Bursa Malaysia Daily Market Report - 24 May

Transcription

1. Wednesday , 24 May, 2017 For Internal Circulation Only TA RESEARCH’S ‘DAILY COMPILED REPORTS’ News 1. Daily Market Commentary 2. Daily Brief Fundamental Reports 1. 2. 3. 4. 5. 6. 7. 8. IOI Properties Group Bhd: A Solid 9MFY17 Luster Industries Berhad: A Strong Comeback in 1Q17 Malakoff Corporation Berhad: Extended Hiccups at Tg. Bin Energy RHB Bank Berhad: More Corporate Impairments in Singapore Sentoria Group Berhad: Launching RM241mn New Projects in 2HFY17 Star Media Group Berhad: Not Looking Good for Print Telekom Malaysia Berhad: On Track to Meet Targets UMW Holdings Berhad: Fifth Consecutive Quarter of Core Losses 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 Wednesday, 24 May 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only KLSE Market Statistics (23.05.2017) Volume (mil) +/-chg (RMmn) Main Market 1,955.7 -493.7 2,631.0 Warrants 320.0 -92.1 43.1 ACE Market 635.1 -593.4 128.4 Bond 4.1 -2.1 0.8 ETF 0.0 0.04 0.1 Total 2,915.0 2,803.4 Off Market 25.8 2.5 135.0 Value +/-chg -109.5 -11.0 -26.4 -0.8 0.05 114.7 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 (mn) 11.7 3.5 2.3 2.0 1.8 1.7 1.1 Up Down 210 448 43 123 34 62 2 2 3 1 292 636 % chg % YTD chg 1,767.17 12,666.36 17,850.75 1,765.00 -7.78 -74.36 -133.80 -9.00 -0.44 -0.58 -0.74 -0.51 7.64 10.46 21.31 7.92 20,937.91 6,138.71 7,485.29 19,613.28 2,311.74 25,403.15 3,222.69 1,564.69 5,730.61 3,061.95 1,789.47 5,760.19 43.08 5.09 -11.05 -65.00 7.71 11.81 9.12 6.96 -18.83 -13.73 -38.75 -11.01 0.21 0.08 -0.15 -0.33 0.33 0.05 0.28 0.45 -0.33 -0.45 -2.12 -0.19 5.95 14.04 4.79 2.61 14.08 15.47 11.87 1.41 8.19 -1.34 -9.12 1.67 @ @ @ @ @ @ @ (RM) 9.32 2.45 1.40 0.55 5.98 0.50 0.45 Counter IHH MAXIS AXIATA DIGI PETGAS GENTING GENM HLBANK IOICORP KLK Mkt Cap. (RM’mn) 48,264 48,217 46,665 39,031 37,952 36,615 33,614 28,636 28,340 26,369 Chg (RM) -0.11 -0.10 -0.04 -0.01 -0.62 -0.03 -0.06 -0.04 -0.03 -0.08 Stocks slipped back into profit-taking correction mode Tuesday, dragged down by a terrorist incident in the UK and weaker oil prices after the US proposed to sell half of its huge crude oil inventory. The index fell 7.78 points to close at the day's low of 1,767.17, off an early high of 1,777.08, as losers swarmed gainers 636 to 292 on slower turnover of 2.91bn shares worth RM2.8bn. Renewed geopolitical concerns following the terror attack in the UK and concerns a looming glut will upset OPEC's plan to extend output cuts may act to dampen near-term sentiment. Meantime, immediate uptrend supports for the index are at the rising 30 and 50-day moving average levels, now at 1,760 and 1,753, with better support at 1,740. 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. Any price weakness on Sapura Energy shares towards the 61.8%FR (RM1.89), reinforced by the 100-day ma (RM1.86) support, will be attractive to bargain for rebound upside towards the 50%FR (RM2.08), with a decisive breakout to aim for the 38.2%FR (RM2.26) next. Wah Seong remains in base building mode, pending convincing breakout above the 61.8%FR (94sen) to target the 50%FR (RM1.04) and 38.2%FR (RM1.14) going forward. Key chart support is from the 200-day ma (86sen). News Bites • • • • Top 10 KLCI Movers Based on Mkt Cap. Off Market SIME TOMYPAK CHINHIN GUNUNG CIMB OMESTI BERTAM Review & Outlook Value/ Volume 1.35 0.13 0.20 0.19 1.29 0.96 5.24 Vol. (mn) 8.30 1.40 1.76 2.44 0.48 2.12 7.75 1.61 3.18 1.80 • • • • • • • Telekom Malaysia Bhd's 1QFY17 core net profit of RM230mn (-14.9% QoQ, +13.2% YoY) was within ours and consensus expectations. RHB Bank Bhd's 1QFY17 net profit contracted to 11.4% YoY to RM500.3mn. It was within expectations. UMW Holdings Bhd reported headline net profit of RM20.2mn in 1Q17 but excluding exceptional items, the core net loss of RM4.5mn was within our full year estimates and consensus. AirAsia X Bhd saw its net profit plunge 94.2% to RM10.3mn in 1QFY17 from RM179.5mn a year ago, on higher operating expenses including fuel prices. Star Media Group Bhd's net profit fell 57.1% YoY to RM6.6mn in 1Q17 on lower profit from its print segment. It was below expectations. Pos Malaysia Bhd's net profit for FY17 advanced 33% YoY to RM84.1mn, mainly due to inclusion of results from the newly-acquired logistics business, coupled with strong growth in its courier business. Ranhill Holdings Bhd aims to increase its power generation capacity to 1,000MW by 2020 from 380 MW currently. The race between China's Geely Automobile Holdings Ltd and France's Groupe PSA as the foreign strategic partner for Proton Holdings Bhd is nearing its end, with Geely the ultimate winner, according to sources. Wing Tai Malaysia Bhd has received a voluntary take-over offer from Wing Tai Holdings Ltd and Wing Tai Investment & Development Pte Ltd for a cash offer of RM1.80 per share. Kerjaya Prospek Group Bhd has secured a RM77mn contract for the building and external works of a 24-storey office building in Mutiara Damansara, Selangor. Purchases of new, single-family homes, which account for a narrow slice of all U.S. home sales, decreased to a seasonally adjusted annual rate of 569,000 in April, down 11.4% from March. 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. Exchange Rate USD/MYR 4.2930 -0.0120 USD/JPY 111.26 -0.1600 EUR/USD 1.124 0.0012 Commodities Futures Palm Oil (RM/mt) 2,617.00 -42.00 Crude Oil ($/Barrel) 51.49 0.68 Gold ($/tr.oz.) 1,250.80 -9.70 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 Wednesday , May 24, 2017 FBMKLCI: 1,767.17 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Market View Tel: +603-2072 1277 taresearch@ta.com.my www.taonline.com.my Lower on Oil & Terror Concerns Stocks slipped back into profit-taking correction mode Tuesday, dragged down by a terrorist incident in the UK and weaker oil prices after the US proposed to sell half of its huge crude oil inventory. The index fell 7.78 points to close at the day’s low of 1,767.17, off an early high of 1,777.08, as losers swarmed gainers 636 to 292 on slower turnover of 2.91bn shares worth RM2.8bn. Uptrend Supports at 1,760/1,753 Renewed geopolitical concerns following the terror attack in the UK and concerns a looming glut will upset OPEC’s plan to extend output cuts may act to dampen near-term sentiment. Meantime, immediate uptrend supports for the index are at the rising 30 and 50-day moving average levels, now at 1,760 and 1,753, with better support at 1,740. 