104.57mn, in comparison with a net profit of RM69.49mn a year ago, due to a one-off full impairment provision of RM172mn on its investment in Malaysian Newsprint Industries Sdn Bhd. Meanwhile, the quarterly revenue slipped down 0.8% YoY slightly to 569.01mn. For FY17, it saw net profit more than halve to RM103.09mn from RM247.22mn in FY16, mainly due to the impairment provision. Revenue for FY17 was up 4.1% YoY to RM2.28bn. (Bursa Malaysia/The Edge) Pos Malaysia Bhd’s net profit up 19.1% YoY to RM37.91mn for 1QFY18 due to higher contribution from its courier segment, international division, and its newly acquired logistics and aviation business. The quarterly revenue expanded 47.1% to RM611.63mn from RM415.87mn a year ago. The group believes e-commerce will be the key driver for revenue growth in future. (Bursa Malaysia/The Edge) Carlsberg Brewery Malaysia Bhd registered 18.6% YoY increase in net profit in 2Q17 ended June 30 to RM60.92mn. The quarterly revenue went up 4.1% YoY to RM412.14mn. The stronger finance performance was mainly due to higher sales volume and a one off trade discount adjustment in Singapore. Besides, the group also recorded higher share of profit in the second quarter from its associate company in Sri Lanka. The group declared a single tier interim dividend of 10sen per share. (Bursa Malaysia/The Edge) S P Setia Bhd’s net profit rose 8.38% YoY to RM136.32mn for 2QFY17 due to higher units of residential properties being completed and handed over for Battersea Power Station Phase 1, as compared with lesser units completed in the preceding quarter. Nevertheless, the revenue dropped 21.6% YoY to RM794.71mn which was attributable to lower income from its property development, construction and other operations. The group declared an interim dividend of 4sen per share. In a separate note, the group has confirmed that the second phase of the Battersea Power Station Project in London has seen rising of construction costs due to push up for the building envelope, changes in design and inflation. (Bursa Malaysia/The Edge) Page 4 of 10
7. TA Securities 18-Aug-17 A Member of the TA Group Shangri-La Hotels (M) Bhd’s net profit declined 17.5% YoY to RM13.28mn for 2QFY17 which was due to lower contribution from the group's resorts in Penang and Sabah. Besides, the fall was also contributed by unfavourable foreign currency translation impact on the group's US dollar loans to its associates in Myanmar. Quarterly revenue increased 10.2% YoY to RM122.99mn and the group declared an interim dividend of 3sen per share. (Bursa Malaysia/The Edge) Allianz Malaysia Bhd’s net profit declined 12.9% YoY to RM66.48mn for 2QFY17 mainly due to higher expenses especially on the investment in the digital assets and provision for impairment on insurance receivables. The quarterly revenue rose 3.95% YoY to RM1.19bn. The group expects competition to intensify for its general insurance business and as such, it will take key initiatives to remain competitive such as building a technical pricing model, active portfolio and claims management, as well as disciplined expense management. (Bursa Malaysia/The Edge) Notion VTec Bhd registered net profit of RM2.77mn for 3QFY17, compared with a net loss of RM5.5mn a year ago, due to income tax gain. The quarterly revenue increased 27.58% YoY to RM67.78mn. The camera segment continues to be on a decline and the expected new businesses in the engineered products will likely contribute significantly in the next financial year onwards. The group declared a third interim dividend of 0.75sen per share. (Bursa Malaysia/The Edge) Malayan Flour Mills Bhd’s net profit dropped 47.3% YoY to RM16.15mn for 2QFY17 due to lower margins in flour and grains trading segment coupled with higher operating expenses in both flour and grains trading and poultry integration segments. The quarterly revenue declined by 5.3% to RM575.9mn which mainly attributable to lower sales volume recorded in flour and grains trading segment. The group declared an interim single tier dividend of 3.0sen per share. (Bursa Malaysia) Tasco Bhd’s net profit for 1QFY18 surged 17.2% YoY to RM7.04mn while the quarterly revenue posted 21.0% YoY increase to RM156.96mn. The stronger financial result was mainly attributable to higher contributions from international business solutions. (Bursa Malaysia) Jaks Resources Bhd's net profit for 2QFY17 dropped 79.9% YoY to RM1.98mn due to losses in its property development division and one-off expenses in relation to the granting of share options. The group posted 7.4% YoY increase of revenue amounting to RM170.95mn as it was mainly driven by higher contribution from construction division. (Bursa Malaysia/The Edge) JobStreet Corporation Bhd's net profit for 2QFY17 slipped 31.9% YoY to RM2.05mn which was attributable to unrealised foreign exchange losses. Meanwhile, the quarterly revenue grew 41.6% YoY to RM3.37mn thanks to higher dividend income, higher investment distribution income and interest income. (Bursa Malaysia) JCY International Bhd posted a net loss of RM9.98mn as compared to net loss of RM28.6mn a year ago was due mainly to favorable USD exchange rate against Ringgit recorded in current reporting periods. The quarterly revenue increased 13.5% YoY to RM390.2mn due to higher volume shipped and favorable USD exchange rate also. The group declared a single tier third interim dividend of 0.75sen per share. (Bursa Malaysia) Sam Engineering & Equipment Bhd’s net profit slipped 1.7% YoY slightly to RM9.67mn for 1QFY18 while the quarterly revenue increased 4.9% YoY to RM133.36mn. The increase in revenue was mainly due higher revenue contribution from Aerospace segment. (Bursa Malaysia) Page 5 of 10
