Bursa Malaysia Daily Market Report - 22 May

Transcription

1. Monday , 22 May, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. 2. 3. Daily Market Commentary Weekly Strategy Weekly Technical Outlook Fundamental Reports 1. 2. 3. 4. 5. Axiata Group Berhad: New Strategic Partner in Cambodia IHH Healthcare Berhad: 1QFY17 Weighed by Pre-operating & Start-up Costs Malaysian Economy: 1Q17 Real GDP Shifting to a Higher Gear Petronas Dagangan Berhad: Total Industry Volume Contraction in 1Q17 Top Glove Corporation Berhad: Acquiring 2 Rubber Glove Factories for RM39.0mn Technical Reports 1. Weekly Technical Stock Picks 2. Daily Money Flow Technical Stock Picks FBMKLCI Stocks Under Coverage PLANTATION Sector CONSTRUCTION Sector PROPERTY Sector 3. Weekly Ace Market Stock Watch 4. Weekly Small Cap Stock Watch 5. Weekly Stock Screen Foreign Technical Reports 1. Foreign Stock Watch (AUS) 2. Foreign Stock Watch (HK) 3. Foreign Stock Watch (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 (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 Monday, 22 May 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only KLSE Market Statistics (19.05.2017) Volume (mil) +/-chg (RMmn) Main Market 2,092.4 245.0 3,053.2 Warrants 416.7 -112.6 61.4 ACE Market 760.1 153.7 123.1 Bond 4.2 1.4 0.8 ETF 0.0 -0.04 0.0 Total 3,273.4 3,238.4 Off Market 199.6 157.7 475.0 Value +/-chg 579.0 -5.3 24.3 0.1 -0.06 190.0 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP May 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 Up Down 447 221 100 59 71 20 5 2 0 0 623 302 % chg % YTD chg Strategy-wise, investors should look to buy weakness in blue chips such as IHH Healthcare, Malakoff, Sime Darby and Tenaga for longer-term upside, while IWCity may attract profit-taking and selling given uncertainties over its participation in the iconic Bandar Malaysia megaproject. 1.11 25.48 155.80 8.50 0.06 0.20 0.88 0.48 7.71 10.63 21.25 8.19 20,804.84 6,083.70 7,470.71 19,590.76 2,288.48 25,174.87 3,216.92 1,549.64 5,791.88 3,090.63 1,853.71 5,727.41 141.82 28.57 34.29 36.90 1.66 38.35 -4.74 3.76 146.43 0.49 -2.28 -10.90 0.69 0.47 0.46 0.19 0.07 0.15 -0.15 0.24 2.59 0.02 -0.12 -0.19 5.27 13.01 4.59 2.49 12.93 14.43 11.67 0.43 9.35 -0.42 -5.86 1.09 Top 10 KLCI Movers Based on Mkt Cap. (RM) @ 1.10 @ 0.30 @ 9.35 @ 0.01 @ 1.29 @ 9.32 @ 1.20 @ 0.95 @ 5.96 @ 2.38 @ 0.22 @ 13.80 @ 0.07 The presence of bearish divergence signals on momentum and trend indicators, as they made lower peaks following last week's failure swing on the index which came off a higher peak, suggest more correction or profit-taking should ensue this week. Nonetheless, trading could be choppy given the increased volatility in US markets, while the index will need to convincingly climb above the recent two-year high to counter the bearish divergence signals. Immediate uptrend supports for the index stays at the rising 30 and 50day moving average levels, now at 1,757 and 1,750, reinforced by the lower Bollinger band at 1,749. Immediate upside hurdle for the benchmark stays at last Tuesday's new two-year high of 1,787, followed by the 1,800 psychological level and 18 May 2015 high of 1,823. 1,768.28 12,685.88 17,842.10 1,769.50 Off Market (mn) YONGTAI 107.0 BJASSET-WA 30.0 MAYBANK 27.5 PUC-LA 11.1 UEMS 3.2 SIME 3.0 BJASSET-WA 3.0 VERSATL 2.8 CIMB 2.6 ECONBHD 2.5 FSBM 2.3 TENAGA 2.0 TIGER 1.0 Value/ Volume 1.46 0.15 0.16 0.20 0.00 0.99 2.38 Counter Mkt Cap. (RM’mn) MAYBANK 95,838 PCHEM 58,640 CIMB 53,951 MAXIS 48,893 AXIATA 47,024 DIGI 38,953 GENTING 37,290 PETDAG 24,598 HAPSENG 22,258 BAT 13,072 Chg (RM) 0.03 0.05 0.02 0.02 0.01 0.02 0.21 0.68 0.01 0.52 Vol. (mn) 28.52 12.60 29.24 1.15 1.92 8.11 1.19 1.54 0.28 0.10 News Bites • • • • • • • • • • • • • Important Dates 3A - 1:4 Bonus Issue - BI of 98.4m shares. Ex-Date: 23/05/2017. Entitlement Date: 25/05/2017. LISTING ON: 26/05/2017. MKH - 1:10 Rights Issue - RI of up to 45.4m shares together bonus issue of up to 90.8m shares. 1 rights share for every 10 existing shares held, at an issue price of RM1.89 per rights share, together with 2 bonus shares for every 1 rights share subscribed. LISTING ON: 01/06/2017. • Malaysia's GDP expanded 5.6% YoY in the 1Q17, fuelled by private sector-led investments, consumption and exports. IHH Healthcare 1Q17 core net profit of RM201.8mn (-15.3% YoY) was below expectations. Magnum Bhd's 1Q17 earnings of RM30.6mn was down 55.6% from a year ago, due to lower gaming sales and higher prize payout ratio. Ranhill Holdings Bhd's net profit for 1QFY17 jumped 127% YoY to RM15.7mn, mainly because the previous year had recorded a one-off IMTN premium redemption that amounted to RM13.3mn. Mitsui Co Ltd is buying 10% stake in Axiata Group Bhd's Cambodian subsidiary, Smart Axiata Co Ltd, for US$66mn, with option to buy another 10% in within 12 months. Top Glove Corp Bhd has entered into 2 separate agreements - with A1 Glove Sdn Bhd and Titi Glove Sdn Bhd - to acquire 2 properties for a total consideration of RM60.7mn. Tenaga Nasional Bhd has inked a MoU with Thai-based GOV Supply Limited to explore business opportunities in Thailand and Indochinese countries. The Inland Revenue Board has served Magnum Bhd notices of tax assessment and penalties totaling RM476.6mn. Malaysia Airports Holdings Bhd has confirmed the sale of a stake of less than 50% in the wholly-owned Istanbul Sabiha Gokcen International Airport in Turkey. Cypark Resources Bhd has bagged 2 contracts worth a combined RM75.0mn to build 2 large-scale solar photovoltaic plants in Negeri Sembilan. Star Media Group Bhd's proposed disposal of its 52.51% stake in Cityneon Holdings Ltd is "slightly credit negative" but is not expected to have immediate rating implications according to RAM Rating Services Bhd. Metronic Global Bhd has appointed Ferrier Hodgson MH Sdn Bhd as special auditor to identify any irregularities in the company's transactions. Nexgram Holdings Bhd has brought in a partner, ChinaAsian Capital Holding Ltd, to undertake the RM1.15bn Angkasa Icon City development project in Cyberjaya. The European Commission on Friday said its measure of consumer sentiment across the 19-member currency area rose to minus 3.3 in May from minus 3.6 in April, reaching its highest level since July 2007. Exchange Rate USD/MYR 4.3211 -0.0130 USD/JPY 111.40 1.0500 EUR/USD 1.116 0.0027 Commodities Futures Palm Oil (RM/mt) 2,635.00 7.00 Crude Oil ($/Barrel) 50.53 1.19 Gold ($/tr.oz.) 1,255.70 8.90 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 Monday , May 22, 2017 FBMKLCI: 1,768.28 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Weekly Strategy Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Kaladher Govindan Market View Tel: +603-2167 9609 kaladher@ta.com.my www.taonline.com.my Any Correction Pressure is Expected to