Results Roundup - DBS Bank Market Focus Results Roundup Page 2 Mixed set of results in 4Q15 Despite...
Transcript of Results Roundup - DBS Bank Market Focus Results Roundup Page 2 Mixed set of results in 4Q15 Despite...
ed: JS / sa: WMT
KLCIKLCIKLCIKLCI :::: 1,670.821,670.821,670.821,670.82
Analyst Bernard CHING +603 2604 3918 [email protected] Malaysian Research Team +603 2604 3333 [email protected]
Market Key Data
(%)(%)(%)(%) EPS GthEPS GthEPS GthEPS Gth Div YieldDiv YieldDiv YieldDiv Yield
2015E 0.2 3.0
2016F 8.8 3.3
2017F 8.8 3.5
(x)(x)(x)(x) PERPERPERPER PBPBPBPB
2015E 16.8 1.8
2016F 15.4 1.7
2017F 14.2 1.6
Source: AllianceDBS Research STOCKS
Source: AllianceDBS Research (Price date: 29 Feb 2016)
DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity DBS Group Research . Equity
2 Mar 2016
Malaysia Market Focus
Results Roundup Refer to important disclosures at the end of this report
Rough ride continues
• 4Q15 results were mixed; 2016 earnings cut by 2.6%
• Valuation remains unattractive given muted growth prospects
• Maintain end-2016 KLCI target at 1,740
• Top buys: TNB, PBK, HLBK, MISC, GAM, MUHI, KICB, GTB, SKP
Mixed 4Q15 results. Although only 26% of our coverage universe reported negative surprises, we have cut 2016 earnings estimates for FBMKLCI by 2.6% largely driven by banks and telcos, which has more than offset the higher earnings of plantation stocks following our recent CPO price forecast upgrade. Earnings risk lingers. Despite recent underperformance of the FBMKLCI vs MSCI South East Asia, the PE valuation of FBMKLCI is still unattractive at 15.4x and 14.2x for 2016 and 2017 respectively, compared to historical mean of 15.3x. Earnings growth remains the Achilles’ heel of Malaysian equities with FBMKLCI earnings growth estimates for 2016 cut from 11.8% to 8.8%. This is also the second lowest earnings growth within ASEAN and PE spread of Malaysian equities over other South East Asian markets has widened to above +1SD. Maintain KLCI target. In view of lingering earnings risks, we continue to take a cautious stance on the market and maintain our end-2016 FBMKLCI target of 1,740 (implies 14.9x 2017 PE). The banking sector is a dark horse but much depends on signs that its earnings downgrade cycle is finally over after kitchen sinking exercises in 2015. Key themes. Amid weakness in the domestic market, we continue to focus on three key themes for our stock selections : (1) resilient domestic earnings; (2) transport related infrastructure spending; and (3) exporters with resilient external demand. Our top picks are Tenaga, Public Bank, Hong Leong Bank, MISC, Gamuda, Muhibbah, Kimlun, Globetronics and SKP Resources (new addition).
Price Price Price Price Mkt CapMkt CapMkt CapMkt Cap Target PriceTarget PriceTarget PriceTarget Price Performance (%)Performance (%)Performance (%)Performance (%)
RMRMRMRM US$mUS$mUS$mUS$m RMRMRMRM 3 mth3 mth3 mth3 mth 12 mth12 mth12 mth12 mth RatingRatingRatingRating
Tenaga Nasional 13.12 17,602 15.00 (1.8) (10.9) BUY Public Bank 18.48 16,964 21.95 0.5 0.9 BUY Hong Leong Bank 13.14 6,410 14.70 (3.1) (5.3) BUY MISC 8.75 9,285 10.80 (5.3) 3.9 BUY Gamuda 4.44 2,539 5.60 (2.2) (15.6) BUY Muhibbah Engineering
2.28 254 2.90 2.2 (0.4) BUY Kimlun Corp 1.53 109 2.26 15.9 18.6 BUY Globetronics Technology Bhd
5.50 368 7.10 (13.8) 13.4 BUY SKP Resources Bhd 1.36 362 1.78 3.0 76.6 BUY
Market Focus
Results Roundup
Page 2
Mixed set of results in 4Q15
Despite earnings cuts in earlier quarters, 4Q15 results turned
out to be rather mixed. Within our coverage universe, 53% of
stocks met our expectations, 21% exceeded expectations and
26% fell short.
4Q15 summary of financial performance
PerformancePerformancePerformancePerformance vs AllianceDBS (%)vs AllianceDBS (%)vs AllianceDBS (%)vs AllianceDBS (%) vs Consensus (%)vs Consensus (%)vs Consensus (%)vs Consensus (%)
Above 21% 24% In line 53% 40% Below 26% 36%
Source: AllianceDBS
Automotive (lower volume, unfavourable FX), building
materials (intense competition) and oil & gas (slower work
progress and capex cutbacks) sectors continued on their
disappointing run, while aviation (yield improvement) and
property (accelerated recognition of unbilled sales) sectors
surprised on the upside.
Among FBMKLCI component stocks, Public Bank (lower
provisions), PPB (stronger contribution from Wilmar), and KLK
(stronger oleochemicals contribution) beat expectations while
notable disappointments came from AMMB (NIM
compression), RHB ( lower non-interest income), Sime Darby
(lower FFB yield, replanting expenses and slowdown in
property), FGV (lower FFB yield), DiGi (intense price
competition), and UMW Holdings (lower contribution from
auto segment and losses from oil & gas division).
Sector performance
SectorSectorSectorSector 4Q154Q154Q154Q15 (RM m)(RM m)(RM m)(RM m)
4Q144Q144Q144Q14 (RM m)(RM m)(RM m)(RM m)
YYYY----oooo----y y y y change %change %change %change %
vs vs vs vs expectexpectexpectexpectationationationation
CommentsCommentsCommentsComments
AutomotiveAutomotiveAutomotiveAutomotive (37.25) 260.63 (114.3%) Below UMW’s earnings declined due to losses from the oil & gas segment; MBM's earnings were dragged by lower associates’ contribution and provisioning from slow-moving stocks and receivables.
AviationAviationAviationAviation 16.18 64.94 (75.1%) Above Sector earnings were dragged by heavy core losses at MAHB, but airline stocks AIRA and AAX outperformed on stronger-than-expected yields and lower fuel costs.
BankingBankingBankingBanking 5,294.51 5,395.47 (1.9%) In line Results were largely in line with our expectation but missed consensus expectation. The key disappointment was the higher-than-expected provisions. Sporadically, there were also disappointments due to higher-than-expected NIM compression (AMMB) and lower-than- expected non-interest income (RHB). While MAY’s results were in line with expectations, disappointing trends were noted as loan loss coverage and dividend trended lower.
Building MaterialsBuilding MaterialsBuilding MaterialsBuilding Materials 121.37 93.88 29.3% Below Further erosion in ASP and margins as competition in Peninsular Malaysia cement market intensified due to new incoming supply.
ChemicalsChemicalsChemicalsChemicals 791.00 500.00 58.2% In line Weak quarter as expected. Improved plant utilisation and availability were offset by declining petrochemical prices.
ConglomerateConglomerateConglomerateConglomerate 46.45 199.15 (76.7%) In line The group recorded decent performance attributed by its ports division which continued to register steady growth. However, construction earnings momentum is slowing from additional provisions.
ConstructionConstructionConstructionConstruction 394.44 373.28 5.7% In line Results were largely in line barring lumpy items, though construction earnings were relatively soft. However, our top picks like Gamuda, Muhibbah and Kimlun continue to secure orders.
Market Focus
Results Roundup
Page 3
Sector performance (cont’d)
SectorSectorSectorSector 4Q154Q154Q154Q15 (RM m)(RM m)(RM m)(RM m)
4Q144Q144Q144Q14 (RM m)(RM m)(RM m)(RM m)
yyyy----oooo----y y y y change %change %change %change %
vs vs vs vs expectationexpectationexpectationexpectation
CommentsCommentsCommentsComments
ConsumerConsumerConsumerConsumer 486.94 358.80 35.7% In line Despite the continued soft consumer sentiment, the results reported were mainly within expectations as weak consumer spending was largely priced in by the market.
Financial nonFinancial nonFinancial nonFinancial non----bankbankbankbank 210.93 288.00 (26.8%) In line Largely in line, with the exception of TAE which reported fair value adjustment losses during the quarter.
GamingGamingGamingGaming 958.09 1,053.59 (9.1%) In line Genting counters benefitted from foreign exchange gains, but NFOs and gaming operations felt the adverse impact of weaker consumer sentiment.
GloveGloveGloveGlove 299.16 152.00 96.8% In line Glove makers recorded higher unit profitability this quarter from higher sales volume and efficiency gains, as well as the strengthening of USD. Capacity expansion is the core theme for this sector in 2016.
HeHeHeHealthcarealthcarealthcarealthcare 440.41 267.66 64.5% In line Earnings (excluding exceptional items) from both KPJ and IHH reported a decline during this results season. This is due to (i) slower revenue growth arising from lower inpatients admission given the macroeconomic uncertainties; (ii) higher operating costs, predominantly staff and pre-operating expenses, particularly in the lead-up to the opening of new hospitals; and (iii) higher interest expenses arising from loans undertaken.
MediaMediaMediaMedia 282.86 233.68 21.0% In line Despite weak adex sales amid the poor consumer sentiment, earnings have remained stable due to prudent cost measures.