8. TA Securities 18-Aug-17 A Member of the TA Group Vitrox Corporation Bhd ’s net profit surged 48.0% YoY to RM21.34mn for 2QFY17 due to higher revenue recorded for Machine Vision System and Automated Board Inspection as the demand for these products had picked up. The quarterly revenue increased 37.05% YoY to RM77.62mn. (Bursa Malaysia) Century Logistic Holdings Bhd’s net profit declined 44% YoY to RM3.01mn for 2QFY17. Meanwhile, the quarterly revenue fell 13% YoY to RM71.95mn. The group said its total logistic services and procurement logistic services recorded lower revenue and pre-tax profit due to lower activity amid the Hari Raya festival during the quarter. (Bursa Malaysia/The Edge) Page 6 of 10
9. TA Securities 18-Aug-17 A Member of the TA Group News In Brief Economy Asia Malaysia ’s Medical Inflation at Double-Digit Pace Besides rising food prices, Malaysians are facing double-digit healthcare inflation, according to a global survey done by consulting and broking entity Mercer Marsh Benefits, which is affiliated to Marsh Insurance Broking (Malaysia) Sdn Bhd (MIB). Malaysia’s healthcare inflation stood at 11.5% in 2016 and is projected to rise to 12.7% this year, the survey shows. The pace is much faster than the average of 10.7% in Asia last year, and the rate is projected to ease to 10.2% this year. In fact, Malaysia is the third-highest among the 11 Asian countries surveyed, after India’s 14% and Indonesia’s 13.1%, in terms of healthcare inflation rate. Asian countries surveyed were China, Hong Kong, India, Indonesia, the Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam and Malaysia. The survey was conducted in 63 countries between March and May this year. Among the reasons for the growing inflationary pressure on medical costs, the top three are utilisation medical services as more people are falling sick, the growing ageing population, and the costly advancement of medical technology, said Marsh Insurance Brokers (Malaysia) Sdn Bhd’s (MIB) senior and vice-president and national practice leader Ho Mun Kiat yesterday at the 2017 Mercer Marsh Benefits seminar. Also, Ho noted that the weak ringgit is another major factor that has fuelled the inflationary pressure on healthcare as a result of more expensive imported medical equipment and supplies. Other news in Malaysia: • Malaysia is on track to export RM50bn halal products by 2020 from RM42.18bn last year, aided by more entrepreneurs increasing their presence in the global market, said Halal Industry Development Corporation (HDC) Chief Executive Officer, Datuk Seri Jamil Bidin. He said despite the global economic downturn, demand for halal products, especially food and beverages, remained high with China continuing to be the biggest importer, and followed by Singapore and Indonesia. • The Construction Industry Development Board Malaysia (CIDB) expects a 5% reduction in construction cost by 2020, if the use of Industrialised Building System (IBS) is made mandatory by then. (The Edge Market/ The Star/ New Straits Times) Singapore Non-Oil Exports Expand for Third Straight Month Singapore's non-oil domestic exports (NODX) in July rose 8.5% from a year earlier, slower than a revised 8.8% growth in June, and driven by continuing strength in electronics. July's NODX growth came in below a median forecast of 9.1% made by analysts polled by Bloomberg. NODX rose by 8.8% in June, revised up from an earlier estimate of 8.2%, and 0.4% in May. YoY, exports of electronic products - which comprised 28.8% of NODX in the 1H 2017 - increased by 16.3% in July, about triple the 5.4% growth in the previous month, according to data from International Enterprise (IE) Singapore. (The Straits Time) Australia Jobless Rate Unchanged At 5.6% The jobless rate in Australia came in at a seasonally adjusted 5.6% in July, the Australian Bureau of Statistics said. That was in line with expectations and unchanged from the June reading. The Australian economy added 27,900 jobs to 12,201,400 in July - beating expectations for an increase of 20,000 following the addition of 14,000 jobs in the previous month. Full-time employment decreased 20,300 to 8,342,300 and part-time employment increased 48,200 to 3,859,100. Unemployment increased 1,100 to 730,600. The number of unemployed persons looking for full-time work decreased 3,800 to 496,400 and the number of unemployed persons only looking for part-time work increased 4,900 to 234,200. The participation rate ticked up to 65.1% - exceeding expectations for 65.0%, which would have been unchanged. Monthly hours worked in all jobs decreased 14.4 million hours (0.8%) to 1,690.4 million hours. (RTT News) Page 7 of 10
10. TA Securities 18-Aug-17 A Member of the TA Group Japan July Trade Surplus Y418 .8bn Japan posted a merchandise trade surplus of Y418.8bn in July, the Ministry of Finance said down 17.0% on year. The headline figure topped forecasts for a surplus of Y327.1bn but was down from Y439.8bn in June. Exports climbed 13.4% on year to Y6.494tn, beating forecasts for 13.2% and up from 9.7% in the previous month. Exports to Asia climbed 14.8% on year to Y3.495tn, while exports to China alone advanced an annual 17.6% to Y1.211tn. Exports to the United States gained 11.5% on year to Y1.318tn and exports to the European Union added an annual 8.3% to Y721.068bn. Imports picked up an annual 16.3% to Y6.076tn versus expectations for 17.1% and up from 15.5% a month earlier. Imports from Asia jumped 18.1% on year to Y3.026tn, while imports from China alone gained an annual 13.1% to Y1.467tn. Imports from the United States were up 13.9% to Y671.747bn, while imports from the European Union gained 3.1% to Y688.176bn. The adjusted trade surplus was Y337.4bn, exceeding expectations for Y195.3bn and up from Y87.3bn in June. (RTT News) Economic Growth in the Philippines Exceeds 6% for Eighth Quarter The Philippines’ economy