Regional Daily Ideas Troika Top Stories

Transcription

Regional Daily, 20 November 2014
5
Regional Daily
Ideas Troika
Top Stories
Thailand Market Strategy
Strategy
St
Pg3
9M14 net profits of stocks under our coverage fell 3.6% to THB504.50bn, ie
77.1% of our FY14 earnings forecast. 2014 net profit growth is at risk of
further downgrades on oil prices, with YoY earnings possibly coming in
between -2% and +2% if oil trades between USD85 and USD95.
Analyst: Veena Naidu ([email protected])
Sawit Sumbermas Sarana (SSMS IJ)
Agriculture - Plantation
BUY IDR1,250 TP: IDR1,430
Mkt Cap : USD981m
Pg4
SSMS’s results disappointed on weaker production. We cut our FY14/FY15
forecast by 26%/12% and reduce TP to IDR1,430 from IDR1,615. Its asset
injection at USD8k/planted ha is cheap and will improve future growth
visibility but unlikely to contribute to FY15 earnings.
Analyst: Alvin Tai ([email protected])
Press Metal (PRESS MK)
Basic Materials - Metals
BUY MYR3.42TP: MYR5.75
Mkt Cap : USD1,155m
Pg5
We applaud Press Metal’s plan to double its Samalaju plant’s capacity which
is timely to ride on aluminium supply deficit and replicate its successful lowcost model, raised our TP of MYR5.75.
Analyst: Ng Sem Guan ([email protected])
Other Key Stories
Malaysia
Suria Capital Holdings (SURIA MK)
Transport - Logistics
BUY MYR2.58 TP: MYR3.50
Pg6
Analyst: Jerry Lee ([email protected])
Lafarge Malaysia (LMC MK)
Basic Materials - Building Materials
Neutral MYR10.14 TP: MYR10.00
Pg7
Tune Ins (TIH MK)
Financial Services - Insurance
Buy MYR2.07 TP: MYR3.00
Pg8
OCK Group (OCK MK)
Telecommunications Infrastructure
Buy MYR1.41 TP:MYR1.59
Pg9
Dialog (DLG MK)
Energy & Petrochemicals - Oil & Gas Services
Pg10
TH Plantations (THP MK)
Sell: MYR1.22 TP: MYR1.63
Pg11
AMMB (AMM MK)
Financial Services - Banks
Pg12
See important disclosures at the end of this report
Results Largely In Line
Stiff Competition May Dampen Short-Term Outlook
Analyst: Ng Sem Guan ([email protected])
Rejuvenating Its Take-up Rate
Analyst: Kong Ho Meng ([email protected])
Rising Up The Ranks
Analyst: Malaysia Research ([email protected])
Maiden Contributions From PSC Boost Revenue
Analyst: Kong Ho Meng ([email protected])
Hit By Delayed Impact Of Dry Weather In Sarawak
Analyst: Hoe Lee Leng ([email protected])
([email protected])
Underlying Trends Generally Positive
Analyst: David Chong ([email protected])
Powered by EFATM Platform
1
Regional Daily, 20 November 2014
Kuala Lumpur Kepong (KLK MK)
Neutral MYR23.00 TP: MYR20.70
Pg13
MSM Malaysia (MSM MK)
Consumer Non-cyclical
Pg14
AirAsia X (AAX MK)
Transport - Aviation
Sell MYR0.65 TP: MYR0.57
Pg15
Wing Tai Malaysia (WING MK)
Malaysia - Small & Mid Caps
Sell MYR2.02 TP: MYR1.76
Pg16
Singapore
Oxley Holdings (OHL SP)
Property - Real Estate
BUY SGD0.51 TP: SGD0.91
To Benefit From Low Raw Sugar Prices
([email protected])
Still In Turbulence
Analyst: Jerry Lee ([email protected])
Double Whammy
Analyst: Chaw Sook Ting ([email protected])
Pg17
Overseas Diversification Bearing Fruits
Analyst: Goh Han Peng ([email protected])
Hi-P International (HIP SP)
Industrial - Misc. Manufacturer
BUY SGD0.66TP: SGD0.87
Pg18
Midas (MIDAS SP)
Neutral SGD0.30 TP: SGD0.33
Pg19
Thailand
Industrial Estate
Neutral
Weaker Manufacturing Contributions
YotaPhone 2 Meets Xi Jinping
Analyst: Jarick Seet ([email protected])
More Reasons To Be Cautious Than Optimistic
Analyst: Shekhar Jaiswal ([email protected])
Pg20
3Q14 Earnings Have Yet To Recover
Analyst: Wanida Geisler ([email protected])
2
Strategy, 18 November 2014
Strategy - Thailand
Overweight
Macro
Risks
Early Signs Of Recovery In Non-Oil Sectors
Growth
Value
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2
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1
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2
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2
9M14 net profits of stocks under our coverage fell 3.6% to
THB504.50bn, ie 77.1% of our FY14 earnings forecast. 2014 net profit
growth is at risk of further downgrades on oil prices, with YoY earnings
possibly coming in between -2% and +2% if oil trades between USD85
and USD95. Maintain OVERWEIGHT on Thailand and expect lower oil
prices to boost 2015 corporate earnings – we forecast 14% earnings
growth. At current SET Index levels, Thailand trades at 13x 2015
earnings.






Veena Naidu License No. 24418, 66 2862 9752
Sectors that outperformed. Agro & food (+85.6% YoY), residential
property (+19.3% YoY), large banks (+5.2% YoY) and healthcare
(+10.2% YoY).
Sectors that got hit the hardest. Transportation (-102.6% YoY), media
& publishing (-42.9% YoY), automobile (-26.2% YoY), tourism (-20.3%
YoY), petrochemicals (-19% YoY), small banks (-16.1% YoY),
construction and construction materials (-13.2% YoY) and energy (-6.1%
YoY).
Revenue grew 6.15% YoY. Despite the weak bottomline, the topline
growth of the stocks under our coverage in 9M14 grew 6.2% YoY. This
was despite the anaemic economy.
Sectors that saw weak topline growth. These were automobile (15.7% YoY), small banks (-9.6% YoY) and transportation (-5% YoY).
The 24.4% drop in the infrastructure sector was due to the setting up of
the BTS Rail Mass Transit Growth Infrastructure fund (BTS Infra fund)
that resulted in BTS’ (BTS TB, UNDER REVIEW) revenue being
transferred to the fund while it received profit contributions via equity
accounting. This led to a lower topline.
On a QoQ basis several sectors saw improvements in net earnings.
Agro & food (+12.5%), automobile (+18.3%), tourism (+9.2%), banks
(+3.4%), healthcare (+25.7%), property (+13.7%) and information &
communication (+1.1%).
There are signs of recovery. Automobile sales have bottomed out,
international tourists are returning, and the healthcare sector is
benefiting from higher capacity from both domestic and overseas
markets. The ICT sector continues to see high data growth while voice
revenue is stabilising. Demand for residential property along mass transit
routes remains strong while landed property has seen 7-8% growth in
demand YTD. Banking sector loans grew 4.8% in 9M14 while demand
for construction materials is seeing a pick-up due to higher construction
activities. The only areas that continue to be under pressure are the
energy and petrochemical sectors. This is on lower oil prices.
P/E (x)
[email protected]
Com pany Nam e
Ananda Development
Price
THB3.72
Target
THB3.70
THB238.00
THB264.20
12.3
THB23.00
THB26.00
9.8
THB4.10
THB5.50
Total Access Communications
THB99.75
Unique Engineering & Construction
THB10.20
Kasikornbank
Krung Thai Bank
Quality Houses
P/B (x)
Dec-14F Dec-14F
12.0
1.8
Yield (%)
Dec-14F
1.6
Rating
BUY
2.2
1.7
BUY
1.4
4.1
BUY
12.3
2.0
4.1
BUY
THB137.97
21.3
7.9
4.5
BUY
THB14.00
18.2
2.3
1.1
BUY
Source: Company data, RHB
3
Results Review, 20 November 2014
Sawit Sumbermas Sarana (SSMS IJ)
Buy (Maintained)
Market Cap: USD981m
Target Price:
Price:
IDR1,430
IDR1,250
Macro
Risks
Drought Weighs On 3Q Earnings
Growth
Value
Sawit Sumbermas (SSMS IJ)
Price Close
Relative to Jakarta Composite Index (RHS)
1,490
210
1,390
197
1,290
183
1,190
170
1,090
157
990
143
890
130
790
117
690
103
590
300
90
0
0
.
2
0
0
Sawit Sumbermas’ results were disappointing on weaker production .
0
and shipment mistiming. Maintain BUY but reduce our TP to IDR1,430 0
(from IDR1,615, a 14.4% upside) as we cut our FY14/FY15 forecasts by 0
26%/12%. The company’s asset injection of USD8,000/planted ha is
cheap and will improve visibility for future growth. However, it is
unlikely to contribute to FY15 earnings.


