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Regional Daily, 5 November 2014
5
Regional Daily
Ideas Troika
Top Stories
Islamic Capital Markets Strategy
Pg3
At the Securities Commission’s (SC) forthcoming semi-annual review of
Shariah-compliant securities, we have identified three stocks that we believe
will be designated as non-compliant. They are IOI Corp, Perdana Petroleum
and SapuraKencana.
Analyst: Alexander Chia ([email protected])
Giken Sakata (GSS SP)
Exploration & Production
BUY SGD0.29 TP: SGD0.65
Mkt Cap : USD105m
Pg4
Giken acquired 51% of Cepu Sakti Energy, transforming into an oil company
focused on the old wells programme. Giken’s market cap only prices in two
out of five fields and FY15F P/E is 3x.
Analyst: Lee Yue Jer CFA ([email protected])
Dayang Enterprise (DEHB MK)
Offshore & Marine
BUY MYR2.94 TP: MYR4.52
Mkt Cap : USD777m
Pg5
Dayang has placed out the first tranche of 52.1m shares from the 82.1m
proposed placement. This raised MYR175.6m, which we believe will be used
to buy more Perdana Petroleum, of which Dayang currently owns 26.6%. We
trim our TP in light of the enlarged share base.
Analyst: The Research Team ([email protected])
Hi-P International (HIP SP)
Industrial - Misc. Manufacturer
BUY SGD0.68 TP: SGD0.87
Mkt Cap : USD429m
Pg6
Despite 3Q14 revenue falling 32.7% YoY to SGD246m from SGD365m. Hi-P
recorded a 243.2% surge in NPAT YoY to SGD10.8m from SGD3.1m.
Maintain BUY with a SGD0.87 TP (a 28% upside) as we believe a
turnaround is firmly in place.
Analyst: Jarick Seet ([email protected])
Pg7
Poor 9M14 Results
Other Key Stories
Indonesia
Adhi Karya (ADHI IJ)
Construction
NEUTRAL IDR2,745 TP: IDR2,720
Analyst: Yualdo T. Yudoprawiro ([email protected])
Indofood CBP (ICBP IJ)
Food & Beverage Products
NEUTRAL IDR11,000 TP: IDR11,350
Pg8
Indofood Sukses Makmur (INDF IJ)
Food & Beverage Products
BUY IDR6,850 TP: IDR8,200
Pg9
Malaysia
Alam Maritim (AMRB MK)
Offshore & Marine
NEUTRAL MYR1.07 TP: MYR1.12
Analyst: Andrey Wijaya ([email protected])
Expect Better 4Q14 Earnings
Analyst: Andrey Wijaya ([email protected])
Pg10
Secures MYR31.7m Demobilisation Contract
Analyst: Kong Ho Meng ([email protected])
Malaysia Airports Holdings (MAHB MK)
Transport - Aviation
BUY MYR7.23 TP: MYR8.04
Pg11
Petronas Gas (PTG MK)
Downstream Products
Pg12
See important disclosures at the end of this report
Higher ASP Boosts 3Q14 Earnings
The Worst May Be Over
Analyst: Ahmad Maghfur Usman ([email protected])
9M14 Core Net Profit Grows 10.4%
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1
Regional Daily, 5 November 2014
Analyst: Joshua Ng ([email protected])
NEUTRAL MYR21.80 TP: MYR21.98
Thailand
Advanced Info Services (ADVANC TB)
Telecommunications
NEUTRAL THB238 TP: THB249
See important disclosures at the end of this report
Pg13
Boost from Lower Regulatory Cost
Analyst: Veena Naidu ([email protected])
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2
Strategy, 5 November 2014
Islamic Capital Markets Strategy
Macro
Shariah-Compliant Securities Semi-Annual Review
Risks
Growth
Value
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3
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2
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2
2
Shariah-compliant Top Picks
TP (MYR)
Tenaga Nasional
15.50
Unisem
2.16
Matrix Concepts
3.93
Cahya Mata Sarawak
5.00
Naim
5.06
The Securities Commission (SC) is expected to publish its semi-annual
review of Shariah-compliant securities at the end of November. Of the
169 stocks under our coverage universe, 121 are currently designated
as Shariah-compliant. We have identified three stocks that we believe
will be designated as non-compliant in the coming review. They are IOI
Corp, Perdana Petroleum and SapuraKencana Petroleum.
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Source: RHB
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
Alexander Chia +603 9207 7621
[email protected]