grew faster than 6% for an eighth consecutive quarter, underscoring the nation’s resilience as domestic and global challenges mount. Gross domestic product increased 6.5% in the Q2 from a year earlier, the Philippine Statistics Authority said in Manila, after expanding 6.4% in the Q1. That was near to the median estimate of 19 economists surveyed by Bloomberg was for growth of 6.4%. The Philippines, already one of the world’s fastest-expanding economies, is being buoyed by strong domestic demand and President Rodrigo Duterte’s planned spending on roads, railways and ports. The International Monetary Fund sees the Southeast Asian nation’s economy growing about 6.8% over the medium term. The government is also fighting a political insurgency in the restive Muslim-majority south, putting pressure on the budget and adding to investor uncertainty. Consumer spending, which makes up about 70% of GDP, gained 5.9% from a year earlier while government spending rose 7.1%. (Bloomberg) United States US July Industrial Production Rises Slightly Less than Forecast Production at US factories, mines and utilities rose a shade less than expected in July, weighed down by a decline in manufacturing output and tepid mining growth. Industrial production climbed 0.2% in July from the previous month, a fall from the 0.4% gain that was recorded in June, the Federal Reserve said. Economists had forecast a rise of 0.4%. Manufacturing production slipped 0.1%, reversing a 0.2% climb in June. Mining rose 0.5% and utilities jumped 1.6%. The data represent a smudge on what has otherwise been an upbeat start to the third quarter, with retail sales data out earlier this week beating economists’ expectations. (Financial Times) U.S. Jobless Claims Dropped to 232,000 Last Week The number of Americans filing new applications for unemployment benefits dropped last week from already low levels, a sign of health in the U.S. labour market. Initial jobless claims, a proxy for layoffs across the U.S., declined by 12,000 to a seasonally adjusted 232,000 in the week ended Aug. 12, the Labor Department said. That was the lowest level since February and the second-lowest weekly reading since 1973. “The trend is still extraordinarily low, signalling that firms are very reluctant to let people go, presumably because it is so hard to find replacements,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients. Economists surveyed by The Wall Street Journal had expected 240,000 new claims last week. Initial claims for the week ended Aug. 5 were left unrevised at 244,000. Data on jobless claims are volatile. The more-stable fourweek moving average was 240,500 last week, down by 500 from the prior week. (The Wall Street Journal) Page 8 of 10
11. TA Securities 18-Aug-17 A Member of the TA Group Philly Fed Index Indicates Slightly Slower Growth in August Manufacturing activity in the Philadelphia-area saw a slightly slower rate of growth in the month of August , the Federal Reserve Bank of Philadelphia revealed in a report. The report said the Philly Fed Index edged down to 18.9 in August from 19.5 in July, although a positive reading still indicates growth in regional manufacturing activity. The index has been expected to dip to 18.5. The modest decrease by the headline index was partly due to a slowdown in the pace of job growth, as the number of employees index dipped to 10.1 in August from 10.9 in July. On the other hand, the new orders index jumped to 20.4 in August from 2.1 in July and the shipments index surged up to 29.4 from 12.2. The report also said the prices paid index rose to 21.1 in August from 19.1 in July, while the prices received index climbed to 13.5 from 9.0 in the previous month. Looking ahead, the Philly Fed said the survey's indexes of future activity indicate that firms expect a continuation of growth in the region's manufacturing sector over the next six months. (RTT News) Leading Economic Indicators Index Rose in July A basket of economic indicators rose in July for the seventh consecutive month. The Conference Board’s leading economic index rose 0.3% to 128.3 last month. The results are in line with what economists surveyed by The Wall Street Journal expected. Ataman Ozyildirim, director of business cycles and growth research at the Conference Board, said the index “may experience further improvements in economic activity in the second half of the year.” Despite a large negative contribution from housing permits, the index rose primarily on new orders and sentiment. Comprised of 10 components, including initial claims for jobless benefits, factory orders and the S&P 500’s price change, the index is intended to signal swings in the business cycle and to smooth out some of the volatility of individual indicators. The board’s coincident index—designed to reflect current economic conditions and made up of four data points including nonfarm payrolls—rose 0.3% last month after climbing 0.1% in June. The index of lagging indicators rose 0.1% in July after increasing 0.2% in June. (The Wall Street Journal) Europe and United Kingdom British Retail Sales Slow in July After Strong Second Quarter British retail sales slowed as expected in July after a strong second quarter, as shoppers cut back on purchases of most things other than food, adding to worries about a fall in consumer demand. Retail sales volumes grew by 0.3% MoM in July, a shade above economists' forecasts in a poll for a 0.2% rise, the Office for National Statistics said, and the same as a downwardly revised reading for June. Looking at the three months to July as a whole, which smooth out monthly volatility in the data, sales growth dropped to 0.6% from an unchanged 1.5% for the Q2, the strongest calendar quarter since Q3 2016. Rising inflation has eaten into British