Regional Daily Ideas Troika Top Stories

Transcription

Regional Daily, 17 November 2014
5
Regional Daily
Ideas Troika
Top Stories
Samart Corp PCL (SAMART TB)
Communications - Telecommunications
TAKE PROFIT THB32.80 TP: THB34.50
Mkt Cap : USD1,005m
Pg2
Samart Corp’s net profit declined to THB350.9m (-14.8% QoQ) mainly due to
low seasonality in its handset business and a delay in Set Top Box (STB)
coupon. Given the share price has increased 123% ytd and is now trading at
15.5x FY15 P/E, we downgrade to Take Profit from Buy.
Analyst: Veena Naidu ([email protected])
Dialog (DLG MK)
Energy & Petrochemicals - Oil & Gas Services
BUY MYR1.56 TP: MYR2.00
Mkt Cap : USD2,298m
Pg3
We are positive on the green light received by Dialog to develop the LNG
phase of its mega Pengerang Terminal project, though significant earnings
accretion will only be in FY18. Maintain BUY with adjusted TP MYR2.00
Analyst: Kong Ho Meng ([email protected])
Other Key Stories
Malaysia
Petronas Gas (PTG MK)
Pg4
Energy & Petrochemicals - Downstream Products
NEUTRAL MYR21.66 TP: MYR21.98
KKB Engineering (KKB MK)
Construction & Engineering - Construction
SELL MYR1.96 TP: MYR1.38
Thailand
Asia Aviation (AAV TB)
Transport - Aviation
SELL THB4.18 TP: THB3.01
Nok Airlines (NOK TB)
NEUTRAL THB11.90 TP: THB12.50
HongKong
Strategy - Hong Kong
Pg5
Embarking On Pengerang Regasification Project
Analyst: Joshua Ng ([email protected])
Waning Hope On O&G Contract Wins
Analyst: Ng Sem Guan, CFA ([email protected])
Pg6
Bracing For a Robust 4Q14
Analyst: Ahmad Maghfur Usman ([email protected])
Pg7
Higher-Than-Expected Unit Costs Widen Losses
Analyst: Ahmad Maghfur Usman ([email protected])
Pg8
Shanghai/HK Stock Connect Launch
Analyst: Kong Yong Ng ([email protected])
See important disclosures at the end of this report
Powered by EFATM Platform
1
Results Review, 14 November 2014
Samart Corp PCL (SAMART TB)
Take Profit (from Buy)
Communications - Telecommunications
Market Cap: USD1,005m
Target Price:
Price:
THB34.50
THB32.80
Macro
Risks
9M14 Earnings Increased 6% YoY
Growth
Value
Samart Corp (SAMART TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
37.0
174
32.0
154
27.0
134
22.0
114
17.0
94
12.0
60
74
50
40
20
Sep-14
Jul-14
May-14
Mar-14
Jan-14
10
Nov-13
Vol m
Samart Corp’s 9M14 earnings rose 6.0% YoY to THB1.16bn.
We revise our call to TAKE PROFIT from Buy, with an
unchanged 12-month TP of THB34.50 (5.3% upside) based
on a 16.2x blended P/E. While 9M14 earnings accounted for
65.6% of our full-year forecast, we expect its earnings to
pick up substantially in 4QFY14, supported by: i) the big
smartphone order from DTAC, ii) higher consumer spending
due
to the festive
season,
and
revenue(-14.8%
from sale
of Samart
set 3QFY14
net profit
declined
to iii)
THB350.9m
QoQ).
top Corp’s
boxes(Samart)
(STBs).
sales revenue declined to THB5.43bn (-15.4% QoQ) in
3QFY14 mainly due to low seasonality in its handset business and the
delay in distributing STB’s coupon. Handset sales revenue declined
22.7% QoQ while ICT solution business revenue declined slightly by
1.85% QoQ in 3QFY14. Its EBIT fell 18.5% QoQ to THB637.2m as GPM
remained stable, while sales, general and administrative (SG&A)
expenses remained relatively stable in 3QFY14.

