Asia Pacific Daily- 25 May 2016

Transcription

Equity research│May 25, 2016
Showcasing CIMB Research Ideas
IN: Insurance - Life
Farrago >PDF
23/05
———————————————————————————————————————————————————————————————————————————————————
CHN: Strategy Note 20/05
Things may not be that bad >PDF
———————————————————————————————————————————————————————————————————————————————————
THB: Strategy Note-Alpha 19/05
Time to lock in your profit >PDF
———————————————————————————————————————————————————————————————————————————————————
HKG: IMAX China Holding. Inc 18/05
The Golden Ticket >PDF
———————————————————————————————————————————————————————————————————————————————————
THB: Telco - Mobile 17/05
Structural improvement >PDF
Asia Pacific Daily
- 25 May 2016
Equity Research Reports…
▌IDEA OF THE DAY | Singapore
Cityneon Holdings (ADD- Initiation, tp:S$0.88) - The era of superheroes | P2
Exhibition production and distribution firm with Marvel and Transformers IP rights. Upcoming
permanent installations are new additions to Las Vegas that will attract superhero fans with its
interactive and advanced technology experience offering. Scalable model for travelling sets with
minimal execution risk. Key potential catalyst is winning of 3rd licensing right, and risks are
termination of existing licensing rights and soft tourism industry outlook for Las Vegas. Initiating
coverage at Add with a TP of S$0.88 (based on a FY17F P/E of 13.1x).
———————————————————————————————————————————————————————————————————————————————————————
▌Australia
Technology One (HOLD, tp:A$5.00▲) - Timing issue but it’s normal | P3
———————————————————————————————————————————————————————————————————————————————————————
Regional Equity Research Contacts
Kenneth NG, CFA
Head of Research
T: (65) 6210 8610
E: [email protected]
———————————————————————————————————————————————————————————————————————————————————
Show Style "View Doc Map"
▌China/Hong Kong
Property - Overall (OVERWEIGHT) - Developer sentiment survey | P4
———————————————————————————————————————————————————————————————————————————————————————
▌Indonesia
Ramayana Lestari (HOLD, tp:Rp740.00) - Trying to become relevant again | P5
———————————————————————————————————————————————————————————————————————————————————————
▌South Korea
CJ CheilJedang Corp (ADD, tp:W510,000.00) - CJCJ ends talks to buy Meihua | P6
Kakao ADD, tp:W135,000.00) - What drivers think of Kakao Driver | P7
———————————————————————————————————————————————————————————————————————————————————————
▌Malaysia
Affin Holdings (ADD, tp:RM2.70) - 1QFY16 results – tamed credit costs | P8
Felda Global Ventures (ADD, tp:RM1.73) - Higher production to lift future earnings | P9
Genting Bhd (HOLD, tp:RM8.40▲) - Unexcited about Las Vegas | P10
Genting Malaysia (ADD, tp:RM5.28▼) - Hit by lower VIP hold rate in Malaysia | P11
Hong Leong Bank (REDUCE, tp:RM12.10▼) - 3QFY16 results – topline growth still at …| P12
Hovid Bhd (REDUCE▼, tp:RM0.34▼) - Hoping for a better 4QFY16 | P13
Karex Berhad (HOLD, tp:RM2.45▼) - 3QFY16 preview: Sub-par results blip | P14
Kossan Rubber Industries (ADD, tp:RM7.90▼) - The rose among the thorns | P15
Signature International (ADD, tp:RM2.02) - Proposes 10sen special DPS | P16
Star Media Group Bhd (HOLD, tp:RM2.23▼) - A weak start | P17
UMW Holdings (REDUCE▼, tp:RM4.80▼) - 1Q16 results: Starting off weak | P18
———————————————————————————————————————————————————————————————————————————————————————
▌Taiwan
Catcher Technology (HOLD▼, tp:NT$242.00▼) - The wolves are approaching | P19
———————————————————————————————————————————————————————————————————————————————————————
▌Thailand
Muangthai Leasing (HOLD, tp:THB21.00) - Shift toward larger ticket-size loans | P20
CIMB Conference / Events | 
CIMB Malaysia Consumer Corporate Day
01 June 2016, Malaysia, Kuala Lumpur
———————————————————————————————————————————————————————————————————————————————————
CIMB Malaysia Equities Campus Day
14 June 2016, Malaysia, Kuala Lumpur
———————————————————————————————————————————————————————————————————————————————————
CIMB 10th Annual Indonesia Conference
08-12 August 2016, Bali
———————————————————————————————————————————————————————————————————————————————————
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.
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Lifestyles│Singapore│Equity research│May 24, 2016
Company Note │ Alpha series
▎Singapore
Cityneon Holdings
ADD
The era of superheroes
Current price:
Target price:
Previous target:
Up/downside:
S$0.69
S$0.88
27.9%
Reuters:
Bloomberg:
Market cap:
CNHL.SI
CITN SP
US$121.3m
S$167.4m
US$1.16m
S$1.58m
224.3m
29.5%
Average daily turnover:
Current shares o/s
Free float:
Key changes in this note
N/A
Price Close
Exhibition production and distribution firm with Marvel and Transformers IP rights.
■
■
Scalable model for travelling sets with minimal execution risk.
■
Initiating coverage at Add with a TP of S$0.88 (based on a FY17F P/E of 13.1x).
Upcoming permanent installations are new additions to Las Vegas that will attract
superhero fans with its interactive and advanced technology experience offering.
Key potential catalyst is winning of 3rd licensing right, and risks are termination of
existing licensing rights and soft tourism industry outlook for Las Vegas.
Combining superpowers with strategic alliance
Victory Hill Exhibitions (VHE, a 100%-owned subsidiary of Cityneon) is an exhibition
production and distribution company that owns the licensing rights for both Avengers
and Transformers brands in partnership with Marvel Entertainment and Hasbro. As the
combination of advanced technology and exclusive partnerships translates into works of
immersive permanent installations and travelling exhibits, we expect FY16-18F EPS to
surge at 35-224% per annum.
‘New kids on the block’ in Las Vegas
Relative to FSSTI (RHS)
267
0.50
196
0.30
124
0.10
40
30
20
10
53
Vol m
0.70
May-15
■
■
VHE’s permanent installations of Avengers S.T.A.T.I.O.N. and Transformers are the latest
attractions at Treasure Island hotel, boasting an interactive and high-tech experience for
superhero fans. Our top-line assumptions only include ticket and merchandise sales,
leaving upside potential from additional sponsorship income and naming rights fees. Apart
from the permanent sets, VHE’s earnings growth also correlates strongly with the number
of travelling exhibits it can lease and for which it can earn the minimum guarantee.
Scalable model for travelling exhibits
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
1M
19.1
3M
149.1
12M
155.7
Relative (%)
25
145.5
175.5
Major shareholders
Star Publications (M
Tan Aik Ti
Poh Hock Lim
% held
52.6
16.4
1.2
We like the scalable model for VHE’s travelling exhibits most, as there is minimal
execution risk in leveraging on strong local partners, with almost 100% flow-through of
licensing fees and minimum guarantees (based on estimated budget) to the bottom line.
While the first set typically costs US$5-9m and may take one year for production due to
R&D, each subsequent set only requires US$2-3m capex and 2-3 months’ turnaround.
We forecast the current travelling set to multiply to 2/4/6 by FY16/17/18, respectively.
Key catalysts and risks
While we expect a strong blockbuster pipeline by Marvel/ Hasbro and increasing
popularity of such franchises in China to support demand for these exhibits, we see
greater expansion opportunities for VHE in the near-to-medium term: 1) better-thanexpected uptake of travelling set in China, and 2) securing a third IP right among the
Disney universe. Key risks include unexpected cessation of existing licensing rights,
weak tourist sentiment and franchise fatigue.
Initiating coverage at Add; TP of S$0.88
We initiate coverage of Cityneon with an ADD rating and target price of S$0.88, pegged
to a FY17F P/E of 13.1x (20% above the peer average of 10.9x). We think this is fair, as
it is in the early stage of multi-year earnings growth, in our view, with more upside
potential and re-rating catalysts to look forward to. The stock also offers a FY17-18F
dividend yield of 2.9-4.0%.
[X]
Analyst(s)
NGOH Yi Sin
T (65) 6210 8604
E [email protected]
William TNG, CFA
T (65) 6210 8676
E [email protected]
Financial Summary
Revenue (S$m)
Operating EBITDA (S$m)
Net Profit (S$m)
Normalised EPS (S$)
Normalised EPS Growth
FD Normalised P/E (x)
DPS (S$)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
% Change In Normalised EPS Estimates
Normalised EPS/consensus EPS (x)
Dec-14A
78.0
3.45
2.34
0.026
162%
25.9
0.010
1.46%
13.45
6.69
(57.5%)
2.41
10.0%
Dec-15A
96.5
1.97
0.87
0.007
(73%)
121.6
0.00%
34.77
NA
(32.8%)
3.05
2.3%
Dec-16F
111.6
8.71
4.76
0.021
193%
33.2
0.00%
16.21
NA
(22.4%)
2.18
7.6%
0.98
Dec-17F
148.7
23.34
16.10
0.067
224%
10.2
0.020
2.93%
6.15
36.31
(23.4%)
1.80
19.2%
1.06
Dec-18F
162.8
31.88
21.72
0.090
35%
7.6
0.027
3.95%
4.16
10.61
(29.6%)
1.52
21.7%
1.05
SOURCE: COMPANY DATA, CIMB FORECASTS
2
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IT Services│Australia│Equity research│May 24, 2016
▎Australia
Technology One
HOLD (no change)
Timing issue but it’s normal
Current price:
Target price:
Previous target:
Up/downside:
Reuters:
Bloomberg:
Market cap:
A$5.23
A$5.00
A$3.80
-4.5%
TNE.AX
TNE AU
US$1,174m
A$1,630m
US$2.37m
A$3.32m
308.8m
51.9%
Current shares o/s
Free float:
■
TNE reported a weak 1H16 result with expense growth exceeding revenue growth
and consequently resulting in NPAT declining yoy. However, as is common for
TNE, this is largely a timing issue and FY16 is on-track for 10-15% profit growth.
■
We retain our Hold recommendation and increase our price target to A$5.00.
Result snapshot – messy but it’s a short-term timing issue
TNE delivered a weak 1H16 result but as we’ve come to realise it’s not meaningful to
look at half yearly numbers because there are always some timing issues. TNE guided
to FY16 profit growth of 10-15% and we’re already at 14.7% so make no meaningful
changes. In 1H16 TNE reported 12% revenue growth but the 16% expenses growth
resulted in profits contracting 17% year on year and its net cash position declining 12%
to A$45.4m. TNE reported a 10% increase in the interim dividend to 2.36cps.
Composition
FY16 guidance has been set at 10-15% profit
growth. We were already forecasting 14.7%
growth so make no meaningful changes.
TNE booked 12% revenue growth for the period but initial licence fees were flat yoy.
TNE noted that the sales pipeline was weighted to the second half due to a number of
large multi-million dollar licences that could not be concluded at the half, for which TNE
is preferred supplier. Cloud services revenue tripled year on year to A$4.3m (and sits at
~4% of revenue). Annual licence fees were up 15% yoy to A$43.7m. Expenses were up
16% yoy as R&D costs temporarily tracked higher and A$4.3m of acquisition-related
costs hit the bottom line. Excluding the impact of the acquisitions, expenses were up
11% yoy and are expected to grow at this rate for the full year.
Price Close
Relative to S&P/ASX 200 (RHS)
5.60
146.0
5.10
134.0
4.60
122.0
4.10
110.0
3.60
98.0
3.10
3
86.0
Vol m
2
1
May-15
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
6.7
5.1
Nick Harris
T +61 7 3334 4557
E [email protected]
3M
14.7
5.6
12M
30.1
36.2
Outlook – as expected
TNE guided to 10-15% profit growth, which is what we’ve come to expect of TNE and
were consequently already forecasting the top end. TNE expects 11% expense growth
across the full year (versus 16% growth in 1H16). This moderating of expenses in 2H16
is due largely to revenue expected to increase in 2H16 (i.e. the pipeline converting to
revenue in 2H16 as some of it has pushed over or been delayed from 1H16).
