Bursa Malaysia Daily Market Report - 23 June

Transcription

1. Friday , 23 June, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. IPO-Advancecon Holdings Berhad: Debut of an Earthwork Specialist Contractor 2. SP Setia Berhad: Sealing the Acquisition of I&P 3. United Malacca Berhad: Rewards Shareholders with Special Dividend 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 (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 Friday, 23 June 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only Review & Outlook KLSE Market Statistics (22.06.2017) (mil) Main Market 1,029.9 Warrants 180.0 ACE Market 423.7 Bond 9.7 ETF 0.0 Total 1,643.3 Off Market 160.5 Volume +/-chg (RMmn) -162.6 1,708.0 -69.1 16.8 186.5 67.5 -5.0 3.1 -0.02 0.0 1,795.5 124.5 72.6 Value +/-chg -624.9 -8.1 17.3 -2.4 -0.03 13.6 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP June 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 Value/ Volume 1.66 0.09 0.16 0.32 1.28 1.09 0.45 Up Down 329 261 67 87 59 38 3 2 1 1 459 389 % chg % YTD chg 1,777.43 12,631.51 17,286.41 1,785.00 1.86 15.75 55.94 5.50 0.10 0.12 0.32 0.31 8.27 10.16 17.47 9.14 21,397.29 6,236.69 7,439.29 20,110.51 2,370.37 25,674.53 3,215.55 1,580.91 5,829.71 3,147.45 1,862.84 5,705.95 -12.74 2.73 -8.50 -28.28 12.84 -20.05 13.78 3.90 11.16 -8.76 -24.35 40.23 -0.06 0.04 -0.11 -0.14 0.54 -0.08 0.43 0.25 0.19 -0.28 -1.29 0.71 8.27 15.86 4.15 5.21 16.97 16.70 11.62 2.46 10.06 1.41 -5.40 0.71 Off Market (mn) PANPAGE 70.0 @ BARAKAH 48.6 @ TOMYPAK-WA 12.5@ AEM 9.5 @ OCR 5.0 @ GBGAQRS 3.0 @ SGB-PA 2.7 @ APPASIA 2.0 @ ASIAPLY 1.6 @ MEDAINC-WB 1.1 @ BAUTO 1.0 @ (RM) 0.35 0.60 0.27 0.17 0.62 1.38 0.06 0.30 0.20 0.04 1.95 Exchange Rate USD/MYR 4.2917 0.0034 USD/JPY 111.29 0.0600 EUR/USD 1.117 0.0016 Stocks closed mixed Thursday, copying the region as investor caution prevailed with the weak oil price trend dampening market tone. The KLCI was up 1.86 points to end at 1,777.43 after oscillating between high of 1,778.68 and low of 1,775.07 as gainers led losers 459 to 389 on moderating turnover totaling 1.64bn worth RM1.79bn. The local market tone is expected to quieten down today with most market players sidelined ahead of the extended four-day Hari Raya Puasa festival holiday weekend, forcing stocks to stay trapped in sideways trade. Immediate support is retained at the 50-day moving average at 1,768, with better support from 1,760, the lower Bollinger band, and subsequently the 100-day ma at 1,744. Immediate upside hurdle remains at the 1,800 psychological level, followed by the 18 May 2015 high of 1,823. Dips on Ekovest shares towards better support from the 138.2%FP (RM1.18) or 123.6%FP (RM1.09) will be attractive to bargain for rebound upside to the 161.8%FP (RM1.31) and 176.4%FP (RM1.40) ahead. Stronger chart support is from the 200-day ma (RM1.03). Further weakness on SunCon shares should attract buyers looking for recovery towards the 123.6%FP (RM2.08), 22/5/17 peak (RM2.15) and 138.2%FP (RM2.21) going forward. Key chart support is from the 100-day ma (RM1.87). • • • • • Top 10 KLCI Movers Based on Mkt Cap. • Counter • Mkt Cap. (RM’mn) SIME 65,288 IHH 49,335 PETGAS 37,398 GENTING 36,962 GENM 31,517 HLBANK 31,500 HAPSENG 22,855 RHBBANK 20,612 HLFG 19,996 KLCC 14,100 Chg (RM) 0.01 0.09 0.20 0.18 0.06 0.02 0.18 0.05 0.16 0.02 Vol. (mn) 7.71 1.83 0.81 2.17 7.92 0.64 0.17 2.14 0.22 0.40 Commodities Futures Palm Oil (RM/mt) 2,446.00 5.00 Crude Oil ($/Barrel) 42.78 0.25 Gold ($/tr.oz.) 1,251.20 3.70 Important Dates SEG - 5:7 Bonus Issue - BI of 516.8m shares. 5 bonus shares for every 7 existing shares. Ex-Date: 22/06/2017. Entitlement Date: 28/06/2017. LISTING ON: 29/06/2017. TDM - 1:10 Bonus Issue - BI of 150.5m shares. 1 bonus share for every 10 existing shares. Ex-Date: 29/06/2017. Entitlement Date: 03/07/2017. LISTING ON: 04/07/2017. • • • • • • • • • News Bites Bank Negara Malaysia's international reserves rose marginally to US$98.7bil or RM436.1bil as at June 15, 2017 from US$98bil two weeks ago. It is sufficient to finance 8.2 months of retained imports and is 1.1 times the short-term external debt. S&P Global Ratings affirmed Malaysia's "A-" long-term and "A-2" shortterm foreign currency sovereign credit rating and expects the country's economy to grow at an average rate of over 4% between now and 2020. SP Setia Bhd has agreed to buy sister company I&P Group Sdn Bhd for RM3.65bn in cash, which will enable it to almost double its landbank and fast-track its expansion plans. DRB-Hicom Bhd has received a letter from Finance Ministry approving a reimbursement grant for R&D carried out by Proton Holdings Bhd, where it applied for reimbursement of R&D expenditure amounting to approximately RM3.7bn. The Employees Provident Fund Board and Gapurna Sdn Bhd will apply for excess rights with rights warrants under Malaysian Resources Corp Bhd's proposed 1-for-1 rights issue with warrants provided that they do not trigger the obligation for a MGO. MISC Berhad has secured long term contracts worth USD475mn to own and operate two specialist DP2 Offshore Loading Shuttle Tankers for Norway-based Statoil ASA. Felda Global Ventures Holdings Bhd has agreed to give its suspended group president and chief executive officer Datuk Zakaria Arshad another three days until noon tomorrow to reply to the show-cause letter issued by the FGV board of directors last Tuesday. AirAsia Bhd has signed an agreement with Airbus to order an additional 14 A320 current engine option aircraft to meet higher than expected near-term growth on the carrier's regional network. Affin Bank Bhd has appointed Gen (Rtd) Tan Sri Mohd Zahidi Zainuddin as chairman with effect from Thursday, succeeding the retiring Tan Sri Ismail Omar. Gas Malaysia Bhd has issued RM60mn Islamic Commercial Papers pursuant to a RM700mn Sukuk Murabahah programme it established in September last year. Muhibbah Engineering (M) Bhd does not think its operation in Qatar would likely be impacted by the tension between the country and its neighbours. After stripping out the unrealised forex loss of RM14.2mn and a gain from sale of equity shares of RM20.2mn, United Malacca Bhd's FY17 core net profit increased 68.7% YoY to RM78.6mn. Bintai Kinden Corp Bhd has bagged a SGD39.6mn contract from Singapore's Land Transport Authority to undertake mechanical services work for the four-in-one rail and bus depot in Singapore. George Kent (M) Bhd reported a 23% rise in 1QFY18 net profit at RM18.5mn from RM15.01mn a year earlier on higher revenue from its construction and water-meter units. Bank of Japan Deputy Governor Kikuo Iwata dismissed the need to raise interest rates any time soon, stressing that the economy still needs support from monetary easing with inflation distant from the central bank's 2% target. The US Conference Board said its leading economic index climbed by 0.3% in May after rising by a downwardly revised 0.2% in April. 