1. business and industrial

Regional Daily, 11 November 2014
5
Regional Daily
Ideas Troika
Top Stories
APT Satellite Holdings (1045 HK)
Communications – Telecommunications
BUY HKD11.90 TP: HKD17.00
Mkt Cap : USD951m
Pg3
We initiate APT Satellite with Buy and TP of HKD17. We like APT’s strong
cash flow and visible revenue and earnings growth profile. We see HDTV
migration and broadband connectivity as demand drivers in Asia-Pacific.
Analyst: Jackson Yu, CFA ([email protected])
Indosat (ISAT IJ)
Communications – Telecommunications
BUY IDR3,480 TP: IDR4,590
Mkt Cap : USD1,553m
Pg4
Indosat posted the fastest QoQ revenue growth since the start of its network
modernization exercise. We continue to hold the view that the worst of its
network issues are behind. Our forecast, BUY recommendation and TP
(>30% upside) are unchanged.
Analyst: Jeffrey Tan ([email protected])
Regional Plantation
NEUTRAL
Pg5
While maintain a Neutral call on the Plantation Sector, we believe the
seasonal strength in palm oil price provides a tactical buying opportunity. We
continue to like Bumitama, Astra Agro Lestari, Genting Plant and Sarawak
Oil Palms. The current dryness in Kalimantan will act as catalyst for 2HCY15.
Analyst: Alvin Tai, CFA ([email protected])
Malaysia Airports Holdings (MAHB MK)
Transport - Aviation
BUY MYR7.08 TP: MYR8.04
Mkt Cap : USD2,908m
Pg6
MAHB proposed a 1-for-5 rights issue at an indicative MYR4.80/rights share
price to fund for its unowned 40% stake in ISG. Maintain BUY and MYR8.04
TP (or MYR7.52 ex-rights), a 13.6% upside.
Analyst: Ahmad Maghfur Usman ([email protected])
Other Key Stories
Regional
Weekly Spices
Pg7
Hot On Healthcare Gloves But Downgraded Some O&G Plays
Analyst: Leng Seng Choon CFA ([email protected])
Hong Kong
China State Construction (3311 HK)
Construction & Engineering
BUY HKD11.86 TP: HKD14.63
Kingsoft (3888 HK)
Technology - Software & Services
NEUTRAL HKD18.36 TP: HKD18.88
Malaysia
Berjaya Auto (BAUTO MK)
Consumer Cyclical - Auto & Autoparts
BUY MYR3.25 TP: MYR4.50
IOI Properties Group (IOIPG MK)
Property- Real Estate
BUY MYR2.70 TP: MYR3.10
See important disclosures at the end of this report
Pg8
Expect Strong Nov-Dec 2014 New Contract Wins
Analyst: Winston Cao ([email protected])
Pg9
Poor 3Q14 Should Have Been Priced In
Analyst: Yujie Li ([email protected])
Pg10
Another Leg Up Thanks To Abenomics
Analyst: Alexander Chia ([email protected])
Pg11
Building Up War Chest For Future Opportunities
Analyst: Loong Kok Wen, CFA ([email protected])
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1
Regional Daily, 11 November 2014
Kuala Lumpur Kepong (KLK MK)
Agriculture – Plantation
NEUTRAL MYR22.80 TP: MYR21.30
Pg12
Malaysia Smelting Corp (SMELT MK)
Basic Materials - Mining
BUY MYR3.18 TP: MYR3.88
Pg13
MISC (MISC MK)
Transport – Shipping
BUY MYR7.38 TP: MYR8.15
Pg14
Singapore
AusGroup (AUSG SP)
Energy & Petrochemicals - Oil & Gas Services
NEUTRAL SGD0.35 TP: SGD0.36
Disposes Of 50% Stake In Refinery Company To AALI
Analyst: Hoe Lee Leng ([email protected])
Look Beyond Near-Term Weakness
Analyst: Ng Sem Guan, CFA ([email protected])
Upbeat On Prospects In 2015
Analyst: Ahmad Maghfur Usman ([email protected])
Pg15
Slow Start To FY15 As Margins Slide
Analyst: Lee Yue Jer, CFA ([email protected])
CapitaLand (CAPL SP)
Property - Real Estate
BUY SGD3.15 TP: SGD3.54
Pg16
Global Testing (GTC SP)
Technology – Technology
BUY SGD0.09 TP: SGD0.165
Pg17
Singapore Real Estate
Pg18
Housekeeping In Progress
Analyst: Ivan Looi ([email protected])
Bags Full Of Cash
Analyst: Jarick Seet ([email protected])
The Real Estate Pulsebeat: Journey to the West – “Sutras” seekers in
Jurong Lake District
Analyst: Ivan Looi ([email protected])
Super Group (SUPER SP)
Pg19
Consumer Non-cyclical - Food & Beverage
Products
SELL SGD1.07 TP: SGD0.90
Not a Superb Year
Yangzijiang (YZJSGD SP)
Industrial – Shipbuilding
BUY SGD1.16 TP: SGD1.68
Enjoys Government White List Support
Thailand
Bumrungrad Hospital PCL (BH TB)
Consumer Non-cyclical – Healthcare
NEUTRAL THB136 TP: THB125
Pg20
Analyst: Lee Yue Jer, CFA ([email protected])
Pg21
9M14 Core Earnings Grew 7.8% YoY
Analyst: Veena Naidu ([email protected])
Major Cineplex (MAJOR TB)
Communications – Media
BUY THB23.90 TP: THB27.00
Pg22
Pruksa Real Estate (PS TB)
Property - Real Estate
BUY THB33.50 TP: THB43.00
Pg23
Somboon Advance (SAT TB)
Consumer Cyclical - Auto & Autoparts
BUY THB18.30 TP: THB22.00
Pg24
See important disclosures at the end of this report
Analyst: James Koh ([email protected])
3QFY14 Revenue And EBITDA Still Growing YoY
Analyst: Wanida Geisler ([email protected])
So Far So Good
Analyst: Wanida Geisler ([email protected])
Revenue Rose 6.5% QoQ
Analyst: Veena Naidu ([email protected])
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2
Initiating Coverage, 11 November 2014
APT Satellite Holdings (1045 HK)
Buy
Communications - Telecommunications
Market Cap: USD951m
Target Price:
Price:
HKD17.00
HKD11.90
Macro
Risks
A Rising Star
Growth
Value
APT Satellite (1045 HK)
Price Close
Relative to Hang Seng Index (RHS)
13.6
161
12.6
149
11.6
138
10.6
126
9.6
114
8.6
103
7.6
6
91