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. BUY Sapura Energy & Wah Seong Any price weakness on Sapura Energy shares towards the 61.8%FR (RM1.89), reinforced by the 100-day ma (RM1.86) support, will be attractive to bargain for rebound upside towards the 50%FR (RM2.08), with a decisive breakout to aim for the 38.2%FR (RM2.26) next. Wah Seong remains in base building mode, pending convincing breakout above the 61.8%FR (94sen) to target the 50%FR (RM1.04) and 38.2%FR (RM1.14) going forward. Key chart support is from the 200-day ma (86sen). Asian Markets Lower Following Deadly Blast Markets across Asia traded lower on Tuesday as news of a suspected terror attack in Manchester offset an overnight advance by Wall Street that took US stocks close to a fresh record. An explosion following a blast at the Manchester Arena in northern England where U.S. singer Ariana Grande had been performing, killed at least 22 people and injured about 50, according to local police. The attack came just two-and-a-half weeks before an election that British Prime Minister Theresa May is expected to win easily, although polls showing that the contest was tightening added to the sterling's woes. The news of the bombing sparked some support for haven assets such as gold and the Japanese yen. The Nikkei shares average fell 0.33 percent to 19,613.28. The benchmark ASX 200 reversed early gains to close slightly lower by 0.19 percent or 11.01 points to close at 5,760.20, dragged lower by the banks and the miners. Meanwhile, China stocks were mixed with gains in financials only partially soothing lingering concerns over policy tightening steps. The blue-chip CSI300 index rose 0.38 percent, to 3,424.19 points, while the Shanghai Composite Index lost 0.45 percent to 3,061.95 points. Page 1 of 8
4. TA Securities 24-May-17 A Member of the TA Group U .S Market Rises as Investors Parse Trump Budget U.S markets rallied for the fourth day in a row, leaving the S&P 500 within striking distance of its all-time high on Tuesday as investors were relieved by the release of President Donald Trump's budget proposal and oil prices inched up in spite of a White House proposal to sell half the country's petroleum reserves. Trump's first full budget plan calls for an increase in military and infrastructure spending but also a raft of cuts, including healthcare and food assistance. Oil prices rose slightly in volatile trading as expectations of an extension to OPECled supply cuts and another drop in U.S. crude inventories offset the proposal in Trump's budget plan to roll out sales of petroleum reserves over 10 years. Shares of financial companies led the gains as investors expanded their appetite for risk again following last week’s turbulent trading, with Goldman Sachs and J.P. Morgan contributing the most gains. Some traders also turned cautious ahead of the release of the Federal Reserve's minutes of its May 2-3 meeting on Wednesday. The Dow Jones Industrial Average rose 43.08 points, or 0.21 percent, to 20,937.91, the S&P 500 gained 4.40 points, or 0.18 percent, to 2,398.42 and the Nasdaq Composite rose 5.09 points, or 0.08 percent, to 6,138.71. Page 2 of 8
5. TA Securities 24-May-17 A Member of the TA Group News In Brief Corporate The two-horse race between China ’s Geely Automobile Holdings Ltd and France’s Groupe PSA to see who will emerge as the foreign strategic partner (FSP) for Proton Holdings Bhd is nearing its end, with Geely the ultimate winner, according to sources. DRB-Hicom Bhd requested yesterday to suspend the trading of its shares today, pending the release of a material announcement. (The Edge) Wing Tai Malaysia Bhd (WTM) has received a voluntary take-over offer from Wing Tai Holdings Ltd and Wing Tai Investment & Development Pte Ltd for a cash offer of RM1.80 per share. The offer is not conditional upon any minimum level of acceptances of the offer shares. In addition, the joint offerors do not intend to maintain the listing status WTM. Telekom Malaysia Bhd (TM) recorded a 28.5% YoY lower net profit at RM230.4mn for 1Q17, on the back of reduced operating profit before finance cost and lower forex gain on its borrowings. With regard to overall revenue, TM registered a 3.8% YoY higher top line at RM3.0bn, in contrast to the RM2.9bn revenue recorded a year ago. (The Star/ Bursa Malaysia) RHB Bank Bhd's pre-tax profit for 1Q17 was reduced at RM658.3mn from RM755.3mn recorded in the same quarter in 2016. Revenue decreased to RM2.6bn from RM2.7bn previously. The lower pre-tax profit in the first quarter was mainly due to higher allowances for loans and financing and higher operating expenses, partially offset by higher net funding income. (Bernama/ Bursa Malaysia) AirAsia X Bhd saw its net profit plunge 94.2% to RM10.3mn in 1QFY17 from RM179.5mn a year ago, on higher operating expenses including fuel prices, which rose to US$66 per barrel compared with US$64 per barrel in 4QFY16. Quarterly revenue, however, rose 21.6% to RM1.2bn from RM970.7mn in 1QFY16, on strong passenger numbers, which grew by 33% YoY on the back of a 28% YoY increase in seat capacity. (The Edge/ Bursa Malaysia) IGB Corp Bhd's net profit jumped 122% in 1QFY17 to RM115.3mn, from RM51.8mn in the previous corresponding period. The big jump on earnings is mainly due to a one-off gain of RM34.3mn from sales of assets. Higher contributions from its property investment divisions and better earnings from its hotel business also helped to boost the group's profit. Quarterly revenue, however, dropped 9% to RM254.8mn from RM280.2mn a year ago. (The Edge/ Bursa Malaysia) Ann Joo Resources Bhd saw its 1Q17 net profit jump 13x to RM74mn from RM5.5mn a year ago, on lower operating expenses. Quarterly revenue grew 2.0% to RM499.1mn from RM489.5mn in 1QFY16. (The Edge/ Bursa Malaysia) Star Media Group Bhd's net profit fell 57.1% to RM6.6mn in 1Q17 from RM15.5mn a year ago, on lower profit from its print segment. Quarterly revenue was 7.9% lower at RM183.1mn in 1Q17 from RM198.7mn in 1QFY16, as contribution from the print and radio segment fell. (The Edge/ Bursa Malaysia) Lii Hen Industries Bhd’s 1QFY17 saw net profit rise 5.2% to RM22.1mn, against RM21.0mn in the corresponding quarter last year. Lower margin in the current quarter due to accelerated cost of raw materials and labour being mitigated by better US-ringgit foreign exchange rate. This resulted in higher revenue in the period, up 4.6% to RM173.0mn, from RM165.4mn last year. (The Edge/ Bursa Malaysia) Pos Malaysia Bhd’s net profit for FY17 advanced 33% YoY to RM84.1mn, from RM63.1mn in FY16, as revenue grew 21% to RM2.1bn from RM1.7bn. Its improved FY17 was mainly due to inclusion of results from the newly-acquired logistics business, Pos Aviation Sdn Bhd, coupled with strong growth in its courier business. (The Edge/ Bursa Malaysia) Page 3 of 8