See important disclosures at the end of this report
Stocks at risk of exclusion. After reviewing the 169 stocks under our
coverage, we have identified 10 stocks (see Figure 1) that are currently
Shariah-compliant and now fall afoul of the financial ratio hurdles based
on their latest audited accounts. The Shariah Advisory Council (SAC) of
the SC stipulates that on top of the business activity benchmarks, cash
and debt should each not exceed 33% of total assets. We expect three
stocks – IOI Corp (IOI MK, NEUTRAL, TP: MYR4.50), Perdana
Petroleum (PETR MK, BUY, TP: MYR2.20) and SapuraKencana
Petroleum (SAKP MK, BUY, TP: MYR5.33) – will be designated as noncompliant as they each have debt that exceeds 33% of their respective
total assets. IOI Corp and SapuraKencana are component stocks in the
benchmark FBMKLCI. Malaysia Airlines (MAS MK, NEUTRAL, TP:
MYR0.27) also has nominal debt that exceeds the allowable threshold,
we believe a portion of this is Islamic debt as the stock passed the May
review. Malaysian Resources Corp’s (MRCB) (MRC MK, BUY, TP:
MYR2.05) debt is 37% of total assets but management advises that
stripping out Islamic debt, this ratio drops to only 29.3%. The remaining
five stocks in Figure 1 have “excess” cash but are all expected to pass
scrutiny as most of the cash holdings are parked in Islamic accounts.
Investors in “Shariah-compliant securities” which are subsequently reclassified as “Shariah non-compliant” are required to dispose of the
stocks within a month, unless the market price is below investment cost.
Stocks that could be included in the Shariah-compliant list. We also
identify four stocks, Esthetics International Group (EIG MK, NEUTRAL,
TP: MYR1.35), Pantech Group (PGHB MK, BUY, TP: MYR1.25), SKP
Resources (SKP MK, BUY, TP: MYR0.85) and Padini (PAD MK,
NEUTRAL, TP: MYR2.03) that are currently not in the (May) list of
compliant securities, but could be included in the coming review (see
Figure 2)
Shariah-compliance increases addressable market. For stocks that
are Shariah-compliant, the addressable investor base is significantly
larger with commensurate benefits to their share prices. According to
data from the SC, domestic assets under management (AUM) at endSep 2014 amounted to MYR633bn, of which MYR263bn are invested
domestically in equities and unit trust funds. Around 12.7% of this
amount is invested in Shariah assets (see Figure 3). The addressable
investor base grows exponentially larger if we include foreign portfolio
investors such as sovereign wealth funds from the Middle East, such as
the Abu Dhabi Investment Authority with AUM of about USD773bn. The
growing AUM of Islamic funds and the diminishing quantum of Shariahcompliant stocks could give rise to a scarcity premium for these stocks.
Top Picks. Our top stock picks in the Shariah-compliant space include
Tenaga Nasional Berhad (TNB MK, BUY, TP: MYR15.50), Unisem (UNI
MK, BUY, TP: MYR2.16), Matrix Concepts (MCH MK, BUY, TP:
MYR3.93), Cahya Mata Sarawak (CMS MK, BUY, TP: MYR5.00) and
Naim (NHB MK, BUY, TP: MYR5.06). We remain optimistic on the
outlook for equities heading into the tail-end of 2014 and looking ahead
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3
Initiating Coverage, 5 November 2014
Giken Sakata (GSS SP)
Buy
Energy & Petrochemicals - Exploration & Production
Market Cap: USD105m
Target Price:
Price:
SGD0.65
SGD0.29
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Macro
Risks
Old Is Beautiful
Growth
Value
Giken Sakata (GSS SP)
Price Close
Relative to Straits Times Index (RHS)
603
0.25
503
0.20
403
0.15
303
0.10
203
0.05
103
0.00
80
70
60
50
40
30
20
10
3
0
0
.
3
0
0
We initiate coverage on Giken with a BUY and a DCF-derived SGD0.65 .
0
TP, a 124% potential upside. Giken transformed itself into an 0
Indonesian onshore oil company with the 51% acquisition of CSE and is 0
focused on the old wells programme. We see production surging to
6,300bopd/14,400bopd in FY15/16F (Aug) from c.900bopd at present.
Giken’s market cap only prices in two existing fields, with three new
fields not valued yet.
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Sep-14
May-14
Jul-14
703
0.30
Mar-14
803
0.35
Jan-14
0.40
Nov-13
Vol m
0.45
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
1.12m/0.89m
986.2
124.1
0.03 - 0.39
74
473
Roots Capital Asia Ltd
Java Petral Energy Pte Ltd
16.1
16.1
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Share Performance (%)
New oil company focused on old wells. Giken Sakata (Giken) owns
51% of Cepu Sakti Energy Pte Ltd (CSE), which has signed contracts for
five oilfields under Indonesia’s old wells programme. The first two have
proven and probable (2P) reserves and best estimate of contingent
resources (2C) of 7.6m barrels of oil (mmbo) and 3.8mmbo respectively.
We expect the next three fields to be larger.
Superior economics yield NPV/barrel (bbl) of USD16.60/bbl, low oil
price variability. The Old Wells Programme has a much simpler cash
waterfall that results in an NPV/bbl of USD16.60/bbl vs USD7-10/bbl
under production sharing contracts (PSCs). The oil is sold at a fixed
price to Pertamina, ie there is almost no oil price risk.
Business model is scalable at negligible cost, strong production
ramp-up. CSE can secure new acreages at low cost, requiring only the
signing of new contracts. Exploration risk is negligible, as the fields have
produced before. It can even reach first oil in the year of contract signing,
with no data acquisition costs. Drilling costs are also <20% of its peers.
From c.900bbls of oil per day (bopd) currently, we expect
6,356bopd/14,336bopd in FY15/FY16F.
Strong profitability and cashflow. CSE was already profitable in 1Q14,
producing c.300bopd. With a strong production profile, we expect
earnings and cash flows to surge. Giken is effectively trading at 3x
FY15F P/E, with 1.1x EV/EBITDA. If management pays out 20% of
earnings, the yield would be 5.8%/15.5% for FY15/16F respectively.
Deeply undervalued even after price surge. Share prices have surged
post acquisition, but market clearly values only two out of its five fields.
Our SGD0.65 valuation is based on a DCF of the five fields, which can
still grow as it continues to sign more old wells acreage in the Cepu area.
Key risks: Operational delay which may defer production growth; Short
track record for CSE; Portfolio concentration.
YTD
1m
3m
6m
12m
Absolute
391.4
(9.5)
(19.7)
3.6
418.2
Forecasts and Valuations
Relative
389.3
(8.2)
(16.1)
4.5
418.1
Total turnover (SGDm)
Shariah compliant
Aug-12
Aug-13
Aug-14
Aug-15F
90
127
69
126
285
Reported net profit (SGDm)
0.4
0.5
2.1
32.6
87.1
Recurring net profit (SGDm)
0.4
Recurring net profit growth (%)
na
Aug-16F
0.5
2.1
32.6
87.1
24.0
357.1
1486.8
166.7
Recurring EPS (SGD)
0.00
0.00
0.01
0.08
0.22
DPS (SGD)
0.00
0.00
0.00
0.02
0.04
103
83
37
3
1
P/B (x)
4.87
4.47
5.88
1.90
0.90
Singapore Research +65 6533 0781
P/CF (x)
13.2
12.9
[email protected]
Dividend Yield (%)
0.0
0.0
0.0
Lee Yue Jer, CFA +65 6232 3898
[email protected]
Recurring P/E (x)
EV/EBITDA (x)
na
1.5
0.7
5.8
15.5
15.5
17.3
20.0
1.1
0.2
Return on average equity (%)
4.9
5.6
17.4
75.9
78.9
Net debt to equity (%)
2.1
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
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2
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.
2
0
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3
Source: Company, RHB
net cash net cash
net cash
0.0
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net cash
0.0
4
Company Update, 5 November 2014
Dayang Enterprise (DEHB MK)
Buy (Maintained)
Energy & Petrochemicals - Offshore & Marine
Market Cap: USD777m
Target Price:
Price:
MYR4.52
MYR2.94
Macro
Risks
Slowly Increasing Stake In Perdana Petroleum
Growth
Value
Dayang Enterprise (DEHB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
4.00
110
3.80
105
3.60
100
3.40
95
3.20
90
3.00
85
2.80
80
2.60
16
14
12
10
8
6
4
2
75
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Sep-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
3.67m/1.14m
49.3
53.7
2.75 - 3.86
29
877
Naim Cendera Holdings
Ling Suk Kiong
Ahmad Shahruddin
30.9
9.3
8.0