be Minimal Profit-taking forced the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FMB KLCI) to pull back from a fresh two-year high last week, which accelerated following sharp corrections on US stocks and the region amidst increased scrutiny over the sustainability of the US President’s market reforms, sparked by wrangling in the US political scene amid concern over impeachment possibilities against the US President. Week-on-week, the FBM KLCI retraced 7.59 points, or 0.4 percent to 1,768.28, dragged down mostly by losses on BAT (-42sen), HLFG (-36sen), IHH (-17sen), AMBank (-11sen) and IOI Corp (-11sen). Average daily traded volume stabilized at 3.39 billion shares, while value improved to RM3.12 billion, compared with the 3.37 billion shares and RM2.7 billion average respectively the previous week, as buying momentum on the small cap and ACE Market sector recovered. Malaysia’s first quarter 2017 gross domestic product announcement last Friday showed a much stronger performance than consensus expectations. It expanded at a much stronger pace of 5.6% year-on-year (YoY) for the quarter, the highest since first quarter 2015, versus 4.1% YoY a year ago and 4.5% YoY in the fourth quarter of 2016. It outperformed consensus expectations of 4.7% YoY as well and displayed a strong turnaround in momentum after expanding 1.8% quarter-on-quarter. The strong outperformance was underpinned by a steady growth in domestic demand and higher investments from the private sector. From a supply side perspective, a turnaround in the agriculture sector and pickup in manufacturing and services sectors contributed to the growth. With this, Bank Negara expects growth momentum to sustain and expects full year expansion to come in at the higher-end of its projected 4.3% to 4.8%, if private investment and exports continued to show strong growth. That aside, we believe growth in private consumption as a result of sustained employment, wage growth and measures induced by the government to enrich selected group of consumers in this possible election year, such as higher BR1M cash transfers, should contribute to stronger than expected 2017 GDP. The recent recovery in crude oil prices, in anticipation of OPEC extending its production cut by another six months until end of this year, is another boost for the economic growth and the nation’s finances. OPEC is set to announce its final decision officially this Thursday. Such eventuality could sustain Brent crude oil prices around USD55/barrel for the rest of the year, provided there are no sudden increases in production from the US shale producers. A better deal in term of the extension period and/or further cuts in production could be additional boosters. These expectations could drive some trading interest in the oil and gas stocks this week. Page 1 of 7
4. TA Securities 22-May-17 A Member of the TA Group Better-than-expected GDP growth and higher crude oil price expectations should be positive for the ringgit and market sentiment as well . Records showed foreign investors have been net buyers of Malaysian equities in the first four months of this year and they have turned net buyers of domestic bonds for the first time this year in April 2017 (+RM6.76bn), which contributed to the current below 4.0% yield for the 10-year MGS. Of course, anything negative or contrary to above expectations will exert downside pressure on the benchmark index. However, any corrective pressures are expected to be minimal and well absorbed, in view of the recovery in economic activities and corporate earnings, to sustain the FBMKLCI’s momentum until the 14th general election. The impending launch of the Mid and Small Cap scheme by Bursa Malaysia this week is another catalyst for investors who are seeking alpha to outperform the benchmark index. Page 2 of 7
5. TA Securities 22-May-17 A Member of the TA Group News In Brief Corporate The Inland Revenue Board has served Magnum Bhd notices of tax assessment and penalties totaling RM476 .6mn. Magnum had appointed solicitors and are initiating proceedings to challenge the validity and legality of the notices of assessment. (New Straits Times/ Bursa Malaysia) IHH Healthcare Bhd's pre-tax profit surged to RM526.1mn in 1Q17 from RM355.3mn chalked up in the same quarter last year. Revenue rose 8% to RM2.7bn from RM2.5bn recorded previously, attributable to organic growth from existing operations and the continuous ramping-up of hospitals opened in 2015. (Bernama/ Bursa Malaysia) Malaysia Airports Holdings Bhd has confirmed the sale of a stake of less than 50% in the wholly-owned Istanbul Sabiha Gokcen International Airport in Turkey. Managing director Datuk Badlisham Ghazali reiterated that the company would remain the major shareholder of ISG, but declined to give a time frame for the sale. (The Star) Magnum Bhd posted earnings of RM30.6mn in 1Q17 down 55.6% from a year ago, due to lower gaming sales and higher prize payout ratio. This marked the first quarter in 4 years that the directors did not propose any dividend. (The Star/ Bursa Malaysia) Mitsui Co Ltd is buying 10% stake in Axiata Group Bhd's Cambodian subsidiary, Smart Axiata Co Ltd, for US$66mn (RM285.5mn), with option to buy another 10% in within 12 months. Through the deal, Mitsui will appear as a strategic partner — with expertise in Internet of Things (IoT) — to help Axiata leapfrog its digital leadership in the Cambodian telco market. (The Star/ Bursa Malaysia) Top Glove Corp Bhd has entered into 2 separate agreements - with A1 Glove Sdn Bhd and Titi Glove Sdn Bhd - to acquire 2 properties for a total consideration of RM60.7mn. The properties, both equipped with machinery and equipment, and fixture and fittings, were located in Mukim Sentul, Seremban, Negri Sembilan and Mukim Jalan Bakri, Muar, Johor. (The Star/ Bursa Malaysia) Tenaga Nasional Bhd has inked a MoU with Thai-based GOV Supply Limited to explore business opportunities in Thailand and Indochinese countries. The MoU would also enable TCI to venture into new markets in the South-East Asian region. (Bernama/ Bursa Malaysia) Cypark Resources Bhd has bagged 2 contracts worth a combined RM75.0mn to build 2 large-scale solar photovoltaic (PV) plants in Negeri Sembilan. Under the first contract worth RM53.4mn, Cypark will develop a 10.5MW solar PV plant at Ladang Tanah Merah. The second contract valued at RM21.6mn, meanwhile, involves the development of a 3.95MW plant at Jelebu. (The Edge/ Bursa Malaysia) Ranhill Holdings Bhd's net profit for 1QFY17 jumped 127% YoY to RM15.7mn, mainly because the previous year had recorded a one-off IMTN premium redemption that amounted to RM13.3mn. Revenue for the period, meanwhile, grew a marginal 2% to RM352.0mn from RM344.8mn a year ago, largely on stronger contribution from its environment segment due to higher volume of water consumption coupled with a wider customer base from new developments of housing and industrial areas. (The Edge/ Bursa Malaysia) Ho Hup Construction Co Bhd reported a 35% drop in its net profit to RM12.4mn for its 1QFY17 from RM19.1mn a year ago. Quarterly revenue also fell 56% to RM35.6mn in 1QFY17 from RM81.1mn in 1QFY16. Ho Hup attributed its weak quarterly performance to lower contribution from both its property development and building materials divisions. (The Edge/ Bursa Malaysia) Page 3 of 7