6. TA Securities 24-May-17 A Member of the TA Group For the cumulative 9 months , GD Express Carrier Bhd's net profit rose 18% to RM25.3mn from RM21.4mn in the same period of FY16. Revenue was up 15.4% to RM185.6mn from RM160.9mn. On the group's prospects, GD Express said that with the entrance of new players, the competition in the express delivery market is expected to be more intense. Nevertheless, it expects to report satisfactory results due to the growing popularity in ecommerce business. (The Edge/ Bursa Malaysia) Ranhill Holdings Bhd aims to increase its power generation capacity to 1,000MW by 2020 from 380 MW currently. To meet this target, the company was focusing on supplying renewable energy such as solar, wind and geothermal, while also looking at potential acquisition of existing power plants when the opportunities arise. (Bernama) Kerjaya Prospek Group Bhd has secured a RM77mn contract for the building and external works of a 24-storey office building in Mutiara Damansara, Selangor. The latest contract was Kerjaya’s 3rd contract award for the year 2017, bringing the current outstanding orderbook to RM2.6bn. (The Star/ Bursa Malaysia) Bursa Malaysia Securities Bhd has issued an Unusual Market Activity (UMA) query to Visdynamics Holdings Bhd Tuesday due to the sharp rise in the company's share price. (Bernama/ Bursa Malaysia) Page 4 of 8
7. TA Securities 24-May-17 A Member of the TA Group News In Brief Economy Asia Japan Manufacturing Growth Slows to Six-Month Low : Flash PMI Japanese manufacturing activity expanded at the slowest pace in six months in May as export orders slowed, a private survey showed, in a warning sign that global demand may be weakening. The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to 52.0 in May on a seasonally adjusted basis, from a final 52.7 in the previous month. The index remained above the 50 thresholds that separates expansion from contraction for the ninth consecutive month but indicated that growth was the slowest since November. The flash index for new export orders fell to 51.6 from a final 53.3 in the previous month, which also marked the slowest growth since November. Japan's exports rose in April at a slower pace that the previous month, government data showed on Monday. The flash PMI data suggests this slowdown continued into May. Economists remain optimistic that Japan's exports will continue to grow as overseas economies recover, but any further slowdown could prompt some analysts to scale back their assumptions for Japan's economic growth. Separately, Japan’s all industry activity index fell 0.6% month-over-month in March, reversing a 0.7% rise in February. Economists had expected a 0.5% decrease for the month. The sub-index for industrial production dropped 1.9% over the month and the measure for construction industry activity slid by 0.5%. The index measuring tertiary activity registered a moderate decline of 0.2%. On an annual basis, the all industry activity index climbed 1.1% in March, after remaining flat in the preceding month. (Reuters) Singapore’s Inflation Remained Low in April Inflation in Singapore remained benign overall in April, coming in lower-than-expected, but that's largely because housing costs continued to fall. Singapore's consumer price index (CPI) raised 0.4% on-year in April, slowing from a 0.7% rise in March, coming in below the 0.7% expected from a poll. That was despite the cost of electricity and gas shooting up 18.7% in April, compared with a 4.2% rise in March, data from Singapore's central bank, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) showed. Rising private road transportation costs also grew 7.0% in April, as increases in car and petrol prices accelerated, the data showed. But all of that was offset by continued declines in rents and imputed rents. The all items less accommodation figure for April rose 2.4% on-year, nearly six times the headline figure. In the first quarter, Singapore's rental price index fell 0.9% on quarter, while property prices fell 0.4%, data from the Urban Redevelopment Authority (URA) in late April showed. The vacancy rate fell to 8.1% in the quarter, from 8.4% in the fourth quarter, but that's still elevated historically. The vacancy rate touched a 16-year high of 8.9% touched in the second quarter of last year. However, the core CPI figure, which excludes accommodation and private road transport, rose 1.7%, faster than the 1.2% rise in March. (CNBC) United States U.S. New-Home Sales Fell More than Expected in April New-home sales fell sharply in April, a potential sign of weakening in the market at a time of rising prices and limited inventories. Purchases of new, single-family homes, which account for a narrow slice of all U.S. home sales, decreased to a seasonally adjusted annual rate of 569,000 in April, down 11.4% from March, the Commerce Department said Tuesday. The data have a margin of error of 10.5%, and the overall trend remains one of continuing improvement in the market. Before last month, sales had risen for three-consecutive months. New-home construction has lagged throughout much of the housing market’s fiveyear recovery, but there have been recent signs of a resurgence in the starter-home segment. Builders say they are stepping up construction at the lower end, and the share of first-time buyers in the market is increasing. The National Association of Realtors on Wednesday is scheduled to report sales of existing homes, which account for the bulk of the market. (The Wall Street Journal) Page 5 of 8
