News Bites · Maxis Bhds 9M13 core net profit of RM1.55bn (-3% YoY) was within our expectations and consensus accounting for 70% and 72% of full-year forecasts respectively. · Hartalega Holdings Berhads 1HFY14 net profit rose 12.8% YoY to RM126.2mn. The results were within expectations. · Petroliam Nasional posted a 16% YoY rise to RM14.5bn in 3Q net profit, helped by higher demand for crude oil and a return to production in South Sudan. · The government is likely to announce the much anticipated revised National Automotive Policy on Jan 15, 2014, Minister of International Trade and Industry, Datuk Seri Mustapa Mohamed said. · Five big developers, including one from Singapore, will submit their proposals for the redevelopment of the former Pudu Jail site to UDA Holdings Bhd next Friday. · AMMB Holdings Bhd says clients of its Singapore unit have gross exposure of some RM120mn to Singapore-listed Blumont Group Ltd, LionGold Corp Ltd and Asiasons Capital Ltd. and have proactively provided RM40mn. · Kuala Lumpur Kepong Bhd, which is in talks with Equatorial Palm Oil Plc, has received an extension until 12 Dec 2013from the UK Panel to decide on the proposed acquisition of EPO. · TH Heavy Engineering Bhd, through its subsidiary received a Letter of Award from Lundin Malaysia B.V. to undertake the fabrication of wellhead platform for the Bertam Field Development project. · Malaysia Smelting Corp Bhd sank deeper into the red, with a net loss of RM22mn in the 3QFY13 due to the inflated loss to exceptional items in its Butterworth international tin smelting business. · Indonesias central bank unexpectedly raised its benchmark interest rate by 25bps to 7.5% as policy makers intensify efforts to narrow a current-account deficit that has weighed on the rupiah. · Japan consumer confidence unexpectedly fell 4.2 points to 41.2 in October, the most since a record earthquake in 2011, with gauges of views of livelihoods, employment, and incomes declining. · China elevated the role of markets in the nations economic strategy after President Xi Jinping oversaw a gathering of Communist Party leaders while stopping short for now of unveiling detailed policy shifts. Results Update Hartalega Holdings Berhad Target Price: RM8.15/share (Hold) Hartalega reported its 1H FY14 results with net profit increasing 12.8% YoY to RM126.2mn. The results were within expectations, accounting for 46.6% and 47.2% of ours’ and consensus full-year net profit estimates. Sequentially, revenue and net profit remained relatively unchanged. Revenue was marginally boosted by the addition of two lines during the quarter. However, blended ASPs declined by 7.8% QoQ to RM95/thousand pieces from RM103/thousand pieces. This was attributed to declining material prices, increased price competition and higher sales to emerging markets. Further muting growth, utilisation rate fell 5.1% to 86.0% due to maintenance works which led to downtimes. Based on the latest expansion plans, we tweak our FY14/FY15/FY16 capacity assumption to 13.6bn/17.4bn/22.8bn from 14.0bn/15.4bn/ 20.0bn. As a result, we decrease our FY14 net profit estimates by 1.6% to RM266.6mn. However, we increase our FY15 and FY16 estimates by 14.0% - 16.0% to RM333.9mn and RM389.6mn respectively. Based on the new estimates, we increase our TP for Hartalega to RM8.15/share from RM7.50/share previously. This is based on a 45.0% premium to our targeted industry PE multiple of 14x and CY14 EPS of 40 sen. We believe our premium is justified due to the group’s industry high profit margins and ROE. Hence, we maintain our HOLD recommendation with a total potential upside of 10.3%. Maxis Group Berhad Target Price: RM8.04/share (Hold) Maxis’ 9M13 core net profit of RM1.55bn (-3% YoY) was within our expectations’ and consensus’ accounting for 70% and 72% of full-year forecasts respectively. Core net profit excludes one-off Career Transition Scheme (CTS) costs totaling RM102mn in 3Q13 that was disbursed to 500 Maxis employees that opted to take-up the scheme. Maxis’ 4Q13 EBITDA margin continued to inch up to 51.8% (2Q13: 50.8%, 3Q12: 47.6%), which marks the group’s highest quarterly margin achieved since its listing in FY09. This was on the back of: 1) lower device sales of RM43mn (2Q13: RM95mn), and 2) cost discipline. Management revised their FY13 revenue guidance lower to 2% (YTD: 3%) (previous: mid-single digit) on the back of: 1) Maxis’ strategy to intentionally reduce outright sales of devices, and 2) lower than expected traction at the prepaid segment. In addition, the group lowered its FY13 capex guidance to RM900mn (previous: RM1bn) but maintained its FY13 EBITDA margin guidance of 48% (YTD: 50.2%). We believe there is limited upside to the stock price given concerns on rising debt levels. The share price overhang will aptly subside if Maxis provides more guidance on its long-term dividend policy and balance sheet management strategy. Therefore, we downgrade our Buy recommendation on Maxis from Buy to Hold at unchanged DDM-derived TP of RM8.04. Oil & Gas Sector (Overweight) Petronas’ 1H13 net profit of RM52.8bn (+4% YoY) was stronger due to higher revenue (+10% YoY) on the back of higher production (+5.7% YoY) across all segments and was aided by a stronger ringgit (versus USD). 9M13 revenue was higher despite lower crude oil and gas prices of USD108.5 per bbl (9M12: USD112.09) and USD110.5 per bbl (9M12: USD115.3) respectively. Production (+6% YoY) at the Exploration & Production (E&P) segment was unexpectedly boosted by resumption of operations at Sudan that helped to cushion decline in Chad and lower gas demand in Turkmenistan. To recap, Petronas had earlier targeted to shutdown operations at South Sudan by September 2013. On sequential basis, Petronas’ capex spending increased by 37% QoQ and 39% YoY to RM16.1bn (2Q13: RM11.8bn). This is a rebound from sluggish capex spend in the previous quarters and brings total YTD capex to RM38.4bn. We maintain our Overweight stance on the O&G sector premised on robust contract flows, in particular for upstream fabrication contracts. This is on the back of Petronas’ RM300bn 2012-16 capex program, whereby to-date, the national oil company and its PSCs have announced major contracts totaling RM11.4bn. In addition, we also expect the award of the RM8.0bn Pan-Malaysia Integrated Transportation and Installation (T&I) contract and USD500mn-1.0bn marginal field projects by 4Q13-1H14. TA RESEARCH
Posted on: Wed, 13 Nov 2013 02:47:27 +0000
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