First tranche of placement. The first tranche of the private placement
proposed by Dayang Enterprise (Dayang) was completed on 1 Oct for
52.1m shares. The initial proposal was to place out 82.5m shares, which
is 10% of the fully paid-up capital as of 3 Sep 2014 – the date of the
proposal. Note that the placement price was also set at MYR3.37 instead
of the initial MYR3.69. The first tranche has raised MYR175.6m.
Proceeds utilisation. In our 11 Sep 2014 report – Dayang Enterprise : 3
Possible Ways To Use Placement Proceeds, we highlighted three
possible scenarios that Dayang could utilise its proceeds: i) accumulate
more shares of Perdana Petroleum (Perdana) (PETR MK, BUY, TP:
MYR2.20), ii) ramp up capacity for engineering, procurement,
construction and commissioning (EPCC) jobs, and iii) purchase
deepwater-capable marine assets. Dayang has been slowly
accumulating Perdana’s shares during the recent market selldown and
currently owns 26.6% of Perdana’s shares. On the EPCC bids, we
gather from our channel checks that Dayang has been bidding and
preparing for an EPCC job related to an enhanced oil recovery off the
coast of Sarawak.
Maintain BUY with a lower TP of MYR4.52. In light of the enlarged
share base and a larger stake in Perdana, we update our model and
take the opportunity to lower our TP to MYR4.52 (from MYR4.80), based
on a 16x FY15F P/E. We lift our earnings forecast marginally and
reiterate BUY on Dayang, which is a local premier oil and gas service
provider with an excellent track record, in our view.
Share Performance (%)
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
382
401
553
938
1,104
Reported net profit (MYRm)
83
101
149
212
252
Recurring net profit (MYRm)
83
101
120
212
252
Recurring net profit growth (%)
22.7
21.8
19.0
76.2
18.5
Recurring EPS (MYR)
0.10
0.12
0.15
0.26
0.31
DPS (MYR)
0.07
0.07
0.07
0.13
0.15
The Research Team +603 9207 7680
Recurring P/E (x)
29.2
24.0
20.1
11.4
9.6
[email protected]
P/B (x)
4.64
4.06
3.64
2.48
2.20
P/CF (x)
24.4
24.8
15.6
15.4
10.4
2.3
2.3
2.3
4.4
5.2
YTD
1m
3m
6m
12m
Absolute
(23.8)
(12.8)
(22.2)
(20.1)
(20.0)
Relative
(23.2)
(13.6)
(21.8)
(19.3)
(22.5)
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Kong Ho Meng +603 9207 7620
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
16.9
13.2
9.9
6.9
5.9
Return on average equity (%)
18.6
18.1
23.6
25.8
24.2
3.1
net cash
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash
net cash
1.3
net cash
5.2
Source: Company data, RHB
See important disclosures at the end of this report
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.
2
0
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3
0
0
.
3
0
0
Dayang has placed out the first tranche of 52.1m shares from the 82.1m .
0
proposed private placement. It has raised MYR175.6m proceeds, which 0
we believe will be used to buy more Perdana’s shares. Dayang currently 0
owns 26.6% of Perdana’s shares, given the recent share price
weakness. We trim our TP to MYR4.52 from MYR4.80 (a 53.7% upside) in
light of the enlarged share base and a larger stake in Perdana. BUY.
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Nov-13
Vol m
Price Close
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Results Review, 5 November 2014
Hi-P International (HIP SP)
Buy (Maintained)
Industrial - Misc. Manufacturer
Market Cap: USD429m
Target Price:
Price:
SGD0.87
SGD0.68
Macro
Risks
2H14 Turnaround Firmly In Place
Growth
Value
Hi-P International (HIP SP)
Price Close
Relative to Straits Times Index (RHS)
0.80
127
0.75
120
0.70
112
0.65
105
0.60
97
0.55
90
0.50
3
82
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2
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Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1
Source: Bloomberg
0.32m/0.25m
25.0
28.0
0.53 - 0.78
10
818
Yao Hsiao Tung
Molex Incorporate
Hi-P International
60.2
21.8
8.4
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9M14 net loss narrowed to SGD4.5m. Even though 3Q14 revenue fell
32.7% YoY to SGD246m from SGD365m due to decreased sales
volume from two key customers, which we suspect to be Blackberry (BB
CN, NR) and Motorola (MSI US, NR), this did not stop Hi-P from making
a spectacular comeback in 3Q14, recording a 243.2% YoY surge in
NPAT to SGD10.8m due to an increase in production yields. 9M14 net
loss narrowed to SGD4.5m from SGD15.3m. Gross margin increased to
9.4% in 3Q14 from 6.5% in 3Q13 due to a positive shift from plastic to
metal components for the wireless segment. Total selling & distribution
and administrative expenses decreased 23.4% YoY to SGD17.5m,
mainly due to the reversal of warranty provision of SGD2.7m, in view of
the expiry of the warranty period.
New projects in the pipeline. With the ramping up of Xiaomi, we expect
production yield to reach 60% by the end of FY14, above the estimated
50% breakeven limit, which should contribute significantly to 4Q14
earnings. Going forward, we expect its metal case production to be split
evenly between Hi-P and Foxconn (2354 TT, NR), on account of
successful ramp-up in 4Q14. New projects involving tablets, computers,
medical equipment and coffee machines could further drive growth.
Turnaround firmly in place. Going forward, Jarick Seet will assume
coverage of Hi-P. With management guidance in line and its strong
3Q14 performance, we believe that a 2H14 turnaround is firmly in place
and reinstate our bullish stance on a record 4Q14. We lower our FY14F
revenue by 3.5% to SGD1.14bn but maintain our FY14 NPAT estimate
of SGD12.3m. This is because we are expecting further shifts in product
mix from plastic to metal components, driven by the ramp up of Xiaomi’s
metal casing as well as other new projects. Maintain BUY with its TP
unchanged at SGD0.87, based on a 1.2x peer average FY14 P/BV.
Share Performance (%)
YTD
1m
3m
6m
12m
Forecasts and Valuations
Absolute
15.4
(6.9)
(2.2)
18.4
10.7
Total turnover (SGDm)
Relative
11.5
(8.1)
(1.4)
17.2
8.0
Shariah compliant
Jarick Seet +65 6232 3891
[email protected]
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
1,204
1,167
1,262
1,099
1,387
Reported net profit (SGDm)
45.0
17.9
6.4
12.3
40.1
Recurring net profit (SGDm)
45.0
17.9
6.4
12.3
40.1
(33.1)
(60.1)
(64.4)
91.9
226.8
Recurring EPS (SGD)
0.05
0.02
0.01
0.01
0.05
DPS (SGD)
0.02
0.01
0.02
0.02
0.04
Recurring P/E (x)
12.4
31.1
87.1
45.4
13.9
P/B (x)
0.94
0.96
0.93
0.94
0.93
P/CF (x)
5.49
6.74
3.57
4.18
Recurring net profit growth (%)
Terence Wong CFA +65 6232 3896
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
3.6
1.8
3.0
3.0
5.9
2.91
5.87
5.25
4.44
3.22
7.7
3.1
1.1
2.1
6.7
net cash net cash net cash net cash net cash
(7.1)
21.4
Source: Company data, RHB
See important disclosures at the end of this report
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2
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.
2
0
.
3
0
0
.
2
0
0
Despite 3Q14 revenue falling 32.7% YoY to SGD246m from SGD365m on .
0
lower sales volume, Hi-P recorded a 243.2% surge in NPAT YoY to 0
SGD10.8m from SGD3.1m due to a change in product mix, cost control 0
and reversal of warranty provision. Maintain BUY with a SGD0.87 TP (a
28% upside) as we believe a turnaround is firmly in place. YTD net loss
narrowed significantly to SGD4.5m from SGD15.3m. We expect Hi-P to
further outperform in 4Q14 with Xiaomi playing a major role.
2
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
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Results Review, 4 November 2014
Adhi Karya (ADHI IJ)
Neutral (from Buy)
Construction & Engineering - Construction
Market Cap: USD409m
Target Price:
Price:
IDR2,720
IDR2,745
Macro
Risks
Poor 9M14 Results
Growth
Value
Adhi Karya (ADHI IJ)
Price Close
Relative to Jakarta Composite Index (RHS)
3,700
173
3,200
153
2,700
133
2,200
113
1,700
93
1,200
140
73
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0
0
.
2
0
0
Adhi Karya’s 9M14 earnings plunged 44% YoY to IDR101bn while its .
0
revenue slid 8% YoY to IDR5.19trn, below our expectations. Downgrade 0
to NEUTRAL (from Buy) with a lower IDR2,720 TP, implying a 0.9% 0
downside and 17.4x FY15F P/E. We cut our FY14/FY15 earnings
projections by 43%/48% to reflect the poor results and to tone down our
previously over-aggressive stance on the company.


