1. business and industrial
2. company
3. earnings

Regional Daily, 24 October 2014
5
Regional Daily
Ideas Troika
Top Stories
Total Access Communications (DTAC TB)
Communications - Telecommunications
BUY THB103 TP: THB138
Mkt Cap : USD7,500m
Pg2
DTAC’s core 9MFY14 earnings were in line with ours although behind
consensus’ expectations. While 3Q14 revenue remains weak, we think it
may have bottomed out with seasonality. Reiterate BUY with TP of THB138
Analyst: Vikran Lumyai ([email protected])
Thai Banks
OVERWEIGHT
Pg3
Thailand's four large banks reported a 7% QoQ rise in 3Q14 core net profit.
We expect prospects to improve from late-2014 buoyed by the Government's
stimulus measures. KBank and KTB are our top sector picks.
Analyst: Fiona Leong ([email protected])
Ascendas REIT (AREIT SP)
Property - REITS
BUY SGD2.30 TP: SGD2.50
Mkt Cap : USD4,353m
Pg4
2QFY15/1HFY15 results were in line. AREIT has SGD128.5m worth of
developments/AEI works due end-2015 to buffer downside risks, and we like
its well-diversified income stream and exposure to business parks. Assume
BUY with TP of SGD2.50 (15.1% total return).
Analyst: Ivan Looi ([email protected])
Malaysia Airports Holdings (MAHB MK)
Transport – Aviation
BUY MYR6.69 TP: MYR8.51
Mkt Cap : USD2,808m
Pg5
As anticipated, Malaysia Airports announced that it would exercise ROFR to
block Limak’s 40% sale of Istanbul Sabiha Gokcen airport (ISG) to TAV.
Funding details have yet to be revealed but we believe it may be a pure cash
call. We maintain our MYR8.51 TP and BUY call.
Analyst: Ahmad Maghfur Usman ([email protected])
Pg6
Continuing To Ride On SCORE
Other Key Stories
Malaysia
Cahya Mata Sarawak (CMS MK)
Basic Materials - Building Materials
BUY MYR4.13 TP: MYR5.00
Analyst: Ng Sem Guan CFA ([email protected])
Daibochi (DPP MK)
Consumer Non-cyclical – Packaging
NEUTRAL MYR4.21 TP: MYR4.10
Pg7
Sime Darby (SIME MK)
Agriculture - Plantation
NEUTRAL MYR9.13 TP: MYR9.00
Pg8
Hua Yang (HYB MK)
Property - Real Estate
BUY MYR2.30 TP: MYR2.74
Pg9
Singapore
Cache Logistics Trust (CACHE SP)
Property - REITS
NEUTRAL SGD1.19 TP: SGD1.21
See important disclosures at the end of this report
Looking Towards a Better 2015
Analyst: Fong Kah Yan ([email protected])
Long Term Plans To Unlock Value
Analyst: Hoe Lee Leng ([email protected])
Dark Days Are Over
Analyst: Alia Arwina ([email protected])
Pg10
Much Ado About Nothing
Analyst: Ivan Looi ([email protected])
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1
Results Review, 24 October 2014
Total Access Communications (DTAC TB)
Communications - Telecommunications
Market Cap: USD7,500m
Buy (Maintained)
Target Price:
Price:
THB138.00
THB103.00
Macro
Risks
A Laggard Play
Growth
Value
Total Access Communication (DTAC TB)
Relative to Stock Exchange of Thailand Index (RHS)
109
118
104
113
99
108
94
103
89
98
84
93
79
88
20
18
16
14
12
10
8
6
4
2
74
Jun-14
Feb-14
0
0
.
2
0
0
Total Access Communications’ (DTAC) core 9MFY14 earnings were in .
0
line with our but behind consensus expectations. While 3Q14 revenue 0
was weak, we think it may have bottomed out with seasonality and 0
measures instituted to claw back market share driving a recovery in
revenue momentum from 4Q14. Investors should accumulate on dips
given the stock’s significant underperformance. Reiterate BUY, with a
DCF-based TP of THB138.00 (34.6% upside).


Aug-14
114
123
Apr-14
128
Dec-13
119
Oct-13
Vol m
Price Close
133
Source: Bloomberg

Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
343m/10.7m
14.6
34.6
92.5 - 129
13
2,368
Telenor Asia
Thai Telco Holdings
TOT Public Company
42.6
22.4
5.6
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
5.7
2.0
(5.5)
(17.0)
(10.9)
Relative
(12.3)
5.6
(6.3)
(25.3)
(16.1)


