Bursa Malaysia Daily Market Report - 28 July

Transcription

1. Friday , 28 July, 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. Heineken (M) Berhad: 3Q Earnings Expected to be Strong Overseas-Chinese Banking Corp.: Resilient Growth Momentum Rubber Sector: 2HCY17 Banking on Capacity Growth & Easing Competition Tenaga Nasional Berhad: Steady She Goes 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, 28 July 2017 TA Research e-mail : taresearch@ta.com.my For Internal Circulation Only Review & Outlook KLSE Market Statistics (27.07.2017) Volume (mil) +/-chg (RMmn) Main Market 1,010.1 122.3 1,843.5 Warrants 122.3 10.5 13.1 ACE Market 449.5 154.0 114.9 Bond 3.6 -4.5 0.6 ETF 0.0 0.03 0.0 Total 1,585.5 1,972.1 Off Market 39.9 -78.9 136.8 Value +/-chg 395.7 0.6 26.0 -0.2 0.04 -262.2 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP July Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA Value/ Volume 1.82 0.11 0.26 0.17 1.52 1.24 3.43 Up Down 303 286 74 77 45 44 1 2 2 1 425 410 % chg % YTD chg 1,770.07 12,605.16 17,319.57 1,771.00 4.07 37.56 45.31 0.00 0.23 0.30 0.26 0.00 7.82 9.93 17.70 8.28 21,796.55 6,382.19 7,443.01 20,079.64 2,443.24 27,131.17 3,354.71 1,581.06 5,819.74 3,249.78 1,865.96 5,785.01 85.54 -40.56 -9.31 29.48 8.73 190.15 17.99 -2.11 19.54 2.11 22.84 8.39 0.39 -0.63 -0.12 0.15 0.36 0.71 0.54 -0.13 0.34 0.06 1.24 0.15 10.29 18.56 4.20 5.05 20.57 23.32 16.45 2.47 9.87 4.71 -5.24 2.10 Blue chips rose further on Thursday, encouraged by firmer regional peers as stronger earnings and the dovish tone from the US Federal Reserve's monetary policy statement improved sentiment. The KLCI closed up 4.07 points at 1,770.07, off an early low of 1,765.84 and high of 1,772.03, as gainers edged losers 425 to 410 on cautious trade totaling 1.58bn shares worth RM1.97bn. The local market should stay range bound ahead of the weekend, with caution over the US Federal Reserve's eventual move to reduce the government's balance sheet discouraging trading commitments. Immediate support from the 100-day moving average remains at 1,758, which must hold to prevent further correction to 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,709. Immediate resistance stays at the 50-day moving average at 1,771, next 1,782, followed by the recent peak of 1,796. Any selling dips on AFG towards the lower Bollinger band (RM3.79), matching the 50%FR (RM3.78) support, should encourage bargain hunting for rebound upside towards the 100-day moving average (RM4.06), with next hurdle from the 76.4%FR (RM4.16). Stronger retracement support is from the 38.2%FR (RM3.61). Likewise, AMMB shares should attract buyers on dips towards the lower Bollinger band (RM4.92) or stronger support from the 50%FR (RM4.80), ahead of recovery to the 100-day moving average (RM5.06), the 76.4%FR (RM5.28) and RM5.50 going forward. News Bites • • • • Top 10 KLCI Movers Based on Mkt Cap. Off Market MAYBANK NICE SERBADK HLT VOIR VOIR-WA EKOVEST MEXTER BKAWAN YINSON EDEN (mn) 8.5 8.0 6.0 5.3 4.2 0.3 2.2 1.0 1.0 1.0 1.0 (RM) @ 9.41 @ 0.09 @ 2.00 @ 0.50 @ 0.80 @ 5.50 @ 1.12 @ 0.28 @ 18.90 @ 3.45 @ 0.20 Counter Mkt Cap. (RM’mn) MAYBANK 101,603 TENAGA 80,584 IHH 59,653 PCHEM 49,022 AXIATA 43,661 PETGAS 37,517 DIGI 37,165 GENTING 36,834 GENM 34,634 HAPSENG 22,781 Chg (RM) 0.01 0.02 0.19 0.01 0.02 0.06 0.03 0.05 0.01 0.05 Vol. (mn) 7.81 14.41 25.26 3.78 5.40 0.26 1.90 1.42 3.46 0.25 • • • • • • Tenaga Nasional Bhd's 9MFY17 core net profit of RM5.6bn (-8% YoY) was within our expectations and consensus, accounting for 76%/75% of FY17 forecasts respectively. Malayan Banking Bhd's Indonesia unit PT Bank Maybank Indonesia Tbk 1HFY17 net profit rose 16.3% YoY to IDR998.5bn on overall improvement in its core banking business. Felda Global Ventures Holdings Bhd will open employment opportunities to locals, especially new generation settlers, for a career in the plantation industry in an effort to reduce dependency on foreign workers. Pavilion Real Estate Investment Trust, which inked an agreement to buy Pavilion Elite Mall for RM580.0mn, is planning a private placement to raise RM370.6mn to help fund the purchase. Zecon Bhd has proposed a private placement that will raise about RM6.5mn as interim funding for the group's working capital pending the completion of a proposed RCULS. PTTEP, the exploration and production arm of Thailand's oil and gas giant PTT Group, has agreed to buy a 10% stake in Petronas' LNG 9 Sdn Bhd for US$500mn. Malaysia Airlines Bhd is expected to decide on the purchase of new or second-hand aircraft by the end of the year, said its Chief Executive Officer, Peter Bellew. CIMB Group Holdings Bhd has informed Bursa Malaysia Securities Bhd of the transfer of five million shares worth RM31.7mn in the company by Chairman and Non-Independent Non-Executive Director, Datuk Seri Nazir Razak. The US initial jobless claims rose by 10,000 to a seasonally adjusted 244,000 in the week ended July 22, vs. forecast 240,000 new claims. China's industrial profits surged 19.1% YoY to CNY 727.78bn Yuan ($107.83bn) in June, the fastest pace in three months in the latest sign economic momentum in the country remains solid. Important Dates CAB - 1:4 Bonus Issue - BI of 138.6m subdivided shares. 1 bonus share for every 4 subdivided shares. Ex-Date: 02/08/2017. Entitlement Date: 04/08/2017. LISTING ON: 07/08/2017. ORION - 7:2 Rights Issue - RI of up to 465.9m shares together with up to 232.9m free detachable warrants. 7 rights shares together every 2 existing shares held, at an issue price of RM0.17 per rights share, with 1 free warrant for every 2 rights shares subscribed. LISTING ON: 02/08/2017. Exchange Rate USD/MYR 4.2778 -0.0069 USD/JPY 111.35 -0.4400 EUR/USD 1.171 0.0063 Commodities Futures Palm Oil (RM/mt) 2,675.00 42.00 Crude Oil ($/Barrel) 49.15 0.43 Gold ($/tr.oz.) 1,258.70 -1.60 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 , July 28, 2017 FBMKLCI: 1,770.07 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 Cautious Over US Fed Balance Sheet Trimming Blue chips rose further on Thursday, encouraged by firmer regional peers as stronger earnings and the dovish tone from the US Federal Reserve’s monetary policy statement improved sentiment. The KLCI closed up 4.07 points at 1,770.07, off an early low of 1,765.84 and high of 1,772.03, as gainers edged losers 425 to 410 on cautious trade totaling 1.58bn shares worth RM1.97bn. Support at 1,758, Resistance at 1,771 The local market should stay range bound ahead of the weekend, with caution over the US Federal Reserve’s eventual move to reduce the government’s balance sheet discouraging trading commitments. Immediate support from the 100-day moving average remains at 1,758, which must hold to prevent further correction to 1,729, a key support level in April, while crucial uptrend support is from the 200-day moving average at 1,709. Immediate resistance stays at the 50-day moving average at 1,771, next 1,782, followed by the recent peak of 1,796. Bargain AFG & AMMB Any selling dips on AFG towards the lower Bollinger band (RM3.79), matching the 50%FR (RM3.78) support, should encourage bargain hunting for rebound upside towards the 100day moving average (RM4.06), with next hurdle from the 76.4%FR (RM4.16). Stronger retracement support is from the 38.2%FR (RM3.61). Likewise, AMMB shares should attract buyers on dips towards the lower Bollinger band (RM4.92) or stronger support from the 50%FR (RM4.80), ahead of recovery to the 100-day moving average (RM5.06), the 76.4%FR (RM5.28) and RM5.50 going forward. Asian Markets Higher on Earnings & Fed Statement Indices in Asia closed on a positive note Thursday as a slew of corporate earnings came through and as markets digested the Federal Reserve's decision to leave interest rates unchanged. Japan's benchmark Nikkei 225 index reversed earlier losses to rise 0.15 percent, or 29.48 points, and closed at 20,079.64. South Korea's Kospi advanced 0.36 percent, or 8.73 points, to end at 2,443.24. In Australia, the S&P/ASX 200 gained 0.14 percent, or 8.375 points, to finish at 5,785. Hong Kong's Hang Seng Index rose 0.76 percent after opening trade above the 27,000 level. The index was buoyed by gains in several property developer stocks, with Evergrande shares higher by 10.05 percent. Mainland markets erased earlier losses to close higher. The Shanghai Composite edged up 0.05 percent, or 1.6179 points, to close at 3,249.2927 and the Shenzhen Composite surged 1.239 percent, or 22.8351 points to end at 1,865.9582. Shenzhen's tech-focused ChiNext Composite finished the session with 3.459 percent in gains. Sentiment in the broader region was positive, with the MSCI Asia Pacific ex Japan index near its highest levels since 2007. Markets digested the Federal Reserve's widely expected decision to hold interest rates steady at the end the Federal Open Market Committee's two-day policy meeting Wednesday. Page 1 of 7