consumers' disposable income this year, causing the weakest Q1 for retail sales since 2010, as the fall in the pound after last year's Brexit vote pushed up the cost of the imports. Compared with a year earlier, growth in sales volumes was the slowest since November 2013 at 1.8%. Official data showed that wages in the Q2 were 0.5% lower in real terms than in 2016, one of the biggest falls in the past three years. There are some signs, however, that the rapid rise in inflation - which has quadrupled over the past year - is starting to level off. The Bank of England expects inflation to peak at around 3% in October, compared with 2.6% now. The volume of purchases of almost all categories of goods other than food dropped in July, the ONS said. (Reuters) ECB Worried by Euro Strength, Toyed With Changing Forward Guidance The European Central Bank was worried in July that the euro might become too strong and decided against a change to its forward guidance that could have driven the currency higher, the accounts of its latest meeting showed. “Concerns were expressed about the risk of the exchange rate overshooting in the future,” the minutes of the July 19-20 meeting said. A fall in the euro against the dollar accelerated when the minutes were released, with the common currency down 0.9% on the day before regaining some ground. “A suggestion was made that some consideration be given to an incremental adjustment in the language on forward guidance,” the minutes said. Page 9 of 10
12. TA Securities 18-Aug-17 A Member of the TA Group This was based on the notion that waiting too long to tweak guidance could create a “misalignment” between the ECB’s communication and its assessment of the economy, which could bring about increased market volatility when the communication eventually changed. The council ultimately rejected this idea as, “it was generally judged paramount at this stage to avoid sending signals that could be prone to over-interpretation and might prove premature.” The minutes depicted a central bank that doesn’t want to pull the plug too soon on its large bond-buying program, especially as inflation isn’t yet at its target of just below 2% in the medium term. (The Wall Street Journal) Eurozone Inflation Stable in July, Core Inflation Rises Year on Year Inflation in the 19 countries sharing the euro currency remained stable in July, European statistics office Eurostat said, but the much watched core inflation metric excluding volatile energy costs and unprocessed food rose. Eurostat confirmed its earlier flash estimate of annual inflation in the Eurozone at 1.3%, with price rises excluding energy and unprocessed food, a metric closely followed by the European Central Bank in setting monetary policy, also confirmed at 1.3%. While price rises are still below the ECB's target of close to but below 2% per year, core inflation has increased from 1.2% in June and came in above analyst estimates of 1.2% in a poll of 29 economists conducted by Reuters. Other economic data released showed that the Eurozone’s trade surplus came in ahead of analysts' expectations at 26.6 billion euros ($31.22 billion) in June. Eurostat added that exports from the Eurozone increased by 3.9% in June compared to last year, while imports were up 6.2%. In the first six months of the year, European Union trade rose with all its main partners, most notably with Russia, China and South Korea. (Reuters) Share Buy-Back: 17 August 2017 Company DAIBOCI TNLOGIS UNIMECH Bought Back Price (RM) Hi/Lo (RM) 4,100 585,300 5,000 2.20 1.76/1.74 1.05 2.20/2.18 1.77/1.74 1.06/1.03 Total Treasury Shares 327,600 12,406,900 5,505,710 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 10 of 10
13. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 17-Aug-17 1.89 2.23 5.70 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 0.81 0.50 1.28 10.3 24.1 19.7 15.8 25.3 30.6 18.3 9.3 28.9 11.9 8.8 18.6 6.2 4.0 2.3 8.4 4.0 3.5 2.41 2.70 5.98 -21.6 -17.4 -4.7 1.87 2.08 4.09 1.1 7.2 39.3 -11.3 4.2 35.0 4.80 3.70 5.70 8.00 17.50 11.00 23.60 5.80 11.10 1.26 0.87 1.30 1.45 0.62 0.93 0.77 1.30 0.72 33.6 29.4 43.9 49.6 105.2 71.4 137.2 50.7 40.2 30.5 33.6 48.4 55.2 115.5 80.7 142.4 54.5 39.0 11.3 8.6 10.7 13.6 14.7 13.6 15.0 9.7 25.2 12.5 7.5 9.7 12.3 13.4 12.0 14.4 9.0 26.0 4.2 3.2 3.7 3.0 2.7 5.2 2.7 2.4 3.4 4.2 3.2 3.8 3.3 2.7 5.2 2.8 2.4 3.4 4.49 3.00 5.70 6.87 16.30 9.84 20.76 5.59 10.98 -15.1 -16.0 -17.4 -1.5 -5.2 -1.4 -1.0 -11.8 -7.8 3.60 2.08 3.90 4.49 12.70 7.50 19.40 4.53 8.08 5.8 21.2 20.8 50.8 21.7 29.3 6.0 8.8 25.2 2.4 5.4 9.3 50.1 14.5 18.3 4.3 4.7 16.0 0.37 1.24 5.43 3.39 0.61 1.08 2.30 1.84 5.89 0.45 1.75 6.00 3.50 0.78 0.58 2.26 1.49 6.26 0.61 0.44 1.00 1.07 0.82 1.11 na 0.97 0.17 5.5 15.3 27.9 15.3 4.9 8.3 12.7 11.5 42.0 5.5 14.3 34.6 20.2 5.7 9.6 12.5 11.6 45.7 6.6 8.1 19.5 22.2 12.2 13.0 18.2 16.0 14.0 6.7 8.7 15.7 16.7 10.6 11.2 18.3 15.9 12.9 0.0 2.4 2.2 2.2 4.1 0.9 2.4 1.6 4.2 0.0 2.4 2.2 2.8 4.1 0.9 2.4 1.6 4.2 0.51 1.37 5.52 3.61 0.74 1.39 2.32 2.48 6.15 -28.4 -9.5 -1.6 -6.1 -17.7 -22.3 -0.9 -25.7 -4.2 0.33 0.89 4.65 3.07 0.39 0.41 1.56 1.53 5.57 12.3 40.1 16.8 10.4 57.1 166.7 47.4 20.2 5.7 -16.1 18.1 13.6 5.9 0.0 87.8 35.3 7.0 0.2 1.34 1.97 1.58 2.00 na 0.41 8.6 11.0 11.8 11.5 15.5 17.9 11.4 17.1 3.0 5.1 4.5 5.1 1.49 2.19 -10.1 -10.0 0.85 1.92 58.6 2.6 54.0 -2.0 14.70 18.18 18.06 19.14 0.46 0.47 79.3 79.6 86.2 84.0 18.5 22.8 17.0 21.6 5.4 3.9 5.8 4.2 15.30 19.10 -3.9 -4.8 13.72 15.56 7.1 16.8 5.6 11.0 2.00 7.07 24.62 1.19 84.20 4.20 1.93 4.92 0.89 2.23 8.62 27.41 1.50 88.66 4.10 2.46 4.32 1.23 0.55 0.31 0.25 0.38 0.37 0.51 0.61 0.29 0.23 6.7 26.4 121.1 6.5 290.1 22.3 27.4 15.7 8.1 7.9 40.6 151.0 6.6 327.7 24.7 27.0 16.7 11.6 29.8 26.8 20.3 18.3 29.0 18.8 7.0 31.3 11.0 25.4 17.4 16.3 18.0 25.7 17.0 7.1 29.5 7.7 2.0 1.4 2.8 5.0 3.3 3.6 3.1 