1. business and industrial
2. company
3. earnings

Regional Daily, 9 October 2014
5
Regional Daily
Ideas Troika
Top Stories
Digi.com (DIGI MK)
Communications - Telecommunications
BUY MYR5.84 TP: MYR6.50
Mkt Cap : USD13,877m
Pg2
We do not expect any surprises to DiGi’s upcoming 3QFY14 results. A stable
competitive environment and continued growth in mobile internet growth are
key drivers, in our view.
Analyst: Lim Tee Yang CFA ([email protected])
Anton Oilfield (3337 HK)
Energy & Petrochemicals - Oil & Gas Services
SELL HKD2.39 TP: HKD1.70
Mkt Cap : USD682m
Pg3
Anton released a disappointing guidance yesterday. Maintain SELL despite
recent selloff, and cut TP by 15% to HKD1.70, implying 29% downside.
Analyst: Laurent Wong ([email protected])
Thailand Real Estate
OVERWEIGHT
Pg4
Improved sentiments helped to drive presales growth in 2Q14 by 58% q-o-q
and 3Q14 by another 9% q-o-q. 9M14 numbers dipped 19% y-o-y to
THB124bn, 66% of full year target. Pruksa remains the market leader while
AP and SPALI see the strongest YTD presales growth.
Analyst: Wanida Geisler ([email protected])
Pg5
Highlights From Analyst & Investor Day 2014
Other Key Stories
Malaysia
Axiata Group (AXIATA MK)
Communications - Telecommunications
NEUTRAL MYR7.03 TP: MYR7.30
LPI Capital (LPI MK)
Financial Services - Insurance
BUY MYR17.50 TP: MYR20.70
Singapore
Keppel Corp (KEP SP)
Energy & Petrochemicals - Oil & Gas Services
BUY SGD10.30 TP: SGD12.50
Thailand
Bangchak Petroleum (BCP TB)
Energy & Petrochemicals - Oil & Gas Services
NEUTRAL THB34.3 TP: THB33.2
See important disclosures at the end of this report
Analyst: Lim Tee Yang CFA ([email protected])
Pg6
Stable Results, Expect Dividends In 4Q
Analyst: Kong Ho Meng ([email protected])
Pg7
Still Winning Orders Despite Market Concerns
Analyst: Lee Yue Jer CFA ([email protected])
Pg8
Completes NIDO Acquisition
Analyst: Kannika Siamwalla CFA ([email protected])
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1
Results Preview, 9 October 2014
Digi.com (DIGI MK)
Buy (Maintained)
Communications - Telecommunications
Market Cap: USD13,877m
Target Price:
Price:
MYR6.50
MYR5.84
Macro
Risks
Expect Another Good Quarter
Growth
Value
Digi.com (DIGI MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
115
5.70
112
5.50
108
5.30
104
5.10
100
4.90
97
4.70
93
4.50
40
35
30
25
20
15
10
5
89
Jun-14
Feb-14



Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Telenor Asia Pte Ltd
Employees Provident Fund
41.5m/13.0m
-7.2
11.3
4.65 - 5.85
31
7,775
49.0
12.7
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
17.7
0.9
2.5
11.0
17.5
Relative
19.5
2.9
5.6
12.0
14.3
Shariah compliant