4. TA Securities 28-Jul-17 A Member of the TA Group Tech Stocks Weigh on Shares U .S stock markets traded mixed on Thursday as technology shares faced pressure as investors took profits off the table following strong earnings from companies in the space. The S&P 500 technology sector was the worst performing major group, falling 0.8 percent even as Facebook shares gained 2.9 percent after the social media company's results. Twitter fell 14.1 percent after the microblogging platform reported lackluster user growth. After the bell, Amazon shares fell 2.7 percent after it reported quarterly results showing a 77 percent fall in profit. Meanwhile, the Dow Jones Transport Average closed down 3.1 percent, dragged lower after a worrisome outlook from package delivery company United Parcel Service. The Dow closed at record highs following a jump in Verizon and Boeing shares. Verizon shares surged 7.7 percent after the U.S wireless carrier's quarterly revenue topped expectations. Meanwhile, Boeing continue to rally after reporting forecast-beating earnings Wednesday. Its shares rose 3.2 percent, adding roughly 52 points to the Dow industrials. In economic news, initial jobless claims came in at 244,000, slightly above the expected 240,000. Durable goods orders, meanwhile, rose 6.5 percent in June. The Dow Jones Industrial Average rose 88.54 points, or 0.39 percent, to 21,796.55, the S&P 500 lost 2.41 points to 2,475.42 and the Nasdaq Composite fell 40.56 points, or 0.63 percent, to 6,382.19. Page 2 of 7
5. TA Securities 28-Jul-17 A Member of the TA Group News In Brief Corporate Tenaga Nasional Bhd ’s net profit for its third quarter ended May 31, 2017 shrank 15% to RM2.0bn or 34.68 sen per share, from RM2.3bn or 40.91 per share a year ago, mainly due to higher deferred tax expense. However, revenue for the quarter was up 3.5% to RM12.6bn, from RM12.1bn due to an under-recoverability in costs via the Imbalance Cost PassThrough mechanism recognized in 3QFY17, compared with an over-recoverability of RM537.6mn recognised in 3QFY16. (Bursa) Malayan Banking Bhd's Indonesia unit PT Bank Maybank Indonesia Tbk (Maybank Indonesia) posted a 16.3% YoY rise in its profit after tax and minority interests (Patami) to IDR998.5bn in the first six months ended June 30, 2017 from IDR858.4bn, on overall improvement in its core banking business. Net interest income rose 7% YoY to IDR3.8tr from IDR3.6tr, mainly due to the bank's discipline in loan pricing and active funding management. (Bursa) Bertam Alliance Bhd’s unit Bertam Development Sdn Bhd (BDSB) has been served with a statutory notice, demanding for payment in the sum of RM4.6mn as at July 25 and continuing interest at the rate of 7.65% per annum on RM4.1mn from July 26 until full and final realisation of the total sum due. If BDSB fails to pay R & C Cergas Teguh at the expiration of 21 days from the date of the statutory notice served, BDSB will be deemed pursuant to Section 466(1)(a) of the Companies Act 2016 and the winding up proceedings will be commenced against BDSB. (Bursa/The Edge Markets) Caring Pharmacy Group Bhd's net profit for the fourth quarter of financial year ended May 31, 2017 grew by 59.2% to RM4.4mn or two sen per share from RM2.7mn or 1.26 sen per share in the corresponding quarter a year ago, mainly contributed by higher sales generated from existing outlets. This was in line with the group's revenue, which increased by 10.3% to RM119.5mn compared with RM108.3mn. The higher revenue was mainly contributed by higher sales generated from existing outlets due to aggressive and extensive promotional campaigns launched during FY17. (Bursa) Felda Global Ventures Holdings Bhd (FGV) will open employment opportunities to locals, especially new generation settlers, for a career in the plantation industry in an effort to reduce dependency on foreign workers. FGV officer-in-charge Datuk Khairil Anuar Aziz said the group is highly dependent on foreign labour with more than 35,000 foreign employees across the country and is in need of more workers to ensure daily operations run smoothly. (The Edge Markets) Cement producer Tasek Corp Bhd’s net profit for the second quarter ended June 30, 2017 plunged by 91.7% down to RM1.5mn from RM18.0mn a year earlier, due mainly to lower net revenue for its cement segment. The group said its revenue dipped 22.3% to RM135.0mn from RM173.7mn due to lower demand for cement in the domestic market and lower average net pricing for both cement and ready-mixed concrete. The group also proposed an interim dividend of 20 sen per share, payable on Sept 8. (Bursa) Pavilion Real Estate Investment Trust, which inked an agreement to buy Pavilion Elite Mall for RM580.0mn, is planning a private placement to raise RM370.6mn to help fund the purchase. It is buying Pavilion Elite Mall from Urusharta (KL) Sdn Bhd, whose ultimate shareholders are Tan Sri Lim Siew Choon and Qatar Holdings LLC — both major stakeholders in Pavilion REIT. Under the placement exercise, it will be issuing 218 million new units via a book-building exercise. Separately, Pavilion REIT reports that its net property income slid 5.8% YoY in its second quarter ended June 30, 2017 to RM76.7mn from RM81.4mn — its first quarterly decline since the third quarter of 2015. Similarly, distribution per unit was lower at 1.94 sen apiece representing a yield of 4.54%, compared with 2.06 sen in the same quarter last year. This brings its half-year FY17 distribution to Page 3 of 7
6. TA Securities 28-Jul-17 A Member of the TA Group 3 .96 sen, which it will pay on Sept 6. (Bursa/The Edge Markets) Ancom Bhd continued its financial turnaround with a net profit of RM4.0mn in its fourth quarter ended May 31, 2017, compared with a net loss of RM5.2mn a year earlier, due to higher revenue from its agricultural and industrial chemicals sector and media segment. Quarterly revenue was up 28.2% at RM477.5mn, compared with RM372.4mn previously. (Bursa) Zecon Bhd has proposed a private placement that will raise about RM6.5mn as interim funding for the group's working capital pending the completion of a proposed rights issue of redeemable convertible unsecured loan stocks (RCULS). The RCULS would see the group raise minimum proceeds of RM24.9mn for its working capital requirements. The exercise is expected to be completed in the fourth quarter of 2017. (Bursa/The Edge Markets) Homeritz Corp Bhd's net profit for the third quarter ended May 31, 2017 grew 20.7% to RM7.8mn or 2.61 sen per share from RM6.5mn or 2.16 sen per share in the corresponding quarter a year ago. The group's revenue also rose 10.2% to RM44.6mn from RM40.5mn, mainly attributed to the strengthening of the US dollar. The group declared a second interim single tier tax-exempt dividend of 5%, equivalent to one sen per share. The ex-date is Aug 28, and payment date is Sept 29. (Bursa) PTTEP, the exploration and production arm of Thailand's oil and gas giant PTT Group, has agreed to buy a 10% stake in Petronas' LNG 9 Sdn Bhd (PL9SB), a LNG Liquefaction plant in Malaysia with a current capacity of 3.6mn per annum. The investment worth US$500mn (RM2.1bn) will be undertaken by PTT Global LNG Co Ltd, a joint set up between PTTEP and PTT Public Company Ltd. "The business cooperation with Petronas