4

Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
4.50m/0.58m
11.8
43.3
8.05 - 12.5
20
622
China Satcom

23.6

Share Performance (%)
Strong cash flow generation and visible revenue stream. APT
Satellite (APT) has a strong cash flow-generating business model and
high operating leverage. Its contracts with telecom operators and TV
broadcasters are mostly long-term, ie 2-3 years, which provide high
visibility on future revenue. Driven by the move to high-definition TV
(HDTV) and increased broadband connectivity in the region, a continued
improvement in the utilisation rate will be the main revenue driver for
APT over 2014-16F, in our view.
Solid growth and potential increase in payout ratio. Since the launch
of its third satellite in 2012, the company has achieved strong revenue
growth and generated sufficient operating cash flow for future business
growth. Its newest satellite, Apstar 9, which is due to be launched in
2H15, should fuel revenue growth from 2016. Successful marketing and
contract booking of Apstar 9A could fuel its revenue and earnings growth
from 2H14. We forecast a 3-year recurring EPS CAGR of 22% over
FY13-16F on the back of an 18% revenue CAGR. We believe APT's
strong cash flow and earnings growth could support a potential increase
in its dividend payout ratio over the next three years.
Initiate coverage with BUY and HKD17.0 TP. Our TP is derived from
8x FY15F EV/EBITDA, or a 10% discount to the global industry average,
which we consider justified by its lower dividend payout ratio and smaller
business scale. Our TP is corroborated by our DCF-derived TP of
HKD17.60.
Risks: i) a failure to launch Apstar 9, ii) satellite performance anomalies,
and iii) significant pricing pressure. See page 22 for more details on
risks.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (HKDm)
901
1,138
1,437
1,663
1,889
Reported net profit (HKDm)
354
545
572
704
896
Recurring net profit (HKDm)
382
497
619
704
896
Recurring net profit growth (%)
87.4
30.1
24.6
13.7
27.2
Recurring EPS (HKD)
0.61
0.80
1.00
1.13
1.44
DPS (HKD)
0.06
0.12
0.14
0.23
0.36
Jackson Yu, CFA +852 2103 9424
Recurring P/E (x)
19.3
14.8
11.9
10.5
8.2
[email protected]
P/B (x)
2.39
2.06
1.82
1.59
1.39
P/CF (x)
11.4
7.8
8.2
6.7
5.7
0.5
1.0
1.2
1.9
3.0
EV/EBITDA (x)
10.9
7.8
6.1
5.2
4.0
Return on average equity (%)
12.1
16.4
15.0
16.2
18.1
Net debt to equity (%)
17.7
net cash
YTD
1m
3m
6m
12m
Absolute
28.9
5.9
7.4
14.5
44.6
Relative
27.4
4.9
10.4
5.7
41.2
Shariah compliant
Forecasts and Valuations
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
net cash
4.8
net cash
(4.1)
net cash
4.0
Source: Company data, RHB
See important disclosures at the end of this report
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1
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2
0
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2
0
0
.
3
0
0
We initiate coverage on APT with a BUY rating and TP of HKD17.0 .
0
(8x FY15F EV/EBITDA multiple) representing a 43% upside. APT is a 0
leading satellite operator in the Asia-Pacific region. We like APT’s 0
strong cash flow generation, visible revenue stream and long-term
earnings growth profile. We see HDTV migration and broadband
connectivity as major demand drivers in Asia-Pacific. We forecast a
3-year recurring EPS CAGR of 22% over FY13-16F.
5
3
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3
Results Review, 11 November 2014
Indosat (ISAT IJ)
Buy (Maintained)
Communications - Telecommunications
Market Cap: USD1,553m
Target Price:
Price:
IDR4,590
IDR3,480
Macro
Risks
A Case Of Perception
Growth
Value
Indosat (ISAT IJ)
Price Close
Relative to Jakarta Composite Index (RHS)
4,500
125
4,300
118
4,100
110
3,900
103
3,700
95
3,500
88
3,300
140
80
120