No surprises. We expect a steady 3QFY14 from DiGi, and expect y-o-y
revenue growth to be sustained at 5.0% (1HFY14: +5.0%). Thus, we
forecast 3QFY14 earnings to grow 9.0% y-o-y, partly boosted by a low
effective tax base in 3QFY13 (16.7%). Overall, we estimate 9MFY14
revenue growth of 5.0% to be still within management guidance (4-6%)
while we anticipate core earnings to grow by 17.0%.
Stable competition. We believe DiGi’s growth will likely be supported by
a relatively stable competitive environment. Other than Maxis’ (MAXIS
MK, NEUTRAL, TP: MYR6.00) launch of MaxisOne Business for
business users, we believe 3QFY14 was rather quiet in terms of new
product launches. Besides that, Celcom remained quiet as it works to
resolve issues related to its IT transformation. We note that its ARPU
levels for both prepaid and postpaid have been holding up quite well for
several consecutive quarters, which should bode well for earnings.
Mobile internet growth momentum should continue. Continued sales
of mid-tier smartphones and further inroads in the postpaid market will
likely drive DiGi’s mobile internet revenue growth (1HFY14: +40.3% y-oy). As at 2QFY14, its smartphone penetration stood at 41.9%, and we
expect this figure to continue rising steadily as mid-tier smartphones like
Xiaomi continue to remain popular. Following some marketing efforts to
highlight the reliability of its new network for data consumption, we
believe DiGi could make further inroads in the postpaid segment.
Dividends. We forecast a third interim DPS of 6.5 sen (100% payout).
Earnings forecasts. We introduce our FY16 earnings forecasts.
Investment case. We maintain BUY on the stock, with an unchanged
DDM-based TP of MYR6.50. We like the company for its strong growth
in the prepaid segment, growing revenue market share and good traction
in data monetisation. Our TP translates to a FY15 P/E of 23x, which is
comparable to industry peers.
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (MYRm)
6,361
6,733
7,084
7,416
7,655
Reported net profit (MYRm)
1,206
1,678
1,990
2,102
2,155
Recurring net profit (MYRm)
1,619
1,793
1,990
2,102
2,155
1.7
10.7
11.0
5.6
2.5
Recurring net profit growth (%)
Lim Tee Yang, CFA +603 9207 7607
Recurring EPS (MYR)
0.21
0.23
0.26
0.27
0.28
[email protected]
DPS (MYR)
0.18
0.21
0.26
0.27
0.28
Recurring P/E (x)
28.0
25.3
22.8
21.6
21.1
174
69
90
90
90
18.3
23.4
14.2
16.6
16.3
P/B (x)
P/CF (x)
Dividend Yield (%)
3.1
3.6
4.4
4.6
4.7
15.6
15.2
14.2
13.5
13.2
Return on average equity (%)
144.2
363.8
341.3
416.1
426.5
Net debt to equity (%)
142.1
51.2
2.9
22.3
3.2
0.0
EV/EBITDA (x)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
1
0
.
3
0
0
.
2
0
0
We do not expect any surprises from DiGi’s upcoming 3QFY14 results. .
0
We maintain our BUY call and MYR6.50 DDM-based TP, reflecting 11% 0
upside. For 3QFY14, we expect revenue growth to be sustained at 5.0% 0
(1HFY14: +5.0%) and earnings to grow 9.0% y-o-y, partly boosted by a
low effective tax base in 3QFY13. A stable competitive environment and
continued growth in mobile internet growth are key drivers, in our view.
Aug-14
5.90
Apr-14
119
Dec-13
6.10
Oct-13
Vol m
Price Close




Source: Company data, RHB
net cash
2.4
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2
Company Update, 8 October 2014
Anton Oilfield (3337 HK)
Sell (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD682m
Target Price:
Price:
HKD1.70
HKD2.39
Macro
Risks
New Guidance a Negative Surprise
Growth
Value
Anton Oilfield Services Group (3337 HK)
Price Close
Relative to Hang Seng Index (RHS)
116
4.90
89
4.40
80
3.90
72
3.40
63
2.90
54
2.40
45
1.90
90
80
70
60
50
40
30
20
10
36
Jun-14
Feb-14
0
0
.
1
0
0
Anton guided for a "slight increase" in 2014 revenue (vs +30% guided .
0
previously before its dismal 1H14 results), below our old forecast of 0
+15% and consensus of +11%. The negative surprise implies likely 0
backlog execution delays in 2H14 and China’s challenging oil servicing
industry. We cut our 2014/2015/2016 earnings forecasts by
11%/11%/10%. Despite the recent selloff, we maintain SELL with a lower
HK1.70 TP (a 28.9% downside), based on the same 12x P/E FY15.