Investment view – Hold recommendation
TNE is a high quality business and a strong performer, in our view. However, even great
businesses can be a poor investment if you pay too much for them. Share price
momentum currently remains strong but we believe momentum will eventually weaken,
and that this will be the catalyst to exit the stock. For now we retain a Hold
recommendation and highlight the substantial premium that TNE currently trades on
relative to peers, its EPS growth outlook and TNE’s long-term trading range. We
acknowledge that cheaper capital has pushed equity risk premiums lower, but even on
relative grounds, TNE looks expensive. Our TNE valuation has increased from A$3.18 to
A$3.80 as we now apply a peer analysis based compco (formerly TNE’s long-term
average). Our equally weighted DCF/PE valuation is A$4.00 (was A$3.18) and sits well
below the TNE share price but, given the market remains buoyant and supportive of high
quality stocks, we see little to change the share price dynamics in the short term so
retain our Hold recommendation. We now set our price target at A$5.00 (from A$3.80)
after retaining a 25% premium to valuation to reflect market conditions.
Financial Summary
Revenue (A$m)
Operating EBITDA (A$m)
Net Profit (A$m)
Normalised EPS (A$)
DPS (A$)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Sep-14A
193.4
43.49
31.01
0.10
13.9%
52.69
0.08
1.57%
35.81
51.70
(73.3%)
15.63
32.3%
Sep-15A
217.1
49.06
35.79
0.11
13.8%
46.28
0.09
1.68%
32.27
81.37
(62.0%)
13.97
32.2%
Sep-16F
243.2
56.84
40.97
0.13
14.7%
40.35
0.10
1.94%
27.84
56.01
(55.6%)
13.04
33.5%
0.000%
0.98
Sep-17F
269.9
64.51
46.87
0.15
14.4%
35.27
0.11
2.17%
24.20
35.62
(61.9%)
11.11
34.0%
(0.329%)
0.98
Sep-18F
296.9
71.85
53.81
0.17
14.8%
30.72
0.12
2.24%
21.49
30.60
(65.9%)
9.99
34.2%
(0.009%)
0.93
SOURCE: MORGANS, COMPANY REPORTS
IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS
CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP
3
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Property│China│Equity research│May 24, 2016
Sector Note │ Alpha series
▎China
Property - Overall
Overweight (no change)
Developer sentiment survey
■
Highlighted companies
China Overseas Land & Investment Ltd
ADD, TP HK$35.00, HK$22.50 close
We assess investors’ concerns over the CITIC
deal as overdone because most of the assets
acquired are located in second- and top-tier
cities. Meanwhile, we estimate net gearing to
remain low at around 30% post acquisition.
China Resources Land
CR Land is benefiting from its parent’s asset
injection last year, and we expect sales to
increase by more than 10% p.a. in 2016-18.
We also expect its recurring income from IPs
to register strong growth of 20-30% p.a.
Guangzhou R&F
RF benefits significantly from the inexpensive
funding costs in China due to its high gearing. A
potential IPO in China could be a near-term
catalyst. The stock is trading at a relatively cheap
valuation of a 53% discount to NAV, 4x FY16 P/E
and 8% yield.
Summary valuation metrics
P/E (x)
Guangzhou R&F
Dec-16F Dec-17F Dec-18F
7.37
6.45
5.59
7.94
6.75
5.91
3.74
3.15
2.75
P/BV (x)
Guangzhou R&F
1.00
0.89
0.79
0.98
0.89
0.80
0.61
0.53
0.47
Dividend Yield
Guangzhou R&F
2.98%
3.30%
3.66%
3.78%
4.45%
5.07%
8.02%
9.54% 10.92%
■
■
■
Our survey shows that most Chinese developers believe they are likely to beat their
sales targets this year and expect GPM improvements on the back of rising ASP.
Developers also said that they would be interested in buying more land this year,
which could be a key risk given the sharply rising land prices.
While developers have some concerns over policy, they think tightening will be
limited to top-tier cities as inventory levels for smaller cities remain high.
We maintain Overweight on the sector’s cheap valuations (50% discount to NAV
and 7x FY16 P/E) and improved fundamentals. Top buys: COLI, CR Land and RF.
We conducted a corporate sentiment survey among 16 key Chinese developers during
our China Property Corporate Day in Hong Kong last week. We asked a total of 10
questions to ascertain their expectations on sales, selling prices, and profitability, as well
as their views on new starts, land buying plans, and government policy.
Developers are likely to beat their sales targets this year
Most developers we surveyed expect to beat their sales targets this year. In 4M16,
developers’ aggregate sales rose 75% yoy and achieved about 36% of their full-year
targets (vs. 24% in 4M15). Based on this, we now think that our current contracted sales
growth estimate of 10% for these developers in FY16 may be a little too conservative.
Gross margins for FY16-17 expected to improve
Developers said ASPs are 3-10% higher than their expectations, and indicated that this
could translate into a 1-3% pts improvement in gross margin. This should bode well for
developers’ gross margins this year and next when the projects are delivered. CIMB
estimates that developers’ gross margins will improve 0.5% pts in both FY16 and FY17.
Key risk: land purchases
Half of the developers surveyed indicated that they would be interested in buying more
land this year, even though land prices are above their expectations. In our view, land
prices are expensive especially in top-tier cities, where ASPs have to rise by 10-15%
p.a. over the next 2-3 years just to maintain developers’ current margins.
Developers: tightening will be selective
While developers have some concerns over policy tightening, they do not believe these
measures will be extended to smaller cities. This is because, according to Centaline
China, a leading China property agent who attended our corporate day event last week,
inventory levels in the smaller cities remain high at around 30 months.
Current valuation factors in a bearish view of the sector
Maintain Overweight. We think investors are too bearish on the sector which is trading at
a 50% discount to NAV, factoring in a 10-15% ASP decline. Given the improvements in
fundamentals, we believe the 20% share price declines YTD (making it one of the worst
performing sectors this year) are unjustified. Top buys: COLI, CR Land and Guangzhou
RF. Key risks to our positive call include further tightening from the government, and
overly aggressive land banking, which could hurt margins in FY18 or beyond.
[X]
Figure The sector is trading at attractive valuations of ~50% discount to NAV
40%
20%
Analyst(s)
0%
Average since 2007: ~40%
-20%
-40%
-60%
-80%
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Raymond CHENG, CFA
T (852) 2539 1324
E [email protected]
SOURCES: CIMB RESEARCH, COMPANY
4
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Retail│Indonesia│Equity research
Company Flash Note
Ramayana Lestari
▎Indonesia
May 25, 2016 - 11:46 PM
Trying to become relevant again
HOLD (no change)
Consensus ratings:
Buy 7
Hold 6
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 3
Rp730.0
Rp740.0
Rp740.0
1.4%
-7.7%
Reuters:
Bloomberg:
Market cap:
RALS.JK
RALS IJ
US$379.8m
Rp5,180,080m
US$0.32m
Rp4,208m
7,096m
30.8%
Current shares o/s
Free float:
Key financial forecasts
Net Profit (Rpb)
356.9
403.8
463.0
Core EPS (Rp)
50.30
56.90
65.24
14.7%
Core EPS Growth
12.0%
13.1%
FD Core P/E (x)
14.32
12.66
11.04
Recurring ROE
10.5%
11.3%
12.2%
P/BV (x)
1.48
1.41
1.33
DPS (Rp)
28.67
30.45
34.45
3.93%
4.17%
4.72%
Dividend Yield
Price Close
Relative to JCI (RHS)
■
■
■
Ramayana is trying to rebrand itself in Indonesia’s evolving consumer landscape as
the proliferation of smartphones changes consumer buying behaviour.
Being relevant seems to be the theme behind its strategy to use social media.
Future improvements in its outright or private label products should indicate whether
Ramayana’s new strategy can be successful.
The remaking of Ramayana’s brand
● In an analyst meeting held last Friday, Ramayana launched a new strategy that
introduced six new pillars that revolve around its renewed and concentrated effort to
revive its previously flagging brand to become more relevant to its target market:
Indonesia’s aspirational consumers.
● Ramayana plans on revamping its outdated store format, working together with brand
ambassadors, advertising through social media and placing more emphasis on its
membership programme. Additionally, it plans to continue its commitment in rolling
out more SPAR supermarkets, its renewed supermarket brand.
● Jane Tumewu, daughter of Ramayana’s founder, will spearhead these exciting
changes as she holds the Head of Merchandising position in Ramayana.
Capitalising on the narcissistic generation
● The proliferation of cheap smartphones at the grass roots level has transformed
Indonesia’s retail landscape. More leading offline retailers are using an online
platform to provide existing customers with an end-to-end shopping experience.
● 50% of Indonesia’s population are under thirty years old and most are familiarised
with the digital world. Indonesia has the third-highest number of Facebook users
globally. Ramayana recognises the importance of social media in Indonesia and has
been trying to increase its brand awareness through instagram and other platforms.
● With the well-known actor, Raffi Ahmad, and actress, Zaskia Mecca, as brand
ambassadors, Ramayana is trying to reach a specific portion of the lower tier of
Indonesia’s consumers: aspirational buyers.
● If well-executed, this strategy could recapture consumers that have moved up the
ladder and create a stickier patronage for its previously abandoned stores.
870
122.0
770
113.3
670
104.5
570
95.8
Packaging is important
470
30
87.0
● The shopping environment is also crucial for aspirational buyers; it is all about image
in the end. Management has identified 40 stores for refurbishment and so-called
regeneration.
● Refurbishment cost could be around Rp1.5m-2m per sq m, or half of what it spends
on a new store (Rp4m-4.5m per sq m). Renovations for the 40 stores could cost
Ramayana c.Rp480-640bn. The company has Rp1.5tr cash as at end-1Q16, or 18%
of sales; we do not think funds will be an issue.
Vol m
20
10
May-15
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
5
9.2
Major shareholders
Ramayana Makmur
Paulus Tumewu
3M
0
-1.1
12M
-4.6
6.8
% held
65.5
3.7
Go big or …
● Concentrated efforts and commitment to its strategy may pay off in the short- to
medium-term. Outright products grew by c.7.2%, higher than its consignment
products (6.3%) in 4M16, which seems positive for its strategy.
● We have yet to determine the underlying costs of the rebranding strategy
implemented by Ramayana. We maintain our Hold recommendation and would turn
more positive once we see visible improvements in its SSSG. Our DCF-based target
price of Rp740 (WACC: 15.5%) is unchanged. Upside risk to our earnings may come
from better-than-expected contribution from outright products on the back of
improving profitability.
Analyst(s)
Linda LAUWIRA
T (62) 21 3006 1734
E [email protected]
5
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Food & Beverages│South Korea│Equity research
Company Flash Note
CJ CheilJedang Corp
▎South Korea
May 24, 2016 - 12:37 PM
CJCJ ends talks to buy Meihua
ADD (no change)
Consensus ratings:
Buy 25 Hold 1
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 0
W387,500
W510,000
W510,000
31.6%
3.5%
Reuters:
Bloomberg:
Market cap:
097950.KS
097950 KS
US$4,311m
W5,099,577m
US$14.15m
W16,587m
14.49m
59.0%
Current shares o/s
Free float:
Key financial forecasts
Net Profit (Wb)
Normalised EPS (W)
438.1
466.1
514.1
33,346
35,533
39,190
10%
132%
7%
11.62
10.91
9.89
13.1%
12.4%
12.1%
Recurring ROE
P/BV (x)
1.43
1.27
1.13
DPS (W)
4,050
4,050
4,050
1.05%
1.05%
1.05%
Dividend Yield
Price Close
Relative to KOSPI (RHS)
420,000
104.0
370,000
91.5
320,000
300
79.0
Vol th
200
■
CJCJ announced that it has ended talks to buy Meihua Holdings (600873 CH).
We view this decision as positive given high acquisition price and severe oversupply
problem in lysine market.
Add rating maintained, with a TP of W510K (based on a FY17F P/E of 14.5x, the peer
mean).
CJCJ ends talks to buy Meihua holdings (China)
● On 24 May, CJCJ announced that it had ended its attempt to buy China’s Meihua
holdings. We view this decision as positive because 1) the acquisition price was too
burdensome considering CJCJ’s high debt ratio(174% in 1Q16); 2) it’s unlikely CJCJ
would have added further pricing power through the acquisition given severe
oversupply in the lysine market. We believe the downtrend in CJCJ’s share price
following the January MOU announcement implies that there had already been
concerns associated with this deal.