8. TA Securities 24-May-17 A Member of the TA Group Bipartisan Pushback Greets Trump ’s Proposed Budget President Donald Trump faced swift resistance from Democrats and even some Republicans on Capitol Hill on Tuesday after offering a 10-year plan to balance the federal budget that depends heavily on cuts to the government’s safety-net programs such as food stamps and Medicaid and expectations of a big gain in economic growth. The White House budget proposal for the 2018 fiscal year that begins Oct. 1 would cut federal spending by $4.5 trillion over 10 years. But it leaves untouched the big entitlement programs—Social Security and Medicare for retirees—and proposes increases to infrastructure spending, a new parental leave program and a short-term boost to military spending. With those priorities set, the White House offered up significant reductions in other programs that touch households and the broader economy in myriad ways, large and small. Tuesday’s proposal is merely one step in the budget process, although an important one. Republicans in both the House and Senate now will craft their own budget resolutions in the coming months. Payments to Medicaid, the federal-state health program for the poor, would be cut by more than $600 billion under the proposed budget over a decade from levels projected under current law in addition to proposed Medicaid cuts under the House bill repealing and replacing much of the Affordable Care Act. (The Wall Street Journal) Europe and United Kingdom German GDP Expands as Estimated in Q1 Germany's economy expanded at a faster pace, as estimated in the first quarter, on domestic and foreign demand, data published by Destatis showed. Gross domestic product grew 0.6% sequentially, in line with preliminary estimate and faster than the 0.4% expansion seen in the fourth quarter. This was the fastest growth since the first quarter of 2016, when GDP climbed 0.7%. On a yearly basis, the calendar-adjusted growth slowed slightly to 1.7% from 1.8% a quarter ago. At the same time, the price-adjusted GDP climbed 2.9%, following the previous quarter's 1.3% expansion. The annual growth figures matched the provisional estimate published on May 12. The expenditure-side breakdown of GDP showed that household spending grew 0.3%, slightly faster than the 0.2% expansion a quarter ago. Likewise, growth in government spending improved to 0.4% from 0.3%. Gross capital formation declined 0.5%, in contrast to the 2.5% growth in the fourth quarter. Exports advanced 1.3%, but slower than the 1.7% expansion in the previous quarter. Similarly, imports climbed only 0.4% after rising 2.5%. (RTT News) U.K. Government Borrowing Fell Further than Thought in Last Financial Year Higher than expected tax receipts since the start of the year meant the UK government beat forecasts and cut its annual public borrowing by more than it had initially thought, according to revised data released. Public sector net borrowing fell by £23.4bn in the year ending March 31 to £48.7bn, the lowest figure since the start of the financial crisis. The Office for Budget Responsibility had predicted a full-year reduction of £20.3bn and initial data released last month suggested the government had missed this forecast. However, the Office for National Statistics today revised down the total borrowing figures as a result of higher than expected VAT receipts since January. Borrowing in the first month of the new financial year was higher than expected however, with net borrowing of £9.6bn compared to forecasts of £8bn. Total borrowing in the coming year is expected to rise again for the first time since 2012-2013, to £58.3bn. The government’s total net debt excluding public sector banks as a proportion of gross domestic product was 2.5 percentage points higher than April 2016, at 86 per cent. (Financial Times) U.K. Retail Sales to Rise Marginally Again in June: CBI British retail sales are expected to rise marginally again in June but growth is set to remain below its long-term average, the Quarterly Distributive Trades Survey from the Confederation of British Industry showed Tuesday. The retail sales balance fell to +2% in May, well below the expected level of +31%. Retailers expect sales volume to pick up pace a little next month, with balance improving to +6 percent in June. Nonetheless, retailers expect their overall business situation to deteriorate over the next three months. "Retail sales flattened out this month, as the bounce in April unwound," Alpesh Paleja, CBI Principal Economist, said. "It's clear that households are increasingly feeling the pinch, as Page 6 of 8
9. TA Securities 24-May-17 A Member of the TA Group rising inflation pushes down on real earnings . Taken together with higher import cost pressures from a weaker pound, this is creating a challenging environment for retailers," said Paleja. (RTT News) Eurozone Manufacturing Adds Jobs at Fastest Pace in 20 Years The Eurozone’s economic recovery maintained its recent, stronger momentum in May as the currency area’s manufacturing sector added jobs at the fastest pace in 20 years while German businesses were more optimistic than at any time since 1991. Data firm IHS Markit said its composite Purchasing Managers Index for the Eurozone, based on a survey of 5,000 companies, was unchanged at 56.8 in May, remaining at a six-year high. A reading above 50.0 signals an increase in activity, while a reading below signals a decline. Economists had expected the measure to fall very slightly. Separately, Germany’s Ifo Institute said its measure of business sentiment rose to 114.6 from 113.0 in April, reflecting what it described as a “euphoric” mood. The PMIs are the first measure of activity to cover the period since pro-European centrist Emmanuel Macron was elected president of France on May 7, easily defeating the anti-euro Marine Le Pen. 