News Bites · Felda Global Ventures Berhad reported a net loss of RM9.3mn in 3Q14. It was below expectations. · Lingkaran Trans Kota Holdings Berhads 1HFY15 net earnings of RM69.1mn came in within expectations. · Unimech Group Berhad posted 9MFY14 net profit of RM14.5mn, which came in slightly below our expectation. · MMC Corporation Bhd is buying MISC Bhds 15.73% stake in port operator NCB Holdings Bhd for RM221.9mn or at an average price of RM3 each. · Prasarana Malaysia Bhd has won the bid to be the shadow operator for Phase One of the Mecca Public Transport Programme Metro in Saudi Arabia. · Malaysia Airports Holdings Bhd expects the soil movement issue at the apron and taxiway area of the Kuala Lumpur International Airport 2 to be settled in the next five years. · Kronologi Asia Bhd plans to raise RM17.2mn from its proposed listing on the Ace Market of Bursa Malaysia Securities involving 59.2mn new shares of 10 sen each at an offer price of 29 sen each. · OPEC took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. · Chinas central bank refrained from selling repurchase agreements for the first time since July, loosening monetary policy further as a report showed industrial companies profits fell by the most in two years. · Economic sentiment in the euro area unexpectedly increased in November, a sign the European Central Banks bid to boost growth and inflation is starting to hit home with companies and consumers. Results Update Lingkaran Trans Kota Holdings Bhd Target Price: RM4.18 (Hold) Litrak’s 1HFY15 net earnings of RM69.1mn came in within expectations. YoY, the 1HFY15 net profit grew by 5.4% to RM69.1mn, backed by 1.7% increase in revenue to RM95.8mn. The increases in both the revenue and the net profit were due to higher traffic volume, lower finance cost and lower share of losses from its associate, SPRINT. QoQ, Litrak recorded marginal drop in revenue by 0.9% to RM94.9mn. Net profit dropped 3.1% due to lower revenue and higher share of losses in associate. The drop in traffic volume in 2QFY15 was due to discounts given during national major festivals. GST will be implemented effective 1 April 2015. We expect GST will have minimal impact on Litrak’s business as tolling has been classified as an exempt item and additional costs arising from GST imposed on its operating costs is not expected to be significant. No change to our earnings forecasts. Maintain HOLD call on LITRAK with unchanged target price of RM4.18/share. Boustead Holdings Bhd Target Price: RM5.31 (Hold) Boustead’s 3Q14 earnings took a plunge as the group recognise the profit distribution element of the outstanding perpetual Sukuk (RM15.5mn in 3Q14). Core net profit, after stripping out forex and stockholding gains amounted to a mere RM28.9mn (+25.7% QoQ, -73.1% YoY). As a result, 9MFY14 core net profit of RM120.5mn (-47.0% YoY) came in far below ours’ and consensus estimates. The group also cut quarterly dividend to 6.0 sen/share, compared with the usual 7.5 sen/share. We impute the profit distribution from the perpetual Sukuk into our earnings forecasts. In addition, we have also reduced associate income as our banking analyst cut the earnings forecasts for Affin by 8% post-3Q14 results. All in, we downgrade FY14/15/16 earnings forecasts by 32.1%/22.4%/20.1%. Target price reduced to RM5.31, based on Sum-of-Parts valuation method, after taking into account the downgrade in earnings forecasts, the perpetual Sukuk and lower share price of the Affin Group. We cut the recommendation on Boustead from Buy to Hold. While we continue to expect better earnings in FY15/16, execution risks, in the Heavy Industries and Property segments, is the key. We are also taking a more cautious view on dividends, taking cue from the lower dividend in 3Q14, and had cut our forecasts to below 30 sen/share in FY14/16. Previously, stable dividends had been a key investment theme. Unimech Group Berhad Target Price: RM1.73 (Hold) Unimech posted lower earnings in 3QFY14. 9MFY14 net profit of RM14.5mn came in slightly below our expectation, accounted for 68% of ours full year estimate. We are expecting a stronger earnings in 4Q. On a quarterly basis, 3QFY14 net profit dropped 38.0% QoQ to RM4.3mn on the back of a 17.5% decline in revenue. The weak performance was mainly attributable to lower sales, higher finance and operating costs. All business segment recorded lower revenue mainly due to soft demand, especially in the Valves, Instruments and Fittings (VIF) segment. EBIT margin declined significantly from 21% in 2QFY14 to 14% in 3QFY14. We trimmed FY14-FY16 earnings forecasts by 3.2%-5.1%, respectively, as we lower our sales forecasts and margin assumptions. Maintain HOLD on Unimech with a revised TP of RM1.73 Company Update Icon Offshore Berhad Target Price : 1.33 (Sell) Below are key takeaways from an analyst briefing held by management of Icon Offshore Bhd (Icon) 1) Icon has current outstanding orderbook of RM818mn which largely comprises of firm contracts (70%), with the balance being (30%) being extension options, 2) the group has a tenderbook of RM200mn consisting of 20 bids including bids at new markets such as Indonesia and the Middle East, 3) the current OSV tender pipeline remains strong, with increased