30
Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Vilailuck International Holding
Co.,
Ltd.
Mr. Watchai
Vilailuck
Mr. Charoenrath Vilailuck
252m/7.80m
-31.7
5.3
14.0 - 34.0
51
1,007
17.4
12.0
11.9
Share Performance (%)






Handset sales dropped in 3QFY14 but we expect it to pick up in
4QFY14. Although the company’s total handset unit sales declined to
0.9m units (-23.1% QoQ) in 3QFY14, we expect total unit sales to pick
up substantially in 4QFY14 as: i) we expect consumer spending to pick
up due to festive season in 4QFY14 and ii) the company has delivered
500,000 units of smartphones worth THB637m in revenue to Total
Access Communication (DTAC TB, BUY, TP: THB138) in early 4Q14.
Moreover, we expect STB sales to contribute THB1.03bn in revenue in
4QFY14, assuming the company sells 1.5m of STBs at THB690/unit.
ICT solutions business flat. ICT revenue declined to THB1.54bn in
3QFY14 (-1.8% QoQ) as all government projects were delayed due to
the political unrest. Note that we assume flat earnings growth in ICT
solution business for FY15.
Revised to TAKE PROFIT. Given that the share price has increased
123% YTD and is now trading at 15.5x FY15 P/E (around 2SD above its
average 8-year mean), we believe the stock has factored in most of the
positive news flow on its record-high earnings this year. As such, we
revise the stock to TAKE PROFIT with an unchanged TP of THB34.50,
based on a blended P/E of 16.2x.
YTD
1m
3m
6m
12m
Absolute
121.3
0.8
40.6
65.4
68.8
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
101.0
(0.5)
39.5
51.8
57.6
Total turnover (THBm)
19,767
16,733
22,315
27,963
29,288
Reported net profit (THBm)
836
1,084
1,468
1,776
2,120
Recurring net profit (THBm)
836
1,084
1,468
1,776
2,120
Recurring net profit growth (%)
33.1
29.6
35.5
21.0
19.4
Recurring EPS (THB)
0.85
1.10
1.47
1.77
2.12
DPS (THB)
0.75
0.61
0.81
0.89
1.06
Recurring P/E (x)
38.5
29.9
22.2
18.5
15.5
P/B (x)
6.88
6.00
5.21
4.56
3.98
7.3
15.7
34.0
19.7
2.3
1.8
2.5
2.7
3.2
EV/EBITDA (x)
18.6
17.8
12.6
10.0
9.3
Return on average equity (%)
18.4
21.5
25.1
26.3
27.5
124.8
120.9
94.9
113.7
103.1
0.7
4.7
Shariah compliant
Veena Naidu License No. 24418, 66 2862 9752
[email protected]
Chun Phokaisawan +66 2862 2029
P/CF (x)
[email protected]
Dividend Yield (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
na
2


3

.
2
0
.
2
0
0
.
3
0
0
.
0
0
0
Corporate News Flash, 17 November 2014
Dialog (DLG MK)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Target Price:
Price:
MYR2.00
MYR1.56
Macro
Risks
Green Light for Pengerang LNG
Growth
Value
Dialog (DLG MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
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
We are positive on the green light received by Dialog to develop a key .
0
phase of its mega Pengerang Terminal project - dedicated for LNG 0
storage, trading and supply to the requirements of the Pengerang 0
Integrated Complex. We don’t expect any impact to our 3-year earnings
forecast, given its long development period. Maintain BUY, with revised
MYR2.00 TP (28.2% upside) to account for our new oil price forecast.

Details of the shareholders’ agreement. Dialog’s wholly owned
subsidiary, Dialog LNG SB, inked a shareholders’ agreement with
Petronas Gas (PTG MK, NEUTRAL, TP: MYR21.98) on 14 Nov, to
undertake a MYR2.7bn development of Liquefied Natural Gas (LNG)
regasification facilities. The development comprised a regasification unit
and two units of 200,000 m³ LNG storage tanks. The tanks will have
initial send out capacity of 3.5m tonnes per annum. Dialog expects its
stake in the JV, Pengerang LNG (Two) SB (PLNG-2), to dilute to 25%
from 100% previously, while Petronas Gas will acquire 65% of PLNG-2
and Johor State for the remainder 10% of the special purpose vehicle.
According to Petronas Gas, 4Q17 is the targeted commercial operation.