2

.
2
0
.
2






An expectedly poor quarter. DTAC’s 3Q14 core earnings fell 8.3%
YoY (-14.6% QoQ), bringing 9MFY14 core earnings to THB8.85bn
(+ 0.4% YoY). The results were in line with RHB’s full-year forecast, at
74%, but below the consensus estimate, at 68%. A third interim DPS of
THB1.57 was declared, reflecting a payout ratio of 144%.
Prepaid cedes further share. Overall revenue slipped 2.5% YoY (-4.6%
QoQ) due mainly to stiff competition, the still-dampened consumer
sentiment and a further loss in prepaid market share. The contraction in
service revenue accelerated to 4.3% YoY (-4.1% QoQ) from -2.1% in
2Q14 although we suspect this is likely to have bottomed out. While
mobile internet revenue (35% of service revenue) grew a robust 39% in
9MFY14, it was not compensated by the decline in short message
service (SMS) (-28.4%) and voice revenue (-15.3%).
No news yet on CEO. Management said the hunt for a new CEO is still
on-going without disclosing more details.
Forecast and risks. Management has moderated its service revenue
guidance, the second in three months but maintained its EBITDA
guidance. We lower our FY14/15 forecasts by 6.7% and 7.6%
respectively to factor in higher depreciation and marketing expenses,
while keep revenue unchanged. Key risks to our forecast are: i) weakerthan-expected macroeconomic recovery, ii) higher-than-expected
competition, and iii) higher-than-expected capex.
Maintain BUY. We trim our DCF-derived FV to THB138.00 (WACC:
9.7%, TG: 1.5%) – implying a FY15 P/E of 15.7x – to reflect the lower
revenue. We continue to like DTAC as it has underperformed the SET by
over 15% in the last six months and, in our view, presents a good
laggard play.
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (THBm)
79,298
89,497
94,617
94,476
98,193
Reported net profit (THBm)
11,813
11,278
10,549
11,100
15,426
Recurring net profit (THBm)
12,270
11,235
11,843
11,100
15,426
Recurring net profit growth (%)
12.4
(8.4)
5.4
(6.3)
39.0
Veena Naidu License No. 24418, 66 2862 9752
Recurring EPS (THB)
5.18
4.74
5.00
4.69
6.51
[email protected]
DPS (THB)
17.6
5.1
3.7
4.5
6.2
Recurring P/E (x)
19.8
21.6
20.5
21.9
15.7
P/B (x)
6.96
6.95
6.97
8.16
7.46
9.2
11.1
10.1
18.9
8.7
Shariah compliant
Jeffrey Tan +603 9207 7633
P/CF (x)
[email protected]
Dividend Yield (%)
17.2
4.9
3.6
4.3
6.0
EV/EBITDA (x)
8.16
9.89
8.87
8.85
7.24
22.8
32.3
30.2
34.4
49.5
73.2
74.6
178.3
160.3
(14.1)
2.0
Vikran Lumyai +66 2862 9999 Ext 2028
Return on average equity (%)
[email protected]
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
net cash
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2
Sector Update, 24 October 2014
Thai Banks
Overweight (maintained)
Macro
Risks
Modest Improvements In 3Q14 Results
Growth
Value
Thailand’s four large banks reported a 7% QoQ rise in 3Q14 core net
profit. However, the slower-than-expected economic recovery has
impacted banks’ underlying operations and asset quality. Kasikornbank
delivered the best results, helped by its broad-based non-II businesses
and solid asset quality. We expect the banks’ prospects to improve
from late-2014 onwards, buoyed by the Government’s stimulus
measures. Kasikornbank and Krung Thai Bank our top sector picks.
Core net profit
(THB bn)
BBL
KBank
KTB
SCB
16.0
14.0
12.0
10.0
8.0
6.0

4.0
2.0
0.0
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
Source: Company data
Pre-impairment operating profit
(THB bn)
BBL
KBANK
KTB
SCB

23.0
21.0
19.0
17.0
15.0
13.0
11.0
9.0
7.0
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12

Source: Company data
Loans Growth
BBL
KBank
KTB




SCB
30%
25%

20%
15%
10%
5%
Results broadly in line while Kasikornbank stands out. Thailand’s
four large banks (TH Banks) posted 3Q14 results that were broadly
within expectations. Their aggregate core net profit grew 7% QoQ mainly
on higher trading gains, tightly controlled costs and lower impairment
charges from Krung Thai Bank (KTB). Kasikornbank (KBank) delivered
the best results with earnings up 7% QoQ while Siam Commercial
Bank’s (SCB) 1% QoQ dip was the weakest (see below for details).
Key takeaways from the 3Q14 results: i) slow recovery in
underlying operations. TH Banks’ net interest income grew a moderate
2% QoQ on a 1bp uptick in net interest margin (NIM). Loans were flattish
in 3Q14 with demand dampened by the anemic economy. The resulting
drop in loan-related fee income as well as lower trading and investment
gains led to lower pre-impairment operating profit from KTB and SCB.
ii) Asset quality remained under pressure. The prolonged economic
downturn saw TH Banks’ non-performing loans rise 4% QoQ while
impairment charges increased 19% QoQ (after excluding KTB’s
THB3.0bn additional provisions in 2Q14). Still, annualised credit cost of
75bps for 9M14 remains manageable and banks are hopeful that asset
quality would stabilise when the economy rebounds in 4Q14.
iii) Strong fee income a differentiation. While BBL, KTB and SCB
reported disparate growth in non-interest income (non-II) due to
fluctuations in trading and investment gains, KBank’s non-II has been on
a consistent uptrend. KBank’s ability to sustain non-II growth lies in the
bank’s wider base on fee income businesses such as credit cards,
bancassurance, transaction services and fund management.
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
0%
-5%

