Regional Daily Ideas Troika Top Stories
Transcription
Regional Daily Ideas Troika Top Stories
Regional Daily, 9 October 2014 5 Regional Daily Ideas Troika Top Stories Digi.com (DIGI MK) Communications - Telecommunications BUY MYR5.84 TP: MYR6.50 Mkt Cap : USD13,877m Pg2 We do not expect any surprises to DiGi’s upcoming 3QFY14 results. A stable competitive environment and continued growth in mobile internet growth are key drivers, in our view. Analyst: Lim Tee Yang CFA ([email protected]) Anton Oilfield (3337 HK) Energy & Petrochemicals - Oil & Gas Services SELL HKD2.39 TP: HKD1.70 Mkt Cap : USD682m Pg3 Anton released a disappointing guidance yesterday. Maintain SELL despite recent selloff, and cut TP by 15% to HKD1.70, implying 29% downside. Analyst: Laurent Wong ([email protected]) Thailand Real Estate OVERWEIGHT Pg4 Improved sentiments helped to drive presales growth in 2Q14 by 58% q-o-q and 3Q14 by another 9% q-o-q. 9M14 numbers dipped 19% y-o-y to THB124bn, 66% of full year target. Pruksa remains the market leader while AP and SPALI see the strongest YTD presales growth. Analyst: Wanida Geisler ([email protected]) Pg5 Highlights From Analyst & Investor Day 2014 Other Key Stories Malaysia Axiata Group (AXIATA MK) Communications - Telecommunications NEUTRAL MYR7.03 TP: MYR7.30 LPI Capital (LPI MK) Financial Services - Insurance BUY MYR17.50 TP: MYR20.70 Singapore Keppel Corp (KEP SP) Energy & Petrochemicals - Oil & Gas Services BUY SGD10.30 TP: SGD12.50 Thailand Bangchak Petroleum (BCP TB) Energy & Petrochemicals - Oil & Gas Services NEUTRAL THB34.3 TP: THB33.2 See important disclosures at the end of this report Analyst: Lim Tee Yang CFA ([email protected]) Pg6 Stable Results, Expect Dividends In 4Q Analyst: Kong Ho Meng ([email protected]) Pg7 Still Winning Orders Despite Market Concerns Analyst: Lee Yue Jer CFA ([email protected]) Pg8 Completes NIDO Acquisition Analyst: Kannika Siamwalla CFA ([email protected]) Powered by EFATM Platform 1 Results Preview, 9 October 2014 Digi.com (DIGI MK) Buy (Maintained) Communications - Telecommunications Market Cap: USD13,877m Target Price: Price: MYR6.50 MYR5.84 Macro Risks Expect Another Good Quarter Growth Value Digi.com (DIGI MK) Relative to FTSE Bursa Malaysia KLCI Index (RHS) 115 5.70 112 5.50 108 5.30 104 5.10 100 4.90 97 4.70 93 4.50 40 35 30 25 20 15 10 5 89 Jun-14 Feb-14 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) Telenor Asia Pte Ltd Employees Provident Fund 41.5m/13.0m -7.2 11.3 4.65 - 5.85 31 7,775 49.0 12.7 Share Performance (%) YTD 1m 3m 6m 12m Absolute 17.7 0.9 2.5 11.0 17.5 Relative 19.5 2.9 5.6 12.0 14.3 Shariah compliant No surprises. We expect a steady 3QFY14 from DiGi, and expect y-o-y revenue growth to be sustained at 5.0% (1HFY14: +5.0%). Thus, we forecast 3QFY14 earnings to grow 9.0% y-o-y, partly boosted by a low effective tax base in 3QFY13 (16.7%). Overall, we estimate 9MFY14 revenue growth of 5.0% to be still within management guidance (4-6%) while we anticipate core earnings to grow by 17.0%. Stable competition. We believe DiGi’s growth will likely be supported by a relatively stable competitive environment. Other than Maxis’ (MAXIS MK, NEUTRAL, TP: MYR6.00) launch of MaxisOne Business for business users, we believe 3QFY14 was rather quiet in terms of new product launches. Besides that, Celcom remained quiet as it works to resolve issues related to its IT transformation. We note that its ARPU levels for both prepaid and postpaid have been holding up quite well for several consecutive quarters, which should bode well for earnings. Mobile internet growth momentum should continue. Continued sales of mid-tier smartphones and further inroads in the postpaid market will likely drive