0.9 2.8 2.4 2.1 3.0 5.0 3.3 4.0 4.1 0.9 3.9 3.00 8.74 26.00 1.28 85.20 4.23 2.06 5.00 1.07 -33.3 -19.1 -5.3 -7.0 -1.2 -0.7 -6.3 -1.6 -16.8 1.98 7.05 22.44 1.13 74.12 2.26 1.50 4.14 0.78 1.0 0.3 9.7 5.2 13.6 85.8 28.7 18.8 14.1 -22.2 -3.5 4.9 3.4 7.7 65.4 11.6 13.6 11.9 44.38 52.08 0.99 198.6 187.4 22.3 23.7 4.5 4.5 51.04 -13.1 40.61 9.3 0.5 9.79 6.18 11.51 6.54 1.37 1.35 49.3 25.7 54.7 27.7 19.9 24.1 17.9 22.3 0.5 1.3 0.6 1.5 10.00 6.38 -2.1 -3.1 7.50 4.22 30.6 46.4 23.2 36.8 2.30 0.12 3.34 0.13 0.75 1.17 19.3 0.4 23.2 0.4 11.9 31.7 9.9 31.9 6.1 0.0 7.0 0.0 3.42 0.16 -32.7 -28.1 2.28 0.05 0.9 130.0 -22.3 130.0 6.03 4.18 6.39 4.70 0.75 0.49 9.5 13.3 14.9 16.4 63.2 31.5 40.4 25.5 0.6 1.5 0.6 1.8 6.73 4.36 -10.4 -4.1 5.54 3.85 8.8 8.6 -5.0 0.0 7.10 7.05 1.85 5.70 1.46 6.87 7.60 1.80 6.05 2.20 0.52 0.05 0.18 -0.31 0.20 19.5 35.8 12.4 26.4 3.7 24.6 40.0 15.1 29.8 5.5 36.5 19.7 14.9 21.6 39.1 28.8 17.6 12.2 19.1 26.6 1.2 2.5 2.0 2.3 0.6 1.5 2.8 2.4 2.6 0.9 7.40 7.36 2.38 5.94 2.62 -4.1 -4.2 -22.3 -4.0 -44.3 4.25 5.62 1.83 4.20 1.38 67.1 25.4 1.1 35.7 5.8 47.0 7.0 -12.3 6.5 -38.1 INDUSTRIAL SCIENTX SKPRES 8.50 1.44 9.28 1.75 0.42 0.42 55.1 8.6 66.6 10.6 15.4 16.8 12.8 13.5 2.1 2.9 2.4 3.6 8.99 1.47 -5.5 -2.0 6.01 1.15 41.4 25.2 26.9 11.6 MEDIA ASTRO MEDIA PRIMA STAR 2.62 0.69 2.30 3.50 0.60 1.40 1.13 0.58 0.65 13.2 0.9 7.1 14.5 2.8 6.5 19.8 80.6 32.4 18.1 24.4 35.5 4.8 1.0 7.8 5.0 3.3 7.8 2.98 1.46 2.65 -12.1 -52.7 -13.2 2.47 0.66 2.19 6.1 5.3 5.0 0.8 -40.0 2.7 -30.4 -16.7 -37.9 -7.7 -5.1 -6.7 -29.0 -8.3 -69.6 0.23 4.14 0.68 7.03 0.44 6.48 1.33 1.51 0.28 113.3 31.4 5.9 3.7 48.3 12.3 12.0 39.7 10.7 88.2 -16.3 -21.3 -0.8 44.9 4.3 -8.0 40.7 -64.6 -29.3 1.30 7.7 -17.6 BANKS & FINANCIAL SERVICES AFG 3.81 AFFIN 2.52 AMBANK 4.71 CIMB 6.77 HLBANK 15.46 MAYBANK 9.70 PBBANK 20.56 4.93 RHBBANK BURSA 10.12 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials CHINHIN 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 0.48 0.76 0.91 3.7 4.6 13.1 10.5 2.1 2.1 0.69 LCTITAN 5.44 6.88 na 43.1 64.9 12.6 8.4 3.1 5.7 6.53 MHB 0.72 0.78 1.96 -2.0 -0.5 na na 0.0 0.0 1.16 MISC 7.29 6.56 0.88 56.3 46.9 13.0 15.6 4.1 4.1 7.90 PANTECH 0.65 0.69 1.13 4.0 6.1 16.2 10.5 2.8 4.3 0.68 PCHEM 7.28 7.62 1.04 34.7 39.3 21.0 18.5 2.6 2.6 7.80 SENERGY 1.49 1.71 2.44 6.6 4.0 22.5 37.6 0.7 0.7 2.10 SERBADK 2.11 2.77 na 22.1 25.2 9.6 8.4 3.3 3.6 2.30 UMWOG 0.31 0.80 1.99 -12.0 -3.5 na na 0.0 0.0 1.02 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.40 1.55 1.44 10.9 11.5 12.9 12.2 0.0 0.0 1.98
14. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.64 3.03 4.47 24.30 9.30 6.28 Target Price BETA (RM) 1.55 3.88 4.15 26.18 10.02 7.52 1.83 0.42 1.15 0.84 1.24 0.32 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.8 103.4 34.0 37.5 8.5 15.7 21.1 120.4 37.5 34.5 38.9 24.6 23.8 23.5 27.3 16.7 19.3 19.2 21.2 20.2 24.8 18.2 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 3.0 2.3 2.2 2.1 2.7 3.7 3.0 2.6 2.7 2.5 3.3 2.7 2.52 3.70 4.81 25.50 9.70 6.55 -34.9 -18.1 -7.1 -4.7 -4.1 -4.1 1.42 2.95 4.30 23.00 7.56 5.50 PROPERTY GLOMAC 0.67 0.70 0.38 1.6 6.3 42.0 10.6 4.0 4.0 0.83 -18.8 0.61 HUAYANG 0.81 0.96 0.57 17.3 10.2 4.7 7.9 5.0 2.5 1.43 -43.8 0.80 IBRACO 0.90 1.00 0.43 5.2 11.1 17.1 8.0 3.9 4.5 1.05 -14.8 0.76 IOIPG 2.12 2.25 0.90 17.4 17.4 12.2 12.2 3.3 3.5 2.46 -13.8 1.85 MAHSING 1.57 1.76 0.77 14.3 13.5 11.0 11.6 4.1 4.1 1.70 -7.6 1.34 SNTORIA 0.82 0.98 0.20 6.2 10.3 13.3 7.9 1.2 1.2 1.00 -18.0 0.69 SPB 4.80 5.98 0.51 25.6 22.8 12.9 14.5 2.5 2.5 5.19 -7.5 4.32 SPSETIA 3.31 4.10 0.69 11.6 12.5 36.1 33.6 4.2 4.2 4.50 -26.4 3.10 SUNWAY 4.19 4.15 0.47 15.5 15.6 17.4 17.2 1.2 1.2 4.40 -4.8 2.89 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 1.73 1.87 0.47 9.2 10.0 18.7 17.3 5.3 5.8 1.84 -6.0 1.63 CMMT 1.49 1.72 0.51 8.1 8.6 18.4 17.3 5.6 6.0 1.72 -13.4 1.45 % Chg YTD 15.5 2.7 4.0 5.7 23.0 14.1 5.8 -10.9 1.6 1.3 14.8 5.2 9.8 0.6 18.5 14.8 17.2 18.8 11.0 6.8 44.9 -3.6 -28.8 -10.5 8.7 9.8 2.5 8.6 5.8 39.7 6.1 2.8 0.6 -2.6 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.01 23.96 18.66 14.24 1.41 1.13 21.47 19.37 17.38 1.45 0.66 0.74 0.78 0.92 0.52 7.1 98.5 87.6 131.9 8.2 6.4 102.4 100.1 130.6 10.6 14.2 24.3 21.3 10.8 17.1 15.8 23.4 18.6 10.9 13.3 6.9 3.0 3.4 3.1 5.0 6.9 3.2 3.8 3.2 3.5 1.80 25.70 22.50 14.90 1.64 -43.9 -6.8 -17.1 -4.4 -14.0 1.00 22.96 18.10 13.00 1.38 1.5 4.4 3.1 9.5 2.2 -26.3 0.7 -12.4 2.4 -5.4 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.85 4.83 5.76 6.34 5.20 4.90 5.85 7.50 1.40 1.00 0.76 0.64 14.5 20.0 24.5 21.4 15.9 20.4 24.7 22.3 33.3 24.1 23.5 29.6 30.4 23.7 23.3 28.4 1.5 4.1 3.5 3.0 1.6 4.2 3.5 3.2 5.91 5.19 6.60 6.90 -17.9 -6.9 -12.7 -8.1 4.11 4.63 5.48 5.81 18.0 4.3 5.1 9.1 2.8 0.0 -3.7 6.6 TECHNOLOGY Semiconductor & Electronics IRIS 0.17 INARI 2.53 MPI 14.10 UNISEM 3.95 0.28 2.30 15.60 4.30 1.17 0.72 0.21 0.53 -2.3 10.2 89.4 26.9 -0.3 na 12.3 24.8 113.4 15.8 32.1 14.7 na 20.6 12.4 12.3 0.0 3.2 1.9 3.0 0.0 1.9 1.9 3.0 0.23 2.58 14.30 4.25 -26.7 -1.9 -1.4 -7.1 0.10 1.50 7.20 2.27 65.0 69.0 95.8 74.0 50.0 52.4 90.3 67.4 3.25 8.43 3.34 8.10 0.85 1.38 37.6 17.2 37.1 17.5 8.6 48.9 8.8 48.2 1.2 1.2 1.5 1.2 3.59 9.45 -9.5 -10.8 2.16 5.91 50.5 42.6 41.9 39.1 1.77 3.62 2.05 4.05 0.63 0.76 12.4 17.1 19.7 15.1 14.3 21.1 9.0 23.9 2.4 3.5 4.0 3.1 1.87 4.50 -5.3 -19.6 1.47 3.58 20.4 1.1 11.3 -15.8 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 20.53 OCBC 11.14 UOB 23.60 PLANTATIONS WILMAR IFAR 3.14 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 1.15 1.05 172.9 87.7 192.9 189.2 11.9 92.4 12.7 206.5 12.2 10.8 12.1 11.4 2.9 5.7 3.0 2.9 6.7 3.0 22.3 11.5 24.6 -7.7 -3.0 -4.1 14.72 8.84 17.51 39.5 33.7 34.8 18.4 24.9 15.7 3.72 0.53 0.95 1.06 28.9 4.9 31.1 5.2 10.1 9.0 2.5 2.6 2.9 2.7 4.0 0.6 -21.5 -21.8 3.03 0.44 3.6 5.7 -12.5 -11.4 10.9 9.6 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.