120
100
80
60
Below expectations. Adhi Karya’s 9M14 revenue and earnings only
made up 45%/47% and 23%/24% respectively of our/consensus full-year
projections. Over the past three years, its Jan-Sep revenue and earnings
averaged at 50% and 34% respectively of full-year numbers.
9M14 new contracts dropped 29% YoY to IDR4.9trn. This indicates
that the company only achieved an additional IDR400bn in new contracts
in 3Q14. Total new contracts YTD only represented 32.7% of 2014
target, vs the average of 74% for new contracts won in Jan-Sep over the
last three years.

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
40
20
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Republic of Indonesia
37,047m/3.11m
24.9
-0.9
1,430 - 3,380
49
1,801
51.0
Share Performance (%)


3Q14 revenue declined sharply YoY. Due to lower contracts
achievement, Adhi Karya’s 3Q14 revenue declined 14% YoY. This,
coupled with other factors such as lower profit from joint operations,
higher opex and interest expenses (helped slightly by a forex gain),
caused 3Q14 net income to fall 63% YoY to IDR41bn (see Figure 1).
Slash new contract projections. We cut our FY14/FY15 new contract
projections to IDR7trn/IDR10.5trn (from IDR15trn/IDR20trn) to reflect
lower contracts achievement YTD as well as to tone down our previously
over-aggressive stance on the company. Our new FY14/FY15 total
orderbook forecasts are IDR15.7trn/IDR17.8trn respectively.
Downgrade to NEUTRAL (from Buy). Following changes in our new
contract projections, we lower our FY14/FY15 earnings estimates by
43%/48%. Therefore, our TP is reduced to IDR2,720 (from IDR3,745),
based on a 17.4x FY15F P/E.
Forecasts and Valuations
YTD
1m
3m
6m
12m
Absolute
81.8
(0.7)
(11.7)
(8.1)
33.9
Relative
62.7
0.2
(11.7)
(13.3)
22.7
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
7,628
9,800
7,230
8,315
9,703
Reported net profit (IDRbn)
209
406
251
281
340
Recurring net profit (IDRbn)
209
406
251
281
340
14.6
93.8
(38.1)
12.0
21.0
Total turnover (IDRbn)
Recurring net profit growth (%)
Shariah compliant
116
225
139
156
189
DPS (IDR)
32.6
23.5
14.5
16.3
19.7
Yualdo T.Yudoprawiro +6221 2598 6888
Recurring P/E (x)
23.6
12.2
19.7
17.6
14.5
[email protected]
P/B (x)
4.24
3.24
3.03
2.70
2.38
P/CF (x)
12.9
6.4
5.4
3.8
4.9
1.2
0.9
0.5
0.6
0.7
5.28
4.49
3.66
2.45
0.96
19.5
30.1
15.9
16.2
17.4
Agus Pramono, CFA +6221 2598 6765
[email protected]
Recurring EPS (IDR)
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(45.2)
(50.3)
(53.0)
Source: Company data, RHB
See important disclosures at the end of this report


3

.
3
0
.
2
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7
Results Review, 4 November 2014
Indofood CBP (ICBP IJ)
Neutral (Maintained)
Consumer Non-cyclical - Food & Beverage Products
Market Cap: USD5,307m
Target Price:
Price:
IDR11,350
IDR11,000
Macro
Risks
Higher ASP Boosts 3Q14 Earnings
Growth
Value
Indofood CBP (ICBP IJ)
Relative to Jakarta Composite Index (RHS)
12,000
112
11,500
104
11,000
96
10,500
88
10,000
80
0
0
.
2
0
0
Indofood’s 9M14 earnings came in at IDR2.1trn (+11.6% YoY), in line .
0
with our expectations but above street estimates. 3Q14 earnings rose 0
12.7% QoQ to IDR732bn, driven by a higher ASP which boosted its EBIT 0
margin and lowered sales volume. The higher 3Q14 EBIT for noodles
was partially offset by lower EBITs for dairy and beverage products.
Maintain NEUTRAL with IDR11,350 TP (3.2% upside), based on a 21.5x
FY15 P/E.