250
200
150
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
50
Dec-13
Vol m
100
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Citra Borneo Utama PT
Prima Sawit Borneo PT
Putra Borneo Agro Lestari PT
68,930m/5.75m
7.2
14.4
670 - 1,430
15
9,525
26.5
13.7
13.7
Share Performance (%)
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
2

.
2
0
.
2

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
Weak production and earnings number. Sawit Sumbermas Sarana’s
(Sawit Sumbermas) 9M core earnings were sharply below our
expectations, making up only 56% of our full-year forecast. Production
was down 18% QoQ as dry weather hit Central Kalimantan, delaying fruit
ripening. There was also some significant increase in cost of sales as
well as general and administration costs.
Forecast cut. Though production growth at 23% YTD is still above our
full-year forecast of 16%, we are cutting our growth rate to 4.5% for the
year. This brings our FFB production number down to 800,000 tonnes as
the drought impact may continue to weigh on 4Q numbers. Along with
this, we have also increased cost assumptions, factoring in a wage
inflation rate of 11% for Central Kalimantan as well as higher general
and administration costs. All these led to our earnings forecast being cut
by 26%/12% for FY14/FY15 respectively. We also introduce our FY16
forecast of IDR860bn.
Asset injection. Sawit Sumbermas will buy a 100% equity stake in two
sister companies, ie PT Tanjung Sawit Abadi (TSA) and PT Sawit Multi
Utama (SMU), for IDR1.5trn. Taking into account their net debt, the
company is paying USD8,000/planted ha. The acquisition will increase
its planted hectarage by 25,000ha to 58,000ha from the current
33,000ha. We are positive on the asset injection, as it is done at an
undemanding valuation and will significantly boost Sawit Sumbermas’
future growth visibility, given that TSA’s and SMU’s plantations have an
average age of just 4.2 years. It will also bring the company’s EV/planted
ha to a more palatable USD20,000 compared with USD30,000 currently.
Nevertheless, given the young age, we believe they will only contribute
to Sawit Sumbermas’ bottomline in 2016, albeit marginally.
YTD
1m
3m
6m
Absolute
52.4
13.1
(1.6)
(0.4)
12m
Forecasts and Valuations
Relative
33.0
11.6
(0.4)
(2.1)
Total turnover (IDRbn)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,880
1,962
1,963
2,182
2,200
Reported net profit (IDRbn)
474
577
611
850
860
Recurring net profit (IDRbn)
474
577
611
850
860
Recurring net profit growth (%)
41.5
21.7
5.9
39.2
1.1
Alvin Tai, CFA +603 9207 7628
Recurring EPS (IDR)
49.8
60.6
64.1
89.3
90.3
[email protected]
Recurring P/E (x)
25.1
20.6
19.5
14.0
13.8
P/B (x)
27.4
5.2
4.1
3.4
2.9
P/CF (x)
20.5
17.5
14.2
10.9
10.4
Shariah compliant
EV/EBITDA (x)
14.4
11.7
11.5
8.7
8.6
Return on average equity (%)
104.4
42.6
23.7
26.4
22.3
Net debt to equity (%)
192.3
Our vs consensus EPS (adjusted) (%)
net cash
net cash
net cash
net cash
(15.0)
(5.2)
(2.3)
4
Company Update, 20 November 2014
Buy (Maintained)
Market Cap: USD1,155m
Target Price:
Price:
MYR5.75
MYR3.42
Macro
Risks
Capacity To Surge With New Power Deal
Growth
Value
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
4.30
318
3.80
282
3.30
247
2.80
211
2.30
175
1.80
139
1.30
104
0.80
20
18
16
14
12
10
8
6
4
2
68

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Shareholders (%)
10.7m/3.29m
137.1
68.1
1.12 - 3.69
43
1,135
Dato' Paul Koon & brothers
51.0

Phase III expansion. Press Metal’s 80%-owned subsidiary, Press Metal
Bintulu SB (PMB), has inked a term sheet with Syarikat Sesco for the
supply of an additional 500 megawatts (MW) of power to PMB to
undertake its proposed Phase III expansion, which would double the
present aluminium smelting capacity at its plant in Samalaju, Sarawak to
640,000 tonnes per annum (tpa). Together with its smelting plant in
Mukah, the expansion could see the group expanding its smelting
capacity to 760,000 tpa, which is about 1.5% of global primary aluminium
consumption.
Replicating proven low-cost model. Press Metal already runs
successful aluminium smelters in Sarawak, which are in the first quartile
of the global production cost curve. Although the tariff for the additional
power supply is confidential, we understand from management that the
profitability of Phases II and III of the smelter is similar, after imputing a
lower capex and potentially greater efficiency, for the new plant.
Meanwhile, the first drawdown of 330MW will start in end-2015, while the
remaining 170MW will be drawn down from early-2018 onwards. To be
prudent, we imputed the new capacity into our financial model, which
assumes contributions only from 2016 onwards together with some
higher costs. Thus, our FY16 estimates rise by 27.7% to MYR555m.
BUY, with a higher TP of MYR5.75. We are excited over the news of
the capacity expansion, as it is timely for Press Metal to ride on the
bottoming out of aluminium prices and expand its presence in the
aluminium industry. Its projected record earnings indicate that the
company can fund this project using internally-generated funds together
with bank borrowings, while maintaining its generous dividend payout
policy of 30%-50%. Thus, we reiterate BUY with a higher TP of MYR5.75
(from MYR4.72), which we derive from a 10% discount to our latest DCF
valuation, on a fully diluted basis. Key investment risks are on page 9.
YTD
1m
3m
6m
12m
Absolute
194.8
30.3
12.9
94.3
183.8
Relative
197.4
28.6
15.8
98.0
183.2
Total turnover (MYRm)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
2,384
3,120
4,146
4,613
5,933
Reported net profit (MYRm)
184
15
263
417
555
Recurring net profit (MYRm)
64
114
263
417
555
(41.6)
78.8
129.8
58.9
33.0
Ng Sem Guan, CFA +603 9207 7678
Recurring EPS (MYR)
0.13
0.22
0.33
0.38
0.50
[email protected]
DPS (MYR)
0.03
0.02
0.11
0.11
0.15
Recurring P/E (x)
25.3
15.2
10.5
9.0
6.8
P/B (x)
1.39
1.38
2.04
1.76
1.49
P/CF (x)
3.05
5.63
5.02
4.13
0.9
0.6
3.2
3.3
4.4
EV/EBITDA (x)
12.5
10.5
6.6
7.9
5.7
16.8
1.2
16.9
21.0
23.8
166.0
170.1
Dividend Yield (%)


2

.
2
0
.
3
0
0
.
3
0
0
We applaud Press Metal’s plan to double its Samalaju plant’s capacity, .
0
which would lift total smelting capacity to 760,000 tpa (~1.5% of global 0
primary aluminium consumption). Maintain BUY, with a higher TP of 0
MYR5.75 (68.1% upside) – at a 10% discount from our fully-diluted DCF
valuation. We also lift FY16F earnings by 27.7% as the new plant will
most probably replicate its low-cost model, which is in the first quartile
of the global cost curve.

Nov-13
Vol m
Price Close




na
77.7
90.0
57.7
(28.7)
(40.1)
(22.6)
5
Suria Capital Holdings (SURIA MK)
Buy (Maintained)
Transport - Logistics
Market Cap: USD218m
Target Price:
Price:
MYR3.50
MYR2.58
Macro
Risks
Results Largely In Line
Growth
Value
Suria Capital (SURIA MK)
Price Close
116
3.00
113
2.90
110
2.80
107
2.70
104
2.60
101
2.50
98
2.40
95
2.30
92
2.20
89
2.10
2
2
2
1
1
1
1
1
86


Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Warisan Harta
Lembaga Tabung Haji
0.23m/0.07m
35.7
35.7
2.25 - 2.97
30
283

Results in line. Suria Capital’s 9M14 net profit dropped 1.5% YoY to
MYR45.5m. This was largely within our estimates, meeting 71% of our
full-year forecast. The 9M14 numbers were mainly lifted by higher
contribution from its port operations core business, and logistics and
bunkering services segments. The rise in operating expenses has
affected its overall profit margin.
Segmental overview. Within the ports operations division, there was a
9% YoY increase in the total 20-foot equivalent units (TEUs) in 9M14.
However, 9M operating expenses increased 12% YoY on higher
depreciation, maintenance costs, port land leasing fees and labour costs,
which correlated with the higher volume. Logistics and bunkering
improved YoY, reporting a profit instead of losses. This was mainly on a
fuel volume sales increase for the supply of bunkering fuel for cruise
ships at Kota Kinabalu Port. This wing also resumed its heavy lifting and
shuttling business with the commencement of the Sabah Ammonia Urea
(SAMUR) project which is currently at the completion stage. Ferry
terminal operations’ topline improved, mainly contributed by the increase
in passenger fee income from the new international cruise terminal and
increased tourist arrivals in Sabah. Contract and engineering still did not
do well on a lack of major external projects.
Jesselton Quay update. Suria Capital is still awaiting the approval for
its development plan from the authorities to advance to a new phase.
Nonetheless, we understand that the project is progressing as planned.
46.2
9.2

Maintain BUY and earnings forecast. We keep our DCF-based
MYR3.50 TP unchanged, which implies 14x FY15F P/E. We deem this
fair, given Suria Capital’s property joint-venture. The port segment’s
average P/E is 14x.
Absolute
Relative
YTD
1m
3m
6m
12m
(2.7)
6.6
(2.7)
2.8
4.9
4.1
0.5
5.6
0.3
6.9
Shariah compliant
Jerry Lee 603 9207 7622
[email protected]
Dec-11
Dec-12
Dec-13
Dec-14F
276
263
263
264
Dec-15F
274
53.6
65.1
61.8
65.1
69.4
69.4
53.6
53.2
61.5
65.1
(4.4)
(0.7)
15.5
5.8
6.7
Recurring EPS (MYR)
0.19
0.19
0.22
0.23
0.25
DPS (MYR)
0.06
0.06
0.06
0.08
0.09
Recurring P/E (x)
13.6
13.7
11.9
11.2
10.5
P/B (x)
0.95
0.91
0.87
0.83
0.79
P/CF (x)
6.95
5.35
4.91
6.16
5.89
2.3
2.4
2.4
3.1
3.3
5.94
5.03
4.66
5.14
4.89
7.2
8.3
18.2
7.0
Dividend Yield (%)
EV/EBITDA (x)
7.5
net cash
7.5
7.7
13.1
14.2
0.0
0.0