also allows PTTEP to gain a foothold in Malaysia, supporting further business expansion and investments in petroleum fields in the country," it said in statement after announcing its second quarter results.The investment is in accordance with the company's strategy in looking for business opportunities in the LNG value chain. (Bernama) Malaysia Airlines Bhd is expected to decide on the purchase of new or second-hand aircraft by the end of the year, said its Chief Executive Officer, Peter Bellew. He said even though aircraft manufacturers, Airbus and Boeing, were offering some improved deals on aircraft during their visit to Kuala Lumpur in the last couple of days, they were still 'not good enough'. Furthermore, he said there were attractive offers on second-hand aircraft, which were relatively-new, wide body and equipped with Wi-Fi. (Bernama) CIMB Group Holdings Bhd has informed Bursa Malaysia Securities Bhd of the transfer of five million shares worth RM31.7mn in the company by Chairman and Non-Independent Non-Executive Director, Datuk Seri Nazir Razak. The transaction, made on July 25, was based on a price of RM6.3455 per share, the company said in the filing. In an email, CIMB also explained that the transfer was made to a company owned by Nazir himself, hence, there was no change in the ultimate beneficiary of those shares. (Bernama/Bursa) . Page 4 of 7
7. TA Securities 28-Jul-17 A Member of the TA Group News In Brief Economy Asia Gross Domestic Product Income Approach 2010-2016 Malaysia ’s economy increased in 2016 as the value of GDP at current prices expanded further to register RM1,230.1bn and grew 6.3%. The expansion in GDP was propelled by the higher performance of all income components spearheaded by Gross Operating Surplus (GOS) which recorded RM732.3bn while Compensation of Employees (CE) has reached a value of RM433.7 bn. taxes less subsidies on production and imports stood at RM64.2bn. In 2016, GOS maintained its position as the largest income components with a share of 59.5% and posted 4.8% growth (2015: 0.6%) which was backed by services, agriculture and manufacturing sectors. The share of CE to Malaysia’s economy expanded to 35.3% and rose to 7.7% (2015: 6.2%) which was largely led by services and manufacturing. Taxes less subsidies on production and imports formed 5.2% of overall income and registered a double-digit growth of 13.5% (2015: 71.1%). Separately, Malaysia External Trade Development Corp (Matrade) said that, the increase in Malaysia's trade with the world showed that the country's economy is resilient despite the slowing economy worldwide. Its Chief Executive Officer, Dr Mohd Shahreen Zainooreen Madros, said the country's total trade with the world increased by 1.5% last year to RM1.48 trillion from 2015 with a trade surplus of RM87.26bn. (Department of Statistics Malaysia/Bernama) China Industrial Profits Jump Most in Three Months, Weather Higher Financing Costs Earnings for China's industrial firms in June rose at the fastest pace in three months in the latest sign economic momentum in the country remains solid, though analysts expect growth to slow later this year as tighter policies begin to bite. Profits surged 19.1% in June from a year earlier to CNY 727.78bn Yuan ($107.83bn), the National Bureau of Statistics (NBS) said. Statistics bureau official He Ping said in a statement that accelerated profits growth in steel, auto and electronics sectors helped to boost overall earnings. A year-long construction boom in China has lifted earnings for both domestic companies like oil refiner PetroChina to multinational construction equipment maker Caterpillar Inc. Moreover, solid global demand for Chinese goods have helped underpin growth as authorities tighten financial conditions in an attempt to tackle debt risks and reduce the world's second-largest economy's dependence on years of cheap credit. The robust industrial earnings in June was in part driven by continued appetite for iron ore and other commodities, whose prices have recovered modestly after taking a hit since March. (Reuters) Plan to Raise Indonesia 2017 Spending, Deficit Approved The Indonesian parliament's budgetary committee has approved a government proposal to increase spending this year, which will widen the fiscal deficit close to a legal limit. By law, the combined annual budget deficits of the central and regional governments cannot exceed 3% of gross domestic product (GDP). The approved budget has an official fiscal deficit of 2.92%. But the government said it sees the gap at 2.67% by year-end, as not all of the allocated budget is typically spent. The budgetary committee and the government agreed to set 2017 state spending at 2,133.3 trillion rupiah (US$160.24 billion), which represents an increase of 52.8 trillion rupiah. The government has said it would add spending on projects related to the 2018 Asian Games and pay more for energy subsidies. The committee late on Wednesday also approved a slightly smaller revenue target for the government of 1,736.1 trillion rupiah, compared with 1,750.3 trillion rupiah in the original budget. To finance the widening deficit, the government will issue more bonds. Total issuance for 2017, excluding buyback plans and treasury bills, was approved to be increased by 67.3 trillion rupiah to 467.3 trillion rupiah. (The Edge Market) Australia Export Prices Fall 5.7% in Q2 Export prices in Australia skidded 5.7% on quarter in the Q2 2017, the Australian Bureau of Statistics said. That missed forecasts for a decline of 5.5% following the 8.8% gain in the previous three months. The fall was driven by lower prices received for crude materials, Page 5 of 7
8. TA Securities 28-Jul-17 A Member of the TA Group inedible , except fuels (-13.1%) and mineral fuels, lubricants, and related materials (-4.8%). Offsetting these price falls were rises in food and live animals (+1.8%) and commodities and transactions, (non-monetary gold) (+3.1%). On a yearly basis, the Export Price Index rose 22.5 %, driven by mineral fuels, lubricants, and related materials (+68.3%). Import prices eased 0.1 % on quarter, also shy of forecasts for an increase of 0.7% following the 1.2% gain in the three months prior. The fall was driven by lower prices paid for mineral fuels, lubricants, and related materials (-4.8%) and machinery and transport equipment (0.3%). Offsetting these price falls were rises in manufactured goods classified chiefly by material (+1.9%); chemicals and related products (+1.7%); and miscellaneous manufactured articles (+1.0%). On a yearly basis, the Import Price Index rose 0.3%, driven by mineral fuels, lubricants, and related materials (+13.9%). (RTT News) United States U.S. Durable-Goods Orders Rise on Jetliner Demand U.S. sales of big-ticket manufactured goods rose at the quickest pace in nearly three years in June, driven by surging demand for civilian aircraft. Orders of durable goods—products designed to last at least three years, such as cars and refrigerators—grew a seasonally adjusted 6.5% from a month earlier, the Commerce Department said. Economists surveyed by The Wall Street Journal projected a 3.8% increase. Outside of transportation goods, orders rose 0.2%, reflecting a dip in demand on a range of goods such as cars and computers. The report offered a mixed assessment of the economy. Durable-goods orders have risen steadily this year: They are up 5% in the first six months compared with the same period in 2016. That suggests that over the broader term, businesses and consumers are confident and able to boost spending, supporting stronger economic growth. But the past month’s rise in durable orders was contained largely in one segment of the economy— transportation—that is volatile. It largely reflects better business at aircraft makers such as Boeing Co., which is benefiting from a rise in global passenger airline traffic and higher sales of jetliners. Businesses outside of transportation cut capital spending last month. Orders for nondefense capital goods excluding aircraft, a proxy for spending on equipment