Aug-14
98
Apr-14
107
5.40
Dec-13
5.90
Oct-13
Vol m
6.40

Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Pro Development Holdings
Schlumberger LTD
Erdos Holdings Co. LTD
60.2m/7.77m
76.6
-28.9
2.30 - 6.06
43
2,213
32.5
19.8
4.9
Share Performance (%)

New 2014 guidance a negative surprise. This morning, Anton Oilfield
Services (Anton) announced its new revenue guidance for 2014 – for
which it expects a "slight increase" (1H14 revenue grew 5%). Assuming
this implies a low- to high-single-digit growth for 2014, the implied
revenue growth in 2H14 would be in the range of -3% to +13%. Its fullyear guidance is below consensus revenue growth forecast of 11%.
Potential delays in backlog execution. The new guidance is worse
than our forecast of +15% for full-year 2014, or +23% for 1H14. Our old
2H14 revenue forecast was based on its backlog on hand of CNY1,815m
(59% China) as of 30 Jun 2014. The new revenue guidance implies that
Anton cannot fully execute its backlog in 2H14, compared to 1H14 when
the company successfully executed all its backlog. China’s oil majors
have been adjusting their exploration and production (E&P) plans and
delaying E&P projects with low returns.
Reducing earnings forecasts. We lower our recurring earnings
estimates by 11%/11%/10% for 2014/2015/2016. This follows an 8% cut
in our revenue forecasts for those years to reflect the guidance surprise,
as we now expect 2014 revenue to grow only 6%. We slightly lift our
gross profit margin (GPM) to reflect more revenue cuts on well
completion, which delivers lower margins, and raise the admin/revenue
ratio on higher costs but stagnant revenue growth.
Maintain SELL with lower TP of HKD1.70 (from HKD2.00). We reduce
our TP to HKD1.70 (from HKD2.00) due to lower earnings forecasts, but
maintain our target P/E FY15 of 12x, in line with its HK-listed peer
average of 12x FY15F P/E. Anton's valuation premium is no longer
justified after its dismal 1H14 results. We deem it inferior to SPT Energy
Group (1251 HK, BUY, TP: HKD4.30) in terms of backlog orders, GPM
risk, project quality and gearing. We believe that SPT may surpass
Anton as China’s largest private oilfield service provider in the future.
YTD
1m
3m
6m
12m
Absolute
(49.4)
(30.3)
(55.1)
(51.3)
(53.3)
Forecasts and Valuations
Relative
(49.4)
(22.7)
(54.1)
(55.5)
(54.8)
Total turnover (CNYm)
Shariah compliant
Dec-12
Dec-13
2,005
2,534
2,683
3,219
3,863
Reported net profit (CNYm)
303
383
211
264
324
Recurring net profit (CNYm)
295
369
205
250
310
287.7
25.1
(44.5)
21.9
24.0
Recurring EPS (CNY)
0.14
0.17
0.09
0.11
0.14
DPS (CNY)
0.05
0.06
0.03
0.04
0.05
Recurring P/E (x)
13.6
11.0
20.3
16.7
13.4
P/B (x)
2.05
1.79
1.72
1.58
1.45
P/CF (x)
11.5
10.8
8.5
11.3
9.3
2.4
2.9
1.6
1.9
2.4
8.71
7.09
8.06
7.12
6.34
16.6
18.0
9.1
10.7
12.0
24.2
38.8
46.7
50.3
(15.3)
(30.3)
(32.9)
Recurring net profit growth (%)
Laurent Wong +852 2103 9432
[email protected]
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
2




Source: Company data, RHB
net cash
Dec-14F Dec-15F Dec-16F
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3
Sector Update, 9 October 2014
Real Estate
Overweight
Macro
Risks
Presales Momentum Continues Into 3Q14
Growth
Value






3

2

2
2
Figure 1: Quarterly presales trend
Homebuyer sentiment, which has improved since May, helped to boost
presales by 58% q-o-q in 2Q14 and 9% q-o-q in 3Q14. 9M14 presales,
however, fell 20% y-o-y to THB124bn (66% of the industry’s full-year
target). Asian Property and Supalai were developers with the strongest
presales in 9M14. Top Buys are Quality Houses, Pruksa and LPN – the
top three large-cap developers with the highest 2015F earnings growth
– while Ananda is our top small-cap pick.