Our view. This is another positive development for Dialog’s long-term
recurring income stream, as it marks at least 2 out of 3 of its key phases
for the mega Pengerang Terminal projects that have been given the
green light. The third phase, in which the company expects to see full
development by mid-2018, will be similar to PLNG-2 in the sense that
both are dedicated for the Refinery And Petrochemical Integrated
Development (RAPID). Nonetheless, given the long development period,
we do not expect significant earnings accretion until late 2017 (FY18).
250
200
150
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
100
50
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Shareholders (%)
EPF
Azam Utama
Wide Synergy
14.9m/4.59m
18.6
28.4
1.45 - 1.93
59
4,931
10.6
9.3
9.1


2

.
1
0
.
2





Maintain BUY, SOP TP adjusted to MYR2.00 (from MYR2.25). We
reevaluated our SOP to take into account i) our current oil price forecast
of USD90-100/bbl, ii) a 25% stake in PLNG2, and iii) lower P/E multiple
to reflect current O&G sentiment. Our FY16F forecast is reduced by 2%
as lower oil prices will have direct impact on Dialog’s upstream activities.
While the stock will be increasingly driven by offshore developments, we
believe current levels do not reflect its defensive nature in its locational
advantage and concession-nature of its tank terminal/ logistic business.
Risk to our valuation would be worse-than-expected costs, as the
company is in the midst of an expansion.
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
2,238
2,552
3,004
4,097
5,364
Reported net profit (MYRm)
193
191
246
322
437
Recurring net profit (MYRm)
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
Kong Ho Meng +603 9207 7620
Recurring P/E (x)
43.2
42.8
33.8
25.9
19.1
[email protected]
P/B (x)
6.15
5.34
4.88
4.38
3.85
P/CF (x)
26.6
97.4
18.9
23.4
18.8
1.0
0.9
1.2
1.5
2.1
EV/EBITDA (x)
19.7
18.5
15.5
12.6
10.3
15.2
13.1
15.1
17.8
21.5
3.6
23.8
49.7
48.4
46.0
(10.1)
(5.1)
7.5
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
Total turnover (MYRm)
Dividend Yield (%)
3
Corporate News Flash, 17 November 2014
Neutral (Maintained)
Energy & Petrochemicals - Downstream Products
Target Price:
Price:
MYR21.98
MYR21.66
Macro
Risks
Embarking On Pengerang Regasification Project
Growth
Value
Price Close
26.0
106
25.0
103
24.0
99
23.0
96
22.0
93
21.0
89
20.0
7
86
0
0
.
2
0
0
Petronas Gas is embarking on the MYR2.7bn Pengerang regasification .
0
terminal project. While we are positive on the news, we maintain our 0
NEUTRAL call, earnings forecasts and TP of MYR21.98 (1.5% upside), 0
as the project will only start contributing from FY18. We believe the
market has priced in near-term earnings catalysts, ie contributions from
a new power plant in Sabah and a regasification terminal in Melaka.

6
5
4
3
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2
Source: Bloomberg

Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Petroliam Nasional
EPF
Kumpulan Wang Persaraan
29.9m/9.23m
-12.9
1.5
21.1 - 24.9
21
1,979
60.7
13.7
5.3