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 , June 23, 2017 FBMKLCI: 1,777.43 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+603-2072 1277 taresearch@ta.com.my taresearch@ta.com.my www.taonline.com.my Quiet Sideways Trade Ahead of Long Hari Raya Break Stocks closed mixed Thursday, copying the region as investor caution prevailed with the weak oil price trend dampening market tone. The KLCI was up 1.86 points to end at 1,777.43 after oscillating between high of 1,778.68 and low of 1,775.07 as gainers led losers 459 to 389 on moderating turnover totaling 1.64bn worth RM1.79bn. Immediate Support Stays at 1,768/1,760 The local market tone is expected to quieten down today with most market players sidelined ahead of the extended four-day Hari Raya Puasa festival holiday weekend, forcing stocks to stay trapped in sideways trade. Immediate support is retained at the 50-day moving average at 1,768, with better support from 1,760, the lower Bollinger band, and subsequently the 100-day ma at 1,744. Immediate upside hurdle remains at the 1,800 psychological level, followed by the 18 May 2015 high of 1,823. Buy Weakness in Ekovest & SunCon Dips on Ekovest shares towards better support from the 138.2%FP (RM1.18) or 123.6%FP (RM1.09) will be attractive to bargain for rebound upside to the 161.8%FP (RM1.31) and 176.4%FP (RM1.40) ahead. Stronger chart support is from the 200-day ma (RM1.03). Further weakness on SunCon shares should attract buyers looking for recovery towards the 123.6%FP (RM2.08), 22/5/17 peak (RM2.15) and 138.2%FP (RM2.21) going forward. Key chart support is from the 100-day ma (RM1.87). Asian Markets Mixed as Oil Struggles Asian markets closed sideways after cautious trade on Thursday as oil prices declined further. The Nikkei 225 reversed earlier gains to close lower by 0.14 percent or 28.28 points at 20,110.51, and the Kospi rose 0.54 percent or 12.84 points to close at 2,370.37. Australia's S&P/ASX 200 climbed 0.71 percent or 40.279 points to end at 5,706, with energy and materials stocks showing signs of recovery after selling off in the previous session. Markets in greater China traded lower, with the Shanghai Composite down 0.29 percent or 9.0869 points to close at 3,147.1249 and the Shenzhen Composite fell 1.29 percent or 24.3536 points to end the session at 1,862.8391. Oil prices gave up earlier gains to trend lower, which had fallen more than 2 percent overnight despite the U.S. Energy Information Administration (EIA) announcing that inventories had fallen more than expected. With Brent crude prices below the USD45 handle, OPEC may be forced to deepen production cuts, as Saudi Arabia, the de-facto leader of OPEC, is preparing for the IPO of Saudi Aramco next year and cannot afford prices below USD50. Most Australian energy stocks made gains even though oil stocks in South Korea and Japan remained in negative territory. Oil and gas producer Santos was up 1.03 percent and Oil Search was up 2.17 percent at the close. Page 1 of 7
4. TA Securities 23-Jun-17 A Member of the TA Group Stocks Little Moved on Wall Street U .S stock markets ended little changed on Thursday as weak financials and consumer staples shares eclipsed a rally in the health-care and biotechnology sectors. Health care stocks was boosted after Republicans unveiled their proposal to replace Obamacare. The bill would continue to offer reimbursements to health insurance companies for subsidies for at least two years. It would also do away with current Obamacare taxes and would phase out Medicaid's expansion program. The Senate is expected to vote on the bill next week. Financials was down 0.6 percent as the big banks got ready for the release of their sector's annual stress test results. In corporate news, shares of American Airlines gained 1.12 percent after the airline disclosed Qatar Airways had approached the firm about taking a large stake in the company. Crude oil prices rebounded after a sharp two-day sell-off, with U.S. oil futures climbing half a percent. Economic data on Thursday showed jobless claims for last week increased by 3,000 to 241,000, but remain at levels consistent with a tight labor market. The Dow Jones Industrial Average fell 12.74 points, or 0.06 percent, to 21,397.29, the S&P 500 lost 1.11 points, or 0.05 percent, to 2,434.50 and the Nasdaq Composite gained 2.73 points, or 0.04 percent, to 6,236.69. Page 2 of 7
5. TA Securities 23-Jun-17 A Member of the TA Group News In Brief Corporate DRB-Hicom Bhd has received a letter from Finance Ministry (MOF) approving a research and development (R&D) reimbursement grant for R&D carried out by Proton Holdings Bhd. This represented the culmination of its extensive application process, dating back to Aug 19, 2011, when it applied for reimbursement of R&D expenditure amounting to approximately RM3.7bn (StarBiz). SP Setia Bhd has agreed to buy sister company I&P Group Sdn Bhd for RM3.65bn in cash, which will enable it to almost double its landbank and fast-track its expansion plans. The conditional agreement was inked to buy a 100% stake in I&P from Permodalan Nasional Bhd (PNB) and AmanahRaya Trustees Bhd (as trustee for PNB's unit Amanah Saham Bumiputera) - both also SP Setia’s direct major shareholders (StarBiz). The Employees Provident Fund Board (EPF) and Gapurna Sdn Bhd will apply for excess rights with rights warrants under Malaysian Resources Corp Bhd’s (MRCB) proposed 1for-1 rights issue with warrants provided that they do not trigger the obligation for a mandatory general offer (MGO). According to MRCB, its two biggest shareholders had decided not to pursue the proposed MGO exemption to enable the company to complete the proposed rights issue expeditiously (StarBiz). MISC Berhad has secured long term contracts to own and operate two specialist DP2 Offshore Loading Shuttle Tankers for Norway-based Statoil ASA. The vessels will operate at the Norwegian Continental Shelf of the North Sea, Norwegian Sea, and the southern Barents Sea. The final contracts will be revealed by end-Dec 2017. The estimated contract values comprise:- 1) USD200mn (for 5 year charter), and 2) USD275mn (7 years). To service this contract, MISC will commission Samsung Heavy Industries to build two 125,000dwt DP shuttle tankers (delivery: 2019). Comment: We are mildly positive on these contract wins, which adds on to MISC’s fleet expansion and renewal program. Inclusive of these new contracts, MISC has 13 upcoming contracted newbuilds for delivery in 2017-19. MISC also has experience operating its existing fleet of four DP Shuttles (average age: 3 years, 105k-121k dwt) for clients, Petrobras and Statoil. If the estimated contract value is crystalized by year-end, it translates to average DCR of USD110k (5 year charter) and USD107k (7 years). Assuming 100% utilization for both vessels in 2019, this may lead to a 3%/1% uplift to FY19 revenue/earnings. Nevertheless, we maintain our earnings forecasts at this juncture, pending more details such as contract start date and final value. Maintain Sell on MISC with TP of RM7.65 based on 14x CY18 P/E. Felda Global Ventures Holdings Bhd (FGV) has agreed to give its suspended group president and chief executive officer (CEO) Datuk Zakaria Arshad another three days until noon tomorrow to reply to the show-cause letter issued by the FGV board of directors last Tuesday. The decision came after considering Zakaria's request to shift the deadline to reply the letter from 4.30pm on June 20 to July 30 (StarBiz). AirAsia Bhd has signed an agreement with Airbus to order an additional 14 A320 current engine option (CEO) aircraft to meet higher than expected near-term growth on the carrier’s regional network. This order will see the total number of A320 Family aircraft ordered by AirAsia rise to 592 (StarBiz). Affin Bank Bhd has appointed Gen (Rtd) Tan Sri Mohd Zahidi Zainuddin as chairman with effect from Thursday, succeeding the retiring Tan Sri Ismail Omar. Mohd Zahidi, 69, has been chairman of Affin Bank’s listed parent company Affin Holdings Bhd since Oct 17, 2005. Mohd Zahidi was the Chief of Defence Forces from 1999 until his retirement in 2005 (The Edge). Page 3 of 7