DiGi’s mobile internet revenue growth (1HFY14: +40.3% y-oy). As at 2QFY14, its smartphone penetration stood at 41.9%, and we expect this figure to continue rising steadily as mid-tier smartphones like Xiaomi continue to remain popular. Following some marketing efforts to highlight the reliability of its new network for data consumption, we believe DiGi could make further inroads in the postpaid segment. Dividends. We forecast a third interim DPS of 6.5 sen (100% payout). Earnings forecasts. We introduce our FY16 earnings forecasts. Investment case. We maintain BUY on the stock, with an unchanged DDM-based TP of MYR6.50. We like the company for its strong growth in the prepaid segment, growing revenue market share and good traction in data monetisation. Our TP translates to a FY15 P/E of 23x, which is comparable to industry peers. Forecasts and Valuations Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F Total turnover (MYRm) 6,361 6,733 7,084 7,416 7,655 Reported net profit (MYRm) 1,206 1,678 1,990 2,102 2,155 Recurring net profit (MYRm) 1,619 1,793 1,990 2,102 2,155 1.7 10.7 11.0 5.6 2.5 Recurring net profit growth (%) Lim Tee Yang, CFA +603 9207 7607 Recurring EPS (MYR) 0.21 0.23 0.26 0.27 0.28 [email protected] DPS (MYR) 0.18 0.21 0.26 0.27 0.28 Recurring P/E (x) 28.0 25.3 22.8 21.6 21.1 174 69 90 90 90 18.3 23.4 14.2 16.6 16.3 P/B (x) P/CF (x) Dividend Yield (%) 3.1 3.6 4.4 4.6 4.7 15.6 15.2 14.2 13.5 13.2 Return on average equity (%) 144.2 363.8 341.3 416.1 426.5 Net debt to equity (%) 142.1 51.2 2.9 22.3 3.2 0.0 EV/EBITDA (x) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 1 0 . 3 0 0 . 2 0 0 We do not expect any surprises from DiGi’s upcoming 3QFY14 results. . 0 We maintain our BUY call and MYR6.50 DDM-based TP, reflecting 11% 0 upside. For 3QFY14, we expect revenue growth to be sustained at 5.0% 0 (1HFY14: +5.0%) and earnings to grow 9.0% y-o-y, partly boosted by a low effective tax base in 3QFY13. A stable competitive environment and continued growth in mobile internet growth are key drivers, in our view. Aug-14 5.90 Apr-14 119 Dec-13 6.10 Oct-13 Vol m Price Close Source: Company data, RHB net cash 2.4 Powered by EFATM Platform 2 Company Update, 8 October 2014 Anton Oilfield (3337 HK) Sell (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD682m Target Price: Price: HKD1.70 HKD2.39 Macro Risks New Guidance a Negative Surprise Growth Value Anton Oilfield Services Group (3337 HK) Price Close Relative to Hang Seng Index (RHS) 116 4.90 89 4.40 80 3.90 72 3.40 63 2.90 54 2.40 45 1.90 90 80 70 60 50 40 30 20 10 36 Jun-14 Feb-14 0 0 . 1 0 0 Anton guided for a "slight increase" in 2014 revenue (vs +30% guided . 0 previously before its dismal 1H14 results), below our old forecast of 0 +15% and consensus of +11%. The negative surprise implies likely 0 backlog execution delays in 2H14 and China’s challenging oil servicing industry. We cut our 2014/2015/2016 earnings forecasts by 11%/11%/10%. Despite the recent selloff, we maintain SELL with a lower HK1.70 TP (a 28.9% downside), based on the same 12x P/E FY15. Aug-14 98 Apr-14 107 5.40 Dec-13 5.90 Oct-13 Vol m 6.40 Source: Bloomberg Avg Turnover (HKD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (HKD) Free float (%) Share outstanding (m) Shareholders (%) Pro Development Holdings Schlumberger LTD Erdos Holdings Co. LTD 60.2m/7.77m 76.6 -28.9 2.30 - 6.06 43 2,213 32.5 19.8 4.9 Share Performance (%) New 2014 guidance a negative surprise. This morning, Anton Oilfield Services (Anton) announced its new revenue guidance for 2014 – for which it expects a "slight increase" (1H14 revenue grew 5%). Assuming this implies a low- to high-single-digit growth for 2014, the implied revenue growth in 