Lysine price bottoming out
● We believe the lysine ASP rebound from its bottom starting this month is a positive,
and is likely to persist, as prices are climbing higher for pork and soybean meal in
China. In addition, as lysine producers usually halt production during summer for
plant maintenance, we believe we should see tighter supplies in the short term.
● We expect CJCJ’s lysine contract prices to rise 3.0% qoq to US$1,236/tonne in
2Q16. And we estimate the operating loss from the lysine business will decline to the
W9bn level in 2016 from more than W30bn in 2015, as several producers, including
CJCJ, are reducing production while demand remains solid.
Methionine still strong growth driver
● We expect CJCJ to secure more methionine market share and maintain high (30%
OPM) profitability. With greater production efficiency than existing methionine
producers, CJCJ’s methionine selling price is 5% above that of competitors’. The
company’s methionine factory is operating at 100% capacity despite its higher selling
price, a testament to its product quality.
● Furthermore, the company is ramping up its methionine capacity from 80,000 tonnes
to 100,000 tonnes by 2H16. We expect the company to generate more than W400bn
in sales in 2016 from its methionine business, accounting for 25% of total bio division
revenue.
Maintain Add, with target price of W510,000
100
May-15
■
■
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
1M
4.4
3M
6.3
12M
-12.8
Relative (%)
7.4
4.2
-3.9
Major shareholders
CJ Corp
National Pension Service
% held
33.5
12.1
● We are seeing structural improvement across different divisions and earnings
volatility dependent on lysine ASP is easing. Therefore, we believe there is no reason
that can justify valuation discount on CJCJ compared to other F&B companies. We
believe that the recent drop in share price presents a good buying opportunity.
Figure 1: CJCJ’s share price and China lysine price trend
(W)
(RMB/kg)
500,000
13
12
450,000
11
400,000
10
9
350,000
8
300,000
7
MOU with Meihua
6
250,000
5
Analyst(s)
200,000
04/13
4
08/13
12/13
04/14
08/14
Lysine price(RHS)
Hyunah JO
T (82) 2 6730 6132
E [email protected]
12/14
04/15
08/15
12/15
04/16
Share price(LHS)
SOURCES: CIMB, COMPANY REPORTS
6
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IT Services│South Korea│Equity research│May 24, 2016
Company Note │ Alpha series
Kakao
▎South Korea
What drivers think of Kakao Driver
ADD (no change)
Consensus ratings:
Buy 21 Hold 9
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 4
W99,200
W135,000
W135,000
36.1%
4.7%
Reuters:
Bloomberg:
Market cap:
035720.KS
035720 KS
US$5,657m
W6,691,788m
US$26.63m
W31,028m
67.44m
55.4%
Current shares o/s:
Free float:
■
■
■
We talked to the head of NARD who believes Kakao Driver will be a success, but he
believes that drivers will see limited benefit due to Kakao’s high commission policy.
Overall feedback on the trial run seems positive, especially on pricing relative to
distance driven, but with room for improvement in the mobile app’s functionality.
The findings reinforce our previous view of Kakao Driver’s successful market
penetration with its market share reaching 40% by 2017.
Economically net positive for average drivers
We estimate the relative economic benefit for drivers from using Kakao Driver amounts
to 6% (compared to media reports of 10-20% commission rate difference) for an
average designated driver with five calls per day. We think that National Association of
Relief Drivers’ (NARD) view of limited benefit for drivers from Kakao’s pricing scheme is
partially justified given that high income earners are unlikely to benefit (see Figure 1).
Drivers hoping for a better working environment
147,000
138.0
While the economic benefits may be lower than previously expected, judging from
drivers’ views on Korea’s largest online community of designated drivers, we found that
the drivers and NARD welcome Kakao entering the market. Common complaints about
the current agencies include: 1) having to use multiple programmes, 2) cancellation
penalty even when invoked by customers, and 3) insurance payment regardless of
driving frequency – all which are expected to improve with Kakao Driver.
127,000
121.3
Drivers likely to continue using multiple platforms
107,000
104.7
No change.
Price Close
Relative to KOSPI (RHS)
88.0
Vol m
87,000
4
3
2
1
May-15
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
Major shareholders
Beom-su Kim
K Cube holdings
Maximo PTE
1M
-0.4
3.5
3M
4.4
3.1
12M
-12.2
-2.5
% held
20.9
16.6
9.3
While we believe Kakao will gain a significant share of the market (40% by 2017), these
factors are likely to limit Kakao from dominating the market: 1) drivers still prefer
customers paying cash given concerns on taxes and higher probability of receiving a tip,
2) high income earners will likely limit their taxable business income to W24m (US$20k)
annually, and 3) drivers see maximising peak-time monetisation as a priority.
Drivers expect price to rise on Kakao’s pricing scheme
Drivers generally welcome Kakao’s pricing policy on rates relative to distance driven on
top of a base rate of W15k (US$13) vs. current agencies’ pricing based on straight
distance. But they were concerned customers may not pay more than current W15k-20k
for intra-city runs. We believe customers will be willing to pay more for reliable service
and quicker match with a driver. Myongji Uni’s study that customers are willing to pay up
to 21% premium for better service and reliability of Kakao Driver, strengthens our view
Room for improvement on Kakao Driver mobile app
We found that the negative feedback from beta version of Kakao Driver (For Driver)
mobile app was largely technical in nature and mostly related to functionalities. We
believe key features will be added in the near-term before official launch in Jun, just as
Kakao was quick to reflect users’ request on Kakao Navi within few weeks of launch.
Maintain Add
We keep our Add call with an unchanged SOP-based target price of W135k. We believe
that success of Kakao Driver could catalyse the stock, along with better earnings
visibility for Kakao’s subsequent O2O services including home cleaning and parking.
Downside risks include lower-than-expected customer usage of Kakao Driver due to
higher price from varying rates, and competitors’ aggressive promotions.
[X]
Financial Summary
Analyst(s)
TJ OK
T (82) 2 6730 6134
E [email protected]
Revenue (Wb)
Operating EBITDA (Wb)
Net Profit (Wb)
Normalised EPADS (W)
DPADS (W)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
CIMB/consensus Core EPADS (x)
Normalised EPADS/consensus EPADS (x)
Dec-14A
499
176.4
150.1
2,998
35.4%
33.09
172.5
0.17%
24.60
25.94
(25.8%)
2.35
11.4%
Dec-15A
932
88.6
75.7
1,269
(57.7%)
78.17
164.3
0.17%
60.74
25.41
(21.9%)
2.37
3.0%
Dec-16F
1,448
190.6
131.5
2,004
58.0%
49.49
200.0
0.20%
35.49
5.86
6.1%
2.03
4.4%
0.94
0.94
Dec-17F
1,876
328.7
232.9
3,323
65.8%
29.85
400.0
0.40%
21.29
20.57
(0.7%)
1.91
6.6%
0.97
0.97
Dec-18F
2,166
403.9
288.3
4,113
23.8%
24.12
500.0
0.50%
16.74
17.70
(7.2%)
1.78
7.6%
1.04
1.04
7
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Banks│Malaysia│Equity research│May 24, 2016
Company Note
▎Malaysia
Affin Holdings
ADD (no change)
1QFY16 results – tamed credit costs
Current price:
Target price:
Previous target:
Up/downside:
RM2.20
RM2.70
RM2.70
22.7%
Reuters:
Bloomberg:
Market cap:
AFIN.KL
AHB MK
US$1,047m
RM4,274m
US$0.13m
RM0.54m
1,943m
20.5%
Current shares o/s
Free float:
No change.
■
At 23% of our full-year forecast, we deem the 1Q16 net profit as in line with our
expectations, as we envisage stronger revenue growth in the coming quarters.
■
■
■
■
1QFY16 net profit jumped by 282% yoy due to improved credit costs.
Loan growth recovered from 6.9% yoy in Dec 15 to 8.9% yoy in Mar 16.
GIL ratio rose slightly from 1.9% in Dec 15 to 1.96% in Mar 16.
We maintain our Add recommendation, given the expected strong rebound in FY16
earnings and attractive valuations; we maintain our EPS forecasts and target price.
In line with expectations
Although Affin’s 1Q16 net profit only accounted for 23.2% of our full-year forecasts, we
deem the 1Q16 results as in line, as we envisage stronger revenue growth in the coming
quarters on the back of improved GDP growth in 2H16. The 1Q16 earnings was also in
line with market estimates at 24.8% of consensus. As a norm, no dividend was declared
in the 1Q16.
A strong rebound in 1Q16 net profit
Price Close
Relative to FBMKLCI (RHS)
2.80
101.2
2.60
95.7
2.40
90.1
2.20
84.6
2.00
3
79.0
Vol m
2
A recovery in loan growth
1
May-15
As expected, Affin’s 1QFY16 net profit surged by 281.5% yoy, from the lower base in
1Q15, which was dented by high loan loss provisioning (LLP). In fact, the bank recorded
a net write-back of RM1.6m in LLP in 1Q16 compared to a provision of RM102m a year
ago. However, revenue inched down by 0.4% yoy in 1Q16, dragged by a 7.8% yoy drop
in non-interest income. Meanwhile, net interest income only grew by 2.6% yoy in 1Q16,
impacted by a 7bp yoy contraction in net interest margin.
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
Major shareholders
LTAT
Bank of East Asia
Boustead
1M
-6.8
-2
3M
-1.4
1.1
12M
-22
-13.5
% held
35.3
23.5
20.7
Affin’s loan momentum improved from 6.9% yoy in Dec 15 to 8.9% yoy in Mar 16, ahead
of the industry’s growth of 6.4%. This was mainly driven by strong rebound in the growth
from (1) 11.4% yoy in Dec 15 to 19% yoy in Mar 16 for working capital loans, and (2) a
mere 1.9% yoy to 13.7% yoy for non-residential mortgages. Conversely, the expansion
of residential mortgages plunged from 12% yoy in Dec 15 to only 1.7% yoy in Mar 16.
Auto loans also grew at a slower pace of 6.2% yoy in Mar 16.
A marginal increase in gross impaired loan ratio
Although Affin’s gross impaired loan (GIL) ratio rose marginally from 1.9% in Dec 15, the
ratio remained low at 1.96% in Mar 16. Meanwhile, loan loss coverage rose from 64% in
Dec 15 to 68% in Mar 16.
Maintain Add
We retain our Add recommendation on Affin, in view of the potential re-rating catalysts
from (1) the expected strong rebound in FY16 net profit arising from improved credit
costs and attractive valuations – a FY17F P/E of 7.3x and a P/BV of 0.5x. Also intact are
our FY16-18 EPS forecasts and DDM-based target price of RM2.70. Downside risks to
our target price include: (1) a spike-up in in credit costs in the event of a rise in GIL ratio;
and (2) a slowdown in loan growth.
[X]
Financial Summary
Analyst(s)
Winson NG, CFA
T (60) 3 2261 9071
E [email protected]
Net Interest Income (RMm)
Total Non-Interest Income (RMm)
Operating Revenue (RMm)
Total Provision Charges (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
BVPS (RM)
P/BV (x)
ROE
% Change In Core EPS Estimates
CIMB/consensus EPS (x)
Dec-14A
969
851
1,820
16.4
592.7
0.34
(20.7%)
6.38
0.15
6.82%
4.08
0.54
8.28%
Dec-15A
948
855
1,802
(188.4)
369.3
0.19
(44.9%)
11.57
0.08
3.64%
4.26
0.52
4.56%
Dec-16F
983
940
1,922
(115.9)
499.0
0.26
35.1%
8.57
0.09
4.11%
4.34
0.51
5.97%
0%
1.10
Dec-17F
1,148
1,006
2,154
(153.2)
583.1
0.30
16.9%
7.33
0.11
4.80%
4.53
0.49
6.77%
0%
1.17
Dec-18F
1,228
1,066
2,294
(171.8)
630.1
0.32
8.0%
6.78
0.11
5.18%
4.73
0.47
7.01%
0%
1.21
8
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Plantations│Malaysia│Equity research│May 24, 2016
Company Note
Felda Global Ventures
▎Malaysia
Higher production to lift future earnings
ADD (no change)
Consensus ratings:
Buy 2
Hold 5
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 9
RM1.34
RM1.73
RM1.73
29.2%
29.4%
Reuters:
Bloomberg:
Market cap:
FGVH.KL
FGV MK
US$1,197m
RM4,889m
US$1.94m
RM7.82m
3,648m
53.6%
Current shares o/s:
Free float:
No change.