2

.
1
0
.
1





Pengerang regasification project is good to go. Petronas Gas has
decided to go ahead with the MYR2.7bn regasification terminal project at
the Pengerang Deep Water Terminal, which is an integral part of the
MYR89bn Refinery and Petrochemical Integrated Development (RAPID)
project in Pengerang, Johor. The project will be carried out via a
65:25:10 JV called Pengerang LNG (Two) SB between Petronas Gas,
Dialog Group (DLG MK, BUY, TP: MYR2.00) and the Johor state
government. Petronas Gas’ share of the project cost is MYR2bn.
Construction for the plant with an annual capacity of 35m tonnes will
start in 2Q15 with a targeted commercial operations date by 4Q17.
Petronas Gas has awarded a MYR1.5bn engineering, procurement,
construction and commissioning contract for the plant to a SamsungWhessoe-STS-SCTKL consortium. Separately, Petronas Gas has
entered into heads of agreement with Linde (M) SB to “pursue possibility
of the development” of an air separation unit on a JV basis in
Pengerang, to be operational by 4Q18.
Forecasts. We are positive on Petronas Gas’ latest venture that will
underpin its earnings growth over the longer term. The MYR2bn capital
outlay will result in Petronas Gas having a net debt and gearing of
MYR1.9bn and 0.18x respectively that are still highly manageable, from
a net cash of MYR69m as at end-3Q14. We maintain our earnings
forecasts as the project will only start contributing from FY18.
Maintain NEUTRAL. We believe the market has priced in near-term
earnings catalysts of Petronas Gas, ie contributions from a new 300MW
power plant in Kimanis, Sabah, and a regasification terminal in Sg
Udang, Melaka. However, its long-term outlook remains favourable,
backed by continued industrialisation in Malaysia, and hence rising
demand for gas. We maintain our SOP-based TP of MYR21.98 (see
Figure 1).
YTD
1m
3m
6m
12m
Absolute
(10.8)
2.2
(4.6)
(8.2)
(4.7)
Relative
(8.1)
1.1
(2.1)
(4.8)
(6.5)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,577
3,892
4,101
4,240
4,382
1,405
1,453
1,673
1,785
1,908
1,405
1,453
1,673
1,785
1,908
434.1
3.4
15.2
6.6
6.9
Recurring EPS (MYR)
0.71
0.73
0.85
0.90
0.96
DPS (MYR)
0.40
0.50
0.62
0.63
0.67
Recurring P/E (x)
30.5
29.5
25.6
24.0
22.5
P/B (x)
4.68
4.17
4.14
3.98
3.84
P/CF (x)
22.2
20.7
26.1
14.5
12.5
1.8
2.3
2.9
2.9
3.1
22.7
22.5
23.2
22.5
21.4
15.9
15.0
16.2
16.9
17.4
Dividend Yield (%)
EV/EBITDA (x)
Joshua Ng +603 9207 7606
[email protected]
net cash net cash net cash net cash net cash
(5.0)
(3.0)
1.5
4
Sell (from Trading Buy)
Construction & Engineering - Construction
Market Cap: USD151m
Target Price:
Price:
MYR1.38
MYR1.96
Macro
Risks
Waning Hope On O&G Contract Wins
Growth
Value
Price Close
3.00
105
2.80
98
2.60
92
2.40
85
2.20
78
2.00
72
1.80
1
65
0
0
.
2
0
0
KKB’s 9M14 results were way below our and street expectations. We .
0
downgrade our rating to SELL (from Trading Buy) as we trim our target 0
P/E to 12x FY15 and cut our TP to MYR1.38 (-29.5% downside). Due to 0
the waning hope on its associate unit winning more O&G contracts in
the near future (on weakening oil prices) and poor contract wins for
other divisions to-date, we are slashing our FY14/15 earnings numbers.

Disappointing results. KKB Engineering’s (KKB) 9M14 net profit of
MYR12.6m represented only 31.9%/27.3% of our/street estimates. We
are not surprised by its weak results after the absence of significant new
contract wins for its fabrication unit for the past one year. Nevertheless,
the actual profit was way more disappointing; we initially thought its
MYR227m pipe order contract win in late-2013 may have helped to
partly compensate for the poor results in the fabrication unit.
Furthermore, pressured by higher interest rate and depreciation
expenses arising from the commissioning of its new fabrication yard at
Lot 777 resulted in a marginal loss to the fabrication unit.

Pushback on Oil and Gas (O&G) hope. KKB’s associate, OceanMight
SB, became a licensed supplier of Petronas under the category of
onshore fabrication for offshore major construction in early 2013. We
were initially encouraged that this associate finally won its first fabrication
works in September as it was a critical breakthrough into the lucrative
O&G industry. However, the weakening oil prices, which recently broke
its support level of USD80 a barrel, suggest that a majority of new O&G
projects may be put on hold, thus limiting the number of fabrication jobs
available in the market. Being the new kid on the block, its unit may also
find it tougher to compete with its peers on the lack of track record.
1
1
1
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
1
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
0.07m/0.02m
38.8
-29.5
1.94 - 2.76
31
258
Dato Kho Kak Beng & family
Cahya Mata Sarawak
Laman Satria SB
42.5
20.1
5.6