2H14 would be in the range of -3% to +13%. Its fullyear guidance is below consensus revenue growth forecast of 11%. Potential delays in backlog execution. The new guidance is worse than our forecast of +15% for full-year 2014, or +23% for 1H14. Our old 2H14 revenue forecast was based on its backlog on hand of CNY1,815m (59% China) as of 30 Jun 2014. The new revenue guidance implies that Anton cannot fully execute its backlog in 2H14, compared to 1H14 when the company successfully executed all its backlog. China’s oil majors have been adjusting their exploration and production (E&P) plans and delaying E&P projects with low returns. Reducing earnings forecasts. We lower our recurring earnings estimates by 11%/11%/10% for 2014/2015/2016. This follows an 8% cut in our revenue forecasts for those years to reflect the guidance surprise, as we now expect 2014 revenue to grow only 6%. We slightly lift our gross profit margin (GPM) to reflect more revenue cuts on well completion, which delivers lower margins, and raise the admin/revenue ratio on higher costs but stagnant revenue growth. Maintain SELL with lower TP of HKD1.70 (from HKD2.00). We reduce our TP to HKD1.70 (from HKD2.00) due to lower earnings forecasts, but maintain our target P/E FY15 of 12x, in line with its HK-listed peer average of 12x FY15F P/E. Anton's valuation premium is no longer justified after its dismal 1H14 results. We deem it inferior to SPT Energy Group (1251 HK, BUY, TP: HKD4.30) in terms of backlog orders, GPM risk, project quality and gearing. We believe that SPT may surpass Anton as China’s largest private oilfield service provider in the future. YTD 1m 3m 6m 12m Absolute (49.4) (30.3) (55.1) (51.3) (53.3) Forecasts and Valuations Relative (49.4) (22.7) (54.1) (55.5) (54.8) Total turnover (CNYm) Shariah compliant Dec-12 Dec-13 2,005 2,534 2,683 3,219 3,863 Reported net profit (CNYm) 303 383 211 264 324 Recurring net profit (CNYm) 295 369 205 250 310 287.7 25.1 (44.5) 21.9 24.0 Recurring EPS (CNY) 0.14 0.17 0.09 0.11 0.14 DPS (CNY) 0.05 0.06 0.03 0.04 0.05 Recurring P/E (x) 13.6 11.0 20.3 16.7 13.4 P/B (x) 2.05 1.79 1.72 1.58 1.45 P/CF (x) 11.5 10.8 8.5 11.3 9.3 2.4 2.9 1.6 1.9 2.4 8.71 7.09 8.06 7.12 6.34 16.6 18.0 9.1 10.7 12.0 24.2 38.8 46.7 50.3 (15.3) (30.3) (32.9) Recurring net profit growth (%) Laurent Wong +852 2103 9432 [email protected] Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 2 . 2 0 . 2 Source: Company data, RHB net cash Dec-14F Dec-15F Dec-16F Powered by EFATM Platform 3 Sector Update, 9 October 2014 Real Estate Overweight Macro Risks Presales Momentum Continues Into 3Q14 Growth Value 3 2 2 2 Figure 1: Quarterly presales trend Homebuyer sentiment, which has improved since May, helped to boost presales by 58% q-o-q in 2Q14 and 9% q-o-q in 3Q14. 9M14 presales, however, fell 20% y-o-y to THB124bn (66% of the industry’s full-year target). Asian Property and Supalai were developers with the strongest presales in 9M14. Top Buys are Quality Houses, Pruksa and LPN – the top three large-cap developers with the highest 2015F earnings growth – while Ananda is our top small-cap pick. Source: Company data, RHB Figure 2: Presales in 3Q14 and 3Q13 Source: Company data, RHB Figure 3: Presales in 9M14 and 9M13 3Q14 sector presales grew modestly q-o-q. The combined presales of the seven major listed developers were at almost THB50bn (+9% q-o-q, +12% y-o-y) in 3Q14, led by condo presales. Developers that launched new condo projects in 3Q14 like Supalai (SPALI TB, NEUTRAL, TP: THB27.00), Asian Property (AP TB, NEUTRAL, TP: THB8.00), Land and Houses (LH TB, BUY, TP: THB12.50) and Pruksa (PS TB, BUY, TP: THB43.00) recorded strong y-o-y presales growth. In the meantime, companies with