-10%
Source: Company data

Fiona Leong +603 9207 7638
[email protected]
KBank and KTB are our Top Picks. We like KBank for its solid asset
quality, more diversified sources of non-II and management’s ability to
sustained earnings growth in challenging times. KTB, being a stateowned bank, is expected to be a major beneficiary of the Government’s
stimulus measures. We forecast its earnings to rise by a healthy 17% in
FY15F.
Key risks to the sector include: i) delays in execution of approved
infrastructure projects, ii) a slower-than-expected economic rebound that
would exert further pressure on businesses and highly leverage
consumers, and iii) a sharper-than-expected margin compression should
competition for loans and deposits intensify.
Thanapol Withayaruksun +66 2862 9999 ext 2029
[email protected]
P/B (x)
Yield (%)
Dec-15F
Dec-15F
THB220.00
9.1
1.1
4.4
BUY
THB232.00
THB264.20
10.6
1.9
1.9
BUY
THB22.50
THB26.00
8.2
1.2
5.0
BUY
THB170.00
THB198.00
9.6
1.8
3.8
NEUTRAL
Price
Target
Bangkok Bank
THB192.50
Kasikornbank
Krung Thai Bank
Siam Commercial Bank
See important disclosures at the end of this report
P/E (x)
Dec-15F
Com pany Nam e
Source: Company data, RHB
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Rating
3


2

2

3
2
Results Review, 24 October 2014
a
Ascendas REIT (AREIT SP)
Buy (Maintained)
Property - REITS
Market Cap: USD4,353m
Target Price:
Price:
SGD2.50
SGD2.30
Macro
Risks
On Steady Footing
Growth
Value
Ascendas REIT (AREIT SP)
Price Close
Relative to Straits Times Index (RHS)
2.50
106
2.45
105
2.40
103
2.35
102
2.30
100
2.25
99
2.20
98
2.15
96
2.10
95
2.05
93
2.00
30
92
0
0
.
2
0
0
2QFY15/1HFY15 (Mar) results were in line with our and market .
0
estimates. It has SGD128.5m worth of developments and AEI works due 0
for completion by end-2015 to buffer downside risks, and we like its 0
well-diversified income stream and exposure to business parks. It is our
only favorable pick in the industrial segment, which is vulnerable to
property price corrections at this juncture. Assume coverage with BUY.
Our DDM-derived TP of SGD2.50 implies a 15.1% total return upside.

25
20
15
Sep-14
Jul-14
Apr-14
Feb-14
Dec-13
5
Oct-13
Vol m
10

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
13.7m/10.7m
4.8
8.7
2.09 - 2.47
83
2,404
Ascendas Pte Ltd
Matthews International
Blackrock
17.1
9.4
5.2
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
4.5
1.8
(1.3)
(1.3)
(0.4)
Relative
3.4
4.7
2.8
0.4
(0.3)
Shariah compliant


2

.
2
0
.
2





No surprises, operating metrics remain steadfast. Ascendas REIT’s
2QFY15/1HFY15 revenue grew 8.6/8.4% YoY to SGD164.8m/328m,
bolstered by acquisitions, positive rental reversions and income support
for A-REIT City at Jinqiao. 2Q/1H distribution per unit (DPU) rose
1.7/2.1% YoY to 3.66/7.30 cents, making up 24.5/48.8% of our full-year
estimate. A 6.3% positive rental reversion (1QFY15: 11.8%) was
achieved for leases renewed last quarter. Management expects mid- to
high single-digit overall positive reversions for FY15. Its portfolio
occupancy rate stayed high at 85.6%, while 8.0% of its property income
is due for renewal this year. The REIT’s financing cost remained flat
QoQ at 2.70% with an average term of debt of 4.0 years (1QFY15: 3.7
years). Based on a disclosed interest rate sensitivity analysis, DPU
would decline ~1%, or 0.17 cents, for every 50bps hike in interest rates.
Well-diversified revenue. With the completion of Asperia, its gross floor
area (GFA) rose 3% QoQ to 3m sqm. Asperia is 27.7% occupied and the
conversion of C&P Logistics Hub to a multi-tenanted asset (from single
tenant) led to a 66.4% occupancy rate. In 1H, asset enhancement
initiatives (AEI) at Corporation Place, LogisTech and Techquest were
completed. It also announced plans to convert 2 Senoko South Road
into a multi-tenanted food factory when its lease expires in October, and
expects works to start immediately upon getting the relevant approvals.
Buffered against downside. Business parks accounted for 36.2/34% of
total 2QFY15 revenue/net property income respectively. With a tenant
base of around 1,360 in a portfolio of 106 properties, and no single asset
accounting for more than 4.0% of monthly gross revenue, Ascendas
REIT is well-diversified in terms of rental income. We assume coverage
with BUY and a DDM-derived TP of SGD2.50 (CoE: 7.0%, TG: 1%).
Forecasts and Valuations
Mar-13 Mar-14 Mar-15F Mar-16F Mar-17F
Total turnover (SGDm)
576
614
672
709
733
Net property income (SGDm)
409
436
489
518
536
Reported net profit (SGDm)
336
482
452
465
484
Total distributable income (SGDm)
305
339
373
387
403
0.13
0.14
0.16
0.16
0.17
DPS (SGD)
DPS growth (%)
9.7
11.3
9.8
3.6
4.1
Ivan Looi +65 6232 3841
Recurring P/E (x)
14.2
11.1
12.0
11.6
11.2
[email protected]
P/B (x)
1.16
1.11
1.11
1.09
1.07
Dividend Yield (%)
5.6
6.3
6.5
7.1
7.4
Singapore Research +65 6232 3845
Return on average equity (%)
7.8
10.1
9.3
9.4
9.6
[email protected]
Return on average assets (%)
5.0
6.7
5.9
5.7
5.8
2.94
5.95
5.23
4.39
4.48
Interest coverage ratio (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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4
Corporate News Flash, 24 October 2014
Malaysia Airports Holdings (MAHB MK)
Transport - Aviation
Market Cap: USD2,808m
Buy (Maintained)
Target Price:
Price:
MYR8.51
MYR6.69
Macro
Risks
Taking Full Control Of Sabiha Gokcen
Growth
Value
Malaysian Airports (MAHB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
10.10
117
9.60
111
9.10
106
8.60
100
8.10
95
7.60
89
7.10
83
6.60
78
6.10
25
72
0
0
.
2
0
0
As anticipated, Malaysia Airports announced that it would exercise .
0
ROFR to block Limak’s 40% sale of Istanbul Sabiha Gokcen airport 0
(ISG) to TAV. Funding details have yet to be revealed but we believe it 0
may purely be a cash call. We maintain our MYR8.51 TP and BUY call
(a 27.2% upside), pending its funding decision. ISG is on the verge of an
earnings uptick that could materialise earlier than anticipated.

