Analyst calls for August 23
KUALA LUMPUR, Aug 23 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Boustead Holdings
Second quarter core net profit tumbled 44 per cent year-on-year and 70 per cent quarter-on-quarter to RM44 million, taking 1H12 core profit to RM188 million (-7 per cent year-on-year). The poor result was due to weaker profits at heavy industries and plantation divisions.
Stripping out dividend income from Boustead REIT in 1Q12, 2Q12 plantation EBIT fell 48 per cent quarter-on-quarter to RM16m, as FFB production fell 16 per cent but was compensated by higher CPO prices of RM3,197 per MT (+2 per cent).
Pharmaceuticals EBIT fell 27 per cent quarter-on-quarter due to a one-off impact from the elimination of unrealized profit on goods supplied to Idaman Boustead declared a single tier 7.5 sen DPS for in 2Q12 to take YTD DPS to 15 sen; this is in line with its KPI of 30 sen for FY12 but may fall short of our 41 sen forecast.
Rating: Buy, nudged down Target Price to RM7.20. This was largely after factoring our lower TP for BHIC. Despite downgrading earnings, the stock remains cheap at 10x FY13F PE and 1.2x NTA, and offers 7.2 per cent dividend yield.
TSH Resources
TSH reported 2Q12 earnings of RM14.6 million (-3 per cent quarter-on-quarter, -59 per cent year-on-year), on the back of RM66.8 million sales (+23 per cent quarter-on-quarter, -15 per cent year-on-year). This brings its 1H12 earnings to RM30 million (-50 per cent year-on-year), which makes up only 22 per cent of our original FY12 forecast. The weaker-than-expected result was due to poor FFB harvest especially in its Sabah mature estates; lower profit from refinery JV and sequentially lower ASP.
Its 2Q12 FFB production came in at 91.7k MT (+2 per cent quarter-on-quarter, -16 per cent quarter-on-quarter). Tress stress had adversely affected the group’s Sabah output (-9 per cent quarter-on-quarter, -38 per cent year-on-year); which dragged 1H12 production to just 40 per cent of our original FY12F FFB output, hence below on annualized basis. We expect the poor crop formation to normalize in 2H12, following last year’s peak. Meanwhile, its 2Q12 CPO ASP was booked at RM3,002/MT (+2 per cent quarter-on-quarter, -5 per cent year-on-year).
Maintain Hold. We trimmed our DCF-derived TP to RM2.65 (WACC 9.9 per cent, TG 3 per cent), following our earnings adjustments – rolled forward to FY13 base year. While we continue to like TSH for its impressive 3-year FFB volume CAGR of 16 per cent (the highest in our Malaysia plantation universe); we believe current market valuation has priced in this outlook. HOLD for c.3 per cent total return (including 1.3 per cent net dividend yield).
Guan Chong
2Q12 net profit grew 2.5 per cent year-on-year and 12.8 per cent quarter-on-quarter to RM35.3 million on the back of RM312.8 million revenue (-6.5 per cent year-on-year, -11.7 per cent quarter-on-quarter). The weaker revenue was due to lower selling prices of cocoa products despite marginally higher sales volume.
However, bottom line was lifted by better margins and lower effective tax rate of 12 per cent due to tax incentives (2Q11: 12 per cent; 1Q12: 26 per cent). This takes 1H12 net profit to RM66.6 million (+3.2 per cent year-on-year), or 50 per cent of our full-year earnings.
Group EBITDA margin continued to improve, to 15.1 per cent in 2Q12 versus 2Q11’s 12.9 per cent and 1Q12’s 13.8 per cent, as its plants were running at near-full capacity. It also declared a third interim net DPS of 2.5 sen, lifting YTD net DPS to 7.0 sen.
Meanwhile, the ex-date for its 1-for-2 bonus issue has been fixed on 7 Sept 2012.
We maintain our Hold rating and RM3.00 TP, pegged to 7.5x FY13F FD EPS of 40 sen. The stock – which hit a low of RM2.86 (-5.0 per cent) before closing at RM2.95 (-2.0 per cent) yesterday after it scrapped dual-listing plans in Singapore (refer to our report published yesterday for more details) – may find downside limited by 4.8 per cent FY13F net dividend yield and low 7.1x fully-diluted P/E.
From RHB Research
Axiata
We expect Axiata’s 2Q12 core net profit (results due on August 30) growth to be relatively flat on a year-on-year basis.
While we have seen strong year-on-year revenue growth from XL and Dialog, margin erosion will continue to cap earnings growth. In addition, RM appreciation will also squeeze earnings.
Earnings growth should return in 2H, driven mainly by steady performance in Celcom (in addition to tax incentives), greater traction in XL’s data business as well as seasonality effect.
Maintain Outperform call on Axiata with unchanged SOP fair value of RM6.60.
AFG
DBS’s proposal to acquire Temasek’s 49 per cent stake in Vertical Theme (balance 51 per cent held by Langkah Bahagia) may not comply with the 20 per cent ownership limit by any single group in financial institutions as Vertical Theme will still be holding a 29 per cent stake in AFG. (Financial Daily)
From the article, it appears that the solution would be for either:
1) the removal of the immediate holding company (Vertical Theme) structure, such that Langkah Bahagia and Temasek/DBS would end up holding 14.8 per cent and 14.2 per cent direct stakes in AFG respectively; or
2) DBS acquires Langkah Bahagia’s stake in Vertical Theme, which would still meet the 30 per cent single foreign ownership limit.
DBS could also walk away from the deal, but we think option (2) is the likelier choice given that Langkah Bahagia was reportedly interested to sell off its stake.
Rating: Market perform, fair value RM4.35
* 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.