no new launches in 3Q14 like LPN Development (LPN TB, BUY, TP: THB27.00) and Sansiri (SIRI TB, TRADING BUY, TP: THB2.34) booked a decline in presales. Despite a strong rebound in 2Q14/3Q14, 9M14 presales fell 19% y-oy. 9M14 sectorial presales were at THB124bn (-19% y-o-y), 66% of the industry’s 2014 target. Pruksa remains the market leader, with THB31bn in presales (-7% y-o-y) and a 25% market share. Asian Property booked the strongest presales growth of 45% y-o-y, thanks to the successful launches of four condo projects developed in a JV with Mitsubishi Estate (8802 JP, NR). On the other hand, Sansiri was the hardest hit, as it registered a 82% y-o-y plunge in 9M14 presales to THB6.7bn. Healthy presales for some mid- to small-cap players like Ananda (ANAN TB, BUY, TP: THB3.70) and Golden Land (GOLD TB, NR). Ananda’s YTD presales were almost at THB13bm, which beat its fullyear target of THB12bn. Its four condo projects (two built under a JV with Mitsui Fudosan (8801 JP, NR)) worth a total of THB14.5bn had a take-up rate of 80% during their soft launch at end-3Q14. Golden Land, a midto low-end landed property developer, booked 9M14 presales of THB3.4bn, exceeding its full-year target of THB3bn. Seasonally high new launches in 4Q14. Quarterly new launches may peak in 4Q14 as LPN and Sansiri resume their launches, valued at a total of THB20bn-25bn. We agree with industry experts that 2014 sectorial presales could contract by 10% y-o-y. Next year, we expect double-digit presales growth to resume. Sectorial 5-year presales CAGR (2009-2013) was at 20%. Note that presales fell in 2011 from the severe floods in Bangkok suburbs and in 2014 from political instability. P/E (x) Source: Company data, RHB Wanida Geisler +66 2862 9748 [email protected] P/B (x) Dec-15F Dec-15F Yield (%) Com pany Nam e Price Target Ananda Development THB3.82 THB3.70 10.4 1.5 Dec-15F 1.9 Rating BUY AP (Thailand) Public Company Limited THB6.60 THB8.00 8.1 1.1 4.4 NEUTRAL Land and Houses THB9.90 THB12.50 13.8 2.7 6.1 BUY LPN Development THB21.00 THB27.00 9.8 2.5 5.2 BUY Pruksa Real Estate THB33.00 THB43.00 9.9 2.1 3.0 BUY Quality Houses THB4.06 THB5.50 9.8 1.8 5.1 BUY Sansiri PCL THB1.90 THB2.34 8.3 1.0 5.8 TRADING BUY Supalai PCL THB24.80 THB27.00 9.1 2.2 4.0 NEUTRAL Source: Company data, RHB See important disclosures at the end of this report Powered by EFATM Platform 4 Company Update, 9 October 2014 Axiata Group (AXIATA MK) Neutral (Maintained) Communications - Telecommunications Market Cap: USD18,425m Target Price: Price: MYR7.30 MYR7.03 Macro Risks Highlights From Analyst & Investor Day 2014 Growth Value Axiata (AXIATA MK) Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS) 7.20 101 7.10 100 7.00 98 6.90 97 6.80 96 6.70 94 6.60 93 6.50 92 6.40 90 6.30 35 89 0 0 . 1 0 0 We attended Axiata’s Analyst & Investor Day 2014 yesterday and came . 0 away feeling more upbeat on the group’s growth prospects 0 notwithstanding our NEUTRAL call due to limited upside (+3.8%) based 0 on our MYR7.30 SOP TP. Nonetheless, Celcom is prepared to return with a bang with a slew of new products, while XL has made excellent progress on its integration with Axis. Competition remains a key risk. 30 25 20 15 Aug-14 Jun-14 Apr-14 Feb-14 Dec-13 5 Oct-13 Vol m 10 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) Khazanah Nasional Employees Provident Fund Permodalan Nasional Berhad 63.7m/19.9m -0.3 3.8 6.44 - 7.07 39 8,576 38.9 12.0 10.3 Share Performance (%) YTD 1m 3m 6m Absolute 1.9 1.3 2.0 6.0 12m 1.6 Relative 3.7 3.3 5.1 7.0 (1.6) Shariah compliant Lim Tee Yang, CFA +603 9207 7607 [email protected] Celcom to return with a bang. After almost a year of no new product launches, Celcom has lined up a slew of