and software, fell 0.1% after two months of solid gains. That marked the first drop since December. Lower business investment, if sustained, would restrain the broader economy. Business investment spending is still up 2.8% this year. Orders for cars fell 0.6% in June from May but are up 1.6% this year over last. (The Wall Street Journal) U.S. Jobless Claims Rose Last Week The number of Americans applying for first-time unemployment benefits rose last week, though broader trends remain consistent with steady job gains. Initial jobless claims, a proxy for layoffs across the U.S., rose 10,000 to a seasonally adjusted 244,000 in the week ended July 22, the Labor Department said. Economists surveyed by The Wall Street Journal had forecast 240,000 new claims. Estimates of jobless claims can be volatile from week to week, but generally have hovered near four-decade lows in recent months, suggesting that employers are holding on to workers. The four-week moving average of initial claims, which evens out weekly volatility, remained flat last week at 244,000. The number of claims drawn by workers for longer than a week-—so-called continuing claims—fell 13,000 to 1.964 million in the week ended July 15. Data on continuing claims are released with a one-week lag. (The Wall Street Journal) Europe and United Kingdom German Consumer Morale Reaches 16-Year High Heading into August German consumer confidence is set to strengthen in August, survey data from the market research group GfK showed. The forward-looking consumer sentiment index rose to 10.8 in August from 10.6 in July. The score was forecast to remain unchanged at 10.6. Both the economic and the income expectations advanced once again in July, while the tendency to buy declined somewhat from June. Suggesting that the economy will develop in the course of the year, the economic expectations index climbed 3.3 points to a three-year high of 44.6. The income indicator increased 0.7 points to 60.9 points in July. Never since reunification has a better value been measured, GfK said. The tendency to buy index dropped 3.1 points to 54.8 in July. Nonetheless, consumption was underpinned by a very weak saving rates. (RTT News) Page 6 of 7
9. TA Securities 28-Jul-17 A Member of the TA Group UK Retail Sales Shoot Higher in July , Boosted by Clothing Sales – CBI British retail sales growth hit a three-month high in July, boosted by groceries and summer clothing, according to a survey that bucked other signs of a consumer slowdown. The Confederation of British Industry's (CBI) monthly retail sales balance rose to +22 in July from +12 in June, its highest since April. Expectations for August were the strongest since December last year, but the CBI warned it might not last. The Brexit vote in June 2016 led to a big fall in the value of sterling, which has pushed up inflation, gnawing at consumers' disposable income this year. A survey from supermarket chain Asda (WMT.N showed almost half of Britons expect their disposable income to fall over the next month. The CBI survey was conducted between June 28 and July 14 and was based on 57 retail chains. (Reuters) Eurozone M3 Growth Rises Slightly in June Eurozone monetary aggregate rose at a slightly faster pace in June, the European Central Bank reported. The M3 broad monetary aggregate climbed 5% annually, slightly faster than the revised 4.9% growth logged in May. Economists had forecast M3 growth to remain unchanged at May's initially estimated increase of 5%. The narrower aggregate M1, which includes currency in circulation and overnight deposits, increased 9.7% in June versus 9.3% in May. Annual growth rate of credit to the private sector increased to 3.1% in June from 2.9% in May. Meanwhile, adjusted loans to the private sector increased at a weaker pace of 2.5% after rising 2.7% a month ago. The annual growth in loans to households held steady at 2.6% in June and loans to non-financial corporations gained 2.1% versus 2.5 percent rise in May. (RTT News) Share Buy-Back: 27 July 2017 Company AMPROP DAIBOCI KOMARK Bought Back Price (RM) Hi/Lo (RM) 86,200 5,000 1,000 0.81/0.805 2.29 0.25 0.815/0.80 2.29 0.25/0.245 Total Treasury Shares 14,179,500 101,500 4,382,000 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) 27-Jul-17 1.92 2.21 5.90 Target Price BETA (RM) EPS (sen) PER (X) FY17 FY18 FY17 FY18 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg % Chg YTD 2.37 2.28 5.04 0.94 0.62 1.26 10.3 24.1 19.8 15.8 25.3 30.6 18.6 9.2 29.8 12.1 8.7 19.3 6.1 4.1 2.2 8.2 4.1 3.4 2.44 2.70 6.47 -21.3 -18.1 -8.8 1.88 2.08 4.09 2.1 6.3 44.1 -9.9 3.3 39.7 4.80 3.70 5.70 8.00 17.50 11.00 23.60 5.80 11.10 1.29 0.97 1.32 1.39 0.67 0.96 0.79 1.32 0.69 33.6 29.4 43.9 49.6 105.2 73.4 137.2 50.7 40.3 30.5 33.6 48.4 55.2 115.5 82.9 142.4 54.5 39.0 11.7 8.9 11.4 13.3 15.0 13.1 14.9 10.0 26.3 12.9 7.8 10.3 11.9 13.7 11.6 14.4 9.3 27.1 4.1 3.1 3.5 3.1 2.6 5.2 2.7 2.4 4.9 4.1 3.1 3.6 3.4 2.6 5.2 2.8 2.4 3.2 4.49 3.00 5.70 6.87 16.30 9.68 20.66 5.59 11.14 -12.5 -13.0 -12.5 -4.1 -3.2 -0.4 -0.8 -8.9 -4.8 3.60 2.08 3.90 4.21 12.70 7.50 19.38 4.53 8.20 9.2 25.5 27.9 56.5 24.3 28.5 5.8 12.4 29.3 5.6 9.2 15.8 46.1 16.9 17.6 4.0 8.1 19.8 0.38 1.27 5.38 3.48 0.64 1.15 2.09 1.95 5.90 0.45 1.57 6.00 3.50 0.78 0.58 2.26 1.49 6.26 0.80 0.64 1.04 1.08 1.00 1.29 na 1.10 0.10 5.6 15.4 28.1 15.3 4.9 8.3 12.6 11.9 42.0 5.6 13.5 34.8 20.3 5.7 9.6 12.5 12.0 45.8 6.7 8.3 19.2 22.7 12.9 13.9 16.5 16.3 14.1 6.8 9.4 15.4 17.1 11.2 11.9 16.7 16.3 12.9 0.0 1.8 2.2 2.2 3.9 0.9 2.6 1.5 4.2 0.0 2.4 2.2 2.7 3.9 0.9 2.6 1.5 4.2 0.51 1.37 5.52 3.61 0.74 1.39 2.15 2.48 6.15 -25.5 -7.3 -2.5 -3.6 -12.9 -17.3 -2.8 -21.2 -4.1 0.38 0.89 4.65 3.07 0.37 0.41 1.56 1.50 5.57 1.3 43.5 15.7 13.4 73.0 184.0 34.0 29.9 5.9 -12.6 21.0 12.6 8.7 5.8 100.0 22.9 13.4 0.3 1.97 2.00 0.49 11.0 11.5 17.9 17.1 5.1 5.1 2.19 -10.0 1.93 2.1 -2.0 15.00 17.96 17.84 19.14 0.50 0.59 74.8 79.6 81.3 84.0 20.1 22.6 18.4 21.4 5.0 4.0 5.4 4.2 15.30 19.10 -2.0 -6.0 13.72 15.56 9.3 15.4 7.8 9.6 2.20 7.35 24.80 1.21 84.16 3.68 1.91 4.90 0.90 2.23 8.62 27.41 1.50 88.66 4.10 2.46 4.41 1.23 0.50 0.35 0.32 0.47 0.36 0.48 0.65 0.42 0.57 6.7 26.4 121.1 6.5 290.1 22.3 27.5 15.7 8.1 7.9 40.6 151.0 6.6 327.7 24.7 27.0 16.6 11.6 32.7 27.9 20.5 18.6 29.0 16.5 7.0 31.2 11.1 27.9 18.1 16.4 18.3 25.7 14.9 7.1 29.4 7.8 1.8 1.4 2.8 5.0 3.3 4.1 3.1 0.9 2.8 2.2 2.0 3.0 5.0 3.3 4.6 4.2 1.0 3.9 3.00 8.85 26.52 1.31 85.20 3.89 2.04 5.00 1.07 -26.7 -16.9 -6.5 -7.5 -1.2 -5.4 -6.4 -2.0 -15.9 2.11 7.30 22.44 1.13 74.12 2.26 1.47 4.14 0.78 4.3 0.7 10.5 7.0 13.5 62.8 29.9 18.3 15.4 -14.4 0.3 5.6 5.1 7.6 44.9 10.4 13.1 13.2 44.40 52.08 1.01 198.6 187.4 22.4 23.7 4.5 4.5 51.50 -13.8 40.61 9.3 0.5 9.72 6.11 11.51 6.54 1.35 1.29 49.3 25.7 54.7 27.7 19.7 23.8 17.8 22.0 0.5 1.3 0.6 1.5 10.00 6.38 -2.8 -4.2 7.50 4.22 29.6 44.7 22.3 35.2 2.36 0.12 3.34 0.13 0.75 1.26 19.3 0.4 23.2 0.4 12.2 33.1 10.2 33.3 5.9 0.0 6.8 0.0 3.42 0.16 -31.0 -25.0 2.28 0.05 3.5 140.0 -20.3 140.0 5.95 4.20 6.39 4.70 0.77 0.51 9.5 13.3 15.0 16.5 62.4 31.5 39.8 25.5 0.6 1.5 0.6 1.8 6.73 4.37 -11.6 -3.9 5.54 3.85 7.4 9.1 -6.3 0.5 7.21 7.05 1.96 5.76 1.62 6.85 7.60 1.80 6.05 2.20 0.57 0.16 0.33 -0.19 0.30 19.5 35.8 12.3 26.4 3.7 24.6 40.0 15.1 29.8 5.5 37.0 19.7 15.9 21.8 43.4 29.4 17.6 13.0 19.3 29.5 1.1 2.5 1.9 2.3 0.6 1.5 2.8 2.3 2.6 0.8 7.40 7.15 2.38 5.94 2.64 -2.6 -1.4 -17.6 -3.0 -38.6 4.06 5.62 1.88 4.20 1.51 77.6 25.4 4.3 37.1 7.3 49.3 7.0 -7.1 7.7 -31.4 INDUSTRIAL SCIENTX SKPRES 8.58 1.33 9.71 1.75 0.52 0.50 54.5 8.6 66.3 10.6 15.8 15.5 12.9 12.5 2.1 3.1 2.3 3.9 8.99 1.44 -4.6 -7.6 6.01 1.15 42.8 15.7 28.1 3.1 MEDIA ASTRO MEDIA PRIMA STAR 2.50 0.90 2.35 3.45 0.60 1.40 1.05 0.65 0.64 13.2 1.7 7.1 14.5 2.8 6.5 18.9 52.7 33.1 17.3 31.9 36.2 5.0 1.5 7.7 5.2 2.5 7.7 3.01 1.48 2.67 -16.9 -39.2 -12.0 2.47 0.87 2.19 1.2 4.0 7.3 -3.8 -21.7 4.9 -14.5 -5.7 -37.1 -6.6 -1.5 -10.8 -26.2 -70.2 0.20 6.07 0.73 7.03 0.44 6.48 1.33 0.29 195.0 1.5 0.0 5.0 50.6 7.4 16.5 8.8 131.4 -5.2 -20.2 0.4 47.2 -0.3 -4.3 -64.6 -24.2 1.30 15.4 -11.8 BANKS & FINANCIAL SERVICES AFG 3.93 AFFIN 2.61 AMBANK 4.99 CIMB 6.59 HLBANK 15.78 MAYBANK 9.64 PBBANK 20.50 5.09 RHBBANK BURSA 10.60 CONSTRUCTION BPURI GADANG GAMUDA IJM PESONA SENDAI SUNCON WCT LITRAK Building Materials WTHORSE CONSUMER Brewery CARLSBG HEIM Retail AEON AMWAY F&N HUPSENG NESTLE PADINI POHUAT QL SIGN Tobacco BAT GAMING Casino GENTING GENM NFO BJTOTO LUSTER HEALTHCARE Hospitals IHH KPJ Rubber Gloves HARTA KOSSAN SUPERMX TOPGLOV KAREX OIL & GAS DNEX 0.59 0.76 1.04 3.7 4.6 16.1 12.9 1.7 1.7 0.69 LCTITAN 6.16 7.41 na 60.3 71.5 10.2 8.6 4.2 5.7 6.53 MHB 0.73 0.87 1.83 -1.2 1.3 na 55.7 0.0 0.0 1.16 MISC 7.38 6.85 0.79 56.4 48.9 13.1 15.1 4.1 4.1 7.90 PANTECH 0.66 0.69 1.27 4.0 6.2 16.4 10.6 2.7 4.1 0.67 PCHEM 6.96 7.74 1.06 39.2 40.5 17.8 17.2 3.0 3.2 7.80 SENERGY 1.55 1.71 2.49 6.6 4.0 23.5 39.1 0.6 0.6 2.10 UMWOG 0.31 0.80 2.11 -11.7 -3.5 na na 0.0 0.0 1.04 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.50 1.55 1.48 12.0 12.6 12.5 11.9 0.0 0.0 1.98