80
60
Sep-14
Jul-14
May-14
Mar-14
Jan-14
20
Nov-13
Vol m
40

Source: Bloomberg
2,276m/0.19m
32.8
31.9
3,480 - 4,295
15
5,434
65.0
14.3
5.6

Broadly in line. Indosat’s 3Q14 EBITDA of IDR2.57trn (-3.3% YoY) and
IDR7.6trn (-4.6% YoY) for 9M14 made up 76% and 71% of our and
consensus FY14 estimates respectively. It made a retrospective
provision of IDR1.4trn for its 2Q14 numbers in relation to the legal suit
involving IM2, which has no impact on EBITDA and cash flow.
Operational highlights. Mobile revenue rose 4.5% QoQ, the strongest
growth since the start of its network modernization exercise back in
2H12, and grew a marginal 0.4% YoY in 3Q14 following four consecutive
quarters of contraction as more network sites were modernized, allowing
it to better capture revenue opportunities on data. Mobile internet
revenue surged 24% QoQ (vs -1% in 2Q14) and 22.1% YoY in 3Q14.
Guidance. Management has reaffirmed its previous guidance. Indosat’s
expectation of “low single digit” revenue growth implies a strong 5% YoY
growth in 4Q14 (9M14: -0.5% YoY), driven by seasonality and the
additional modernised sites coming on stream. Our forecast models in a
1% contraction in full-year revenue.
Maintain BUY. We continue to believe that the worst of the network
challenges for Indosat are behind it. The stock is trading at a FY15
EV/EBITDA of 3.2x, at -2SD below its historical EV/EBITDA, which
suggests that most of the downside has been priced in. We keep our
FY14/FY15 forecasts and DCF-based TP of IDR4,590 (WACC: 9.8%)
while introducing our numbers for FY16. Key risks to earnings are: i)
protracted network challenges, ii) stronger-than-expected competition in
the market, and iii) higher-than-expected capex. While we like Indosat as
a recovery play, Telkom (TLKM IJ, BUY, TP: IDR3200) remains our
preferred pick for exposure to the Indonesian telco sector.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(16.2)
(10.8)
(10.9)
(15.1)
(7.2)
Relative
(32.9)
(11.3)
(9.6)
(16.9)
(18.6)
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (IDRbn)
22,419
23,855
23,635
25,293
28,809
Reported net profit (IDRbn)
(809)
(2,923)
237
1,479
1,666
Recurring net profit (IDRbn)
1,115
914
237
1,479
1,666
27.5
(18.0)
(74.1)
524.3
12.6
205
168
44
272
307
35
0
23
140
141
Recurring net profit growth (%)
Shariah compliant
Recurring EPS (IDR)
DPS (IDR)
Jeffrey Tan +603 9207 7633
Recurring P/E (x)
17.0
20.7
79.8
12.8
11.4
[email protected]
P/B (x)
1.00
1.19
1.00
0.93
0.89
P/CF (x)
2.25
2.18
2.49
2.14
1.86
1.0
0.0
0.7
4.0
4.1
EV/EBITDA (x)
3.17
3.48
3.58
2.92
2.35
Return on average equity (%)
(4.3)
(16.8)
1.4
7.5
8.0
Net debt to equity (%)
93.2
131.4
100.9
83.1
65.5
(68.1)
35.8
53.0
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report