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. The composite PMI for France rose to 57.6 from 56.6 in April, reaching its highest level for six years. The German measure also increased, hitting a 73-month high, but growth slowed in some other parts of the Eurozone. IHS Markit said the readings for April and May are consistent with quarter-to-quarter economic growth of 0.7%. If realized, that would be the fastest expansion since the first three months of 2015. Clemens Fuest, president of the Ifo Institute, said the confidence measure points to quarter-on-quarter growth of 0.6% in the three months to June, which would leave it unchanged from a strong start to the year. (The Wall Street Journal) Eurogroup Aims for Greece Deal in June Eurozone finance ministers hope to reach a deal on Greece's debt relief and release another tranche of bailout funds to the country in their June meeting, as they failed to reach an agreement on the matter with the International Monetary Fund. Greek lawmakers approved a reforms package last Thursday that includes pension cuts and tax hikes as demanded by the country's creditors to pave the way for the disbursement of bailout funds totaling more than EUR 7 billion and to begin talks on debt relief. Discussions over providing more bailout funds had stalled after a review mission to Athens returned in December without reaching a deal. The country is in dire need of bailout cash to meet debt repayment of more than EUR 7 billion due in July, or risk default. Welcoming the progress made by Greece, Eurogroup President Jeroen Dijsselbloem said, "I think we are close to formally closing the second review, with a positive outcome." That would open up discussion on debt sustainability, which was already explored in depth on Monday by euro area finance ministers and the IMF. (RTT News) Page 7 of 8
10. TA Securities 24-May-17 A Member of the TA Group Share Buy-Back : 23 May 2017 Company CBIP FITTERS GRANFLO SALCON TEXCHEM Bought Back Price (RM) Hi/Lo (RM) 30,000 100,000 5,000 30,000 1,200 2.11 0.41 0.24 0.65 1.46/1.42 2.18/2.09 0.41/0.405 0.24/0.23 0.65/0.635 1.46/1.42 Total Treasury Shares 14,659,127 19,366,300 6,148,800 35,480,000 2,546,400 Source: Bursa Malaysia 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 8 of 8 We accept no We, our associates, directors, employees may have an interest in
11. RESULTS UPDATE TA Securities Wednesday , 24 May, 2017 FBM KLCI: 1,767.17 Sector: Property A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 IOI Properties Group Bhd TP: RM2.25 (+8.2 %) Last Traded: RM2.08 A Solid 9MFY17 Hold THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Thiam Chiann Wen Tel: +603-2167 9615 cwthiam@ta.com.my Review Excluding exceptional items amounting to a loss of RM128.8mn, IOIPG’s 9MFY17 normalised net profit of RM713.0mn came in above expectations. Exceptional items include the gain on disposal of land of RM27.7mn (recognised in 2Q), additional buyer stamp duty with interest (ABSD) of RM163.9mn incurred for Trilinq project in Singapore and fair value gain on investment properties of RM7.4mn (both recognised in 3Q). The results accounted for 88% and 85% of ours and consensus full-year estimates respectively. The variance was largely due to 1) stronger-than-expected progress billing from its on-going projects and 2) lower-than-expected effective tax rate. www.taonline.com.my Share Information Bloomberg Code IOIPG MK Stock Code 5249 Listing Main Market Share Cap (mn) 5506.1 Market Cap (RMmn) 11452.8 Par Value 1.00 52-wk Hi/Lo (RM) 2.46/1.85 12-mth Avg Daily Vol ('000 shrs) 3,166.5 Esti mated Free Fl oat (%) 30.9 Beta 0.91 Major Shareholders (%) Verti cal Capacity Sdn Bhd - 51.7% Summervest S/B - 8.5% To recap, the ABSD imposes an additional tax on developers, if they cannot complete and sell out all units in a development within five years of buying the site. The penalty is 15% of the land price (10% for sites purchased before 12th January 2013), plus 5% interest per annum. This penalty applies if even one unit is left unsold. 9MFY17 normalised net profit grew 77% YoY to RM713.0mn, on the back of 40% growth in revenue. Property development division’s 9MFY17 revenue and normalised operating profit (excluding ABSD charges) surged 46% and 39% to RM2.6bn to RM857mn respectively driven by increasing progress works from all on-going projects in Malaysia, coupled with higher property sales achieved in Singapore and Malaysia. Property development division operating margin contracted 1.5ppt YoY to 32.5% in 9MFY17, largely due to higher revenue contribution from overseas projects that have lower margins as compared to its Malaysian projects. Forecast Revision Forecast Revision (%) FY17 FY18 18.1 13.8 Net profit (RMmn) 961.2 963.5 Consensus TA's / Consensus (%) 842.6 114.1 881.6 109.3 Previous Rating Hold (Mai ntai ned) Financial Indicators Net Debt/Equity (%) CFPS (sen) FY17 FY18 37.3 32.5 (103.7) 20.1 Price/CFPS (x) (0.0) 0.1 ROE (%) 5.6 5.2 NTA/Share (RM) 3.3 3.4 Price/NTA (x) 0.7 0.6 Scorecard % of FY Property investment division registered better performance in 9MFY17, with revenue and operating profit advanced 12% and 22% YoY to RM225mn and RM126mn respectively. The improved results were mainly contributed by IOI City Mall which recorded higher average occupancy rates and an upward rental rate revision upon tenancy renewal during the period under review. Meanwhile, the hospitality division’s 9MFY17 revenue and operating profit surged 22% and 23% YoY to RM120mn and RM17mn respectively. The better performance was largely due to contribution from Fourpoint Sheraton Hotel and Le Meridien Hotel by Starwood, Putrajaya which commenced its business operation in Aug 2016. vs TA 88 Above vs Cons e ns us 85 Above IOIPG FBM KLCI 2.5 5.7 0.6 4.1 Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth Page 1 of 3 8.8 0.0 8.7 (12-Mth) Share Price relative to the FBM KLCI Sequentially, 3QFY17 normalised net profit increased by 13% QoQ to RM278mn despite revenue decreased by 25%. The stronger bottom-line was attributed to a combination of higher property development margin and lower effective tax rate. IOIPG recorded new property sales of RM663mn in 3QFY17 (-17% QoQ, +65% YoY), bringing the 9MFY17 sales to RM2.2bn (+43% YoY). Of the (2.6) Source: Bloomberg