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price (RM) PLANTATIONS FGV IJMPLNT IOICORP KLK SIME UMCCA 1.66 2.95 4.48 24.70 9.54 6.30 Target Price BETA (RM) 1.55 3.88 4.15 26.19 10.02 7.52 1.79 0.47 1.07 0.86 1.23 0.43 EPS (sen) PER (X) FY17 FY18 FY17 FY18 4.2 12.3 18.7 111.8 34.0 37.6 8.5 15.7 21.0 119.1 37.5 34.5 39.3 24.0 23.9 22.1 28.0 16.8 19.5 18.7 21.3 20.7 25.4 18.3 Div Yield (%) 52weeks 52weeks FY17 FY18 High Price % Chg Low Price % Chg 3.0 2.4 2.2 2.2 2.6 3.7 3.0 2.7 2.7 2.4 3.2 2.7 2.52 3.70 4.81 25.50 9.70 6.55 -34.1 -20.3 -6.9 -3.1 -1.6 -3.8 1.42 2.95 4.22 22.92 7.42 5.50 PROPERTY GLOMAC 0.65 0.70 0.56 1.6 6.3 40.8 10.3 4.6 4.6 0.83 -21.2 0.61 HUAYANG 0.86 0.96 0.66 17.3 10.2 5.0 8.4 4.7 2.3 1.43 -40.0 0.85 IBRACO 0.92 1.00 0.39 5.2 11.1 17.6 8.3 3.8 4.3 1.05 -12.4 0.76 IOIPG 2.11 2.25 0.86 17.4 17.4 12.1 12.1 3.3 3.6 2.46 -14.2 1.85 MAHSING 1.54 1.76 0.73 14.3 13.5 10.8 11.4 4.2 4.2 1.70 -9.4 1.34 SNTORIA 0.83 0.98 0.27 6.2 10.3 13.5 8.0 1.2 1.2 1.00 -17.0 0.69 SPB 4.89 5.98 0.59 25.6 22.8 12.6 14.1 2.5 2.5 5.19 -5.8 4.32 SPSETIA 3.22 4.10 0.68 27.1 29.5 15.8 14.5 4.3 4.3 4.50 -28.4 2.96 SUNWAY 4.27 4.15 0.48 18.3 18.4 13.2 13.0 2.8 2.8 4.32 -1.2 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 1.69 1.86 0.51 8.9 10.1 19.1 16.7 5.2 6.0 1.84 -8.2 1.63 CMMT 1.55 1.72 0.59 8.1 8.6 19.2 18.0 5.4 5.8 1.72 -9.9 1.45 % Chg YTD 16.9 0.0 6.2 7.8 28.6 14.5 7.1 -13.2 1.8 2.9 17.8 5.5 6.6 1.8 21.9 14.2 14.9 20.3 13.1 8.8 50.3 -6.5 -23.9 -8.0 8.2 7.7 3.7 10.6 2.9 42.3 3.7 6.9 -1.7 1.3 POWER & UTILITIES MALAKOF PETDAG PETGAS TENAGA YTLPOWR 1.04 23.86 18.96 14.24 1.40 1.13 21.47 19.60 17.38 1.45 0.76 0.76 0.77 1.02 0.53 7.1 98.4 88.2 175.9 8.2 6.4 102.3 101.3 130.6 10.6 14.6 24.3 21.5 8.1 17.0 16.2 23.3 18.7 10.9 13.2 6.7 3.1 3.3 3.0 5.0 5.8 3.2 3.7 3.2 3.6 1.80 25.70 22.50 14.90 1.64 -42.2 -7.2 -15.7 -4.4 -14.6 1.01 22.96 18.10 13.00 1.39 3.0 3.9 4.8 9.5 0.7 -24.1 0.3 -11.0 2.4 -6.0 TELECOMMUNICATIONS AXIATA DIGI MAXIS TM 4.69 4.78 5.59 6.27 5.20 4.90 5.85 7.50 1.31 0.93 0.71 0.66 14.6 20.0 25.5 21.4 16.0 20.4 25.7 22.3 32.2 23.9 21.9 29.2 29.3 23.4 21.8 28.1 1.6 4.2 3.6 3.1 1.7 4.3 3.6 3.2 5.99 5.19 6.60 6.90 -21.7 -7.9 -15.3 -9.1 4.11 4.63 5.48 5.81 14.1 3.2 2.0 7.9 -0.6 -1.0 -6.5 5.4 TECHNOLOGY Semiconductor & Electronics IRIS 0.17 INARI 2.53 MPI 14.20 UNISEM 3.82 0.28 2.30 15.60 3.95 1.34 0.79 0.51 0.82 -2.6 10.3 94.2 26.9 -0.3 na 12.4 24.6 112.9 15.1 27.1 14.2 na 20.5 12.6 14.1 0.0 3.2 1.9 3.1 0.0 1.9 1.9 3.1 0.24 2.54 14.20 3.82 -29.2 -0.4 0.0 0.0 0.10 1.50 7.20 2.27 70.0 69.0 97.2 68.3 54.5 52.4 91.6 61.9 3.25 8.75 3.34 8.10 1.12 1.44 37.6 17.2 37.1 17.5 8.6 50.8 8.8 50.0 1.2 1.1 1.5 1.1 3.59 9.45 -9.5 -7.4 2.16 5.77 50.5 51.6 41.9 44.4 1.73 3.70 2.05 4.05 0.76 0.67 14.3 17.1 22.7 15.1 12.1 21.6 7.6 24.5 2.5 3.5 4.0 3.1 1.87 4.59 -7.5 -19.4 1.47 3.61 17.7 2.5 8.8 -14.0 TRANSPORTATION Airlines AIRASIA AIRPORT Freight & Tankers TNLOGIS WPRTS SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price (S$) BANKS & FINANCIAL SERVICES DBS 22.25 OCBC 11.49 UOB 24.60 PLANTATIONS WILMAR IFAR 3.30 0.48 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 1.17 1.08 173.8 87.7 195.6 190.2 12.8 92.4 13.1 209.3 12.6 11.7 12.4 11.8 2.7 5.7 2.8 2.7 6.7 2.8 22.3 11.5 24.6 0.0 0.0 0.0 14.72 8.84 17.51 51.2 38.9 40.5 28.3 28.8 20.6 3.72 0.53 0.93 1.10 28.9 4.9 31.1 5.2 10.6 9.1 2.4 2.5 2.7 2.7 4.0 0.6 -17.5 -20.2 2.97 0.44 11.1 8.0 -8.1 -9.5 11.4 9.8 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. TA Securities COMPANY UPDATE Friday , July 28, 2017 A Member of the TA Group FBMKLCI: 1,770.07 Sector: Consumer MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Heineken (M) Berhad TP: RM19.14 (+6.6%) Last Traded: RM17.96 3Q Earnings Expected to be Strong Hold THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Tel: +603-2072 1277 ext. 1324 kjtan@ta.com.my Key takeaways from Heineken’s results briefing are: 1. 2. 3. www.taonline.com.my Share Information Bl oomberg Code Sustainable EBIT margin at above 18% this year; Change in excise duties and average selling price (ASP); and Launching of new product. HEIM MK Stock Code 3255 Li sti ng Mai n Market Share Cap (mn) 302.1 Market Cap (RMmn) 5,425.7 Par Val ue (RM) We downgrade Heineken from Buy to Hold with unchanged target price of RM19.14/share. 0.50 52-wk Hi /Lo (RM) 19.10 / 15.56 12-mth Avg Dai l y Vol ('000 shrs) 95.2 Esti mated Free Fl oat (%) 43.9 Beta Sustainable EBIT margin at above 18% this year To recap, Heineken’s 1HFY17 operating margin improved by 1.7p.p. to 18.14%. This was despite a drop in revenue of 12% to RM807.7mn. The increase in margin can be attributed to i) implementation of cost-cutting measures, ii) increase in average selling price, and iii) growth in premium and cider products. Looking forward, management expects the EBIT margin to at least match the 1H17 level, if not higher, on the back of its continuous effort in trimming costs. Besides that, the increasing demand for premium and cider products will also help to sustain margins. Note that there was a double digit growth in Strongbow apple ciders in 2Q17. Increase in Excise Duties and ASP? Management has no clues on excise duties in the upcoming 2018 Budget. However, it has always been in talks with the customs and hopes to maintain the duties at current levels. Any increase in excise duty will likely be passed on to consumers. In terms of selling price, management said that Heineken will not increase ASP to burden the consumers. It has no dire need to increase the price unless there is a duty hike in Budget 2018. The last price increase Heineken did was back in July-16 due to change in excise duties structure. We do not expect an excise duties increase in 2018 due to: 1) The government may not want to increase the burden of consumers especially before the general election; 2) Malaysia’s excise duties on alcohols already the third highest in world, behind Norway and Singapore; and 3) The hike in duties will encourage demand for contrabands and this may result in lower tax collection for the government. GAPL Pte Ltd - 51.0% Aberdeen Asset - 5.12% Forecast Revision FY17 0.0 Net profi t (RMm) 240.6 253.7 Consensus 285.5 303.2 84.3 83.7 TA's / Consensus (%) Previ ous Rati ng Buy (Downgraded) Financial Indicators FY17 FY18 0.0 Net cash CFPS (sen) 92.1 94.5 P/CFPS (x) 19.5 19.0 ROAA (%) ROAE (%) 32.3 32.7 54.6 54.6 NTA/Share (RM) Pri ce/ NTA (x) 1.4 1.4 13.2 12.4 HEIM FBM KLCI (1.2) (0.1) 3 mth 2.4 0.1 6 mth 13.1 5.0 12 mth (1.9) 6.7 Net geari ng (x) Share Performance (%) Price Change 1 mth (12-Mth) Share Pricerelative to the FBM KLCI Source: Bloomberg Page 1 of 3 FY18 0.0 Forecast Revi si on (%) Launching of New Product Consumers can expect more new products to be launched this year. Heineken’s latest innovation was Guinness Bright, which has garnered very good response. Besides that, the new Anchor Smooth Draught was also well-received by the market. We are positive on the new product launches as it will promote brand equity that help to capture additional market share. According to management, it is looking to launch a few more new products for this year. 0.6 Major Shareholders (%)