15. TA Securities RESULTS UPDATE Friday , August 18, 2017 A Member of the TA Group FBMKLCI: 1,776.31 Sector: Consumer MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Carlsberg (M) Berhad TP: RM18.06 (+22.9%) Last Traded: RM14.70 Higher Margins Driven by Premium Brands Buy THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Tel: +603-2167 9605 kmtan@ta.com.my Review Carlsberg’s 1H17 core profit of RM128.3mn came in slightly above our expectation at 55.6% of our full-year estimates and 55.2% of consensus forecast. For this quarter, the group declared a first interim dividend of 10sen/share, which is 5sen/share higher than the same period last year. www.taonline.com.my Share Information Bloomberg Code CAB MK Stock Code 2836 Listing Main Market Share Cap (mn) 307.6 Market Cap (RMmn) 4,521.7 Par Value (RM) YoY, 1H17 PBT grew by 18.5% mostly due to 1) price increase 2) higher sale volume in both Malaysia and Singapore segments 3) favorable margins due to strong growth in premium brands. Recall that back in March and July last year, Carlsberg raised prices twice which resulted in an average price increase of 3% and 1.6% respectively. The increase was in response to change in excise duties structure in March last year. Meanwhile, there was a 22% volume growth in premium brands which include Asahi, Somersby, Kronenbourg and Connor’s Stout. Carlsberg recorded higher share of profit of RM2.4mn from associate, Lion Brewery (Ceylon), this quarter versus RM1mn in 2QFY16. This was mainly due to insurance compensation. If we remove this, Lion Brewery remained in the red as a result of operation disruption from the flood back in May last year. We note that Lion Brewery is still the market leader with 85% of market share. So far, Carlsberg have received RM4.2mn from the insurance compensation in 1H17 and about RM6.8mn balance not yet recognized. Impact We raise our FY17, FY18 and FY19 earnings projections higher by 5.6%, 6% and 10% respectively after increasing contributions from Lion Brewery and revise our MLM volume assumptions higher to 6.5%/5.2%/2.0% to be in line with the higher-than-expected volume growth. 0.50 52-wk Hi/Lo (RM) 15.30 / 13.72 12-mth Avg Daily Vol ('000 shrs) 98.6 Estimated Free Float (%) 49.3 Beta 0.5 Major Shareholders (%) Carlsberg Asia Pte Ltd - 50.7% Forecast Revision FY17 FY18 5.6 6.0 Net profit (RMm) 243.8 265.3 Consensus 232.5 252.3 TA's / Consensus (%) 104.9 105.2 Previous Rating Buy(Maintained) Forecast Revision (%) Financial Indicators FY17 Net gearing (x) FY18 Net cash Net cash CFPS (sen) 0.7 1.0 P/CFPS (x) 26.5 17.7 ROAA (%) ROAE (%) 36.0 37.4 72.9 77.1 NTA/Share (RM) Price/ NTA (x) 1.1 1.1 16.5 16.0 Scorecard % of FY17 Outlook Management thinks that the industry volume for this year is expected to be flattish. However, it expects to see continued growth in premium brand going forward. Besides, management provides a heads up that consumers can look forward to “something” in September this year. There was no progress in regards to the bills of demand. To recap, the bills demanded a payment of additional excise duties and sales tax, amounting to 56.3mn. No provision has been recognized. vs. TA 55.6 Above vs. Consensus 55.2 Above Share Performance (%) Price Change 1 mth (3.2) 1.2 3 mth (0.3) 0.5 6 mth 2.1 4.0 12 mth (2.9) 4.8 (12-Mth) Share Pricerelative to the FBM KLCI We are positive on the outlook going forward. The 2018 World Cup will be held in Russia, which is 5 hours behind Malaysia time. Thus, Malaysian’s can expect kick off time to be around 8pm till 4am. Valuation Maintain Buy with a higher DCF valuation of RM18.06 (previously 17.84) based on an unchanged discount rate of 7.6%. At current levels, it offers a compelling dividend yield of 5.4%. Source: Bloomberg Page 1 of 2 CAB MK FBM KLCI
16. TA Securities 18-Aug-17 A Member of the TA Group 1QFY17 Results Analysis (RMmn) FYE Dec Revenue ---> Malaysia ---> Singapore EBIT ---> Malaysia ---> Singapore Depreciation & Amortisation Associates Profit before Tax (PBT) Taxation Minority Interest (MI) Net Profit Core Net Profit EPS (sen) DPS (sen) Margins EBIT Margin (%) ---> Malaysia ---> Singapore PBT Margin (%) Tax Rate (%) Net Profit Margin (%) Core Net Profit Margin (%) 2QFY16 395.8 257.3 138.6 65.7 38.4 27.3 7.5 1.0 66.6 (13.7) (1.5) 51.4 51.4 16.8 5.0 17.2 14.9 19.7 16.8 20.6 13.0 13.0 1QFY17 502.6 341.1 161.5 95.2 68.9 26.3 13.1 -5.9 88.0 (19.5) (1.1) 67.4 67.4 22.0 0.0 17.9 20.2 16.3 17.5 22.1 13.4 13.4 2QFY17 412.1 252.0 160.1 82.0 42.6 39.4 5.3 2.4 83.5 (17.2) (5.4) 60.9 60.9 19.9 10 20.7 16.9 24.6 20.3 20.6 14.8 14.8 QoQ (%) (18.0) (26.1) (0.9) (13.9) (38.2) 50.0 (59.5) (140.2) (5.1) (11.8) 373.9 (9.6) (9.6) (9.6) nm 2.8 (3.3) 8.3 2.7 (1.6) 1.4 1.4 YoY (%) 4.1 (2.0) 15.6 24.9 11.0 44.5 (29.7) 141.8 25.3 25.0 256.6 18.6 18.6 18.6 100.0 3.4 2.0 4.9 3.4 (0.1) 1.8 1.8 1HFY16 851.5 577.0 274.6 146.4 99.2 47.3 19.4 (0.2) 144.7 (27.8) (2.6) 114.3 114.3 37.4 5.0 17.2 17.2 17.2 17.0 -19.2 13.4 13.4 1HFY17 YoY (%) 914.8 7.4 593.2 2.8 321.6 17.1 177.2 21.0 111.6 12.5 65.6 38.9 18.3 (5.3) (3.5) 1,794.1 171.5 18.5 (36.7) 32.0 (6.5) 149.6 128.3 12.3 128.3 12.3 42.0 12.2 10.0 100.0 19.4 18.8 20.4 18.7 -21.4 14.0 14.0 2.2 1.6 3.2 1.8 -2.2 0.6 0.6 Earnings Summary (RMmn) FYE Dec Revenue EBITDA Depreciation & Amortisation EBIT Net Finance Cost Equity Accounted Associate PBT EI Taxation MI Net Profit Revenue Growth (%) EPS (sen) EPS Growth (%) PER (x) DPS (sen) Dividend Yield (%) FY15 1,659.9 323.3 (32.8) 290.5 (5.6) 16.1 301.0 (12.5) (63.4) (4.3) 233.3 FY16 1,679.5 327.8 (33.7) 294.1 (5.2) (5.1) 283.9 0.0 (73.2) (5.7) 205.0 FY17F 1,913.0 371.2 (35.9) 335.3 (9.2) (0.7) 325.4 0.0 (74.8) (6.8) 243.8 FY18F 1,999.4 390.9 (36.6) 354.3 (8.7) 8.5 354.1 0.0 (81.4) (7.4) 265.3 FY19F 2,069.7 398.5 (35.4) 363.2 (8.8) 10.0 364.3 1.0 (83.8) (7.6) 272.9 1.5 70.6 2.0 20.8 72.0 4.9 1.2 67.0 -5.1 21.9 72.0 4.9 13.9 79.7 18.9 18.4 78.9 5.4 4.5 86.8 8.8 16.9 85.9 5.8 3.5 89.3 2.9 16.5 88.4 6.0 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 2 of 2