12. TA Securities 24-May-17 A Member of the TA Group RM2 .2bn new sales, 41% were derived from Malaysia, 16% from China and 43% from Singapore (as compared to Malaysia: China: Singapore, 52%: 35%: 12% in 9MFY16). The significant improvement was largely driven by recovery in sales of Trilinq project in Singapore with 236 units sold in 9MFY17 (vs 120 units sold in FY16). Unbilled sales eased to RM1.48bn (from RM1.62bn a quarter ago) as at Mar-17, providing the group with about one-year earnings visibility. Impact We revise our FY17/18/19 earnings forecasts higher by 18%/14%/6% respectively after factoring in 1) FY17/18/19 sales assumptions of RM2.7bn/RM2.8bn/RM3.0bn (from RM2.4bn/RM2.7bn/RM2.7bn previously), 2) revise progress billings assumptions, and 3) lower effective tax rate of 30% from 35% previously. Outlook In our opinion, the group is likely to surpass its internal sales target of RM2.3bn given YTD sales already accounted for 95% of the sales target. We understand that the group has officially launched RM3.0bn worth of properties in 9MFY17. Despite macro headwinds, the group continued to see encouraging sales from IOI Resort City, Warisan Puteri @ Sepang and D3 Residence in Xiamen, People's Republic of China. Meanwhile, the Trilinq project in Singapore sales has improved further with 76% of the 705 unit launched were taken up. Near-term earnings visibility is expected to be underpinned by: 1) unbilled sales of RM1.48bn and 2) additional recurring income from newly completed investment properties such as PFCC office tower 4 and 5 in Bandar Puteri Puchong, and IOI City Office Towers and Le Meridien Hotel in Putrajaya. Valuation Rolling forward our valuation base year to CY18, we raise our target price to RM2.25/share (from RM2.10/share previously), based on target PER of 13x. Despite impressive quarterly sales and profit growth, we are keeping our Hold recommendation as the group’s frequent cash call and the perception of over-paid land deals may continue clouding investors’ confidence towards the stock. Earnings Summary (RM mn) YE June Revenue EBITDA EBITDA margin (%) Normalised Pretax profit * Reported Net Profit Normalised Net Profit * EPS * (sen) EPS Growth * (%) PER (x) GDPS (sen) Div Yield (%) EV/EBITDA (x) ROE (%) * excludes fair value gains and disposal gains FY15 1906.5 866.9 45.5 813.7 890.7 574.1 15.2 27.3 13.7 6.0 2.9 1.0 4.6 Page 2 of 3 FY16 3024.9 1029.9 34.0 1056.6 1080.0 611.9 13.8 (9.0) 15.0 8.0 3.8 2.1 4.1 FY17f 3868.1 1836.8 47.5 1409.1 961.2 961.2 17.4 25.7 12.0 7.0 3.4 3.7 5.6 FY18f 4002.7 1765.0 44.1 1412.2 963.5 963.5 17.4 0.2 11.9 7.5 3.6 3.4 5.2 FY19f 3876.1 1739.5 44.9 1391.7 949.6 949.6 17.2 (1.4) 12.1 8.0 3.8 3.0 5.0
13. TA Securities 24-May-17 A Member of the TA Group 3QFY17 Results Analysis (RM mn) Revenue Property Development Property Investment Leisure & Hospitality Other operations Operating Profit Operating Profit Ex Fair Value Gain Property Development Property Investment Leisure & Hospitality Other operations Share of results of associates & JVs EBIT EBIT Ex Fair Value Gain & EI Fair Value Gain & EI Interest Income Finance Cost PBT PBT Ex Fair Value Gain & EI Tax Minority Interests Reported Net Profit Normalised Net Profit EPS Core EPS DPS Operating profit margin* Property Development OP Margin Property Investment OP Margin Leisure & Hospitality OP Margin Other operations OP Margin Profit before tax margin* Net profit margin* Effective tax rate * * Excludes Fair Value Gains 3Q16 643.6 535.7 70.4 29.6 7.8 371.0 214.6 170.6 36.3 3.0 4.8 (16.0) 355.1 198.7 156.4 16.4 0.0 371.5 215.1 (99.4) (4.1) 268.0 111.6 2Q17 1,194.7 1,068.3 77.5 47.5 1.5 393.6 365.9 309.8 43.9 11.1 1.1 (5.0) 388.6 360.9 27.7 7.6 0.0 396.2 368.5 (107.8) (14.9) 273.5 245.8 3Q17 895.8 777.2 75.9 40.0 1.9 183.3 339.8 323.7 39.6 2.9 1.3 2.4 185.7 342.2 (156.5) 15.6 0.0 201.3 357.8 (87.2) 7.0 121.1 277.6 6.4 2.6 0.0 6.2 5.6 0.0 2.7 6.2 0.0 33.4 31.9 51.5 10.2 61.1 33.4 17.3 (50.9) 30.6 29.0 56.6 23.3 74.3 30.8 20.6 (32.2) 37.9 41.6 52.3 7.2 69.8 39.9 31.0 (26.8) QoQ (%) YoY (%) 9MFY16 9MFY17 YoY (%) (25.0) 39.2 2133.2 2990.1 40.2 (27.2) 45.1 1810.5 2639.0 45.8 (2.1) 7.8 200.2 224.7 12.2 (15.8) 34.8 98.3 120.0 22.0 22.4 (76.3) 24.1 5.5 (77.4) (53.4) (50.6) 902.1 847.3 (6.1) (7.1) 58.3 613.7 976.0 59.0 4.5 89.7 614.5 857.0 39.4 (9.6) 9.4 103.7 126.0 21.5 (74.1) (5.4) 13.6 16.8 23.2 15.0 (72.9) 13.9 3.9 (71.8) (148.8) (115.3) 67.8 1.6 (97.7) (52.2) (47.7) 969.9 848.8 (12.5) (5.2) 72.3 681.5 977.6 43.4 (664.6) (200.1) 288.4 (128.8) (144.7) 104.6 (4.9) 44.2 38.2 (13.6) 0.0 0.0 0.0 0.0 0.0 (49.2) (45.8) 1014.1 887.0 (12.5) (2.9) 66.4 725.7 1015.8 40.0 (19.1) (12.3) (312.5) (284.6) (8.9) (147.2) (273.4) (11.0) (18.2) 65.0 (55.7) (54.8) 690.6 463.1 (32.9) 12.9 148.9 402.2 713.0 77.3 (56.1) 11.8 0.0 ppt 7.3 12.6 (4.4) (16.1) (4.5) 9.1 10.4 5.4 (57.2) 135.7 0.0 ppt 4.6 9.8 0.8 (3.0) 8.6 6.5 13.7 24.0 17.6 10.4 0.0 13.2 16.1 0.0 28.8 33.9 51.8 13.9 57.5 34.0 18.9 (47.4) 32.6 32.5 56.1 14.0 71.8 34.0 23.8 (30.8) (24.8) 55.4 0.0 ppt 3.9 (1.5) 4.3 0.1 14.3 (0.0) 5.0 16.5 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 3 of 3
14. RESULTS UPDATE TA Securities Wednesday , 24 May 2017 FBM KLCI: 1,767.17 Sector: Gaming A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 6 Luster Industries Berhad TP: RM0.11 (-26.7%) Last traded: RM0.15 A Strong Comeback in 1Q17 SELL THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY Tan Kam Meng, CFA Tel: +603-2167 9605 kmtan@ta.com.my Review Luster Industries (Luster) made a strong comeback in 1Q17 after reporting a quarterly core profit of RM1.8mn. Although 1Q17 earnings accounted for 46% of our full-year forecast, FY17 earnings remain vulnerable to the challenging operating environment in Cambodia, which may adversely affect its lottery business. As such, we deem 1Q17 performance as within expectation. 1Q17 staged a turnaround in core profit to RM1.8mn from RM0.4mn losses in 1Q16. The recovery in earnings was mainly due to the kitchen sinking exercise carried out last year. Also, the manufacturing segment contributed to higher 1Q17 earnings as the company started OEM production of pest control products for one of its main customers. Meanwhile, the gaming and leisure segment also contributed positively (RM0.1mn PBT) to 1Q17 earnings as the lottery business in Cambodia managed to expand its sales network. Luster’s balance sheet remained solid with net cash of RM11.7mn. The financial position will be further strengthened by the placement of shares, which raised a total of RM18.9mn in April. The near-term liquidity risk is low with strong current ratio and quick ratio of 3.9x and 3.3x respectively. Impact No change to our FY17-19 profit projections. However, we reduce FY17-19 EPS by 9.3% each due to the dilution effect arising from the private placement and ESOS conversion. Outlook We believe the construction progress on Taman Tasik 1Malaysia project in Perak have reached tail-end. In 1Q17, the group had capitalized RM10.0mn property