Regional Daily Ideas Troika Top Stories

Transcription

Regional Daily, 21 November 2014
5
Regional Daily
Ideas Troika
Top Stories
Kossan Rubber Industries (KRI MK)
Consumer Non-cyclical - Rubber Products
BUY MYR4.54 TP: MYR5.12
Mkt Cap : USD862m
Greatview Aseptic Packaging
Neutral Non-cyclical - Packaging
Consumer
NEUTRAL HKD3.71 TP: HKD3.89
Mkt Cap : USD645m
(468
Pg2
We keep our BUY recommendation and TP of MYR5.12. 9M14 earnings
came in weaker than expected due to lower contributions from all divisions,
but we see a bright outlook for FY15 when its new lines commence
operations.
Analyst: Jerry Lee (jerry.lee@rhbgroup.com)
HK) Pg3
We are concerned after 3Q14 operating results reflected a sharp
deterioration. Downgrade to NEUTRAL, with a lower TP. We believe sales
and GPM could deteriorate further amid lower demand and ASP. However,
negatives looked priced in and there is attractive yield of 5.4%.
Analyst: Robin Yuen CFA (robin.yuen@rhbgroup.com)
Pg4
October auto sales rebounded +13.4% MoM to 54,187 units as deliveries of
the Perodua Axia gathered pace. Cumulative 10M14 TIV sales was flat with
some buyers awaiting more attractive discounts and clarity on pricing postGST. Non-national passenger car sales remain robust. NEUTRAL
Analyst: Alexander Chia (alexander.chia@rhbgroup.com)
Pg5
Spectacular October Rebound From a Low Base
Malaysia Auto Sector
NEUTRAL
Other Key Stories
Hong Kong
Sunny Optical (2382 HK)
Technology - Handset Components
BUY HKD13.40 TP: HKD13.50
Malaysia
AEON (AEON MK)
Consumer Cyclical - Retail
NEUTRAL MYR3.51 TP: MYR3.67
Genting Plantations (GENP MK)
Agriculture - Plantation
Analyst: Kong Yong Ng (ng.kong.yong@rhbgroup.com)
Pg6
Affected By Higher Operating Costs
Pg7
Indonesia The Growth Catalyst
Analyst: Hoe Lee Leng (hoe.lee.leng@rhbgroup.com)
QL Resources (QLG MK)
Pg8
Consumer Non-cyclical - Food & Beverage
Products
All On Track
Mah Sing (MSGB MK)
Property- Real Estate
Pg9
Rights Issue To Pay Off Landbank
CB Industrial Product Holding (CBP MK)
Agriculture – Plantation
Pg10
See important disclosures at the end of this report
Analyst: Loong Kok Wen CFA (loong.kok.wen@rhbgroup.com)
Upgrade To NEUTRAL
Analyst: Hoe Lee Leng (hoe.lee.leng@rhbgroup.com)
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1
Results Review, 21 November 2014
Buy (Maintained)
Consumer Non-cyclical - Rubber Products
Market Cap: USD862m
Target Price:
Price:
MYR5.12
MYR4.54
Macro
Risks
Outlook Remains Bright
Growth
Value
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
4.90
144
4.70
138
4.50
133
4.30
127
4.10
122
3.90
116
3.70
111
3.50
105
3.30
100
3.10
7
94

5
4
3

Oct-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2
Source: Bloomberg
3.41m/1.05m
9.5
12.8
3.26 - 4.69
32
639
51.1
7.4
5.6
Share Performance (%)