Oil & GasOil & GasOil & GasOil & Gas (232.07) 532.77 (143.6%) Below Generally weak results due to slower work progress and cutbacks in workflow from the likes of PETRONAS.
PlantationPlantationPlantationPlantation 1,443.42 844.80 70.9% In line Results were mixed across planters as while CPO spot prices only improved marginally, production issues still impacted selective areas.
PortPortPortPort 8.30 9.88 (16.0%) In line Suria's FY15 core earnings came in within expectations. We are still awaiting the launch of the Jesselton Quay project as its re-rating catalyst.
PropertyPropertyPropertyProperty 564.04 464.43 21.4% Above Profit recognition driven by progressive milestone completions of unbilled sales.
REITREITREITREIT 447.72 427.02 4.8% In line Rental reversions were still positive at retail assets, though flattish for office due to oversupply conditions.
ShippingShippingShippingShipping 849.26 723.87 17.3% In line MISC was boosted by stronger petroleum shipping rates, while WPRTS saw steady container throughput growth.
TechnologyTechnologyTechnologyTechnology 150.52 105.79 42.3% In line Tailwinds from the stronger USD were offset by slower sales following production cut by a leading smartphone manufacturer since Dec-15.
TelecommunicationTelecommunicationTelecommunicationTelecommunication 1,563.50 1,836.92 (14.9%) In line Mobile operators suffered from weaker margins amid tepid industry growth. Fixed-line operators fared better due to internet and data services.
UtilitiesUtilitiesUtilitiesUtilities 2,614.98 2,546.71 2.7% In line Lifted by TNB's strong earnings due to strong electricity demand growth of 3.2% in 1QFY16.
Source: AllianceDBS
Market Focus
Results Roundup
Page 4
Earnings estimates cut
Following 4Q15 results season, we cut our FBMKLCI earnings
(free float adjusted) for CY16F by 2.6% from a month ago.
Key contributors to CY16F earnings cut include Maybank,
Sime, CIMB, DiGi, UMW, and AMMB mainly due to
challenging operating environment for both banking and telco
sectors. The earnings cut has more than negated the positive
earnings revision for plantation counters following our regional
plantation analyst’s upgrade of the CPO price forecast.
Following our earnings cut, earnings growth estimates for
CY16F have been adjusted to 8.8% from 11.8% when our
2016 strategy report was published on 15 Dec 2015.
FBMKLCI earnings change (calendarised)
29292929----FebFebFebFeb----16161616
29292929----JanJanJanJan----16161616
ChangeChangeChangeChange
% Change% Change% Change% Change
CY15CY15CY15CY15 CY16CY16CY16CY16
CY15CY15CY15CY15 CY16CY16CY16CY16
CY15CY15CY15CY15 CY16CY16CY16CY16
CY15CY15CY15CY15 CY16CY16CY16CY16
RM m RM m
RM m RM m
RM m RM m
AMMB Holdings Bhd 937.98 849.59 971.21 923.31 -33.2 -73.7 -3.4% -8.0% Astro Malaysia Holdings Bhd 244.72 294.33 244.72 294.33 0.0 0.0 0.0% 0.0% Axiata Group Bhd 1,026.57 1,274.34 1,074.15 1,237.43 -47.6 36.9 -4.4% 3.0% British American Tobacco Malaysia 449.30 432.45 455.12 486.84 -5.8 -54.4 -1.3% -11.2% CIMB Group Holdings Bhd 1,794.19 2,273.28 1,784.48 2,373.35 9.7 -100.1 0.5% -4.2% DiGi.Com Bhd 824.16 844.63 887.16 936.47 -63.0 -91.8 -7.1% -9.8% Genting Bhd 1,055.06 1,080.62 986.90 1,166.90 68.2 -86.3 6.9% -7.4% Genting Malaysia Bhd 704.87 790.32 705.01 809.38 -0.1 -19.1 0.0% -2.4% Hong Leong Bank Bhd 636.75 664.98 628.58 657.69 8.2 7.3 1.3% 1.1% Hong Leong Financial Group Bhd 293.29 315.38 301.86 323.53 -8.6 -8.1 -2.8% -2.5% IHH Healthcare Bhd 316.15 343.88 271.95 372.62 44.2 -28.7 16.3% -7.7% IOI Corp Bhd 298.04 598.17 260.27 525.31 37.8 72.9 14.5% 13.9% KLCC Property Holdings Bhd 181.13 183.52 177.58 183.52 3.6 0.0 2.0% 0.0% Kuala Lumpur Kepong Bhd 471.02 597.98 451.69 512.35 19.3 85.6 4.3% 16.7% Malayan Banking Bhd 3,576.73 3,669.19 3,568.56 3,973.76 8.2 -304.6 0.2% -7.7% Maxis Bhd 679.34 697.34 708.05 758.49 -28.7 -61.1 -4.1% -8.1% MISC Bhd 885.40 977.21 880.57 977.21 4.8 0.0 0.5% 0.0% Petronas Chemicals Group Bhd 1,000.93 1,059.35 1,000.93 1,059.35 0.0 0.0 0.0% 0.0% Petronas Dagangan Bhd 235.72 252.74 254.54 252.74 -18.8 0.0 -7.4% 0.0% Petronas Gas Bhd 709.29 731.50 712.07 733.68 -2.8 -2.2 -0.4% -0.3% PPB Group Bhd 492.18 542.94 492.18 542.94 0.0 0.0 0.0% 0.0% Public Bank Bhd 4,059.19 4,338.30 3,899.11 4,221.54 160.1 116.8 4.1% 2.8% RHB Capital Bhd 355.98 457.82 392.65 524.68 -36.7 -66.9 -9.3% -12.7% Sapurakencana Petroleum Bhd 723.55 808.58 723.55 808.58 0.0 0.0 0.0% 0.0% Sime Darby Bhd 1,099.68 1,152.11 1,196.14 1,269.89 -96.5 -117.8 -8.1% -9.3% Telekom Malaysia Bhd 521.11 622.18 521.11 634.05 0.0 -11.9 0.0% -1.9% Tenaga Nasional Bhd 3,946.14 4,139.61 3,946.14 4,139.61 0.0 0.0 0.0% 0.0% UMW Holdings Bhd 325.63 198.80 227.62 293.91 98.0 -95.1 43.1% -32.4% Westports Holdings 156.71 174.75 154.16 176.52 2.5 -1.8 1.7% -1.0% YTL Corp Bhd * 496.51 632.44 589.82 661.32 -93.3 -28.9 -15.8% -4.4% FBMKLCI (free float weighted)FBMKLCI (free float weighted)FBMKLCI (free float weighted)FBMKLCI (free float weighted) 28,497.33 28,497.33 28,497.33 28,497.33 30,998.38 30,998.38 30,998.38 30,998.38 28,467.90 28,467.90 28,467.90 28,467.90 31,831.29 31,831.29 31,831.29 31,831.29 29.429.429.429.4 ----832.9832.9832.9832.9 0.1%0.1%0.1%0.1% ----2.6%2.6%2.6%2.6%
* Earnings for stocks not under coverage are based on consensus estimates Source: AllianceDBS, Bloomberg Finance L.P
Market Focus
Results Roundup
Page 5
FBMKLCI earnings growth (calendarised)
Estimated Estimated Estimated Estimated % % % % wwwweight eight eight eight in Indexin Indexin Indexin Index Market CapMarket CapMarket CapMarket Cap
FreeFreeFreeFree Float Float Float Float Weighted Weighted Weighted Weighted Mkt CapMkt CapMkt CapMkt Cap
Under Under Under Under CoverageCoverageCoverageCoverage
Free Float Weighted NPFree Float Weighted NPFree Float Weighted NPFree Float Weighted NP
Company NameCompany NameCompany NameCompany Name
2012012012015555 2012012012016666 2012012012017777
RM m RM m
RM m RM m RM m
AMMB Holdings Bhd 2.38 13,051.4 8,323.5 Yes
938.0 849.6 916.9
Astro Malaysia Holdings Bhd 1.22 14,209.7 5,504.4 Yes
244.7 294.3 328.0
Axiata Group Bhd 5.62 52,198.5 25,871.5 Yes
1,026.6 1,274.3 1,437.1
British American Tobacco Malaysia 1.70 15,995.4 7,969.6 Yes
449.3 432.5 444.3
CIMB Group Holdings Bhd 5.76 38,543.2 24,278.4 Yes
1,794.2 2,273.3 2,535.9
DiGi.Com Bhd 4.16 38,330.8 18,339.4 Yes
824.2 844.6 849.5
Genting Bhd 0.93 13,742.3 4,265.5 Yes
156.7 174.7 183.1
Genting Malaysia Bhd 3.68 29,289.8 17,391.0 Yes
1,055.1 1,080.6 1,311.7
Hong Leong Bank Bhd 2.50 23,414.8 12,194.3 Yes
704.9 790.3 811.4
Hong Leong Financial Group Bhd 1.67 26,965.4 7,962.8 Yes
636.8 665.0 757.1
IHH Healthcare Bhd 0.64 16,010.5 2,924.6 Yes
293.3 315.4 356.4
IOI Corp Bhd 3.28 52,631.0 17,817.1 Yes
316.2 343.9 438.3
KLCC Property Holdings Bhd 2.99 29,614.5 17,420.0 Yes
298.0 598.2 720.2
Kuala Lumpur Kepong Bhd 0.63 12,637.3 3,159.3 Yes
181.1 183.5 189.3
Malayan Banking Bhd 2.28 25,346.2 12,638.8 Yes
471.0 598.0 641.6
Maxis Bhd 9.32 83,072.5 43,465.5 Yes
3,576.7 3,669.2 3,994.9
MISC Bhd 3.45 45,962.1 15,995.8 Yes
679.3 697.3 792.0
Petronas Chemicals Group Bhd 2.45 39,058.2 12,810.4 Yes
885.4 977.2 1,031.1
Petronas Dagangan Bhd 3.55 54,000.0 19,354.2 Yes
1,000.9 1,059.3 1,065.2
Petronas Gas Bhd 1.21 24,538.3 7,322.1 Yes
235.7 252.7 264.0
PPB Group Bhd 3.40 43,611.3 17,372.8 Yes
709.3 731.5 753.8
Public Bank Bhd 1.80 18,968.0 9,426.2 Yes
492.2 542.9 572.4
RHB Capital Bhd 11.60 71,360.4 57,221.7 Yes