vessel tenders being floated to the market, 4) Icon is confident of its prospects in Malaysia given Petronas’ priority for local players with sizeable scale, 5) except for 2 vessels, the bulk of Icon’s new vessels delivery have been delayed by 1-2 quarters, 6) Price of OSVs, particularly small-to-medium sized vessels, have remain suppressed for the past 7 years, thus presenting fleet expansion opportunities for Icon, 7) Icon is currently in talks with bankers to raise funds for financing of vessels under construction and make available an acquisition war chest. We adjust our earnings forecasts in accordance to the revised vessel delivery schedule. As a result, our FY15/16 earnings are revised by -8%/1%. Following the earnings revision, our TP on Icon is lowered to RM1.33 (previous: RM1.45) based on unchanged 11x FY15 P/E. Maintain Sell. UMW Holdings Berhad Target Price: RM13.05 (Buy) We attended UMW Holdings Berhad (UMW)’s Analysts’ Briefing yesterday following the release of its 3QFY14 results. Overall, management is expecting stronger earnings growth in 4Q and appear more optimistic on the Equipment segment. We remain positive on UMW’s long-term prospects, partially underpinned by its effort to restructure or hive-off the loss-making businesses. Maintain BUY on UMW with an unchanged TP of RM13.05. The sales of Toyota and Perodua are expected to improve in 4Q, boosted by aggressive marketing and promotion as well as higher demand of Perodua Axia. Year-to-date, Vios is still the best-selling model, accounted for 42% of total unit sales, followed by Hilux (25%), Altis (10%) and others (23%). To defend market share, more new launches are being lined-up for next year. Management reiterated that Toyota will offer Camry Hybrid as a locally-assembled CKD model to the market in 1QFY15. While for Perodua, management guided that Perodua Axia received 54.1k bookings and 16.4k have been delivered to customers. On the car loan applications, management guided that the situation is getting better as most buyers are actually not first-time car buyers, and therefore, easier to get loans. Despite stiff competition in the lubricant business and lower contribution from the local automotive component manufacturers, this segment is expected to turn profitable in FY14 compared to a loss in FY13. The better performance will be driven by lower losses from India (the disposal of its loss-making India automotive components business) and improved operating margin of the lubricant business in China. Reiterate our BUY recommendation on UMW with an unchanged TP of RM13.05. Kwantas Corporation Berhad Target Price: RM1.72 (Sell) (See attached file: Kwantas Corporation Berhad_1Q15 – Affected by Lower Sales Volume_141128.pdf) Kwantas reported RM3.3mn net profit in 1Q14. Excluding the RM2.3mn fair value gain on derivatives booked during the quarter, core net profit amounted to a mere RM1.0mn. CPO sales volume plunged by 18% YoY in 1Q15. This was attributable to some customers deferring purchases as CPO price corrected significantly during the quarter. As CPO price had stabilised, we expect the implied increase in inventory to normalise in the quarters ahead. We also understand that the oleochemical plant in China was shut down for one month in August due to mandatory annual maintenance requirement. As a result, revenue of this segment declined by 45.6% on QoQ basis. We have adjusted average margin assumption for downstream segment in our earnings model. The impact is that FY15 and 16 earnings forecasts downgraded by 22.0% and 20.8%n respectively. Target price reduced to RM1.72 from RM1.99 previously based on target PER of 11x. Maintain Kwantas as Sell. Earnings volatility remains our key concern. Initial Public Offer E.A.Technique Berhad Fair Value: RM0.715 (Not Rated) E.A. Technique is an owner and operator of marine vessels. The company operate a total fleet of 32 marine vessels, comprising 9 O&G tankers (inclusive of one FSU and one FSO under construction), 2 OSVs and 21 marine support vessels. Of the 32 vessels, E.A. Technique owns 23 vessels including 7 O&G tankers, 2 OSVs and 14 marine support vessels. The remaining 9 marine vessels are chartered from external parties. E.A. Technique also has shipbuilding facilities on a rented 10-acre piece of land located in Perak. The shipyard is equipped with a 4,000 tonnes weightage capacity launching bay, which is capable to hold/launch up to 6 unit of 35-metre tugboats, or 1 unit of vessel of up to 10,000 DWT, at any one time. Investment case 1) Prudent approach in managing fleet size 2) Strong order book 3) Petronas approved licences We make direct comparison with Icon Offshore. Icon Offshore is currently trading at 10.2x FY15 PE, which is close to E.A.Technique’s 10x FY15 based on the IPO price of RM0.65. However, based on our target PE of 11x for Icon Offshore, E.A.Technique’s fair value will be 71.5sen. Although E.A.Technique’s market capitalization is relatively small if compared with Icon Offshore, the company’s FY15 EPS growth will be decent and superior to Icon Offshore. As such, we value E.A.Technique at RM71.5sen using 11x FY15 earnings. NOT RATED. TA Research
Posted on: Fri, 28 Nov 2014 06:13:34 +0000
Trending Topics
Recently Viewed Topics
© 2015