Slower growth. Kossan Rubber Industries’ (Kossan) 9M14 net profit of
MYR105.8m (+3.7% YoY) came in weaker than our and consensus
expectations, at 63% and 65% of the respective full-year forecasts. This
was attributed to lower-than-expected sales (-2% YoY) from the
technical rubber division due to lower exports of industrial and
automotive parts, although the sales of infrastructure products together
with marine and dock fenders remained strong. Lower average selling
prices (ASPs) in the gloves division due to lower raw material prices
offset higher sales volume (+5.5% YoY for 3Q14). As for its clean-room
division, higher operating expenses incurred from the expansion of its
clean-room facilities in China coupled with higher staff costs led to a
decline in earnings contribution.
Outlook. We learnt that Kossan is currently ramping up its production
volume – Plant 1 is currently running at full capacity, while Plants 2 and 3
are expected to commence commercial production in Nov 2014 and Jan
2015 respectively. Coupled with its cost-control measures to improve
production efficiency, we remain positive on the company’s future
earnings prospects. The technical rubber products division is expected to
pick up when supply to the mass rapid transit (MRT) projects starts,
while the clean-room division is set to improve since the expansion
investment has been completed.
Maintain BUY. We trim our FY14 earnings forecast by 6% as full
contribution from its new plants has yet to come in, and keep our FY15
forecast unchanged. Maintain BUY with an unchanged TP of MYR5.12,
based on a 17x FY15F P/E, at a discount to Hartalega Holdings’ (HART
MK, BUY, TP: MYR7.50) 21x. However, we think this is justifiable noting
that Hartalega fetches a better net profit margin of 20% vs Kossan’s 1112%, given the former’s superior operating efficiency and greater
emphasis on nitrile glove production.
YTD
1m
3m
6m
12m
Absolute
5.1
0.4
14.4
14.6
36.7
Forecasts and Valuations
Relative
7.4
(0.8)
17.3
17.6
35.3
Total turnover (MYRm)
Shariah compliant
Jerry Lee +603 9207 7622
jerry.lee@rhbgroup.com
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,234
1,307
1,467
1,697
2,046
Reported net profit (MYRm)
102
136
157
193
236
Recurring net profit (MYRm)
100
142
157
193
236
Recurring net profit growth (%)
9.6
42.0
10.8
22.3
22.6
Recurring EPS (MYR)
0.16
0.22
0.25
0.30
0.37
DPS (MYR)
0.05
0.07
0.08
0.10
0.12
Recurring P/E (x)
29.0
20.4
18.4
15.1
12.3
P/B (x)
4.80
4.12
3.56
3.06
2.60
P/CF (x)
23.9
13.9
15.9
14.9
15.9
1.0
1.5
1.8
2.2
2.7
EV/EBITDA (x)
16.4
12.5
10.9
9.1
7.6
Return on average equity (%)
18.0
20.8
20.7
21.8
22.9
Net debt to equity (%)
16.1
9.5
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)


2

.
2
0
.
3
0
0
.
2
0
0
We keep our BUY recommendation and TP of MYR5.12 (12.8% upside, .
0
17x FY15F P/E). 9M14 earnings came in weaker than expected due to 0
lower contributions from all divisions, but we see a bright outlook for 0
FY15 when its new lines commence operations. Kossan declared a
dividend of 3.5 sen in the quarter under review. We remain positive on
the company’s future growth prospects.
6
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Kossan Holdings
Invesco Ltd
KWAP




Source: Company data, RHB
8.7
4.1
2.9
(5.3)
(5.9)
(0.2)
2
Company Update, 21 November 2014
Greatview Aseptic Packaging (468 HK)
Consumer Non-cyclical - Packaging
Market Cap: USD645m
Neutral (from Buy)
Target Price:
Price:
HKD3.89
HKD3.71
Macro
Risks
Mounting Concerns – But Appear To Be Priced In
Growth
Value
Greatview Aseptic Packaging (468 HK)
Relative to Hang Seng Index (RHS)
115
5.20
105
4.70
95
4.20
85
3.70
75
3.20
200
180
160
140
120
100
80
60
40
20
65
May-14
Oct-14
5.70
Jul-14
125
Mar-14
6.20
Jan-14
135
Nov-13
Vol m
Price Close
6.70
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Shareholders (%)
14.6m/1.64m
34.0
4.8
3.49 - 6.15
73
1,348
Wellington management
Matthews International
Foxing Development Ltd.
0
0
.
2
0
0
We are concerned with the negative factors affecting Greatview, after .
0
3Q14 operating results reflected a sharp deterioration. Downgrade to 0
NEUTRAL, with a lower TP of HKD3.89 (4.8% upside). We believe its 0
sales and GPM could deteriorate further amid reduced demand and
lower prices from Mengniu and Yili. However, we believe these
negatives are priced in. The stock offers an attractive yield of 5.4%.