20
15
Sep-14
Jul-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 (%)
8.29m/2.58m
24.5
27.2
6.46 - 9.78
33
1,374
Khazanah
PNB
EPF
36.6
13.0
11.3
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(25.7)
(10.6)
(17.4)
(17.0)
(21.8)
Relative
(21.9)
(8.2)
(13.4)
(13.2)
(20.8)


2

.
2
0
.
2




Blocking the sale. As anticipated, Malaysia Airports announced
yesterday that it would exercise right of first refusal (ROFR) to block TAV
Havalimanlari (TAV) (TAVHL TI, NR) from landing 40% of ISG for
EUR285m from stakeholder Limak. This will see ISG becoming a 100%
wholly owned subsidiary of MAHB. Limak had earlier said it would sell to
TAV if Malaysia Airports does not exercise its ROFR. At that price, ISG
is valued at EUR712.5m, ie 12% lower than our DCF-derived valuation
of EUR808.87m. As highlighted earlier, the rationale to acquire ISG is to
avoid its existing competitor, TAV, to become partners as Malaysia
Airports is not keen to partner TAV. Had it not exercise its ROFR, there
was a possibility that TAV would still focus on making Istanbul Ataturk
Airport (Ataturk) Turkey’s primary hub despite owning a stake in ISG. In
such a case, ISG’s role could be irrelevant until 2018 at the earliest,
once Istanbul’s third airport opens with Ataturk closing operations.
A fair price. The 40% stake acquisition translates into a valuation of a
12.8x FY13 EV/EBITDA and a 10-11x FY14 EV/EBITDA, based on a
FY14 EBITDA forecast of EUR101.1m (FY13 EBITDA was at
EUR85.3m). We deem this fair as it is in line with the valuation of
Malaysia Airports and Airports of Thailand (AOT TB, BUY, TP:
THB245.00). The company has yet to unveil its funding details, but fully
consolidating ISG’s balance sheet based on FY13 proforma numbers, its
debt to equity ratio will hit 1.22x, close to breaching its 1.25 debt
covenant. This could jeopardise its AAA rating. As such, a 100% funding
through a rights issue is highly likely. As we have highlighted earlier,
assuming a rights share of MYR5.36 (20% discount) and 100% funding
through rights as a worst case scenario, this would see its share base
expanding by 16%. As this will see full consolidation of ISG, the FY15
EPS dilution impact could be as much as 53%. We, however, caution
that EPS is a meaningful metric due to the higher depreciation of KLIA2,
which has yet factored in a concession extension. Furthermore, this is
based on the premise that ISG will only be breaking even by FY17 as
opposed to management’s target of as early as FY15. Should ISG be
profitable earlier than expected, the impact could be earnings accretive.
Forecasts and Valuations
Dec-12
Dec-13
2,163
2,463
2,884
3,227
3,479
Reported net profit (MYRm)
331
306
92
169
179
Recurring net profit (MYRm)
402
331
89
166
176
Ahmad Maghfur Usman 603 9207 7654
Recurring net profit growth (%)
1.5
(17.8)
(73.1)
86.2
6.1
[email protected]
Recurring EPS (MYR)
0.33
0.27
0.07
0.13
0.13
DPS (MYR)
0.14
0.12
0.13
0.16
0.16
Recurring P/E (x)
20.1
24.9
99.0
53.2
50.1
P/B (x)
1.86
1.76
1.58
1.59
1.60
P/CF (x)
12.5
9.2
8.3
8.0
8.9
2.0
1.8
2.0
2.3
2.4
12.3
14.4
12.5
10.4
9.8
8.4
6.8
1.8
3.0
3.2
57.4
77.9
67.6
62.3
54.0
(67.2)
(52.3)
(58.9)
Shariah compliant
Total turnover (MYRm)
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
Source: Company data, RHB
Dec-14F
Dec-15F
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Dec-16F
5
Company Update, 24 October 2014
Cahya Mata Sarawak (CMS MK)
Buy (Maintained)
Basic Materials - Building Materials
Market Cap: USD1,306m
Target Price:
Price:
MYR5.00
MYR4.13
Macro
Risks
Continuing To Ride On SCORE
Growth
Value
Cahya Mata Sarawak (CMS MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
254
3.90
226
3.40
197
2.90
169
2.40
140
1.90
112
1.40
10
9
8
7
6
5
4
3
2
1
83
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 (%)
6.05m/1.88m
-2.0
22.0
1.70 - 4.50
32
1,039
Majaharta SB
Lejla Taib
Dato Sri Sulaiman A Taib
13.6
11.2
8.9
Share Performance (%)