13. TA Securities 28-Jul-17 A Member of the TA Group Forecast Management guided that 3QFY17 results are likely to be stronger on volume , revenue and bottom-line. In terms of market share, Heineken is still the market leader. In regards to the bills of demand from the customs, management said that the on-going dialog has been positive and is closing in on a solution. To recap, the bills demanded a payment of additional excise duties and sales tax, amounting to 56.3mn. The group remains firm on its stance that a retrospective application of the new excise duty valuation method implemented on 1 November 2013 is unjustifiable. Thus, no provision has been recognized. No change to our FY17-19 earnings forecast. We maintain our assumption on MLM volume growth of 1.6% for FY17 and 4.1% for FY18 and FY19. Downgrade to Hold with TP of RM19.14 Per Share We keep Heineken’s target price unchanged at RM19.14/share, based on DCF valuation methodology (COE: 7.2%, g: 2.5%). Downgrade the stock from buy to hold as the total return is less than required rate of return of 12%. Downside risks to our call are 1) Unexpected increase in excise duty, 2) Unfavourable outcome from the unresolved bills of demands, 3) Increase in contrabands. Earnings Summary (RMmn) P&L FYE Dec (RMmn) Revenue EBITDA Depreciation & Amortisation EBIT Net Finance Cost EI PBT Adjusted PBT Taxation MI Net profit Core net profit EPS (sen) DPS (sen) FY15 1,748.9 383.6 (88.2) 295.4 (3.0) 0.0 292.4 292.4 (78.2) 0.0 214.2 214.2 70.9 71.0 Ratios FYE Dec (RMmn) Valuations PER Dividend yield PBV 25.3 4.0 14.4 Profitability Ratios ROAE ROAA EBITDA Margin EBIT Margin PBT Margin PAT Margin 58.4 30.7 21.9 16.9 16.7 12.2 FY15 FY16F* 2,810.3 712.6 (161.5) 551.1 (1.8) 0.0 549.2 549.2 (122.0) 0.0 427.3 427.3 141.4 145.0 FY16F* FY17F 1,704.1 356.9 (42.1) 314.8 1.7 0.0 316.5 316.5 (76.0) 0.0 240.6 240.6 79.6 71.7 FY18F 1,783.5 373.0 (42.0) 331.0 2.8 0.0 333.8 333.8 (80.1) 0.0 253.7 253.7 84.0 75.6 FY19F 1,866.7 389.2 (41.8) 347.3 3.6 0.0 350.9 350.9 (84.2) 0.0 266.7 266.7 88.3 79.5 FY17F FY18F FY19F 12.7 8.1 13.8 22.6 4.0 12.0 21.4 4.2 11.4 20.3 4.4 10.8 111.2 56.7 25.4 19.6 19.5 15.2 54.6 32.3 20.9 18.5 18.6 14.1 54.6 32.7 20.9 18.6 18.7 14.2 54.3 33.0 20.8 18.6 18.8 14.3 Liquidity Ratios Current Ratio Quick Ratio 1.9 1.7 1.4 1.2 Growth Ratios Sales PBT Earnings Total Assets 8.6 10.0 8.1 (1.3) 60.7 87.8 99.5 17.5 2.3 2.0 (39.4) (42.4) (43.7) (6.7) 2.4 2.1 2.4 2.4 4.7 5.5 5.5 4.2 4.7 5.1 5.1 4.6 Balance Sheet FYE Dec (RMmn) PPE Intangible Assets Investment in subsidiaries Others LT Assets FY15 219.6 33.3 0.0 27.0 279.9 FY16F* 221.7 33.5 0.0 32.0 287.2 FY17F 216.0 41.2 0.0 27.0 284.1 FY18F 214.7 41.2 0.0 27.0 282.9 FY19F 214.4 40.9 0.0 27.0 282.3 Inventories Receivables Others Cash Current Assets 49.0 296.3 15.1 52.3 412.8 61.9 448.0 12.6 4.0 526.5 51.5 317.2 15.1 91.0 474.8 55.3 324.6 15.1 112.9 507.9 57.7 343.9 15.1 128.1 544.8 Total Assets 692.7 813.6 758.9 790.8 827.2 Payables ST Borrowings Others Current Liabilities 193.0 25.0 0.0 218.0 292.3 74.0 16.3 382.6 183.0 25.0 0.0 208.0 189.6 25.0 0.0 214.6 199.2 25.0 0.0 224.2 50.0 48.5 98.5 0.0 38.5 38.5 50.0 48.5 98.5 50.0 48.5 98.5 50.0 48.5 98.5 Share Capital Retained Earnings 151.0 225.1 151.0 241.5 151.0 301.3 151.0 326.7 151.0 353.4 Total Liabilities and Equity 692.7 813.6 758.9 790.8 827.2 Cash Flow FYE Dec (RMmn) PBT Depreciation & Amortisation Net Interest Other Non-cash Changes in WC Tax Paid Net Interest Operational cash flow FY15 292.4 88.2 3.0 2.7 (0.6) (85.1) (5.6) 295.0 FY16F* 549.2 161.5 1.8 12.9 (151.7) (123.4) (4.8) 445.5 FY17F 316.5 42.1 (1.7) 0.0 (0.0) (76.0) (2.8) 278.1 FY18F 333.8 42.0 (2.8) 0.0 (4.6) (80.1) (2.8) 285.4 FY19F 350.9 41.8 (3.6) 0.0 (12.1) (84.2) (2.8) 290.0 Capex Others Investing cash flow (37.3) 2.6 (34.7) (84.9) 3.0 (81.9) (41.4) 4.6 (36.8) (40.8) 5.7 (35.1) (41.3) 6.4 (34.8) Dividend Paid Net Change in Debts Financial Cash Flow (194.9) (75.0) (269.9) (410.9) (1.0) (411.9) (216.5) 0.0 (154.3) (228.3) 0.0 (228.3) (240.0) 0.0 (240.0) (9.5) 61.8 52.3 (48.2) 52.3 4.0 86.9 4.0 91.0 22.0 91.0 112.9 15.2 112.9 128.1 LT Borrowings Others LT Liabilities Net Cash Flow Opening Cash Flow Closing Cash Flow *Change in Financial Year End from June to December – FY16 consists of 18-months performance. Page 2 of 3
14. TA Securities 28-Jul-17 A Member of the TA Group ( T HI S P AGE I S I NT E N T I ON AL L Y L E FT B L ANK) Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rateof 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
15. TA Securities RESULTS UPDATE Friday , July 28, 2017 STI: 3,354.71 A Member of the TA Group Sector: Finance MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Overseas-Chinese Banking Corp. TP: S$ 12.00 (+4.4%) Last Traded: S$ 11.49 Resilient Growth Momentum HOLD THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Tel: +603-2167 9610 liwong@ta.com.my Review OCBC posted another strong set of results, spurred by broad-based income growth across geographies and businesses. All major subsidiaries’ local units reported higher sequential earnings. Registering double-digit QoQ and YoY increases, the group’s 1H17 net profit accelerated to S$2,056mn. ROE widened to 11.4% in 1H17 from 10.3% a year ago. An interim dividend of 18 cents/ share has been declared for the 1H17 (1H16: 18 cents). Representing 37% of OCBC’s 1H17 net profit after tax, the Scrip Dividend Scheme will not be applicable to the interim dividend. Net interest income (NII) rebounded in 2Q17. YTD, NII climbed 2.0% YoY to S$2,517mn. The QoQ increase of 6% was driven by asset growth and 3 bps rise in the net interest margin (NIM) owing to higher gapping income and a higher average loans-to-deposits ratio (LDR). Advances in loans were broad-based across most industry segments and key markets. Rising 11% YoY and 2% QoQ, loan growth was underpinned by increases in Indonesia (+17% YoY, +5% QoQ), Greater China (+13% YoY, +3% QoQ) and Singapore (+8% YoY, flat QoQ). By industry, the expansion in loans were spurred by higher housing loans, other consumerrelated loans, general commerce and loans to the financial sector. Non-interest income (non-NII) maintained its healthy upward momentum - climbing 8% QoQ and 34% YoY. 1H17 non-NII ballooned 32% to S$2,030mn underpinned by improvement in fee income arising from wealth management income, which rose 52% YoY. Management noted strong growth across OCBC’s Consumer Banking, Private Banking and Insurance franchise. The increase in wealth management income was also partly attributed to the acquisition of the former wealth and investment management business of Barclays PLC in Singapore and Hong Kong in November 2016. Bank of Singapore’s AUM rose 13.4% YTD to US$110b. Also boosting non-NII in 1H17 were improvements in trading income and income from life and general insurance. 1H17 total allowances widened to S$337mn from S$255mn a year ago. Sequentially, net allowances was relatively unchanged. Net specific allowances (SA) eased during the quarter, thanks to an increase in write backs and recoveries. The formation of new non-performing assets (NPA) however, accelerated partly due to the housing portfolio. The YoY increase in NPAs was also premised on the downgrade of a few large corporate accounts associated with the oil and gas services sector which remained under stress. Management noted that 37% of O&G NPLs are being serviced with proactive steps being taken to restructure loans based on stress-test results. Exposure to the oil and gas segment decreased 8% mainly driven by drop in exposure to oil majors and OSV sector. The NPL ratio for the sector improved to 0.59% from 0.62% in March 2017. Excluding the O&G portfolio, the NPL ratio for the rest of the group’s portfolio was relatively stable at 0.66% vs. 0.63% in March 2017. Sequentially, overall NPL ratio and allowance coverage was also stable at 1.3% (4QFY16: 1.3%) and 101% (4QFY16: 100%) respectively. By Page 1 of 3 www.taonline.com.my 4 Share Information 2 Bloomberg Code Code 2. Stock Listing 1 Share Cap (mn) OCBC SP O39 STI 4187.4 48113.2 1.00 11.25/8.27 5413.9 69.1 1.2 Market Cap (S$mn) Par Value 52-wk Hi/Lo (S$) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta Major Shareholders (%) Selat - 11.0% Lee Foundation - 4.3% Singapore Investments - 3.8% Forecast Revision Forecast Revision (%) Net profit (S$m) Consensus TA's / Consensus (%) Previous Rating FY17 FY18 3,673.1 3,869.7 3,744.0 4,140.0 98.1 93.5 Buy (downgraded) Financial Indicators ROE (%) Net Interest Margin (%) Cost/Income (%) NPL ratio (%) Loan loss coverage (%) BV/ Share (S%) Price/ BV (x) FY17 9.8 1.8 43.7 1.6 94.6 9.3 1.2 FY18 9.8 1.8 43.9 1.2 76.8 9.9 1.2 % of FY 56.0 55.0 Within Within OCBC 6.5 17.2 22.4 33.6 STI 4.0 5.6 10.1 16.9 Scorecard vs TA vs Consensus Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth (12-Mth) Share Price relative to the FBM KLCI Source: Bloomberg