Price Close
110.0
1.90
101.0
1.70
92.0
1.50
83.0
1.30
74.0
1.10
100
65.0
Vol m
2.10
50
May-15
Aug-15
Nov-15
1M
-10.1
-5.3
3M
-15.7
-13.9
Major shareholders
Federal Land Development Authority
Felda Asset Holdings
Lembaga Tabung Haji
FGV posted a core net loss of RM61m for 1Q16 due to weak plantation earnings.
1Q core net loss trailed consensus expectations but was broadly in line with ours.
Project better earnings in future quarters due to higher production and CPO prices.
FGV targets to reduce administrative costs by RM100m and improve efficiency.
We maintain our non-consensus Add call as we see value emerging from efforts to
raise earnings.
1Q losses broadly in line with expectation
FGV reported a core net loss of RM61m (US$17m) in 1Q16 due mainly to weaker
plantation and sugar earnings as well as higher FV changes in LLA liability. The losses
would have been wider if not for higher associates’ earnings. We consider the 1Q results
to be broadly in line with expectation as we project higher FFB output, CPO prices and
lower administrative costs in subsequent quarters to boost earnings.
Plantations hit by weaker yields
The group posted a 16% yoy drop in FFB output for 1Q16 as its estates yield was
impacted by El Nino-induced drought. The lower output raised its cost of production for
CPO by 15% yoy to RM1,824 per tonne (ex-mill) in 1Q16. These more than offset the
slight improvement in CPO prices, leading the plantation division to report its first
quarterly loss of RM11m since its listing (see Fig 2 & 3).
Weaker sugar earnings and higher FV charges of LLA in 1Q16
Its sugar business posted lower earnings due to higher raw sugar costs and two one-off
administrative costs. This, coupled with an increase in the fair value changes to land
lease assets liability (LLA) of RM89m in 1Q16 compared to RM74m in 1Q15, contributed
to the losses for the quarter. On the bright side, the downstream business returned to
profitability this quarter due to positive refining margin.
Outlook for the remaining year
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
■
■
■
■
■
12M
-35.3
-26.8
% held
20.0
18.7
7.8
We are more optimistic on prospects for the remaining quarters due to higher production
and prices. FGV is targeting a 40% qoq improvement in FFB output for 2Q. This,
coupled with an improving CPO price to RM2,567 per tonne currently (+11% from the
1Q average), will boost plantation contributions. Sugar earnings are expected to improve
from festive demand and the removal of approval permits for imported refined sugar.
New CEO plans to build a leaner and more profitable group
Under the new leadership of Datuk Zakaria effective 1 Apr 2016, FGV revealed plans to
cut its administrative costs by RM100m in the current year and boost the profitability of
its existing assets, in particular the yields of its palm oil estates. The group will also be
putting all M&A activities on the back burner and plans to cut off funding to
underperforming assets in the group.
Maintain Add call, with unchanged SOP target price of RM1.73
We maintain our earnings forecasts and maintain our non-consensus Add call on the
group as we see value emerging from the new CEO’s efforts to improve earnings. Our
target price is supported by the group’s NBV of RM1.73 and dividend yield of 3-5%.
Potential re-rating catalysts would be stronger FFB yields and improving earnings. The
main downside risk to our target price is execution risks on plans to improve earnings.
[X]
Financial Summary
Analyst(s)
Ivy NG Lee Fang, CFA
T (60) 3 2261 9073
E [email protected]
Revenue (RMm)
Operating EBITDA (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
16,462
1,269
306.4
0.10
200%
13.86
0.10
7.46%
4.97
24.84
(9.2%)
0.77
5.45%
Dec-15A
15,700
973
139.6
(0.02)
(123%)
NA
0.04
2.99%
10.49
14.55
33.4%
0.76
(1.25%)
Dec-16F
15,738
1,069
162.5
0.04
30.08
0.03
2.24%
9.64
3.94
30.3%
0.75
2.51%
0%
0.78
Dec-17F
16,769
1,316
334.1
0.09
106%
14.63
0.06
4.48%
7.94
3.78
27.7%
0.74
5.10%
0%
1.17
Dec-18F
17,725
1,592
516.0
0.14
54%
9.47
0.10
7.46%
6.24
4.04
18.8%
0.72
7.71%
0%
1.52
9
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Gaming│Malaysia│Equity research│May 24, 2016
Company Note
Genting Bhd
▎Malaysia
Unexcited about Las Vegas
HOLD (no change)
Consensus ratings:
Buy 7
Hold 9
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 3
RM8.47
RM8.40
RM8.20
-0.8%
-8.3%
Reuters:
Bloomberg:
Market cap:
GENT.KL
GENT MK
US$7,712m
RM31,483m
US$8.08m
RM32.34m
3,743m
60.0%
Current shares o/s:
Free float:
122.0
9.20
112.0
8.20
102.0
7.20
92.0
6.20
15
82.0
The Las Vegas casino is set to open in 1H19, but it is a very challenging market.
We tweak FY16-18F EPS for GENS’s updated forecasts.
Our target price is raised to RM8.40 but we maintain our Hold rating. We prefer
GENM for gaming exposure.
Opening of GITP to drive GENT’s earnings from FY17
In 1QFY16, 50% of Genting (GENT)’s EBITDA came from Genting Malaysia (GENM),
42% from Genting Singapore (GENS), and 4% from Genting Plantations. In terms of
gaming contribution, we expect GENM’s EBITDA to surpass GENS’s contribution this
year, and rise very substantially from FY17 onwards (25-30% more in FY17-18) when
the Genting Integrated Tourism Plan (GITP) comes on-stream.
Investment and others wreak havoc but deemed non-core
In the conference call, GENT’s EVP of Finance, Mr Chong Kin Leong, said the company
is finalising the design and budget for Las Vegas Phase 1, with the opening of the
casino slated for 1H19. According to media reports, Genting is planning a 3,100-room
Chinese-themed property that includes a 150,000 sq ft casino. We are not too excited
about the Las Vegas project as 1) it is a no-growth market, and 2) the Genting group has
traditionally thrived in less competitive markets, like Malaysia, Singapore and New York.
Risks to our target price and rating
10
Vol m
■
■
■
Unexcited about Las Vegas casino
10.20
5
May-15
We deem GENT’s 1Q16 core net profit of RM270m in line with expectations at 19%
of our full-year estimate as GENS is expected to see sequential improvements.
On a yoy basis, the ‘investment and others’ segment saw a swing from a positive
EBITDA of RM319m in 1Q15 to an EBITDA loss of RM312m in 1Q16 due to translation
losses of foreign currency assets with the strengthening of the ringgit in the quarter.
However, this is stripped out when accounting for core net profit estimates.
FY16F EPS cut by <1%
FY17F EPS increased by 2%
FY18F EPS increased by 3%.
Price Close
■
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-10.2
-4.8
Major shareholders
Kien Huat Realty
3M
7.8
10.1
12M
-3.2
5.9
% held
40.0
Potential upside risks to our Hold rating include high market share gains and lower bad
debt charges at GENS. Possible downside risks to our rating are further delays of the
th
opening of the 20 Century Fox theme park in Genting Highlands. We believe that
GENT’s share price performance will remain largely a reflection of foreign institutional
investors’ flows. Fundamentally, investors are likely to adopt a wait-and-see attitude until
Las Vegas opens in 2019.
Target price raised
We tweak our FY16F EPS lower but raise our FY17-18F EPS marginally after updating
for GENS’s results and EPS changes. Our target price is raised from RM8.20 to RM8.40
after raising our target price for GENS from S$0.80 to S$0.86. Our target price is still
based on a 30% holding discount to our RNAV estimate of RM11.96. We maintain our
Hold rating and advise investors to switch to GENM instead.
[X]
Financial Summary
Analyst(s)
Marcus CHAN, CFA
T (60) 3 2261 9070
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
18,217
6,742
1,610
0.54
7.8%
19.02
0.040
0.472%
7.76
18.79
(8.3%)
1.18
7.72%
Dec-15A
18,101
5,707
1,388
0.47
(13.6%)
21.89
0.040
0.472%
9.63
4.68
(9.1%)
0.97
5.87%
Dec-16F
20,792
5,784
1,420
0.38
(18.6%)
26.66
0.040
0.472%
8.25
17.70
(22.7%)
0.92
4.24%
(0.57%)
0.81
Dec-17F
23,244
7,043
1,918
0.51
35.1%
19.96
0.040
0.472%
6.56
14.81
(26.3%)
0.88
5.45%
1.65%
0.94
Dec-18F
24,697
7,579
2,037
0.54
6.2%
18.83
0.040
0.472%
5.90
13.50
(29.9%)
0.84
5.53%
3.07%
0.94
10
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Gaming│Malaysia│Equity research│May 24, 2016
Company Note
Genting Malaysia
▎Malaysia
Hit by lower VIP hold rate in Malaysia
ADD (no change)
Consensus ratings:
Buy 8 Hold 11 Sell 3
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
RM4.25
RM5.28
RM5.93
24.2%
12.2%
Reuters:
Bloomberg:
Market cap:
GENM.KL
GENM MK
US$5,902m
RM24,095m
US$4.74m
RM19.02m
5,938m
50.7%
Current shares o/s:
Free float:
1QFY16 core net profit of RM301m was below expectations at 20% of our previous
full-year estimate.
■
■
■
■
UK recovers but Bimini suffered from the termination of Bimini Superfast ferry.
Additional gaming capacity at Genting Highlands to come onstream by 4Q16.
FY16-18F EPS lowered by 8-14%.
Maintain Add with lower target price of RM5.28. GENM remains our top pick and
only Add rating in the Malaysian gaming sector.
Malaysia chugging along
The Malaysian gaming business saw revenue fall 6%, and EBITDA falling 7% on lower
VIP hold percentage. On a normalised hold-adjusted basis, revenue would have risen
1%, and EBITDA risen by 9%, while EBITDA margin would have been 38% (vs. reported
35%). Both VIP and mass revenues were flat, according to management. VIP: mass
revenue mix was 40:60 for 1Q16.
The Chinese are returning in droves
FY16F EPS cut by 8%
FY17F EPS cut by 14%
FY18F EPS cut by 14%
Price Close
■
1Q16’s visitor arrivals rose 8% yoy. Hotel revenues rose 23% yoy, contributed by visitors
from China (>100%), Vietnam and Middle East. Hotel occupancy remained stable at
89% (1Q15: 89%), despite the 9% increase in available rooms due to the opening of
1,300 rooms at First World Hotel. Average room rate rose to RM93 (1Q15: RM82), with
the majority still taken up by loyalty card members.
115.0
Overseas operations review
4.50
111.0
4.30
107.0
4.10
103.0
3.90
99.0
3.70
40
30
20
10
95.0
Genting UK’s performance improve sharply on improvement in hold rate and bad debt
recovery despite a sharp volume drop of 39%. 1Q saw UK turn in an EBITDA of
RM99m (1Q15: RM38m profit). Going forward, UK will see a shift in focus to the mass
market and its VIP business will be less Chinese-centric. Resorts World Bimini saw
wider 1Q EBITDA loss of US$19m (1Q15: -US$14m) on higher staff VSS cost as a
results of the termination of Bimini Superfast.
Vol m
4.70
May-15
Aug-15
Nov-15
Lower FY16-18F EPS by 8-14%
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-6
-0.6
Major shareholders
Genting Berhad
3M
1.2
3.5
12M
-2.1
7
% held
49.3
We lower FY16-18F EPS by 8-14% that incorporate 1) Halving of Genting UK’s profits
as it will take longer time to diversify its VIP customer base; and 2) Lower new table
additions of 50 (vs. 100 previously) in FY17 given the delay in the opening of the theme
park.
Target price lowered
We maintain our Add rating on GENM, with a lower RNAV-based target price of RM5.28
after we adjust for 1) lower net cash as GENM goes through its intensive capex cycle; 2)
updating for Genting HK’s market price; and 3) lower FY17 EBITDA for Malaysia and
UK. Risks to our target price is the potential further delay in the opening of the theme
park. GENM remains our top pick and only Add rating in the Malaysian gaming sector.