Source: Bloomberg
13.0
9.9
9.6

Profit warning recap. Greatview Aseptic Packaging’s (Greatview) 9M14
net profit dropped 16% YoY and sales grew only 10% YoY. While FX
losses accounted for 75% of the net profit (NP) decline of CNY35m,
3Q14 results deteriorated sharply as sales fell 7% YoY vs a growth of
20% in 1H14. Greatview surprised investors when guided its sales in 4Q
to be similar to 3Q, thus implying a c.7% decline. We estimate its
reported EPS to drop c. 16% YoY, or by 8%, excluding FX losses.
Twin industry headwinds in dairy. Domestic milk price hikes after
channel restocking in 1Q14 by dairy processors such as Mengniu (2319
HK, NR) have led to waning demand. Additionally, the global milk glut
has encouraged retailers to import foreign ultra-high temperature
processing (UHT) milk products into China. These two factors put a
short- to medium-term dampener on UHT milk production, which in turn
affected demand for packaging.
Competitive pressure. Greatview’s top rival, ie Tetra Pak, defended its
market share by giving discounts, which led to a price war. To date, the
State Administration for Industry and Commerce’s (SAIC) anticompetitive investigation into Tetra Pak has made little progress, with
bundling of filling machines, servicing and packaging believed to be still
in practice. Moreover, recent price promotions by its major customers
like Mengniu and Yili (600887 CH, NR) to maintain their own margins
may pressure Greatview’s ASP, in our view. All these factors suggest
that Greatview’s gross profit margins (GPM) are vulnerable.
Downgrade to NEUTRAL (from Buy). We cut our recurring NP
forecasts by 22%, 31% and 35% for FY14-16 respectively. Our new TP
of HKD3.89 (from HKD7.05) is now based on a 13x FY15F P/E, about
0.5SD below the historical average forward P/E of 15x from its Dec 2010
IPO. We believe its lower P/E (from 16x previously) is justified by a
slower growth profile and a more competitive operating environment.
This marks the transfer of coverage to Robin Yuen.
YTD
1m
3m
6m
12m
Absolute
(19.0)
(29.3)
(37.6)
(21.6)
(25.8)
Relative
(20.0)
(31.3)
(31.1)
(24.6)
(25.1)
Total turnover (CNYm)
Shariah compliant
Robin Yuen, CFA +852 2103 9202
robin.yuen@rhbgroup.com
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,744
2,160
2,278
2,618
3,029
Reported net profit (CNYm)
315
317
268
318
359
Recurring net profit (CNYm)
310
310
284
318
359
14.2
(0.0)
(8.4)
11.9
12.8
Recurring EPS (CNY)
0.23
0.23
0.21
0.24
0.27
DPS (CNY)
0.08
0.08
0.16
0.16
0.16
Recurring P/E (x)
12.6
12.6
13.9
12.4
11.0
P/B (x)
2.10
1.87
1.57
1.41
1.26
P/CF (x)
9.6
16.8
15.5
18.3
13.1
Dividend Yield (%)
2.7
2.7
5.4
5.4
5.4
8.22
7.38
8.87
7.53
6.51
18.0
16.0
11.6
12.0
12.1
EV/EBITDA (x)


2

.
2
0
.
2




net cash net cash net cash net cash net cash
(4.8)
(15.6)
(19.2)
3
Sector Update, 21 November 2014
Auto & Autoparts
NEUTRAL (Maintained)
Macro
Risks
Auto Sales Rebound
Growth
Value






3

2

1
2
2013 market share
October auto sales rebounded +13.4% MoM to 54,187 units from a 6.6%
MoM contraction in September as deliveries of the Perodua Axia
gathered pace. However, cumulative 10M14 TIV sales continued to slow
to +0.6% YoY from a higher base, in addition to consumers’ anticipation
of year-end discounts and some choosing to defer their purchases until
the GST impact on car prices becomes clearer. Maintain NEUTRAL.

Source: MAA
YTD Oct 2014 market share


Source: MAA

Auto sales rebound. According to data from the Malaysian Automotive
Association (MAA), auto sales rebounded 13.4% MoM to 54,187 units,
against a 6.6% MoM contraction last month. The jump in auto sales was
expected as deliveries of the Perodua Axia, which was launched on 15
Sep gathered pace. Despite the MoM gain, auto sales for the month
declined 1.6% YoY, while cumulative 10M14 total industry volume (TIV)
remained flattish at +0.6% YoY with YTD sales of 546,492 units. We
believe the sluggish sales could be due to consumers taking a wait-andsee approach ahead of the implementation of the goods and services tax
(GST) next April, where a 6% GST will replace a 10% sales tax. In
addition, consumers could be putting off purchases to avail themselves of
year-end discounts as automakers seek to clear inventories.
Perodua steals the show while Proton lags. Perodua and Proton sales
rose 46% and 1% MoM respectively. We believe the higher Perodua
sales were due to ramped-up deliveries of the new Axia model after its
launch. Perodua looks to be on track to meet its sales target of 193,000
units this year. We understand that Proton has been slow in ramping up
production of the new Iriz in a concerted effort to avoid quality issues of
the past. We expect Proton sales to edge up further in the coming
months, though its increasingly dated model line-up could continue to
weigh on sales.
Nissan boosted by the new complete-knock-down (CKD) Serena.
Honda, Toyota and Nissan all posted sales gains during the month,
though Nissan sales rose 15.7% MoM, boosted by sales of the new
Nissan Serena S-Hybrid. Mazda sales remained flat, down 1.9% MoM
although cumulative Mazda sales were up 20.8% YoY. We expect Mazda
sales to improve next year following the launch of the highly-anticipated
Mazda 2 and Mazda 3 CKD in Jan 2015. Cumulative Toyota sales rose
14.4% YoY and Toyota is on track to meet its 2014 sales target.
Outlook. The MAA expects November sales volume to be sustained at
October’s level, ahead of the GST implementation while an elevated
financing rejection rate continues to crimp vehicle sales. However,
aggressive discounting and sales promotions in the run-up to the yearend could boost sales. Our current 2014 TIV forecast of 675,000 units
can still be met if the industry has a strong close for the year.