6. TA Securities 23-Jun-17 A Member of the TA Group Gas Malaysia Bhd has issued RM60mn Islamic Commercial Papers (ICPs) pursuant to a RM700mn Sukuk Murabahah programme it established in September last year. The proceeds raised from the issuance of the Sukuk Murabahah would be utilised to repay/refinance the borrowings/financing of the group as well as to finance present and future shariah-compliant investments (Bernama). Muhibbah Engineering (M) Bhd does not think its operation in Qatar would likely be impacted by the tension between the country and its neighbours. The company’s road project in Qatar is ongoing as planned with 20% of work complete. Management hopes to at least win one of the projects that the group is currently tendering in Qatar (The Edge). United Malacca Bhd posted a strong 42% growth in earnings in the financial year ended April 30, 2017 (FY17), despite incurring a foreign exchange loss of RM15.28mn on a US dollar loan. Earnings rose to RM84.55mn on 34% higher revenue of RM274.71mn (Bursa Malaysia). Bintai Kinden Corp Bhd has bagged a SGD39.6mn (RM122.1mn) contract from Singapore's Land Transport Authority (LTA) to undertake mechanical services work for the four-in-one rail and bus depot in Singapore. The contract is non-renewable, with completion estimated by 2024 (The Edge). Eduspec Holdings Bhd (EHB) has signed an agreement with Beijing ZhongChuang Huaying Technology Co Ltd (BZC) to promote and distribute the Carnegie Mellon University Robotics Academy (CMRA) certified Science, Technology, Engineering and Mathematics (STEM) Robotic Curriculum in China. BZC is in the business of marketing and distributing scientific, intelligent teaching equipment and STEM overall solution. EHB had also appointed BZC as the exclusive distributor in the territory for five years with a total contract value of USD15mn (Bursa Malaysia). Far East Holdings Bhd (FEHB) has signed a sale and purchase agreement with Jasa Unik Sdn Bhd for the sale of agricultural land in Pekan, Pahang, for RM6.74mn. The land of 170.699 hectares (421.80 acres), planted with oil palm trees, is leasehold for 99 years and expiring on Feb 2, 2115 (Bernama). George Kent (M) Bhd reported a 23% rise in first quarter net profit at RM18.5mn from RM15.01mn a year earlier on higher revenue from its construction and water-meter units. Group revenue climbed to RM129.42mn in the first quarter ended April 30, 2017 (1QFY18) from RM122.9mn (The Edge). Electrical, mechanical and telecommunications contractor Kejuruteraan Asastera Bhd (KAB) has filed a draft prospectus for an initial public offering (IPO) on the ACE Market of Bursa Malaysia. The IPO will consist of 112mn shares, including a public issuance of 80mn new shares and offer for sale of up to 32mn existing shares (The Edge). Page 4 of 7
7. TA Securities 23-Jun-17 A Member of the TA Group News In Brief Economy Asia S &P Expects Malaysia's Economy to Grow Over 4% Up to 2020 S&P Global Ratings expects the government to continue implementing prudent budgetary and economic policies and forecasts the economy will grow at an average rate of over 4% between now and 2020. The ratings agency said it had also affirmed its “A-” long-term and “A-2” short-term foreign currency sovereign credit rating on Malaysia. At the same time, it affirmed its “A” long-term and “A-1” short-term local currency sovereign credit rating on Malaysia. “The outlook on the long-term rating remains stable. We also affirmed our 'axAAA/axA-1+' ASEAN regional scale rating on Malaysia,” it said. S&P pointed the stable outlook was based on its expectation that Malaysia's strong external position and monetary flexibility would balance its relatively weaker, but improving, public finances over the next 24 months. “We believe Malaysia's credit fundamentals can withstand further stress in the oil and gas sector during that period,” it said. S&P said it might raise the ratings if stronger economic growth, combined with the government's fiscal efforts, lead the government to reduce the level of public debt to GDP substantially, for example if the government started paying down outstanding public debt. (The Star) Bank Negara’s International Reserves Up Slightly at US$98.7bil Bank Negara Malaysia’s international reserves rose marginally to US$98.7bil or RM436.1bil as at June 15, 2017 from US$98bil two weeks ago. The reserves position is sufficient to finance 8.2 months of retained imports and is 1.1 times the short-term external debt. Bank Negara said the reserves were made up of US$92.3bil in foreign currency reserves, US$0.8bil International Monetary Fund reserves position, US$1.1bil in holdings of Special Drawing Rights (SDRs), US$1.5bil in gold and US$3bil consisted of other assets. (The Star) BOJ's Iwata Sees No Need to Raise Rates Now as Economy Needs Support Bank of Japan Deputy Governor Kikuo Iwata dismissed the need to raise interest rates any time soon, stressing that the economy still needs support from "powerful" monetary easing with inflation distant from the central bank's 2% target. Japan's low inflation expectations mean its short-term real interest rate, which is calculated by subtracting inflation expectations from nominal interest rates, remains higher than that of the United States, Iwata said. The BOJ must therefore maintain its massive stimulus program, even if global long-term interest rates rise on expectations of stronger world economic growth and steady interest rate hikes by the U.S. Federal Reserve, he said. "Japan is still distant from achieving the BOJ's inflation target and needs support from monetary easing," Iwata said in a speech to business leaders in Aomori, northern Japan. "There is absolutely no need to raise interest rates and diminish the degree of monetary easing, which is not that big compared with that of the United States," he said. Iwata also countered the view the BOJ should abandon its 2% inflation target, saying the goal was crucial in heightening inflation expectations and ensuring real interest rates remain low to fend off any adverse shocks to the economy. "Many major economies, including Japan, set their inflation targets around 2% because of a commonly shared view that it's important to anchor inflation expectations at 2% and secure sufficient room to reduce real interest rates," he said. (Reuters) United States U.S. Weekly Jobless Claims Total 241,000 versus 240,000 Estimate The number of Americans filing for unemployment benefits increased slightly last week, but remains at levels consistent with a tight labor market. Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 241,000 for the week ended June 17, the Labor Department said. Economists polled by Reuters had forecast firsttime applications for jobless claims rising to 240,000 in the latest week. Jobless claims for the prior week were revised upwards by 1,000 to 238,000 from 237,000. This week's tally is the 120th consecutive week that claims have been below 300,000, the threshold associated with a strong labor market. It's the longest stretch that the U.S. jobs market has remained below that level since 1970. The four-week moving average of claims, considered a better measure of labor market trends as it smoothest week-to-week volatility, rose 1,500 to 244,750 last week, the highest since early April. (CNBC) Page 5 of 7