IMHK 2014. Last week, Cahya Mata Sarawak (CMS) participated in
Invest Malaysia Hong Kong 2014 (IMHK 2014) event, which was jointly
organised by Bursa Malaysia and RHB Investment Bank. The group’s
meeting slots were well attended by both new and existing investors.
Growth with the Sarawak Corridor of Renewable Energy (SCORE).
Key topics of discussion with the management of this Sarawak-based
conglomerate were its growth prospects moving forward. This was
especially after CMS’ turnaround in late 2010. Investors were generally
convinced by its outlook, driven by the initiatives rolled out at the SCORE
economic region. Meanwhile, the first two furnaces of CMS’ 20%-owned
OM Materials (Sarawak)’s (OMS) smelter were just commissioned. We
expect Phase 1 of the OMS project to reach full commissioning by end2Q15. Hence, it will be the main earnings driver for FY15 while other
divisions ought to indirectly benefit from the developments at SCORE.
Long term potential. Phase 2 of OMS is currently on the drawing board,
with construction possibly beginning in 2H15. Thus, its contribution can
be expected from FY16 onwards. CMS’ Malaysian Phosphate Additives
SB (MPA) project is also progressing well while 51%-owned Samalaju
Property Development SB (SPD) may offer some upside. CMS is also in
the midst of installing a brownfield 1m tonne/annum (tpa) grinding plant
next to its clinker facility to meet growing demand from 2H16 onwards.
That said, we also introduce our FY16 projections with this report.
Maintain BUY and SOP-based MYR5.00 TP. Investors’ expectations on
CMS’ huge cash pile is high. Most believe that this allows the group to
take on projects with attractive returns that may arise from SCORE or
other opportunities. These would eventually lift CMS’ future earnings
potential. With that, we maintain our BUY rating on CMS and MYR5.00
TP, which is derived from a SOP valuation methodology.
YTD
1m
3m
6m
12m
Absolute
79.0
(6.6)
2.5
21.6
138.0
Forecasts and Valuations
Relative
82.8
(3.7)
6.4
25.2
138.4
Total turnover (MYRm)
Shariah compliant
Ng Sem Guan, CFA +603 9207 7678
[email protected]
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,203
1,418
1,605
1,739
1,752
Reported net profit (MYRm)
137
175
206
271
321
Recurring net profit (MYRm)
137
175
206
271
321
Recurring net profit growth (%)
4.3
28.3
17.4
31.5
18.4
Recurring EPS (MYR)
0.14
0.17
0.20
0.26
0.31
DPS (MYR)
0.04
0.06
0.06
0.08
0.09
Recurring P/E (x)
29.8
23.6
20.5
15.7
13.3
P/B (x)
2.76
2.53
2.36
2.13
1.92
P/CF (x)
18.6
16.9
18.3
13.6
12.9
1.0
1.4
1.5
1.9
2.3
11.2
8.3
8.6
7.5
6.7
9.4
11.2
11.9
14.2
15.2
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


3

.
1
0
.
3
0
0
.
2
0
0
CMS continues to be an excellent proxy to SCORE. Maintain BUY and .
0
SOP-based MYR5.00 TP, a 22% upside. Its OMS associate and MPA 0
phosphate project are making good progress, and are set to benefit 0
from attractive power tariffs. Investors also think its huge cash pile will
allow CMS to participate in projects with attractive yields that may arise
from SCORE’s developments or other opportunities.
Aug-14
4.40
Apr-14
283
Dec-13
4.90
Oct-13
Vol m
Price Close




Source: Company data, RHB
net cash net cash net cash net cash net cash
0.0
4.2
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23.4
6
Results Briefing, 24 October 2014
Daibochi (DPP MK)
Neutral (Maintained)
Consumer Non-cyclical – Packaging
Market Cap: USD146m
Target Price:
Price:
MYR4.10
MYR4.21
Macro
Risks
Looking Towards a Better 2015
Growth
Value
Daibochi (DPP MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
4.80
128
4.60
123
4.40
118
4.20
113
4.00
108
3.80
103
3.60
98
3.401
93
1
0
0
.
1
0
0
In view of Daibochi’s mediocre 9M14 thus far, we trim our earnings .
0
forecasts for FY14. However, we believe 2015 may be a record year, 0
with earnings fuelled by its topline growth as well as margin expansion 0
on the back of lower raw material prices. Despite this, valuations are
not compelling at this juncture. Maintain NEUTRAL and a MYR4.10 TP
(2.6% downside), premised on an unchanged 13x P/E 2015 EPS.