Alexander Chia +603 9207 7621
alexander.chia@rhbgroup.com
4
Sector Update, 21 November 2014
5
Corporate News Flash, 21 November 2014
Neutral (Maintained)
Technology - Handset Components
Market Cap: USD1,898m
Target Price:
Price:
HKD13.50
HKD13.40
Macro
Risks
Spectacular October Rebound From a Low Base
Growth
Value
Price Close
Relative to Hang Seng Index (RHS)
15.3
14.3
212
13.3
198
12.3
184
11.3
170
10.3
156
9.3
142
8.3
128
7.3
114
6.3
100
5.3
35
86
30
Our view:


20
15
Oct-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-13
Vol m
10
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Shareholders (%)

70.9m/9.08m
0.0
0.8
6.12 - 13.9
56
1,097
Management
JP Morgan Chase & Co.
The impressive YoY shipment growth in Oct 2014 was due to Oct 2013’s
flooding of Sunny’s headquarters (HQ) as well as continued strong
demand from its key customers. We believe the YoY growth rates for the
rest of the year should ease as production normalised in Nov 2013.
In 10M14, HCM shipments reached 155m (+40% YoY), ahead of our
+35% YoY forecast. Total HLS shipments reached 88m units (+97%
YoY), catching up to our forecast of +107% YoY. VLS shipments
reached 9m (+61% YoY), also above our +50% YoY forecast. However,
as we expect November and December growth rates to slow down, we
remain comfortable with our current forecasts.
Maintain NEUTRAL with an unchanged TP of HKD13.50, based on a
13x FY15F P/E (+1SD above 3-year forward P/E). At the current 13x
FY15F P/E valuation, we believe Sunny is fairly valued as its HK-listed
peers are trading at 10x FY15. We note our FY14/FY15 recurring EPS
forecasts are still substantially above consensus by 18%/19%.
38.5
5.0
YTD
1m
3m
6m
12m
Absolute
78.0
1.1
23.8
46.7
96.2
Total turnover (CNYm)
Relative
77.0
(0.9)
30.3
43.7
96.9
Dec-12
Dec-13
3,984
5,813
8,577
11,252
13,274
Reported net profit (CNYm)
346
440
668
882
1,085
Recurring net profit (CNYm)
350
440
668
882
1,085
44.8
25.7
51.7
32.1
23.0
Recurring EPS (CNY)
0.36
0.44
0.63
0.83
1.02
Kong Yong Ng +852 2103 5844
DPS (CNY)
0.11
0.12
0.18
0.24
0.30
ng.kong.yong@rhbgroup.com
Recurring P/E (x)
29.1
23.9
16.8
12.7
10.3
P/B (x)
5.52
4.07
3.50
2.95
2.48
P/CF (x)
25.4
17.0
23.1
14.1
9.9
1.0
1.1
1.7
2.3
2.8
EV/EBITDA (x)
26.8
20.3
14.9
10.9
8.6
19.4
18.5
21.6
24.3
25.1
Shariah compliant
Christopher Tse +852 2103 9415
christopher.tse@rhbgroup.com
Dividend Yield (%)
Dec-14F Dec-15F Dec-16F
18.0
18.9
23.3


2

.
2
0
.
3
0
0
.
2
0
0
What’s new?
.
0
0

Sunny Optical (Sunny) released its October shipment numbers: 0
i) handset camera modules (HCM) surged 99% YoY and rose 5% MoM
(Sep 2014: +36% YoY), ii) total handset lens sets (HLS) jumped 308%
YoY but slowed 4% MoM (Sep 2014: +167% YoY), and iii) vehicle lens
sets (VLS) rose 80% YoY and 9% MoM (Sep 2014: +13% YoY).
25
Source: Bloomberg




6
AEON (AEON MK)
Consumer Cyclical - Retail
Target Price:
Price:
MYR3.67
MYR3.51
Macro
Risks
Affected By Higher Operating Costs
Growth
Value
AEON (AEON MK)
4.20
106
4.00
101
3.80
97
3.60
93
3.40
88
3.20
84
3.00
79
2.80
5
5
4
4
3
3
2
2
1
1
75
0
0
.
1
0
0
AEON’s 9M14 core earnings of MYR137.4m missed expectations, at .
0
54.3%/57.5% of our/consensus full-year estimates. We attribute this to 0
higher utilities and promotional expenses, as well as initial start-up 0
costs for new stores. Maintain NEUTRAL with a revised DCF-based TP
of MYR3.67 (4.6% upside). We cut our FY14/FY15 earnings forecasts by
20.5%/19.2% respectively.