3

.
2
0
.
2
0
0
.
3
0
0
Suria Capital’s 9M14 numbers came in largely within expectations and .
0
we believe 4Q14 may be better. We keep our BUY recommendation with 0
an unchanged DCF-based MYR3.50 TP, a 35.7% upside. Heightened 0
operating expenses have offset the growth in revenue and the
Jesselton Quay project may need more time to realised. However, we
understand that it is still in progress.
Vol m
3.10




6
Lafarge Malaysia (LMC MK)
Neutral (from Buy)
Basic Materials - Building Materials
Target Price:
Price:
MYR10.00
MYR10.14
Macro
Risks
Stiff Competition May Dampen Short-Term Outlook
Growth
Value


3

.
2
0
.
2
11.1
113
10.6
108
10.1
103
0
0
.
2
0
0
As Lafarge’s 9M14 profit of MYR206.1m represented only 47.9/52.5% of .
0
our/street’s full-year estimates, we downgrade the stock to NEUTRAL 0
and pare our TP to MYR10.00 (1.4% downside) from MYR11.27. We cut 0
our FY14F/FY15F earnings by 29.1%/11.1% respectively, but keep our
target P/E at +2SD from its historical trading range or at 21.6x FY15 EPS
as it is still the best proxy to government infrastructure spending.
9.6
98

9.1
93
8.6
88
8.1
83
7.6
12
78
Lafarge Malayan Cement (LMC MK)
Price Close
10
8
6

4
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m




Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Ass. International Cement Ltd
Employees Provident Fund
5.73m/1.76m
-4.2
-1.4
7.90 - 10.6
31
850
51.0
7.3

Poor results. Lafarge Malaysia’s (Lafarge) 9M14 profit of MYR206.1m
was well short of expectations, at 47.9%/52.5% of our/consensus fullyear estimates. Meanwhile, its 3Q14 revenue dropped 7.3%/8.7%
QoQ/YoY on poor cement sales. Apart from that, we believe its peer,
YTL Cement, may have initiated a price cutting exercise in 3Q to expand
its market share ahead of its new plant commissioning in 4Q – which
induced cement players in Peninsular Malaysia including Lafarge to raise
their bulk rebates. Also, the untimely electricity tariff and diesel price
hikes early this year also partly contributed to the lower EBITDA margin,
which fell to 16.5% in 3Q14 vs 19.5% in 2Q14 and 26.9% in 3Q13.
Hoping for a better 4Q. We believe the stiff competition could remain
for at least another quarter or two, considering that the additional volume
from YTL Cement is gradually entering the market. That said, we have
not given up hope of a potentially stronger 4Q as construction activities
normally gain momentum at the final quarter of the year. Apart from that,
Lafarge raised its cement list price by 9% from May – which may give the
company better leeway to cut its bulk rebates as it sees fit.
Downgrade to NEUTRAL. For the time being, its disappointing results
have prompted us to cut our ex-gate cement price assumptions by
MYR18/MYR9 per tonne for next two years, which lowers our
FY14/FY15 earnings estimates by 29.1%/11.1% respectively. However,
we decided to keep valuing Lafarge at its peak P/E, ie at +2SD (or 21.6x
FY15) from its 5-year historical trading range as the company remains
the best proxy to the Government’s implementation of infrastructure and
affordable housing projects that is expected to stay for the next couple of
years. That said, we pare our TP to MYR10.00 (from MYR11.27) due to
the earnings cut. As such, we also downgrade our rating to NEUTRAL
(from Buy).
YTD
1m
3m
6m
12m
Absolute
18.3
0.0
(3.3)
9.9
6.2
Relative
21.5
(1.0)
(0.3)
14.0
5.4
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
2,740
2,852
2,812
2,995
3,056
349
390
305
393
409
349
390
305
393
409
9.8
11.7
(21.8)
29.0
3.9
Recurring EPS (MYR)
0.41
0.46
0.36
0.46
0.48
DPS (MYR)
0.37
0.41
0.32
0.42
0.43
Ng Sem Guan, CFA +603 9207 7678
Recurring P/E (x)
24.7
22.1
28.2
21.9
21.1
[email protected]
P/B (x)
2.72
2.66
2.64
2.61
2.58
P/CF (x)
18.9
18.8
18.6
17.2
16.2
3.6
4.0
3.2
4.1
4.3
13.4
12.4
14.9
12.0
11.4
11.1
12.2
9.4
12.0
12.3
Dividend Yield (%)
EV/EBITDA (x)
net cash net cash net cash net cash net cash
(22.1)
(6.3)
(8.8)
7
Tune Ins (TIH MK)
Buy (Maintained)
Financial Services - Insurance
Market Cap: USD465m
Target Price:
Price:
MYR3.00
MYR2.07
Macro
Risks
Rejuvenating Its Take-up Rate
Growth
Value
Tune Insurance Holdings (TIH MK)
Price Close
2.60
133
2.50
128
2.40
123
2.30
118
2.20
113
2.10
108
2.00
103
1.90
98
1.80
93
1.70
14
88
12


8
6
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m
4
Source: Bloomberg
2.01m/0.62m
33.8
45.0
1.80 - 2.53
59
752

17.2
13.7
9.4
YTD
1m
3m
6m
12m
Absolute
6.2
5.6
(16.5)
(7.2)
10.1
Relative
9.1
4.2
(13.8)
(3.5)
8.8
Shariah compliant

Key takeaways from the group’s 3Q14 briefing are: i) The Middle East
North Africa (MENA) JV platform is in place to support rapid expansion;
ii) The Thai associate to experience a strong growth from 2015 with the
expansion of the Osotspa business, AirAsia (AIRA MK, BUY, TP:
MYR2.73) and new ventures; iii) Its Indonesia acquisition is still in the
plans, iv) it plans to realign focus to develop capabilities in business-toconsumer (B2C) and business-to-business (B2B).
Travel insurance and associates update. For the travel insurance
segment, we understand that the QoQ decline in travel policies earned
were due to a combination of poorer international tourist flows in
Thailand/ Indonesia and issues with AirAsia’s booking process. This had
effected in a 1-2% dip in take-up rate (or 200,000 policies in our view),
and had caused a slight mis-correlation to the 15% YTD passenger
growth. AirAsia has committed itself to improve the booking process and
we believe this to have a positive impact on its take-up rate from FY15.
For the MENA region, we believe the cancellation of a memorandum of
understanding with Al Hai LLC is not a setback as management is still on
a lookout for partnerships in both MENA and Indonesia. We expect the
Thai associate to perform better in terms of earnings vs 3Q14’s MYR2m
due to increments from travel insurance and new business locally.
Low 3Q14 underwriting (UW) margin at 18% not likely to recur. The
group’s UW margins, at a quarterly low vs the average of 20%, were due
to lumpy claims on Tune Insurance Malaysia Berhad (TIMB)’s level.
TIMB had exposure to two lumpy fire claims of MYR8m-10m each
(TIMB’s portion of claims provisioning is MYR1m each). The medical
claims unit, which is a new business segment in 2014, is still a new
business strain where the net claims ratio is high, albeit trending down.
The group is looking to diversify the medical risk via quota-sharing
agreements. We retain our earnings forecasts for now.
Maintain BUY, TP of MYR3.00 at an unchanged 24x FY15F P/E – a
premium to sector valuations of 14-20x, implying a 16% 3-year forward
earnings CAGR vs the sector’s 13%. Tune Ins is a growth stock with
valuations supported by swift global expansion, coupled with
partnerships with airlines, travel providers and e-commerce players.
Diversification away from AirAsia is pivotal to support our call.
Kong Ho Meng +603 9207 7620
[email protected]
Net premium revenue (MYRm)
Net profit growth (%)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
217
241
268
309
354
41
68
76
96
110
(15.9)
64.4
11.6
26.3
14.8
50
70
76
96
110
Recurring EPS (MYR)
0.07
0.09
0.10
0.13
0.15
DPS (MYR)
0.00
0.04
0.04
0.05
0.06
Recurring P/E (x)
31.3
22.3
20.5
16.2
14.1
P/B (x)
12.8
4.3
3.8
3.3
2.9
0.0
1.9
1.9
2.5
2.8
(3.9)
(1.9)
(2.4)
Dividend Yield (%)


3

.
2
0
.
3
0
0
.
1
0
0
The share price correction yesterday was likely due to temporary .
0
setbacks in 3Q results and a cancellation of agreement with Al Hai LLC, 0
which management said to be non-material as it is still on the lookout 0
for MENA and Indonesia partnerships. Maintain BUY and its MYR3.00
TP (24x FY15F P/E, 45% upside). We envision long-term value from its
associates, potential partnerships and a recovery in travel demand.
10
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Tune Group SB
AirAsia Group
CIMB SI II SB




8
OCK Group (OCK MK)
Buy (Maintained)
Communications - Telecommunications Infrastructure
Market Cap: USD148m
Target Price:
Price:
MYR1.59
MYR1.41
Macro
Risks
Rising Up The Ranks
Growth
Value
OCK Group (OCK MK)
Price Close
1.20
142
1.00
122
0.80
102
0.60
18
16
14
12
10
8
6
4
2
82
May-14
Sep-14
162
Jul-14
1.40
Mar-14
182
Jan-14
1.60
Nov-13
Vol m
1.80
We believe OCK’s transfer to the Main Market (20 Nov) and
the 1-for-2 bonus issue (ex-date: 24 Nov) would catalyse a
re-rating of the stock. Maintain BUY with a revised TP of
MYR1.59 (ex-bonus TP of MYR1.06) (12.8% upside). We
lower our FY14 earnings forecast by 28% due to the delay in
the USP contract award and recognition of PMT in 4Q14. The
stock’s FY14-16 EPS CAGR remains a compelling 32%.



Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Aliran Armada Sdn Bhd
Lembaga Tabung Angkatan
Tentera
Low Hock Keong
1.33m/0.41m
12.8
12.6
0.75 - 1.58
42
352
41.0
14.5
2.1

A bonus and a transfer. OCK Group’s (OCK) listing status will be
transferred to the Main Market (from the ACE Market) effective 20 Nov.
Its 1-for-2 bonus issue of 176m shares will go ex on 24 Nov. We expect
the corporate exercises to catalyse a share price re-rating with the stock
attracting a wider base of investors on the back of its improved liquidity
and profile.
Awaiting the USP award. Despite the close of the tender exercise in
2Q14, the Malaysian Communications and Multimedia Commission
(MCMC) has yet to award the first phase of the Timeline 3 (T3) Universal
Service Provisioning (USP) contract, which forms part of the MYR1.5bn
Budget 2014 allocation for the construction of 1,000 telco sites in rural
areas. We expect OCK to clinch a portion of the USP contract, being a
front-runner for the project and given its good execution track record.
Forecast lowered. We lower our FY14 core earnings forecast by 28.4%
to factor in: i) the delay in the USP project, and ii) the consolidation of PT
Mulia Telecommunication’s (PMT) earnings in 4Q14 (from 3Q13
assumed previously). OCK’s acquisition of an 85% stake in PMT is EPSaccretive to the tune of 2-12% for FY14-16. We also trim our FY15 core
earnings estimate by 3.8% following some house-keeping adjustments
and introduce FY16 projections. While the bonus issue will inflate OCK’s
issued share capital by 50%, this should be more than offset by the likely
doubling of core earnings YoY in FY15, supported by its healthy project
pipeline, tower construction and recurring site maintenance projects. Key
downside risks to earnings are: i) continued delays in the award of the
USP project, and ii) weaker-than-expected margins.
Maintain BUY. We like OCK for its strong earnings growth prospects, its
focus on growing its recurring revenue base, and its exposure to less
mature but high-growth emerging markets. Our TP is lowered slightly to
MYR1.59 (pegged to an unchanged 18.5x FY15 EPS) from MYR1.65
(ex-bonus TP: MYR1.06), which still offers a more than 12% upside.
YTD
1m
3m
6m
12m
Absolute
76.3
10.2
(1.4)
(2.8)
77.4
Relative
79.5
9.2
1.6
1.3
76.6
Shariah compliant
Malaysia Research +603 9207 7688
[email protected]
Jeffrey Tan +603 9207 7633
[email protected]




Dec-12
Dec-13
Dec-14F
Dec-15F
139
152
180
312
338
13.1
13.6
15.0
30.2
34.4
13.1
13.6
15.0
30.2
34.4
54.3
3.3
10.2
101.9
14.0
Recurring EPS (MYR)
0.02
0.03
0.03
0.06
0.07
Recurring P/E (x)
56.6
54.8
49.8
24.6
21.6
P/B (x)
13.3
9.3
4.2
3.6
51.4
94.0
P/CF (x)
na
na
EV/EBITDA (x)
37.9
34.1
25.9
15.6
35.3
20.0
11.7
15.9
54.9
52.3
net cash
0.0
net cash
0.0
Dec-16F
3.1
27.5
13.5
15.5
net cash
0.0
9


2

.
1
0
.
3
0
0
.
3
0
0
.
0
0
0
Dialog (DLG MK)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Target Price:
Price:
MYR2.00
MYR1.50
Macro
Risks
Maiden Contributions From PSC Boost Revenue
Growth
Value
Dialog (DLG MK)
Price Close
2.00
132
1.90
127
1.80
122
1.70
117
1.60
112
1.50
107
1.40
102
1.30
300
97
0
0
.
2
0
0
Dialog’s 1QFY15 (Jun) core profit of MYR49m was within our .
0
but below consensus estimates, as the boost from Malaysian 0
0
upstream and downstream activities offset a temporary
slowdown in some of its international activities. Maintain
BUY and our SOP TP at MYR2.00 (33% upside), as we like
the continued growth in its offshore and onshore
businesses.
Further
of its
PIDT
project
are our
on but below
 Core 1QFY15
profit phases
of MYR49m
(+12%
YoY)
in line with
schedule.
consensus numbers (at 20%/17% of our/consensus full-year estimates
respectively). Its Malaysian operations were the top-line performers
(+8% revenue growth) due to: i) upstream contributions from its farmedin D35/D21/J4 production-sharing contract (PSC) that was signed in Sep
2014, ii) engineering activities for Phase 1C at its Pengerang
Independent Deepwater Terminal (PIDT), and iii) various local fabrication
projects. International operations (-17% revenue growth), however, were
hampered by low activities in engineering, construction and plant
maintenance works in Singapore and fabrication in New Zealand. These
offset the good revenue traction in its Jubail Supply Base logistics
services and specialist products and services. Overall, net margins
improved to 9% (from 8% YoY) due to higher-margin upstream activities.
250
200
150
Sep-14
Jul-14
May-14
Mar-14
Jan-14
50
Nov-13
Vol m
100

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
EPF
Azam Utama
Wide Synergy
14.9m/4.59m
15.4
33.3
1.45 - 1.93
59
4,931
10.6
9.3
9.1


Business updates. Phase 1B is now being commissioned for start-up
while Phase 1C is on schedule for mechanical completion by Dec 2014.
Phase 2, which involves a regasification terminal and storage tanks, will
be developed at a total project cost of MYR2.7bn – with its operational
date in line with our end-2017 estimate. All its key upstream assets are
up and running following the inclusion of the PSC.
Maintaining our forecast. We believe that the aforementioned low
international activities are likely due to slow work schedules during the
quarter, and expect these to pick up in subsequent quarters. We also
expect incremental contributions from the commencement of the further
phases of its PIDT projects. Typically, the group charts better 2H profits.
Maintain BUY, SOP TP at MYR2.00. Our SOP is based on our current
oil price forecast of USD90-100/bbl. While the stock will be increasingly
driven by offshore developments, we believe current levels do not reflect
the defensive nature in its locational advantage and concession-nature
of its tank terminal/ logistics business. The risk to our valuation would be
worse-than-expected costs, as Dialog is in the midst of an expansion.
YTD
1m
3m
6m
12m
Absolute
(12.2)
(0.6)
(12.4)
(16.4)
7.0
Relative
(9.5)
(1.7)
(9.9)
(13.0)
5.2
Shariah compliant
Kong Ho Meng +603 9207 7620
[email protected]
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
2,238
2,552
3,004
4,097
5,364
194
216
246
322
437
193
194
246
322
437
9.4
0.8
26.6
30.8
35.7
Recurring EPS (MYR)
0.04
0.04
0.05
0.06
0.08
DPS (MYR)
0.01
0.01
0.02
0.02
0.03
Recurring P/E (x)
43.2
42.8
33.8
25.9
19.1
P/B (x)
6.15
5.34
4.88
4.38
3.85
P/CF (x)
26.6
94.1
18.9
23.4
18.8
1.0
0.9
1.2
1.5
2.1
EV/EBITDA (x)
19.7
18.3
15.5
12.6
10.3
15.2
14.8
15.1
17.8
21.5
3.6
23.8
49.7
48.4
46.0
(10.1)
(5.1)
7.5
Dividend Yield (%)


2

.
1
0
.
2




10
Sell (Maintained)
Market Cap: USD429m
Target Price:
Price:
MYR1.22
MYR1.63
Macro
Risks
Hit By Delayed Impact Of Dry Weather In Sarawak
Growth
Value
Price Close
2.30
117
2.20
113
2.10
108
2.00
104
1.90
100
1.80
95
1.70
91
1.60
86
1.50
4
82
3
0
0
.
1
0
0
THP’s 9M14 results were below expectations, due to weaker-than- .
0
expected FFB production resulting in lower cost efficiency. We maintain 0
our SELL recommendation with a lower TP of MYR1.22 (from MYR1.40) 0
a 25% downside. Despite THP’s decent annual FFB expected
production growth of 10-15% over the next few years, we believe this
may not be enough to offset the impact of lower CPO prices.


3
2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.43m/0.13m
19.0
-25.1
1.61 - 2.17
22
884
Lembaga Tabung Haji
EPF
71.8
5.8
YTD
1m
3m
6m
12m
Absolute
(13.3)
(0.6)
(15.1)
(24.9)
(12.4)
Relative
(10.7)
(2.3)
(12.2)
(21.2)
(13.0)
Shariah compliant