Downgrade to SELL, MYR1.38 TP. Together with the poor contract win
for its fabrication units to-date and waning hope on its associate winning
more lucrative O&G contracts in the near future on weakening oil prices,
we are cutting our contract win rate for the next two years. We cut our
FY14/15 earnings estimates by a hefty 64.4%/42.0% respectively, while
we introduce our FY16 projection. We also trim our target P/E to 12x
FY15F (from 14x) as we remove the premium we had incorporated
earlier due to its exposure to the O&G industry. Accordingly, we slash
our TP to MYR1.38 (from MYR2.78) and downgrade KKB’s rating to
SELL (from Trading Buy).
YTD
1m
3m
6m
12m
Absolute
(26.6)
(10.9)
(18.0)
(19.0)
(28.7)
Relative
(23.9)
(12.0)
(15.5)
(15.6)
(30.5)
Shariah compliant
[email protected]
Dec-13
Dec-14F
Dec-15F
167
229
191
289
Dec-16F
315
19.5
33.1
14.1
29.7
33.1
19.5
33.1
14.1
29.7
33.1
69.7
(57.5)
111.1
11.6
Recurring EPS (MYR)
0.08
0.13
0.05
0.12
0.13
DPS (MYR)
0.05
0.07
0.02
0.05
0.05
Recurring P/E (x)
25.9
15.3
35.9
17.0
15.3
P/B (x)
1.95
1.82
1.76
1.64
1.52
18
31
10
462
14
2.6
3.4
1.1
2.3
2.6
16.6
9.8
18.1
9.7
8.6
7.7
12.3
5.0
10.0
10.4
P/CF (x)
Dividend Yield (%)
EV/EBITDA (x)
Dec-12
(58.1)
Ng Sem Guan, CFA +603 9207 7678


2

.
2
0
.
2




(69.2)
(48.4)
(48.6)
5
Sell (Maintained)
Market Cap: USD618m
Target Price:
Price:
THB3.01
THB4.18
Macro
Risks
Bracing For a Robust 4Q14
Growth
Value
5.70
104
5.20
96
4.70
88
4.20
80
3.70
72
3.20
160
140
120
100
80
60
40
20
64
0
0
.
2
0
0
AAV’s 9M14 core net loss of THB307m came in line with our estimate. .
0
Maintain SELL, with a THB3.01 TP (9x FY15 adjusted EV/EBITDAR, 0
27.9% downside). Thailand’s new tax deduction on travel package costs 0
incurred by locals should propel demand for low-cost travel. As we
expect a strong 4Q14 (4Q is the peak season for travel), the company
may make up for its current earnings shortfall this quarter.

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Tassapon Bijleveld
Prichaya Rasamitanin
Gerdprasert
113m/3.52m
6.5
-27.9
3.42 - 5.30
42
4,850
28.1
5.9
5.9
YTD
1m
3m
6m
12m
Absolute
14.2
(4.1)
(9.5)
8.3
(21.1)
Relative
(6.1)
(5.4)
(10.6)
(5.3)
(32.3)