1
Sep-14
Jul-14
Apr-14
Feb-14
Dec-13
Oct-13
Vol m
1

Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
0.16m/0.03m
5.2
-2.6
3.55 - 4.63
39
113
Low Chan Tian
Lim Koy Peng
Apollo Asia Fund Limited
8.9
7.6
7.5
Share Performance (%)


2

.
2
0
.
2





Double-digit topline growth not an issue. During Daibochi’s analyst
briefing yesterday, management was upbeat on its sales target moving
forward. We understand from management that one of its key multinational corporation (MNC) customers has renewed its contract with the
company this month. Daibochi also received a few tender requests in the
Asean region as well as Australia.
Lower raw material prices on the back of declining crude oil prices.
We understand that prices for polyethylene (PE) and polypropylene (PP)
in October dropped 3% MoM. Moving forward, we expect prices to
decline further in tandem with the decline in crude oil prices. As > 50% of
its raw materials comprise of PE and PP, the decline in PE and PP
prices could fuel its EBIT margin expansion moving forward to 11% in
FY15 from 9.7% as of 9M14.
A better 2015. In view of the higher operating costs and forex loss
incurred in 3Q14 due to the depreciation of AUD/MYR, we trim our FY14
earnings forecasts by 13.9%. However, we make no changes to our
FY15 and FY16 projections. We believe 2015 may be a record year for
Daibochi, with earnings driven by sales growth as well as margin
expansion on the back of lower raw material prices. Our projections take
into consideration its limited pricing power in sales.
Maintain NEUTRAL. As we make no changes to our FY15 earnings
forecasts, we maintain our TP at MYR4.10, based on a target P/E of 13x
on FY15 EPS, in line with its 3-year historical average. We reiterate our
view that Daibochi’s valuations are not compelling at this juncture with
the stock already trading at a 15-40% premium to its peers. For
exposure to the consumer packaging sector, we prefer SKP Resources
(SKP MK, BUY, TP: MYR0.85), Scientex (SCI MK, BUY, TP: MYR8.64)
and Thong Guan (TGI MK, BUY, TP: MYR2.60).
Dec-12
Dec-13
Dec-14F
Dec-15F
279
310
367
439
492
Reported net profit (MYRm)
24.6
27.5
24.8
35.0
40.0
Recurring net profit (MYRm)
24.6
27.5
24.8
35.0
40.0
Recurring net profit growth (%)
22.7
11.4
(9.7)
41.4
14.2
Recurring EPS (MYR)
0.22
0.24
0.22
0.31
0.35
DPS (MYR)
0.12
0.14
0.13
0.18
0.21
Fong Kah Yan +603 9207 7668
Recurring P/E (x)
19.5
17.5
19.3
13.7
12.0
[email protected]
P/B (x)
3.19
2.96
2.79
2.58
2.37
P/CF (x)
12.2
16.6
17.7
17.1
12.5
3.0
3.4
3.1
4.4
5.0
EV/EBITDA (x)
9.84
9.73
9.90
7.74
6.93
Return on average equity (%)
17.0
17.6
14.8
19.6
20.6
Net debt to equity (%)
14.9
27.2
28.9
26.8
21.8
(5.3)
(2.2)
(4.9)
YTD
1m
3m
6m
12m
Absolute
1.4
(2.1)
(4.3)
(7.5)
13.8
Relative
5.2
0.3
(0.3)
(3.7)
14.8
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
Dec-16F
Source: Company data, RHB
See important disclosures at the end of this report
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7
Company Update, 24 October 2014
Sime Darby (SIME MK)
Neutral (Maintained)
Agriculture - Plantation
Market Cap: USD16,973m
Target Price:
Price:
MYR9.00
MYR9.13
Macro
Risks
Long Term Plans To Unlock Value
Growth
Value
Sime Darby (SIME MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
9.90
103
9.70
101
9.50
99
9.30
97
9.10
95
8.90
93
8.70
30
91
0
0
.
2
0
0
Sime answered many questions on its strategy for the spinning off and .
0
listing of core units, latest acquisition and potential contributions from 0
its Battersea project at our IMHK event last week. Despite its rather 0
subdued earnings prospects, we believe news flow about its potential
restructuring could support its share price. Maintain NEUTRAL, as we
lift our SOP-based TP to MYR9.00 (from MYR8.75) a 1.4% downside.


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 (%)
43.6m/13.6m
8.3
-1.4
8.82 - 9.75
40
6,064
Skim Amanah Saham
Bumiputra
Employees Provident Fund
Permodalan Nasional Berhad

36.5
11.0
10.0
Share Performance (%)