2

.
2
0
.
1





Dry weather impact. TH Plantations’ (THP) 9M14 core net profit came
in below our and consensus expectations, at 54-56% of the respective
FY14 forecasts. The main discrepancy was the lower-than-expected
fresh fruit bunches (FFB) production growth of only 5.2% YoY in YTD
FY14 (vs management’s guidance of 10% growth and our projected 8%
for FY14), due to the delayed impact of the dry weather in Sarawak
experienced in February-May. This has resulted in lower cost efficiency
(YTD production cost climbed 21% YoY).
Core net profit up 40 YoY. THP’s 9M14 core net profit rose 40% YoY
while revenue grew 24%. The rise in topline was due to the 5.2% YoY
rise in FFB production, the 17% increase in mature hectarage and a 10%
YoY hike in crude palm oil (CPO) prices. FFB yields declined by 1.7
tonnes/ha YoY due to young areas coming into maturity, which bear
lower yields. At present, approximately 20% of THP’s matured area is in
its first year of maturity.
FFB production targets revised down. Management is in the midst of
revising down its FFB production targets, in view of the delayed impact
of the dry weather which it expects to start coming through more strongly
in 4Q14 and 1Q15. Initially, management targeted a FFB production
growth of 10% in FY14 and 26% in FY15. For FY14, management has
now lowered its FFB growth target to 5%, while FY15’s new target is yet
unknown. We are revising down our production growth targets to 5% for
FY14 (from 8%) and 14% for FY15 (from 16%) and lower our FY14-15
earnings forecasts by 13-19%. We also introduce our FY16 forecast.
Maintain SELL. We lower our TP to MYR1.22 (from MYR1.40), based
on an unchanged 16x CY15 target P/E. Despite THP’s decent expected
annual FFB production growth of 10-15% over the next few years, we
believe this may not be enough to offset the impact of lower CPO prices
given THP’s significant sensitivity to CPO prices, as every
MYR100/tonne decrease in CPO price could negatively affect the
company’s earnings by 8-10% annually.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
376
470
517
574
655
160
63
54
67
79
68.1
63.1
53.7
67.2
79.5
(45.4)
(7.4)
(14.9)
25.2
18.2
Hoe Lee Leng +603 9207 7605
Recurring EPS (MYR)
0.09
0.07
0.06
0.08
0.09
[email protected]
DPS (MYR)
0.05
0.03
0.03
0.04
0.05
Recurring P/E (x)
17.4
22.7
26.7
21.4
18.1
P/B (x)
1.06
1.21
1.18
1.15
1.11
10.2
10.0
7.7
6.9
2.8
1.7
1.8
2.4
2.8
EV/EBITDA (x)
14.9
16.7
14.6
12.9
11.9
18.3
5.5
4.5
5.5
6.3
24.1
54.4
61.2
65.3
64.9
(12.9)
(15.2)
0.0
P/CF (x)
Dividend Yield (%)
na
11
AMMB (AMM MK)
Buy (Maintained)
Financial Services - Banks
Target Price:
Price:
MYR7.45
MYR6.52
Macro
Risks
Underlying Trends Generally Positive
Growth
Value
AMMB (AMM MK)
7.40
102
7.20
99
7.00
96
6.80
94
6.60
91
6.40
88
6.20
18
16
14
12
10
8
6
4
2
85
Jul-14
Mar-14
Jan-14
0
0
.
2
0
0
AMMB’s 2QFY15 (Mar) results met our and consensus expectations. A .
0
much improved set of results together with low valuations means we 0
retain our BUY call, albeit with a revised TP of MYR7.45 (14% upside). 0
Underlying trends were generally positive this quarter, with 2QFY15 net
profit up 35% QoQ (underlying basis), driven by a combination of NIM
expansion, tight cost control and lower credit cost.


Sep-14
105
May-14
7.60
Nov-13
Vol m
Price Close

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
23.8m/7.35m
15.0
14.3
6.36 - 7.50
49
3,014
ANZ Bank
Amcorp Group
EPF
23.8
13.3
14.2
YTD
1m
3m
6m
12m
Absolute
(10.0)
(1.7)
(8.8)
(10.3)
(10.3)
Relative
(7.4)
(3.4)
(5.9)
(6.6)
(10.9)


Results in line. AMMB’s 2QFY15 (Mar) net profit of MYR446m (+1%
YoY, +35% QoQ, ex-lumpy items in 1QFY15) was within expectations,
with 1HFY15 net profit of MYR983m (-4% YoY, underlying basis)
accounting for 51% of our and consensus full-year net profit estimates.
An interim DPS of 12 sen (2QFY14: 7.2 sen, net) was declared.
2QFY15 highlights. Positives were: i) estimated 13bps QoQ (-6bps
YoY) expansion in net interest margin (NIM), aided by July’s 25bps
overnight policy rate (OPR) hike. Hence, net interest income rose 3%
QoQ despite the weak loan growth, ii) a 7% QoQ rise in underlying noninterest income, driven by higher forex and other income, iii) tight cost
control (-7% QoQ, -12% YoY), and iv) an improvement in asset quality,
leading to annualised credit cost of just 3bps in 2QFY15 (vs 1QFY15:
53bps; 2QFY14: 7bps). The main negative was the weak loan growth,
although partly deliberate. Deposit base also contracted, resulting in a
higher loan-to-deposit ratio (LDR).
Loans and deposits. Gross loans fell 1% QoQ (+1% YoY), partly due to
deliberate tightening of credit policies in the auto and non-residential
segments amid asset quality concerns as highlighted in the previous
briefing. Apart from that, corporate loans were down 2% QoQ due to the
rollout of a new, streamlined wholesale banking model. Wholesale
lending momentum has since improved post quarter-end. Deposits fell
2% QoQ and 3% YoY while current account and savings account
(CASA) deposits declined 9% QoQ (possibly due to lumpy corporate
balances) but were up 4% YoY. Overall, group LDR rose 80bps QoQ to
99.3% while CASA ratio fell 150bps QoQ to 20.1%.
Asset quality. Absolute gross impaired loans declined 6% QoQ and 7%
YoY, aided by higher write-offs while impaired loan formation
(annualised) was stable QoQ at around 204bps. Thus, the gross
impaired loan ratio improved by 8bps QoQ and 16bps YoY to 1.8%.
Forecasts and investment case. We trim our FY15-16 net profit
projections by 3-4% amid lower loan growth assumptions. We lower our
TP to MYR7.45 (from MYR8.00) but maintain our BUY call.
Shariah compliant
David Chong, CFA +603 9207 7618
[email protected]
Mar-13
Mar-14
Mar-15F
Mar-16F
Mar-17F
Net interest income (MYRm)
3,093
3,201
3,109
3,168
3,300
1,621
1,782
1,867
1,977
2,113
9.2
10.0
4.7
5.9
6.9
1,621
1,782
1,867
1,977
2,113
Recurring EPS (MYR)
0.54
0.59
0.62
0.66
0.70
DPS (MYR)
0.22
0.24
0.25
0.27
0.28
Recurring P/E (x)
12.1
11.0
10.5
9.9
9.3
P/B (x)
1.63
1.50
1.39
1.28
1.18
Net profit growth (%)
Dividend Yield (%)
3.4
3.7
3.8
4.1
4.3
14.0
14.1
13.7
13.4
13.2
Return on average assets (%)
1.3
1.4


2

.
2
0
.
2




1.4
1.4
1.4
(2.2)
(3.2)
(0.4)
12
Neutral (Maintained)
Target Price:
Price:
MYR20.70
MYR23.00
Macro
Risks
Weaker Manufacturing Contributions
Growth
Value
Price Close
26.0
106
25.0
102
24.0
99
23.0
95
22.0
92
21.0
88
20.0
85
19.0
3
81
0
0
.
2
0
0
KLK’s FY14 (Sep) results were within our expectations but below .
0
consensus. Stronger profits from the plantation division offset weaker 0
contributions from the manufacturing and property divisions. While we 0
like the company’s strong management and steady growth strategy, we
keep our NEUTRAL call with a revised SOP-based TP of MYR20.70 from
MYR21.30 (10% downside), as valuations remain fair at current levels.


2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
11.5m/3.57m
-0.9
-10.0
20.0 - 25.0
40
1,065
Batu Kawan Bhd
46.6
13.6

In line. Kuala Lumpur Kepong’s (KLK) FY14 profit was in line with our
expectations, but below consensus expectations, coming in at 82% of
FY14 forecasts. KLK declared a final net DPS of 40 sen, bringing FY14
net DPS to 55 sen (FY13: 50 sen), translating into a net payout of 59%
and a net yield of 2.4%.
Plantation unit the saviour. KLK’s FY14 core net profit grew 10.1%
YoY on the back of a 21.7% YoY rise in revenue. This was mainly due to
improved profitability at the plantation unit, which saw EBIT surging
28.3% YoY, buoyed by higher CPO (+5.3%) and palm kernel (PK)
(+43%) prices and higher FFB production (+3.5%), offset by weaker
contributions from its manufacturing division, due to negative margins at
the refineries and kernel crushing plants.
Forecasts. After updating our forecasts for FY14 results, we lower our
FY15-16 earnings forecasts by a slight 1.5-3% and introduce our FY17
forecasts.
Maintain NEUTRAL. With the seasonal peak season almost over, we
believe CPO prices have a window of opportunity to strengthen between
now and 1Q15, which would bode well for companies like KLK, as we
estimate every MYR100/tonne change in CPO price could affect its
earnings by 4-6% per annum. After updating for KLK’s latest net debt,
we lower our TP to MYR20.70 (from MYR21.30) and maintain our
NEUTRAL call.


2

.
2
0
.
2




Sep-13
Sep-14
Sep-15F
Sep-16F
Sep-17F
9,147
11,130
13,244
13,821
13,898
YTD
1m
3m
6m
12m
918
986
1,183
1,398
1,478
Absolute
(7.6)
13.7
(0.5)
(7.7)
(7.0)
918
990
1,183
1,398
1,478
Relative
(5.0)
12.0
2.4
(4.0)
(7.6)
(16.7)
7.9
19.5
18.1
5.8
Recurring EPS (MYR)
0.86
0.93
1.11
1.31
1.38
DPS (MYR)
0.50
0.55
0.65
0.70
0.65
Recurring P/E (x)
26.7
24.8
20.7
17.6
16.6
P/B (x)
3.26
3.17
2.98
2.76
2.54
P/CF (x)
19.0
32.2
20.6
15.4
12.7
2.2
2.4
2.8
3.0
2.8
EV/EBITDA (x)
14.9
13.9
12.1
10.4
9.9
12.5
12.9
14.8
16.3
15.9
7.3
19.7
22.2
20.1
14.3
(8.4)
(0.0)
0.0
Shariah compliant
Hoe Lee Leng +603 9207 7605
[email protected]
Dividend Yield (%)
13
Buy (from Neutral)
Consumer Non-cyclical - Food & Beverage Products
Target Price:
Price:
MYR5.74
MYR4.90
Macro
Risks
To Benefit From Low Raw Sugar Prices
Growth
Value
Price Close
5.30
105
5.20
103
5.10
100
5.00
98
4.90
96
4.80
94
4.70
91
4.60
2
1
1
1
1
1
89
0
0
.
2
0
0
We consider MSM’s 9M14 earnings to be in line, as 4Q14 could see a .
0
recovery in EBIT margins. While MSM still faces potentially declining 0
domestic volumes, we believe the absence of an LTC come 2015 and 0
the current low raw sugar prices would bode well for margins. We raise
our TP to MYR5.74 from MYR5.23 (17% upside) and upgrade to BUY. We
highlight MSM’s decent dividend yield of 4-5.5% per annum.