2

.
3
0
.
1
0
0
.
2
0
0
Indosat posted the fastest QoQ revenue growth in 3Q14 since the start .
0
of its network modernization exercise in 2H12, with the small YoY 0
turnaround in revenue denoting a possible inflection point for the 0
group’s mobile business. We continue to hold the view that the worst of
its network modernization woes is behind it, with revenue and EBITDA
poised for further improvements going into FY15. Our forecast, BUY
recommendation and TP (>30% upside) are unchanged.
100
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Ooredoo Asia
Govt of Indonesia
Skagen AS
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4
Sector News Flash, 11 November 2014
Plantation
Neutral
Macro
Risks
Tactical BUY Opportunity
Growth
Value
Palm oil trades at USD59/t to soybean oil
1,600
500
450
1,400
400
1,200
350
1,000
300
250
800
200
600
150
400
100
50
200
-
-
Malaysia’s palm oil inventory inched up further in Oct as production
decline was marginal. Nevertheless, the production number was only
held up by Sabah. We expect production to decline significantly over
the next 3 months, driving palm oil price higher. Soybean has also
stopped being a factor weighing on palm oil, while crude oil appears to
have stabilized. Maintain Neutral.

-50
Prem ium , USD (RHS)
Soyoil, USD (LHS)
CPO, USD (LHS)
Source: Bloomberg

Palm oil/gasoil spread at USD8.4/bbl
175
40.0
165
30.0
155
20.0
145
135
10.0
125
-
115
-10.0

105
-20.0
95
-30.0
85
75
Jul-11
-40.0
MayOct-12 Mar-13 Aug-13 Jan-14 Jun-14 Nov-14
12
Gasoil (LHS)
CPO (LHS)

Dec-11
Brent crude (LHS)
Biodiesel margin (RHS)
Source: Bloomberg

SOI shows El Nino reading
Production dipped further. Malaysia’s palm oil production eased
further albeit a marginal 0.2%. While West Malaysia and Sarawak
experienced a 2.2 – 2.5% MoM decline, Sabah’s output rose by 5.4%.
This resulted in a less pronounced overall production decline. We expect
production in Sabah to fall in tandem with the rest in November,
accelerating the seasonal fall in national output.
Export still commendable. Palm oil export fell by 1.4% MoM but
maintained above 1.6m tonnes. Recovery in export was seen to China
(+46.3%), Europe (+38.7%) and the US (+46.6%) while shipment to India
fell by 40.4%.
Local consumption at record high. Local consumption rose further to
294.1k tonnes, bringing YTD total to 2.445m tonnes (+28.8% YoY). We
expect the number to pick up further with the implementation of B7
biodiesel in November.
Strong dollar effect. We note that while palm oil price in MYR term rose
by 13% from the September low, it was only up by 7% in USD term,
which means it has hardly deteriorated in terms of affordability.
Tactical trading opportunity. We expect palm oil price to strengthen
further from here on seasonal production weakness, which could be
aggravated by earlier dry weather. We also noticed significant dryness in
Central, South and East Kalimantan since early July, which is causing
stress to oil palm trees and could lift 2HCY15 palm oil price. This
significantly increases the probability of our 2015 price assumption of
MYR2,500/t being achieved. We continue to like Bumitama, AALI,
Genting Plant and SOP.
Com pany Nam e
Source: Bloomberg


1

2

2




Price
Target
P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
4.3
BUY
Rating
Astra Agro Lestari
IDR22,925
IDR30,003
12.2
2.8
Bumitama Agri Ltd
SGD1.10
SGD1.45
11.7
2.2
Felda Global Ventures Holdings
MYR3.49
MYR3.68
24.2
1.8
2.1
NEUTRAL
First Resources
-
BUY
SGD2.04
SGD2.42
12.9
2.0
2.3
BUY
MYR10.64
MYR11.15
21.9
2.1
1.0
BUY
Golden Agri
SGD0.51
SGD0.57
13.7
0.6
1.6
BUY
IJM Plantation
MYR3.70
MYR3.30
17.7
2.0
2.8
NEUTRAL
IOI Corporation
MYR4.85
MYR4.50
19.8
4.3
2.6
NEUTRAL
Jaya Tiasa Holdings
MYR2.07
MYR1.81
15.4
1.1
1.2
SELL
MYR22.84
MYR21.30
20.0
2.8
2.8
NEUTRAL
Genting Plantations
Alvin Tai, CFA +603 9207 7628
Kuala Lumpur Kepong
[email protected]
London Sumatra Indonesia
IDR1,890
IDR2,118
12.5
1.8
Saraw ak Oil Palms
MYR5.71
MYR6.60
13.8
1.5
Saw it Sumbermas Sarana
IDR1,115
IDR1,615
11.0
2.8
Hoe Lee Leng +603 9207 7605
Sime Darby Bhd
MYR9.60
MYR9.01
20.7
[email protected]
Ta Ann Holdings
MYR3.79
MYR3.80
TDM
MYR0.90
MYR0.90
TH Plantations
MYR1.68
TSH Resources
MYR2.31
-
NEUTRAL
1.2
BUY
1.9
3.1
NEUTRAL
14.3
1.2
1.5
NEUTRAL
16.8
0.9
1.8
NEUTRAL
MYR1.40
19.2
1.2
2.4
SELL
MYR3.70
11.1
1.5
1.7
NEUTRAL
-
BUY
Source: Company data, RHB
See important disclosures at the end of this report
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5
1
Company Update, 11 November 2014
Malaysia Airports Holdings (MAHB MK)
Transport - Aviation
Market Cap: USD2,908m
Buy (Maintained)
Target Price:
Price:
MYR8.04
MYR7.08
Macro
Risks
Opting For a Cash Call
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
MAHB proposed a 1-for-5 rights issue at an indicative MYR4.80/rights .
0
share price to fund for its unowned 40% stake in ISG. Maintain BUY and 0
MYR8.04 TP (or MYR7.52 ex-rights), a 13.6% upside. Priced at a 28.45% 0
discount to its theoretical MYR6.71/share ex-rights price, we think this
is an opportunity for investors to raise their exposure in the growing
aviation market prospects in Turkey and Malaysia.