Oct-14
Jul-14
Mar-14
May-14
110
Jan-14
4.40
Nov-13
Vol m
Price Close
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
1.14m/0.35m
2.3
4.6
2.97 - 4.21
10
1,404
AEON Co
Aberdeen Asset Mngt
EPF
51.0
19.8
8.6


1

.
1
0
.
2






Better sales. AEON’s 9M14 revenue grew 5.9% YoY, mainly driven by:
i) better turnover from the retail segment (+5.5% YoY) given improved
performance from its existing stores and contribution from its new stores,
and ii) higher revenue from the property management segment (+8.2%
YoY) due to contribution from its new shopping centres, higher rental
rates and sales commissions from tenant revamp in some of its existing
malls. However, 9M14 core earnings fell 11.6% YoY, largely due to
higher utilities and promotional expenses, coupled with initial costs
incurred from new store openings. To date, AEON has opened two new
malls in Bukit Mertajam and Taiping, as well as a new store in Quill City
Mall, Kuala Lumpur. Compared to 2Q14, 3Q14 revenue improved 8.5%
but earnings declined 7.1%.
Lower margins. 9M14 EBIT margin decreased to 7.3% from 8.5% a
year ago, mainly attributed to weaker margin from the retail business
(-200bps YoY). Property management’s margin, on other hand, trended
higher to 43.1% from 38.5% a year ago.
Earnings revision and risks. We believe the retail industry may
continue to face challenges from weak consumer sentiment. Hence, we
cut our FY14 and FY15 earnings forecasts by 20.5% and 19.2%
respectively. We also introduce our FY16 figures. Key risks include
weaker consumer sentiment and the emergence of new competitors
within the retail landscape.
Maintain NEUTRAL. We adjust our DCF-based TP to MYR3.67 (from
MYR15.60), after factoring in the enlarged share base of 1,404m shares,
post-bonus issue and share split exercise (completed in May 2014). Our
TP is based on a lower WACC of 8.3% (from 8.7%), in line with RHB’s
revised valuation assumptions. Maintain NEUTRAL.
YTD
1m
3m
6m
12m
Absolute
0.3
(4.6)
(12.3)
(6.5)
(8.2)
Relative
2.6
(5.8)
(9.4)
(3.5)
(9.6)
Shariah compliant
Alexander Chia +603 9207 7621
alexander.chia@rhbgroup.com
Malaysia Research +603 9207 7660
research2@rhbgroup.com
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,256
3,514
3,769
3,997
4,314
212
231
201
220
297
212
231
201
220
297
21.3
8.8
(13.0)
9.2
35.1
Recurring EPS (MYR)
0.15
0.16
0.14
0.16
0.21
DPS (MYR)
0.23
0.22
0.05
0.06
0.08
Recurring P/E (x)
23.2
21.3
24.5
22.4
16.6
P/B (x)
3.35
3.00
2.79
2.59
2.36
P/CF (x)
12.3
11.0
13.8
10.3
8.1
6.6
6.3
1.6
1.7
2.3
9.86
9.21
8.62
8.05
6.06
15.4
14.9
11.8
12.0
14.9
Dividend Yield (%)
EV/EBITDA (x)
(13.1)
(12.6)
0.7
7
Genting Plantations (GENP MK)
Buy (Maintained)
Target Price:
Price:
MYR11.60
MYR10.46
Macro
Risks
Indonesia The Growth Catalyst
Growth
Value
Genting Plantation (GENP MK)
Price Close
12.0
103
11.5
99
11.0
96
10.5
92
10.0
89
9.5
4
85
0
0
.
2
0
0
GP’s 9M14 earnings were in line, with continued strength seen from its .
0
Indonesian plantations. Maintain BUY and SOP-based TP of MYR11.60 0
(11% upside), as we believe GP’s strong FFB production growth would 0
help offset the lower CPO prices somewhat. We also highlight that
stripping out the RNAV of the company’s property landbank from its
current market capitalisation would bring its P/E down by 5-6x.

In line. Genting Plantations’ (GP) 9M14 core net profit was within our
and consensus estimates, ie 73-76% of FY14 forecasts.