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.41m/0.13m
11.0
17.2
4.68 - 5.20
23
703
Felda Global Ventures
Koperasi Permodalan Felda
51.0
20.1
6.0
YTD
1m
3m
6m
12m
Absolute
(2.0)
(0.2)
3.2
(2.2)
(2.6)
Relative
0.6
(1.9)
6.1
1.5
(3.2)



In line. We consider MSM’s 9M14 net profit to be in line with our and
consensus expectations, making up 67-69% of FY14 forecasts. In 3Q14,
MSM utilised a larger amount of highly-priced long-term-contract (LTC)
raw sugar (50% of requirements, due to timing of shipments) vs the
normal average of 25-30%, which resulted in EBIT margins falling to
10.9% (from 17.1% in 2Q14 and 19.1% in 3Q13). LTC sugar is priced at
USD0.26/lb (vs current market price of USD0.16/lb). In 4Q14, the
amount of LTC raw sugar utilised should reduce by 67%, which could
push EBIT margins back to similar levels seen in 2Q14.
Key briefing highlights: i) total sales volume rose 2.2% in 9M14,
coming mainly from stronger industrial sales offset by lower domestic
and export sales, ii) the sugar import permit issue has worsened, with 32
permits issued in 3Q (vs 16 in 2Q14), meaning increasing cheap Thai
imports, and iii) raw sugar prices remain low at USD0.15-16/lb, which
management believes will remain low until 2H15. As such, MSM has
acquired more than 50% of its FY15 raw sugar requirements at these
low prices, which should bode well for its earnings in FY15, particularly if
there is a need to adjust selling prices downwards.
Forecasts. We maintain our FY14 earnings forecast but raise our FY15
forecast by 9.8% to take into account the current lower raw sugar prices,
which should bode well for MSM. We also introduce our FY16 forecast.
Risks. i) a worse-than-expected slowdown in domestic sugar demand,
ii) a spike in raw sugar prices, iii) a weak MYR vs USD, and iv) no LTC
for raw sugar.
Upgrade to BUY. Although MSM still faces the issue of potentially
declining domestic volumes due to the sugar import permit issue, we
believe the absence of an LTC come 2015 and the current low raw sugar
prices bode well for margins. We raise our TP to MYR5.74 (from
MYR5.23), based on a 15x CY15 P/E, which is in line with the stock’s
2-year historical average P/E. We highlight that MSM’s dividend yield is
also relatively decent at >4% per year.
Shariah compliant


2

.
2
0
.
2




Dec-12
Dec-13
2,301
2,202
1,926
1,716
1,803
202
255
250
269
302
202
251
250
269
302
(23.8)
24.3
(0.1)
7.5
12.4
Dec-14F
Dec-15F
Dec-16F
Hoe Lee Leng +603 9207 7605
[email protected]
Recurring EPS (MYR)
0.29
0.36
0.36
0.38
0.43
DPS (MYR)
0.19
0.22
0.20
0.22
0.25
Recurring P/E (x)
17.1
13.7
13.8
12.8
11.4
P/B (x)
1.97
1.86
1.75
1.66
1.56
P/CF (x)
58.5
10.1
8.8
8.8
9.9
3.9
4.4
4.1
4.5
5.0
EV/EBITDA (x)
10.2
8.3
8.0
7.0
6.1
11.8
14.1
13.1
13.3
14.1
Dividend Yield (%)
net cash
net cash
net cash
4.7
net cash
0.7
net cash
13.2
14
AirAsia X (AAX MK)
Sell (Maintained)
Transport - Aviation
Market Cap: USD455m
Target Price:
Price:
MYR0.57
MYR0.65
Macro
Risks
Still In Turbulence
Growth
Value
AirAsia X (AAX MK)
Price Close
1.10
106
1.00
96
0.90
86
0.80
76
0.70
66
0.60
70
56

50
40
30
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

10
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Tune Group
AirAsia
Datuk Kamarudin Meranun
7.56m/2.31m
4.3
-11.6
0.65 - 1.07
37
2,370
17.8
13.8
7.1


YTD
1m
3m
6m
12m
Absolute
(35.2)
(11.0)
(21.4)
(14.6)
(38.0)
Relative
(32.6)
(12.7)
(18.5)
(10.9)
(38.6)
3Q14 numbers below expectations. AirAsia X’s 9M14 net loss of
MYR340m (->100% YoY) came in below our and street estimates,
mainly due to declining yields as a result of airlines incidents. In 3Q14,
the overall yield as measured by revenue/revenue passengers per
kilometres (RPK) dropped by 15% YoY. This was coupled with a drop in
ancillary revenue per passenger of 6% YoY due to the change in the
composition of passengers. Its cost per average seat kilometre (ASK) for
the quarter, ie cost per available seat kilometre (CASK), rose by 13%
YoY, mainly due to an increase in staff headcount, aircraft fuel
expenses, maintenance as well as higher operating lease expenses on
the back of an increase in capacity of 24% YoY.
4Q yield may improve. Management guided that yields have been
improving post the MH17 incident and believes that yields in 4Q should
grow stronger. This, coupled with lower jet fuel costs, could lead to a
positive set of results for AirAsia X in 4Q14 and 2015, it added. AirAsia X
will continue the tactical redeployment of its aircraft, ie by wet-leasing
some to third parties, to improve overall income and maximise the
utilisation of its planes. It plans to consolidate its backroom operations
with AirAsia Group to improve productivity and margins. Management
also highlighted that it will defer its aircraft deliveries to manage capacity
growth in order to improve overall yields. It is confident about the outlook
for its current cash level and may not need to raise cash from the market
at this juncture – it has options to raise cash through debt (possibly via
convertible bonds) and plans to do a sale and leaseback of two of its
aircraft in FY15 to improve its cash position.
Earnings revision. We believe the airline industry may continue to face
challenges as competition in the market remains intense. Hence, we cut
our earnings forecasts to -MYR185m/-MYR165m (from -MYR138m/MYR12m) for FY14/FY15 respectively as we lower our capacity and
yield growth assumptions.
Maintain SELL. We maintain our SELL recommendation and cut our TP
to MYR0.57 (from MYR0.68), based on a 1.5x FY15F P/BV – in line with
global airlines’ average P/BV.
Shariah compliant
Jerry Lee 603 9207 7622
[email protected]
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
1,862
1,967
2,308
2,947
3,210
(97)
34
(88)
(185)
(165)
(106)
(6)
(6)
(185)
(165)
(185.6)
(94.2)
(7.4)
3164.7
(10.6)
(0.07)
(0.00)
(0.00)
(0.08)
(0.07)
Recurring EPS (MYR)
Recurring P/E (x)
P/B (x)
P/CF (x)
EV/EBITDA (x)
na
1.76
na
59.8
na
1.66
1.24
na
13.7
na
na
1.45
na
1.72
8
11
115
19.9
25.1
33.7
(17.0)
(16.2)
6.0
(9.7)
(16.1)
212.9
209.8
140.2
189.5
245.8
6.8
(1260.8)


3

.
3
0
.
2
0
0
.
1
0
0
As AirAsia X’s 9M14 earnings were below expectations, we maintain .
0
SELL with a lower TP of MYR0.57 (from MYR0.68, 1.5x FY15F P/BV, 0
11.6% downside). Earnings continued to come under pressure due to 0
weakening passenger yields and escalation of costs. Airline incidents
compounded the already intense operating environment but
management is confident that the situation will improve.
60
20




15
Sell (from Neutral)
Malaysia - Small & Mid Caps
Market Cap: USD189m
Target Price:
Price:
MYR1.76
MYR2.02
Risks
Double Whammy
Growth
Value
Price Close
2.70
104
2.50
97
2.30
90
2.10
83
1.90
76
1.70
3
69
0
0
.
1
0
0
1QFY15 results were below our expectations. Downgrade to SELL (from .
0
Neutral) with a lower SOP-based MYR1.76 TP (from MYR2.10, a 12.9% 0
downside). Its MYR11m core net profit – accounting for around 15% of 0
our full-year target – fell 29% YoY on lower contribution from property
development and apparel retailing. We are lowering our FY15 revenue
and net profit forecasts by 12% and 19% respectively.