[X]
Financial Summary
Analyst(s)
Marcus CHAN, CFA
T (60) 3 2261 9070
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
8,231
2,248
1,360
0.23
(19.5%)
18.55
0.065
1.53%
10.69
112.8
(7.2%)
1.55
8.6%
Dec-15A
8,396
2,310
1,258
0.23
1.7%
18.24
0.071
1.67%
10.95
38.8
0.1%
1.32
7.8%
Dec-16F
9,820
2,410
1,360
0.23
(1.7%)
18.55
0.080
1.88%
10.07
NA
(5.3%)
1.38
7.3%
(8.4%)
0.97
Dec-17F
11,183
3,101
1,848
0.31
35.9%
13.65
0.090
2.12%
7.90
90.3
(3.8%)
1.28
9.7%
(13.8%)
1.07
Dec-18F
12,215
3,441
2,105
0.35
13.9%
11.99
0.100
2.35%
6.69
12.6
(10.4%)
1.18
10.2%
(13.9%)
1.10
11
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Banks│Malaysia│Equity research│May 24, 2016
Company Note
Hong Leong Bank
▎Malaysia
REDUCE (no change)
Consensus ratings:
Buy 4
Hold 7 Sell 10
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
RM13.20
RM12.10
RM12.30
-8.3%
-5.7%
Reuters:
Bloomberg:
Market cap:
HLBB.KL
HLBK MK
US$6,635m
RM27,089m
US$2.45m
RM9.83m
1,880m
36.4%
Current shares o/s:
Free float:
FY16-18 EPS cut by 5-6%.
3QFY16 results – topline growth still at
bottleneck
■
Hong Leong Bank’s (HLB) 9MFY6/16 net profit below expectations, at 65% of our
and 67% of market full-year forecasts.
■
3QFY16 net profit fell by 4.1% yoy due to upturn in credit costs and lower
contributions from Bank of Chengdu (BOC).
■
■
■
Loan growth eased from 9.9% yoy in Dec 15 to 7.4% yoy in Mar 16.
GIL ratio improved slightly from 0.86% in Dec 15 to 0.82% in Mar 16.
Maintain Reduce due to weaker contributions from BOC and unattractive valuations.
Below expectations
HLB’s 9MFY6/16 net profit missed expectations, at only 65% of our and 67% of market
consensus full-year forecasts. The culprits were lower-than-expected net interest income
and contributions from BOC. As a norm, no dividend was declared in the 3Q. The
weaker-than-expected earnings prompted us to lower our FY16-18 EPS forecasts by 56%, as we cut (1) the contributions from BOC by 20%, and (2) assumed lending yield by
5bp. This led to a decrease in our DDM-based target price from RM12.30 to RM12.10.
Lower 3QFY16 net profit
Price Close
14.50
110.0
14.00
107.6
13.50
105.2
13.00
102.8
12.50
100.4
12.00
4
3
2
1
98.0
Loan growth slowed, but still above-industry
Vol m
May-15
3QFY16 fell by 4.1% yoy to RM497.8m (US$120.8m) mainly due to the (1) normalisation
in credit costs from a net write-back of RM6.7m (US$1.6m) in 3QFY15 to a provision of
RM19.9m (US$4.8m) in 3QFY16, and (2) 18.5% yoy drop in contributions from BOC.
Topline growth was uninspiring with a 0.4% yoy drop in 3QFY16 net interest income,
impacted by a 10bp yoy contraction in net interest margin. The weaker investment
income also constricted the growth in non-interest income to only 0.8% yoy in 3QFY16.
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-3.5
1.3
Major shareholders
Hong Leong Financial Group
EPF
Great Eastern Life Assurance
3M
0.9
3.4
12M
-5.5
3
% held
63.6
14.3
1.2
Loan growth eased from 9.9% yoy in Dec 15 to 7.4% yoy in Mar 16, albeit still above the
industry’s growth of 6.4%. Growth slowed across the board, in all major loan segments –
from 15.9% yoy in Dec 15 to 15% yoy in Mar 16 for residential mortgages, 10.1% yoy to
6.1% yoy for non-residential mortgages, from 4.6% yoy to 2.7% yoy for auto loans, and
from 9.8% yoy to 3.5% yoy for working capital loans.
No strain on asset quality
The group’s gross impaired loan (GIL) ratio inched down from 0.86% in Dec 15 to 0.82%
in Mar 16 while the loan loss coverage rose from 125.5% to 127.3% over the same
period.
Maintain Reduce
HLB remains a Reduce in our book given the potential de-rating catalysts of (1) lower
contributions from BOC, (2) margin contractions, and (3) unattractive valuations –
CY17F P/E of 11.8x vs. the sector’s 10.8x. We prefer RHB Capital for exposure to the
sector. The upside risks to our target price are faster-than-expected recovery in
contributions from BOC and net interest margin, and an upturn in loan growth, which will
significantly rejuvenate its net profit growth in the coming quarters.
[X]
Financial Summary
Analyst(s)
Winson NG, CFA
T (60) 3 2261 9071
E [email protected]
Net Interest Income (RMm)
Total Non-Interest Income (RMm)
Operating Revenue (RMm)
Total Provision Charges (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
BVPS (RM)
P/BV (x)
ROE
Jun-14A
2,662
1,377
4,039
(52.1)
2,102
1.12
13.3%
11.80
0.41
3.11%
7.73
1.71
15.3%
Jun-15A
2,741
1,326
4,067
51.9
2,233
1.19
6.2%
11.11
0.41
3.11%
8.93
1.48
14.3%
Jun-16F
2,777
1,385
4,162
(157.2)
1,938
0.96
(19.4%)
13.79
0.36
2.71%
9.63
1.37
10.3%
(5.95%)
0.96
Jun-17F
2,950
1,470
4,419
(158.6)
2,339
1.08
12.7%
12.23
0.43
3.27%
10.44
1.26
10.8%
(5.55%)
1.01
Jun-18F
3,213
1,547
4,761
(145.7)
2,523
1.16
7.9%
11.34
0.47
3.53%
11.34
1.16
10.7%
(5.71%)
1.01
12
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Pharmaceuticals│Malaysia│Equity research│May 25, 2016
Company Note
Hovid Bhd
▎Malaysia
Hoping for a better 4QFY16
REDUCE (previously HOLD)
Consensus ratings:
Buy 0
Hold 3
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 0
RM0.40
RM0.34
RM0.48
-15.0%
-28.7%
Reuters:
Bloomberg:
Market cap:
HOVI.KL
HOV MK
US$78.93m
RM325.3m
US$0.08m
RM0.31m
781.4m
62.5%
Current shares o/s:
Free float:
FY16-18F EPS decreased by 22.5-37.5%.
Price Close
0.500
111.0
0.400
99.0
0.300
40
30
20
10
87.0
Hovid’s 9MFY6/16 net profit of RM9.5m (US$2.3m) was below expectations,
accounting for only 40.0% of our and consensus full-year estimates.
■
While 3QFY16 revenue fell 26.9%, 3QFY16 core earnings were flat at RM5.0m
(US$1.2m) after adjusting for forex losses.
■
■
We expect better performance in 4QFY16 as 4Q is seasonally stronger.
■
Downgrade to Reduce with lower target price of RM0.34. We prefer IHH.
We cut our FY16-18F EPS by 22.5-37.5% to reflect weaker sales volume and higher
raw material costs.
Below expectations
After adjusting for forex gains of RM2.1m, Hovid’s 9MFY16 core earnings fell 11.8% yoy
to RM9.5m as average selling prices (ASPs) remained unchanged in 1HFY16 despite
increasing cost pressures from a spike in raw material costs. Furthermore, we suspect
that gestation costs from its new production lines have also weighed on earnings.
9MFY16 revenue was also lower at RM137.9m (-5.4% yoy) after the divestment of BPPL
last year (5.3% of FY15 revenue). EBITDA margins fell 2.7% pts yoy to 18.0%.
Sequentially flattish as customers purchased ahead
Sequentially, Hovid’s 3QFY16 core earnings were flat at RM5.0m (-0.3% qoq) after
taking into account the forex losses of RM3.6m. However, the group’s revenue declined
by 26.9% qoq as customers purchased ahead of the price revisions, which were made
at the beginning of 3QFY16 (Jan 16), while the recognition of RM4.2m worth of export
shipments were delayed to Apr from Mar 2016. On a positive note, EBITDA margins
improved to 17.1% (+1.5% pts qoq) thanks to an increase in ASPs.
Stronger RM is a negative
Vol m
May-15
■
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-8.1
-2.7
3M
-13.1
-10.8
Major shareholders
Ho Sue San @ David Ho Sue San
12M
-20
-10.9
% held
37.5
We believe that earnings will continue to be volatile due to the fluctuations in US$/RM. A
stronger ringgit is negative for the group’s profit margins as more than 50% of its sales
are in export markets. On the other hand, an estimated 40% of the total cost is derived
in US which was main factor that led to increasing cost pressures in 1HFY16.
4QFY16 should be better
We expect a better performance in 4QFY16 as clients were holding back on purchases
in 3QFY16 due to the price revision at the beginning of Jan 16. We also note that 4Q is
seasonally stronger due to the recognition of more shipment orders. Nonetheless, we
cut our FY16-18F earnings estimates by 22.5-37.5% as we factor in the weaker sales
volume as well as the higher raw material costs.
Downgrade to Reduce; lower TP to RM0.34
With results continuing to disappoint, we downgrade the stock to a Reduce from Hold
with a lower SOP-based target price of RM 0.34. We believe that valuations have
become unjustifiable; it is trading at 22.5x CY17 P/E, which is the highest among all
listed pharmaceutical players in Malaysia. We will turn positive on the stock if the
group’s profit margins and sales growth improve and become consistent. We prefer IHH
in the healthcare space for its stronger earnings growth.
[X]
Financial Summary
Analyst(s)
Walter AW
T (60) 3 2261 9093
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jun-14A
183.5
32.64
18.08
0.024
(7.0%)
22.43
0.010
2.50%
8.99
61
(10.0%)
1.90
11.6%
Jun-15A
188.4
32.44
20.91
0.026
6.9%
21.04
0.014
3.38%
9.41
78
(3.3%)
1.70
11.6%
Jun-16F
180.4
27.10
15.22
0.019
(24.5%)
27.12
0.010
2.50%
11.54
128
(1.0%)
1.64
8.1%
(37.5%)
0.65
Jun-17F
200.7
32.61
18.91
0.024
24.3%
22.35
0.010
2.50%
9.82
1,032
2.6%
1.55
9.6%
(33.4%)
0.67
Jun-18F
223.3
38.93
23.23
0.030
22.8%
18.53
0.010
2.50%
8.30
99
3.9%
1.44
11.1%
(22.5%)
0.76
13
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Rubber Gloves│Malaysia│Equity research│May 24, 2016
Company Note
Karex Berhad
▎Malaysia
3QFY16 preview: Sub-par results blip
HOLD (no change)
Consensus ratings:
Buy 3
Hold 4
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 0
RM2.48
RM2.45
RM2.80
-1.2%
-14.7%
Reuters:
Bloomberg:
Market cap:
KARE.KL
KAREX MK
US$603.2m
RM2,486m
US$0.90m
RM3.63m
1,002m
35.0%
Current shares o/s:
Free float:
2.40
122
1.90
10
93
Vol m
150
5
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
Major shareholders
KOL
1M
-4.3
1.1
3M
-8.4
-6.1
■
■
In 3QFY16, the RM strengthened against the US$ by 9.2% qoq, while latex prices
increased by 33.1% qoq. Latex costs constituted 28% of total cost in FY15.
Hence, we lower FY6/16-18 EPS by 11.5-15.4% and switch our valuation
methodology to DCF to better reflect the intrinsic value of Karex’s OBM segment.
Maintain Hold, with lower DCF-derived target price of RM2.45.
1HFY16 earnings boosted by external factors
In 1HFY16, Karex benefited from growth in sales volume, as well as external tailwinds
(weakening RM/US$ rate and lower latex prices). The group’s 1HFY16 net profit rose by
55.7% yoy to RM44.9m (US$10.8m) and gross margin increased to 37.3% (+4.5% pts
yoy), although minimal capacity was added. However, we expect the tide to turn as the
RM/US$ rate has strengthened 9.2% YTD and latex prices have increased by 33.1%
qoq in 1QCY16. Note that latex costs constituted c.28% of total cost in FY15.
Given the unfavourable conditions, we expect the group to report weaker qoq 3QFY16
results on 27 May 2016. We expect 3QFY16 net profit of RM10m-15m, with EBITDA
margin of 18-20%. We believe that the strengthening of the RM against the US$ and the
uptrend in raw material prices caught many players in the rubber sector by surprise.