Source: Company data, RHB
Figure 2: Presales in 3Q14 and 3Q13


Source: Company data, RHB
Figure 3: Presales in 9M14 and 9M13

3Q14 sector presales grew modestly q-o-q. The combined presales of
the seven major listed developers were at almost THB50bn (+9% q-o-q,
+12% y-o-y) in 3Q14, led by condo presales. Developers that launched
new condo projects in 3Q14 like Supalai (SPALI TB, NEUTRAL, TP:
THB27.00), Asian Property (AP TB, NEUTRAL, TP: THB8.00), Land and
Houses (LH TB, BUY, TP: THB12.50) and Pruksa (PS TB, BUY, TP:
THB43.00) recorded strong y-o-y presales growth. In the meantime,
companies with no new launches in 3Q14 like LPN Development (LPN
TB, BUY, TP: THB27.00) and Sansiri (SIRI TB, TRADING BUY, TP:
THB2.34) booked a decline in presales.
Despite a strong rebound in 2Q14/3Q14, 9M14 presales fell 19% y-oy. 9M14 sectorial presales were at THB124bn (-19% y-o-y), 66% of the
industry’s 2014 target. Pruksa remains the market leader, with THB31bn
in presales (-7% y-o-y) and a 25% market share. Asian Property booked
the strongest presales growth of 45% y-o-y, thanks to the successful
launches of four condo projects developed in a JV with Mitsubishi Estate
(8802 JP, NR). On the other hand, Sansiri was the hardest hit, as it
registered a 82% y-o-y plunge in 9M14 presales to THB6.7bn.
Healthy presales for some mid- to small-cap players like Ananda
(ANAN TB, BUY, TP: THB3.70) and Golden Land (GOLD TB, NR).
Ananda’s YTD presales were almost at THB13bm, which beat its fullyear target of THB12bn. Its four condo projects (two built under a JV with
Mitsui Fudosan (8801 JP, NR)) worth a total of THB14.5bn had a take-up
rate of 80% during their soft launch at end-3Q14. Golden Land, a midto low-end landed property developer, booked 9M14 presales of
THB3.4bn, exceeding its full-year target of THB3bn.
Seasonally high new launches in 4Q14. Quarterly new launches may
peak in 4Q14 as LPN and Sansiri resume their launches, valued at a
total of THB20bn-25bn. We agree with industry experts that 2014
sectorial presales could contract by 10% y-o-y. Next year, we expect
double-digit presales growth to resume. Sectorial 5-year presales CAGR
(2009-2013) was at 20%. Note that presales fell in 2011 from the severe
floods in Bangkok suburbs and in 2014 from political instability.
P/E (x)
Source: Company data, RHB
Wanida Geisler +66 2862 9748
[email protected]
P/B (x)
Dec-15F Dec-15F
Yield (%)
Com pany Nam e
Price
Target
Ananda Development
THB3.82
THB3.70
10.4
1.5
Dec-15F
1.9
Rating
BUY
AP (Thailand) Public Company Limited THB6.60
THB8.00
8.1
1.1
4.4
NEUTRAL
Land and Houses
THB9.90
THB12.50
13.8
2.7
6.1
BUY
LPN Development
THB21.00
THB27.00
9.8
2.5
5.2
BUY
Pruksa Real Estate
THB33.00
THB43.00
9.9
2.1
3.0
BUY
Quality Houses
THB4.06
THB5.50
9.8
1.8
5.1
BUY
Sansiri PCL
THB1.90
THB2.34
8.3
1.0
5.8
TRADING BUY
Supalai PCL
THB24.80
THB27.00
9.1
2.2
4.0
NEUTRAL
Source: Company data, RHB
See important disclosures at the end of this report
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4
Company Update, 9 October 2014
Axiata Group (AXIATA MK)
Neutral (Maintained)
Communications - Telecommunications
Market Cap: USD18,425m
Target Price:
Price:
MYR7.30
MYR7.03
Macro
Risks
Highlights From Analyst & Investor Day 2014
Growth
Value
Axiata (AXIATA MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
7.20
101
7.10
100
7.00
98
6.90
97
6.80
96
6.70
94
6.60
93
6.50
92
6.40
90
6.30
35
89
0
0
.
1
0
0
We attended Axiata’s Analyst & Investor Day 2014 yesterday and came .
0
away feeling more upbeat on the group’s growth prospects 0
notwithstanding our NEUTRAL call due to limited upside (+3.8%) based 0
on our MYR7.30 SOP TP. Nonetheless, Celcom is prepared to return
with a bang with a slew of new products, while XL has made excellent
progress on its integration with Axis. Competition remains a key risk.