As expected. Indofood CBP’s (Indofood) 9M14 earnings rose 11.6%
YoY to IDR2.1trn, in line with our expectations but higher than
consensus forecasts, making up 76%/79% of our/consensus full-year
estimates. On a quarterly basis, 3Q14 earnings increased 12.7% QoQ
to IDR732bn, driven by a higher average selling price (ASP) which
boosted its EBIT margin. In addition, interest income surged 136% QoQ
to IDR129bn. It is worth noting that during the quarter, sales volumes for
almost all Indofood’s consumer branded products declined, except
beverage products, which recorded flat quarterly sales volume. This
indicates that the room for raising selling prices is limited, going forward.

Higher ASP boosts EBIT for noodles. 3Q14 EBIT for noodles – which
accounted for 85% of Indofood’s consolidated EBIT – increased 11.4%
QoQ to IDR828bn. Anticipating a subsidised fuel price hike, the company
further increased its noodles ASP by 4.1% QoQ to IDR1,625/pack in
3Q14 (total ASP rose 17% YoY in 9M14). As a result, its EBIT margin for
noodles improved to 16.8% in 3Q14 from 14.6% in 2Q14. However, its
3Q14 sales volume declined to 3.04bn packs in 3Q14 (-6.7% QoQ).

Lower EBITs for dairy and beverage. Dairy EBIT – which accounted
for 7% of 9M14 total EBIT – declined 8.3% QoQ to IDR82bn, weighed
down by a lower sales volume of 68,100 tonnes (-32% QoQ). Beverages
booked an operating loss of IDR113bn in 3Q14, up 123% QoQ from a
loss of IDR51bn in 2Q14, caused by higher advertising and promotion
expenses. Indofood said its ready-to-drink (RTD) green tea Ichi Ocha
brand – which just launched in end-2013 – is now among the top-three
green tea brands with an 8% market share, thanks to its strong
distribution channels. Indofood targets its beverage division to begin
booking profit in 2016.
Sep-14
Mar-14
May-14
Jul-14
72
Jan-14
9,500
20
18
16
14
12
10
8
6
4
2
Nov-13
Vol m
Price Close
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Indofood Sukses Makmur
28,354m/2.38m
-1.0
3.2
9,700 - 11,600
19
5,831
80.5
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
7.8
(3.1)
5.3
10.0
(0.5)
Relative
(10.6)
(1.6)
5.9
5.5
(11.1)
Shariah compliant


2

.
2
0
.
1




Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (IDRbn)
19,367
21,575
25,095
27,524
29,999
Reported net profit (IDRbn)
4,367
2,180
2,223
2,736
3,084
Recurring net profit (IDRbn)
4,279
2,177
2,195
2,721
3,062
Recurring net profit growth (%)
156.5
(49.1)
0.8
23.9
12.5
Recurring EPS (IDR)
734
373
376
467
525
DPS (IDR)
123
25
25
31
35
Andrey Wijaya +6221 2598 6888
Recurring P/E (x)
15.0
29.5
29.2
23.6
20.9
[email protected]
P/B (x)
6.28
5.62
5.10
4.24
3.56
P/CF (x)
14.1
23.1
27.9
21.6
18.7
1.1
0.2
0.2
0.3
0.3
12.2
21.6
21.0
15.4
13.2
45.6
20.2
18.5
19.7
18.6
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
9.9
5.5
Source: Company data, RHB
See important disclosures at the end of this report
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8
Results Review, 5 November 2014
Indofood Sukses Makmur (INDF IJ)
Buy (Maintained)
Consumer Non-cyclical - Food & Beverage Products
Market Cap: USD4,967m
Target Price:
Price:
IDR8,200
IDR6,850
Macro
Risks
Expect Better 4Q14 Earnings
Growth
Value
Indofood Sukses Makmur (INDF IJ)
Relative to Jakarta Composite Index (RHS)
117
7,700
113
7,500
109
7,300
105
7,100
101
6,900
98
6,700
94
6,500
90
6,300
86
6,100
40
35
30
25
20
15
10
5
82
0
0
.
1
0
0
Indofood Sukses’ 9M14 earnings jumped 58% YoY to IDR3trn, driven by .
0
higher agribusiness and Minzhong’s earnings, in line with our/street 0
estimates. 3Q14 earnings slipped 14% QoQ to IDR764bn as expected, 0
weighed by slower earnings from agribusiness on lower CPO prices.
Higher Minzhong and Bogasari’s earnings could be a potential earnings
growth catalyst. Maintain BUY and IDR8,200 TP (a 20% upside), based
on a 13.8x FY15F P/E.

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close
7,900
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
55,167m/4.63m
18.2
19.7
6,250 - 7,750
50
8,780
CAB Holdings Ltd
50.1
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
3.8
1.1
(3.2)
(2.8)
5.4
Relative
(15.3)
(1.7)
(3.2)
(8.0)
(9.4)