6. TA Securities 22-May-17 A Member of the TA Group Daya Materials Bhd made a net profit for 1QFY17 of RM581k versus a net loss of RM29 .2mn in the previous year, mainly due to restructuring of its upstream oil and gas activities, which resulted in significant cost reduction and a turnaround into profitability. Revenue meanwhile was lower by 69% at RM57.4mn, from RM186.6mn a year ago. (The Edge/ Bursa Malaysia) Choo Bee Metal Industries Bhd’s net profit rose by 305% to RM11.6mn in 1QFY17, from RM2.9mn a year ago. The increase in profits was due to higher profit margins achieved from improved average selling prices, interest income and realised gains on forex transactions. (The Edge/ Bursa Malaysia) Despite a rise in revenue, Box-Pak (Malaysia) Bhd posted a net loss of RM5.8mn in 1QFY17 versus a net profit of RM1.4mn a year earlier, mainly due to pre-operating costs incurred in Myanmar and higher production costs contributed by higher raw material, labour and finance costs. (The Edge/ Bursa Malaysia) Star Media Group Bhd's proposed disposal of its 52.51% stake in Cityneon Holdings Ltd is "slightly credit negative", according to RAM Rating Services Bhd (RAM Ratings). However, the exercise is not expected to have immediate rating implications. (The Edge) Kein Hing International Bhd (KHIB) has awarded a RM5.4mn contract for the construction of a factory in Vietnam. The proposed construction will cater for the future expansion plans of the KHIB Group in Vietnam, particularly the business of metal stamping, precision machining, assembly of components and fabrication of tools and dies. (Bernama/ Bursa Malaysia) Metronic Global Bhd has appointed Ferrier Hodgson MH Sdn Bhd as special auditor to identify any irregularities in the company's transactions. The audit — to be completed in 2 months — is also to ascertain whether directors involved may have breached their fiduciary duties. (The Edge/ Bursa Malaysia) Nexgram Holdings Bhd has brought in a partner, ChinaAsian Capital Holding Ltd, to undertake the RM1.15bn Angkasa Icon City development project in Cyberjaya. It had inked a conditional joint development agreement with ChinaAsian Capital Holding, a company incorporated in Seychelles. (The Star/ Bursa Malaysia) Samchem Holdings Bhd chairman Ng Thin Poh has been appointed acting CEO of the company, following the resignation of Datuk Ng Lian Poh from the post on May 5. Thin Poh, 59, and Lian Poh, 50, are brothers. The younger Ng brother had resigned from the company due to personal commitments. (The Edge/ Bursa Malaysia) Page 4 of 7
7. TA Securities 22-May-17 A Member of the TA Group News In Brief Economy Asia Robust 5 .6% Quarterly Growth What a stark difference two quarters make. In the second quarter of last year, Malaysia’s economy was in the doldrums, growing at the slowest pace in more than seven years. Yesterday, Bank Negara released data showing an economy that seems to be roaring back to life, with gross domestic product (GDP) expanding 5.6% in the first quarter ended March 31 compared with the same quarter a year ago, fuelled by private sector-led investments, consumption and exports. When compared with the last quarter of 2016, the economy grew by 1.8%. This means the economy in the first quarter grew at the fastest pace in the past two years. The last time it was at this level was back in the first quarter of 2015. Since then, the economy, when measured by GDP, has recovered steadily although at times, given the challenges stemming from domestic consumer demand, exports, commodity prices and geopolitical concerns, the economy seemed to have wobbled a bit. The median forecast in a survey of economists before the data was released by Bank Negara was for the economy to grow by 4.8% year-on-year and 1.2% quarter-on-quarter. Both missed by wide margins with GDP coming in better than what they expected. Bank Negara governor Datuk Muhammad Ibrahim expects growth to be sustained based on the central bank’s projections for the economy to grow in a range of 4.3% to 4.8% this year. “What we’ve seen over the past three months was strong growth in private investments and exports, if these two components show strong numbers, we’ll be seeing growth at the higher end of our projections,” he says at a media briefing. (The Star Online) S&P Lifts Indonesia's Sovereign Ratings Standard & Poor's on Friday lifted the sovereign ratings of Indonesia to investment grade citing authorities' effective expenditure and revenue measures to stabilize the public finances. The country's sovereign ratings were raised to 'BBB-' from 'BB+', with stable outlook. The agency said the ratings reflect the assessment of reduced risks to Indonesia's fiscal metrics. "Despite the broader vulnerabilities of the economy to external shocks, we consider strong public finances a cornerstone of our investment-grade rating on Indonesia," S&P said. Thus, Indonesia is assigned investment grade by all three leading rating agencies. Moody's Investors Service and Fitch Ratings had earlier rated Indonesia with 'BBB-'. S&P upgrade would help Southeast Asia's largest economy to attract more funds. S&P said the government's new focus on realistic budgeting has lowered the risks that budget deficits will widen significantly when government revenue disappoints. The fiscal deficit is forecast to remain below 2.5 percent of GDP over the next three to four years despite the government's intention to expand its infrastructure program. Net general government debt is expected to stabilize near the current low levels. Moreover, S&P noted that economic and financial policy settings have become more predictable, recently. The economy had expanded 5.01 percent in the first quarter, following December quarter's 4.9 percent growth. (RTT News) Singapore Wholesale Trade Rises in Q1 Singapore's domestic wholesale trade increased further in the three months ended March, figures from the Department of Statistics showed Friday. At current prices, domestic wholesale sales rose a seasonally adjusted 1.6 percent sequentially in the first quarter, much slower than the 13.7 percent spike in the fourth quarter. Excluding petroleum, domestic wholesale trade climbed 2.6 percent from the fourth quarter, when it grew by 6.9 percent. After removing the price effect, overall domestic wholesales trade dropped 5.3 percent over the previous quarter. On an annual basis, domestic wholesale trade surged 23.5 percent in the March quarter, after a 2.1 percent increase in the December quarter. Foreign wholesale trade advanced 3.8 percent quarterly and by 27.3 percent annually in the first quarter. (RTT News) Page 5 of 7