17. RESULTS UPDATE TA Securities Friday , August 18, 2017 FBMKLCI: 1,776.31 Sector: Technology A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Malaysian Pacific Industries Berhad TP: RM15.60 (+10.6%) Last Traded: RM14.10 Automotive to Drive Future Growth BUY THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Paul Yap, CFA Tel: +603-2167 9603 paulyap@ta.com.my Review MPI announced a FY17 net profit of RM177.9mn (-7.4% QoQ, +4.2% YoY). Numbers were within ours and consensus estimates at 95.0% and 99.0%. No dividends were declared for the quarter. QoQ. Against our expectations, a seasonal rebound in revenue was smaller than predicted. We estimate USD revenue increased by a marginal 0.8% QoQ. Total revenues declined 1.7% QoQ due to a lower USD/MYR rate (2.5% QoQ). Although we saw a marked improvement in revenues from Asia (+42.8% QoQ), this was offset by declines in USA (-75.4% QoQ) and Europe (-19.5% QoQ). EBITDA margins moderated 1.1pp, in line with the fall in revenues. YoY. Better revenues were driven by the weaker ringgit. USD revenues increased 1.3% YoY, but could have been better, if not for wafer constraints experienced in the 3QFY17. However, we do see increased traction for its automotive and industrial products. Depreciation and amortisation decreased 7.8% YoY, in line with lower capex. This was offset by higher taxes vs. writebacks in the previous year. Its net cash position grew to RM443.8mn. Impact Incorporating year-end figures into our model, we increase our FY18/FY19 earnings by 0.4%/0.3% to RM225.6mn/RM257.5mn. We also introduce our FY20 earnings of RM294.4mn. Outlook We expect the group to outperform the industry, based on targets to grow automotive contributions to 50% of its revenue. The global automotive segment is expected to increase at a 5-year CAGR of 6.4% YoY to US$48bn by 2020. Six out of the top ten largest automotive vendors are currently its customers. Coupled with the high barriers to entry, a larger stable and recurring automotive revenue base will help balance out volatility from the smartphone market, leading to better earnings visibility in the future. Supported by its large net cash position, rerating catalysts can come in the form of potential acquisitions and improved dividends. The group is on the lookout for acquisitions, either local or international, with intentions to acquire new technologies to strengthen its existing product portfolio. Implying the capability to support higher dividends, we project a FY18 FCFE of RM1.10/share or a FCFE yield of 7.8%. Share Information Bloomberg Code MPI MK Stock Code 3867 Listing Main Market 198.9 Share Cap (mn) 2,804.4 Market Cap (RMmn) 14.30/7.20 52-wk Hi/Lo (RM) 266.6 12-mth Avg Daily Vol ('000 shrs) 29.7 Estimated Free Float (%) 0.21 Beta Major Shareholders (%) Hong Leong Co Malaysia Bhd - 55.4 Forecast Revision Forecast Revision (%) Net profit (RMmn) Consensus TA's / Consensus (%) Previous Rating FY18 FY19 0.4 0.3 225.6 257.5 192.0 204.5 117.5 125.9 Buy (Maintained) Financial Indicators Net Debt/Equity (%) CFPS (sen) Price/CFPS (x) ROA (%) ROE (%) NTA/Share (RM) Price/NTA (x) FY18 Net cash 241.5 5.8 13.1 18.7 6.1 2.3 FY19 Net cash 234.1 6.0 13.3 18.5 7.1 2.0 % of FY 95.0 99.0 Within Within MPI 3.2 9.1 56.5 76.5 FBM KLCI 1.2 0.5 4.0 4.8 Scorecard vs TA vs Consensus Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth (12-Mth) Share Price relative to the FBM KLCI Valuation We value MPI at an unchanged TP of RM15.60/share. This is based on an EV/EBITDA multiple of 6.0x and CY18 EBITDA. BUY. We will provide further updates post an analyst briefing scheduled to be held today. Source: Bloomberg Page 1 of 3 www.taonline.com.my
18. TA Securities 18-Aug-17 A Member of the TA Group Table 1 : Earnings Summary (RMmn) FYE Jun 30 Revenue EBITDA EBITDA margin (%) Depreciation and amortisation EBIT Net finance cost EI PBT Tax MI Net profit Core net profit EPS (sen) EPS Growth (%) PER (x) EV/EBITDA (x) DPS (sen) Div Yield (%) FY16 1,463.3 420.2 28.7 (209.4) 210.8 (1.1) (13.3) 196.4 0.4 (39.3) 157.5 170.8 81.4 57.5 17.3 6.2 23.0 1.6 FY17 1,544.5 444.6 28.8 (193.0) 251.6 (0.6) 0.0 251.0 (32.2) (40.8) 177.9 177.9 25.2 (69.0) 55.9 5.8 27.0 1.9 Figure 1: Forward EV/EBITDA FY18F 1,672.1 523.8 31.3 (182.8) 340.9 11.5 0.0 352.5 (70.5) (56.4) 225.6 225.6 32.0 26.8 44.1 5.0 27.0 1.9 FY19F 1,770.2 565.0 31.9 (179.7) 385.3 17.1 0.0 402.3 (80.5) (64.4) 257.5 257.5 36.5 14.2 38.6 4.6 27.0 1.9 FY20F 1,888.3 614.6 32.5 (177.4) 437.2 22.8 0.0 460.0 (92.0) (73.6) 294.4 294.4 41.8 14.3 33.8 4.2 27.0 1.9 Figure 2: Forwad PB x x 6.0 2.5 5.5 2.0 5.0 +1sd: 1.7x 4.5 1.5 Mean: 1.3x +1sd: 3.9x 4.0 Mean: 3.4x 3.5 1.0 -1sd: 0.8x 3.0 0.5 -1sd: 3.0x 2.5 Aug-17 Feb-17 