4,059.2 4,338.3 4,727.0
Sapurakencana Petroleum Bhd 1.06 16,295.8 3,838.1 Yes
356.0 457.8 572.7
Sime Darby Bhd 1.98 11,385.1 7,273.7 Yes
723.6 808.6 815.3
Telekom Malaysia Bhd 5.51 47,263.2 24,022.5 Yes
1,099.7 1,152.1 1,325.7
Tenaga Nasional Bhd 2.96 24,802.4 14,578.7 Yes
521.1 622.2 716.1
UMW Holdings Bhd 9.28 74,044.2 46,049.8 Yes
3,946.1 4,139.6 4,244.7
Westports Holdings 1.37 8,271.5 4,661.4 Yes
325.6 198.8 241.8
YTL Corp Bhd 1.63 16,357.3 8,375.9 No
496.5 632.4 684.6
TotalTotalTotalTotal
980,971.1980,971.1980,971.1980,971.1 477,829.4477,829.4477,829.4477,829.4
28,497.328,497.328,497.328,497.3 30,998.430,998.430,998.430,998.4 33,722.033,722.033,722.033,722.0
% coverage / earnings growth
98.33 98.25
0.2 8.8 8.8
Current implied P/E
16.8 15.4 14.2
Source: AllianceDBS
Market Focus
Results Roundup
Page 6
Tough times ahead
The benchmark FBMKLCI lost 2.2% in the first two months of
2016 and has trailed behind the MSCI South East Asia Index
which posted a meagre 0.2% gain. Foreign net equity flow
turned positive again in Feb (+RM0.5bn) as expectations of
more dovish monetary policies in advanced economies
provided some reprieve to emerging markets. That said,
domestic issues have been a drag on market performance.
Intensifying competition in the mobile telco space and
continued challenges in the domestic banking sector have led
to earnings cuts. While expectations of higher CPO prices is a
bright spot for the Malaysian market, which has heavy
representation of plantation counters, rich valuation vis-à-vis
regional peers has capped upside potential for Malaysian
planters. Other issues continuing to plague Malaysian equities
include rising cost of doing business (subsidy cuts, imported
inflation, minimum wage hikes), and dampened consumer
sentiment.
As such, despite the recent underperformance, the PE
valuation of FBMKLCI is still unattractive at 15.4x and 14.2x for
2016 and 2017 respectively, when compared to historical
mean PE of 15.3x. Earnings growth remains the Achilles’ heel
of Malaysian equities with 2016 earnings growth estimate cut
from 11.8% (as of last strategy report on 15 Dec 2015) to
8.8% now. This is also the second lowest earnings growth
among ASEAN-5 economies but PE spread of Malaysian
equities over South East Asian markets has widened to above
+1SD.
Despite further earnings cuts post 4Q15 results, we are still
expecting an earnings growth rebound after two years of flat
growth. Earnings growth in 2016 will still largely be driven by
banks (36.6%), which has disappointed for seven consecutive
quarters. That said, banks will start 2016 on a cleaner slate
following kitchen sinking exercises in 2015. At -2SD of its
mean PB valuation, banks could be a dark horse in 2016 when
signs emerge that earnings downgrade cycle has ended.
In view of lingering earnings risks, we continue to take a
cautious stance on the market and maintain our end-2016
FBMKLCI target of 1,740 (implies 14.9x 2017 PE). Downside
risks could be capped by (1) buying support by domestic
institutional funds, (2) stabilisation of crude oil price and MYR,
and (3) accommodative monetary policies (both domestic and
global). Amid weakness in the domestic market, we continue
to focus on three key themes for our stock selections : (1)
resilient domestic earnings, (2) transport related infrastructure
spending, and (3) exporters with resilient external demand. For
domestic earners, we like Tenaga, Public Bank, and Hong
Leong Bank which are more resilient, in our view.
Award of transport related infrastructure contracts is expected
to pick up steam in the months ahead. We believe Gamuda,
Muhibbah and Kimlun are the best proxies for this theme.
There has been some selling pressure on exporters in recent
weeks as MYR regained some lost ground vs USD. That said,
MYR is highly correlated to crude oil price. With our
expectation that Brent crude oil price will average just USD35-
40/barrel in 2016 due to supply glut, MYR is unlikely to sustain
its recent gain. Therefore, we remain confident on the export
theme and view the recent selldown as an accumulation
opportunity. Our picks for this theme are MISC, Globetronics
and SKP Resources (new addition).
In terms of sector outlook, we upgrade aviation from
Underweight to Neutral as signs of yield improvements are
emerging. Construction, shipping, technology and utilities
remain Overweight while automotive is now the only
Underweight sector.
Equity fund flow
-2.4
-0.4 -0.5
0.2
-2.5-3.1 -2.9
-4.0
-2.3
0.6
-0.8-1.2
-0.9
0.5
2.7
1.0 1.00.6
2.93.4 3.4
4.5
2.2
-0.3
0.81.4 1.2
-0.4
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Jan
-15
Feb
-15
Ma
r-1
5
Ap
r-1
5
Ma
y-1
5
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
Oct
-15
No
v-1
5
De
c-1
5
Jan
-16
Feb
-16
Foreign Institutional Local InstitutionalInflow/(Outflow)
RM bn
Source: Bursa Malaysia
FBMKLCI P/E trend
9
11
13
15
17
19
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
FBMKLCI Index PE (x)
Mean:
15.3x
- 1 s.d.:
13.7x
+ 1 s.d.:
16.9x
Source: Bloomberg Finance L.P
Market Focus
Results Roundup
Page 7
MSCI Malaysia - SEA PE Spread
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
MSCI MY - SEA spread
Mean:
1.1x
+ 1 s.d.:
1.7x
- 1 s.d.:
0.5x
Source: Bloomberg Finance L.P
ASEAN 5 CY15 earnings growth comparison
5.8%
8.8%
9.5%
9.5%
13.4%
14.0%
0% 5% 10% 15% 20%
Singapore
Malaysia
South East Asia
Philippines
Thailand
Indonesia
Source: Bloomberg Finance L.P
FBMKLCI CY16F earnings growth contributors by sector
36.6%
2.0%
15.5%
2.0%
19.2%
3.4%
14.1%
7.3%
0%
10%
20%
30%
40%
50%
Banking Media Telco Consumer Plantation Oil & Gas Utilities Others
KLCI CY16 Earnings Growth Contributors
Source: Bloomberg Finance L.P
MYR / USD
3.00
3.20
3.40
3.60
3.80
4.00
4.20
4.40
4.60
MYR / USDMYR / USD
Source: Bloomberg Finance L.P
Brent crude oil price
20
25
30
35
40
45
50
55
60
65
70
Jan
-15
Fe
b-1
5
Ma
r-1
5
Ap
r-1
5
Ma
y-1
5
Jun
-15
Jul-
15
Au
g-1
5
Se
p-1
5
Oct
-15
No
v-1
5
De
c-1
5
Jan
-16
Fe
b-1
6
USD/bbl
Source: Bloomberg Finance L.P
Sector Views
OverweightOverweightOverweightOverweight
Construction Shipping Technology Utilities
NeutralNeutralNeutralNeutral
Aviation (↑) Banks Consumer Gaming Gloves Healthcare Oil & Gas Plantation Property REITs Telecommunication
UnderweightUnderweightUnderweightUnderweight Automotive
Source: AllianceDBS
Market Focus
Results Roundup
Page 8
Top stock picks
Tenaga NasionalTenaga NasionalTenaga NasionalTenaga Nasional (TP: RM15.00) will benefit from sustainable
demand growth backed by GDP growth and the
implementation of major infrastructure projects. In addition,
there will be an estimated 25% increase in TNB’s generation
capacity over the next two years. Major overhang from sale of
1MDB's power assets is now lifted and full implementation of
fuel cost pass-through mechanism will provide clear earnings
visibility going forward.
Public BankPublic BankPublic BankPublic Bank (TP: RM21.95) is a safe bet in the beaten down
banking sector given its resilient asset quality and track record
in consistently defying headwinds to grow above industry
average.
MISCMISCMISCMISC (TP: RM10.80) is a beneficiary of a strong USD due to it
being MISC’s functional currency, which is translated into
Ringgit for reporting. Long-term charters for its LNG tankers
buffer it against weak spot rates, and petroleum shipping rates
are expected to remain steady.