development cost in its balance sheet. This value was a tad lower than RM11.1mn recorded in 4Q16, indicating that the company may have started selling properties in 1Q17. Recommendation We are completely in the dark as our queries pertaining to 1) the new business direction; 2) rally in share price despite disposals of shares by founder and major shareholders; and 3) the need of fresh equity funds, as highlighted in our previous report remained unanswered. Furthermore, we observe a slew of activities in relation to conversions of ESOS and subsequent sales of shares by principal officers to lock in profit. Given the lack of clarity, we downgrade Luster to Sell (from Hold previously) as the current excessive valuation is not supported by clear rerating catalysts. Luster’s DCF valuation is raised to 11sen/share (from 10sen/share) after rolling forward our valuation base year. The stock is currently trading at 55x FY18 earnings and 2.2x NTA, which is deemed overvalued. Page 1 of 2 R M 1 . 5 m n www.taonline.com.my Share Information Bl oomberg Code LSTI MK Stock Code LUSTER (5068) Li s ti ng Ma i n Ma rke t Sha re Ca p (mn) 1,944.5 Ma rket Ca p (RMmn) 291.7 Pa r Va l ue 0.10 52-wk Hi /Lo (RM) 0.16/0.05 12-mth Avg Da i l y Vol ('000 s hrs ) 10,616 Es ti ma ted Fre e Fl oa t (%) 87.1 Be ta 1.28 Ma jor Sha rehol ders (%) We e Song He (7.4%) Sunci ty Ente rta i nment (5.5%) Forecast Revision Foreca s t Re vi s i on (%) Net profi t (RMmn) Cons e ns us TA's / Cons e ns us (%) Pre vi ous Ra ti ng FY17 FY18 0.0 0.0 3.9 5.2 Hol d (downgra ded) Financial Indicators Net Gea ri ng (%) FCF/s ha re (s e n) P/CFPS (x) ROE (%) NTA/Sha re (s e n) Pri ce/NTA (x) FY17 Net ca s h 0.5 30.7 2.8 7.3 2.1 FY18 Ne t ca s h 0.8 18.4 3.5 7.6 2.0 Scoreca rd vs TA vs Cons e ns us Share Performance Price Change (%) 1 mth 3 mth 6 mth 12 mth % of FY 46 - LUSTER 25.0 66.7 172.7 130.8 Wi thi n - FBM KLCI 0.6 4.1 8.8 8.7 (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
15. TA Securities 24-May-17 A Member of the TA Group Earnings Summary (RM’mn) FYE Dec Re ve nue EBITDA EBITDA ma rgi n (%) Preta x profi t Adj PBT Re porte d ne t profi t Core profi t Re porte d EPS (s en) Core EPS (s e n) Core EPS growth (%) PER (x) GDPS (s en) Di v yi e l d (%) Core ROE (%) 2015 117.6 4.8 4.0 (14.8) (1.5) (18.0) (4.7) (1.1) (0.3) 18.7 nm 0.0 0.0 (3.1) 2016 113.7 2.5 2.2 (24.3) (2.8) (24.7) (3.2) (1.4) (0.2) >100 (80.0) 0.0 0.0 (2.4) 2017F 182.2 12.6 6.9 6.0 6.0 3.9 3.9 0.2 0.2 (208.0) 74.1 0.0 0.0 2.8 2018F 143.7 14.2 9.9 8.4 8.4 5.2 5.2 0.3 0.3 35.2 54.8 0.0 0.0 3.5 2019F 150.9 16.7 11.1 10.8 10.8 6.8 6.8 0.4 0.4 29.4 42.3 0.0 0.0 4.3 1Q17 Financial Statements FY Dec 31 (RMmn) Revenue EBIT Fi na nce cos t EI PBT Adjusted PBT Tax MI Net profit Adj net profit EPS (sen) Adjusted EPS (sen) DPS (sen) EBITDA margi n Core PBT ma rgi n Core profi t ma rgi n Effecti ve ta x ra te (s en) (s en) 1Q16 25.2 (0.7) (0.1) (0.4) (0.8) (0.4) (0.2) 0.2 (0.8) (0.4) (0.1) (0.0) 0.0 4Q16 28.1 (24.9) (0.1) (18.2) (25.0) (6.8) (0.2) 0.6 (24.6) (6.4) (1.4) (0.4) 0.0 1Q17 29.6 1.9 (0.1) (0.2) 1.9 2.1 (0.3) (0.1) 1.5 1.8 0.1 0.1 0.0 % QoQ 5.4 >100 (16.9) (98.7) >100 >100 59.5 (109.4) >100 >100 >100 >100 nm % YoY 17.7 >100 23.1 (40.9) >100 >100 37.2 (136.5) >100 >100 >100 >100 nm 1Q16 25.2 (0.7) (0.1) (0.4) (0.8) (0.4) (0.2) 0.2 (0.8) (0.4) (0.1) (0.0) 0.0 1Q17 29.6 1.9 (0.1) (0.2) 1.9 2.1 (0.3) (0.1) 1.5 1.8 0.1 0.1 0.0 % YoY 17.7 >100 23.1 (40.9) >100 >100 37.2 (136.5) >100 >100 >100 >100 nm (%) (%) (%) (%) (2.9) (1.5) (1.7) nm (88.7) (24.3) (22.8) (2.7) 6.5 7.1 6.0 13.9 %pts 95.2 31.4 28.7 16.7 %pts 9.5 8.7 7.7 nm (2.9) (1.5) (1.7) nm 6.5 7.1 6.0 13.9 %pts 9.5 8.7 7.7 nm 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 and/ 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. This report has been prepared by TA SECURITIES HOLDINGS BERHAD for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and will be compensated to undertake the scheme. TA SECURITIES HOLDINGS BERHAD has produced this report independent of any influence from the CBRS or the subject company. For more information about CBRS and other research reports, please visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/market/listed-companies/research-repository/research-reports for TA SECURITIES HOLDINGS BERHAD(14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 2 of 2
16. RESULTS UPDATE TA Securities Wednesday , May 24, 2017 FBM KLCI: 1,767.17 Sector: Power & Utilities A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Malakoff Corporation Berhad TP: RM1.23 (+2%) Last Traded: RM1.20 Extended Hiccups at Tg. Bin Energy Hold THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Kylie Chan Sze Zan Tel: +603-2167 9601 kyliechan@ta.com.my Review Malakoff’s 1Q17 core net profit of RM99mn (-8% YoY) was within expectations, accounting for 30%/25% of our full-year forecasts and consensus estimates. Overall, we deem the results as lackluster and we are taken aback by the negative surprise of a prolonged forced outage at Tg. Bin Energy (TBE) in 2Q17. YoY, bottomline weakness was mainly due to:- 1) higher opex and maintenance costs - which partially contributed by additional coal barging costs (RM10mn), 2) higher depreciation arising from lowered residual values for gas plants, 3) lower capacity payment (CP) from gas plants, 4) increased finance costs (+43% YoY) due to consolidation of TBE debt, and 5) higher tax rate of 34% (1Q16: 29%). These were more than offset positive earnings drivers, including:- 1) higher fuel margin, 2) full quarter contribution from TBE (1Q16: 10 days), and 3) improved contribution from associates. Capacity Factor (CF) was lower for gas plants across the board due to weaker demand from the Grid. This was likely attributed to the merit order queue that favours new plants in the Northern Region (which are more efficient). This was particularly evident for PD Power, where CF plunged to 2% (1Q16: 11%). Whereas Prai Power’s CF dipped by 13 ppt to 43%. In addition, weak CF was exacerbated by transmission constraint originating from a 500kV line to Central Region. www.taonline.com.my Share Information Bloomberg Code Stock Code Listing Share Cap (mn) Market Cap (RMmn) Par Value (RM) 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta Major Shareholders (%) MLK MK 5264 Main Market 5,000 6,000 0.10 1.80/1.14 