2
2

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
1
1
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Wing Tai Holdings Ltd
0.31m/0.10m
-12.9
-12.9
1.85 - 2.57
17
315
60.8

Below expectation. Wing Tai Malaysia’s (Wing Tai) 1QFY15 (Jun)
bottomline missed our target. Its MYR11m core net profit – accounting
for about 15% of our FY15 target of MYR11m – fell 29% YoY. The lower
performance was mainly due to less contribution from both the
company’s property development and apparel retailing businesses. On a
YoY basis, Wing Tai’s revenue was flat at MYR83m while its PBT rose
72% to MYR36m. There was an exceptional gain of MYR20m arising
from the company’s disposal of its 25% stake in Indonesian joint-venture
(JV) company PT Windas Development. After stripping off the one-off
gain, PBT was 25% lower at MYR16m.
Double whammy. Profit contributions from Wing Tai’s two core
businesses, namely property development and apparel retailing, were
lower at MYR9m and MYR5m respectively. For its property segment, this
was mainly due to lower sales contribution from its Nobleton Crest, BM
Utama and Jesselton Hills projects. Meanwhile, we believe that Wing
Tai’s apparel retailing business will continue to face eroding margins due
to intense competition and promotion as well as higher operating costs.
Downgrade to SELL (from Neutral) with a MYR1.76 TP (from
MYR2.10). In view of the lower-than-expected results, we reduce our
FY15 revenue and net profit forecasts by 12% and 19% respectively.
Hence, we are lowering our SOP-based TP on the stock to MYR1.76.
This was calculated by applying 11x FY15F P/E to its property
development unit and 9x FY15F P/E to its retail segment.
YTD
1m
3m
6m
12m
Absolute
(9.4)
7.4
(3.8)
(7.3)
(19.9)
Relative
(6.2)
6.4
(0.7)
(3.2)
(20.8)
Shariah compliant


2

.
2
0
.
1




Macro
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
603
435
394
411
459
131
71
60
65
75
131
71
60
65
75
54.8
(46.2)
(15.5)
9.1
15.7
Recurring EPS (MYR)
0.42
0.22
0.19
0.21
0.24
DPS (MYR)
0.10
0.10
0.10
0.10
0.10
4.8
9.0
10.7
9.8
8.4
0.63
0.61
0.59
0.57
0.55
Recurring P/E (x)
Chaw Sook Ting +603 9207 7604
P/B (x)
[email protected]
P/CF (x)
14
8
106
8
6
5.0
5.0
5.0
5.0
5.0
EV/EBITDA (x)
4.03
6.98
8.22
7.19
5.82
13.7
6.9
5.6
5.9
6.6
21.0
18.0
21.1
17.0
11.4
0.0
0.0
0.0
Dividend Yield (%)
16
Buy (Maintained)
Property - Real Estate
Target Price:
Price:
SGD0.91
SGD0.51
Macro
Risks
Overseas Diversification Bearing Fruits
Growth
Value
Relative to Straits Times Index (RHS)
0.80
168
0.75
158
0.70
148
0.65
138
0.60
128
0.55
118
0.50
108
0.45
98
0.40
16
14
12
10
8
6
4
2
88
0
0
.
2
0
0
We hosted Oxley to a luncheon following its 1QFY15 results. Maintain .
0
BUY and SGD0.91 TP (78.4% upside). Management said its healthy 0
earnings stream was from >SGD3bn in Singapore presales while 0
overseas launches were progressing well too with steady take-ups in
London and Cambodia booking SGD1.6bn in sales. Its high gearing was
a talking point, but we expect this to steadily decline with ongoing
progressive collections.


Sep-14
Jul-14
Mar-14
May-14
178
Jan-14
0.85
Nov-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Shareholders (%)
Bullish Investment Pte Ltd
0.56m/0.44m
78.4
78.4
0.46 - 0.82
17
2,948

47.1

YTD
1m
3m
6m
12m
Absolute
(10.5)
(4.7)
(19.1)
(35.0)
6.3
Relative
(14.3)
(8.5)
(18.4)
(35.8)
3.6
A slow start, but solid earnings visibility ahead. Oxley Holdings
(Oxley) reported 1QFY15 (Jun) net profit of SGD19.6m (-92% YoY) due
to a high base previously, which was boosted by the completion of the
Oxley Bizhub. During the quarter, the group booked contributions from its
Singapore projects, most of which were substantially sold. We expect
these projects to deliver more than SGD700m of profits in the course of
the next two years. Robinson Square is slated for completion next
quarter while ongoing construction progress for Oxley’s high-yielding
mixed development projects like KAP, Midtown and NEWest will
underpin our SGD112m FY15 forecast.
Overseas projects gaining momentum. Following the recent launch of
Royal Wharf Phase 2 in London, UK, Oxley has sold more than 1,400
units in the 3,300-unit development and generating presales of
GBP700m. In Cambodia, the group has sold more than half of the
residential/small office home office (SOHO) units in its The Bridge
flagship project, generating sales of USD170m. The next major launch is
Oxley’s KLCC project after legal completion of the land purchase in Jan
2015. With the acquisition of land development rights in Myanmar, the
group has now extended its reach to five overseas countries.
A growing income stream. Oxley’s first hospitality project, the PINES,
will provide the group with a stream of recurring income when completed
in 2016. Recently, it completed the purchase of another commercial
development, Chiba Port Square, in Japan’s Chiba Prefecture. This will
further boost its recurring income.
Maintain BUY. We continue to like Oxley for its dynamic management
and solid earnings visibility. Good execution of overseas projects will
drive the next round of NAV and share price re-rating, in our view.
Jun-12
Jun-13
Jun-14
Jun-15F
Jun-16F
159
458
1,074
1,453
1,083
Reported net profit (SGDm)
17
69
287
116
198
Recurring net profit (SGDm)
11
62
262
112
194
1.5
450.0
321.2
(57.3)
73.4
0.00
0.02
0.09
0.04
0.07
133
24
6
13
8
P/B (x)
10.7
6.3
3.7
2.6
2.0
12.4
36.5
88.3
23.4
29.7
Return on average assets (%)
1.4
3.2
9.4
3.2
4.6
506.2
392.9
415.0
168.3
171.5
0.0
0.0
Total turnover (SGDm)
Shariah compliant
Goh Han Peng +65 6232 3893
[email protected]


2

.
2
0
.
2




Recurring EPS (SGD)
Recurring P/E (x)
17
Buy (Maintained)
Industrial - Misc. Manufacturer
Market Cap: USD413m
Target Price:
Price:
SGD0.87
SGD0.66
Macro
Risks
YotaPhone 2 Meets Xi Jinping
Growth
Value
Price Close
0.80
125
0.75
118
0.70
110
0.65
103
0.60
95
0.55
88
0.50
3
80
2

Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.24m/0.19m
28.8
32.0
0.53 - 0.78
10
818
Yao Hsiao Tung
Molex Incorporate
Hi-P International
60.2
21.8
8.4

Co-operation with China. YotaPhone 2, the first smartphone with dualscreen, will be available in most parts of the world by 1Q15. It consists of
a LCD screen on the front and a Kindle-like screen on the back, with
improved sensitivity for a more pleasant reading experience. We believe
YotaPhone will be a key player in the Chinese market in the next few
years, especially judging from how resolute President Putin was in
confirming that his country will cooperate with China on YotaPhone.
Seizing market share from Kindle. Before the arrival of YotaPhone 2,
consumers did not have a choice of a mobile phone model with an E-ink
display, or better known as the Kindle screen. The older version is only
available in Russia, but with the upcoming worldwide launch of
YotaPhone 2, we believe it will be able to tap into the current target
market of Kindle, which should also benefit Hi-P indirectly.
Bright outlook ahead. Given its robust pipeline of projects, supported
by the ramping up of Xiaomi – the world’s third-largest mobile phone
maker – and the upcoming worldwide launch of YotaPhone 2, we believe
Hi-P is poised for a turnaround and reinstate our bullish view of a record
4Q14. With a new factory in place to accommodate a shift in its product
mix from plastic to metal components, we believe the gloomy days
impacted by Motorola and Blackberry are over, with a brighter outlook
ahead. As a result, we expect a robust FY15 with an over 200% NPAT
growth up to approximately SGD40m, which may bring down its
recurring P/E to 13.5x. We think the share price is very attractive at
current levels, especially given the company’s potential turnaround.
Maintain BUY with our TP unchanged at SGD0.87, based on 1.2x peer
average FY14 P/BV, implying a 32% upside from current levels.
YTD
1m
3m
6m
12m
Absolute
12.0
4.0
(13.8)
20.2
5.6
Total turnover (SGDm)
Relative
8.2
0.2
(13.0)
19.4
2.6
Shariah compliant
Jarick Seet +65 6232 3891
[email protected]
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
1,204
1,167
1,262
1,099
1,387
Reported net profit (SGDm)
45.0
17.9
6.4
12.3
40.1
Recurring net profit (SGDm)
45.0
17.9
6.4
12.3
40.1
(33.1)
(60.1)
(64.4)
91.9
226.8
Recurring EPS (SGD)
0.05
0.02
0.01
0.01
0.05
DPS (SGD)
0.02
0.01
0.02
0.02
0.04
Recurring P/E (x)
12.0
30.1
84.6
44.1
13.5
P/B (x)
0.91
0.93
0.90
0.91
0.90
P/CF (x)
5.33
6.54
3.47
4.06
Terence Wong CFA +65 6232 3896
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
na
3.7
1.8
3.1
3.1
6.1
2.77
5.68
5.08
4.28
3.10
7.7
3.1
1.1
2.1
6.7
net cash net cash net cash net cash net cash
(7.1)
21.4


2

.
2
0
.
3
0
0
.
2
0
0
At the APEC meeting in Beijing, Russian President Vladimir Putin gave .
0
his Chinese counterpart Xi Jinping a dual-screen YotaPhone 2, hinting a 0
potential future cooperation on this device, which will be officially 0
launched in Russia and Europe in December, then in China and the SEA
in 1Q15. As its original design manufacturer (ODM) partner, Hi-P should
stand to benefit from the ramping up of this potentially revolutionary
phone. Maintain BUY and SGD0.87 TP (32% upside).