new products to be launched in the coming weeks. Management said the IT transformation issues that had plagued Celcom for much of the year have been largely resolved, and is confident the much-improved business support system will give it a leg up against its peers by streamlining its dealership, automating back-end systems and shortening customer response time. Management is also preparing a host of events to gain back dealers’ confidence. XL Axiata in a strengthening position. The XL Axiata (XL) (EXCL IJ, NEUTRAL, TP: IDR6,280) and Axis integration is proceeding faster than expected, management said. This has allowed XL to reap significant cost savings and improve its network quality by quickly reaping the benefits of additional spectrum. Nonetheless, we believe XL’s growth expectations may remain tempered by the risk of not properly monetising data. Competition remains fairly intense – which is a risk to XL should it try to raise headline data prices too quickly. Patience needed for edotco. We think the market will need to be a little more patient on the potential monetisation of the group’s tower assets via edotco group (edotco). We gather that for the next year or two, edotco will focus on improving operational efficiencies by boosting revenues (increasing tenancy ratios) and cutting costs (improving procurement processes). edotco currently has about 12,700 towers in its portfolio and is eyeing Pakistan as the next growth market. Investment case. We remain NEUTRAL on Axiata, with an unchanged SOP-based TP of MYR7.30. While we are more upbeat on Celcom and XL’s growth prospects in 2015, we believe these factors are relatively priced in. Both of these operating companies have laid the foundation for future growth, but competition remains a key risk to earnings growth, given the lack of visible signs of diminishing competitive intensity. Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Total turnover (MYRm) 16,290 17,652 18,371 19,453 20,202 Reported net profit (MYRm) 2,346 2,513 2,550 2,653 2,997 Recurring net profit (MYRm) 2,539 2,784 2,761 2,653 2,997 Recurring net profit growth (%) (2.8) 9.7 (0.8) (3.9) 13.0 Recurring EPS (MYR) 0.30 0.33 0.32 0.31 0.35 DPS (MYR) 0.19 0.23 0.22 0.25 0.30 Recurring P/E (x) 23.5 21.5 21.8 22.7 20.0 P/B (x) 3.01 2.98 3.07 2.85 2.78 P/CF (x) 10.3 8.8 8.7 7.9 8.6 2.7 3.3 3.1 3.5 4.3 EV/EBITDA (x) 6.97 6.84 6.73 6.94 6.31 Return on average equity (%) 12.2 12.6 12.8 13.0 14.1 Net debt to equity (%) 22.3 21.6 32.8 32.9 30.4 (2.5) (1.0) Dividend Yield (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report 1 . 2 0 . 1 Source: Company data, RHB Powered by EFATM Platform 5 Results Review, 9 October 2014 LPI Capital (LPI MK) Buy (Maintained) Financial Services - Insurance Market Cap: USD1,181m Target Price: Price: MYR20.70 MYR17.50 Macro Risks Stable Results, Expect Dividends In 4Q Growth Value 18.5 114 18.0 112 17.5 109 0 0 . 1 0 0 LPI’s MYR166m 9M14 profit, at 75% of our/consensus estimates, is in . 0 line. Despite soft topline growth, the 11% bottomline increase was aided 0 by a 210bps improvement in underwriting (UW) margin and expansion 0 of its profitable fire insurance unit. Maintain BUY, and a MYR20.70 TP (18x P/E, 18.4% upside). We expect in 4Q14 an interim dividend/share similar to 4Q13’s MYR0.52 to help fulfil our assumption of a >5% yield. 17.0 107 16.5 105 16.0 103 15.5 100 15.0 250 98 LPI Capital (LPI MK) Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS) 200 150 100 Aug-14 Jun-14 Apr-14 Feb-14 Dec-13 50 Oct-13 Vol th 2 . 2 0 . 