8. TA Securities 22-May-17 A Member of the TA Group Europe and United Kingdom Eurozone Current Account Surplus Falls in March The euro area current account surplus declined in March largely due to widening shortfall on secondary income , figures from the European Central Bank showed Friday. The current account surplus fell to a seasonally adjusted EUR 34.1 billion in March from a record EUR 37.8 billion in February. The visible trade surplus decreased moderately to EUR 29 billion from EUR 29.4 billion. Meanwhile, the surplus on services increased to EUR 11.6 billion from EUR 10.2 billion in the previous month. Primary income dropped to EUR 3.4 billion from EUR 3.8 billion. At the same time, the deficit on secondary income widened to EUR 9.8 billion from EUR 5.5 billion a month ago. On an unadjusted basis, the current account surplus surged to EUR 44.8 billion from revised EUR 27.8 billion in February. The 12-month cumulated current account for the period ending in March registered a surplus of EUR 363.6 billion, equivalent to 3.4 percent of euro area GDP. In March, combined direct and portfolio investment posted net acquisitions of assets of EUR 75 billion and net incurrences of liabilities of EUR 32 billion. (RTT News) Eurozone Consumer Confidence at Highest Level in Nearly a Decade The victory of a pro-European centrist in France’s presidential election has helped deliver a further boost to already high consumer confidence in the eurozone. The European Commission on Friday said its measure of consumer sentiment across the 19-member currency area rose to minus 3.3 in May from minus 3.6 in April, reaching its highest level since July 2007, more than a year before the onset of the global financial crisis. Emmanuel Macron secured almost two-thirds of the vote in May 7 elections, defeating the anti-euro Marine Le Pen, who vowed to undertake contentious labor reforms in France as part of a push for greater economic convergence among the eurozone’s fractious member states. Mr. Macron’s triumph followed March elections in the Netherlands that saw Prime Minister Mark Rutte defeat anti-euro populist candidate Geert Wilders. The French and Dutch votes reduce the threat of a breakup of the currency area, with German elections due later this year almost certain to return a pro-euro government. Coming into 2017, it had seem possible that anti-euro politicians would gain ground and possibly triumph in a series of key polls, following voter revolts against the establishment in the U.K. and the U.S. But while investors and policy makers appeared nervous, households have been less so, as the Commission’s measure of consumer confidence continued to strengthen ahead of the crucial votes, and subsequently. (The Wall Street Journal) Germany's Producer Prices Rise Most Since 2011 Germany's producer prices increased at the fastest pace since late 2011, figures from Destatis showed Friday. Producer prices grew by more-than-expected 3.4 percent year-onyear in April, faster than the 3.1 percent rise in March. This was the biggest increase since December 2011. Economists had forecast 3.2 percent increase. On a monthly basis, producer prices climbed 0.4 percent after staying flat in March. Prices were forecast to rise 0.2 percent. Excluding energy, producer prices gained 0.3 percent from March and advanced 2.8 percent from the previous year. Among main industrial groups, energy prices climbed 4.6 percent. Prices of intermediate goods grew 4.3 percent and that of non-durable consumer goods by 3.2 percent. Similarly, durable consumer goods prices increased by 1.1 percent and prices of capital goods by 1.0 percent. (RTT News) UK Manufacturing Order Books Improve In May: CBI British manufacturing order books improved in May and output growth picked up pace, the Industrial Trends Survey from the Confederation of British Industry showed Friday. The order book balance rose to 9 percent in May from 4 percent in April. The score was forecast to remain at 4 percent. The balance reached its highest level since February 2015. At the same time, the export order book balance came in at 10 percent. Manufacturers expect output to grow at the same robust pace in the coming quarter. About 37 percent forecast growth, while 10 percent expects decline, giving a balance of +28 percent. A net balance of 28 percent said output expanded over the past three months, the fastest pace of growth since December 2013. (Reuters) Page 6 of 7
9. TA Securities 22-May-17 A Member of the TA Group Share Buy-Back : 19 May 2017 Company CBIP TEXCHEM Bought Back Price (RM) Hi/Lo (RM) 130,000 1,000 2.06/2.03 1.47 2.07/2.02 1.47/1.44 Total Treasury Shares 14,255,127 2,545,200 TA RESEARCH – Remisiers’ Briefing Topic: Weekly Market Outlook Speaker: Kaladher/ Stephen Soo Venue: Auditorium, 10th Floor Menara TA One Date: 22 May 2017 (Today) Time: 12.40pm 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. liability for any direct or indirect loss arising from the use of this document. 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 We accept no We, our associates, directors, employees may have an interest in
10. T e c h n i c a l TA Securities V i e w Monday , May 22, 2017 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Weekly Technical Outlook FBM KLCI: 1,768.28 (-7.59, -0.43%) THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Chartist : Stephen Soo Tel: +603-2167 9607 stsoo@ta.com.my www.taonline.com.my Bearish Divergence Signal Correction Profit-taking forced the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FMB KLCI) to pull back from a fresh two-year high last week, which accelerated following sharp corrections on US stocks and the region amidst increased scrutiny over the sustainability of the US President’s market reforms, sparked by wrangling in the US political scene amid concern over impeachment possibilities against the US President. Week-on-week, the FBM KLCI retraced 7.59 points, or 0.4 percent to 1,768.28, dragged down mostly by losses on BAT (-42sen), HLFG (-36sen), IHH (-17sen), AMBank (-11sen) and IOI Corp (-11sen). Average daily traded volume stabilized at 3.39 billion shares, while value improved to RM3.12 billion, compared with the 3.37 billion shares and RM2.7 billion average respectively the previous week, as buying momentum on the small cap and ACE Market sector recovered. While blue