4,509.0 24.0 0.6 MMC - 37.6 EPF - 13.4 LTH - 10.1 Forecast Revision (%) Forecast Revision (%) Core Net Profit (RM mn) Consensus TA/Consensus (%) Previous Rating FY17 FY18 8.0 4.6 355.8 320.4 373.0 335.2 95.4 95.6 Hold (Maintained) Scorecard vs TA vs Consensus % of FY 30 25 Within Within TBE contributed RM150mn of capacity income (CI) in 1Q17 (1Q16: RM19mn), which translates to a chunky 22% of total CI. TBE’s Unscheduled Outage Rate (UOR) trended below its 2nd threshold (UOR2) of 8% (UOR1: 6%), and ended 1Q17 at 7% (Figure 2). Meanwhile, 1Q17 net losses for TBE amounted to RM5mn (FY16: 37mn loss), whilst total cash generated was RM47mn. Financial Indicators Net Debt/Equity (x) ROA (%) ROE (%) NTA/Share (RM) P/NTA (x) FY17 2.1 1.2 6.0 0.4 2.7 FY18 2.0 1.2 5.4 0.4 2.8 TBE’s CF (Figure 3) in March nosedived to 31% (Feb-17: 81%) due to scheduled planned outage of 46 days (start: 12th Mar) for warranty defects rectification. The repair works were completed on 4th May, which implies a delay of 8 days from its targeted recommission date (26th April). Unfortunately, on 5th May, the outage was extended due to a leaked water tube at one of its generators. Therefore, the EPC contractor, General Electric (GE), is responsible to complete rectification works by 25th May. Upon completion, TBE’s UOR is expected to surge to 14%, and thereafter, taper off below UOR1 by 1-May-18 (UOR2: 9-May-18). Recall that if UOR exceeds the threshold limits due to unscheduled outages, this will result in a reduction in CP. Therefore, Malakoff intends to recover the CP shortfall via insurance or claims from GE. However, the quantum and timing is uncertain at this juncture. Share Performance Price Change (%) 1 mth 3 mth 6 mth 12 mth MLK (1.6) 0.8 (15.5) (25.5) FBMKLCI 0.7 3.8 8.5 8.2 On a brighter note, associates contribution skyrocketed by more than 5x to RM33mn (1Q16: 6mn). This was due to improved performance across the board, particularly at Hidd Power (Bahrain), Al-Ghubrah (Oman), and Kapar Energy. For the latter, losses narrowed to RM1mn (1Q16: RM9mn loss) due to UOR reset at end-June-16. Page 1 of 5 (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
17. TA Securities 24-May-17 A Member of the TA Group We expect weaker profits for the remaining 9 months of FY17 , mainly due to:- 1) lower CP for TBE arising from the ongoing unscheduled outage coupled with earlier 8-day delay, and 2) lower CP for Segari following commencement of a new 10-year PPA in Jun-17. According to management, levelised tariffs for Segari’s new PPA is lower by a range of 50%-70%. The dampeners above would more than offset additional 3months contribution from TBE (COD: end-Mar-16) Other Key Takeaways from Conference Call Malakoff has fully settled TBE’s equity bridge loan of RM1.3bn via:- 1) RM800mn of Perpetual Sukuk Wakalah, and 2) RM490mn cash. Recall that management had initially planned to refinance the latter RM490mn via a Sukuk Murabahah at Malakoff Power. Correspondingly, net gearing improved to 1.8x in 1Q17 (1Q16: 2.3x). Pertaining to M&A, management unveiled potential tenders in the MENA region, including bids for:- 1) 1,300MW coal power plant, and 2) new generation desalination plant. Additionally, the group is also bidding for renewable energy projects in Malaysia, comprising:- 1) 1000MW wasteto-energy plant in Kuala Lumpur, and 2) 2nd round of tenders for large scale solar plants in Peninsular (360MWac) and Sabah (100MWac). Impact As per management’s renewed guidance, we reduce CP from Segari and TBE, and also remove our assumption of RM500mn sukuk issuance by Malakoff Power. Additionally, we raise contribution from Hidd Power and Al-Ghubrah, in-line with 1Q17 performance. The net impact is an increase of 8%/5%/4% to our FY17/18/19 earnings forecasts. In tandem with the changes above, TBE’s cashflows are also impacted, which lowers its DCF valuation. This is the main driver to our lowered SOP target price (TP) of RM1.23 (previous: RM1.34). Valuation Maintain Hold on Malakoff (TP: RM1.23) due to lack of catalysts, coupled with earnings risk from lower CP for TBE and Segari. This is underpinned by TBE’s ongoing forced outage and 8-day delay for completed warranty rectification works. Page 2 of 5
18. TA Securities 24-May-17 A Member of the TA Group Figure 1 : 1Q17 Results Analysis FYE 31 Dec (RM mn) Revenue EBITDA Depreciation & amortisation EBIT Interest income Finance cost Associates & JV Exceptional items 1Q17 4Q16 1,781.0 1,713.5 715.3 776.3 (352.3) 363.0 QoQ 1Q16 YoY 1,344.1 32.5 (2.1) 608.6 17.5 (360.0) (12.8) (298.9) 17.9 416.3 (7.8) 309.7 17.2 50.7 55.0 (1.4) 38.3 32.4 (271.6) (275.4) >-100 (190.1) 42.8 (1.4) >-100 32.7 5.8 >100 1.2 (10.8) (23.9) (99.2) Pre-tax profit 174.7 195.7 (34.4) 139.8 25.0 Taxation (59.3) (90.4) 9.5 (40.3) 47.0 Profit after tax 115.4 105.4 9.9 99.5 16.0 Minority interest (16.6) (15.1) 9.5 (15.4) 8.0 Net Profit 98.8 90.2 11.2 84.1 17.5 Core Net Profit 99.0 89.0 108.0 (8.3) Core EPS (sen) (0.2) 3.9 2.0 1.8 11.2 Figure 2: UOR Trend until 25 May-17 for TBE Source: Company Page 3 of 5 2.2 (8.3)
19. TA Securities 24-May-17 A Member of the TA Group Figure 3 : TBE Monthly UOR Source: Company Figure 4: Earnings Summary (RMmn) FYE Dec (RM mn) 2015 2016 2017E 2018F 2019F Revenue 5,302.0 6,098.4 7,838.1 7,622.5 7,603.0 EBITDA 2,454.9 2,830.5 2,727.3 2,542.5 2,423.8 EBITDA margin (%) 46.3 46.4 34.8 33.4 31.9 Pretax Profit 702.0 637.5 655.6 624.8 706.9 Reported Net Profit 453.2 355.5 355.8 320.4 365.0 Core Net Profit 439.4 350.5 355.8 320.4 365.0 (sen) 8.8 7.0 7.1 6.4 7.3 (%) 34.1 (20.2) 1.5 (9.9) 13.9 PER (x) 13.2 16.9 16.9 18.7 16.4 DPS (sen) 7.0 7.0 7.0 7.0 7.0 (%) 5.8 5.8 5.8 5.8 5.8 Core EPS Core EPS growth Dividend Yield Page 4 of 5
20. TA Securities 24-May-17 A Member of the TA Group Figure 5 : SOP Valuation Total DCF Equity Value (RM mn) Stake (%) Attrib. Eq. Value (RM mn) EV/Share (RM) 1,316 94% 1,233 0.25 0.11 FYE 31 Dec Segari Energy GB3 752 75% 564 Prai Power 539 100% 539 0.11 Tg Bin Power 3,886 90% 3,498 0.70 Tg Bin Energy 945 100% 945 0.19 PD Power 273 100% 273 0.05 Kapar (187) 40% (75) (0.01) Macarthur 792 50% 396 0.08 O&M 207 100% 207 0.04 Total 8,524 7,581 Less: Holding Company Net Debt (792) Less: Perpetual Sukuk (800) Equity Value 5,989 No. of shares 5,000 Target Price (RM) 1.20 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