8. TA Securities 23-Jun-17 A Member of the TA Group U .S. Leading Economic Index Rises in Line With Estimates in May Reflecting widespread improvement, the Conference Board released a report showing that its index of leading U.S. economic indicators rose in line with economist estimates in the month of May. The Conference Board said its leading economic index climbed by 0.3% in May after rising by a downwardly revised 0.2% in April. Economists had expected the index to rise by 0.3%, matching the increase originally reported for the previous month. The continued increase by the leading economic index reflected positive contributions from eight of the ten indicators that make up the index. The interest rate spread, the ISM new orders index, average consumer expectations for business conditions, the Leading Credit Index, and stock prices were among the biggest positive contributors. The Conference Board also said the coincident economic index inched up by 0.1% in May following a 0.3% increase in April. (RTT News) Europe and United Kingdom ECB Says Eurozone Solid Growth Pace to Continue in Q2 Eurozone's solid growth momentum is set to continue in the second quarter, mainly driven by domestic demand, and there are signs of a build-up of pipeline inflationary pressures, the European Central Bank said in its latest economic bulletin released on Thursday. "Overall, incoming data point to solid growth in the second quarter of 2017," the bank said. The 19-nation economy expanded 0.6% in the first three months of the year after 0.5% in the fourth quarter of 2016. While underlying inflation is yet to show any sign of an upward adjustment, there has been a build-up of pipeline pressures at the early stages of production and pricing chain, though wage growth remains low, the bank said. (RTT News) ECB Sets Up Instant Payment Service for Eurozone Businesses and Customers The European Central Bank will set up a Eurozone-wide instant payment system allowing consumers and businesses to send money anywhere in the bloc “within a matter of seconds”. Known as TIPS (Target Instant Payment Settlement), the 24-hour system will “help facilitate instant money transfers, offered via banks, so that citizens and firms can make instant retail payments across Europe”, the ECB said. It is due to launch in November next year. As it stands, it can take up to one business day for money transfers to move across the Eurozone. Under the new settlement system, this will be reduced to a matter of seconds. Instant payments are already available in the Italy, the Netherlands, and Spain, with the ECB now offering the technology across the 19-country bloc as way of reducing the threat of financial fragmentation in the single currency area. The service will also pave the way for consumers to make person-to-person mobile payments, said the ECB. (Financial Times) CBI U.K. Manufacturing Survey Hits Highest Level in 29 Years Britain’s manufacturers are enjoying their healthiest pipeline of orders in nearly thirty years, according to a survey from the country’s main industry body. In its latest monthly survey of factories, the Confederation of British Industry (CBI)’s measure of export orders was at its best level since 1995, with its measure of overall demand having its best month since 1988. The figures suggest the slowdown in manufacturing growth at the start of the year could prove to be just a “blip”. UK manufacturing grew just 0.3% in three months to the end of March, moderating amid a wider slowdown in the service sector which dragged down quarterly GDP growth to 0.2%. (Financial Times) Page 6 of 7
9. TA Securities 23-Jun-17 A Member of the TA Group Share Buy-Back : 22 June 2017 Company AMPROP BKAWAN GLBHD PWF UNIMECH Bought Back Price (RM) Hi/Lo (RM) 125,000 6,000 15,400 18,500 10,000 0.79 18.84/18.80 0.61/0.605 1.04/1.03 1.13/1.12 0.785/0.78 18.84/18.80 0.61/0.605 1.06/1.03 1.14/1.11 Total Treasury Shares 13,914,100 32,526,231 7,036,800 4,597,118 5,130,410 Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD (14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 7 of 7
10. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company AUTOMOBILE BAUTO MBMR UMW Share Price (RM) 22-Jun-17 1.97 2.25 6.02 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 5.41 0.99 0.60 1.26 10.3 24.1 19.7 15.8 25.3 29.8 19.1 9.4 30.6 12.4 8.9 20.2 5.9 4.0 2.2 8.0 4.0 3.2 2.44 2.70 7.00 -19.3 -16.7 -14.0 1.94 1.95 4.43 1.5 15.4 35.9 -7.5 5.1 31.7 4.80 3.70 5.70 7.80 17.30 10.80 23.30 5.60 10.00 1.28 0.95 1.34 1.37 0.67 0.96 0.79 1.35 0.70 33.6 29.4 43.9 49.6 105.2 73.4 137.2 50.7 40.3 30.5 33.6 48.4 55.2 115.5 82.9 142.4 54.5 39.0 11.8 9.1 11.6 13.4 14.6 13.1 14.9 10.1 25.8 13.0 8.0 10.5 12.0 13.3 11.6 14.3 9.4 26.6 4.1 3.0 3.5 3.0 2.7 5.2 2.7 2.3 3.3 4.1 3.0 3.5 3.4 2.7 5.2 2.8 2.3 3.3 4.49 3.00 5.70 6.87 15.74 9.68 20.58 5.59 11.14 -12.0 -10.7 -10.5 -3.2 -2.2 -1.0 -1.0 -8.1 -6.8 3.60 2.08 3.90 4.11 12.70 7.50 19.02 4.53 8.20 9.7 28.8 30.8 61.7 21.3 27.7 7.2 13.5 26.6 6.2 12.1 18.3 47.5 14.1 16.8 3.3 9.1 17.3 0.42 1.30 5.45 3.46 0.64 1.30 2.00 2.06 5.89 0.46 1.62 5.49 3.50 0.78 0.58 2.26 1.49 6.26 0.80 0.62 1.05 1.10 1.03 1.31 na 1.04 0.09 5.7 14.6 31.6 15.3 4.9 8.3 12.6 11.9 42.0 5.7 13.5 36.4 20.3 5.7 9.6 12.5 12.0 45.8 7.3 8.9 17.3 22.6 12.9 15.7 15.8 17.3 14.0 7.3 9.6 15.0 17.0 11.2 13.5 15.9 17.2 12.9 0.0 2.2 2.2 2.2 3.9 0.8 2.8 1.5 4.2 0.0 2.2 2.2 2.7 3.9 0.8 2.8 1.5 4.2 0.51 1.35 5.48 3.61 0.74 1.33 2.15 2.48 6.15 -18.6 -3.8 -0.5 -4.2 -12.9 -2.3 -7.0 -16.8 -4.2 0.36 0.80 4.65 3.07 0.33 0.41 1.50 1.46 5.55 15.3 63.3 17.2 12.7 93.9 221.0 33.3 41.0 6.1 -4.6 23.8 14.0 8.1 5.8 126.1 17.6 19.8 0.2 2.00 2.00 0.49 11.0 11.5 18.2 17.4 5.0 5.0 2.19 -8.7 1.93 3.6 -0.5 14.74 18.46 17.84 21.08 0.51 0.57 74.8 93.1 81.3 19.7 101.9 19.8 18.1 18.1 5.1 4.5 5.5 5.0 15.30 19.10 -3.7 -3.4 12.90 14.96 14.3 23.4 5.9 12.7 2.20 7.47 24.96 1.21 83.24 3.51 1.96 4.88 0.91 2.23 8.62 27.41 1.39 88.66 4.10 2.50 4.41 1.36 0.50 0.36 0.33 0.49 0.36 0.50 0.67 0.44 0.56 6.7 26.4 120.5 6.1 293.5 22.3 27.5 15.7 9.3 7.9 30.5 148.1 6.2 326.2 24.7 27.5 16.6 12.7 32.7 28.3 20.7 19.9 28.4 15.7 7.1 31.1 9.8 27.9 24.5 16.8 19.4 25.5 14.2 7.1 29.3 7.1 1.8 4.0 2.8 5.0 3.3 