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
PNB
EPF
7.31m/2.27m
17.7
13.6
6.46 - 9.78
33
1,374
36.6
13.0
11.3
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(21.3)
0.7
(6.4)
(11.6)
(16.6)
Relative
(19.4)
(0.6)
(6.0)
(9.7)
(18.1)


Salient details and utilisation of proceeds. The proposed rights issue
did not come as a surprise, given the strain to Malaysia Airport’s (MAHB)
balance sheet should the funding be by debt (partial or full). The
MYR4.80 indicative rights price represents a 28.45% discount to its
theoretical MYR6.71 ex-rights price. This is based on its last closing
price. Using this, gross proceeds of MYR1.319bn could be raised and
this closes the chapter on its funding deliberation for the acquisition of
the unowned 40% share in Sabiha Gokcen (ISG). The rights issue
exercise and acquisition is expected to be completed by end-1Q15.
Earnings uptick seen for ISG. While ISG is in losses on its bottomline
due to high borrowing costs, EBITDA margins are deemed superior at
54% as at 1H14 (of EUR60m) (FY13: 36%), ie higher than the 48%
1H14 EBITDA margin (of EUR105.1m) that Istanbul Ataturk is
commanding. As of 9M14, ISG has raked in an EBITDA and net loss of
EUR90m and EUR21.2m respectively. We expect it to start booking
profits of EUR13.3m by FY17. The upside to earnings we have yet to
factor in is the potential EUR5m-8m in annual savings post its successful
borrowings restructuring. ISG has benefited from the traffic spillover at
Istanbul Ataturk and will continue to be marked as an important
secondary hub in the city in the future, given its closer proximity to the
city centre vs Istanbul’s upcoming third airport terminal.
Dilution impact. The 100% acquisition is expected to be EPS dilutive as
this will see MAHB consolidating 100% of ISG’s losses. Coupled with the
enlarged share base impact, the EPS dilution post rights and acquisition
is estimated to be by 60.4%/22.5%/7% in FY15/FY16/FY17 respectively
(see Figure 2).
Maintain BUY. Our ex rights MYR7.52 TP (after factoring in 100%
ownership in ISG and the expanded share base of MAHB) still
represents a 12% upside to its theoretical ex-rights price of MYR6.71. As
such, we continue to retain our MYR8.04 TP for now until it goes ex.
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
Recurring net profit growth (%)
1.5
(17.8)
(75.2)
(3.1)
74.0
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
21
26
119
123
70
P/B (x)
1.97
1.87
1.75
1.79
1.81
P/CF (x)
13.3
9.8
10.1
10.2
11.0
1.9
1.7
1.6
2.0
2.0
12.9
15.0
15.2
12.3
11.8
Total turnover (MYRm)
Shariah compliant
Ahmad Maghfur Usman 603 9207 7654
[email protected]
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