2 Source: Bloomberg Avg Turnover (MYR/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (MYR) Free float (%) Share outstanding (m) Shareholders (%) 0.21m/0.07m 14.9 18.4 15.8 - 17.9 52 220 Consolidated TehHoldings SB Nipponkoa Insurance Co Ltd 43.0 8.6 Share Performance (%) YTD 1m 3m 6m 12m Absolute 0.2 2.2 2.8 5.3 13.2 Relative 1.6 3.8 5.5 5.9 9.6 9M14 performance in line. LPI Capital (LPI)’s 9M14 earnings growth of 11% y-o-y was due to a sustained profitable track record by subsidiary Lonpac Insurance. The key takeaway is a surge in UW margins in the general insurance (GI) segment of 210bps to 30.6% (from 28.5%), mainly reflected by an improved product mix especially from fire insurance (its most profitable business portfolio) and sustained loss ratios across its motor and non-motor segments. Its management expense ratio was stable at 19.1% (vs 18.8% in 9M13), indicating cost control. These factors offset a soft 4% gross written premium (GWP) growth due to a challenging operating environment and increased competition from other general insurers across Malaysia and Singapore. Fire insurance still a winner. The UW margin for its fire segment grew to 79% (vs 75% in 9M13), as its fire net claims ratio improved significantly to 16% (from 21% in 9M13). This was in line with the levels of 1Q14 and 2Q14 – which indicated that its business had sizeable and healthy risk diversification. LPI’s overall portfolio remains healthy, as its overall claims ratio rose to 46.5% from 44.8% in 9M13. The motor claims ratio, at 75%, improved slightly from 76% in 9M13 and is in line with current industry trends. Maintain BUY and a TP of MYR20.70, pegged to an unchanged 18x FY15F P/E and implying a 2.3x FY15F P/BV. While we like LPI for its profitable product mix, our TP is at the lower range of its historical 2.32.4x P/BV and 18-20x P/E to reflect the risks in the longer term. We retain our forecasts, as there were no surprises in earnings. Traditionally, LPI announces a handsome second interim dividend towards the 4Q. Our full-year MYR0.89 DPS estimate translates to a >5% yield. Risks. A lower dividend payout and uncertainties in competition/pricing as the industry prepares for the liberalisation of fire and motor tariffs in 2016. Lonpac has a combined 57% exposure in fire and motor premiums. While increasing competition has resulted in the erosion of premium rates, it is is boosting online offerings and new segments while focusing on cost efficiency and distribution. Dec-12 Dec-13 Dec-14F Dec-15F Dec-16F Net premium revenue (MYRm) 585 621 693 762 838 Reported net profit (MYRm) 167 201 222 247 269 Net profit growth (%) 8.0 20.7 10.1 11.2 9.2 Kong Ho Meng +603 9207 7620 Recurring net profit (MYRm) 167 201 222 247 269 [email protected] Recurring EPS (MYR) 0.75 0.91 1.00 1.11 1.22 DPS (MYR) 0.65 0.70 0.80 0.89 0.97 Recurring P/E (x) 23.2 19.2 17.4 15.7 14.4 P/B (x) 2.82 2.41 2.19 1.99 1.81 3.7 4.0 4.6 5.1 5.6 Return on average equity (%) 13.1 13.5 13.1 13.3 13.2 Return on average assets (%) 6.5 6.8 6.6 6.7 6.5 (0.1) 0.2 3.2 Shariah compliant Forecasts and Valuations Dividend Yield (%) Our vs consensus EPS (adjusted) (%) Source: Company data, RHB See important disclosures at the end of this report Powered by EFATM Platform 6 Company Update, 8 October 2014 Keppel Corp (KEP SP) Buy (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD14,654m Target Price: Price: SGD12.50 SGD10.30 Macro Risks Still Winning Orders Despite Market Concerns Growth Value 11.4 108 11.2 106 11.0 103 0 0 . 2 0 0 Keppel has secured contracts from repeat customers worth SGD153m, . 0 including its first FPSO conversion for the year. Maintain BUY with an 0 unchanged SOP-based SGD12.50 TP. The submersible barge (Royal 0 Boskalis Westminster) and FPSO (Bumi Armada) contracts are due in 2H15 and 2Q16 respectively. Near-term oil price fluctuations should also have limited impact on this stock. 