A weaker quarter as expected. Indofood Sukses Makmur’s (Indofood
Sukses) 9M14 earnings surged 58% YoY to IDR3.0trn, driven by higher
earnings from agribusiness and Minzhong (MINZ SP, NR), in line with
expectations at 69%/71% of our/consensus full-year estimates. On a
quarterly basis, 3Q14 earnings slipped 14% QoQ to IDR764bn as
expected, weighed by slower agribusiness earnings, as crude palm oil
(CPO) prices declined to USD706/tonne in September from
USD842/tonne in July. Note that CPO prices have recovered to
USD750/tonne in October.
Expect higher sales volume from Bogasari. Going forward, we see
sales volume from Bogasari Flour Mills (Bogasari) may increase, after
the company cut flour average sales price (ASP) by 2% in August, and a
further 2% in September, driven by lower raw material wheat price which
declined 8.6% QoQ to USD6.80/bushel. Despite the ASP cut, we expect
EBIT margin to improve since there is a time lag for lower wheat prices
to lift EBIT margin due to a 3-6 month raw material inventory holding
period. In 3Q14, lower flour sales volume and narrower EBIT margin
caused Bogasari’s EBIT to sink 52% QoQ to IDR229bn.
Minzhong’s earnings may improve. Indofood Sukses maintained
Minzhong’s FY14 sales target of IDR6trn and guided for EBIT margin of
21-22%, despite 9M14 revenue and EBIT margin of merely IDR3.5trn
and 20.9% respectively. This indicates that the company expects
Minzhong’s 4Q14 sales to reach IDR2.5trn (41% of FY14 sales) and
EBIT margin to improve, which could significantly boost earnings.
Maintain BUY. We reiterate BUY with an unchanged TP of IDR8,200 (a
20% upside), based on a 13.8x FY15F P/E. Indofood Sukses is trading
at ~40% discount to its subsidiary Indofood CBP (ICBP IJ, NEUTRAL,
TP: IDR11,350).
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (IDRbn)
45,332
50,059
57,732
65,971
70,111
Reported net profit (IDRbn)
3,077
3,261
2,502
4,403
5,219
Recurring net profit (IDRbn)
2,975
3,191
1,957
4,583
5,398
(8.3)
7.3
(38.7)
134.1
17.8
Recurring EPS (IDR)
339
363
223
522
615
DPS (IDR)
132
138
146
112
197
Recurring net profit growth (%)
Shariah compliant


2

.
2
0
.
2




Andrey Wijaya (6221) 2598 6888
Recurring P/E (x)
20.2
18.8
30.7
13.1
11.1
[email protected]
P/B (x)
3.10
2.84
2.54
2.21
1.95
P/CF (x)
16.1
11.5
25.2
10.0
8.4
1.9
2.0
2.1
1.6
2.9
EV/EBITDA (x)
12.7
12.5
14.3
8.5
7.7
Return on average equity (%)
17.0
16.1
11.2
17.3
17.9
0.2
4.2
25.0
6.9
2.4
0.6
(4.3)
Dividend Yield (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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9
Corporate News Flash, 4 November 2014
Alam Maritim (AMRB MK)
Neutral (Maintained)
Energy & Petrochemicals - Offshore & Marine
Market Cap: USD298m
Target Price:
Price:
MYR1.12
MYR1.07
Macro
Risks
Secures MYR31.7m Demobilisation Contract
Growth
Value
Alam Maritim (AMRB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
1.70
103
1.60
97
1.50
92
1.40
86
1.30
81
1.20
75
1.10
69
1.00
64
0.90
35
58
0
0
.
2
0
0
Alam Maritim has received a USD9.56m (MYR31.7m) letter of award .
0
(LOA) to demobilise a floating storage facility. Maintain NEUTRAL, with 0
our TP trimmed to MYR1.12 (from MYR1.35), implying a 4.7% upside. 0
Although this LOA and a possible short-term contract for 1MAS-300 are
positive surprises to us, we believe they are insufficient to lift the
stock’s sentiment amid the current cautious outlook.


30
25
20
15
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-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 (%)
SAR Venture Holdings (M) SB
Lembaga Tabung Haji
Caprice Capital International
2.20m/0.68m
42.1
4.7
0.99 - 1.65
39
924
35.7
8.6
7.3
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(31.9)
(13.0)
(31.4)
(32.3)
(32.7)
Relative
(31.3)
(13.8)
(31.0)
(31.5)
(35.2)


USD9.56m (MYR31.7m) demobilisation job. Alam Maritim is
undertaking a short-term contract to demobilise a floating storage facility
for a local oil and gas (O&G) services firm. The company commenced
work on 6 Oct and expects to complete all works by 15 Nov.
Our view. Although no further details are given, we believe this contract
is in line with a similar decommissioning contract carried out by IEV (IEV
SP, NR) for M3nergy’s Perintis floating, production, offloading and
storage (FPSO) located offshore Terengganu. The USD15m (MYR50m)
contract was carried out from Jan-Mar 2014. IEV carried out the project’s
engineering capabilities with vessels from a partner, EMAS-AMC Pte
Ltd. Based on this example, we expect Alam Maritim to perform the
engineering phase of the work via a 50% joint-venture with subsidiary
Alam Swiber Offshore SB. Similarly, we understand that it may likely rely
on third-party vessels rather than its own for the job. Although the profit
contribution falls under the subsidiary, we expect ~10% bottomline
margins to the group given that demobilisation is among Alam Swiber’s
offshore, installation and construction (OIC) works capabilities.
Forecast changes. We raise our FY14F EPS by 5% to account for the
two positive surprises as: i) we did not factor in the demobilisation job
earlier (we assumed Alam Swiber would remain idle for the rest of 2014),
and ii) we understand that its 1MAS-300 pipelay barge (assumed idle
previously) is likely operating on a short-term accommodation contract.
Maintain NEUTRAL, TP reduced to MYR1.12 (from MYR1.35). We
keep our NEUTRAL call but lower our TP to MYR1.12 as we trim our P/E
assumption to 12x (from 14x) given the sector-wide de-rating amid a
more cautious O&G sector outlook and lack of contract news flow. Based
on Alam Maritim’s 2013 annual report, 31 out of its 44 vessels are on
long-term charters, implying that 30% of its current fleet are susceptible
to uncertainties in garnering favourable charter rates upon contract
renewal. Further risks include partnership risk, execution risk and weaker
offshore support vessel (OSV) margins.
Forecasts and Valuations
Shariah compliant
Total turnover (MYRm)
Reported net profit (MYRm)
Kong Ho Meng +603 9207 7620
[email protected]
Recurring net profit (MYRm)
Dec-12
Dec-13
Dec-14F
Dec-15F
502
447
511
528
Dec-16F
565
58.3
74.3
76.9
86.7
92.6
93.6
60.4
73.6
76.9
86.7
101.4
21.8
4.5
12.7
8.0
Recurring EPS (MYR)
0.07
0.08
0.08
0.09
0.10
Recurring P/E (x)
16.4
13.4
12.9
11.4
10.6
P/B (x)
1.88
1.63
1.45
1.28
1.15
P/CF (x)
10.2
25.4
7.3
7.0
EV/EBITDA (x)
18.9
12.0
9.9
8.6
7.7
Return on average equity (%)
11.7
13.1
11.9
11.9
11.3
Net debt to equity (%)
83.8
70.4
Recurring net profit growth (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
1
0
.
1




Source: Company data, RHB
na
71.6
60.5
45.6
(16.8)
(23.8)
(23.9)
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10
Results Review, 3 November 2014
Malaysia Airports Holdings (MAHB MK)
Transport - Aviation
Market Cap: USD2,994m
Buy (Maintained)
Target Price:
Price:
MYR8.04
MYR7.23
Macro
Risks
The Worst May Be Over
Growth
Value
Malaysian Airports (MAHB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
10.10
118
9.60
112
9.10
107
8.60
101
8.10
96
7.60
90
7.10
84
6.60
79
6.10
25
73
0
0
.
2
0
0
3QFY14 core losses reduced QoQ to MYR2.7m from MYR25.5m. .
0
Maintain BUY with lower MYR8.04 TP (11% upside). We deem this in line 0
with our expectation as 4Q could be soft in view of the anticipated flight 0
cancellations in the peak season post MH17 and MH370. The worst may
be nearing its tail end as FY15 earnings growth for domestic operations
could be robust on KLIA 2’s full-year contribution.