May-17 Aug-16 Nov-16 Feb-16 May-16 Aug-15 Nov-15 Feb-15 May-15 Aug-14 Nov-14 Feb-14 May-14 Aug-13 Nov-13 Feb-13 May-13 Aug-12 Source: Bloomberg, TA Securities Nov-12 Aug-17 Feb-17 May-17 Aug-16 Nov-16 Feb-16 May-16 Aug-15 Nov-15 Feb-15 May-15 Aug-14 Nov-14 Feb-14 May-14 Aug-13 Nov-13 Feb-13 May-13 Aug-12 0.0 Nov-12 2.0 Source: Bloomberg, TA Securities Table 2: FY17 Results Analysis (RMmn) FYE Jun 30 Revenue EBITDA Depreciation & Amortisation EBIT Net finance cost EI PBT Tax MI Net profit Core net profit Capex USD/MYR rate (RM) EPS (sen) DPS (sen) Profitability ratios (%) EBITDA margin PBT margin Net profit margin Tax rate 4QFY16 344.8 98.2 (49.4) 48.8 (0.3) 0.0 48.5 1.1 (11.0) 38.7 38.7 16.5 4.01 20.4 0.0 3QFY17 396.0 110.2 (48.2) 62.0 0.3 0.0 62.3 (9.0) (10.1) 43.2 43.2 54.7 4.45 22.8 19.0 4QFY17 389.1 104.0 (49.8) 54.2 (0.9) 0.0 53.3 (4.6) (8.7) 40.0 40.0 20.8 4.33 21.1 0.0 QoQ (%) (1.7) (5.6) 3.4 (12.6) (401.7) n/a (14.5) (48.9) (13.8) (7.4) (7.4) (61.9) (2.5) (7.4) n/a YoY (%) 12.8 5.9 0.8 11.1 253.9 n/a 9.8 (502.3) (20.9) 3.4 3.4 25.9 8.1 3.4 n/a FY16 1,463.3 420.2 (209.4) 210.8 (1.1) (13.3) 196.4 0.4 (39.3) 157.5 170.8 125.1 16.5 82.9 23.0 FY17 1,544.5 444.6 (193.0) 251.6 (0.6) 0.0 251.0 (32.2) (40.8) 177.9 177.9 115.5 17.2 93.7 27.0 YoY (%) 5.6 5.8 (7.8) 19.4 (42.3) (100.0) 27.8 (7,513.1) 3.9 12.9 4.2 (7.7) 3.7 13.0 17.4 28.5 14.1 11.2 (2.4) 27.8 15.7 10.9 14.4 26.7 13.7 10.3 8.6 pp (1.1) (2.0) (0.6) (5.8) pp (1.8) (0.4) (0.9) 11.0 28.7 13.4 11.7 (0.2) 28.8 16.2 11.5 12.8 pp 0.1 2.8 (0.2) 13.1 Page 2 of 3
19. TA Securities 18-Aug-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 3 of 3
20. COMPANY UPDATE TA Securities Friday , August 18, 2017 FBMKLCI: 1,776.31 Sector: Oil & Gas A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Serba Dinamik Holdings Bhd TP: RM2.77 (+31.3%) Last Traded: RM2.11 Leveraging on Pengerang Integrated Complex Buy THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Abel Goon Tel: +603 2072 1277 ext. 1641 abelgoon@ta.com.my The News Serba Dinamik Holdings Bhd (Serba) entered into two memorandum of agreement (MoAs) to participate in the development of industrial, commercial and residential projects in Pengerang, Johor over 85.9 acres of land. Serba’s partners in the MoAs are Izin Budi Sdn Bhd and AIMurisi Holding Sdn Bhd, to develop 15.9 acres and 70 acres of land respectively. Under the MoAs, Serba will participate in EPCC of approximately 132 acres of the said land. Serba plans to develop 3 different developments which include 1) Pengerang eco-Industrial Park (PeIP): a MRO (Marine, Repair, & Operations) and IRM (Inspection, Repair & Maintenance) plant to serve the Pengerang Integrated Complex (PIC), 2) Pengerang International Commercial Centre (PICC): corporate offices and service apartments, and 3) Pengerang Northshore Residence: mixed commercial and residential properties. Our View We are largely positive on the news but are slightly cautious given Serba’s diversification into property development with no prior experience and track record. We note that Serba previously revealed in its prospectus that it intends to establish new facilities in Pengerang to service RAPID and other projects at PIC. However, development of residential and commercial properties is a huge surprise to us as it is not within Serba’s core competencies. Therefore, we believe both Izin Budi and AIMurisi are real estate developers which would provide the needed expertise in both residential and commercial developments. Nevertheless, construction of PeIP is well within Serba’s core business and competencies. The residential and commercial developments are expected to serve the large influx of staff working in PeIP, PIC and PICC. We opine that additional MoAs will be signed until the full 132 acres are apportioned out. Serba estimates that construction will begin in 2018 and the developments will yield GDV of RM1.4bn with capex of RM1bn. That being said, the developments are still at the preliminary planning stage, and its timeline remains uncertain. Share Information Bloomberg Code SDH MK Stock Code 5279 Listing Main Market Share Cap (mn) 1,335.0 Market Cap (RMmn) 2,816.9 Par Value 0.50 52-wk Hi/Lo (RM) 2.30/1.51 12-mth Avg Daily Vol ('000 shrs) 6,127 Estimated Free Float (%) 31.5 Beta n.a. Major Shareholders (%) Mohd Abdul Karim - 26.2 Abdul Kadier Sahib - 20.8 Awang Daud - 13.2 Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating FY17 FY18 0.0 0.0 294.9 336.4 277.9 321.6 106 105 Buy (Maintain) Financial Indicators Net Debt / Equity (x) CFPS (sen) Price / CFPS (x) ROA (%) NTA/Share (RM) Price/NTA (x) FY17 0.1 0.2 12.8 11.9 1.1 2.0 FY18 Net cash 0.3 6.9 12.4 1.2 1.7 Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth SDH 13.4 3.4 23.4 n.a. FBM KLCI 1.2 0.5 4.0 4.8 (12-Mth) Share Price relative to the FBM KLCI Assuming Serba enters a 50:50 partnership for the PICC and Pengerang Northshore Residence, capex required would be circa RM600mn. Given Serba’s cashpile of RM330mn, robust operating cashflow, and undemanding net gearing of 0.16x, we opine that funding would not be a problem. We estimate that Serba’s EPCC orderbook may increase by RM840mn to RM1.54bn with the launch of these projects. Besides that, O&M costs for PIC clients will be lowered given the projects’ location within PIC. Source: Bloomberg Page 1 of 3 www.taonline.com.my