16. TA Securities 28-Jul-17 A Member of the TA Group geography , we note QoQ improvements from most key overseas market except for Malaysia and Greater China, which saw NPAs increase to S$717mn (from S$584mn) and S$323mn (from S$307mn). Elsewhere, capital ratios remained relatively stable, with proforma common equity tier 1 (CET1) and total capital ratio at 12.0% and 16.1% respectively. Impact No change to our earnings estimates. Outlook OCBC delivered another set of encouraging results, with strong performance driven by the group’s banking, wealth management and insurance operations. As predicted, the group continued to register new highs in wealth management fee income and AUMs, boosted by synergies from the acquisition of Barclay’s wealth business in Asia last year. Combined with improvement in overseas operations - in particular Indonesia, along with tightly managed expenses, we envisage earnings growth of some 6% for OCBC in 2017. We project softer cost-to-income ratio of 43-44% for the FY on the back of management’s firm grip on cost management coupled with tight control on headcount. We believe the group’s diversity of its geographical network and business franchise will continue to drive earnings forward. Amid the headwind of challenges envisaged for the remaining part of the year, asset quality should remain relatively stable. Nevertheless, management does not foresee a near term recovery in the oil and gas sector. Sufficient provisions have been set aside. Strong capital and liquidity position should also help the group weather though an increasingly demanding regulatory environment. Valuation and recommendation TP is maintained at S$12.00, valuing the stock at an implied FY18e PBV of 1.2x. However given the recent increase in share price, the potential total capital upside has narrowed to between 7% and 12%. With that, we downgrade OCBC from buy to HOLD. Earnings Summary (S$mn) FYE Dec 2015 2016 2017F 2018F 2019F Net interest income 5,189 5,052 5,654 5,986 6,387 Non-interest income 3,533 3,437 3,540 3,700 3,885 Total operating income 8,722 8,489 9,194 9,686 10,272 Operating expenses 3,664 3,788 4,015 4,256 4,597 Operating profit 5,058 4,701 5,178 5,430 5,676 Net profit 3,903 3,473 3,673 3,870 4,209 EPS (sen) 93.2 82.9 87.7 92.4 100.5 EPS growth (%) 1.6 (11.0) 5.8 5.4 8.8 Gross div (sen) 36.0 36.0 36.0 36.0 36.0 Div yield (%) 3.1 3.1 3.1 3.1 3.1 Page 2 of 3
17. TA Securities 28-Jul-17 A Member of the TA Group 2QFY17 Results Analysis (S$mn) YE 31 Dec Net interest income Non interest income Total income Operating expenses Operating profit Amortisation of intangibles Allowances Associates & JVs Tax & non-controlling items Net profit EPS (sen) 2Q FY16 1,260 788 2,048 (932) 1,116 (24) (88) 103 (222) 885 21 1Q FY17 1,272 977 2,249 (973) 1,276 (26) (168) 114 (223) 973 23 2Q FY17 1,345 1,053 2,398 (992) 1,406 (27) (169) 119 (246) 1,083 26 QoQ 5.7 7.8 6.6 2.0 10.2 3.8 0.6 4.4 10.3 11.3 11.3 YoY 6.7 33.6 17.1 6.4 26.0 12.5 92.0 15.5 10.8 22.4 22.4 YTD FY16 2,567 1,541 4,108 (1,855) 2,253 (48) (255) 209 (418) 1,741 42 YTD FY17 2,617 2,030 4,647 (1,965) 2,682 (53) (337) 233 (469) 2,056 49 YoY 1.9 31.7 13.1 5.9 19.0 10.4 32.2 11.5 12.2 18.1 18.1 [ T HE RE M AI NI NG OF T HI S P AG E I S I NT E NT I ON AL L Y LE FT B L AN K] Stock Recommendation Guideline BUY : HOLD : SELL : Not Rated: Total return within the next 12 months exceeds required rate of return by 5%-point. Total return within the next 12 months exceeds required rate of return by between 0-5%-point. Total return is lower than the required rate of return. The company is not under coverage. The report is for information only. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD(14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 3 of 3
18. TA Securities SECTOR REPORT Friday , July 28, 2017 FBM KLCI: 1,770.07 A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Neutral Rubber Sector 2HCY17: Banking on Capacity Growth & Easing Competition THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Wilson Loo Tel : +603-2167 9606 wilsonloo@ta.com.my www.taonline.com.my Executive Summary • Thus far in 2017, based on 1QCY17 results of rubber glove manufacturers under our coverage consisting of heavyweights: Top Glove, Hartalega, Kossan and Supermax, the rubber sector has sustained its growth momentum with revenue +14.1% QoQ and core PBT +8.7% QoQ. Earnings growth was generally driven by higher sales volume and average selling prices, albeit partly offset by the climb in latex prices. • In terms of the sector’s valuation, the sector had traded mostly between the 5-year PE multiple average of 18.5x and +1 S.D. band of 21.8x. And lately, we observe valuations stretching to 22.0x, slightly over the +1 S.D. band and this, we reckon is due to the recent decline in latex prices. In 2QCY17, the average prices of natural rubber latex and synthetic latex respectively declined by 20.5% QoQ to RM6.01/kg and 19.7% QoQ to RM6.50/kg. • On a more granular level, YTD share price performances have been rather mixed with Hartalega leading gains (+49.3%), followed by Top Glove +7.7%, Kossan +7.0%, and Supermax -7.1%. In our opinion, Hartalega’s relatively strong share price performance was due to its smooth sailing expansion, robust sales, and the market’s confidence in its ability to sustain the recent recovery of its margins above (~2.1x) that of the industry. Against CY18, the stock is currently trading at a PE multiple of 26.3x, a premium to the sector’s average of 21.6x. • Going forward, for 2HCY17, we expect the sector’s earnings growth momentum to sustain primarily on higher sales volume with near-term demand expected to remain driven by the healthcare sector. Room for higher sales volume is present from on-going capacity expansion projects. In 2017, our projected new rubber glove supply of 8.8bn gloves from manufacturers under our coverage would meet 77.0% of new rubber glove global demand of 11.4bn gloves which we project in tandem with its 10-year CAGR of 5.6%. • Latest trends within Malaysia’s rubber glove sector indicate that: 1) while the nitrile wave persists with 2016’s natural latex glove (NR) to nitrile glove (SR) export ratio at 43:57, there is sustained growth in demand for both NR and SR gloves with exports growing by 8.8% YoY and 5.7% YoY respectively in 2016, 2) demand remains very much driven by developed markets (i.e. the USA, Germany, Japan and the UK) with the bulk absorbed by the USA at 31.3% in 2016, 3) demand is still predominantly for medical gloves, which are indispensable in the healthcare sector, accounting for 93.2% of rubber glove exports in 2016. • Boding well for the sector would be Malaysia’s export competitiveness both from a currency standpoint and its economies of scale as well as continued moderation in competitive pressures. We believe such moderation in competition has been evidenced by the easing ability for glove manufacturers to pass through the increase in latex prices to customers and relatively stable QoQ margin fluctuations of ~1-2%-points over the past quarters. • Volatile fluctuations in the USD/Ringgit and latex prices remain key risks to our estimates. For the USD/Ringgit, our house’s CY17 outlook is kept unchanged at RM4.25/USD (YTD average: RM4.38/USD) and for latex prices, we expect prices to be range bound from their current levels (June 2017 average - natural rubber latex: RM5.68/kg and synthetic latex: RM5.80/kg) in the absence of major catalysts beyond the wintering season. • Lastly, for smaller cost components, we see minimal interruptions from on-going cost hikes as thus far, only an increase in natural gas tariff by 0.6% to RM26.46/MMBtu is expected. This contrasts with 2HCY16 whereby the sector faced natural gas tariff hike of 6.0% to RM27.05/MMBtu and minimum wage hike of 11.1% to RM1,000 per month. • Above all, we view that the sector’s defensive and growth qualities are intact. Valuations are still very much influenced by fluctuations in key external factors - the USD/Ringgit and latex prices. Our Neutral stance on the sector is maintained with scarce opportunities from a valuation standpoint. Within our coverage we have a Buy recommendation for Karex (TP: RM2.20/share) at 30.0x PE, Hold for Top Glove (TP: RM6.05/share) at 19.0x PE and Kossan (TP: RM7.60/share) at 19.0x PE and Sell for Hartalega (RM6.85/share) at 25.0x PE and Supermax (RM1.80/share) at 11.0x PE. Page 1 of 20