30

25
20
15
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
5
Oct-13
Vol m
10
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Khazanah Nasional
Employees Provident Fund
Permodalan Nasional Berhad
63.7m/19.9m
-0.3
3.8
6.44 - 7.07
39
8,576
38.9
12.0
10.3
Share Performance (%)
YTD
1m
3m
6m
Absolute
1.9
1.3
2.0
6.0
12m
1.6
Relative
3.7
3.3
5.1
7.0
(1.6)
Shariah compliant
Lim Tee Yang, CFA +603 9207 7607
[email protected]


Celcom to return with a bang. After almost a year of no new product
launches, Celcom has lined up a slew of new products to be launched in
the coming weeks. Management said the IT transformation issues that
had plagued Celcom for much of the year have been largely resolved,
and is confident the much-improved business support system will give it
a leg up against its peers by streamlining its dealership, automating
back-end systems and shortening customer response time. Management
is also preparing a host of events to gain back dealers’ confidence.
XL Axiata in a strengthening position. The XL Axiata (XL) (EXCL IJ,
NEUTRAL, TP: IDR6,280) and Axis integration is proceeding faster than
expected, management said. This has allowed XL to reap significant cost
savings and improve its network quality by quickly reaping the benefits of
additional spectrum. Nonetheless, we believe XL’s growth expectations
may remain tempered by the risk of not properly monetising data.
Competition remains fairly intense – which is a risk to XL should it try to
raise headline data prices too quickly.
Patience needed for edotco. We think the market will need to be a little
more patient on the potential monetisation of the group’s tower assets
via edotco group (edotco). We gather that for the next year or two,
edotco will focus on improving operational efficiencies by boosting
revenues (increasing tenancy ratios) and cutting costs (improving
procurement processes). edotco currently has about 12,700 towers in its
portfolio and is eyeing Pakistan as the next growth market.
Investment case. We remain NEUTRAL on Axiata, with an unchanged
SOP-based TP of MYR7.30. While we are more upbeat on Celcom and
XL’s growth prospects in 2015, we believe these factors are relatively
priced in. Both of these operating companies have laid the foundation for
future growth, but competition remains a key risk to earnings growth,
given the lack of visible signs of diminishing competitive intensity.
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (MYRm)
16,290
17,652
18,371
19,453
20,202
Reported net profit (MYRm)
2,346
2,513
2,550
2,653
2,997
Recurring net profit (MYRm)
2,539
2,784
2,761
2,653
2,997
Recurring net profit growth (%)
(2.8)
9.7
(0.8)
(3.9)
13.0
Recurring EPS (MYR)
0.30
0.33
0.32
0.31
0.35
DPS (MYR)
0.19
0.23
0.22
0.25
0.30
Recurring P/E (x)
23.5
21.5
21.8
22.7
20.0
P/B (x)
3.01
2.98
3.07
2.85
2.78
P/CF (x)
10.3
8.8
8.7
7.9
8.6
2.7
3.3
3.1
3.5
4.3
EV/EBITDA (x)
6.97
6.84
6.73
6.94
6.31
Return on average equity (%)
12.2
12.6
12.8
13.0
14.1
Net debt to equity (%)
22.3
21.6
32.8
32.9
30.4
(2.5)
(1.0)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


1

.
2
0
.
1




Source: Company data, RHB
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5
Results Review, 9 October 2014
LPI Capital (LPI MK)
Buy (Maintained)
Financial Services - Insurance
Market Cap: USD1,181m
Target Price:
Price:
MYR20.70
MYR17.50
Macro
Risks
Stable Results, Expect Dividends In 4Q
Growth
Value
18.5
114
18.0
112
17.5
109
0
0
.
1
0
0
LPI’s MYR166m 9M14 profit, at 75% of our/consensus estimates, is in .
0
line. Despite soft topline growth, the 11% bottomline increase was aided 0
by a 210bps improvement in underwriting (UW) margin and expansion 0
of its profitable fire insurance unit. Maintain BUY, and a MYR20.70 TP
(18x P/E, 18.4% upside). We expect in 4Q14 an interim dividend/share
similar to 4Q13’s MYR0.52 to help fulfil our assumption of a >5% yield.
17.0
107