Hong Leong BankHong Leong BankHong Leong BankHong Leong Bank (TP: RM14.70) should start to re-rate now
that capital-raising issues are a thing of the past. Its other
strong attribute is its strong liquidity position with the lowest
loan-to-deposit ratio among peers. With the capital-raising
overhang over, HLB can now focus on business growth. The
gradual build-up of non-interest income would be a key
catalyst.
GamudaGamudaGamudaGamuda (TP: RM5.60) is the best transportation infrastructure
proxy play. We expect Gamuda to solidify its position for MRT
Line 2 with the eventual award of tunnelling works by mid-
2016, adding another RM6bn of high-margin projects to its
orderbook on top of the RM8bn recognised as PDP fees. The
company could also be more aggressive in other transport-
related tenders like LRT 3, Pan Borneo Highway, Southern
Double tracking and eventually the High Speed Rail.
GlobetronicsGlobetronicsGlobetronicsGlobetronics (TP: RM7.10) will see another breakthrough year in 2016 as its end-customer is likely to introduce a major upgrade involving 3D imaging sensor for its next-gen smartphone camera. Despite near-term headwinds due to production cut by its end-customer in 1H16, we remain upbeat about its 3D imaging sensor that should boost FY16-17F revenue significantly and drive 3-year earnings CAGR of 27%. Share price has corrected by 16% YTD in line with the cautious market sentiment, which we believe provides a good entry point to accumulate at the current level.
MuhibbahMuhibbahMuhibbahMuhibbah (TP: RM2.90) is the most complete 11MP proxy
given its ability to focus on a more varied set of works (civil
engineering, marine-based construction and also onshore and
offshore fabrication). Its infrastructure orderbook has seen
significant replenishment and now stands at RM1.7bn (1.4x
FY16F revenue). Its Cambodian airport concession continues to
grow following the doubling up of passenger capacity at Siem
Reap and Phnom Penh airports.
KimlunKimlunKimlunKimlun (TP: RM2.26) is the most direct MRT proxy as it has
secured c.50% market share of segmental box girders (SBG)
and tunnelling lining segment (TLS) for MRT Line 1. 2016 will
likely be a busy year for this division with potential wins for
MRT Line 2 and Eastern Region Line (in Singapore).
SKP ResourcesSKP ResourcesSKP ResourcesSKP Resources (TP: RM1.78) is expected to register a record
earnings growth of 104% y-o-y in FY17F (March 2017),
boosted by the inclusion of two sizeable contracts from Dyson
totalling RM1bn p.a. over five years. Taking into account the
projects on hand, only c.25% of the capacity at SKPRES’s new
plant in Senai, Johor has been utilised. With ample spare
capacity, we believe the group is well prepared to take on
more contracts, which can come from both Dyson and non-
Dyson related parties.
Please refer to pages 16 to 18 for detailed key investment
merits of these stock picks.
Top stocks picks
FY2016/2017
Recommen
dation
Target
Price
Current
Price
Market
CapCY2016 CY2017 CY2016 CY2017 CY2016 CY2017 CY2016 CY2017 CY2016 CY2017
Tenaga BUY 15.00 13.12 74,044.2 11.1x 10.8x 5% 3% 2.3% 2.4% 1.4x 1.3x 13% 12%
Public Bank BUY 21.95 18.48 71,360.4 13.3x 12.2x 7% 9% 3.1% 3.4% 2.1x 1.9x 16% 16%
Hong Leong Bank BUY 14.70 13.14 26,965.4 12.6x 11.1x (3%) 14% 2.7% 3.0% 1.3x 1.2x 11% 11%
MISC BUY 10.80 8.75 39,058.2 13.1x 12.4x 10% 6% 2.3% 2.9% 1.2x 1.2x 10% 10%
Gamuda BUY 5.60 4.44 10,682.2 16.4x 15.2x (1%) 8% 2.0% 2.0% 1.5x 1.4x 10% 10%
Muhibbah Engineering BUY 2.90 2.28 1,069.1 9.1x 8.0x 24% 14% 2.2% 2.5% 1.0x 0.9x 12% 12%
Kimlun Corporation BUY 2.26 1.53 459.8 7.5x 6.6x (13%) 14% 2.1% 2.4% 0.9x 0.8x 13% 13%
Globetronics BUY 7.10 5.50 1,550.1 15.1x 11.6x 43% 29% 6.2% 7.6% 5.0x 4.8x 34% 42%
SKP Resources BUY 1.78 1.36 1,521.0 12.3x 10.1x 62% 22% 4.1% 5.0% 4.8x 3.9x 45% 43%
ROAEP/E EPS Growth (YoY) Dividend Yield Price/ BVPS
Source: AllianceDBS Price date: 29 Feb 2016
Market Focus
Results Roundup
Page 9
Sector Outlook
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
AutomotiveAutomotiveAutomotiveAutomotive
Underweight
• Dampened growth. Dampened growth. Dampened growth. Dampened growth. The weak consumer sentiment and economic headwinds will
likely weigh on industry volume growth in 2016. Although selected brands will
increase prices arising from higher cost, principals will be constrained by challenging
macro conditions and demands to maintain market share.
• Facing cost pressure. Facing cost pressure. Facing cost pressure. Facing cost pressure. The increase in car prices will help manufacturers cover part of
the increase in imported cost (arising from the Ringgit’s depreciation), aggressive
promotions and sales campaigns – and ease the pressure on margins for now. Further
weakening of the Ringgit would be a risk for the manufacturers.
None
AviationAviationAviationAviation
Neutral (↑)
• Jet fuel spot prices tumbled again in 2016 alongside the fall in crude oil prices.
Currently below the USD45/bbl level, this is already >30% lower than average 2016
price of c.USD65/bbl. Airlines will see lower operating costs if these prices persist as
fuel costs makes up 20-40% of operating costs. However there will be some offset
from the weaker Ringgit as key costs like operating leases, maintenance and fuel are
USD-denominated.
• Yields (fares/RPK) had picked up in 2015 after two years of successive declines caused
by severe competition (now eased with Malaysia Airlines’ capacity rationalisation) plus
the phasing out of fuel surcharges. While yields may continue on its recovery
upswing, we expect growth to be mild as 1) the lower fuel price environment gives
airlines more freedom in pricing and promotion; and 2) travel demand may be softer
on the weaker Ringgit and economic slowdown. There also may be further
downtrading, like in 2015 where Malaysia Airports (MAHB) posted a 0.5% decline in
international passengers while domestic passengers increased 1.5%.
• AirAsia is our top pick as we believe its valuation will re-rate after the easing of its
associate-related concerns – which will be helped by low fuel prices.
AirAsia
BanksBanksBanksBanks
Neutral
• Earnings recovery in 2016 largely driven by lower expenses (due to staff
rationalisation in 2015). No fundamental improvement in trends noted. Top-line
growth is limited with NIM compression still a feature, while loan growth is expected
to moderate to 6-7% in 2016.
• Capital-raising issues largely addressed. After the slew of rights issues in 2015, the
sector’s average (fully loaded) CET1 ratio is estimated at 11%, while the ‘new-
normal’ ROEs hover around 10% from 13% previously.
• All eyes on asset quality. Banks have largely accelerated provisions in 2015 but
concerns still linger on how asset quality will pan out this year. Exposure to the oil &
gas sector is less than 5% of total loans, based on what the banks have disclosed
during the recent analyst briefings. We remain cautious on asset quality and expect
credit costs to remain high y-o-y.
• Stay safe; PBK and HLB remain our top picks. Both have strong asset quality attributes
and both are expected to see loan growth driven by mortgages from strong pipelines
built up in the past few quarters. HLB’s additional feature would be the removal of
the capital raising overhang and its strong liquidity position, providing it more room
for growth.
Public Bank, Hong Leong
Bank
Market Focus
Results Roundup
Page 10
Sector Outlook (cont’d)
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
BuildinBuildinBuildinBuilding materialsg materialsg materialsg materials
Neutral
• We believe competition among cement players is unlikely to improve in 2016 given
the slower construction activities (MRT Line 1 mostly completed) amid further
capacity expansion by industry players.
• The saving grace for the industry is the prevailing low coal prices. Nonetheless, this
will be offset by the continued weakness in Ringgit.
• CMS is on a better footing as the Sarawak-based company will not be impacted by
price competition, unlike its Peninsular peers. The company is also expected to
benefit from the increased infrastructure spending leading up to the Sarawak state
election in 2016.
None
ConstructionConstructionConstructionConstruction
Overweight
• The higher development expenditure for the 11MP (RM260bn over the next five
years) together with the commitment given by the Prime Minister at the recent
Budget revision should provide assurance that key projects are intact. Among the
large mega projects which have little risk in terms of deferment are MRT Line 2, LRT
3, RAPID, High Speed Rail and Pan Borneo highway. Other highway projects such as
WCE, DASH and SUKE will also continue.
• We think the market will focus on the timely execution of tenders and awards. For
MRT Line 2, three above-ground viaduct packages have opened for tender and
awards are expected in April/May 2016. The tunneling portion has also closed for
tender and we understand three other foreign contractors put in bids. Our view
remains that MMC-Gamuda will return as the tunneling contractor for MRT Line 2
given its expertise gained from Line 1 and also the cost advantage it has with the
depreciated tunneling boring machines. We also expect some awards for Pan Borneo
in 2Q16.