2

.
2
0
.
2





Many questions asked at Invest Malaysia Hong Kong (IMHK). Sime
Darby (Sime) participated in our IMHK event last week. Questions
abounded about the group’s strategy going forward, in relation to the
spin-off and listing of its core divisions, its latest acquisition, as well as
expectations on contributions from its Battersea development.
Spin-off/listing of core businesses. In terms of group strategy,
management reiterated its view that in order to grow its businesses, it
continues to contemplate various options, including spinning off/listing
its core divisions. The first would be Sime’s motor division, as
management is already in the midst of talking to investment bankers to
list this unit in Malaysia. Another division which management is thinking
of listing/spinning off would be its plantation assets in Indonesia. This
move could come in the form of an IPO or a reverse takeover (RTO). We
believe it could potentially be in the form of a tie-up with an Indonesian
partner which has a sizeable plantation landbank, which would be
injected into a listed entity. In the longer term, we believe management
would also look to list/spin off its other divisions. We believe listing the
property division is likely to unlock the most value, given the vastness
and location of Sime’s property landbank.
Contributions from Sime’s iconic Battersea Power Station will start
coming through in FY16/17 (Jun). We expect a pretax profit contribution
of MYR200m-300m from the recognition of the first phase of
development. As we estimate its associate contribution from the
Battersea project to positively impact earnings by 6-7% in FY16 and 1213% in FY17, we have adjusted our earnings forecasts accordingly.
Still NEUTRAL. We lift our SOP TP to MYR9.00 (from MYR8.75). We
maintain our NEUTRAL recommendation on the stock. Although
earnings prospects remain rather subdued, we believe news flow
surrounding Sime Darby’s potential restructuring/demerger proposals
could provide some support to its share price.
YTD
1m
3m
6m
12m
(4.1)
0.2
(5.4)
(1.8)
(3.5)
Forecasts and Valuations
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
(3.1)
Total turnover (MYRm)
47,144
44,568
44,997
47,035
49,707
Reported net profit (MYRm)
3,724
3,353
2,748
2,887
3,463
Recurring net profit (MYRm)
3,383
3,123
2,748
2,887
3,463
Recurring net profit growth (%)
(19.3)
(7.7)
(12.0)
5.1
19.9
Recurring EPS (MYR)
0.56
0.52
0.45
0.48
0.57
DPS (MYR)
0.34
0.36
0.30
0.31
0.37
Recurring P/E (x)
16.2
17.6
20.1
19.2
16.0
P/B (x)
2.02
1.94
1.87
1.80
1.72
Hoe Lee Leng +603 9207 7605
P/CF (x)
16.5
19.9
13.5
14.7
12.5
[email protected]
Dividend Yield (%)
3.8
3.9
3.2
3.4
4.1
EV/EBITDA (x)
11.6
12.8
14.1
14.6
13.6
Return on average equity (%)
14.0
12.0
9.4
9.6
11.0
Net debt to equity (%)
20.0
21.3
25.1
28.2
30.7
(24.5)
(25.6)
0.0
Absolute
Relative
(0.3)
3.1
(1.5)
1.8
Shariah compliant
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
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8
Results Review, 24 October 2014
Hua Yang (HYB MK)
Buy (Maintained)
Property - Real Estate
Market Cap: USD186m
Target Price:
Price:
MYR2.74
MYR2.30
Macro
Risks
Dark Days Are Over
Growth
Value
Hua Yang (HYB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
2.60
112
2.50
108
2.40
104
2.30
100
2.20
96
2.10
92
2.00
88
1.90
84
1.80
80
1.70
76
1.606
72

4

Sep-14
Jul-14
Apr-14
Feb-14
Dec-13
1
Oct-13
Vol m
2
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
1.02m/0.32m
53.9
19.0
1.75 - 2.50
63
264
Heng Holdings S/B
Cham Poh Meng
30.3
6.5
Share Performance (%)
Absolute
Relative


Within expectations. Hua Yang’s 2QFY15 net profit of MYR26.0m
(+>100% YoY, +8.5% QoQ) brought 1HFY15 net profit to MYR49.9m
(+>100% YoY), coming in at 54/49% of ours and consensus estimates.
YoY 1H revenue grew 51.8%, underpinned by the progress billings from
its ongoing township projects such as Taman Pulai Hijauan, Bandar
Universiti Seri Iskandar (BUSI) and new projects such as Metia
Residences and Sentrio Suites. Net profit margins have also gradually
improved to 18.6% in 2QFY15 vs 17.5% in 1QFY15.
On track to meet sales target. Total new sales for 1HFY15 were strong
at MYR192.2m (1QFY15: MYR81.9m). The new sales growth was
attributed to the new phases of existing projects such as Taman Pulai
Hijauan and BUSI as well as from Sentrio Suites. Given its slew of
pipeline launches in 2HFY15, we believe that management will likely
reach its FY15 new sales target of MYR500-600m. Meanwhile, its
unbilled sales remained resilient at MYR717.9m (1QFY15: MYR756.4m).
Net gearing was stable at 0.44x during the quarter.
Earnings forecasts. We keep our FY15/16 forecasts unchanged
pending a briefing later today. We are, however, introducing our FY17
forecasts.
Maintain BUY. We maintain BUY on Hua Yang with an unchanged TP
of MYR2.74, based on a 10% discount to RNAV. We believe that
affordable housing players with units priced MYR500k and below such
as Hua Yang, Matrix Concepts (MCH MK, BUY, TP: MYR3.93) and
Tambun Indah Land (TILB MK, BUY, TP: MYR3.00) would continue to
perform better than its higher-end peers, as the Government has
recently announced several key incentives in Budget 2015 that could
help to boost home ownership in this segment.
YTD
1m
3m
6m
12m
19.8
(3.0)
(2.6)
19.2
1.3
Forecasts and Valuations
2.3
Total turnover (MYRm)
23.6
(0.6)
1.4
23.0
Shariah compliant
Alia Arwina +603 9207 7608
[email protected]
Mar-13
Mar-14
Mar-15F
Mar-16F
Mar-17F
409
510
612
729
751
Reported net profit (MYRm)
70
81
93
103
109
Recurring net profit (MYRm)
70
81
93
103
109
Recurring net profit growth (%)
33.1
14.6
14.7
11.6
5.1
Recurring EPS (MYR)
0.37
0.36
0.35
0.39
0.41
DPS (MYR)
0.12
0.12
0.12
0.14
0.14
Recurring P/E (x)
6.29
6.42
6.56
5.88
5.59
P/B (x)
1.36
1.57
1.36
1.18
1.04
5.2
5.2
5.3
6.0
6.3
Return on average equity (%)
23.5
22.4
22.2
21.5
19.8
Return on average assets (%)
13.0
11.1
10.6
10.6
10.2
Net debt to equity (%)
25.6
55.6
49.6
43.9
41.7
(8.9)
(11.1)
(6.5)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
3
0
0
Hua Yang’s 1HFY15 results were in line, coming in at 54/49% of .
0
ours/consensus estimates. Net profit more than doubled YoY, as 0
contributions from its new projects started trickling in. With more 0
projects to be launched in 2HFY15 (Mar), management’s full-year new
sales target of MYR500-600m looks achievable (1HFY15: MYR192.2m).
Maintain BUY, and a RNAV-based TP of MYR2.74 (19.0% upside).
5
3