GP’s 9M14 core net profit grew 18% YoY, while its turnover rose 9%.
The net profit increase was due to a 6% YoY rise in CPO average price,
a 46% rise in palm kernel (PK) average price and a 12% rise in fresh fruit
bunches (FFB) production, as well as an estimated 4% YoY fall in
production cost. In addition, GP recorded some industrial and
commercial property land sales during the period, which resulted in a 3%
YoY increase in property contributions.
3
3
2

2
Oct-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
4.26m/1.32m
4.8
10.9
9.70 - 11.6
30
758.85
Genting Berhad
EPFund
Kumpulan Wang Persaraan
(Diperbadankan)
53.6
14.9
3.1


Briefing highlights: i) GP maintains its FY14 FFB projection growth of
10-12% YoY, which is in line with our projected 12% for FY14. For FY15,
GP expects FFB production to grow about 13%, in line with our 13.7%
projection, ii) its 9M14 production cost was down 4% YoY to
MYR1,370/tonne. GP expects costs to rise in FY15 due to lower PK
credit and higher fertiliser prices, iii) GP continues to target new planting
of 3,500ha in FY14 and 6,000ha in FY15, in line with our expectations,
and iv) its unbilled property sales currently total MYR62m, while it
expects to record some MYR142m worth of industrial lot land sales in
4Q14.
No changes to our forecasts. We highlight that every MYR100/tonne
change in CPO price could impact the company’s net profit by 5-7% per
annum.
Maintain BUY. We maintain our SOP-based TP of MYR11.60 based on
an unchanged 18x CY15 target P/E for the plantation division and RNAV
of property development landbank. Maintain BUY, as we believe GP’s
strong FFB production growth would help offset the lower CPO prices
somewhat. We also highlight that stripping out the RNAV of the
company’s property landbank from its current market capitalisation would
bring its P/E down by 5-6x.
YTD
1m
3m
6m
12m
Absolute
(5.3)
4.2
4.4
(5.8)
(4.7)
Relative
(3.0)
3.0
7.3
(2.8)
(6.1)
Shariah compliant
Hoe Lee Leng +603 9207 7605
hoe.lee.leng@rhbgroup.com
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,233
1,384
1,555
1,753
1,906
361
228
306
390
448
355
299
306
390
448
(18.8)
(15.9)
2.5
27.3
15.0
Recurring EPS (MYR)
0.47
0.39
0.40
0.51
0.59
DPS (MYR)
0.09
0.36
0.09
0.10
0.12
Recurring P/E (x)
22.3
26.6
25.9
20.4
17.7
P/B (x)
2.32
2.32
2.17
2.02
2.06
P/CF (x)
35.4
23.9
65.1
18.6
15.8
0.9
3.4
0.8
1.0
1.1
17.6
18.8
17.9
14.3
12.9
10.9
6.7
8.6
10.3
11.5
1.0
9.9
11.6
22.3
(8.3)
(3.1)
(7.7)
Dividend Yield (%)
EV/EBITDA (x)


2

.
2
0
.
2




net cash
8
Kuala Lumpur Kepong (KLK MK)
Target Price:
Price:
MYR20.70
MYR23.00
Macro
Risks
Weaker Manufacturing Contributions
Growth
Value
Kuala Lumpur Kepong (KLK MK)
Price Close
26.0
106
25.0
102
24.0
99
23.0
95
22.0
92
21.0
88
20.0
85
19.0
3
81
0
0
.
2
0
0
KLK’s FY14 (Sep) results were within our expectations but below .
0
consensus. Stronger profits from the plantation division offset weaker 0
contributions from the manufacturing and property divisions. While we 0
like the company’s strong management and steady growth strategy, we
keep our NEUTRAL call with a revised SOP-based TP of MYR20.70 from
MYR21.30 (10% downside), as valuations remain fair at current levels.


2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
11.5m/3.57m
-0.9
-10.0
20.0 - 25.0
40
1,065
Batu Kawan Bhd
Employees Provident Fund
46.6
13.6

In line. Kuala Lumpur Kepong’s (KLK) FY14 profit was in line with our
expectations, but below consensus expectations, coming in at 82% of
FY14 forecasts. KLK declared a final net DPS of 40 sen, bringing FY14
net DPS to 55 sen (FY13: 50 sen), translating into a net payout of 59%
and a net yield of 2.4%.
Plantation unit the saviour. KLK’s FY14 core net profit grew 10.1%
YoY on the back of a 21.7% YoY rise in revenue. This was mainly due to
improved profitability at the plantation unit, which saw EBIT surging
28.3% YoY, buoyed by higher CPO (+5.3%) and palm kernel (PK)
(+43%) prices and higher FFB production (+3.5%), offset by weaker
contributions from its manufacturing division, due to negative margins at
the refineries and kernel crushing plants.
Forecasts. After updating our forecasts for FY14 results, we lower our
FY15-16 earnings forecasts by a slight 1.5-3% and introduce our FY17
forecasts.
Maintain NEUTRAL. With the seasonal peak season almost over, we
believe CPO prices have a window of opportunity to strengthen between
now and 1Q15, which would bode well for companies like KLK, as we
estimate every MYR100/tonne change in CPO price could affect its
earnings by 4-6% per annum. After updating for KLK’s latest net debt,
we lower our TP to MYR20.70 (from MYR21.30) and maintain our
NEUTRAL call.