Karex is unlikely to have aligned prices immediately due to time-lag effects.
2.90
May-15
■
Karex will be releasing its 3QFY16 results on 27 May 2016. We expect sub-par
earnings performance as the operating environment has turned unfavourable.
Expect weaker 3QFY16 earnings performance
Lowering our EPS estimates by 11.515.4% for FY16-18F
Price Close
■
12M
18.8
27.9
% held
35.0
3QFY16 underperformance a likely blip, anticipate better 4QFY16
We would deem 3QFY16 earnings underperformance a blip. We expect better 4QFY16
results due to ramp-up in the group’s newly-added capacity (+1bn pieces/year in Dec
2015) and price adjustment after a 2-month lag. We still believe that Karex’s earnings
outlook is bright, driven by its budding original brand manufacturing (OBM) segment and
its expansion plans (targets 40% rise in production capacity to 7bn pieces/year by end2017), which would solidify its original equipment manufacturer (OEM) position.
Lowering our FY16-18F EPS estimates by 11.5-15.4%
Given the likely weaker 3QFY16 results, we lower our EPS estimates by 11.5-15.4% for
FY16-18F. This reflects the following changes in our assumptions: i) more conservative
US$/RM rates of 4.10/3.90/3.85 for FY16/17/18, ii) higher latex price of RM4.50/kg in
FY16-18F, and iii) higher overall operating expenses. We also switch our target price
basis from 25x CY17 P/E to DCF in order to better reflect the intrinsic value of Karex’s
OBM segment.
Maintain Hold with DCF-based target price of RM2.45
We maintain our Hold call with lower target price of RM2.45 (WACC: 8.3%, terminal
growth rate: 3%). Although we think the stock is fairly valued at this juncture, we advise
investors to take position in Karex if there is any sell-down due to weaker-than-expected
3QFY16 results. We believe the group’s long-term outlook remains bright, with the value
of the stock to be driven by its expanding OBM segment and its unrivalled position as an
OEM. We believe that a fair entry price would be RM2.20.
[X]
Financial Summary
Analyst(s)
Walter AW
T (60) 3 2261 9093
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Jun-14A
285.3
64.0
48.8
0.05
49.4%
50.93
0.017
0.67%
37.86
238.1
(28.7%)
11.13
29.6%
Jun-15A
297.4
80.5
61.0
0.06
25.0%
40.74
0.015
0.61%
28.60
NA
(42.8%)
5.75
18.6%
Jun-16F
393.9
103.6
74.1
0.07
21.5%
33.54
0.018
0.75%
22.57
NA
(30.8%)
5.10
16.1%
(14.4%)
0.84
Jun-17F
473.1
123.3
87.6
0.09
18.2%
28.36
0.022
0.88%
18.72
46.5
(32.5%)
4.49
16.8%
(15.4%)
0.82
Jun-18F
552.8
145.3
104.4
0.10
19.2%
23.80
0.026
1.05%
15.59
34.5
(35.5%)
3.94
17.6%
(11.5%)
0.82
14
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Rubber Gloves│Malaysia│Equity research│May 24, 2016
Company Note
Kossan Rubber Industries
▎Malaysia
The rose among the thorns
ADD (no change)
Consensus ratings:
Buy 12 Hold 5
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 0
RM6.71
RM7.90
RM9.80
17.7%
-2.0%
Reuters:
Bloomberg:
Market cap:
KRIB.KL
KRI MK
US$1,051m
RM4,291m
US$2.27m
RM9.12m
639.5m
35.8%
Current shares o/s:
Free float:
FY16-18F EPS cut by 1.4-10.6%
Price Close
142
7.60
125
6.60
107
5.60
20
15
10
5
89
Vol m
160
8.60
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
5.8
11.2
Major shareholders
Kossan Holdings Sdn Bhd
Kumpulan Wang Persaraan
Asian Small Companies
3M
-0.6
1.7
■
■
■
■
Kossan’s 1QFY16 core net profit rose 12.9% yoy, mainly on the back of higher
glove sales and better NBR:NR sales mix of 70:30 (vs. 60:40 in 1Q15).
1QFY16 net profit was slightly below expectations, at 21% of our full-year estimate.
Although industry-wide pricing pressure is expected to worsen in 2H16, Kossan will
be the least affected due to its wider product offerings and lower concentration risk.
As such, we lower EPS by 1.4-10.6% for FY16-18F.
Maintain Add with lower TP of RM7.90. Kossan remains our top pick for the sector.
1QFY16 net profit rose 12.9% yoy, with 11.7% increase in revenue
1QFY16 net profit rose 12.9% yoy, mainly due to a 7.8% increase in glove sales volume
and better product mix (growth in nitrile glove sales). All divisions (technical rubber,
gloves, cleanroom) posted strong revenue growth, leading to an 11.7% yoy increase in
overall revenue to RM412.3m (US$101.1m). 1QFY16 net profit was below expectations,
at 21% our FY16 estimate and 22% of Bloomberg consensus, due to stronger pricing
competition and lower profitability from increase in lower-margin products sold.
Weaker qoq performance due to unfavourable environment
9.60
May-15
■
12M
6.5
15.6
% held
51.8
7.6
4.9
On a qoq basis, 1QFY16 revenue and net profit declined by 6.1% and 7.1%,
respectively. The softer qoq performance was due to: i) seasonality (1Q is generally
weaker than 4Q), ii) rising pricing competition, and iii) increasing cost pressures.
Accordingly, EBITDA margin contracted slightly to 20.7% (-1.5% pts qoq). Overall, we
view 1QFY16 results as commendable, given the unfavourable operating environment
(RM/US$ rate strengthened 9.7% qoq), uptrend in raw material prices and cost hikes.
No major capacity expansion plans in 2016
We forecast net profit growth of 14.6% yoy in 2016, underpinned by a 12-month
contribution from its two plants (+4bn pieces p.a.) that commenced operations in Jul
2015. Kossan does not plan to add new capacity in 2016 but will focus on improving
operating efficiency and productivity through refurbishment of older lines. The group
also has altered certain existing lines for the production of specialised gloves, which
generally generate higher margins and face less competition.
Kossan is the best of all the glove players
Although we expect stronger pricing competition in the nitrile (NBR) segment in
2HFY16, we believe that Kossan would be least affected of all the glove players
because of its diversified earnings base from broader product offering and lower
dependence on large-scale contracts from key clients, minimising concentration risk.
Nonetheless, we lower FY16-18F EPS estimates by 1.4-10.6% for stronger pricing
competition and lower US$/RM assumptions of 4.00/3.95/3.90 for FY16/17/18.
Maintain Add, with lower target price of RM7.90
Given our EPS cuts, our 12-month target price declines to RM7.90, based on a lower
CY17 P/E multiple of 19x (1s.d. above its 3-year historical mean), instead of 21x. We
reduce our P/E multiple to factor in the less favourable environment and increasing
price competition. Nevertheless, Kossan continues to be our sector top pick due to its
diversified earnings base and undemanding valuations. Downside risks to our view are
stronger-than-expected pricing competition and sharp appreciation of RM vs US$.
[X]
Financial Summary
Analyst(s)
Walter AW
T (60) 3 2261 9093
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
1,302
245.8
145.6
0.23
6.7%
29.47
0.08
1.19%
18.04
NA
14.9%
5.32
19.3%
Dec-15A
1,636
343.2
203.3
0.32
39.6%
21.11
0.12
1.79%
12.66
40.5
3.0%
4.37
22.7%
Dec-16F
1,913
384.8
232.1
0.36
14.2%
18.48
0.15
2.16%
11.44
109.6
7.3%
3.83
22.1%
(7.7%)
0.99
Dec-17F
2,119
432.2
261.8
0.41
12.8%
16.39
0.18
2.75%
10.12
28.3
3.9%
3.39
21.9%
(10.6%)
0.99
Dec-18F
2,490
503.0
312.2
0.49
19.2%
13.75
0.22
3.27%
8.65
25.7
1.6%
2.99
23.1%
(1.4%)
0.99
15
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Construction│Malaysia│Equity research
Company Flash Note
Signature International
▎Malaysia
May 24, 2016 - 7:35 AM
Proposes 10sen special DPS
ADD (no change)
Current price:
Target price:
Previous target:
Up/downside:
RM1.06
RM2.02
RM2.02
90.6%
Reuters:
Bloomberg:
Market cap:
SGNA.KL
SIGN MK
US$61.42m
RM250.7m
US$0.20m
RM0.80m
240.0m
50.3%
Current shares o/s
Free float:
Jun-16F Jun-17F Jun-18F
Net Profit (RMm)
21.10
40.37
42.53
Core EPS (RM)
0.07
0.13
0.14
91.3%
5.4%
Core EPS Growth
(41.6%)
FD Core P/E (x)
15.07
7.88
7.48
Recurring ROE
12.0%
18.1%
17.0%
P/BV (x)
1.51
1.35
1.20
DPS (RM)
0.13
0.06
0.06
12.3%
5.7%
5.7%
Dividend Yield
Price Close
1.70
139.0
1.50
125.0
1.30
111.0
1.10
97.0
0.90
83.0
0.70
40
30
20
10
69.0
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
Major shareholders
Tan KC
Chooi Yoey Sun
Value Partners Group
1M
5
9.8
3M
19.1
21.6
■
■
Declared 10sen special DPS or RM24m, which was within our expectations. Ex-date
set at 6 Jun, dividend to be paid on 4 Jul.
Special DPS comes from RM80m sale of existing industrial land to Selangor state
government.
The stock’s dividend yield looks very attractive, above 12% in FY6/16.
Declared 10sen special DPS
● Signature announced a special 10sen DPS on Monday evening. The ex-date has
been set at 6 Jun and dividends would be paid on 4 Jul. Including its expected
dividends to be paid out in FY6/16, total DPS to be paid this financial year is 13sen
DPS.
Positive for shareholders
● The special DPS declared is not a positive surprise to us. We were expecting the
company to distribute part of the RM80m proceeds from the sale of its 3.3-acre
industrial land in Kota Damansara to the Selangor government. The declared 10sen
special DPS amount to RM24m, equivalent to 30% of the RM80m proceeds.
Remaining proceeds to buy new factory land
● We believe the remaining RM80m proceeds would be used to fund the proposed
acquisition of 39 acres of industrial land in Bandar Baru Enstek, Seremban (which is
close to KLIA) for RM50.8m or RM30 psf. We understand that the market value for
the land has doubled in the past year and management is looking to either develop
the land or resell it.
2017 promises to be a better year
● FY16 has been a challenging year for Signature. Replenishment of its orderbook has
been slow as some of the major projects management was looking at are still not
finalised. We are confident the company will secure some major projects over the
next few months. Some projects Signature is bidding for include Country Garden’s
Johor project (contract worth RM150m) and the UK’s Battersea Phases 2/3 (projects
worth RM100m).
Raise DPS forecast, dividend yield looks attractive
● We raise our FY16 DPS forecast to reflect the proposed special dividends to be paid
in FY16 but our FY17 and FY18 DPS forecasts remain unchanged. The stock’s
dividend yield looks attractive at more than 12%, based on current share price levels.
Vol m
May-15
■
12M
-18.2
-9.7
% held
24.9
24.8
5.6
Maintain Add
● Other than attractive dividend yields, the stock valuation looks cheap at only 2017F
7.5x P/E. We maintain our EPS forecasts and target price, based on an unchanged
30% discount to RM2.89 SOP/share to reflect its small market cap. Potential re-rating
catalysts are the special dividends and the securing of major projects over the next
few months.
Figure 1: DPS (sen) forecast for Signature
14
13
12
10
8
6
6
6
FY2017F
FY2018F
5
4
Analyst(s)
Nigel FOO
T (60) 3 2261 9069
E [email protected]
2
0
FY2015
FY2016F
SOURCES: CIMB, COMPANY
16
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Newspaper│Malaysia│Equity research│May 24, 2016
Company Note
Star Media Group Bhd
▎Malaysia
A weak start
HOLD (no change)
Consensus ratings:
Buy 1
Hold 8
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Sell 2
RM2.39
RM2.23
RM2.30
-6.8%
-5.1%
Reuters:
Bloomberg:
Market cap:
STAR.KL
STAR MK
US$432.0m
RM1,764m
US$0.08m
RM0.33m
740.5m
42.7%
Current shares o/s:
Free float:
■
Its core EPS dropped 41.7% yoy due to lower adex across all of its key segments
on the back of poor consumer sentiment and uncertainty in domestic economy.