chips stayed in consolidation mode Monday, lower liners perked up in late afternoon trade led by Ecovest and IWCity which ended limit-up on speculation IWH CREC may still be in the running to develop Bandar Malaysia. The KLCI gained 2.78 points to close at the day’s high of 1,778.65, off an earlier low of 1,771.87, as losers beat gainers 508 to 421 on active trade totaling 3.74bn shares worth RM2.99bn. The local benchmark slid from a fresh two-year high on profit-taking the next day, as trading interest focused on stocks expected to bid for the mammoth Bandar Malaysia project. The KLCI ended off half-a-point at 1,778.15, after falling from early high of 1,787.54 to low of 1,773.09, as losers edged gainers 497 to 412 on lower turnover of 3.51bn shares worth RM3.84bn. Blue chips extended profit-taking consolidation Wednesday, as investors locked in profits after the previous week’s strong run-up and in line with lackluster regional markets amid political and legal turmoil surrounding the US President. The KLCI ended 2.5 points down to 1,775.65, off an early high of 1,779.94 and low of 1,770.22, as losers beat gainers 473 to 417 on total turnover of 3.45bn shares worth RM2.88bn. Stocks slumped the subsequent day, dragged down by sharp corrections on overnight US stocks and the region amidst increased scrutiny in US politics on concern over a potential impeachable offence against the US President. The KLCI shed 8.48 points to close at 1,767.17, after oscillating between early low of 1,762.04 and high of 1,769.80, as losers swarmed gainers 625 to 317 on reduced turnover totaling 2.98bn shares worth RM2.64bn. The local market staged mild recovery on Friday, encouraged by the overnight US market rebound, but cautious undertone persisted as investors questioned the sustainability of the US President’s market reforms. The index ended 1.11 points up at 1,768.28, off a high of 1,771.50 and low of 1,767.89, as gainers led losers 623 to 302 on improved total turnover of 3.27bn shares worth RM3.12bn. Trading range for the blue-chip benchmark index last week expanded to 25.5 points, compared to the 17.2-point range the previous week, as profit-taking interest forced a significant retracement from a fresh two-year high. For the week, the FBM-EMAS Index slipped 32.22 points or 0.25 percent to 12,685.88, but the FBM-Small Cap Index rose 160.69 points, or 0.9 percent to 17,842.10, helped by resurgent rotational buying in small cap stocks. Page 1 of 3
11. TA Securities 22-May-17 A Member of the TA Group The daily slow stochastic momentum indicator for the FBM KLCI hooked down to show a bearish divergence against the index which charted a higher high , while the weekly indicator hooked back down in overbought territory. The 14-day Relative Strength Index (RSI) indicator also registered a bearish divergence with a weaker reading of 55.38 as of last Friday, while the 14-week RSI hooked down to a softer reading of 67.50. Chart 1 The daily Moving Average Convergence Divergence (MACD) trend indicator’s trigger line flashed a sell signal backed by a similar bearish divergence pictorial, while the weekly MACD indicator’s signal line is leveling, suggesting weaker upside momentum (Chart 2). On the other hand, the 14-day Directional Movement Index (DMI) trend indicator stayed positive, with the +DI and –DI lines at a comfortable distance on a stable ADX line, suggesting the uptrend is intact. Chart 2 Page 2 of 3
12. TA Securities 22-May-17 A Member of the TA Group Conclusion The presence of bearish divergence signals on momentum and trend indicators , as they made lower peaks following last week’s failure swing on the index which came off a higher peak, suggest more correction or profit-taking should ensue this week. Nonetheless, trading could be choppy given the increased volatility in US markets, while the index will need to convincingly climb above the recent two-year high to counter the bearish divergence signals. Immediate uptrend supports for the index stays at the rising 30 and 50-day moving average levels, now at 1,757 and 1,750, reinforced by the lower Bollinger band at 1,749. Immediate upside hurdle for the benchmark stays at last Tuesday’s new two-year high of 1,787, followed by the 1,800 psychological level and 18 May 2015 high of 1,823. Strategy-wise, investors should look to buy weakness in blue chips such as IHH Healthcare, Malakoff, Sime Darby and Tenaga for longer-term upside, while IWCity may attract profittaking and selling given uncertainties over its participation in the iconic Bandar Malaysia megaproject. Chart 3 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 3 of 3
13. COMPANY UPDATE TA Securities Monday , May 22, 2017 FBMKLCI: 1,768.28 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 Axiata Group Berhad TP: RM5.75 (+9.7%) Last Traded: RM5.24 New Strategic Partner in Cambodia HOLD THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Paul Yap, CFA Tel: +603-2167 9603 paulyap@ta.com.my Axiata announced the proposed disposal of up to 20% of its stake in Smart. This includes an initial sale of 10% to MY Asia and Mitsui & Co. Ltd. for US$66.0mn (RM285.7mn). MY Asia will then be granted a call option for a further 10% stake, to be exercised within 12 months at a pre-agreed exercise price of 140% the initial consideration. This values Smart at an equity value of US$724mn (RM3.1bn) or an implied FY16 PE of 10.8x. The sale is part of the group’s portfolio management strategy, which has been previously reported. As a surprise, however, we were expecting the sale of underperforming assets such as M1 and Idea. Proceeds will be utilised for general corporate purposes and the repayment of debt. We adjust our earnings by <1.0%. Rolling forward our valuation base year to CY18, we increase our TP for Axiata to RM5.75/share. However, balancing existing risks and rewards, we downgrade our recommendation to HOLD. Selling up to 20% of Smart Axiata Group Berhad announced the proposed disposal of up to 20% of its stake in Smart. This includes the sale of a 10% stake to M&Y Asia Telecom Holdings Pte. Ltd. (MY Asia) and Mitsui & Co. Ltd for US$66.0mn (RM285.7mn). MY Asia will also be granted a call option for a further 10% stake, which can be exercised within 12 months from the completion of the initial sale. The pre agreed exercise price is 140% of the initial consideration, at US$92.4mn (RM400.0mn). The transaction consideration is based on an equity value of US$724mn (RM3.1bn), after factoring in additional cash received from dividends as part of the transaction structure. This translates into an implied FY16 PE of 10.8x. Post-transaction, Axiata’s stake in Smart will be diluted to 82.5%. The initial sale is expected to be completed by end May 2017. Purchaser Details MY Asia is