19. TA Securities 28-Jul-17 A Member of the TA Group YTD 2017 Performance Thus far in 2017 , based on 1QCY17 results of rubber glove manufacturers under our coverage consisting of heavyweights: Top Glove, Hartalega, Kossan and Supermax, the rubber glove sector has sustained its growth momentum with QoQ revenue and earnings growth. All manufacturers except for Supermax reported earnings that met our expectations. Top Glove, the world’s largest rubber glove manufacturer, recorded the highest revenue of RM851.5mn while Hartalega, one of the most efficient rubber glove manufacturer, recorded the highest core net earnings of RM89.4mn. Supermax’s earnings miss was partly due to higher expenses arising from the expansion of its contact lens division. Collectively, the sector’s core PBT grew by 8.7% QoQ in tandem with revenue growth of 14.1% QoQ and core PBT margins declined marginally by 0.7%-points to 13.2%. Earnings growth was generally driven by higher sales volume and average selling prices (ASPs), albeit partly offset by the climb in latex prices. Prices of both natural rubber latex and synthetic latex had generally been rising since 3QCY16 and the momentum persisted into 1QCY17 before easing midway through the quarter. Against 4QCY16, average prices of natural rubber latex and synthetic latex in 1QCY17 were respectively higher by 31.0% at RM7.56/kg and 33.5% at RM8.10/kg. Contributing factors to the increase included the recovery in crude oil prices and floods in southern Thailand. Table 1: Quarterly Earnings (Core PBT) Analysis 1QCY16 (RM mn’) Company 4QCY16 (RM mn’) 1QCY17 (RM mn’) QoQ (%) YoY (%) Top Glove* 130.4 85.7 100.8 +17.6 -22.7 Hartalega 52.5 107.5 116.0 +7.9 +121.1 Kossan 61.4 46.2 51.9 +12.3 -15.6 Supermax 33.5 27.0 20.9 -22.6 -37.6 Total 277.8 266.5 289.6 +8.7 +4.2 QoQ Comments Earnings increase primarily due to stronger USD against the Ringgit (+6% QoQ) and higher ASPs (+3% QoQ). Sales volume -1% QoQ. Earnings increase primarily due to higher sales volume (+14% QoQ) and higher ASPs (+5% QoQ). Earnings increase primarily due to higher sales volume (+6% QoQ) and higher ASPs (+4% QoQ). Sales volume higher but earnings weighted downed by higher operating costs from the contact lens division. Note: *Top Glove’s FYE is as at August but 2QFY17 (December 2016 to February 2017) financials are used for comparison purposes. Source: Companies, TA Securities Figure 1: Sector Quarterly Core PBT & Margins RM mn' RM mn' 400 350 300 250 200 150 100 50 0 20% 900 852 800 15% 10% 5% 700 600 527 500 500 400 308 300 Core PBT (LHS) 1QCY17 3QCY16 1QCY16 3QCY15 1QCY15 3QCY14 1QCY14 3QCY13 1QCY13 0% 3QCY12 1QCY12 Figure 2: 1QCY17 Revenue & Core PBT Core PBT margins (RHS) 200 101 100 Revenue Core PBT Hartalega Source: Companies, TA Securities In terms of the sector’s valuation, the sector had traded mostly between the 5-year PE multiple average of 18.5x and +1 S.D. band of 21.8x. And lately, we observe valuations stretching to 22.0x, slightly over the +1 S.D. band and this, we reckon is due to the recent decline in latex prices. In 2QCY17, the average prices of natural rubber latex and synthetic latex respectively declined by 20.5% QoQ to RM6.01/kg and 19.7% QoQ to RM6.50/kg. Above all, we view that the sector’s valuations are still very much influenced by fluctuations in the USD against the Ringgit and latex prices. Page 2 of 20 52 0 Top Glove Source: Companies, TA Securities 116 Kossan Supermax 21
20. TA Securities 28-Jul-17 A Member of the TA Group On a more granular level , YTD share price performances have been rather mixed with Hartalega leading gains (+49.3%), followed by Top Glove +7.7%, Kossan +7.0%, and Supermax -7.1%. In our opinion, Hartalega’s relatively strong share price performance was due to its smooth sailing expansion, robust sales, and the market’s confidence in its ability to sustain the recent recovery of its margins above that of the industry. To recap, in 1QCY17, Hartalega’s core PBT margin of 22.0% was about slightly more than double (~2.1x) that of its peers’ average of 10.5%. Against CY18, the stock is currently trading at a PE multiple of 26.3x, a premium to the sector’s average of 21.6x. Figure 3: Sector PER vs. USD/Ringgit -1 SD: 15.1x Source: Bloomberg, TA Securities Source: Bloomberg, Companies, TA Securities 2H 2017 Preview For 2HCY17, we expect the sector’s earnings growth momentum to sustain primarily on higher sales volume with near-term demand expected to remain driven by the healthcare sector. Room for higher sales volume is present from on-going capacity expansion projects. Boding well for the sector would be Malaysia’s export competitiveness both from a currency standpoint and its economies of scale as well as continued moderation in competitive pressures. Meanwhile, volatile fluctuations in the USD/Ringgit and latex prices remain key risks. For the USD/Ringgit, our house’s outlook is kept unchanged at RM4.25/USD (YTD average: RM4.38/USD) and for latex prices, we expect prices to be range bound from their current levels (June 2017 average - natural rubber latex: RM5.68/kg and synthetic latex: RM5.80/kg) in the absence of major catalysts beyond the wintering season. Lastly, for smaller cost components, we see minimal interruptions from ongoing cost hikes as thus far, only a marginal increase in natural gas tariff by 0.6% to RM26.46/MMBtu is expected. This contrasts with 2HCY16 whereby rubber glove manufacturers faced natural gas tariff hike of 6.0% to RM27.05/MMBtu and minimum wage hike of 11.1% to RM1,000 per month. 1. Rubber Glove Demand Growth Momentum to Sustain Overall, we continue to expect the demand growth momentum for rubber gloves to sustain. Key drivers in the near to medium term remain the defensive and ever-growing healthcare sector. Rubber gloves, being cost-effective barriers of protection against diseases and infections, remain indispensable to the healthcare sector. Their usage can only be expected to increase sustainably into the longer term alongside the world’s growing and ageing population, rising healthcare awareness, and heightening healthcare reforms and regulations. Latest trends within Malaysia’s rubber glove sector are as follows: Figure 5: Global Demand for Rubber Gloves bn. pcs. 250 200 150 110 123 127 128 136 135 2007 2008 2009 2010 2011 153 160 2012 2013 173 180 190 2014 2015 2016 201 213 226 100 50 2006 Source: Companies, TA Securities Page 3 of 20 2017F 2018F 2019F Apr-17 Dec-16 Aug-16 Apr-16 Dec-15 Aug-15 Apr-15 Dec-14 10.0 Aug-12 Apr-17 Dec-16 Apr-16 Aug-16 Dec-15 Apr-15 Aug-15 Dec-14 Apr-14 Aug-14 Dec-13 Apr-13 Aug-13 Dec-12 Aug-12 10.0 15.0 RM/kg 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 +1 SD: 21.8x Mean: 18.5x 20.0 Apr-14 -1 SD: 15.1x 25.0 Aug-14 Mean: 18.5x 15.0 Synthetic Latex (RHS) 30.0 Dec-13 +1 SD: 21.8x 20.0 Natural Latex (RHS) 35.0 Apr-13 30.0 25.0 Sector PE (LHS) X 4.60 4.40 4.20 4.00 3.80 3.60 3.40 3.20 3.00 Aug-13 USD/Ringgit (RHS) Dec-12 Sector PE (LHS) X 35.0 Figure 4: Sector PER vs. Latex Prices