2

.
2
0
.
2




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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6
Regional Weekly, 10 November 2014
Weekly Spices
Hot On Healthcare Gloves But Downgraded Some O&G Plays
We are bullish on Hartalega after visiting its plant
We issued BUY recommendations on two healthcare glove
manufacturers, ie Hartalega and Riverstone. We also like Indonesian
property developer Summarecon Agung for its good recurring income.
In the meantime, we also believe our recommended downgrades for
Sembcorp Marine and Sembcorp are worthy of mention as well.
Our analyst visited the site of Hartalega’s (HART MK, BUY, TP: MYR7.70)
(Hartalega: Site Visit To The Next Generation Complex) next-generation
complex and found that its expansion plans are on track. The first two lines
will commence operations by end-Nov/Dec respectively. Hartalega will
commission two plants of 12 lines each, with completion slated for 4Q15.
Management expects installed capacity to reach 22bn pieces by FY16 (Mar)
vs 14bn in FY14. There could be some short-term impact on its bottomline,
as the new lines have yet to contribute to earnings although pre-operating
costs will be incurred. Nonetheless, the expansion is crucial for the company
to maintain its market leadership. Our TP is pegged to 21x 2015 P/E.
Source: Bloomberg
Summarecon Agung is an interesting Indonesia
property play
Riverstone (RSTON SP, BUY, TP: SGD1.15) (Riverstone Holdings: Steady
Like a Rock) is a much smaller competitor to Hartalega. Its 3Q14 revenue
rose 9.2% YoY while NPAT inched up 5.2%. The ramp-up of production for
its new Taiping plant is on track, and it expects to achieve full capacity of
4.2bn gloves by 4Q14. Going forward, due to the 90% healthcare and 10%
cleanroom production mix for this new plant, overall group margins may dip
as healthcare glove margins are narrower than that of cleanroom gloves. We
are bullish on its management’s ability to deliver strong and steady growth,
especially in FY15. This is with full production capacity at 4.2bn pieces, ie a
1bn increase from FY14, which should directly translate into positive
earnings. Our TP is pegged to the 16.3x FY14F P/E average of its peers.
Summarecon Agung (SMRA IJ, BUY, TP: IDR1,570) (Summarecon Agung:
On The Right Track) reported 9M14 net profit in line with estimates, while its
YTD marketing sales have reached IDR3.6trn (or 80% of our FY14 target).
The latest launch of Kensington Apartments, Kelapa Gading in September
saw 70% of the total 314 units offered sold, generating a sales value of
IDR606bn (or equivalent to an ASP of IDR29m psm). Whilst we cut our
FY15/FY16 forecasts by -7%/-2% respectively due to higher interest
expenses from the company’s new bond issuance in 2014, we like the stock
for its good recurring income, savvy management and its future projects.
Source: Bloomberg
Leng Seng Choon, CFA +65 6232 3890
[email protected]
Hong Kong Research
Indonesia Research
Malaysia Research
Singapore Research
Thailand Research
See important disclosures at the end of this report
We downgraded Sembcorp Marine (SMM SP, NEUTRAL, TP: SGD3.80)
(Sembcorp Marine: Margin Rebound Likely To Be Significantly Delayed) and
Sembcorp Industries (SCI SP, NEUTRAL, TP: SGD5.10) (Sembcorp
Industries: Negative Sentiment Likely To Persist) from BUY last week.
Sembcorp Marine’s 3Q14 disappointed with a PATMI weakness (+2% YoY,
flat QoQ), as a new revenue recognition policy forced earlier bookings of lowmargin procurements. Earnings in the next few quarters may be depressed
by a higher proportion of such low-margin revenue. Without a near-term
margin recovery to catalyse the stock, we pared down our SOP-derived TP.
Sembcorp Industries, on the other hand, reported 3Q14 PATMI of SGD197m
(+10% QoQ, -23% YoY), meeting 71% of our FY14F forecast. Utilities
earnings jumped 23% QoQ on the back of the new Banyan Cogen plant,
while short-term contracts were offset by lower power spreads. Sembcorp
Industries’ valuation takes a hit following our downgrade of Sembcorp
Marine, and we, in turn, lowered our SOP-based TP for Sembcorp Industries.
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7
Company Update, 11 November 2014
China State Construction (3311 HK)
Buy (Maintained)
Construction & Engineering - Engineering & Construction
Market Cap: USD5,914m
Target Price:
Price:
HKD14.63
HKD11.86
Macro
Risks
Expect Strong Nov-Dec 2014 New Contract Wins
Growth
Value
China State Construction (3311 HK)
Price Close
Relative to Hang Seng Index (RHS)
15.0
118
14.5
114
14.0
110
13.5
106
13.0
102
12.5
98
12.0
94
11.5
90
11.0
86
10.5
82
10.0
25
78
20

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m
5
Source: Bloomberg
76.8m/9.90m
31.4
23.4
10.6 - 14.7
43
3,892
China Overseas Holdings
57.1
Affordable housing new contract growth remains strong. 10M14
affordable housing new contract wins climbed 47% YoY to HKD19.8bn,
representing a 90% completion rate of its full-year affordable housing
new contract target of HKD22bn.
Our view
10
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)