4.3 3.1 0.9 5.5 2.2 4.7 3.0 5.0 3.4 4.8 4.1 1.0 5.5 3.00 8.89 27.00 1.35 83.68 3.66 2.04 5.00 1.07 -26.7 -16.0 -7.6 -10.2 -0.5 -4.0 -3.9 -2.4 -15.0 2.11 7.30 22.44 1.13 74.12 2.12 1.43 4.14 0.78 4.3 2.3 11.2 7.0 12.3 65.5 37.1 17.8 16.7 -14.4 1.9 6.3 5.1 6.4 38.2 13.3 12.7 14.5 44.48 52.08 1.05 198.6 187.4 22.4 23.7 4.5 4.5 55.64 -20.1 40.61 9.5 0.7 9.76 5.56 11.53 6.58 1.35 1.28 49.3 25.7 55.5 27.9 19.8 21.6 17.6 19.9 0.5 1.4 0.6 1.6 10.00 6.38 -2.4 -12.9 7.50 4.19 30.2 32.6 22.8 23.0 2.55 0.12 3.34 0.13 0.74 1.26 19.3 0.4 23.3 0.4 13.2 33.1 11.0 33.2 5.5 0.0 6.3 0.0 3.42 0.16 -25.4 -25.0 2.48 0.05 2.8 140.0 -13.9 140.0 5.99 4.17 6.65 4.70 0.78 0.52 10.3 13.3 16.4 16.5 58.1 31.3 36.5 25.3 0.7 1.5 0.7 1.8 6.73 4.37 -11.0 -4.6 5.54 3.85 8.1 8.3 -5.7 -0.2 6.94 6.33 1.98 5.64 1.72 6.05 7.70 1.80 5.80 2.40 0.61 0.16 0.33 -0.20 0.28 20.0 35.8 12.3 26.5 3.7 24.2 40.5 15.3 30.2 6.1 34.7 17.7 16.0 21.3 46.1 28.6 15.6 12.9 18.7 28.4 1.3 2.8 1.9 2.4 0.5 1.6 3.2 2.3 2.7 0.9 7.12 7.07 2.38 5.94 2.64 -2.5 -10.5 -16.8 -5.1 -34.8 4.06 5.62 1.88 4.20 1.65 70.9 12.6 5.3 34.3 4.2 43.7 -3.9 -6.2 5.4 -27.1 INDUSTRIAL SCIENTX SKPRES 8.36 1.28 9.69 1.90 0.55 0.52 54.4 8.6 66.4 11.4 15.4 14.9 12.6 11.2 2.2 3.3 2.4 4.3 8.99 1.44 -7.0 -11.1 5.99 1.12 39.6 14.3 24.8 -0.8 MEDIA ASTRO MEDIA PRIMA STAR 2.63 0.95 2.33 3.45 0.60 1.40 1.04 0.65 0.64 13.2 1.7 7.1 14.5 2.8 6.5 19.9 55.4 32.9 18.2 33.4 35.9 4.8 1.4 7.7 4.9 2.4 7.7 3.01 1.52 2.70 -12.6 -37.8 -13.7 2.51 0.94 2.19 4.8 1.1 6.4 1.2 -17.8 4.0 -15.2 -28.0 -6.1 -10.5 -8.3 -25.2 -53.4 0.19 0.83 7.03 0.44 6.36 1.29 0.49 207.9 0.6 5.5 36.8 12.4 21.7 0.0 129.4 -8.7 1.0 33.7 2.4 -3.1 -44.6 -14.5 1.30 31.5 0.6 BANKS & FINANCIAL SERVICES AFG 3.95 AFFIN 2.68 AMBANK 5.10 CIMB 6.65 HLBANK 15.40 MAYBANK 9.58 PBBANK 20.38 5.14 RHBBANK BURSA 10.38 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N HUPSENG NESTLE PADINI POHUAT QL SIGN Tobacco BAT GAMING Casino GENTING GENM NFO BJTOTO LUSTER HEALTHCARE Hospitals IHH KPJ Rubber Gloves HARTA KOSSAN SUPERMX TOPGLOV KAREX OIL & GAS DNEX 0.59 0.74 1.03 3.5 4.3 16.8 13.7 1.7 1.7 0.69 MHB 0.84 0.95 1.84 -1.2 1.3 na 63.7 0.0 0.0 1.16 MISC 7.42 7.65 0.81 61.4 54.7 12.1 13.6 4.0 4.0 7.90 PANTECH 0.60 0.69 1.28 4.1 5.0 14.3 11.9 3.0 3.3 0.67 PCHEM 7.15 7.91 1.08 39.2 41.6 18.3 17.2 2.9 3.1 7.80 SENERGY 1.57 2.01 2.47 6.6 4.0 23.8 39.6 0.0 0.0 2.10 UMWOG 0.49 0.80 2.02 -12.0 -3.6 na na 0.0 0.0 1.04 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.71 1.55 1.42 12.0 12.9 14.3 13.2 0.0 0.0 2.00
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.75 3.08 4.48 24.86 9.60 6.03 Target Price BETA (RM) 1.55 3.88 4.15 26.19 10.02 7.52 1.75 0.46 1.09 0.87 1.23 0.47 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.7 111.8 34.0 37.6 8.5 15.7 21.0 119.1 37.5 34.5 41.5 25.1 23.9 22.2 28.2 16.1 20.6 19.6 21.3 20.9 25.6 17.5 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 2.9 2.3 2.2 2.2 2.6 3.8 2.9 2.6 2.7 2.4 3.2 2.8 2.52 3.70 4.81 25.50 9.67 6.51 -30.6 -16.8 -6.9 -2.5 -0.7 -7.4 1.42 3.00 4.21 22.72 7.30 5.53 PROPERTY GLOMAC 0.66 0.70 0.60 1.6 6.3 41.1 10.4 4.6 4.6 0.83 -20.6 0.65 HUAYANG 1.06 1.07 0.65 17.3 17.4 6.1 6.1 3.8 3.3 1.43 -26.0 1.05 IBRACO 0.84 0.92 0.35 4.9 10.2 17.2 8.2 4.2 4.8 1.05 -20.0 0.79 IOIPG 2.15 2.25 0.90 17.4 17.4 12.4 12.3 3.3 3.5 2.46 -12.6 1.85 MAHSING 1.56 1.70 0.72 14.4 14.2 10.8 11.0 4.2 4.2 1.70 -8.2 1.34 SNTORIA 0.84 0.98 0.29 6.2 10.3 13.6 8.1 1.2 1.2 1.00 -16.0 0.69 SPB 4.85 5.98 0.59 25.6 22.8 14.1 15.9 3.9 3.9 5.19 -6.6 4.32 SPSETIA 3.62 4.10 0.65 11.7 12.6 33.2 30.8 1.3 1.3 4.50 -19.6 2.80 SUNWAY 3.88 3.95 0.46 15.5 15.8 17.2 16.8 6.8 6.8 4.05 -4.2 2.84 Note: SUNWAY proposed bonus issue of shares and warrants. Ex-Target price RM1.69. For more details please refer to 15.06.17 report. REIT SUNREIT 1.72 1.86 0.51 8.9 10.1 19.4 17.0 5.2 5.9 1.84 -6.5 1.60 CMMT 1.53 1.72 0.56 8.1 8.6 18.9 17.7 5.5 5.8 1.72 -11.0 1.45 % Chg YTD 23.2 2.7 6.4 9.4 31.5 9.0 12.9 -9.4 1.8 3.6 18.5 0.5 0.8 1.0 7.0 16.4 16.4 21.7 12.2 29.3 36.5 -5.8 -6.2 -16.0 10.3 9.1 5.0 9.7 15.7 29.3 7.5 5.5 0.0 0.0 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.07 24.18 18.90 14.18 1.45 1.23 21.47 19.60 17.37 1.90 0.73 0.77 0.77 1.01 0.56 7.1 98.4 88.2 131.9 8.2 6.4 102.3 101.3 130.8 10.7 15.0 24.6 21.4 10.7 17.6 16.7 23.6 18.7 10.8 13.6 6.5 3.0 3.3 3.1 6.9 6.5 3.1 3.7 3.2 6.9 1.80 25.70 22.66 14.90 1.64 -40.6 -5.9 -16.6 -4.8 -11.6 1.04 22.92 18.10 13.00 1.38 2.9 5.5 4.4 9.1 5.1 -21.9 1.6 -11.3 2.0 -2.7 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.94 4.99 5.59 6.60 5.50 4.95 6.05 7.50 1.30 0.93 0.69 0.67 15.0 20.8 25.4 21.4 16.7 21.1 26.1 22.3 32.9 23.9 22.0 30.8 29.7 23.7 21.4 29.6 1.5 4.2 3.6 2.9 1.7 4.2 3.6 3.0 5.99 5.19 6.60 6.90 -17.5 -3.9 -15.3 -4.3 4.11 4.64 5.50 5.81 20.2 7.5 1.6 13.6 4.7 3.3 -6.5 10.9 TECHNOLOGY Semiconductor & Electronics IRIS 0.17 INARI 2.14 MPI 13.20 UNISEM 3.43 0.28 2.40 15.90 4.10 1.35 0.80 0.50 0.80 -2.6 10.3 94.2 26.9 -0.3 na 12.6 20.8 115.7 14.0 29.1 12.7 na 17.0 11.4 11.8 0.0 3.7 2.0 3.5 0.0 2.3 2.0 3.5 0.24 2.23 13.50 3.70 -29.2 -4.0 -2.2 -7.3 0.10 1.41 7.11 2.27 70.0 52.1 85.7 51.1 54.5 28.9 78.1 45.3 3.15 8.60 3.23 8.10 1.11 1.48 37.6 17.2 35.9 17.5 8.4 49.9 8.8 49.2 1.3 1.2 1.6 1.2 3.59 9.45 -12.3 -9.0 2.16 5.76 45.8 49.3 37.6 41.9 1.75 3.72 2.05 4.05 0.74 0.66 14.3 17.1 22.7 15.1 12.2 21.7 7.7 24.6 2.5 3.4 4.0 3.0 1.87 4.59 -6.4 -19.0 1.33 3.62 31.6 2.8 10.1 -13.5 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 20.44 OCBC 10.59 UOB 22.93 PLANTATIONS WILMAR IFAR 3.51 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 1.13 1.09 173.8 87.7 195.6 190.2 11.8 92.4 12.1 209.3 11.7 10.7 11.5 11.0 2.9 5.7 3.1 2.9 6.7 3.1 21.2 10.8 24.0 -3.5 -1.6 -4.5 14.72 8.84 17.41 38.9 28.8 31.7 17.9 18.7 12.4 3.72 0.53 0.92 1.13 28.9 4.9 31.1 5.2 11.3 9.1 2.3 2.5 2.6 2.7 4.0 0.6 -12.3 -21.0 2.96 0.44 18.6 6.8 -2.2 -10.5 12.1 9.7 BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
12. IPO TA Securities Friday , 23 June 2017 FBM KLCI: 1,777.43 Sector: Construction A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Advancecon Holdings Berhad Fair Value: RM 0.825 Debut of an Earthwork Specialist Contractor Main Market Listing Not rated THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Ooi Beng Hooi Tel: +603-2167 9612 benghooi@ta.com.my Background Advancecon Holdings Berhad (Advancecon) is an established specialist contractor primarily involved in integrated earthwork and civil engineering services in Malaysia. IPO Statistic The IPO entails a public issue of 90.0mn new ordinary shares (representing 22.4% of enlarged issued and paid-up share capital), and an offer for sale of 33.0mn shares (representing 8.2% of enlarged issued and paid-up share capital) by offeror to identified Bumiputera Investors approved by MITI, at an IPO price of RM0.63/share. www.taonline.com.my Share Information Listing Main Market Enlarged Share Capital (mn) 402.1 Market Cap @ RM0.63 (RM mn) 253.3 Issue price (RM) 0.63 Oversubscription rate N/A Estimated free float (%) 30.3 Tentative listing date 10 July 2017 Tentative Listing Dates Public issue: 1. 30.0mn new shares for application by the Malaysian public; 2. 5.0mn new shares for application by eligible directors and employees; 3. 