3

.
2
0
.
3






Within estimates. Asia Aviation’s (AAV) 9M14 core net loss of
THB307m was in line with our estimate but significantly below
consensus. Its core net loss of THB214.4m booked in 3Q14 widened
from the loss of THB167.2m in 2Q14, as the company recorded lower
yields while unit costs increased (+4.2% QoQ) given the depreciating
THB. Although the political turmoil in Thailand eased in 3Q, visitor traffic
failed to pick up sequentially as passenger numbers only grew by 1.7%
QoQ vs 5.5% QoQ in 3Q13.
Outlook ahead. We expect the visa exemption (which ended on 8 Nov)
for Chinese and Taiwanese passport holders visiting Thailand to
stimulate demand for tourism activities in the country. Furthermore, the
Government also announced a tax incentive last month for Thai locals, in
which travel package costs (at a maximum of THB15k per annum) can
be claimed in order to offset the individual income tax levied – which
could further stimulate demand for domestic travel. This incentive is in
effect until 31 Dec 2015. We believe low-cost carriers would benefit the
most from this given their relative cheaper air fares. This, on top of the
lower jet fuel prices, leads us to believe that we are likely to see AAV
recording a strong profit in 4Q14. However, moving into 2015, we expect
competition to continue intensifying. Thus, the recovery in yields may not
likely reach levels prior to the political crisis that beset the Kingdom since
Dec 2013.
Forecasts. On expectations of a strong 4Q14 – the peak for seasonal
travel – we expect its robust numbers to make up for the earnings
shortfall in 9M14.
Maintain SELL. AAV is valued at a 20.4x FY15 P/E, which is expensive
compared with the peer average of 15x. We keep our SELL
recommendation, while our TP remains at THB3.01, premised at an
unchanged 9x adjusted FY15 EV/EBITDAR. Our TP also implies a FY15
P/E of 14.7x, which is in line with the company’s regional peer average.
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
8,123
16,103
23,485
25,123
30,420
1,014
15,513
1,042
243
994
Ahmad Maghfur Usman 603 9207 7654
992
787
1,096
243
994
[email protected]
(1.3)
(20.7)
39.2
(77.8)
308.9
Recurring EPS (THB)
0.20
0.16
0.23
0.05
0.20
Recurring P/E (x)
20.4
25.8
18.5
83.4
20.4
2,650
1
1
1
1
77.3
7.7
5.5
6.4
4.4
11.0
Shariah compliant
P/B (x)
P/CF (x)
EV/EBITDA (x)
18.8
13.5
9.1
26.7
26512.4
169.9
5.5
1.2
4.9
net cash
6.4
7.8
20.6
(69.6)
(22.4)
net cash
6
Neutral (from Sell)
Market Cap: USD226m
Target Price:
Price:
THB12.50
THB11.90
Macro
Risks
Higher-Than-Expected Unit Costs Widen Losses
Growth
Value
26.0
105
24.0
96
22.0
88
20.0
79
18.0
70
16.0
61
14.0
53
12.0
44
10.0
18
16
14
12
10
8
6
4
2
35
0
0
.
1
0
0
Nok’s 9M14 core net loss of THB481m was larger than we expected. The .
0
sharp drop in yields amidst higher-than-expected unit costs is 0
worrying, lifting its breakeven load factor to 116% in 3Q14. While it 0
would be challenging for the airline to significantly cut unit costs in
2015, a yield recovery may return it to the black. Upgrade to NEUTRAL,
with a new THB12.50 TP (7.5x adjusted EV/EBITDAR, 5% upside).

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
Thai Airways International
Aviation Investment
State Street Bank Europe
33.7m/1.04m
46.2
5.0
11.9 - 24.4
30
625
39.2
9.5
6.8


Below. Nok Airlines’ (Nok) 9M14 core net loss of THB481m was larger
than our and consensus expectations. For 3Q14, it reported a wider loss
of THB365m vs THB154m in 2Q14, owing to the sharp drop in yields.
Nok suffered a severe drop in yields (-19% YoY, -12% YTD) on
aggressive promotional offerings in 3Q14 as the airline attempted to
keep its load factor high. At the same time, unit costs (excluding fuel)
rose more than expected from higher maintenance costs, leasing rates
and the strengthening USD. Unit costs for fuel were largely unchanged
QoQ but were higher YoY. The sharp drop in its yields amidst higherthan-expected unit costs is worrying, bumping up its breakeven load
factor to 116% in 3Q14 from 93% in 3Q13.
Forecasts. Following the higher-than-expected loss, we raise our FY14F
losses to THB281m from THB111m. Meanwhile, we cut our FY15F
earnings by 8%, but lift our FY17F net profit by 4% given the lower jet
fuel price assumption for that year. The major revision to our numbers
was on its unit costs as we have lifted our estimates on its leasing rates.
Outlook. While we expect Nok to record a seasonally stronger quarter in
4Q, the chances of it recording a sharp spike in profit is highly unlikely
given the increase in its fixed unit costs. The Nok-Scoot JV is also not
likely to start this year, given the slow progress in approvals thus far. The
startup had only received its air operating certificate earlier this month.
After the approval, Nok only submitted an application for Japan's foreign
air carrier permit to the Japan Civil Aviation Bureau.
Upgrade to NEUTRAL. We still think Nok’s outlook would remain
challenging, as it may be difficult for it to trim unit costs drastically next
year – although a yield recovery would bring the airline to profitability.
We upgrade our call to NEUTRAL from Sell, with a lower TP of
THB12.50 (previously THB15.20), premised at an unchanged 7.5x FY15
adjusted EV/EBITDAR. Our new TP also reflects a FY15 P/E of 13.8x,
which is within the regional peer average range of 14-15x.
YTD
1m
3m
6m
12m
Absolute
(37.4)
(18.5)
(28.3)
(30.0)
(51.2)
Relative
(58.8)
(20.5)
(30.6)
(43.0)
(62.6)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
8,218
11,180
14,041
18,404
21,038
505
1,066
(281)
566
733
748
1,063
(281)
566
278.2
42.1
(126.4)
Recurring EPS (THB)
1.50
1.70
(0.45)
0.91
1.17
DPS (THB)
1.10
1.03
0.00
0.45
0.59
8.0
7.0
13.1
10.1
P/B (x)
6.70
1.64
1.70
1.55
P/CF (x)
7.05
6.54
6.03
7.05
9.2
8.7
5.55
1.99
59.9
39.3
Ahmad Maghfur Usman 603 9207 7654
[email protected]
Recurring P/E (x)
Dividend Yield (%)
EV/EBITDA (x)