16.5
105
16.0
103
15.5
100
15.0
250
98
LPI Capital (LPI MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
200
150
100

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
50
Oct-13
Vol th


2

.
2
0
.
2




Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
0.21m/0.07m
14.9
18.4
15.8 - 17.9
52
220
Consolidated TehHoldings SB
Nipponkoa Insurance Co Ltd
43.0
8.6
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
0.2
2.2
2.8
5.3
13.2
Relative
1.6
3.8
5.5
5.9
9.6


9M14 performance in line. LPI Capital (LPI)’s 9M14 earnings growth of
11% y-o-y was due to a sustained profitable track record by subsidiary
Lonpac Insurance. The key takeaway is a surge in UW margins in the
general insurance (GI) segment of 210bps to 30.6% (from 28.5%),
mainly reflected by an improved product mix especially from fire
insurance (its most profitable business portfolio) and sustained loss
ratios across its motor and non-motor segments. Its management
expense ratio was stable at 19.1% (vs 18.8% in 9M13), indicating cost
control. These factors offset a soft 4% gross written premium (GWP)
growth due to a challenging operating environment and increased
competition from other general insurers across Malaysia and Singapore.
Fire insurance still a winner. The UW margin for its fire segment grew
to 79% (vs 75% in 9M13), as its fire net claims ratio improved
significantly to 16% (from 21% in 9M13). This was in line with the levels
of 1Q14 and 2Q14 – which indicated that its business had sizeable and
healthy risk diversification. LPI’s overall portfolio remains healthy, as its
overall claims ratio rose to 46.5% from 44.8% in 9M13. The motor claims
ratio, at 75%, improved slightly from 76% in 9M13 and is in line with
current industry trends.
Maintain BUY and a TP of MYR20.70, pegged to an unchanged 18x
FY15F P/E and implying a 2.3x FY15F P/BV. While we like LPI for its
profitable product mix, our TP is at the lower range of its historical 2.32.4x P/BV and 18-20x P/E to reflect the risks in the longer term. We
retain our forecasts, as there were no surprises in earnings. Traditionally,
LPI announces a handsome second interim dividend towards the 4Q.
Our full-year MYR0.89 DPS estimate translates to a >5% yield.
Risks. A lower dividend payout and uncertainties in competition/pricing
as the industry prepares for the liberalisation of fire and motor tariffs in
2016. Lonpac has a combined 57% exposure in fire and motor
premiums. While increasing competition has resulted in the erosion of
premium rates, it is is boosting online offerings and new segments while
focusing on cost efficiency and distribution.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Net premium revenue (MYRm)
585
621
693
762
838
Reported net profit (MYRm)
167
201
222
247
269
Net profit growth (%)
8.0
20.7
10.1
11.2
9.2
Kong Ho Meng +603 9207 7620
Recurring net profit (MYRm)
167
201
222
247
269
[email protected]
Recurring EPS (MYR)
0.75
0.91
1.00
1.11
1.22
DPS (MYR)
0.65
0.70
0.80
0.89
0.97
Recurring P/E (x)
23.2
19.2
17.4
15.7
14.4
P/B (x)
2.82
2.41
2.19
1.99
1.81
3.7
4.0
4.6
5.1
5.6
Return on average equity (%)
13.1
13.5
13.1
13.3
13.2
Return on average assets (%)
6.5
6.8
6.6
6.7
6.5
(0.1)
0.2
3.2
Shariah compliant
Forecasts and Valuations
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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Company Update, 8 October 2014
Keppel Corp (KEP SP)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD14,654m
Target Price:
Price:
SGD12.50
SGD10.30
Macro
Risks
Still Winning Orders Despite Market Concerns
Growth
Value
11.4
108
11.2
106
11.0
103
0
0
.
2
0
0
Keppel has secured contracts from repeat customers worth SGD153m, .
0
including its first FPSO conversion for the year. Maintain BUY with an 0
unchanged SOP-based SGD12.50 TP. The submersible barge (Royal 0
Boskalis Westminster) and FPSO (Bumi Armada) contracts are due in
2H15 and 2Q16 respectively. Near-term oil price fluctuations should
also have limited impact on this stock.
10.8
101

