Analyst calls for November 29
KUALA LUMPUR, Nov 29 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Sector Update — Malaysian banks
Earnings were driven by lower provisions and higher recoveries across the board. Except for two banks that beat expectations — MAY (from lower provisions) and CIMB (higher non-interest income), the rest were in line. NIMs had stabilised (average -1bp decline q-o-q) with less pressure on asset yields and deposit costs, except for AMMB, which NIM fell 14bps in the quarter as asset yields fell faster than deposit costs. Expenses rose 3 per cent q-o-q but CIMB’s expenses accelerated due to integration costs.
Loan growth slowed; cut 2012 loan growth to 11 per cent (from 12 per cent). The moderation (2 per cent in 3Q vs 5 per cent in 2Q) was largely led by MAY (working capital loans) and CIMB (consumer loans). CIMB appears to be losing market share in mortgages, credit cards, auto and SME segments and is revamping its consumer banking business to regain traction. PBK had the most consistent loan growth in 2012, expanding c.3 per cent q-o-q each quarter. Banks with larger exposure to corporate loans (MAY, CIMB, RHBC) displayed more volatility in the last three quarters as lumpy corporate loans were disbursed, repaid or converted to bonds. We trimmed 2012F loan growth to 11 per cent (from 12 per cent). YTD-Sep12 loan growth stood at 8.5 per cent. Liquidity remains ample to support growth with net loan-to-deposit ratio stable at 85 per cent.
Asset quality on improving trend, recoveries to taper off. Gross NPL ratio and absolute NPLs continued to trend down. With HLB adopting MFRS139, all banks have moved to MFRS139. Post-adoption of MFRS139, provisions had been low while recoveries had been significant. We expect recoveries to taper off over the next two quarters.
Top picks: MAY, RHBC. MAY remains our pick for dividend yield (5 per cent based on 70 per cent payout), while RHBC appeals in terms of valuation. RHBC’s 12M share price performance has lagged the sector’s.
Maintain BUY on Benalec Holdings, with an unchanged sum-of-parts (SOP) derived fair value of RM2.48/share. Benalec reported 1QFY13 net profit of RM23 million – accounting for 24 per cent of our full-year forecast but only 20 per cent of the street’s. Despite a gain on disposal of land in Malacca recorded in 4QFY12, pre-tax earnings still rose 1.2x to RM26 million. The catalyst for the quarter came from two new projects that were kicked-off – namely Pulau Indah Industrial Park and TNB coal freight contract – although the Sentosa Cove project still accounted for the bulk of the group’s revenue at 73 per cent. On a YoY basis, pre-tax profit fell 21 per cent owing to the completion of certain projects last year – while contributions from the two new contracts mentioned above are still at its infancy stages. Further earnings drags came from:
(i) preliminary expenses for its proposed marine/oil & gas hubs in South Johor; and
(ii) one-off disposal of vessels (RM2 million) during the quarter. Be that as it may, we are comfortable with our FY13F net profit forecast of RM93 million (+13 per cent YoY). We expect more prolific land sales from its Malacca concessions – where the group has just closed another deal that will likely be recognised next March (net gain of RM8 million). Benalec has the balance sheet to embark on its ambitious Johor project; with net cash position of RM59 million as at 30 September 2012. This includes an unutilised balance of RM46 million representing 48 per cent of a private placement exercise carried out in 4Q11, for which the group is seeking a one-year extension (until 7 December 2013) to use it.
We maintain our BUY call on Bumi Armada, with an unchanged sum-of-parts-based fair value of RM4.65/share, which implies an FY13F PE of 23x.
Bumi Armada has acquired and taken delivery of a Very Large Crude Carrier (VLCC) known as MT Osprey for US$29 million (RM88 million) from Samoco 1233 Trust. The vessel was built in 1999 by Sumitomo Heavy Industries, Japan and has a capacity of of 160,279 gross tonne.
We continue to like the stock due to:
(1) Likelihood of new floating production storage and offloading (FPSO) vessel contracts as oil & gas developments reignite globally,
(2) tightening vessel utilisation rates, and
(3) premium scarcity for oil & gas stocks with large market capitalisation.
The stock currently trades at an attractive FY13F PE of 20x compared with SapuraCrest Petroleum’s peak of 29x in 2007.
Maintain BUY on IJM Corp with an unchanged fair value of RM5.71/share; pegged at a 10 per cent discount to its sum-of- parts (SOP) value of RM5.71/share.
IJM reported a core net profit of RM234 million for 1HFY13, after excluding unrealised forex losses of RM8 million (1HFY12: RM27 m million). Stripping off these exceptional charges, IJM’s 1H results was in-line with our estimates (52 per cent) and constituted 47 per cent of consensus. The group declared a single-tier interim DPS of 4 sen, similar to last year’s.
IJM remains a top pick for large cap exposure to renewed order book opportunities for Malaysian contractors post elections. The stock is trading at trough PE valuations of 11x-15x (-1sd: 12x). A key re-rating angle will come from the WCE project; this could more than double the group’s order book to RM7 billion.
From RHB Research
3Q core net profit of RM96.1 million was below our and consensus expectations. Key variances were higher-than-expected 9m depreciation and amortization expense, which we believe was attributed to the opening of Mount Novena Hospital in end-Jul.
Revenue was flat quarter-on-quarter, as higher inpatient admissions (+1.3 per cent) in Singapore was offset by a 4.9 per cent and 4.2 per cent decline in inpatient admissions in Malaysia and Turkey, due to the Hari Raya holiday season and the Hungry Ghost Festival in Malaysia as well as the summer season in Turkey.
Coupled with a RM23.9 million EBITDA loss for the new Mount Novena hospital and a higher depreciation expense during the quarter, 3Q core net profit declined 12.4 per cent quarter-on-quarter.
FY12-14 earnings cut by 9.3-20.7 per cent after adjusting for higher depreciation and amortisation.
Despite the cut in numbers, we are keeping our Outperform call based on an unchanged SOP fair value of RM3.53 given the strong earnings visibility ahead.
MAHB said that it had received a letter from the Ministry of Finance and Treasury of Maldives notifying it that the concession agreement for its 20 per cent-owned Male Airport is now void ab initio and the Ministry will take over possession and control of the airport and all facilities within 7 days. We are trimming FY12/13-14 net profit forecasts by 4 per cent each, having removed contributions from Male Airport, just to be conservative.
Fair value has been reduced by 3 per cent from RM6.94 to RM6.72, having removed Male Airport from the equation.
Maxis’ 3QFY12 results was below our and consensus expectations, with 9MFY12 core net profit of RM1,581 million (-2.8 per cent year-on-year) accounting for only 71 per cent and 69 per cent of our and consensus full-year estimates respectively. The key variance was higher-than-expected handset subsidies.
Maintain Market Perform call with unchanged DCF fair value of RM7.40. Although mobile service revenue growth still appears tepid, earnings growth should recover in FY13 due to maiden full-year revenue contributions from the U Mobile roaming deal. But margins remain under pressure as management prioritise revenue growth through aggressive A&P and handset subsidies.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.