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9
Results Review, 24 October 2014
Cache Logistics Trust (CACHE SP)
Neutral (from Buy)
Property - REITS
Market Cap: USD725m
Target Price:
Price:
SGD1.21
SGD1.19
Macro
Risks
Much Ado About Nothing
Growth
Value
Cache Logistics Trust (CACHE SP)
Price Close
Relative to Straits Times Index (RHS)
1.30
101
1.25
99
1.20
98
1.15
96
1.10
94
1.05
93
1.00
6
91
0
0
.
2
0
0
Cache Logistic Trust (Cache)’s 3Q14/9M14 distribution per unit (DPU) .
0
rose 0.7/-1.2% YoY to 2.140/6.427 cents, or at 25.1%/75.2% of our full- 0
year forecast. The supply dynamics for warehouse spaces in Singapore 0
is unfavourable, as additional stock could put pressure on rental fees
and occupancy rates. We also see potential competition arising from
Iskandar Malaysia. We assume coverage with NEUTRAL and a SGD1.21
DDM-based TP (9.5% total return upside).

5
4

3
Sep-14
Jul-14
Apr-14
Feb-14
Dec-13
1
Oct-13
Vol m
2

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
0.98m/0.78m
10.1
2.1
1.06 - 1.24
81
780
CWT LTD
Bank of New York Mellon
Capital Research Global
Investor
Share Performance (%)
7.2
6.4
5.3


2

.
2
0
.
2





3Q14/9M14 results in line. Cache’s 3Q14/9M14 revenue grew 0.4/3.3%
YoY to SGD20.7m/SGD62.2m, driven by positive rental reversion and
the acquisition of Precise Two last April. 3Q14/9M14 distributable
income increased 1.2/2.3% YoY to SGD16.7m/16.5m. The REIT’s
weighted average lease term to expiry of the portfolio is 3.6 years, with
51% of the leases (majority from sponsor CWT (CWT SP, BUY, TP:
SGD2.00)/C&P), due to expire in 2015-2016. The all-in-financing cost for
3Q14 averaged 3.48% (2Q14: 3.47%).
Portfolio remains resilient. Its portfolio’s average occupancy rate
remained healthy. The REIT’s occupancy rate was at 99.5% (2Q14:
99.6%). Its latest build-to-suit development project, DHL Supply Chain
Advanced Regional Center (DSC ARC), is now 36% finished, and is on
track to be completed in 2H15.
No refinancing required for the next three years. Cache has just
refinanced SGD375m loan facilities with a SGD400m club loan
comprising: i) a 4-year term loan facility of SGD185m, ii) a 5-year term
loan facility of SGD150m and iii) a 4-year revolving credit facility of
SGD65m. This extends its weighted average debt maturity to 4.2 years
from 1.6 years.
Bleak outlook for warehouse spaces. We are cautious of the
impending amount of new industrial warehouse space that could put
pressure on industrial rental and occupancy rates. According to CBRE,
approximately 6.3m sq ft of warehouse space will flow in from 2014 to
2016 (see Figure 1). Iskandar Malaysia could also pose a competition in
the medium term to Cache. We assume coverage on the stock with a
NEUTRAL, with our DDM-derived TP at SGD1.21.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (SGDm)
72.6
81.0
82.7
86.1
92.9
Net property income (SGDm)
69.1
76.8
78.5
81.7
88.2
Reported net profit (SGDm)
66.4
63.7
64.1
66.6
72.9
Total distributable income (SGDm)
57.5
65.6
68.6
71.4
77.8
DPS (SGD)
0.08
0.09
0.09
0.09
0.10
DPS growth (%)
1.6
3.3
1.6
3.4
8.3
Ivan Looi +65 6232 3841
Recurring P/E (x)
12.0
13.8
14.4
13.9
12.8
[email protected]
P/B (x)
1.24
1.21
1.21
1.22
1.22
7.1
7.3
7.4
7.7
8.3
9.5
YTD
1m
3m
6m
12m
Absolute
6.3
1.7
(3.7)
1.3
(0.8)
Relative
5.2
4.6
0.4
3.0
(0.7)
Shariah compliant
Forecasts and Valuations
Dividend Yield (%)
Singapore Research +65 6232 3845
Return on average equity (%)
10.5
8.9
8.4
8.7
[email protected]
Return on average assets (%)
7.2
6.2
5.8
5.8
6.2
(5.5)
(5.6)
(3.7)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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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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DMG & Partners Research Guide to Investment Ratings
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