an investment holding company, of which 50% is owned by Mitsui. Mitsui is a listed Japanese company, primarily involved in metals, machinery & infrastructure, chemicals, energy, lifestyle and innovation & corporate development. Smart FY16 Performance Smart is a leading telecommunications provider in Cambodia with 8.1mn subscribers. During a bleak FY16, Smart was one of the few standout performers for the group. It reported double-digit growth in revenue, EBITDA and PAT to US$262.8mn (+13.0% YoY), US$129.8mn (+12.3% YoY) and US$67.2mn (+19.8% YoY). Data revenues grew 48.6%, making up 42.3% of its total revenue. Part of Portfolio Management The sale is part of its portfolio management strategy, which had been previously reported. As a surprise, however, we were expecting the sale of underperforming assets such as its associate stakes in Idea and M1. Nevertheless, we do not discount the possibility of further exercises in the horizon. In March 2017, the group announced it was undertaking a strategic review of its shareholding in M1, which may or may not lead to a transaction. Page 1 of 3 www.taonline.com.my Share Information Bloomberg Code AXIATA MK Stock Code 6888 Listing Main Market Share Cap (mn) 8,974.0 Market Cap (RMmn) 47,023.6 52-wk Hi/Lo (RM) 5.99/4.11 12-mth Avg Daily Vol ('000 shrs) 6,388.0 Estimated Free Float (%) 26.2 Beta 1.26 Major Shareholders (%) Khazanah Nasional Bhd - 37.6 EPF - 15.2 Skim Amanah Saham - 11.7 Commonwealth Bank of Australia - 5.2 Forecast Revision (%) FY17 FY18 Forecast Revision (%) (0.4) (0.6) Core Net Profit (RMm) 1,494 1,571 Consensus 1,611 1,836 TA/Consensus 92.7 85.6 Previous Rating Buy (Downgraded) Financial Indicators FY17 FY18 Net debt/EBITDA (x) 2.0 1.8 CFPS (sen) 76.7 87.8 P/CFPS (x) 6.8 6.0 ROE (%) 6.3 6.4 ROA (%) 2.1 2.2 NTA/Share (RM) 0.7 0.9 P/NTA (x) 7.1 6.1 Share Performance Price Change (%) Axiata FBMKLCI 1 mth 3.6 0.7 3 mth 9.2 3.5 6 mth 17.0 8.5 12 mth (3.1) 8.6 (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
14. TA Securities 22-May-17 A Member of the TA Group Paring Down Debts Proceeds will be utilised for general corporate purposes and the repayment of existing debt . Based on our estimates, following the placement and divestment of its edotco shares, the group’s existing gross debt/EBITDA and net debt/EBITDA stands at 2.27x (ideally below 2.3x) and 1.64x (ideally below 2.0x). Post sale, its gross debt/EBITDA and net debt/EBITDA will be reduced to 2.24x and 1.61x. If the call option is exercised, this will fall further to 2.19x and 1.56x. The additional cash provides a buffer, with anticipated spectrum auctions/renewals in the next one to two years. Last quarter, it lowered its proposed dividend payout ratio to 50%, which will subsequently revert to FY15 levels (85%) in two years. Earnings Impact Factoring interest savings and a loss of profits from the initial 10% sale, we lower our FY17/FY18/FY19 earnings by 0.4%/0.6%/0.5% to RM1,494mn/ RM1,571mn/ RM1,858mn. Valuation As we roll forward our valuation to CY18, we increase our TP for Axiata to RM5.75/share. This is based on a sum of parts valuation. Since we upgraded our recommendation to BUY last November 2016, the stock has gained 21.6%. The group is now trading close to its average historical EV/EBITDA at 7.6x. Balancing present risks and rewards, we downgrade our recommendation for the stock to HOLD. Immediate opportunities are recoveries at Celcom and XL. However, risks are heightened competition and the impact of regulatory uncertainties. Table 1: SOP Valuation Celcom (Malaysia) XL Axiata (Indonesia) Idea Cellular (India) Dialog Axiata (Sri Lanka) Robi (Bangladesh) M1 (Singapore) Smart (Cambodia) Ncell (Nepal) Holding Co Net Cash Total Equity Value (RM mn) 26,128.1 16,772.7 23,374.6 3,011.2 3,948.5 5,854.0 2,266.5 9,666.9 Stake 100.0% 66.4% 19.8% 83.3% 68.7% 28.6% 82.5% 80.0% Effective Equity Value (RM mn) 26,128.1 11,130.3 4,623.5 2,508.3 2,712.6 1,671.3 1,869.9 7,733.5 Value /Share (RM) 2.96 1.26 0.52 0.28 0.31 0.19 0.21 0.88 -7,621.3 50,756.3 -0.86 5.75 Page 2 of 3 % of SOP 51.5% 21.9% 9.1% 4.9% 5.3% 3.3% 3.7% 15.2% -15.0% Valuation Method DCF: WACC 7.0%, TG: 1.0% DCF: WACC 9.0%, TG: 3.0% Consensus TP Consensus TP DCF: WACC 13.8%, TG: 3.0% Consensus TP 10x CY17 EPS 10x CY17 EPS
15. TA Securities 22-May-17 A Member of the TA Group P &L FYE Dec (RMmn) Revenue EBITDA Depreciation & amortisation Net finance cost JV/Associates EI PBT Taxation MI Net profit Core net profit EPS (sen) DPS (sen) FY15 19,883 7,284 (4,170) (658) 434 441 3,331 (695) (82) 2,554 2,071 23.5 20.0 FY16 21,565 8,013 (5,595) (1,018) 30 (290) 1,140 (482) (153) 504 1,418 16.1 8.0 FY17F 23,226 8,953 (5,608) (1,132) 50 0 2,263 (575) (194) 1,494 1,494 16.9 8.5 FY18F 24,282 9,485 (5,726) (1,144) (75) 0 2,539 (680) (288) 1,571 1,571 17.8 8.9 FY19F 25,002 9,952 (5,760) (1,124) (40) 0 3,027 (797) (371) 1,858 1,858 21.1 16.9 Ratios FYE Dec (RMmn) Valuations PER (x) EV/EBITDA (x) Dividend yield (%) PBV (x) FY15 FY16 FY17F FY18F FY19F 22.3 9.5 3.8 1.8 32.6 8.6 1.6 1.6 30.9 7.7 1.6 1.6 29.4 7.3 1.7 1.5 24.9 6.9 3.3 1.5 Profitability ratios (%) ROAE ROAA EBITDA margin PBT margin 9.4 3.9 36.6 16.8 6.0 2.2 37.2 5.3 6.3 2.1 38.5 9.7 6.4 2.2 39.1 10.5 7.3 2.5 39.8 12.1 0.8 0.8 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 Liquidity ratios (x) Current ratio Quick ratio Leverage ratios (x) Total liabilities/equity Gross debt/EBITDA Net debt/EBITDA Net debt/equity Int. coverage ratio Growth ratios (%) Sales Pretax Earnings Total assets 1.2 2.3 1.5 0.4 4.7 1.5 2.8 2.1 0.6 2.4 1.4 2.5 2.0 0.6 3.0 1.4 2.3 1.8 0.6 3.3 1.3 2.2 1.7 0.5 3.7 6.3 5.9 (8.2) 14.3 8.5 (65.8) (31.5) 25.6 7.7 98.6 5.3 0.7 4.5 12.2 5.2 2.3 3.0 19.2 18.2 2.0 Balance Sheet FYE Dec (RMmn) Fixed assets Associates + Subsidiaries Goodwill Others LT assets FY15 23,134 8,311 14,206 610 46,261 FY16 27,466 8,509 23,153 872 60,000 FY17F 28,277 8,559 23,943 899 61,677 FY18F 29,103 8,484 23,888 905 62,380 FY19F 29,860 8,444 23,834 910 63,046 155 3,955 5,511 236 9,857 175 4,780 5,332 202 10,489 178 4,677 4,216 202 9,272 186 4,889 4,943 202 10,220 191 5,034 5,563 202 10,990 Total assets 56,118 70,489 70,949 72,600 74,037 Trade payables ST borrowings Others Current liabilities 9,643 2,348 499 12,490 12,168 7,124 653 19,945 11,628 3,312 653 15,593 11,971 3,325 653 15,949 12,153 3,336 653 16,142 LT borrowings Others LT liabilities 14,045 3,860 17,904 15,135 6,788 21,924 18,766 6,938 25,704 18,841 7,064 25,906 18,905 7,150 26,056 Share capital Reserves Shareholders' funds MI 8,817 14,708 23,525 2,199 8,971 14,609 23,581 5,040 8,971 15,162 24,134 5,519 8,971 15,967 24,939 5,807 8,971 16,689 25,661 6,178 Total liabilities and equity 56,118 70,489 70,949 72,600 74,037 FY15 3,331 4,170 354 (138) (92) (810) (525) 6,291 FY16 1,140 5,595 967 (1,917) 2,891 (747) (1,154) 6,775 FY17F 2,263 5,608 1,132 (50) (317) (575) (1,299) 6,762 FY18F 2,539 5,726 1,144 75 242 (680) (1,304) 7,743 FY19F 3,027 5,760 1,124 40 113 (797) (1,308) 7,959 Capex Interest received Others Investing cash flow (4,861) 171 (1,650) (6,340) (5,564) 187 (5,458) (10,835) (6,392) 167 (531) (6,756) (6,498) 160 0 (6,338) (6,463) 184 0 (6,279) Net share issue Dividend paid Net change in debts Others Financial cash flow 43 (734) 207 929 444 10 (903) 4,063 711 3,882 0 (941) (182) 0 (1,123) 0 (766) 88 0 (678) 0 (1,136) 75 (0) (1,061) (178) 5,511 0 0 5,332 (1,117) 5,332 0 0 4,216 Inventories Trade receivables Cash Others Current assets Cash Flow FYE Dec (RMmn) PBT Depreciation and amortisation Net interest Other non-cash Changes in WC Tax paid Finance cost Operational cash flow Net cash flow Opening cash flow Forex Others Closing cash flow 395 5,116 0 0 5,511 728 4,216 0 0 4,943 619 4,943 0 0 5,563 Stock Recommendation Guideline 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. Not Rated: 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. 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
16. RESULTS UPDATE TA Securities Monday , May 22, 2017 FBM KLCI: 1,768.28 Sector: Healthcare A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 TP: RM6.65 (+10.8%) IHH Healthcare Berhad Last Traded: RM6.00 1QFY17 Weighed by Pre-operating & Start-up Costs HOLD THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Wilson Loo Tel: +603-2167 9606 wilsonloo@ta.com.my Review IHH’s 1QFY17 net profit increased by 99.6% YoY to RM470.0mn. However, excluding chunky exceptional items amounting to RM268.3mn, core net profit (CNP) declined by 15.3% YoY to RM201.8mn. Exceptional items include the gain on disposal of a 6.07% stake in Apollo Hospital Enterprise Limited (Apollo Hospitals) of RM313.4mn and exchange loss on net borrowings of RM94.1mn. CNP was below ours and consensus’s expectations at 17.6% and 18.4% respectively primarily due to higher than expected pre-operating and start-up costs from the new Gleneagles Hong Kong Hospital. Overall, the group’s underlying growth momentum sustained with revenue growing by 8.5% YoY to RM2.7bn. This was driven mainly by organic growth in home markets (Singapore, Turkey, Malaysia, India) followed by acquisitions, namely that of Tokuda Group and City Clinic group in June 2016. At the bottom line however, EBITDA and CNP respectively declined by 8.3% YoY to RM565.6mn and 15.3% YoY to RM201.8mn primarily due to the increase in costs associated with the new Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital. Meanwhile, the group’s financial standing remained robust with net gearing easing QoQ from 0.21x to 0.18x with support from the disposal of 6.07% stake in Apollo Hospitals. Parkway Pantai: In constant currency terms, 1QFY17’s revenue grew by 5% YoY while EBITDA declined by 13% YoY. The higher revenue was driven by both increased inpatients admissions (Singapore +4.1% YoY, Malaysia +3.1% YoY, India +14.1% YoY) and revenue per patient (Singapore +2.9% YoY, Malaysia +10.8% YoY, India +1.8% YoY). Operations at newer hospitals like Mount Elizabeth Novena Hospital, Pantai Hospital Manjung, Gleneagles Kota Kinabalu Hospital and Gleneagles Medini Hospital continued to grow. Meanwhile, pre-operating costs from the new Gleneagles Hong Kong which amounted to RM81.1mn contributed to the 4.6%-points YoY erosion in EBITDA margins to 21.0%. Acibadem Holdings: In constant currency terms, 1QFY17’s revenue and EBITDA respectively increased by 30% YoY and 10% YoY. The robust top line performance was attributed to more complex cases undertaken, the increase in foreign patients, the continuous ramp up of Acibadem Atakent University Hospital and Acibadem Taksim Hospital as well as the acquisition of Tokuda Group and City Clinic Group. Inpatients admissions and revenue per patient both grew by 33.8% YoY and 4.0% YoY. EBITDA margins however declined by 2.9%-points YoY to 16.0% due to preoperating losses of RM5.2mn from the new Acibadem Altunizade Hospital, higher operating costs and rental expenses, and the Turkish Lira’s depreciation against the USD and Euro. Share Information Bloomberg Code IHH MK Bursa Name IHH Stock Code 5225 Listing Main Market Share Cap (mn) 8,231.7 Market Cap (RM'mn) 49,417.6 Par Value (RM) 1.00 52-wk Hi/Lo (RM) 6.73/5.78 12-mth Avg Daily Vol (000' shrs) 5,976.6 Estimated Free Float (%) 18.4 Beta 0.8 Major Shareholders (%) Khazanah Nasional Bhd - 41.1 Mitsui & Co Ltd - 18.0 EPF - 9.8 Central Depository Pte Ltd - 5.1 Forecast Revision Forecast Revision (%) Net profit (RM'mn) Consensus TA/Consensus (%) Previous Rating FY17 FY18 (25.9) (8.6) 848.2 1,349.5 1,058.0 1,302.0 80.2 103.7 Hold (Maintained) Financial Indicators Net gearing (x) CFPS (RM) Price/CFPS (x) ROA (%) ROE (%) NTA/Share (RM) Price/NTA (x) FY17 0.1 0.4 18.2 2.3 3.8 1.4 4.3 FY18 0.1 0.4 17.8 3.5 5.8 1.6 3.9 % of FY 17.6 18.4 Below Below IHH (1.3) (3.2) (6.5) (7.6) FBMKLCI 0.2 3.5 8.5 8.6 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 QoQ, growth in inpatient admissions and revenue per patient was observed across home markets (Singapore, Malaysia, Turkey, India) CNP however declined by 9.3% QoQ to RM201.8mn due to incremental depreciation, amortisation and finance costs associated with the new Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital. Source: Bloomberg Page 1 of 5 www.taonline.com.my
17. TA Securities 22-May-17 A Member of the TA Group Impact Our FY17 /FY18/FY19 earnings estimates are reduced by 25.9%/8.6%/6.1% upon accounting for the higher costs under Parkway Pantai and disposal of 4.78% stake in Apollo Hospitals. Updates, Outlook & Briefing Highlights The group announced that the group had on 18 May 2017 disposed of its remaining 4.78% stake in Apollo Hospitals for a total cash consideration of INR8.2bn (RM555.1mn) to multiple institutional shareholders. The extraordinary gain of RM245.6mn translates into a return on investment of 80.4%. We are positive and not surprised on the group’s exit given its lack of control and influence in Apollo Hospitals. The disposal marks consolidation and rationalization of the group’s investments in India. We estimate the disposal proceeds to ease the group’s net gearing from 0.18x to 0.16x and contribute positively to earnings, albeit marginally by circa 1% from the corresponding increase in interest income. Management remains optimistic on the sustained growth in demand for private healthcare services in its home and growth markets. To capitalize on this, apart from focusing on organic growth fuelled by its stream of expansion projects in Malaysia (+360 beds), Turkey (+510 beds) and China (+870 beds), management is concurrently exploring strategic brownfield acquisitions. With regards to Gleneagles Hong Kong