2

.
2
0
.
2




Sep-13
Sep-14
Sep-15F
Sep-16F
Sep-17F
9,147
11,130
13,244
13,821
13,898
YTD
1m
3m
6m
12m
918
986
1,183
1,398
1,478
Absolute
(7.6)
13.7
(0.5)
(7.7)
(7.0)
918
990
1,183
1,398
1,478
Relative
(5.0)
12.0
2.4
(4.0)
(7.6)
(16.7)
7.9
19.5
18.1
5.8
Recurring EPS (MYR)
0.86
0.93
1.11
1.31
1.38
DPS (MYR)
0.50
0.55
0.65
0.70
0.65
Recurring P/E (x)
26.7
24.8
20.7
17.6
16.6
P/B (x)
3.26
3.17
2.98
2.76
2.54
P/CF (x)
19.0
32.2
20.6
15.4
12.7
2.2
2.4
2.8
3.0
2.8
EV/EBITDA (x)
14.9
13.9
12.1
10.4
9.9
12.5
12.9
14.8
16.3
15.9
7.3
19.7
22.2
20.1
14.3
(8.4)
(0.0)
0.0
Shariah compliant
Hoe Lee Leng +603 9207 7605
Dividend Yield (%)
9
Mah Sing (MSGB MK)
Property- Real Estate
Target Price:
Price:
MYR2.41
MYR2.31
Macro
Risks
Rights Issue To Pay Off Landbank
Growth
Value
Mah Sing (MSGB MK)
2.70
120
2.60
116
2.50
113
2.40
109
2.30
105
2.20
101
2.10
98
2.00
94
1.90
8
7
6
5
4
3
2
1
90


Oct-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
3.09m/0.95m
32.5
4.3
2.02 - 2.59
49
1,476
Tan Sri Leong Hoy Kum
EPF
Felda
35.0
9.2
6.4


Within expectations. Mah Sing’s 3Q14 results came in within our and
market expectations. EBIT margin was stable from last quarter, but lower
compared to last year’s levels.
MYR900m new sales in 3Q14. New sales in 3Q achieved MYR900m,
from MYR780m in 2Q, bringing 9M total to MYR2.45bn, about 68% of
Mah Sing’s full-year target of MYR3.6bn 9M sales were mainly
contributed by Meridin @ Meidni (MYR314m), Southville Bangi
(MYR580m), Icon City (MYR225m), D’sara Sentral (MYR235m) and
Lakeville Residence (MYR260m).
Equity call. Mah Sing has called for rights issue together with free
warrants to raise up to MYR630m. The deal is sweetened by a 1-for-4
bonus issue post-rights and warrants. More than 80% of the proceeds
will be used to pay off new acquisitions of land, including the Rantau
land and Puchong land, with combined land cost of over MYR1bn. The
amount to be raised is roughly 18% of Mah Sing’s current market cap.
The entitlement basis for the rights shares and warrants has not been
fixed, but according to the announcement, it could either be 1-for-5 for
the rights and 1-for-3 for the warrants, or 3-for-10 for the rights and 3-for10 for the warrants. The issue price is expected to be at a discount of at
least 20% to the theoretical ex-rights price.
Forecasts. Based on our assumption of a 3-for-10 entitlement basis for
the rights, our FY15-16 earnings are diluted by 4% and 18%. Meanwhile,
unbilled sales increased to MYR5.1bn (vs MYR4.79bn in 2Q14).
Maintain NEUTRAL. After factoring our assumption of 3-for-10 rights
into our RNAV estimate, our TP is lowered to MYR2.41 (from MYR2.71),
based on an unchanged 15% discount to RNAV. Note that we have not
imputed the impact of warrants and bonus issue in our valuations.
YTD
1m
3m
6m
12m
2.2
(2.1)
(4.6)
2.2
6.0
4.6
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,775
2,006
2,398
3,010
3,233
231
281
334
409
430
231
281
334
409
430
36.8
21.7
19.2
22.3
5.2
Recurring EPS (MYR)
0.28
0.20
0.23
0.22
0.22
Loong Kok Wen, CFA +603 9207 7614
DPS (MYR)
0.08
0.08
0.09
0.10
0.10
loong.kok.wen@rhbgroup.com
Recurring P/E (x)
8.3
11.4
10.1
10.4
10.4
1.54
1.64
1.54
1.76
1.68
3.2
3.5
3.9
4.2
4.2
19.9
17.6
16.1
17.7
16.9
Absolute
Relative
4.5
(3.3)
(1.7)
5.2
Shariah compliant
P/B (x)
Dividend Yield (%)
Return on average assets (%)
7.2
6.9
6.9
7.5
7.1
25.3
15.4
13.2
15.4
16.7
1.8
(15.9)
(17.6)