• Our top picks remain Gamuda, Muhibbah and Kimlun. We continue to like Gamuda
for its position as the best transportation proxy with two visible projects, MRT Line 2
and Penang Transport. Muhibbah remains an all-round proxy to infrastructure flows
as it is able to perform civil engineering works, marine and also offshore fabrication
works. Kimlun remains an alternative proxy to MRT Line 2 where earnings delivery
has been very strong.
Gamuda, Muhibbah,
Kimlun
ConsumerConsumerConsumerConsumer
Neutral
• Our cautious stance with regards to consumer spending since the implementation of
GST has been largely vindicated. Our recent channel checks show that consumer
spending and visits to shopping malls have yet to recover to pre-GST levels. Our
observations are also being supported by recent statistics released, by MIER Malaysia
where the 4Q15 consumer sentiment index fell to a record low of 63.8 (3Q15: 70.2),
attributed to growing concerns of: (1) higher inflation, (2) expectations of a
challenging labour market, and (3) deteriorating household finances.
• At present, we have a Neutral recommendation on the sector. We do expect
consumer spending to recover in the coming quarters, supported by: (1) recent
government stimulus such as 3% cut in employees’ contribution to EPF and hike in
minimum wage, and (2) Ringgit stabilisation. Nonetheless, we believe that the
recovery will be gradual. Based on our studies of the impact of GST implementation
in other economies, we noticed that the adverse impact on inflation and GDP may
take up to four quarters to normalise. Given that Malaysia implemented the GST in
Apr 2015, consumer spending may take up to 2Q16 to normalise.
• Despite our concerns over weak consumer sentiment, we believe this has been largely
priced given that the recent results reported mainly came in within expectations.
Oldtown is our pick for the sector.
OldTown
Market Focus
Results Roundup
Page 11
Sector Outlook (cont’d)
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
GamingGamingGamingGaming
Neutral
• There are no major re-rating catalysts in the near term. Weakening domestic
consumer sentiment could slow down discretionary spending, which may in turn drag
Genting Malaysia’s domestic leisure & hospitality operations and ticket sales of NFOs.
We expect the weak RM to attract more foreign tourist visits and encourage more
local travelling among Malaysians, which could benefit Genting Malaysia.
None
GlovesGlovesGlovesGloves
Neutral
• We have revised our capacity growth forecasts for the top four Malaysian-listed
glovemakers to 12%/12% in 2016/17, vs our previous forecasts of 11%/12%. The
projected capacity in absolute terms, remains relatively unchanged for 2017, but is
now 3%/2% lower for 2015/16 due to the delays in commissioning some of the
major glove projects.
• At first glance, the forecast capacity growth of the Malaysian glovemakers will
seemingly outpace the forecast global glove consumption growth of 6-8% p.a., but
we think the additional output will be readily absorbed, because: (1) the new capacity
are mainly for nitrile gloves where demand growth remains strong (i.e. the 6-8%
global glove consumption growth are mainly driven by this product segment), and (2)
increasing trend for outsourcing to Malaysian shores. Meanwhile, potential delays in
the completion and commissioning of the glove factories, could pose downside risks
to the capacity growth forecasts, which will help to further limit the supply growth.
• But that being said, we think competition would likely still heat up among the
glovemakers, especially in the nitrile glove segment. Increasing nitrile glove supply
and the diversification of supply source (away from the traditional nitrile glovemakers
such as Hartalega and YTY) could shift the bargaining power in favour of the
customers. Meanwhile, Hartalega, with its best-in-class operating structure (i.e. high
unit profits, low breakeven utilisation levels), could choose to be more aggressive in
its pricing to: (1) grab market share, (2) maximise utilisation and profits, and (3) derail
competitors’ expansion plans by depressing IRRs for future projects – once its NGC
plants are fully operational. Hartalega managed to register a 12% y-o-y increase in
EBIT/k gloves in 12MCY15.
• However, the favourable currency tailwind from the stronger USD should limit the
pressure on margins from the increased competition. Kossan has managed to sustain
its EBIT/k gloves at above RM15.00 (+20% y-o-y in 4Q15). Supermax did not disclose
any operational stats, however it managed to record better operating margins at
15.2% (+2.8ppts y-o-y, -0.2ppts q-o-q). Top Glove has been the biggest beneficiary
from this currency tailwind, which together with the productivity gains, saw its EBIT/k
gloves rise 131% y-o-y to RM17.21 in 1QFY16 (end-Nov).
• Our top pick for the sector is Top Glove with a BUY rating and a TP of RM7.10, based
on 20x CY16F PE. Top Glove is best positioned among its peers to retain the currency
gains, given its exposure to the natural rubber glove segment, where competition is
less intense due to modest incoming supply. Valuation (in terms of PE and dividend
yields) remains cheap when compared to the more expensive peers (i.e. Hartalega).
Top Glove
Market Focus
Results Roundup
Page 12
Sector Outlook (cont’d)
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
HealthcareHealthcareHealthcareHealthcare
Neutral
• We remain optimistic of the growth prospects for private hospital operators due to
increasing demand for quality healthcare amid rising disposable income. Capacity
constraints at government healthcare facilities are also expected to drive affluent
patients to private hospitals. The constraints are expected to worsen with the cut in
public healthcare development expenditure from RM3.7bn in fiscal year 2010 to
RM1.6bn in fiscal year 2016.
• Generic pharmaceutical players are expected to enter a new growth phase with the
approach of the patent cliff, providing an opportunity for them to launch new
products and improve sales. However, the ratification of the proposed Trans-Pacific
Partnership Agreement could lead to a prolonged patent protection period for some
of the drugs, which would reduce the opportunity for the generic players.
None
MediaMediaMediaMedia
Neutral
• With the challenging market environment and rising cost of living, there is generally a
lack of feel good factors to spur a recovery in consumer sentiments and for
advertisers to lift adex spending. Even though adex-friendly sporting events such as
Olympics Games and Euro Championship will be held in 2016, we believe it could be
a repeat of 2014 where the FIFA World Cup failed to drive adex spending due to the
weak consumer sentiment.
• Low newsprint cost is a blessing for newspaper publishers, though this will be offset
by the continued weakness in Ringgit.
• Downside risks are limited given low valuation and decent dividend yields for the
sector.
None
Oil & GasOil & GasOil & GasOil & Gas
Neutral
• Crude oil prices struggle to recover as the OPEC continues to power ahead with
production. At the same time, US production continues relatively unscathed by the
low price environment while inventories are still climbing. It has been more than 12
months of the same, and we expect this to persist into 2016. Given the supply, we
project crude oil price to average USD35-40/barrel (Brent) in 2016.
• FY15 saw Malaysian oil & gas companies bear the brunt of declining capex and opex
by production companies. PETRONAS, Exxon and Shell have slowed activities
significantly in Malaysia and multiple earnings downgrades have been made to reflect
the slow activity. All companies, even the relatively resilient brownfield service
companies, have been affected.
• With new tenders and contract awards flowing at an extremely sluggish pace over
FY15, FY16 earnings across the board are slated to be lower y-o-y. Except for rare
exceptions like Bumi Armada, which continues to see progress in its FPSO business.
We expect some earnings downgrades to continue in 1H16. Perhaps, by 2H16 or
closer to FY17, some activity might come back on stream, especially those related to
production and offshore maintenance activities.
• We advise investors to keep an eye on service providers like SapuraKencana which
are still solid in terms of earnings delivery and in a prime position to recover quickly
when the market improves. We also see it fit to keep an eye on Bumi Armada which
could be an M&A target. Furthermore, its earnings are resilient from ongoing FPSO
contracts but in the near term, the OSV division offsets some FPSO earnings. Besides
that, a safe stock to consider is Dialog which is seeing earnings come through from
Phase 1 in Pengerang.
SapuraKencana, Dialog.
Market Focus
Results Roundup
Page 13
Sector Outlook (cont’d)
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
PlantPlantPlantPlantationationationation
Neutral
• Palm oil demand will outstrip supply this year and the next due to El Nino and skips in
fertiliser application on some smallholder estates in Indonesia last year. But global
palm oil demand should pick up sizeably – as Indonesia blends more biodiesel. From a
supply-demand perspective, the palm oil stockpile is expected to shrink over the next
two years. We understand there is limited spare crushing capacity in Argentina
(58.9m MT vs. 44.8m MT forecast crushing) to substitute c.2m MT palm oil deficit –
despite the huge soybean inventory.
• We expect palm oil stock/usage ratio to drop from 19.9% at the end of CY15 to
15.7% at end of this year and to 13.3% by end of CY17F. Spot palm oil prices and
some plantation counters have only partly reflected this prospective drop. We expect
the gap between futures and spot prices to narrow further.
• We also raised CY16F/17F CPO price forecasts (US$/MT) by 12%/16% to
US$600/US$649 – reflecting lower expected global CPO output and expansion in
biodiesel usage in Indonesia – through deployment of CPO funds collected since Jul-
15.
• Despite what we believe is a two-year upcycle for palm oil prices, select plantation
counters still trade at between -1SD and mean forward PE. While planters’ share
prices have historically moved parallel to CPO prices; we caution that age profiles
(e.g. El Nino affects prime-aged yields more than younger trees), changes in export/import tax policies, currency movements, and rising share in downstream
businesses now have different impacts on earnings.