10.6
99
10.4
97
10.2
94
10.0
9
8
7
6
5
4
3
2
1
92
Keppel Corp (KEP SP)
Price Close
Relative to Straits Times Index (RHS)
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13

Oct-13
Vol m


2

.
1
0
.
2




Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
26.1m/20.8m
21.4
20.9
10.2 - 11.3
68
1,817

21.0
5.7
5.0

Temasek
Aberdeen
Blackrock
Share Performance (%)
First floating production storage and offloading (FPSO) conversion
for 2014. Bumi Armada (BAB MK, BUY, TP: MYR2.24)’s FPSO will have
1.7m barrels storage capacity, handling up to 80,000 barrels of oil/day.
This unit will be producing for Angola’s Block 15/06 East Hub project and
is scheduled for completion in 2Q16. The job scope involves
refurbishment and life extension works, upgrading living quarters to
accommodate 100 personnel, and installing and integrating an external
turret mooring system and topside process modules. The submersible
barge for Royal Boskalis Westminster (BOKA NA, NR), its third for the
marine services firm, is slated for completion in 2H15.
Jack-up rigs still being ordered. Keppel recently won a USD227m
jack-up rig contract from Gulf Drilling International in a market where
concerns linger over the relatively large number of jack-up rigs coming
online over the next two years. However, with average day rates for
modern jack-up rigs still climbing, we think orders should continue to flow
if the market can successfully absorb the new supply.
SGD3.7bn of contract wins so far, with about SGD5.4bn in option
value. Keppel has won c.SGD3.7bn of contracts YTD, appearing
somewhat behind schedule vis-à-vis our SGD6bn FY14 order win
forecast. Yet, we note that such wins tend to be lumpy and it could still
pull a rabbit out of the hat at the last minute. We estimate values for the
13 jack-up rig and two floating liquefied natural gas (FLNG) options at a
combined SGD5.4bn, with expiry dates mostly in FY15.
Oil prices not a major source of concern. While oil prices have
become more volatile lately, we see investments still going ahead for
shallow-water units like jack-up rigs and production platforms like FLNG
vessels. Keppel’s operational performance demonstrates relatively low
correlation with oil prices, and we believe the stock’s 4.7% yield remains
attractive to investors. Maintain BUY with a SGD12.50 SOP-based TP.
YTD
1m
3m
6m
12m
Absolute
(8.0)
(4.9)
(4.8)
(5.7)
(2.6)
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
(10.7)
(2.2)
(3.6)
(7.6)
(6.3)
Total turnover (SGDm)
10,082
13,965
12,380
13,536
13,897
Reported net profit (SGDm)
1,946
2,237
1,846
1,485
1,495
Recurring net profit (SGDm)
1,491
1,914
1,412
1,485
1,495
Recurring net profit growth (%)
14.1
28.4
(26.2)
5.1
0.7
Recurring EPS (SGD)
0.83
1.06
0.78
0.82
0.83
DPS (SGD)
0.43
0.72
0.50
0.48
0.48
Recurring P/E (x)
12.5
9.7
13.2
12.5
12.4
P/B (x)
2.52
2.01
1.92
1.80
1.70
18.5
29.8
11.9
10.7
4.2
7.0
4.8
4.7
4.7
EV/EBITDA (x)
1.68
2.47
4.77
5.66
5.70
Return on average equity (%)
28.2
26.9
19.5
14.8
14.1
Net debt to equity (%)
16.6
23.2
11.2
11.9
11.4
(7.2)
(13.2)
Shariah compliant
Lee Yue Jer, CFA +65 6232 3898
[email protected]
P/CF (x)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
na
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Company Update, 8 October 2014
Bangchak Petroleum (BCP TB)
Neutral (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD1,446m
Target Price:
Price:
THB33.20
THB34.30
Macro
Risks
Completes NIDO Acquisition
Growth
Value
Bangchak Petroleum (BCP TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
38.0
111
36.0
106
34.0
101
32.0
96
30.0
91
28.0
86
26.0
81
24.0
25
76
0
0
.
2
0
0
BCP has finalised its upstream investment in an acquisition of NIDO, .
0
which cost AUD98m for a 81.41% stake. Maintain NEUTRAL, with our TP 0
at THB33.20 (1.1x FY15F P/BV), which implies 3.1% downside. This 0
acquisition could offer c.8-9% earnings upside and boost our current
TP by 1%. We are now mainly concerned as to the possibility of major
shareholder PTT divesting its entire 27.22% stake in the company.