10.8 101 10.6 99 10.4 97 10.2 94 10.0 9 8 7 6 5 4 3 2 1 92 Keppel Corp (KEP SP) Price Close Relative to Straits Times Index (RHS) Aug-14 Jun-14 Apr-14 Feb-14 Dec-13 Oct-13 Vol m 2 . 1 0 . 2 Source: Bloomberg Avg Turnover (SGD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (SGD) Free float (%) Share outstanding (m) Shareholders (%) 26.1m/20.8m 21.4 20.9 10.2 - 11.3 68 1,817 21.0 5.7 5.0 Temasek Aberdeen Blackrock Share Performance (%) First floating production storage and offloading (FPSO) conversion for 2014. Bumi Armada (BAB MK, BUY, TP: MYR2.24)’s FPSO will have 1.7m barrels storage capacity, handling up to 80,000 barrels of oil/day. This unit will be producing for Angola’s Block 15/06 East Hub project and is scheduled for completion in 2Q16. The job scope involves refurbishment and life extension works, upgrading living quarters to accommodate 100 personnel, and installing and integrating an external turret mooring system and topside process modules. The submersible barge for Royal Boskalis Westminster (BOKA NA, NR), its third for the marine services firm, is slated for completion in 2H15. Jack-up rigs still being ordered. Keppel recently won a USD227m jack-up rig contract from Gulf Drilling International in a market where concerns linger over the relatively large number of jack-up rigs coming online over the next two years. However, with average day rates for modern jack-up rigs still climbing, we think orders should continue to flow if the market can successfully absorb the new supply. SGD3.7bn of contract wins so far, with about SGD5.4bn in option value. Keppel has won c.SGD3.7bn of contracts YTD, appearing somewhat behind schedule vis-à-vis our SGD6bn FY14 order win forecast. Yet, we note that such wins tend to be lumpy and it could still pull a rabbit out of the hat at the last minute. We estimate values for the 13 jack-up rig and two floating liquefied natural gas (FLNG) options at a combined SGD5.4bn, with expiry dates mostly in FY15. Oil prices not a major source of concern. While oil prices have become more volatile lately, we see investments still going ahead for shallow-water units like jack-up rigs and production platforms like FLNG vessels. Keppel’s operational performance demonstrates relatively low correlation with oil prices, and we believe the stock’s 4.7% yield remains attractive to investors. Maintain BUY with a SGD12.50 SOP-based TP. YTD 1m 3m 6m 12m Absolute (8.0) (4.9) (4.8) (5.7) (2.6) Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Relative (10.7) (2.2) (3.6) (7.6) (6.3) Total turnover (SGDm) 10,082 13,965 12,380 13,536 13,897 Reported net profit (SGDm) 1,946 2,237 1,846 1,485 1,495 Recurring net profit (SGDm) 1,491 1,914 1,412 1,485 1,495 Recurring net profit growth (%) 14.1 28.4 (26.2) 5.1 0.7 Recurring EPS (SGD) 0.83 1.06 0.78 0.82 0.83 DPS (SGD) 0.43 0.72 0.50 0.48 0.48 Recurring P/E (x) 12.5 9.7 13.2 12.5 12.4 P/B (x) 2.52 2.01 1.92 1.80 1.70 18.5 29.8 11.9 10.7 4.2 7.0 4.8 4.7 4.7 EV/EBITDA (x) 1.68 2.47 4.77 5.66 5.70 Return on average equity (%) 28.2 26.9 19.5 14.8 14.1 Net debt to equity (%) 16.6 23.2 11.2 11.9 11.4 (7.2) (13.2) Shariah compliant Lee Yue Jer, CFA +65 6232 3898 [email protected] P/CF (x) Dividend Yield (%) Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report Source: Company data, RHB na Powered by EFATM Platform 7 Company Update, 8 October 2014 Bangchak Petroleum (BCP TB) Neutral (Maintained) Energy & Petrochemicals - Oil & Gas Services Market Cap: USD1,446m Target Price: Price: THB33.20 THB34.30 Macro Risks Completes NIDO Acquisition Growth Value Bangchak Petroleum (BCP TB) Price Close Relative to Stock Exchange of Thailand Index (RHS) 38.0 111 36.0 106 34.0 101 32.0 96 30.0 91 28.0 86 26.0 81 24.0 25 76 0 0 . 