20
15
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-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
Permodalan Nasional
Employees Provident Fund
7.77m/2.41m
15.2
11.2
6.46 - 9.78
33
1,374
36.6
13.0
11.3
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(19.7)
(1.9)
(3.6)
(10.6)
(13.9)
Relative
(19.1)
(2.7)
(3.2)
(9.8)
(16.4)


2

.
2
0
.
2






Reduced losses but still below consensus estimates. Malaysia
Airports (MAHB) reported MYR2.7m core net loss in 3QFY14, better
than the MYR25.5m loss in the previous quarter. 9MFY14 cumulative
core earnings were MYR103m, down from MYR289.2m last year. At the
same time, MAHB’s share of losses from Sabiha Gokcen Airport (ISG)
reduced drastically QoQ to MYR2.8m from MYR8.3m. ISG is on track to
meet management’s loss guidance of EUR20m this year. Earnings are
within our estimates, so far albeit much lower than consensus’.
Passenger spending weakness sets in. Due to slower-than-expected
opening of the remaining outlets (only 87.5% of the outlet space is
opened), MAHB saw softer rental collections. More importantly, the drop
in tourists since the MH370 and MH17 incidents has taken a toll on
overall passenger spending, down 5.3% YoY for 9MFY14.
Forecasts. We trim earnings for FY14/FY15/FY16 by 8%/52%/22% after
factoring in ISG’s expected losses to our bottomline, absent in our
previous earnings forecast, although we have valued it separately for
valuation purposes. Our earnings for MAHB’s Malaysia operations in
FY14/15/16 are reduced by only 0.1%/15%/13% after factoring in lower
passenger growth, which we trim to 4%/6%/5% from 8%/7%/7%.
Outlook. 4Q14 is likely to be a softer quarter due to flight cancellations
in the peak travel season following the MH370 and MH17 tragedies.
However, MAHB should see more outlet openings, though rental
collections may not ramp up as fast. However, expectations of a full-year
earnings contribution next year from its retail segment, coupled with the
recovery in passenger spending, will likely give a boost to earnings,
where we expect FY15 to grow by 60% for its Malaysian operations.
Cutting TP but maintain BUY. Despite cutting our earnings forecast,
we remain positive on MAHB’s outlook as the worst may be over. We
trim our DCF-(WACC: 7.5%) derived TP to MYR8.04 from MYR8.51.
Financing option for the remaining 40% of ISG will be known by year
end. At a bear-case scenario, assuming 100% rights issuance at a 25%
discount, it will see our FV adjusted lower to MYR7.78.
Forecasts and Valuations
Dec-12
Dec-13
2,163
2,463
2,769
3,077
3,265
Reported net profit (MYRm)
331
306
36
79
138
Recurring net profit (MYRm)
402
331
82
79
138
Ahmad Maghfur Usman 603 9207 7654
Recurring net profit growth (%)
1.5
(17.8)
(75.2)
(3.1)
74.0
[email protected]
Recurring EPS (MYR)
0.33
0.27
0.06
0.06
0.10
DPS (MYR)
0.14
0.12
0.11
0.14
0.14
22
27
121
125
72
P/B (x)
2.01
1.90
1.79
1.83
1.84
P/CF (x)
13.5
10.0
10.3
10.5
11.2
1.9
1.7
1.6
1.9
2.0
13.1
15.3
15.5
12.5
12.0
Total turnover (MYRm)
Shariah compliant
Recurring P/E (x)
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
Dec-16F
8.4
6.8
0.7
1.4
2.6
57.4
77.9
63.7
60.5
58.2
(49.1)
(67.0)
(60.4)
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11
Results Review, 5 November 2014
Petronas Gas (PTG MK)
Neutral (Maintained)
Energy & Petrochemicals - Downstream Products
Market Cap: USD13,001m
Target Price:
Price:
MYR21.98
MYR21.80
Macro
Risks
9M14 Core Net Profit Grows 10.4%
Growth
Value
Petronas Gas (PTG MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
26.0
101
25.0
98
24.0
95
23.0
92
22.0
89
21.0
86
20.0
7
83
0
0
.
2
0
0
Petronas Gas’ 9M14 results met expectations. We maintain our .
0
NEUTRAL call, forecasts and TP of MYR21.98 (a 0.8% upside). We 0
believe the market has priced in near-term earnings catalysts of 0
Petronas Gas, ie contributions from a new power plant in Sabah and a
regasification terminal in Melaka. However, its long-term outlook
remains favourable, backed by rising demand for gas.

6
5
4

3
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-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 (%)
30.4m/9.31m
-13.3
0.8
21.1 - 24.9
21
1,979
Petroliam Nasional
EPF
Kumpulan Wang Persaraan
60.7
13.7
5.3