Hospital, which recently commenced operations on 21 March 2017, management alluded that operations have been going smoothly with the hospital experiencing increasing frequency of day procedures as well as utilisation of its operating theatres. Further, the 600 visiting consultants on top of the permanent hires has been a key draw to the hospital. Greater traction is expected ahead, particularly when the hospital’s engagement with insurers begin in June 2016. To ride through a challenging operating environment in 2017, focus remains on efforts to control cost pressures and improving operational efficiencies. Also mindful of the group’s vulnerability to foreign exchange movements, especially by Acibadem, management alluded that it is currently exploring de-risking options. Valuation & Recommendation Our TP is revised to RM6.65/share (from RM6.40/share) upon rolling forward our valuations to CY18. This translates to an implied EV/BITDA and PE multiple of 19.2x and 40.6x. Reiterate Hold. Figure 1: Forward PER Figure 2: Forward EV/EBITDA x 65 x 29 60 27 +1SD: 59.8x 55 +1SD: 25.5x 25 Average: 22.3x 23 Average: 51.8x 50 21 45 19 -1SD: 19.2x 17 Source: Bloomberg, TA Securities Page 2 of 5 Jan-17 Apr-17 Oct-16 Jul-16 Jan-16 Apr-16 Jul-15 Oct-15 Jan-15 Apr-15 Jul-14 Source: Bloomberg, TA Securities Oct-14 Jan-14 Apr-14 Jul-13 Oct-13 15 Jan-13 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 35 Apr-13 -1SD: 43.9x 40
18. TA Securities 22-May-17 A Member of the TA Group Table 1 : SOTP Valuation (RM mn’) Singapore Malaysia Turkey International Method EV/EBITDA EV/EBITDA EV/EBITDA EV/EBITDA Multiple 25 20 22 30 Consensus P/E 15 Value 28,428 9,891 20,767 988 60,075 808 8,307 1,274 52,233 1,795 916 54,944 Less: Net debt/(cash) Less: MI Add: MI Net debt PLife REIT IMU Health Total equity value Shares outstanding (mn') TP Stake 100% 100% 60% na 36% 100% 8,236 RM6.65 Table 2: Earnings Summary (RM mn’) FYE Dec Revenue EBITDA Depreciation and amortisation EBIT Net finance cost Associates & JV PBT Income tax expense MI Net profit (-MI) Core net profit (-MI) FY15 8,455 2,219 -689 1,529 -326 14 1,218 -165 -118 934 899 FY16 10,022 2,189 -800 1,389 -528 17 878 -270 4 612 866 FY17F 12,198 2,428 -920 1,508 -198 20 1,887 -415 -189 1,283 848 FY18F 14,064 3,078 -949 2,130 -141 22 2,010 -442 -218 1,350 1,350 FY19F 16,326 3,611 -984 2,626 -89 24 2,561 -564 -367 1,631 1,631 EPS (sen) EPS growth (%) Core EPS growth (%) DPS (sen) Dividend yield (%) Core PER (x) 11.3 23.8 15.0 3.0 0.5 54.9 7.4 -34.4 -3.7 3.0 0.5 57.0 15.6 109.6 -2.0 3.9 0.6 58.2 16.4 5.2 59.1 4.1 0.7 36.6 19.8 20.9 20.9 5.0 0.8 30.3 Table 3: Peer Comparison Company IHH Healthcare Bhd Price TP Recomm. Country Mkt Cap EPS Growth (%) PER (x) (MYR mn) CY17 CY18 CY17 CY18 EV/EBITDA (x) CY17 CY18 ROE (%) Dividend Yield CY17 CY18 CY17 CY18 RM6.00 RM6.65 Hold Global 49,418 -2.0 59.1 58.2 36.6 23.1 18.2 3.8 5.8 0.6 0.7 Ramsay Healthcare Ltd Primary Healthcare Ltd AUD 70.07 AUD 3.74 N.R. N.R. N.R. N.R. Australia Australia 45,586 6,278 12.8 0.0 11.0 11.9 25.2 19.7 22.7 17.6 12.3 8.5 11.3 7.9 24.4 4.0 23.9 4.5 2.1 3.2 2.3 3.6 Phoenix Healthcare Group Co Ltd Harmonicare Medical Holdings Ltd HKD 11.28 HKD 3.83 N.R. N.R. N.R. N.R. Hong Kong Hong Kong 8,123 1,613 8.0 32.5 27.3 6.6 33.3 20.4 26.2 19.2 20.0 8.8 15.5 7.8 10.4 8.6 9.7 8.8 0.7 1.5 0.8 1.4 Apollo Hospitals Enterprise Ltd Fortis Healthcare Ltd INR 1,261 INR 204 N.R. N.R. N.R. N.R. India India 11,746 7,056 30.2 -40.7 39.3 53.1 45.2 60.9 32.5 39.8 21.2 21.9 17.1 16.8 9.6 4.0 12.6 5.2 0.6 0.1 0.8 0.2 Mitra Keluarga Karyasehat Tbk PT IDR 2,210 Siloam International Hospitals Tbk PT IDR 12,000 N.R. N.R. N.R. N.R. Indonesia Indonesia 10,463 5,078 8.2 43.2 13.4 33.1 42.5 115.6 37.5 86.8 31.7 19.3 27.5 16.0 19.7 4.2 20.9 4.9 1.4 0.1 1.7 0.1 RM4.60 Buy Malaysia 4,353 -6.3 23.5 37.1 30.1 15.2 13.4 8.1 9.5 1.5 1.8 KPJ Healthcare Bhd RM4.15 Ryman Healthcare Ltd NZD 8.49 Bangkok Dusit Med Service THB 18.20 Bumrungrad Hospital Rub Co THB 179.00 Vibhavadi Medical Centre PCL THB 2.76 Bangkok Chain Hospital PCL THB 12.20 Chularat Hospital PCL THB 2.26 Weighted Average Weighted Average Small Mkt Cap (<RM10bn) Weighted Average Large Mkt Cap (>RM10bn) N.R. N.R. New Zld. 12,703 -12.0 11.7 23.0 20.6 21.2 19.1 14.5 11.7 2.3 2.6 N.R. N.R. N.R. N.R. N.R. N.R. N.R. N.R. N.R. N.R. Thailand Thailand Thailand Thailand Thailand 35,499 16,423 4,575 3,831 3,130 29,693 5,630 35,520 4.5 0.4 55.7 23.0 20.9 6.1 9.8 5.2 8.3 8.7 8.4 16.0 14.5 25.3 24.9 25.4 32.2 35.8 33.3 33.1 36.5 39.9 45.4 38.6 29.7 32.9 30.7 28.5 31.8 31.1 35.3 30.1 20.5 21.5 24.8 16.6 23.8 19.6 18.2 20.0 18.7 19.4 21.9 14.6 20.4 16.8 15.1 17.2 15.6 24.8 11.9 17.5 19.7 14.0 8.9 15.2 14.9 23.6 12.9 18.3 20.8 14.3 9.5 15.4 1.5 1.5 0.7 1.6 1.5 1.4 1.1 1.4 1.6 1.6 0.9 1.9 1.7 1.5 1.3 1.5 Page 3 of 5
19. TA Securities 22-May-17 A Member of the TA Group Table 4 : FY16 Results Analysis (RM mn’) FYE Dec 1QFY16 4QFY16 1QFY17 2,684.8 1,674.1 914.8 62.9 32.5 0.5 565.6 352.0 146.3 27.4 69.0 -202.0 -13.6 1.4 43.3 -184.2 0.1 2.0 313.4 526.1 -81.8 25.8 470.0 201.8 QoQ % 2.0 6.5 -5.5 8.5 -4.3 -15.7 0.0 -0.3 6.9 71.1 -22.5 7.4 -5.1 -86.3 -45.5 -51.9 -86.7 -43.0 -310.1 -804.7 151.3 -60.2 -1,205.7 -9.3 YoY % 8.5 8.4 9.4 8.1 5.1 -91.7 -8.3 -10.9 -7.3 18.4 6.1 8.2 0.7 -111.1 142.9 162.7 -70.3 -37.6 nm 48.1 -1.8 -170.4 99.6 -15.3 Revenue - Parkway Pantai - Acibadem Holdings - IMU Health - Plife REIT - Others EBITDA - Parkway Pantai - Acibadem Holdings - IMU Health - Plife REIT Depreciation Amortisation Forex Finance income Finance costs Associates JV Others PBT Tax MI Net profit Core net profit 2,475.4 1,543.9 836.0 58.2 30.9 6.3 617.0 395.3 157.8 23.2 65.0 -186.7 -13.5 -12.8 17.8 -70.1 0.3 3.2 0.0 355.3 -83.3 -36.6 235.5 238.3 2,631.5 1,571.3 967.6 58.0 34.0 0.6 565.4 353.1 136.9 16.0 89.0 -188.1 -14.3 10.3 79.5 -382.6 0.7 3.5 -149.1 -74.7 -32.6 64.7 -42.5 222.4 Profitability ratios (%) EBITDA margin - Parkway Pantai - Acibadem Holdings - IMU Health - Plife REIT PBT margin Tax rate Net profit Core net profit 24.9 25.6 18.9 39.8 210.3 14.4 23.4 9.5 9.6 21.5 22.5 14.1 27.6 262.2 -2.8 -43.6 -1.6 8.5 21.1 21.0 16.0 43.6 212.2 19.6 15.5 17.5 7.5 %-points -0.4 -1.4 1.8 16.0 -50.0 22.4 59.2 19.1 -0.9 %-points -3.9 -4.6 -2.9 3.8 1.8 5.2 -7.9 8.0 -2.1 Operating statistics Inpatient traffic - Singapore - Malaysia - Turkey - India 18,094 49,026 39,296 14,033 18,174 47,318 50,470 15,838 18,842 50,541 52,581 16,008 % 3.7 6.8 4.2 1.1 % 4.1 3.1 33.8 14.1 Revenue per patient - Singapore (SGD) - Malaysia (RM) - Turkey (TL) - India (INR) 9,113 5,583 7,321 119,785 9,074 6,151 6,949 121,351 9,380 6,185 7,616 121,935 % 3.4 0.6 9.6 0.5 % 2.9 10.8 4.0 1.8 Page 4 of 5
20. TA Securities 22-May-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. 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