2




18
Midas (MIDAS SP)
Neutral (from Buy)
Market Cap: USD281m
Target Price:
Price:
SGD0.33
SGD0.30
Macro
Risks
More Reasons To Be Cautious Than Optimistic
Growth
Value
Midas (MIDAS SP)
Price Close
0.57
111
0.52
101
0.47
91
0.42
81
0.37
71
0.32
61
0.27
30
51
25


15
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-13
Vol m
10

Source: Bloomberg
1.50m/1.19m
50.0
10.0
0.30 - 0.52
79
1,218
Sr. management
Dimensional Fund
Ecclesiastical Insurance
20.8
2.5
1.0


China railway order flows to resume. China’s National Development
and Reform Commission has approved new railway construction projects
worth ~CNY1,000bn in Oct-Nov 2014. While these projects should keep
Midas’ orderbook filled for 2-3 years, the timing of orders and its delivery
schedule (and hence, revenue recognition) would be tough to predict.
Tough lessons learnt from high dependence on railways. Almost all
of its current CNY1.1bn orderbook is for the supply of parts to the railway
sector, which made up for 55-75% of its revenue over 2010-2013. While
a weak inflow of railway orders over the last 2-3 years has forced Midas
to diversify away from the sector, this also resulted in high capex,
increased leverage and rising interest costs amidst weak growth.
Diversification has risks. Midas will start producing aluminium plates
and sheets at its 100,000 tonnes per annum (tpa) plant in 2015.
However, the segment is highly competitive and we believe Midas will
have to keep margins lower initially to build a market presence, and
expect this segment to contribute 13% of gross profit in 2015.
Better plays on China railway sector. Winston Cao, our Hong Kongbased analyst views China Railway Group (390 HK, BUY, TP: HKD6.55)
and China CNR (6199 HK, BUY, TP: HKD8.47) as better plays on rising
domestic railway fixed asset investments. Both stocks offer higher ROE
and are trading at lower P/Es compared with Midas (see Error!
Reference source not found.).
Valuations are rich. At 0.6x 2015 P/BV, Midas is trading at the bottom
of its historical P/BV valuation. However, this valuation seems justified by
its dismal 1.6% 2015 ROE. Our SGD0.33 TP is based on a 0.65x 2015
P/BV, which implies a 42.0x 2015 P/E and 1.0x 2015 PEG.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
870
1,148
1,286
1,739
2,367
Reported net profit (CNYm)
27.8
47.7
32.5
46.3
81.2
Recurring net profit (CNYm)
27.8
47.7
32.5
46.3
81.2
(85.1)
71.3
(31.9)
42.5
75.4
Recurring EPS (CNY)
0.02
0.04
0.03
0.04
0.07
DPS (CNY)
0.04
0.02
0.02
0.02
0.04
Shekhar Jaiswal +65 6232 3894
Recurring P/E (x)
61.9
36.1
53.0
37.2
21.2
[email protected]
P/B (x)
0.58
0.58
0.58
0.58
0.57
YTD
1m
3m
6m
12m
Absolute
(41.2)
1.7
(25.9)
(33.3)
(40.0)
Relative
(45.0)
(2.1)
(25.2)
(34.1)
(42.7)
Total turnover (CNYm)
P/CF (x)
Dividend Yield (%)
EV/EBITDA (x)
na
6.25
na
na
na
2.7
1.7
1.2
1.7
3.0
11.6
13.6
14.7
13.8
12.6
0.9
1.6
1.1
1.6
2.7
28.5
47.8
83.6
98.9
112.5
(11.1)
(42.4)
(58.3)


3

.
3
0
.
2
0
0
.
2
0
0
Midas reported improved operations, but its 9M14 profit fell 19% YoY to .
0
CNY21m amidst rising interest costs. Recovering railway order inflows 0
and the start of its new plates & sheets business could translate into 0
43% YoY growth in 2015. However, downside risks from delays in the
start of the new business, which is also highly competitive and may
likely yield lower margins, as well as expensive valuations, have led us
to resume coverage with NEUTRAL and a SGD0.33 TP (10% upside).
20
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)




19
Sector Update, 19 November 2014
Industrial Estate
Neutral (Maintained)
Macro
Risks
3Q14 Earnings Have Yet To Recover
Growth
Value






3

3

1
2
3Q14 and 9M14 revenue
THBm
3Q14
YoY
QoQ
9M14
YoY
AMATA
891
-62%
39%
3,558
-35%
HEMRAJ
864
-56%
-41%
5,150
-19%
ROJNA
4,027
91%
61%
8,607
51%
TICON
340
-21%
18%
1,350
32%
WHA
145
4%
20%
382
-84%
Total
6,267
-10%
25%
19,047
-9%
3Q14 earnings continued to weaken QoQ, leading to a 12% YoY fall in
9M14 earnings. Rojana saw a sharp turnaround so far while Amata’s
and Hemaraj’s quarterly earnings were volatile. Ticon and WHA’s
earnings are set to peak in 4Q14 from asset sale gains to REITs. We
expect an unexciting earnings outlook for 2014-2015, but each stock
has its own particular catalyst. Amata is our Top Pick, as it is trading at
a deep -1SD discount to its long-term mean P/BV.

Source: Company data
3Q14 and 9M14 EBITDA
THBm
3Q14
YoY
QoQ
9M14
YoY
AMATA
361
-64%
75%
1,349
-41%
HEMRAJ
367
-58%
-43%
2,197
-19%
ROJNA
849
462%
76%
1,647
n.a.
TICON
213
-26%
5%
865
-10%
WHA
140
24%
27%
363
-12%
Total
1930
-21%
17%
6,421
0%

3Q14 and 9M14 net profit
THBm
3Q14
YoY
QoQ
9M14
YoY
AMATA
137
-78%
n.a.
558
-61%
HEMRAJ
478
-24%
-53%
2,537
22%
ROJNA
370
n.a.
612%
343
n.a.
TICON
17
-80%
240%
166
-67%
WHA
5
-83%
-82%
65
-63%
Total
1,007
-19%
-8%
3,669
-12%


9M14 net profit as a % of full-year forecast
THBm
AMATA
9M14
2014F
9M14 % of
2014F
558
1,147
49%
2,537
3,323
76%
ROJNA
343
770
45%
TICON
166
1,287
13%
65
1,303
5%
Total
3,669
7,830
Source: Company data, RHB/consensus
47%
HEMRAJ
WHA
Wanida Geisler +66 2862 9748
[email protected]

3Q14 sectoral revenue and EBITDA improved 25% and 17% QoQ,
respectively. All developers except Hemaraj Land and Development
(Hemaraj) (HEMRAJ TB, NEUTRAL, TP: THB4.50) saw meaningful
improvements in their revenues and EBITDA. Rojana Industrial Park
(Rojana) (ROJNA TB, UNDER REVIEW) was the best performer in
3Q14 with revenue growth of 61% QoQ and EBITDA growth of 76%
QoQ. This was on more power income contribution from small power
producer (SPP) plant Phase II while sales of land in Prachinburi were
realised for the first time. Amata (AMATA TB, BUY, TP: THB21.00) also
realised more sales in 3Q14 (see Figure 1).
Sectoral earnings remain weak. 3Q14 sectoral earnings slipped 8%
QoQ. Rojana, Amata and Ticon Industrial Connection (Ticon) (TICON
TB, NEUTRAL, TP: THB19.50) were the top three best performers.
Hemaraj’s earnings plunged from their peak in 1Q14 with fewer land
sales. WHA (WHA TB, TRADING BUY, TP: THB38.00) also performed
poorly over the past nine months.
9M14 earnings slipped 12% YoY. Rojana saw a sharp turnaround in
3Q14, driving its 9M14 net profit to THB343m (9M13: THB41m net loss).
Hemaraj’s impressive 1H14 earnings helped to boost its 9M14 net profit
22% YoY to THB2.54bn. Amata, Ticon and WHA had weak performance
thus far.
Quarterly earnings generally peak in 4Q. Gains from sale of assets
into newly-established REITs should help drive a strong 4Q earnings
recovery for Ticon and WHA. We note that Ticon’s and WHA’s 9M14 net
profits accounted for only 13% and 5% of our full-year forecasts
respectively. Given that 9M14 sectoral earnings accounted for 47% of
our full-year estimate, we may make another round of earning
adjustments.
Unexciting earnings outlook for 2014-2015 but each stock has its
own catalyst. Currently, we forecast sectoral earnings to drop 16% YoY
in 2014 and stage a modest recovery of 10-12% YoY next year.
Industrial land sales have yet to recover despite a pickup in investment
value applied for Board of Investment privileges – an indicator of direct
investment flow – after seeing a new government installed.
Nevertheless, we believe that each stock has its own catalyst. Rojana’s
core earnings are set to normalise this year after it was hit hard by floods
in end-2011. WHA’s deal to take over Hemaraj is expected to be
finalised by end-1Q15. Amata is looking forward to monetise its rental
assets into REITs and list its subsidiary, Amata VN, next year.
P/E (x)
Target
Amata Corporation
THB15.90
THB21.00
12.9
1.7
2.7
BUY
THB4.44
THB4.50
12.4
2.6
4.4
NEUTRAL
Ticon Industrial Connection PCL
THB19.80
THB19.50
15.2
1.8
5.1
NEUTRAL
WHA Corp PCL
THB39.25
THB38.00
23.7
6.5
1.7
TRADING BUY
Dec-15F Dec-15F
Yield (%)
Price
Hemaraj Land & Dev
P/B (x)
Com pany Nam e
Dec-15F
Rating
20
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. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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Holdings Pte
Ltd (a PCL)
subsidiary of Deutsche Bank Group). DMG & Partners Securities
OSK Securities
(Thailand)
Pte Ltd is a Member of the Singapore Exchange Securities Trading
Limited.
10th Floor,
Sathorn Square Office Tower
98, North Sathorn Road,Silom
Bangkok 10500
DMG & Partners Securities Pte Ltd and their associates, directors,Bangrak,
and/or employees
may have positions in, and may effect transactions in the securities
Thailand
covered in the report, and may also perform or seek to perform broking and
other corporate finance related services for the corporations whose securities
Tel: +(66) 2 862report.
9999
are covered in the report. This report is therefore classified as a non-independent
Fax : +(66) 2 108 0999
As of 19 November 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary
positions in the subject companies, except for:
a)
As of 19 November 2014, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except
for:
a)
DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)
22

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