2

.
1
0
.
1






Regasification drives earnings growth. Petronas Gas’ 9M14 core net
profit of MYR1,270m came in within expectations at 76%/72% of
our/consensus full-year estimates respectively. 9M14 core net profit
grew 10.4% YoY, driven by: i) a 9-month contribution from a new
regasification plant in Melaka (vis-à-vis only a 3-month contribution in
FY13), ii) increased gas transportation volumes, iii) a higher electricity
tariff from Jan 2014, and iv) maiden contribution from the 60%-owned
300MW Kimanis Power Plant (KPP). This was partially offset by lower
gas processing profits.
All three KPP units scheduled to be online by year-end. KPP’s first
and second-generation units already commenced commercial operations
in May and Jul 2014 respectively. We expect the third and last unit to go
online as well before the year is out.
Forecasts. We maintain our forecasts.
Risks: i) falling short of efficiency targets, which could hurt performancebased incomes, ii) lower gas transportation volumes, and iii) delays in
the commissioning of KPP’s third generation unit.
Maintain NEUTRAL. We believe the market has priced in near-term
earnings catalysts of Petronas Gas, ie contributions from the new
300MW KPP in Sabah and the liquefied natural gas (LNG) regasification
terminal in Sg Udang, Melaka. However, its long-term outlook remains
favourable, backed by continued industrialisation in Malaysia, and hence
rising demand for gas. We maintain our SOP-based TP of MYR21.98
(see Figure 4).
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(10.2)
(4.6)
(2.7)
(8.0)
(10.3)
Relative
(9.6)
(5.4)
(1.6)
(7.2)
(12.9)
Shariah compliant
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (MYRm)
3,577
3,892
4,101
4,240
4,382
Reported net profit (MYRm)
1,405
1,453
1,673
1,785
1,908
Recurring net profit (MYRm)
1,405
1,453
1,673
1,785
1,908
Recurring net profit growth (%)
434.1
3.4
15.2
6.6
6.9
Recurring EPS (MYR)
0.71
0.73
0.85
0.90
0.96
DPS (MYR)
0.40
0.50
0.62
0.63
0.67
Recurring P/E (x)
30.7
29.7
25.8
24.2
22.6
P/B (x)
4.71
4.20
4.17
4.01
3.87
P/CF (x)
22.3
20.8
26.3
14.6
12.6
1.8
2.3
2.8
2.9
3.1
22.9
22.6
23.4
22.6
21.5
15.9
15.0
16.2
16.9
17.4
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Joshua Ng +603 9207 7606
[email protected]
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(5.0)
(3.0)
1.5
Source: Company data, RHB
See important disclosures at the end of this report
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12
Results Review, 4 November 2014
Advanced Info Services (ADVANC TB)
Communications - Telecommunications
Market Cap: USD21,675m
Neutral (Maintained)
Target Price:
Price:
THB249.00
THB238.00
Macro
Risks
Boost from Lower Regulatory Cost
Growth
Value
Advanced Info Services (ADVANC TB)
Relative to Stock Exchange of Thailand Index (RHS)
250
101
240
96
230
91
220
86
210
81
200
76
190
71
180
40
35
30
25
20
15
10
5
66
Core 9MFY14 earnings declined 2% YoY to THB26.91bn, mainly due to
continuing weak voice revenue, higher depreciation and stiff 3G
competition. We keep our NEUTRAL call on concerns over spectrum
risks but raise DCF-based TP to THB249.00 (4.6% upside) following the
5.6%/2.2% upgrade to FY14/15F earnings from the faster-than-expected
decline in regulatory cost and improving consumer sentiment.


Sep-14
Jul-14
Mar-14
May-14
106
Jan-14
260
Nov-13
Vol m
Price Close
Source: Bloomberg

Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Intouch Holdings
SingTel
1,218m/37.8m
5.0
4.6
187 - 247
51
2,973
42.5
21.3
Share Performance (%)
YTD
1m
3m
6m
12m
19.3
6.3
13.9
(2.9)
(4.8)


2

.
2
0
.
2





In line. Advanced Info Services (AIS) posted a commendable 5.7% QoQ
and 7.4% YoY rise in 3Q14 core earnings- in line with our full year
forecast, at 75% but slightly below consensus estimates at 73%. The
better earnings momentum came from lower-than-expected regulatory
fee (-15% QoQ) and the 19.4% QoQ drop in marketing expenses from
seasonality.
Robust 3G device and subs migration. 9M14’s service revenue
(excluding interconnection revenue) ticked up a marginal 0.5% YoY,
supported by strong non-voice growth (+32% YoY) which offset the
13.6% YoY decline in voice revenue. Its EBITDA margin improved
1.9ppts YoY to 45% from lower interconnection (IC) and regulatory fees.
The strong demand for AIS’ house branded smartphones (Lava),
accelerated 3G subs to 88% of its total subs (from 80% in 2Q14) with
49% of 3G subs on a smartphone, ahead of the 45% target by end-2014.
Forecasts and risks. Management reaffirmed its FY14 service revenue
growth guidance of 1-2% and EBITDA margin of 45%. While we expect
competition to remain intense going into FY15, we foresee a further
improvement in revenue and earnings momentum on the back of a
rebound in consumer confidence. We raise our core earnings forecasts
for FY14 and FY15 by 5.6% and 2.2% respectively, mainly to factor in
the stronger regulatory cost savings. This more than offsets the higher
marketing cost and weaker topline growth.
Spectrum overhang. AIS remains a NEUTRAL due to spectrum related
risks and intense 3G competition in the market. That said, the
underperformance of the telecoms sector relative to the SET is likely to
see some interest returning, with investors gravitating towards more
defensive plays amidst the external market volatility. We prefer DTAC
(DTAC TB, BUY, TP: THB138), given its stronger upside.
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
126,437
141,568
145,833
143,830
148,299
Reported net profit (THBm)
22,218
34,883
36,274
37,767
41,589
Recurring net profit (THBm)
26,600
34,883
36,274
37,767
41,589
20.3
31.1
4.0
4.1
10.1
Recurring EPS (THB)
9.0
11.7
12.2
12.7
14.0
Veena Naidu License No. 24418, 66 2862 9752
DPS (THB)
8.4
10.9
12.1
12.7
14.0
[email protected]
Recurring P/E (x)
26.6
20.3
19.5
18.7
17.0
P/B (x)
18.0
16.3
15.5
14.9
14.3
Jeffrey Tan +603 9207 7633
P/CF (x)
15.0
13.9
13.9
13.2
11.9
[email protected]
Dividend Yield (%)
3.5
4.6
5.1
5.3
5.9
EV/EBITDA (x)
12.6
11.5
11.3
11.1
10.1
Vikran Lumyai +66 2862 9999 Ext 2028
Return on average equity (%)
55.2
84.5
81.4
80.9
85.7
[email protected]
Net debt to equity (%)
25.3
70.5
58.6
2.3
1.4
Absolute
Relative
(2.7)
5.4
8.3
(14.3)
(15.7)
Shariah compliant
Forecasts and Valuations
Total turnover (THBm)
Recurring net profit growth (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
7.4
net cash
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0
0
.
2
0
0
.
0
0
0
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