3

.
3
0
.
3
0
0
.
2
0
0
Mah Sing’s 3Q14 results met expectations. 3Q new sales hit MYR900m, .
0
up from MYR780m in 2Q, on track to hit its MYR3.6bn sales target. In 0
conjunction with the results, the company has called for a rights issue 0
exercise to raise about MYR630m. The proceeds will largely be utilised
for landbanking. Assuming a 3-for-10 entitlement basis for the rights,
our TP is lowered to MYR2.41 (4.3% upside). Maintain NEUTRAL.

Nov-13
Vol m
Price Close




10
Market Cap: USD344m
Neutral (from Take Profit)
Target Price:
Price:
MYR2.10
MYR2.18
Macro
Risks
Upgrade To NEUTRAL
Growth
Value
Price Close
2.60
169
2.40
156
2.20
142
2.00
129
1.80
116
1.60
102
1.40
6
89
0
0
.
2
0
0
CBIP’s 9M14 results were within expectations, with no major surprises. .
0
Given the relatively smaller downside risk to our TP now, we upgrade 0
the stock to NEUTRAL. We adjust our SOP-based TP to MYR2.10 (from 0
MYR4.10), 3.7% downside, after taking into account the bonus issue
and CBIP’s latest net cash. We await the next earnings catalyst, ie the
patent approval and commercialisation of its zero-discharge mill.


5
4
3
Oct-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2

Source: Bloomberg
Cons. Upside (%)
Upside (%)
Free float (%)
Shareholders (%)
1.39m/0.43m
103.2
-3.7
1.54 - 2.54
60
530
Lim Chai Beng & family
40.0


2

.
1
0
.
1





In line. CB Industrial Product’s (CBIP) 9M14 core net profit was in line
with our and consensus estimates, at 68-69% of FY14 forecasts.
9M14 core net profit up 12.6% YoY, revenue down 8.1% YoY. The
decline in its topline was mainly due to a 47.4% drop in revenue from the
vehicle retrofitting division due to lower project completion during the
period. This, however, was offset by a 22.6% rise in the oil mill
engineering division driven by higher project billing. Despite lower topline
numbers, the company’s core net profit rose, bolstered by higher
margins at the vehicle retrofitting division of 10.2% (vs 9.3% in 9M13)
and lower start-up losses at the plantation division of -MYR6.5m (from
-MYR7.4m in 9M13), offset by lower margins of 22.9% (from 24.1% in
9M13) at the oil mill engineering division.
Forecasts. We keep our earnings forecasts unchanged. However, we
update our share base and our TP following CBIP’s newly-completed 1for-1 bonus issue.
Upgrade to NEUTRAL. Although we continue to like CBIP’s business
prospects, we think the potential tax impact from the expiry of its pioneer
tax status in Feb 2015 could dampen its earnings growth. Since August,
the share price has fallen approximately 10-11%. Given the relatively
smaller downside risk now, we upgrade the stock to NEUTRAL (from
Take Profit). We adjust our SOP-based TP to MYR2.10 (from MYR4.10),
after taking into account the bonus issue and CBIP’s latest net cash. We
continue to watch out for the next earnings catalyst, which would be the
patent approval and commercialisation of its zero-discharge mill.
YTD
1m
3m
6m
12m
Absolute
35.8
(7.2)
(10.3)
(4.2)
38.4
Relative
38.1
(8.4)
(7.4)
(1.2)
37.0
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
540
590
611
548
577
240
98
96
84
87
97.7
98.4
96.0
84.4
86.9
(6.6)
0.7
(2.4)
(12.1)
2.9
Recurring EPS (MYR)
0.47
0.36
0.23
0.15
0.16
DPS (MYR)
0.15
0.10
0.08
0.08
0.08
4.6
6.1
9.4
14.2
13.8
1.20
1.03
1.89
1.78
1.67
7.1
9.7
13.2
12.5
6.9
4.6
3.7
3.7
3.7
2.33
3.37
7.09
9.42
9.52
54.6
18.2
15.8
12.9
12.5
Hoe Lee Leng +603 9207 7605
Recurring P/E (x)
P/B (x)
P/CF (x)
Dividend Yield (%)
EV/EBITDA (x)
na
net cash net cash net cash
29.3
5.8
14.4
(9.7)
(16.9)
11
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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Share price
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Sdn the
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at
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levels
Hong Kong Ltd.)
Level 11, Tower One, RHB Centre
10 Collyer Quay
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