Expect strong Nov and Dec 2014 new contract wins. New contract
wins have been accelerating from August this year (16% YoY for 8M14,
19% YoY for 9M14, and 20% YoY for 10M14). We foresee this trend will
continue into November and December as CSCI still lags behind its fullyear new contract growth target of 32%. To achieve the full-year new
contract target of HKD60bn, CSCI needs to deliver at least HKD4bn
each for November and December this year, implying YoY new contract
growth of 138% for November and 590% for December. From our chat
with management after the 10M14 announcement, we gather that
management is very confident of completing the full-year new contract
target on the back of good visibility of its new project pipeline.
Reiterate BUY. CSCI is one of our Top Picks in the sector given: i) its
scarcity value in business exposure to China’s affordable housing
construction industry, ii) strong 3-year earnings CAGR of 35% over
2013-2016, and iii) attractive valuation level of only 8.8x FY15F P/E. We
see catalyst ahead as November and December operating data will likely
be positive and recommend investors to accumulate CSCI at a very
cheap valuation level. We reiterate BUY and a TP of HKD14.63, derived
from a 12x 15P/E, implying a 23.4% upside.
Share Performance (%)
Forecasts and Valuations
Dec-12
Dec-13
Total turnover (HKDm)
21,911
27,192
34,234
47,600
57,962
Reported net profit (HKDm)
2,131
2,772
3,642
5,188
6,784
Recurring net profit (HKDm)
2,131
2,772
3,642
5,188
6,784
Recurring net profit growth (%)
41.4
30.1
31.4
42.5
30.8
Recurring EPS (HKD)
0.58
0.71
0.94
1.33
1.75
DPS (HKD)
0.16
0.21
0.27
0.39
0.51
Winston Cao +852 2103 9414
Recurring P/E (x)
20.2
16.5
12.6
8.8
6.7
[email protected]
P/B (x)
3.39
2.83
2.44
2.05
1.69
YTD
1m
3m
6m
12m
Absolute
(15.3)
0.0
(12.5)
(10.1)
(8.3)
Relative
(16.8)
(1.0)
(9.5)
(18.9)
(11.7)
Shariah compliant
P/CF (x)
25.4
17.4
15.2
1.8
2.3
3.3
4.3
EV/EBITDA (x)
20.5
16.2
12.0
8.5
6.5
Return on average equity (%)
18.5
18.7
20.9
25.3
27.4
Net debt to equity (%)
22.9
27.5
23.2
17.3
13.0
4.2
17.5
25.5
Our vs consensus EPS (adjusted) (%)
na
na
Dec-14F Dec-15F Dec-16F
1.4
Dividend Yield (%)
Source: Company data, RHB
See important disclosures at the end of this report


3

.
1
0
.
3
0
0
.
3
0
0
What’s new
.
0
0
 Solid 10M14 operating data. China State Construction International 0
(CSCI) announced 10M14 operating data after market close today on
October 10. New contract wins in Oct 2014 increased 43% YoY to
HKD3.8bn. 10M14 new contract wins grew 20% YoY to HKD52bn,
representing an 87% completion rate of its full-year new contract win
target of HKD60bn.

15




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8
Results Review, 11 November 2014
Kingsoft (3888 HK)
Neutral (Maintained)
Technology - Software & Services
Market Cap: USD2,805m
Target Price:
Price:
HKD18.88
HKD18.36
Macro
Risks
Poor 3Q14 Should Have Been Priced In
Growth
Value
Kingsoft (3888 HK)
Relative to Hang Seng Index (RHS)
35.0
196
33.0
184
31.0
172
29.0
160
27.0
148
25.0
136
23.0
124
21.0
112
15.0
100
90
80
70
60
50
40
30
20
10
76
May-14
Jan-14
Sep-14
88
Jul-14
100
17.0
Mar-14
19.0
Nov-13
Vol m
Price Close
0
0
.
2
0
0
Kingsoft’s 3Q14 non-GAAP earnings of CNY102.6m (-43% YoY) were .
0
largely expected by the market as the company issued a profit warning 0
previously. We cut by 15% both our FY14-15F non-GAAP earnings 0
estimates mainly on higher operating expenses. Given the mark-tomarket valuation decrease in CMI and our lower earnings forecasts, we
cut our SOP-based TP to HKD18.88 (from HKD26.30), implying an 18x
FY15F P/E vs its peers’ 19x and a 2.8% upside. Maintain NEUTRAL.


Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
177m/22.6m
38.6
2.8
16.9 - 32.3
55
1,184