2 0 0 BCP has finalised its upstream investment in an acquisition of NIDO, . 0 which cost AUD98m for a 81.41% stake. Maintain NEUTRAL, with our TP 0 at THB33.20 (1.1x FY15F P/BV), which implies 3.1% downside. This 0 acquisition could offer c.8-9% earnings upside and boost our current TP by 1%. We are now mainly concerned as to the possibility of major shareholder PTT divesting its entire 27.22% stake in the company. 20 15 10 Completes NIDO acquisition. Bangchak Petroleum (BCP) has acquired an 81.41% stake in Nido Petroleum (NIDO) (NDO AU, NR), for a total of AUD98m (USD86.24m). NIDO’s total proven and probable (2P) reserves comprises 6.2m barrels of oil equivalent (mboe). NIDO, in turn, holds a 22.88% stake in the Galoc field, which has 2.7mboe in reserves (its portion) and produces 8,400 barrels per day (bpd). NIDO also holds a 22.27% stake in the West Linapacan field and holds total reserves of 3.5mboe there. Production has not begun for this field, but we believe it may kick off next year. The company is discussing with its auditors whether or not to consolidate its earnings in 3Q14 or 4Q14. NIDO’s 2013 consolidated net profit was AUD20m (USD17.60m). Aug-14 Jun-14 Apr-14 Feb-14 Dec-13 5 Oct-13 Vol m 2 . 2 0 . 2 Source: Bloomberg Avg Turnover (THB/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (THB) Free float (%) Share outstanding (m) Shareholders (%) PTT Ministry of Finance Thai NDVR 193m/6.01m 12.8 -3.1 25.5 - 37.3 63 1,377 27.2 10.0 5.2 Share Performance (%) YTD 1m 3m 6m Absolute 22.3 (0.7) 18.1 9.6 5.4 Relative 1.4 0.2 13.1 (3.2) (4.6) Impact of NIDO investment on BCP. In our EV/2P valuation, the acquisition would be equivalent to c.USD20.29/boe vs the regional average of around USD17.80/boe, which implies a slight premium. BCP’s stake in NIDO means the former should be able to add around THB325m-407m (+8-9%) to its annual net profit. This should lift our TP of THB33.20 (1.1x 2015 P/BV) by 1%. PTT’s potential divestment of 27.22%. We believe that BCP may be losing a very strong partner should PTT (PTT TB, BUY, TP: THB396.00) hive off its stake. How PTT would divest its stake in BCP, however, remains a risk to the minority shareholders. We believe it would be in the minority shareholders’ best interest if PTT sells its stake to a strategic investor, although this would depend on the type of investor as well. In our view, a financial/silent investor would not be value-accretive, while a national oil company (eg Petronas or Pertamina) or an oil major – eg Total (FP FP, NR) or Statoil (STL NO, NR) – could add value to BCP and make the Thai refinery industry more competitive. Note that a 27.22% divestment to a single buyer will trigger a mandatory tender offer. 12m Forecasts and Valuations Total turnover (THBbn) Reported net profit (THBbn) Shariah compliant Recurring net profit (THBbn) [email protected] Dec-13F Dec-14F 165 187 275 Dec-15F 301 5.61 4.27 4.65 4.92 5.83 6.92 2.64 4.75 4.92 5.83 (61.9) 80.3 3.5 18.6 Recurring EPS (THB) 5.02 1.91 3.45 3.57 4.23 DPS (THB) 1.58 1.24 1.35 1.43 1.69 6.8 17.9 9.9 9.6 8.1 P/B (x) 1.59 1.47 1.36 1.25 1.15 P/CF (x) Recurring P/E (x) 24.0 5.1 12.7 4.7 6.5 Dividend Yield (%) 4.6 3.6 3.9 4.2 4.9 EV/EBITDA (x) 6.8 10.3 7.9 5.8 5.0 Return on average equity (%) 21.4 13.8 13.9 13.6 14.8 Net debt to equity (%) 48.7 34.0 38.8 25.2 17.0 0.0 0.0 0.0 Our vs consensus EPS (adjusted) (%) See important disclosures at the end of this report Dec-12 159 157.3 Recurring net profit growth (%) Kannika Siamwalla, CFA 66 2862 9744 Dec-11 Source: Company data, RHB Powered by EFATM Platform 8 RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. 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