1

.
2
0
.
2




na
1.88
na
0.0
na
(6.6)
na
733
29.6
3.8
4.9
3.79
2.69
13.6
16.0
188.0
(22.7)
(30.6)
7
Sector News Flash, 17 November 2014
Strategy - Hong Kong
Macro
Risks
Shanghai/HK Stock Connect Launch
Growth
Value


2

2

2




2
What’s new?


The highly anticipated Shanghai and HK Stock Connect Scheme will
begin today 17 Nov (Monday). We provide an update following our
report on 11 April when the scheme was first announced.
The highlights are:
HK market (Southbound)
1. Daily quota of CNY10.5bn (19% of 3M average daily turnover
(ADT)) and total quota of CNY250bn.
2. Stocks that are constituents of the HS Composite Large Caps, HS
Composite Mid-Caps and Shanghai listed A-H stocks.
3. Eligible participants are institutional investors and individuals with at
least CNY500,000 in their securities accounts.
4. Eligible Chinese investors can trade approved HK-listed stocks via
the Shanghai Stock Exchange.
5. Eligible Chinese investors are exempted from the 10% Capital
Gains Tax for three years.
Shanghai market (Northbound)
1. Daily quota of CNY13.5bn (9% of 3M ADT) and total quota of
CNY300bn.
2. Stocks that are constituents of SSE180, SSE380 and Shanghai
listed A-H stocks.
3. HK and overseas investors can trade approved Shanghai listed
stocks via the HKEX.
4. Capital gains tax for HK and overseas investors will be waived
“temporarily.”
Our view: Selected stocks may still be impacted