■
■
We cut our FY16-17F EPS by 3-5% to account for prolonged weakness in adex.
■
Maintain Hold with a lower RM2.23 target price, still based on 11x CY17 P/E.
We still expect stronger earnings from Cityneon in 2H16, driven by new Marvel
Avengers and Transformers Experience exhibitions in Las Vegas and Beijing.
1Q16 results below expectation
Revenue in 1Q16 fell 8.6% yoy due to lower sales across Star’s key operating segments
on the back of poor consumer sentiment and uncertainty in domestic economy. As a
result, Star’s net profit dropped 41.7% yoy to RM15.5m (US$3.8m) from RM26.5m
(US$6.5m). As we had expected, it did not declare any dividend in the quarter.
Print and digital segment revenue fell 12.7% yoy. Management attributed the decline to
lower newspaper adex, which decreased by 12.3% yoy. In addition, we believe Star was
also negatively impacted by the continuous decline in print circulation volume. We
project a 6% decline in Star’s circulation volume in FY16.
108.0
2.500
104.0
2.400
100.0
2.300
96.0
2.200
2
2
1
1
92.0
Vol m
2.600
May-15
Star’s 1Q16 core net profit missed expectations, at 11% of our full-year estimate and
12% of consensus.
Persistent weakness in print segment
FY16F Revenue decreased by 1%.
FY16-17F EPS decreased by 3-5%.
Price Close
■
Subdued 2016 adex outlook
We expect adex to remain subdued in 2016, given the domestic economic uncertainties
in the wake of the ringgit depreciation against other currencies and lower commodity
prices. Furthermore, we expect the print segment to face continued headwinds in 2016
due to the structural shift in adex towards the digital platform. Overall, we expect the
print adex to fall 3% in FY16.
Higher project completions by Cityneon
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-2.1
3.3
Major shareholders
MCA
PNB
EPF
3M
0
2.3
12M
-8.1
1
% held
42.5
9.9
5.0
Nevertheless, we are encouraged to learn that Star has successfully narrowed down its
losses for the event, exhibition, interior and thematic (EEIT) segment which posted a
narrower operating loss of RM1.8m (US$440k) in 1Q16 vs. RM5.3m (US$1.3m) in
1Q15. Management attributed the improvement to higher project and event completions
by Cityneon amid lower project completions by I.Star ideas Factory.
More new exhibitions to come in 2H16
Cityneon commenced the “Marvel’s The Avengers S.T.A.T.I.O.N (Scientific Training and
Tactical Intelligence Operative Network)” exhibition in Paris last month and we
understand that another Marvel’s exhibition is expected to open by June at Treasure
Island (TI) Las Vegas. Moreover, we are excited to learn that its Transformer Experience
exhibition is set to open in China in 4Q16.
Dividends are the bright spot
We cut our FY16-18F EPS by 3-5% to account for the slower growth in adex spending.
Maintain Hold with a lower RM2.23 target price, based on 11.4 CY17F P/E (still at 25%
discount to our target market P/E). While the stock offers an attractive FY16 yield of
7.5%, we prefer Astro for better exposure to the media sector. Risks to our view are: i)
higher-than-expected contribution from Cityneon, and ii) lower drop in print adex.
[X]
Financial Summary
Analyst(s)
Mohd Shanaz NOOR AZAM
T (60) 3 2261 9078
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
1,014
239.7
111.4
0.20
4.06%
11.89
0.18
7.52%
6.06
7.87
(29.9%)
1.55
12.9%
Dec-15A
1,019
209.4
132.9
0.18
(9.58%)
13.15
0.18
7.52%
7.02
12.23
(29.7%)
1.54
11.8%
Dec-16F
1,015
220.5
131.1
0.18
(2.64%)
13.50
0.18
7.52%
6.66
13.94
(30.1%)
1.55
11.4%
(5.09%)
0.98
Dec-17F
1,044
237.6
144.0
0.19
9.91%
12.29
0.18
7.52%
6.14
13.02
(30.8%)
1.53
12.5%
(2.97%)
1.03
Dec-18F
1,063
239.6
145.8
0.20
1.22%
12.14
0.18
7.52%
6.03
12.59
(31.8%)
1.51
12.5%
0.10%
1.01
17
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Autos│Malaysia│Equity research│May 25, 2016
Company Note
UMW Holdings
▎Malaysia
1Q16 results: Starting off weak
REDUCE (previously HOLD)
Consensus ratings:
Buy 0
Hold 7 Sell 10
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
RM5.40
RM4.80
RM6.40
-11.1%
-19.1%
Reuters:
Bloomberg:
Market cap:
UMWS.KL
UMWH MK
US$1,531m
RM6,309m
US$1.46m
RM5.90m
1,168m
34.2%
Current shares o/s:
Free float:
FY16-18F Revenue decreased by 17-19%.
FY16-18 EPS decreased by 37-80%.
Price Close
■
1Q16 core net loss of RM53.9m; below expectations as we expected the company
to turn profitable.
■
Core EPS plunged 132.4% yoy due to lower earnings across all segments, hit by
soft commodity prices, poor consumer sentiment and a weaker ringgit.
■
We cut our FY16-18 EPS forecasts by 37-80% to account for lower automotive
earnings and widening O&G losses.
■
Downgrade from Hold to Reduce, with a lower SOP-based target price of RM4.80.
1Q16 results below expectations
UMW’s 1Q16 results came in below both our and consensus expectations, with a net
loss of RM26.4m (US$6.5m). Stripping off net forex loss and net gain on derivative, core
net loss came in at RM53.9m (US$13.2m). The deviation came from lower earnings
across all segments due to commodity price fluctuations, weak consumer sentiment and
ringgit depreciation against the US$.
Double-digit decline in Toyota sales volume
Automotive revenue fell by 22.4% yoy due to lower sales volume from Toyota which
suffered from lack of new model launches. Toyota sales volume fell by 37% yoy in
1Q16. However, we expect recent IMV model launches to push sales volume in 2H16.
Overall, automotive profit shrunk 52.5% yoy to RM55.5m (US$13.6m) on the back of
lower sales volume and higher production cost due to RM depreciation against the US$.
10.8
96.9
Equipment division lacks catalysts
8.8
82.6
6.8
68.3
4.8
6
54.0
Equipment revenue plunged 45.2% yoy in 1Q16 to RM358m, resulting in segment profit
declining 61.7% yoy to RM30.2m (US$7.4m). The impact of a soft commodity price
outlook on domestic demand remains a concern, especially in the construction and
mining sectors. Demand from Myanmar operations could be affected by policy changes
regarding the country’s jade mining activities.
Vol m
4
2
May-15
Aug-15
Nov-15
Oil & gas division remains loss-making
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-21.3
-15.9
Major shareholders
Permodalan Nasional Bhd
EPF
3M
-21.7
-19.4
12M
-49.4
-40.3
% held
50.1
15.7
The O&G segment posted net loss of RM36.2m (US$8.9m) in 1Q16 vs. net profit of
RM32.2m (US$7.9m) in 1Q15 on the back of higher discounts in charter rates and lower
utilisation of its jackup rigs. We do not expect significant improvement from this division
given the weak industry outlook. We understand that only three of its seven units are
employed and demand for jackup rigs in ASEAN has more than halved since 2014.
Cutting our FY16-18 EPS by 37-80%
We cut our FY16-18 EPS forecasts by 37-80% to account for: i) lower automotive
earnings in view of lower shipment volume and higher production and promotional
expenses and ii) widening O&G losses due to lower charter and rig utilisation rates.
Downgrade from Hold to Reduce, with target price of RM4.80
Following the earnings revision, we cut our SOP-based target price to RM4.80. We
downgrade UMW from Hold to Reduce in view of its weak earnings prospects over the
next 12 months. We see further downside to its share price if earnings continue to
deteriorate over the next few quarters, if demand from the new launches disappoint.
Switch to Berjaya Auto for better exposure to the sector. The stock could re-rate if
consumer demand for automotive recovers and losses from its O&G division narrow.
[X]
Financial Summary
Analyst(s)
Mohd Shanaz NOOR AZAM
T (60) 3 2261 9078
E [email protected]
Revenue (RMm)
Net Profit (RMm)
Core EPS (RM)
Core EPS Growth
FD Core P/E (x)
DPS (RM)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
14,932
1,812
652.0
0.57
(4%)
9.55
0.42
7.80%
5.49
2.68
9.2%
0.95
10.1%
Dec-15A
14,442
646
(38.2)
(0.03)
(106%)
NA
0.20
3.70%
16.17
9.23
35.7%
0.97
(0.6%)
Dec-16F
11,698
855
98.1
0.09
63.46
0.20
3.70%
14.31
26.14
33.8%
0.97
1.5%
(80.2%)
0.27
Dec-17F
11,555
1,192
260.1
0.23
165%
23.94
0.25
4.63%
10.27
23.87
31.6%
0.98
4.1%
(55.3%)
0.58
Dec-18F
12,116
1,278
313.8
0.27
21%
19.85
0.30
5.56%
9.67
31.04
30.2%
0.99
5.0%
(37.0%)
0.63
18
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Technology Components│Taiwan│Equity research│May 24, 2016
Company Note
Catcher Technology
▎Taiwan
The wolves are approaching
HOLD (previously ADD)
Consensus ratings:
Buy 14 Hold 9
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Reuters:
Bloomberg:
Market cap:
Sell 2
■
NT$249.0
NT$242.0
NT$330.0
-2.8%
-7.1%
We downgrade Catcher from Add to Hold due to emerging downside risks from
Apple’s move from metal casing to glass casing.
■
■
Metal still used but adoption of glass casing to cut ASP or metal usage by 30-40%.
■
In our worst case scenario, Catcher might see another 33% downside to our revised
forecast and a 58% yoy decline in its FY19 earnings.
2474.TW
2474 TT
US$5,872m
NT$191,827m
US$55.28m
NT$1,800m
770.4m
76.0%
Current shares o/s:
Free float:
FY16-18F Revenue decreased by 9-28%.
FY16-18 EPS decreased by 16-32%.
Price Close
Relative to TAIEX (RHS)
Given limited exposure to 5.5 inch iPhone, we see limited downside to our FY16/17
earnings forecasts but 20% earnings downside in FY18.
Apple’s move from metal casing to glass casing
According to our industry checks, we believe Apple will likely add one premium model in
2H17 with 5.8 inch AMOLED and glass casing. If so, we believe iPhone might still need
a metal frame on the side or metal structural piece inside the iPhone but the ASP might
be significantly lower (c.30-40%) than current metal casing ASP for iPhone. This may
benefit glass-casing makers such as Lens technology, Biel crystal and Hon Hai group.
Limited impact to FY16/17, but potential downside in FY18/19
Catcher has limited exposure to 5.5 inch iPhone and most of its iPhone business still
comes from 4.7inch (90%+ of its iPhone sales). Hence, we see limited earnings impact
from the threat of glass-casing. But we cut our FY18 EPS forecast by 32%. Two-thirds of
this downward revision stem from our assumption that Apple fully adopts glass casing in
FY18 which leads to a 35% ASP cut for metal used for iPhone and the rest due to lower
growth outlook for iPhone.
430
126.0
380
114.0
330
102.0
Worst case scenario caps the valuation upside
280
90.0
230
78.0
180
30
66.0
We conducted a sensitivity analysis for our FY18 forecast with two variables 1) the % of
ASP cut for metal after glass casing is adopted, and 2) how the glass casing adoption
affects Catcher’s market share in iPhone. The worst case scenario suggests there is
additional 33% downside from our current forecast if we assume zero metal usage after
being replaced by glass casing. In that case, Catcher might lose all the iPhone business
in FY19 as well which suggests a 58% yoy decline in FY19 EPS.
Vol m
20
10
May-15
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
6.6
9.4
3M
-0.4
-0.6
Major shareholders
Kai-I Investment
Chia Wei Investment
JP Morgan Chase & Liechtenstein
12M
-29.5
-15.6
% held
4.2
3.3
2.5
Muted 1H16, weaker stocking demand offset market share gains
We cut our FY16-17 EPS forecasts by 16-19% to reflect: 1) gloomy 1H16 outlook, and
2) anticipation of weaker stocking demand in 2H16. Catcher might see further market
share expansion in 4.7” iPhone and some progress in 5.5” in 2016. However, the iPhone
shipment decline in 2016 and our expectation that the mix of iPhones will shift from 4.7”
to 5.5” might offset its market share expansion in 2016.