• While CPO has reacted positively to lower prospective FFB yields, RBD Olein, RBD
Stearin and PFAD have not reacted in the same scale. Consequently, palm oil refining
margins have narrowed significantly, and are estimated to register losses in Jan-16.
As refining margins collapse, processors will push further downstream – chasing
higher-margin products, and export demand will need to switch from CPO to refined
products, which should favour Indonesian processors.
• Malaysian plantation counters’ current valuations have already largely reflected the
favourable outlook. Our sole BUY call is on TSH Resources, an upstream planter
which will benefit from higher CPO prices and is backed by a pipeline of rising
maturities from its young planted area.
TSH Resources
PropertyPropertyPropertyProperty
Neutral
• We expect slower property sales volumes in 2016 although prices should hold up due
to cost-push factors. Sentiment should remain poor given the tightening measures
and inflationary pressures, but mass-market products at strategic locations will
continue to enjoy healthy sales as affordability remains an important factor among
purchasers.
• Developers' margins could be affected by rising development cost as selling price
hikes would be capped by relatively more subdued demand. However, there is no
property bubble for now but we fear an oversupply of KL office space, hybrid high-
rise units and Iskandar Malaysia high-end condos.
• We like Matrix for its sustainable township development in Seremban which has been
growing from strength to strength given its value-for-money product offerings. MKH
is also our pick for the sector given its large exposure to affordable housing and
landed properties in the Kajang-Semenyih growth corridor.
MKH, Matrix
Market Focus
Results Roundup
Page 14
Sector Outlook (cont’d)
SectorSectorSectorSector OutloOutloOutloOutlookokokok Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
REITREITREITREIT
Neutral
• Rental reversion growth is expected to be moderate-to-low for all subsectors. Retail
rents and occupancy should remain resilient at prime locations, but weak consumer
sentiment and spending will cap rental hikes. Office spaces will focus on maintaining
occupancy as oversupply conditions persist, while softer business conditions (weaker
general economy, depreciated Ringgit, minimum wage hike) will pressure rents for
both office and industrial spaces.
• Inorganic growth via acquisitions will be a running theme in the face of weak organic
growth. Among those with recent acquisition news flows are PavREIT (da:men and
Intermark Mall), CMMT (Tropicana City Property), SunREIT (Sunway Putra) and MRCB-
Quill REIT (Platinum Sentral). However, the key point remains whether the REITs will
manage to inject assets at a value that will be DPU-accretive to unitholders.
• Fundamentally, REIT performance looks to be neutral in 2016 with an average 6.3%
earnings growth forecasted across our coverage. In terms of valuation, we are a little
cautious on the negative implication for yield/fixed income instruments if the US Fed
rate hike(s) are faster or more severe than expected. Nonetheless, that is somewhat
counterbalanced by easing efforts from the rest of the world (notably in China and
EU); plus from a localised perspective, the average yield spread of larger-cap REITs
against the 10-year Malaysian Government of Security in the 1.5-1.7% range has
partially priced in the eventuality of the Fed hike.
• Our top pick continues to be Sunway REIT, predicated on strong DPU growth from
the resumed contributions following the completion of Sunway Putra refurbishments,
plus its visible pipeline of potential asset injections from sponsor Sunway Bhd.
Sunway REIT
SSSShippinghippinghippinghipping
Overweight
• LNG spot rates are expected to remain low in 2016 after almost halving in 2015. The
pertinent vessel oversupply issue is unlikely to abate as its orderbook is still strong at
147 vessels. As such, long-term charters would be a boon.
• Crude tanker rates are expected to remain firm. While rates in Baltic Dirty Tanker
Index have been trending down since the start of 2016, it was mainly on the back of
seasonality and frontloading in anticipation of a cold snap. Furthermore, possibilities
of a widening contango in crude oil (large spot-to-futures discount) may make crude
tankers attractive as storage for arbitrage purposes.
• Our top pick for the sector is MISC, with a BUY rating and a TP of RM10.80. We like
the group’s resilient cash flow, backed by long-term LNG charters and offshore oil &
gas assets. As its functional currency is the USD, reported earnings may also be
boosted by further Ringgit weakening.
MISC
TechnologyTechnologyTechnologyTechnology
Overweight
• After few years of high double-digit growth, the global smartphone market is
expected to slow down to low-teen growth in 2016, indicating that the smartphone
cycle might be peaking out. Nonetheless, there are still growth areas for the supply
chain given the upgrade in camera modules (dual camera) and rising RF content,
which play to the strength of Malaysian semi companies.
• RF contents in smartphone are getting higher due to rising adoption of 4G LTE and
introduction of more advanced technology (e.g. carrier aggregation). This will benefit
key RF players such as Avago, Skyworks, and Qorvo. In turn, Malaysian semi
companies which provide outsourced assembly and test services for these RF players
are Inari (>50% sales from Avago RF), Unisem (~30% sales from Skyworks and
Qorvo) and MPI (10-15% sales from Skyworks).
• By 2Q16, Globetronics is expected to ramp up production for the new 3D imaging
sensor that will be supplied to a leading smartphone OEM. This is a new content gain
for the company and will be one of the main growth drivers in 2016.
Globetronics, Inari
Market Focus
Results Roundup
Page 15
Sector Outlook (cont’d)
SectorSectorSectorSector OutlookOutlookOutlookOutlook Top Stock PicksTop Stock PicksTop Stock PicksTop Stock Picks
TelecommunicationTelecommunicationTelecommunicationTelecommunication
Neutral
• The intense competition which started in April 2015 is not showing any signs of
abating soon as mobile players are still offering promotions from time to time in a bid
to gain market share amid the weak consumer environment. We believe a persistent
fall in data pricing is a key threat to mobile operators’ data monetisation strategy to
offset declines in voice and SMS.
• Two key developments to watch for the sector in 2016 are: 1) Re-allocation of 2G
spectrums; and 2) TM’s entry into the mobile space.
• We are optimistic on the eventual rollout of HSBB2, SUBB, and wireless services that
would drive further growth for TM as it expands the coverage of its high-speed
broadband network to more areas.
None
UtilitiesUtilitiesUtilitiesUtilities
Overweight
• Energy demand is expected to grow in tandem with the relatively healthy economic
outlook in Malaysia which will continue to underpin the growing recurring income
for utility players.
• The government remains committed to the power sector reform with the
implementation of incentive-based regulation framework which will offer strong
earnings clarity for utility players as well.
• Our top pick is TNB for its more attractive valuation and improving earnings visibility
from the implementation of the IBR framework.
TNB
Market Focus
Results Roundup
Page 16
Top Stock Picks
StocksStocksStocksStocks Key Investment MeritsKey Investment MeritsKey Investment MeritsKey Investment Merits
Tenaga Tenaga Tenaga Tenaga
NasionalNasionalNasionalNasional
• Sustainable growth.Sustainable growth.Sustainable growth.Sustainable growth. TNB will enjoy sustainable demand growth backed by GDP growth and the implementation of major
infrastructure projects. In addition, there will be an estimated 25% increase in TNB’s generation capacity (excluding
60%-owned Kapar Energy Ventures) over the next two years from new plants under construction – unit 5 at
Janamanjung (coal-fired plants), two hydro power plants and a new gas plant at Prai.
• Clear earnings visibility. Clear earnings visibility. Clear earnings visibility. Clear earnings visibility. The full implementation of fuel cost pass-through mechanism will be a strong re-rating catalyst
for TNB as the national utility company will no longer bear the burden of volatile fuel cost. Potential upside from a tariff
hike under the subsidy rationalisation plan will be a catalyst for TNB as well.
• Maintain BUY. Maintain BUY. Maintain BUY. Maintain BUY. We expect a further re-rating given TNB’s promising demand outlook and improving earnings visibility
with the implementation of fuel cost pass-through mechanism. Also, the overhang from 1MDB issue has now been
resolved as TNB’s bid for Edra Global Energy’s power generation assets has fallen through.
Public BankPublic BankPublic BankPublic Bank • Champion of growth and asset quality. Champion of growth and asset quality. Champion of growth and asset quality. Champion of growth and asset quality. We expect PBK to consistently defy headwinds and grow above industry average.
Its asset quality track record has remained resilient over the cycles.
• Visible and resilient earnings growth.Visible and resilient earnings growth.Visible and resilient earnings growth.Visible and resilient earnings growth. Little needs to be said on PBK’s solid attributes as its deliveries speak for
themselves. Its cost-to-income ratio which ranks way below industry average is admirable. Despite challenging times
ahead, we believe PBK will continue to deliver sustainable earnings growth of c.10%.
• BUY, premium valuations justified. BUY, premium valuations justified. BUY, premium valuations justified. BUY, premium valuations justified. Our RM21.95 target price is derived from the Gordon Growth Model and assumes
9% cost of equity, 4% long-term growth and 16% ROE, implying 2.5x FY16F P/BV. PBK’s premium valuation vs peers is
justified as it continues to depict solid growth and quality trends, contrary to peers.
MISCMISCMISCMISC • Strong USD to lift earnings. Strong USD to lift earnings. Strong USD to lift earnings. Strong USD to lift earnings. MISC’s businesses are generally transacted in USD, but its financials are reported in Ringgit.
As such, a stronger USD would lift the group’s reported earnings.