20
15
10
Completes NIDO acquisition. Bangchak Petroleum (BCP) has acquired
an 81.41% stake in Nido Petroleum (NIDO) (NDO AU, NR), for a total of
AUD98m (USD86.24m). NIDO’s total proven and probable (2P) reserves
comprises 6.2m barrels of oil equivalent (mboe). NIDO, in turn, holds a
22.88% stake in the Galoc field, which has 2.7mboe in reserves (its
portion) and produces 8,400 barrels per day (bpd). NIDO also holds a
22.27% stake in the West Linapacan field and holds total reserves of
3.5mboe there. Production has not begun for this field, but we believe it
may kick off next year. The company is discussing with its auditors
whether or not to consolidate its earnings in 3Q14 or 4Q14. NIDO’s 2013
consolidated net profit was AUD20m (USD17.60m).

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
5
Oct-13
Vol m


2

.
2
0
.
2




Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
PTT
Ministry of Finance
Thai NDVR
193m/6.01m
12.8
-3.1
25.5 - 37.3
63
1,377
27.2
10.0
5.2
Share Performance (%)
YTD
1m
3m
6m
Absolute
22.3
(0.7)
18.1
9.6
5.4
Relative
1.4
0.2
13.1
(3.2)
(4.6)

Impact of NIDO investment on BCP. In our EV/2P valuation, the
acquisition would be equivalent to c.USD20.29/boe vs the regional
average of around USD17.80/boe, which implies a slight premium.
BCP’s stake in NIDO means the former should be able to add around
THB325m-407m (+8-9%) to its annual net profit. This should lift our TP
of THB33.20 (1.1x 2015 P/BV) by 1%.
PTT’s potential divestment of 27.22%. We believe that BCP may be
losing a very strong partner should PTT (PTT TB, BUY, TP: THB396.00)
hive off its stake. How PTT would divest its stake in BCP, however,
remains a risk to the minority shareholders. We believe it would be in the
minority shareholders’ best interest if PTT sells its stake to a strategic
investor, although this would depend on the type of investor as well. In
our view, a financial/silent investor would not be value-accretive, while a
national oil company (eg Petronas or Pertamina) or an oil major – eg
Total (FP FP, NR) or Statoil (STL NO, NR) – could add value to BCP and
make the Thai refinery industry more competitive. Note that a 27.22%
divestment to a single buyer will trigger a mandatory tender offer.
12m
Forecasts and Valuations
Total turnover (THBbn)
Reported net profit (THBbn)
Shariah compliant
Recurring net profit (THBbn)
[email protected]
Dec-13F
Dec-14F
165
187
275
Dec-15F
301
5.61
4.27
4.65
4.92
5.83
6.92
2.64
4.75
4.92
5.83
(61.9)
80.3
3.5
18.6
Recurring EPS (THB)
5.02
1.91
3.45
3.57
4.23
DPS (THB)
1.58
1.24
1.35
1.43
1.69
6.8
17.9
9.9
9.6
8.1
P/B (x)
1.59
1.47
1.36
1.25
1.15
P/CF (x)
Recurring P/E (x)
24.0
5.1
12.7
4.7
6.5
Dividend Yield (%)
4.6
3.6
3.9
4.2
4.9
EV/EBITDA (x)
6.8
10.3
7.9
5.8
5.0
Return on average equity (%)
21.4
13.8
13.9
13.6
14.8
Net debt to equity (%)
48.7
34.0
38.8
25.2
17.0
0.0
0.0
0.0
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Dec-12
159
157.3
Recurring net profit growth (%)
Kannika Siamwalla, CFA 66 2862 9744
Dec-11
Source: Company data, RHB
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RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
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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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