Downgrade to Hold
We cut our target price to NT$242 as we cut FY16-18 EPS forecasts and lower the
target P/E from 5-year mean of 10x to down-cycle average of 8x in 2017. With concerns
about industry structural issues, we believe the uncertainties will cap the valuation
upside though Catcher might still deliver strong earnings in FY16/17. The upside risk to
our call is Apple will keep metal casing in FY17-19; downside risks include worse than
expected iPhone sales, wider and faster adoption of glass casing for the iPhone.
[X]
Financial Summary
Analyst(s)
Felix PAN
T (886) 2 8729 8386
E [email protected]
James TAN
T (886) 2 8729 8378
E [email protected]
Revenue (NT$m)
Net Profit (NT$m)
Normalised EPS (NT$)
Price To Sales (x)
DPS (NT$)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
Dec-14A
55,277
17,877
23.28
26.2%
10.56
3.47
4.90
1.97%
6.04
28.11
(33.9%)
2.00
21.2%
Dec-15A
82,413
25,121
32.71
40.5%
7.61
2.33
6.00
2.41%
3.79
11.47
(36.8%)
1.66
23.8%
Dec-16F
82,443
21,322
27.68
(15.4%)
9.00
2.33
6.00
2.41%
3.38
6.76
(45.8%)
1.45
17.2%
(16.2%)
0.95
Dec-17F
89,626
23,278
30.22
9.2%
8.24
2.14
10.00
4.02%
2.78
7.09
(51.2%)
1.30
16.6%
(18.7%)
0.99
Dec-18F
77,351
19,907
25.84
(14.5%)
9.64
2.48
11.00
4.42%
2.70
6.66
(58.3%)
1.20
12.9%
0.78
19
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Finance Companies│Thailand│Equity research│May 24, 2016
Company Note
Muangthai Leasing
▎Thailand
Shift toward larger ticket-size loans
HOLD (no change)
Consensus ratings:
Buy 9
Hold 4
Current price:
Target price:
Previous target:
Up/downside:
CIMB / Consensus:
Reuters:
Bloomberg:
Market cap:
Sell 1
■
THB19.90
THB21.00
THB21.00
5.5%
-15.2%
MTLS is focused on its domestic lending business, which is expected to grow by
50% in terms of outstanding loans in FY16-17.
■
■
■
The company is aiming for bigger ticket-size loans.
■
Maintain Hold rating and target price because of its rich valuation.
MTLS.BK
MTLS TB
US$1,182m
THB42,188m
US$1.75m
THB61.94m
2,120m
25.0%
Current shares o/s:
Free float:
Relative to SET (RHS)
22.0
129.4
20.0
118.3
18.0
107.2
16.0
96.1
14.0
60
85.0
Vol m
40
20
May-15
Aug-15
Nov-15
Feb-16
Source: Bloomberg
Price performance
Absolute (%)
Relative (%)
1M
-1.5
0.6
Major shareholders
Petaumpai Family
3M
-2.5
-6.7
We raise our FY16-18 EPS forecasts by 5.5-15.2% to reflect its strong operating
results in 1Q16.
Focus on domestic lending business
MTLS’s management is confident that it can achieve 50% loan growth for FY16-17
whereas its 1Q16 results showed strong performance with good asset quality. The
company believes that loan demand remains resilient in Thailand and it will expand to
the south, northeast and east of Thailand. On top of that, its nano-finance lending
business has the largest market share among its peers.
Aiming for bigger ticket-size loans
FY16F EPS increased by 5.5%.
Price Close
Management expects to improve branch efficiency in FY16-17.
12M
7
16.3
% held
66.0
We learned from management that MTLS is aiming for bigger ticket-size loans. It has
raised maximum credit lines, including from THB200k to THB400k for four-wheelerpledging loans, from THB70k to THB150k for agricultural vehicle-pledging loans and
from THB50k to THB200k for land-pledging loans. These led to lofty portfolio expansion
over the past quarters. MTLS believes that the bigger ticket size will help its portfolio
grow sustainably while the collateral for these loans is easier to monitor than that for
motorcycles.
To improve branch efficiency in FY16-17
MTLS emphasises branch efficiency by measuring average loan per branch. It was
THB13.4m (US$0.38m) in FY15, down from THB14.7m (US$0.41m) in FY14 as a result
of its aggressive branch expansion after its IPO in late-FY14. Management said that its
branch efficiency will improve after its newly-opened branches gain customers in the
second and third years of operations. As a result, the company is confident it can
achieve the above loan growth target.
Raising our FY16-18 EPS forecasts by 5.5-15.2%
We lift our FY16 loan growth assumption from 25% to 52% and lower our assumption for
costs of funds in FY16-18 from 4.1-4.4% to 3.5-3.7%. However, we raise our credit cost
assumptions from 0.4% to 1.1-1.2% in FY16-18 to reflect its more conservative
provisioning policy. Based on our new numbers, FY16-18 EPS growth will be 16-49%.
Maintain Hold rating with an unchanged target price
We reiterate our Hold rating on MTLS with an unchanged target price of THB21, which is
based on 6.5x FY17 P/BV (assuming LT ROE of 22% and COE of 11.9%). Its FY16
valuation is at a premium over peers and justified by its hefty earnings growth forecasts.
We think the key concern is the aggressiveness of its lending, which may cause NPLs to
rise if borrowers have lower debt servicing ability.
[X]
Financial Summary
Analyst(s)
Weerapat WONK-URAI
T (66) 2 657 9224
E [email protected]
Net Interest Income (THBm)
Total Non-Interest Income (THBm)
Operating Revenue (THBm)
Total Provision Charges (THBm)
Net Profit (THBm)
Core EPS (THB)
Core EPS Growth
FD Core P/E (x)
DPS (THB)
Dividend Yield
BVPS (THB)
P/BV (x)
ROE
Dec-14A
1,301
288.7
1,590
(14.2)
544
0.29
18.9%
67.57
0.13
0.65%
2.41
8.26
15.5%
Dec-15A
1,998
333.8
2,331
(24.7)
825
0.39
32.1%
51.14
0.20
1.01%
2.67
7.46
15.3%
Dec-16F
3,215
477.5
3,693
(191.7)
1,230
0.58
49.1%
34.30
0.30
1.50%
2.95
6.75
20.7%
5.5%
1.03
Dec-17F
4,176
619.6
4,796
(224.3)
1,619
0.76
31.6%
26.07
0.39
1.97%
3.32
6.00
24.4%
15.2%
1.04
Dec-18F
4,851
722.1
5,573
(262.4)
1,880
0.89
16.2%
22.44
0.46
2.29%
3.75
5.31
25.1%
14.7%
0.93
20
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THCOM, TICON, TISCO, TMB, TOP, TPIPL, TRUE, TTA, TTCL, TTW, TU, UNIQ, UV, VGI, VNG, WHA, WORK.
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the
policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the
Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public
investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may
be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.
Score Range:
Description:
90 - 100
Excellent
80 - 89
Very Good
70 - 79
Good
Below 70 or
N/A
No Survey Result
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing
authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by,
deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report
is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than
the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to
lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory
of the United Arab Emirates.
United Kingdom: The distribution of this report is not an offer to buy or sell to any person within or outside the United Kingdom or a solicitation
to any person within or outside of the United Kingdom to buy or sell any instruments described herein. This report is being issued outside the
United Kingdom and to a limited number of institutional investors and may not be provided to any person other than the original recipient and
may not be reproduced or used for any other purpose.
United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S. registered broker-dealer
and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand)
Co. Ltd, CIMB Securities Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional
Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose
ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional
experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this
communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any
transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC
member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned
securities please contact a registered representative of CIMB Securities (USA) Inc.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to
professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in
2015, Anti-Corruption Progress Indicator 2015.
AAV – Very Good, 3B, ADVANC – Excellent, 3A, AEONTS – Good, 1, AMATA – Very Good, 2, ANAN – Very Good, 3A, AOT – Very Good, 2, AP Good, 3A, ASK – Very Good, 3B, ASP – Very Good, 4, BANPU – Very Good, 4, BAY – Very Good, 4, BBL – Very Good, 4, BCH – not available,
no progress, BCP - Excellent, 5, BEM – not available, no progress, BDMS – Very Good, 3B, BEAUTY – Good, 2, BEC - Good, 3B, BH - Good, 2,
BIGC - Excellent, 3A, BJC – Good, 1, BLA – Very Good, 4, 1, BTS - Excellent, 3A, CBG – Good, 1, CCET – not available, 1, CENTEL – Very
Good, 3A, CHG – Good, 3B, CK – Excellent, 3B, COL – Very Good, 3A, CPALL – Good, 3A, CPF – Very Good, 3A, CPN - Excellent, 5, DELTA Very Good, 3A, DEMCO – Very Good, 3A, DTAC – Excellent, 3A, EA – not available, 3A, ECL – Good, 4, EGCO - Excellent, 4, EPG – not
available, 3B, GFPT - Very Good, 3A, GLOBAL – Very Good, 2, GLOW - Good, 3A, GPSC – not available, 3B, GRAMMY - Excellent, 3B,
GUNKUL – Very Good, 1, HANA - Excellent, 4, HMPRO - Excellent, 3A, ICHI – Very Good, 3A, INTUCH - Excellent, 4, ITD – Good, 1, IVL Excellent, 4, JAS – not available, 3A, JASIF – not available, no progress, JUBILE – Good, 3A, KAMART – not available, no progress, KBANK Excellent, 4, KCE - Excellent, 4, KGI – Good, 4, KKP – Excellent, 4, KSL – Very Good, 2, KTB - Excellent, 4, KTC – Very Good, 3A, LH - Very
Good, 3B, LPN – Excellent, 3A, M - Good, 2, MAJOR - Good, 1, MAKRO – Good, 3A, MALEE – not available, 2, MBKET – Good, 2, MC – Very
Good, 3A, MCOT – Excellent, 3A, MEGA – Very Good, 2, MINT - Excellent, 3A, MTLS – Good, 2, NYT – Good, no progress, OISHI – Very Good,
3B, PLANB – Good, 3B, PS – Excellent, 3A, PSL - Excellent, 4, PTT - Excellent, 5, PTTEP - Excellent, 4, PTTGC - Excellent, 5, QH – Very Good,
2, RATCH – Excellent, 3A, ROBINS – Excellent, 3A, RS – Very Good, 1, SAMART - Excellent, 3B, SAPPE - Good, 3B, SAT – Excellent, 5,
SAWAD – Good, 1, SC – Excellent, 3B, SCB - Excellent, 4, SCBLIF – not available, no progress, SCC – Excellent, 5, SCN – Good, 1, SCCC Good, 3A, SIM - Excellent, 3B, SIRI - Good, 1, SPALI - Excellent, 3A, SPRC – not available, no progress, STA – Very Good, 1, STEC – Very
Good, 3B, SVI – Very Good, 3A, TASCO – Very Good, 3A, TCAP – Very Good, 4, THAI – Very Good, 3A, THANI – Very Good, 5, THCOM –
Excellent, 4, THRE – Very Good, 3A, THREL – Very Good, 3A, TICON – Very Good, 3A, TISCO - Excellent, 4, TK – Very Good, 3B, TKN – not
available, no progress, TMB - Excellent, 4, TPCH – Good, 3B, TOP - Excellent, 5, TRUE – Very Good, 2, TTW – Very Good, 2, TU – Very Good,
3A, UNIQ – not available, 2, VGI – Excellent, 3A, WHA – Good, 3A, WORK – not available, no progress.
Comprises level 1 to 5 as follows:
Level 1: Committed
Level 2: Declared
Level 3: Established (3A: Established by Declaration of Intent, 3B: Established by Internal Commitment and Policy)
Level 4: Certified
Level 5: Extended.
CIMB Recommendation Framework
Stock Ratings
Definition:
Add
The stock’s total return is expected to exceed 10% over the next 12 months.
Hold
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce
The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and
(ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Country Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute
recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute
recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute
recommendation.
Definition:
An Overweight rating means investors should be positioned with an above-market weight in this country relative to
benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to
benchmark.
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Asia Pacific Daily- 25 May 2016

Transcription

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