• Shipping operations remain healthy. Shipping operations remain healthy. Shipping operations remain healthy. Shipping operations remain healthy. As MISC’s LNG tankers are largely fixed on long-term charters, the prevailing low
spot rates will have a limited impact on them. Petroleum tanker rates are expected to remain relatively steady, as the YTD
easing in the Baltic Dirty Tanker Index is mainly due to seasonality. MISC’s minimal gearing after the VTTI stake disposal
also gives it freedom to acquire earnings-accretive assets – such as the recently proposed 50% remaining stake in
Gumusut Kakap Semi-FPS.
• BUY, RM10.80 TP. BUY, RM10.80 TP. BUY, RM10.80 TP. BUY, RM10.80 TP. Our TP is based on SOP-valuation, and implies FY16F PE of 16x.
Hong Leong Hong Leong Hong Leong Hong Leong
BankBankBankBank
• ReReReRe----rating onrating onrating onrating on the cards. the cards. the cards. the cards. HLB should start to re-rate now that capital-raising issues are a thing of the past. HLB’s other
strong attribute is its strong liquidity position with the lowest loan-to-deposit ratio among peers. With the capital-raising
overhang over, HLB can now focus on business growth. The gradual build-up of non-interest income would be a key
catalyst.
• Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. Revised 11% ROE target for FY16F. After taking into account the enlarged equity base, post rights issue, higher cost
base from the MSS exercise and slower contribution from Bank of Chengdu, FY16F ROE target is guided at c.11%. Bank
of Chengdu saw a slower FY16 due to higher provisions and the impact of rate cuts carried out by the Chinese banking
regulator. We understand that its NPLs have since stabilised. Recovery is expected to be underway by 2HCY16.
• BUY, capital overhang removed. BUY, capital overhang removed. BUY, capital overhang removed. BUY, capital overhang removed. HLB is a BUY with TP of RM14.70 derived from the Gordon Growth Model, implying
1.5x CY16 P/BV, and assuming 12% ROE, 10% cost of equity and 5% long-term growth rate.
• Key risk Key risk Key risk Key risk to HLB’s earnings would be the contribution from its associate Bank of Chengdu, which stands at 15% of FY15
pre-tax profit.
Market Focus
Results Roundup
Page 17
Top Stock Picks (cont’d)
StocksStocksStocksStocks Key Investment MeritsKey Investment MeritsKey Investment MeritsKey Investment Merits
GamudaGamudaGamudaGamuda • Best transportation proxyBest transportation proxyBest transportation proxyBest transportation proxy. We expect Gamuda to solidify its position for MRT Line 2 with the eventual award of
tunnelling works by mid-2016, adding another RM6bn of high-margin projects to its orderbook. Tenders for the above-
ground works for MRT Line 2 have also kicked off but the majority will also be in mid-2016. Gamuda’s PDP role will see
another RM8bn of orderbook with a PDP fee of 6%. We also sense that the company will be more aggressive in other
transport-related tenders like LRT 3, Pan Borneo Highway, Southern Double tracking and eventually the High Speed Rail.
• SplSplSplSplash resolution to mitigate potential rights issueash resolution to mitigate potential rights issueash resolution to mitigate potential rights issueash resolution to mitigate potential rights issue. The resolution of Splash, where negotiations are ongoing, is expected
to be resolved by 3Q-4QCY16. While we do not expect a special dividend, the monies will be vital for ensuring the timely
rollout of its Penang Transport Master Plan project. We expect finer details on this project to surface only in early 2016
when the PDP agreement is officially signed. The key hurdle for this project is obtaining federal government approval for
land reclamation and for the LRT. This is expected to only happen at end-2016, implying that physical works should start
in 2HCY17. Gamuda is hoping to have two bites of the cherry – being PDP, and also turnkey contractor for some key
components, but that is still uncertain at this stage.
• BUY, TP RM5.60BUY, TP RM5.60BUY, TP RM5.60BUY, TP RM5.60. Gamuda remains the best large-cap infrastructure proxy in Malaysia. In our view, the market has
already priced in the expected decline in FY16F earnings given there will be a timing gap before MRT Line 2 starts to
contribute.
GlGlGlGlobetronicsobetronicsobetronicsobetronics • 2016 will be another breakthrough year2016 will be another breakthrough year2016 will be another breakthrough year2016 will be another breakthrough year for Globetronics’ sensor division as its end-customer is likely to introduce a
major upgrade involving 3D imaging sensor to its next-gen smartphone camera. This will be a new content gain for
Globetronics besides the proximity sensor that it produces currently.
• A year of two halvesA year of two halvesA year of two halvesA year of two halves. We expect earnings to blip in 1Q16 before growth resumes from 3Q16 onwards with the 3D
imaging sensor going into mass production. Even after adjusting for the recent production cut by its end-customer, y-o-y
earnings growth for GTB is still a respectable 29-43% in FY16-17F, albeit from a lower base.
• Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP Maintain BUY and RM7.10 TP pegged to 15x FY17 EPS, which is below +1SD of its 5-year historical PE band. We believe
GTB stands to benefit from the proliferation of sensor content in smart devices amid the strong relationship with both its
Swiss customer and end-customer.
MuhibbahMuhibbahMuhibbahMuhibbah • Good start for 2016. Good start for 2016. Good start for 2016. Good start for 2016. Muhibbah has won two contracts so far in 2016, one each for its infrastructure and shipyard
division. For its infrastructure division, it won a RM137m building contract from PETRONAS Carigali, in which it has a
70% stake, implying a contract value of RM96m. For its shipyard division, it clinched a RM92m contact win from the
Ministry of Transport to undertake the design and construction of Multi-Purpose Vessel for the Malaysia Marine
Department. Its total outstanding orderbook is now RM2.5bn, of which RM1.7bn comes from infrastructure.
• Cambodian airport concession continues to grow.Cambodian airport concession continues to grow.Cambodian airport concession continues to grow.Cambodian airport concession continues to grow. For 4Q15, its Cambodian airport concession pretax profit grew to
RM16.1m (+3.9% y-o-y, +8.2% q-o-q). Similarly, 12M15 pretax profit was also higher by 22% y-o-y to RM60m. This
was driven by strong traffic volume growth of +13% y-o-y to 6.5m passengers, which was also lifted by an appreciating
USD. The expansion plans for its Siem Reap and Phnom Penh airports have been largely completed with capacity now
double at 12m passengers.
• BUY, most complete 11MP proxy.BUY, most complete 11MP proxy.BUY, most complete 11MP proxy.BUY, most complete 11MP proxy. Muhibbah is our top pick for exposure to the mid-cap construction space. It is also a
more complete 11MP proxy given its ability to focus on a more varied set of works (civil engineering, marine-based
construction and also onshore and offshore fabrication). Our TP of RM2.90 is based on SOP.
Market Focus
Results Roundup
Page 18
Top Stock Picks (cont’d)
StocksStocksStocksStocks Key Investment MeritsKey Investment MeritsKey Investment MeritsKey Investment Merits
KimlunKimlunKimlunKimlun • Impressive yearImpressive yearImpressive yearImpressive year----end record profit. end record profit. end record profit. end record profit. 4Q15 results were strong where 12M15 recorded an impressive core earnings of
RM71m (vs. RM45m in FY14). This was also on the back of strong margins where 4Q15 gross margin was stronger at
14.9% (vs. 12.8% in 3Q15 and 9.5% in 4Q14), largely because of higher margins derived by the construction and
manufacturing segments.
• Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Strong proxy to MRT networks in Singapore and Malaysia. Kimlun’s manufacturing division is to record higher growth in
2016 anchored by stronger order flows of major public transport-related projects such as MRT2 and LRT3 in Malaysia,
and Eastern Region Line (ERL) in Singapore. Given its strong track record with MRT1 previously, of which it had secured
c.50% market share of segmental box girders (SBG) worth RM223m and tunnelling lining segment (TLS) at RM49m, we
believe its manufacturing division will be the front runner to bag MRT2’s SBG and TLS orders. Its outstanding orderbook
in total was RM1.1bn as at 31 Dec (RM0.94bn construction, RM0.17bn manufacturing). We believe its orderbook would
grow and hold up stronger, underpinned by potential wins of several key transport-related projects in 2016.
• BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. BUY, TP raised to RM2.26. Kimlun is the most direct small-cap proxy to MRT, apart from Gamuda, as we expect the
company to win its fair share of TLS and SBG works. Our target price is based on 11x FY16F PE, rolling our base year
one-year forward which is a tad below +1SD of its historical mean of 11.5x and 15% discount to the sector average.
SKP ResourcesSKP ResourcesSKP ResourcesSKP Resources • Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans.Proxy to Dyson’s aggressive expansion plans. Dyson announced in 2014 that it was allocating GBP1.5bn (RM9bn)
towards its R&D budget, and this will eventually culminate into 100 new products that will be launched worldwide in the
next four years. We are positive on SKPRES’s long-term prospects as it is starting to see some spillover effect from
Dyson’s aggressive expansion plan. It has secured two sizeable contracts from Dyson last year for the manufacturing of
cordless vacuum cleaners totalling RM5bn - the first contract was announced in May 2015 (contract value of RM400m
p.a. over five years) and the second contract was announced in Sep 2015 (contract value of RM600m p.a. over five
years).
• Well positioned for further Well positioned for further Well positioned for further Well positioned for further contract awards.contract awards.contract awards.contract awards. Taking into account the projects on hand, only c.25% of the capacity at
SKPRES’s new plant in Senai, Johor has been utilised. With ample spare capacity, we believe the group is well prepared
to take on more contracts, which can come from both Dyson and non-Dyson related parties.