37.0mn new shares by way of private placement to institutional and identified investors; and 4. 18.0mn new shares by way of private placement to identified Bumiputera investors approved by MITI. Event Main Competitive Advantages 1. Experienced key management team with proven track record; and 2. Owning a sizeable fleet of machinery. Ratio & Analysis Valuation At the IPO price of RM0.63/share, Advancecon is trading at a trailing PER of 9.6x FY16 earnings. We value Advancecon at 10x CY18 EPS, in line with our target PER for the small cap construction company, and arrive at a fair value of RM0.825/share. Earnings Summary (RM mn) FYE 31 Dec (RMmn) Revenue Gross profit EBITDA EBITDA margin Operating profit PBT PAT EPS * PER^ Gross dividend * Dividend yield^ ROE (%) (sen) (x) (sen) (%) (%) FY15 264.3 58.9 59.6 22.5 44.9 40.0 29.9 7.5 8.5 na na 38.0 FY16 234.7 64.1 59.0 25.1 42.8 37.1 26.4 6.6 9.6 na na 26.5 FY17F 298.7 74.4 73.8 24.7 51.4 47.8 34.7 8.6 7.3 2.0 3.2 23.9 FY18F 284.2 71.0 70.5 24.8 49.7 45.5 33.1 8.2 7.6 2.5 4.0 16.8 Note: * based on enlarged share base of 402.1mn, ^ based on IPO price of 63sen Page 1 of 6 FY19F 273.6 68.7 68.1 24.9 48.4 44.3 32.0 8.0 7.9 2.5 4.0 14.6 Tentative Date Opening of the IPO 19 June 2017 Closing of the IPO 28 June 2017 Balloting of Applications 30 June 2017 Allotment of Shares 6 July 2017 Listing 10 July 2017 NTA per share (post IPO) (sen) 0.39 Price to NTA (x) 1.62 Proforma ROE (%) 21.0 Proforma ROA (%) 8.8 Proforma Gearing (x) Utilisation of Proceeds 0.24 RM(mn) % Capex 29.7 52.4 Repayment of bank borrowings 12.5 22.0 Working capital 10.7 18.9 Estimated listing expenses TOTAL 3.8 6.7 56.7 100.0
13. TA Securities 23-Jun-17 A Member of the TA Group Business Overview Advancecon Holdings Berhad (Advancecon) is an established specialist contractor primarily involved in integrated earthwork and civil engineering services in Malaysia. Advancecon is a CIDB registered Grade “7” contractor who is able to provide services that include site clearance, rock blasting, excavation, roadworks, drainage works, bridge construction. It is also involved in the provision of support services such as sale of construction materials, hiring of machinery and ad hoc general construction services/ daywork. The group’s business operations began with the incorporation of Pembinaan Sin Soon Kim Sdn Bhd (now known as Advancecon Infra) in October 1990. Exhibit 1: Corporate Structure Source: Company Exhibit 2: Principal Activities of Subsidiaries Company Principal Activities Advancecon Infra Providing earthworks and civil engineering services and sale of construction materials Inspirasi Hebat Providing on-site rock crushing services Advancecon Macinery Providing earth-moving machinery for hire SK-II Tipper Truck Providing tipper trucks for hire Services Advancecon Properties Property investment Advancecon Rock Dormant since January 2015 Advancecon Trading Dormant since November 2015 Source: Company, TA Research Major Shareholders and Management Upon IPO listing, the promoters and substantial shareholders will hold 69.7% of equity interest in the group. Advancecon is led by Dato’ Phum Ang Kia, the Group Chief Executive Officer. He has approximately 41 years of working experience in the construction industry and is responsible for the group’s overall business development, which includes setting up the group’s direction, formulating corporate development plan and driving the business growth. Meanwhile, Mr Lim Swee Chai is the Deputy Group Chief Executive Officer with approximately 36 years of working experience in the construction industry. He Page 2 of 6
14. TA Securities 23-Jun-17 A Member of the TA Group is responsible for the group ’s overall strategic management, strategic corporate planning and oversee the contracts and operations related matters. The group’s business operations began with the incorporation of Pembinaan Sin Soon Kim Sdn Bhd (now known as Advancecon Infra) in October 1990 by Dato’ Phum together with the Phum Brothers. Dato’ Phum subsequently together with Mr Lim Swee Chai incorporated Advancecon Sdn Bhd in 1993 to expand the construction business. Exhibit 3: IPO Structure Public Issue Malaysian public Eligible directors and employees Private placement to institutional and identified investors 30.0mn new shares 5.0mn new shares 37.0mn new shares Private placement to Bumiputera investors approved by the MITI Offer of Sale Private Placement to Bumiputera investors approved by the MITI 18.0mn new shares 33.0mn vendor shares Source: Company, TA Securities Utilisation of proceeds The estimated gross IPO proceeds of RM56.7mn are expected to be utilized for the followings: Exhibit 4: Utilisation of proceeds Description Estimated timeframe for utilisation from Date of Listing Amount (RM'mn) % of Total Gross Proceeds Capex Within 24 months 29.7 52.4 Repayment of bank borrowings Within 6 months 12.5 22.0 Working capital Within 24 months 10.7 18.9 Estimated listing expenses Upon listing 3.8 6.7 56.7 100.0 Total gross proceeds Source: Company, TA Securities Of the RM29.7mn allocation for capex, Advancecon intends to allocate approximately RM15.1mn for the purchase of new construction machinery and equipment to cater for its current construction projects and to facilitate future expansion of its earthworks and civil engineering services. This would provide flexibility in the coordination of machinery and equipment for all its construction projects and result in better time management of project schedule. Besides, the availability of machinery and equipment would enhance its competitiveness in new project tenders. The remaining RM14.6mn allocated for capex would be utilised to construct an in-house workshop for the purpose of carrying out repair and maintenance services of machinery and equipment. The availability of the in-house workshop would enable the group to have more flexibility and convenience for internal serving team to perform repair and maintenance service for its machinery and equipment on a timely basis. Furthermore, the in-house workshop would allow annual rental savings of approximately RM84k for the group. Page 3 of 6