In our view, the scheme's launch will no longer have a big impact on the
overall HK and Shanghai markets. This is because: i) since the scheme
was first announced in April, the price difference between A and H
shares have narrowed considerably, ii) large funds that want exposure to
the eligible stocks are likely to have already done so via the existing
QFII/RFII and QDII mechanisms, iii) Chinese investors with at least
CNY500,000 to invest may have already bought the eligible HK stocks
via their HK brokerage accounts before the scheme's launch.
Nonetheless, certain stocks may still see a more pronounced impact.
Positive impact on:
1.
2.
3.
Kong Yong Ng 852 2103 5844
[email protected]
Christopher Tse 852 2103 9415
[email protected]
HKEX (388 HK, NEUTRAL, TP:HKD181)
Brokerage stocks. Refer to Fig. 1 on the next page.
H shares are still trading at big discounts to their A shares, eg
Sinopec Shanghai (338 HK, NR). See Fig. 2 and A shares trading
at big discounts to their H shares (none currently).
4. Well-known stocks that are: i) listed only in HK, and ii) included in
HS Composite Large Caps Index or HS Composite Mid-Cap
Index, eg Tencent (700 HK, BUY, TP: HKD156), HSBC (5 HK,
NR), AIA (1299 HK, NR) and Macau gaming stocks. See Fig. 3
Negative impact on:
1. A shares still trading at big premium to their H shares (ie Sinopec
Shanghai (386 HK, NR)); H shares still trading at a big premium to
their A shares (none currently). Refer to Fig 2.
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. 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
Disclosure & Disclaimer
All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or
warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer
to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for
information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does
not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the
information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or
financial advice to independently evaluate the particular investments and strategies.
This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s
strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such
information and accordingly investors should make their own informed decisions before relying on the same.
RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in
securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be
materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered
in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies),
may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or
underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this
research report.
RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise
from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are
alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature.
The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below
and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies.
All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior
consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect.
Malaysia
This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak,
50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital
Berhad.
Singapore
This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG &
Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment
Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a whollyowned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG &
Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this
report is therefore classified as a non-independent report.
As of 28 16 November 2014May 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have
proprietary positions in the securities covered in this report, except for:
a)
-As of 28 16 November 2014May 2014, none of the analysts who covered the securities in this report has an interest in such securities, except for:
a)
-Special Distribution by RHB
Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed
to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not
an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research
report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG &
Partners Securities Pte Ltd
Hong Kong
This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong
9
Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is
referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad.
RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company.
RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain
compensation for investment banking services from the subject company.
Risk Disclosure Statements
The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that
losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK
does not maintain a predetermined schedule for publication of research and will not necessarily update this report
Indonesia
This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a
subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned
subsidiary of RHB Capital Berhad.
Thailand
This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a
subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned
subsidiary of RHB Capital Berhad.
Other Jurisdictions
In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and
regulations of the jurisdictions.
DMG & Partners Research Guide to Investment Ratings
Kuala Lumpur
Hong Kong
Singapore
Malaysia
Tel : +(60) 3 9280 2185
Fax : +(60) 3 9284 8693
19 Des Voeux Road
Central, Hong Kong
Tel : +(852) 2525 1118
Fax : +(852) 2810 0908
Tel : +(65) 6533 1818
Fax : +(65) 6532 6211
Buy: Share price may exceed 10% over the next 12 months
Trading Buy:Malaysia
Share price
may exceed 15% over theRHB
nextOSK
3 months,
however longer-term outlook remains uncertain
Research Office
Securities Hong Kong Ltd. (formerly known
DMG & Partners
Neutral: Share
mayInstitute
fall within
months
as 12
OSK
Securities
Securities Pte. Ltd.
RHB price
Research
Sdn the
Bhdrange of +/- 10% over the next
Take Profit:
Target
price
has
been
attained.
Look
to
accumulate
at
lower
levels
Hong Kong Ltd.)
Level 11, Tower One, RHB Centre
10 Collyer Quay
Sell: Share price may
more than 10% over the next 12 months
Jalanfall
TunbyRazak
12th Floor
#09-08 Ocean Financial Centre
Lumpur
World-Wide House
Singapore 049315
Not Rated: Stock isKuala
not within
regular research coverage
DISCLAIMERS
Phnom
Penh
This research is issuedJakarta
by DMG & Partners Research Pte Ltd and it is forShanghai
general distribution only. It does not have any regard
to the
specific investment
objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular
PT RHB OSK and
Securities
Indonesia
(formerlyfinancial
known asadviser
RHB
OSK (China)
Advisory
Ltd. into any
RHBtransaction
OSK Indochina
Securities
Limited
(formerly
investments
consult
an independent
before
makingInvestment
any investments
or Co.
entering
in relation
to any
securities
or
PT OSKmentioned
Nusadana in this report.
(formerly known as OSK (China) Investment
known as OSK Indochina Securities Limited)
investment instruments
Securities Indonesia)
Plaza CIMB Niaga
Advisory Co. Ltd.)
Suite 4005, CITIC Square
No. 1-3, Street 271
Sangkat Toeuk Thla, Khan Sen Sok
Tel : +(6221) 2598 6888
Tel : +(8621) 6288 9611
Fax: +(855) 23 969 171
The information contained
herein has been obtained from sources 1168
we believed
to be reliable but we do not make any representation
or warranty nor
14th Floor
Nanjing West Road
Phnom Penh
accept any responsibility
or liability
as to its accuracy, completeness orShanghai
correctness.
are subject to change
Jl. Jend. Sudirman
Kav.25
20041Opinions and views expressed in this report
Cambodia
without notice.
Jakarta Selatan 12920, Indonesia
China
Tel: +(855) 23 969 161
Fax
: +(6221)
2598or6777
Faxof: +(8621)
6288
9633or sell any securities.
This report does
not
constitute
form part of any offer or solicitation
any offer
to buy
Bangkok
DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank
Berhad, Malaysia which have since merged into RHBRHB
Investment
Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a whollyOSK Securities (Thailand) PCL (formerly known
owned subsidiary of RHB Capital Berhad) and Deutsche Asiaas
Pacific
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 16 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 16 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)
10

Regional Daily Ideas Troika Top Stories

Transcription

Similar documents

Morning Matters - RHB OSK Securities (Thailand)

Sembcorp Marine Buy