• Expanding clientele base.Expanding clientele base.Expanding clientele base.Expanding clientele base. Growth is also supported by SKPRES’s initiative to expand its clientele base and management
has targeted 8% annual growth for non-Dyson contracts. Among the areas management is looking into is the F&B
packaging segment, with plans to supply more plastic packaging to existing customers such as Unilever, Nestle, Suntori,
and Shell. The recent acquisition of Tecnic has not only increased SKPRES’s production capacity but also enable the group
to leverage on Tecnic’s existing clientele to grow its customer base.
• BUY, TP BUY, TP BUY, TP BUY, TP of of of of RM 1.78.RM 1.78.RM 1.78.RM 1.78. Our TP is based on 14.6x fully diluted FY17F EPS, which is the sector’s weighted average PE
valuation excluding SKPRES. The stock is currently trading at an undemanding 11x FY17F PE. Moreover, given its strong
earnings growth potential, it is currently trading at an attractive PEG of c.0.25x.
Market Focus
Results Roundup
Page 19
Appendix: 4Q15 Earnings Summary
FinancialFinancialFinancialFinancial EPSEPSEPSEPS vs AllianceDBSvs AllianceDBSvs AllianceDBSvs AllianceDBS vs consensusvs consensusvs consensusvs consensus
CompanyCompanyCompanyCompany SectorSectorSectorSector quartersquartersquartersquarters ChangeChangeChangeChange estimatesestimatesestimatesestimates estimaestimaestimaestimatestestestes
UMW Holdings Automotive 4QFY15 ▼ Below Below
MBM Resources Automotive 4QFY15 ▼ Below Below
AirAsia Aviation 4QFY15 ▲ Above Above
AirAsia X Aviation 4QFY15 ▲ Above Above
MAHB Aviation 4QFY15 ▲ Below Below
Affin Holdings Banking 4QFY15 ▼ In line Below
AMMB Banking 3QFY16 ▼ Below Below
CIMB Group Banking 4QFY15 ▼ In line Below
Hong Leong Bank Banking 2QFY16 ▼ In line Below
Hong Leong Financial Group Banking 2QFY16 ▼ In line In line
Maybank Banking 4QFY15 ▼ In line In line
Public Bank Banking 4QFY15 ◄► Above Above
RHB Capital Bhd Banking 4QFY15 ▼ Below Below
Cahya Mata Sarawak Building Materials 4QFY15 ◄► Above Above
Lafarge Building Materials 4QFY15 ▼ Below Below
Petronas Chemical Chemicals 4QFY15 ◄► In line In line
MMC Conglomerate 4QFY15 ◄► In line In line
PPB Group Conglomerate 4QFY15 ◄► Above Above
Gamuda Construction 1QFY16 ▼ In line In line
IJM Corp Construction 3QFY16 ◄► In line In line
Muhibbah Engineering Construction 4QFY15 ◄► In line In line
Kimlun Corporation Construction 4QFY15 ◄► Above Above
WCT Holdings Construction 4QFY15 ◄► In line Below
BAT Consumer 4QFY15 ▼ In line In line
MSM Malaysia Consumer 3QFY15 ◄► In line In line
Oldtown Consumer 3QFY16 ▲ In line Below
Padini Consumer 2QFY16 ◄► In line Above
Petronas Dagangan Consumer 4QFY15 ◄► Below Below
Sasbadi Holdings Consumer 1QFY16 ◄► In line Inline
SKP Resources Consumer 3QFY16 ◄► In line Below
QL Resources Consumer 3QFY16 ◄► In line Below
AEON Credit Finance non-bank 3QFY16 ◄► In line In line
Bursa Malaysia Finance non-bank 4QFY15 ◄► In line In line
BIMB Holdings Finance non-bank 4QFY15 ◄► In line In line
TA Enterprise Finance non-bank 4QFY15 ▼ Below Below
Berjaya Sports Toto Gaming 2QFY16 ▼ Below Below
Genting Gaming 4QFY15 ▼ In line In line
Genting Malaysia Gaming 4QFY15 ▼ In line In line
Magnum Gaming 4QFY15 ◄► Below Below
Hartalega Glove 3QFY16 ◄► In line In line
Kossan Glove 4QFY15 ◄► In line In line
Supermax Glove 4QFY16 ◄► Above Above
Top Glove Glove 1QFY16 ▲ Above Above
IHH Healthcare Healthcare 4QFY15 ◄► In line In line
KPJ Healthcare Healthcare 4QFY15 ▼ Below Below
Astro Media 3QFY16 ◄► In line In line
Media Chinese Media 3QFY16 ◄► In line In line
Media Prima Media 4QFY15 ◄► In line In line
Star Media 4QFY15 ◄► Above Above
Bumi Armada Oil & Gas 4QFY15 ◄► In line In line
Market Focus
Results Roundup
Page 20
FinancialFinancialFinancialFinancial EPSEPSEPSEPS vs AllianceDBSvs AllianceDBSvs AllianceDBSvs AllianceDBS vs consensusvs consensusvs consensusvs consensus
CompanyCompanyCompanyCompany SectorSectorSectorSector quartersquartersquartersquarters ChangeChangeChangeChange estimatesestimatesestimatesestimates estimaestimaestimaestimatestestestes
Coastal Contracts Oil & Gas 4QFY16 ◄► Below Below
Dayang Enterprises Oil & Gas 4QFY15 ◄► Above Above
Deleum Oil & Gas 4QFY15 ◄► Below Below
Dialog Group Bhd Oil & Gas 2QFY16 ◄► Below Below
MMHE Oil & Gas 4QFY15 ◄► Below Below
Pantech Group Oil & Gas 3QFY16 ◄► Below Below
SapuraKencana Oil & Gas 3QFY16 ◄► In line In line
UMW Oil & Gas Oil & Gas 3QFY15 ◄► Below Below
CB Industrial Product Plantation 4QFY15 ▲ Above Above
Genting Plantation Plantation 4QFY15 ▲ In line Below
IJM Plantations Plantation 3QFY16 ▼ Below In line
IOI Corporation Plantation 2QFY16 ▲ In line In line
KL Kepong Plantation 1QFY16 ◄► Above Above
Sime Darby Plantation 2QFY16 ▼ Below Below
Felda Global Ventures Plantation 4QFY15 ▼ Below Below
TSH Resources Plantation 4QFY15 ▲ In line In line
Suria Port 4QFY15 ◄► In line In line
Eastern & Oriental Property 3QFY16 ▼ Below Below
MKH Property 1QFY16 ▲ Above Above
SP Setia Property 4QFY15 ◄► Above Above
UEM Sunrise Property 4QFY15 ◄► In line Below
Eco World Development Property 4QFY15 ◄► Above Above
Matrix Concepts Property 4QFY15 ◄► In line In line
Sunway Property 4QFY15 ◄► Above Above
Axis REIT REIT 4QFY15 ◄► In line Below
CapitaMall Malaysia Trust REIT 4QFY15 ▲ In line In line
KLCC Stapled REIT 4QFY15 ◄► In line In line
IGB REIT REIT 4QFY15 ◄► In line In line
Pavilion REIT REIT 4QFY15 ◄► In line In line
MRCB-Quill REIT REIT 4QFY15 ◄► In line In line
Sunway REIT REIT 2QFY16 ◄► In line In line
MISC Shipping 4QFY15 ◄► In line Above
Westports Holdings Shipping 4QFY15 ▼ In line In line
Malaysian Pacific Industries Technology 2QFY16 ▼ Below Below
Globetronics Technology 4QFY15 ◄► In line In line
Inari Amertron Technology 2QFY16 ▼ Below Below
Unisem Technology 4QFY15 ▲ Above Above
Axiata Telecommunication 4QFY15 ▲ In line Below
Digi Telecommunication 4QFY15 ▼ Below Below
Maxis Telecommunication 4QFY15 ▼ In line Above
TIME dotCom Telecommunication 4QFY15 ◄► In line In line
TM Telecommunication 4QFY15 ◄► In line In line
Gas Malaysia Utilities 4QFY15 ◄► Below Below
Petronas Gas Utilities 4QFY15 ◄► In line In line
Tenaga Utilities 1QFY16 ◄► In line In line
YTL Power Utilities 2QFY16 ◄► In line In line
Source: AllianceDBS
Market Focus
Results Roundup
Page 21
AllianceDBS Research recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUYSTRONG BUYSTRONG BUYSTRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY BUY BUY BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLDHOLDHOLDHOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUEDFULLY VALUEDFULLY VALUEDFULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL SELL SELL SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER GENERAL DISCLOSURE/DISCLAIMER This report is prepared by This report is prepared by This report is prepared by This report is prepared by AllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn BhdAllianceDBS Research Sdn Bhd This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the “DBS Vickers Group”) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of AllianceDBS Research Sdn Bhd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATIONANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 Mar 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANYCOMPANYCOMPANYCOMPANY----SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES SPECIFIC / REGULATORY DISCLOSURES 1.1.1.1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates do not have a proprietary
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2.2.2.2. Compensation for investment banking services: Compensation for investment banking services: Compensation for investment banking services: Compensation for investment banking services:
DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
Market Focus
Results Roundup
Page 22
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This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
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