15. TA Securities 23-Jun-17 A Member of the TA Group Competitive Advantages 1 ) Experienced key management team with proven track record The group has been involved in the earthworks and civil engineering services market for approximately 27 years and the key management team has extensive experience in the fields of earthworks and civil engineering services. The key management team is able to offer a one-stop solution for construction projects which require the provision of a combination of earthworks and civil engineering services. Over the years, the group has built a reputation for delivering quality earthworks and civil engineering services. This has helped the group to secure projects from reputable property developers such as Eco World group, S P Setia group, MRCB group, PKNS, Sime Darby group and Tropicana group. 2) Owning a sizeable fleet of machinery The group owns a diverse range of machinery. It has 131 units of tippers, 78 units of excavators, 21 units of bulldozers, 29 unit of compactors, 8 units of water trucks, 9 units of diesel trucks, 7 units of motor graders and 8 units of crawler drills and other machinery. Majority of the machinery vehicles are within the age band of 1 to 7 years. The sizeable fleet of machinery allows Advancecon to undertake various construction activities and to meet customers’ requirements. Key Risks Relating to Business and Industry 1) Contracts are on project basis Earthworks and civil engineering services contracts are normally awarded on a project basis whereby the contracts generally range from 6 months to 3 years. In the event that the group is unable to secure any new contracts, its profitability and long term sustainability and business growth will be adversely impacted. 2) Fluctuations in the prices of raw materials Its raw materials consist of industrial diesel, precast products, quarry products, premix products and ready-mix concrete products. In the event of a sustained increase in prices of these raw materials or unavailability of raw materials, it may result in an increase in its operational costs or interruption to its operations which may adversely affect its financial performance. 3) Reliance on major customers During the past 3 financial years under review, the aggregate revenue contributed by SP Setia group and Eco World group accounted for approximately 55.5%, 45.9% and 42.4% of its total revenue, respectively. In the event that these customers terminate their business relationships with the group, Advancecon may not be able to secure other customers who can contribute the similar proportion of revenue on a timely basis. As such, its operation and financial performance may be adversely affected. 4) Dependent on the performance of property sector and infrastructure development Its business is dependent on the performance of the local property sector and the government infrastructure development as these projects create demand for earthworks and civil engineering services. As such, a slowdown in the demand for real estate properties or implementation of infrastructure projects will have a direct impact on the group’s operation and financial performance. Page 4 of 6
16. TA Securities 23-Jun-17 A Member of the TA Group Financial Highlight FY15 revenue jumped 32 .3% from RM199.8mn to RM264.3mn before moderating to RM234.7mn for FY16. The earnings fluctuation was due to increase/decrease of amount of new jobs secured. We forecast FY17 revenue to jump 27.3% to RM298.7mn, backed by strong outstanding order book of RM572.5mn as of 19 May 2017, and to decline slightly in FY18 and FY19, on the assumptions that the group replenishes RM300mn of new order a year for FY17, FY18 and FY19. Exhibit 5: Financial performance 350.0 11.8 298.7 300.0 264.3 250.0 284.2 11.6 273.6 11.4 234.7 11.2 199.8 200.0 11 150.0 10.8 100.0 10.6 50.0 21.4 29.9 26.4 34.7 32.0 33.1 0.0 10.4 10.2 FY14 FY15 Revenue (RMmn) (LHS) FY16 FY17F Net profit (RMmn) (LHS) FY18F FY19F Net margin (%) (RHS) Source: Company, TA Securities For the past 3 years, its net margin had been considerably consistent, fluctuating within a narrow band of 10.7% and 11.3%. Going forward, we expect the group to maintain the similar net margin and FY17 to FY19 annual net profit to stay above RM30mn. On its balance sheet, post listing and utilisation of IPO proceeds, we expect the net gearing ratio to drop substantially from 0.78x as of end-2016 to 0.09x. Outlook The group has an outstanding order book of about RM572.5mn, translating into 2.4x FY16 revenue. The jobs in hand are expected to provide earnings visibility to the group until 2019. The management revealed that Advancecon currently carries a tender book in excess of RM1.0bn. Exhibit 6: Outstanding Order Book as of 19 May 2017 Projects Outstanding contract value (RMmn) West Coast Expressway Pan Borneo Highway Mixed development project at Ijok, Selangor Tropicana Aman, Tanjung Dua Belas, Selangor Setia Ecohill 2 at Beranang, Selangor Eco Majestic at Beranang, Selangor Mukim Bukit Raja, Seksyen U1, Selangor Others 238.6 104.3 54.8 39.2 31.1 22.7 17.3 64.5 572.5 Source: Company, TA Securities Page 5 of 6
17. TA Securities 23-Jun-17 A Member of the TA Group Besides having sizeable outstanding order book in hand , we are positive on the outlook as Advancecon is in a strong position to get some work packages from the rollouts and implementations of mega infrastructure projects such as East Coast Rail Line, Pan Borneo Highway, Gemas-JB Double Track, West Coast Expressway and Central Spine Road. Dividend Policy The Board has a policy to recommend and distribute minimum dividends of 20% of its annual net profit. The ability to pay dividends is subject to various factors such as having profits and excess funds not required to be retained to fund its working capital requirements. Earnings Forecast We expect a strong net earnings growth of 31.2% for FY17. However, FY18-19 net profit is expected to contract by 4.5% and 3.4% respectively when earnings normalise after a surge in FY17. Our earnings projections are premised upon the following assumptions: 1. Revenue growth of 27.3% for FY17, followed by 4.9% and 3.7% decreases for FY18 and FY19 respectively on the assumptions that yearly order book replenishment to normalise to RM300mn for FY17, FY18 and FY19; and 2. PAT margin of 11.6% to 11.7% between FY17 and FY19. Valuation There are no other listed local competitors that are directly comparable to Advancecon. While Advancecon (based on IPO price), INTA and IKHMAS are all pure construction stocks and having market capitalisation of below RM500mn, INTA focuses mainly on building jobs and IKHMAS provides foundation and civil engineering services. We value Advancecon at RM0.825, based on 10x CY18EPS, in line with our target PE multiple for small cap construction company. NOT RATED. Peer Comparison Stock Share price Market Cap (RM) (RMmn) IKHMAS 0.685 356.2 INTA 0.305 163.3 AVERAGE ADVANCECON 0.63 253.3 EPS* (sen) 5.1 2.8 8.6 P/E ratio (x) 13.4 10.9 12.2 7.3 DPS* (sen) 0.8 1.5 2.0 Div Yield Net gearing P/B ratio (%) (x) (x) 1.2 0.37 1.8 4.9 net cash 2.0 3.0 1.9 3.2 0.09 1.5 * Consensus forecast for FY17 Source: Bloomberg, TA Securities 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 6 of 6
18. TA Securities COMPANY UPDATE Friday 23 June 2017 FBMKLCI : 1,777.43 A Member of the TA Group Sector: Property MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 TP: RM4.10 (+13.3%) SP Setia Berhad Last Traded: RM3.62 Sealing the Acquisition of I&P Buy THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Thiam Chiann Wen Tel: +603-2167 9615 cwthiam@ta.com.my Two months after announcing its intention to acquire I&P Group Sdn Bhd (I&P) from its controlling shareholders Permodalan Nasional Bhd (PNB), SP Setia has announced the followings: • • Acquisition of a 100% stake in I&P from PNB and AmanahRaya Trustees Bhd (as trustee for PNB's unit Amanah Saham Bumiputera) for RM3.65bn cash. Propose equity fund raising, which includes a rights issue of ordinary shares, a rights issue of new Class B Islamic redeemable convertible preference shares (RCPS-i B) and placement of new SP Setia shares. Proposed Acquisition of I&P for RM3.65bn SP Setia has signed a conditional share purchase agreement with PNB and AmanahRaya Trustees Bhd to acquire I&P for RM3.65bn cash. The proposed acquisition will be funded by a combination of equity, internally generated funds and borrowings. According to the announcement, the purchase price is at a discount of approximately 39.3% to I&P’s RNAV of RM6.01bn – see Figure 1 for details. Figure 1: Details of the Proposed I&P Acquisition www.taonline.com.my i Share Information n Bloomberg Code SPSB MK SP Setia 8664 Main Market 2855.2 10335.9 0.75 4.50/2.80 2933.70 17.3 0.65 Stock Name Stock Code Listing Share Cap (mn) Market Cap (RMmn) Par Value 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta Major Shareholders (%) PNB (68.0) KWAP (8.6) EPF (6.2) Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating FY17 FY18 0.0 0.0 730.5 650.1 739.7 669.9 98.8 97.0 Buy (Maintained) Financial Indicators Net Debt / Equity (%) FCFPS (sen) Price / FCF (x) ROA (%) NTA/Share (RM) Price/NTA (x) Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth FY17 20.8 4.0 89.4 3.8 3.3 1.1 FY18 18.5 20.1 18.0 3.2 3.4 1.1 SP Setia (4.2) 4.9 14.9 14.2 FBM KLCI 0.6 1.7 9.9 8.4 (12-Mth) Share Price relative to the FBM KLCI Source: SP Setia Equity Fund Raising To raise the required funding, SP Setia has proposed to undertake: 1) Rights issue of new shares to raise gross proceed of up to RM1.2bn. The distribution ratio and rights price will be determined later; 2) Rights issue of RCPS-i B with an expected preferential dividend rate of 5.93% p.a. to raise up to RM1.2bn. The issue price, distribution ratio and conversion ratio will be determined later; 3) A private placement to raise up to RM1.2bn. Page 1 of 6 Source: Bloomberg
19. TA Securities 23-Jun-17 A Member of the TA Group Note that the proposed rights issue of new shares is intended to be undertaken on a full subscription basis . PNB and the funds under PNB’s management have provided an irrevocable undertaking to subscribe in full for their entitlement. As such, underwriting will be in place for the balance. Meanwhile, SP Setia has also obtained the irrevocable undertaking from PNB to subscribe for its entitlement of the RCPS-i B in full. PNB shall also subscribe for additional RCPSI B not taken up by the other entitled shareholders up to an aggregate of RM340mn in value by way of excess application. In aggregate, PNB will subscribe up to RM1.0bn in value of RCPS-i B. Note that the private placement will be launched after the completion of both the proposed rights issue of new shares and RCPS-i B. The fundraising exercises are expected to be completed by 4Q17. The equity fund raising is expected to raise gross proceeds of up to RM3.6bn and will be utilised as follows: Figure 2: Use of Proceeds of the Proposed Equity Fund Raising Source: SP Setia Our View We believe the merger would benefit both property developers as there will be synergistic values arising from combination of landbank and staff strength. See Figure 4 & 5 for the location of SP Setia & I&P projects. Post-acquisition, the enlarged entity will have a combined landbank of close to 10,000 acres with a total gross development value of RM122bn and total revenue of RM5bn. SP Setia would be the third largest property developer by landbank in Malaysia, just behind Sime Darby Property (28,000 acres) and UEM Sunrise Bhd (13,000 acres) – see Figure 6. In terms of valuation, the purchase price of RM3.65bn is within the indicative price of RM3.5bn-3.75bn, and translates to 1.15x I&P’s 2016 audited net asset value of RM3.16bn, which is comparable to SP Setia’s 1.1x. Meanwhile, the 39% discount to RNAV is also largely within large cap developers’ current valuation of 20-40% discount to RNAV. The proposed fund raising also came in within expectations as we believe it is necessary to avoid overstretching the balance sheet. Despite the near-term earnings dilution arising from the cash call, we are positive on the proposed merger, as it will enable SP Setia to fast track its landbank expansion plans. The proposed acquisition of I&P will likely expedite SP Setia’s aspiration to grow its market cap to RM18bn by 2021, from some RM10bn currently. With regards to the management team and future directions, we opine that the current SP Setia management team will continue to steer the enlarged entity. This is in view of the fact the SP Setia is taking the lead to acquire I&P, instead of PNB creating a new entity to buy over both SP Setia and I&P. We also understand that the Page 2 of 6
20. TA Securities 23-Jun-17 A Member of the TA Group group already has plans for integration and does not anticipate any job cuts . Currently I&P has around 300 employees while SP Setia has 1,891. Financial Impact For illustration purpose, we assume: 1) A ratio of 1 rights share for every 8 existing SP Setia shares, at rights price of RM2.84/rights share (21% discount to theoretical ex rights price (TERP)); 2) A ratio of 2 RCPS-i B for every 5 existing SP Setia shares at an issue price of RM0.89/RCPS-i B with the conversion ratio of 2 new SP Setia shares for every 9 RCPS-i B (implied conversion price RM4.01, or 12% premium to TERP) 3) 335mn of new placement share at RM3.38 (5.5% discount to TERP), Factoring in the interest income from the proceeds and distributions to RCPS-i B Holders; the proposed exercise is expected to dilute our FY18-19 EPS by ~35% (see Figure 3) based on the maximum scenario. However, we are keeping our FY17-19 earnings unchanged for now, pending finalisation of the rights price and distribution ratio. We will only factor in I&P’s earnings contribution to our earnings model once the fund raising details and I&P’s pipeline of launches have been determined. Figure 3: Illustrative Dilution Impact Dilution Impact (maximum scenario) Impact on sharebase (mn) No of Share* 1 rights for 8 existing shares Subtotal 2 RCPS-I B for 5 existing shares Subtotal Placement Shares Enlarged Share Capital 3,369.6 421.2 3,790.8 1,347.8 5,138.6 355.0 5,493.6 Gross proceeds from fund raising 3,596.0 Impact on net profit (RM mn) FY18f FY19f Net profit Add interest income from rights and placement proceeds Minus distribution to RCPS-i B @ 5.93% Net profit corporate exercise 650.1 107.9 (71.1) 686.8 700.1 107.9 (71.1) 736.9 19.3 12.5 (35.2) 20.8 13.4 (35.4) Impact on EPS EPS (sen/share) EPS post fund raising (sen/share) EPS dilution post-rights issue (%) *Assuming 1) all shareholders elect to exercise dividend reinvestment option, and 2) all of the outstanding RCPS-i A, ESOS are exercised before the entitlement date Source: TA Research Recommendation No change to our target price of RM4.10/share, based on 18x CY18 EPS. With a potential total return of 17.1%, we maintain our Buy recommendation on SP Setia. We continue to like SP Setia’s strong near-term earnings visibility, which is backed by its sizable unbilled sales of RM7.8bn. We expect valuation re-rating following the acquisition of I&P, which would further solidify SP Setia as a dominant township player in the central Klang Valley and Johor. Page 3 of 6