36.1
12.6
6.1

Management
Tencent
FIL
Share Performance (%)
YTD
1m
3m
6m
Absolute
(17.9)
0.0
(23.5)
(16.6)
12m
1.7
Relative
(19.4)
(2.4)
(20.7)
(24.8)
(2.3)
3Q14 earnings decline as expected. Kingsoft’s 3Q14 revenue
increased 55% YoY and 14% QoQ to CNY852m, in line with our and
consensus forecasts. Cheetah Mobile (CMI) (CMCM US, NR) posted
strong revenue growth of 153% YoY and 26% QoQ, while WPS revenue
showed a 6% YoY decline due to fewer new contract wins. 3Q14 nonGAAP earnings declined 43% YoY and 37% QoQ to CNY103m, largely
below our and consensus forecasts. 3Q14 NPM was 8.4% (vs
16.5%/32.0% in 2Q14/3Q13), as Kingsoft aggressively invested in its
mobile business. However, as Kingsoft issued a profit warning two
weeks ago stating that its 3Q14 operating profit would be significantly
lower YoY, we believe the large decline in profit and record-low operating
profit margin (OPM) had been largely expected and priced in. In 3Q14,
Kingsoft recorded a CNY194m one-off gain on disposal of Kuaipan.
Key business updates: i) Kingsoft will launch two mobile games in
4Q14, ii) the company plans to invest heavily in the enterprise cloud
business and expects significant growth in cloud revenue in FY15 from a
low base, iii) mobile monthly active users (MAU) of CMI increased 19%
QoQ to 341m and mobile MAU of WPS reached 59m, and iv) mobile
revenue contributed 24% of total CMI revenue in the quarter.
Earnings changes and outlook. We lower our FY14/FY15/FY16 nonGAAP earnings forecasts by 15%/15%/12% mainly on higher marketing
and research and development (R&D) expenses. We expect FY14 nonGAAP earnings to decline 16% while topline to grow 51%. We expect
FY15 revenue to grow 45% and non-GAAP earnings to grow 67% on
recovering margins.
Maintain NEUTRAL with a lower HKD18.88 TP (from HKD26.30). Our
SOP-based TP (see Figure 4) implies an 18x FY15F P/E vs its peers’
19x average and 0.5x FY15 PEG (3-year CAGR 35%) vs its peers’ 0.7x.
The decrease in our TP is mainly due to: i) the mark-to-market valuation
decrease in CMI, and ii) downward revisions in our earnings forecasts.
Dec-12
Dec-13
1,411
2,173
3,283
4,766
6,226
Reported net profit (CNYm)
433
671
706
763
1,516
Recurring net profit (CNYm)
461
694
582
975
1,712
Recurring net profit growth (%)
35.7
50.5
(16.1)
67.4
75.5
Yujie Li +852 2103 5680
Recurring EPS (CNY)
0.41
0.60
0.50
0.84
1.47
[email protected]
DPS (CNY)
0.09
0.09
0.10
0.11
0.21
Recurring P/E (x)
35.7
24.0
28.8
17.3
9.9
P/B (x)
6.59
4.95
4.25
3.66
2.87
P/CF (x)
24.1
15.0
15.6
11.1
6.9
0.6
0.7
0.7
0.7
1.5
EV/EBITDA (x)
30.0
18.9
25.6
12.5
5.9
Return on average equity (%)
18.7
22.8
19.2
17.8
28.9
Shariah compliant
Forecasts and Valuations
Total turnover (CNYm)
Dividend Yield (%)
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
Dec-14F Dec-15F Dec-16F
net cash net cash net cash net cash net cash
(18.4)
(2.2)
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9
Company Update, 11 November 2014
Berjaya Auto (BAUTO MK)
Buy (Maintained)
Consumer Cyclical - Auto & Autoparts
Market Cap: USD789m
Target Price:
Price:
MYR4.50
MYR3.25
Macro
Risks
Another Leg Up Thanks To Abenomics
Growth
Value


2

.
2
0
.
3
3.90
557
3.40
486
2.90
414
0
0
.
2
0
0
Berjaya Auto (BAuto) is a beneficiary of Japan’s policy to competitively .
0
devalue the JPY. Every 10 sen change in JPY/MYR could impact net 0
profit by about MYR5m. Domestic Mazda sales are on track to meet our 0
FY15 sales target while the eagerly-anticipated Mazda 2 B-segment
competitor is on schedule for a Jan 2015 launch together with the CKD
Mazda 3. Reiterate BUY with a revised TP of MYR4.50 (38.5% upside).
2.40
343

1.90
271
1.40
200
0.90
128
0.40
80
70
60
50
40
30
20
10
57
Berjaya Auto (BAUTO MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m




Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
5.63m/1.74m
22.5
38.5
0.70 - 3.69
44
808
Berjaya Group Berhad
EPF
Podium Success Sdn Bhd
44.3
6.3
5.8
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
97.0
2.2
29.0
54.8
n/a
Relative
99.3
1.4
29.9
57.1
n/a


Weaker JPY means better margins. The JPY has depreciated 5.8%
against the MYR since mid-October, exacerbated by the Bank of Japan’s
expanded monetary stimulus programme last week. We estimate a 10
sen change in the JPY/MYR exchange rate could impact BAuto’s net
profit by MYR5m. We revised our JPY100/MYR exchange rate
assumptions to MYR3.05 and MYR2.80 for FY15 and FY16 respectively
(from MYR3.25), in line with our latest house exchange rate forecasts.
Weaker JPY also means more competitive vehicle pricing. The
weaker JPY also gives BAuto an advantage in vehicle pricing
negotiations as Mazda Motor Corp can now offer more competitive
pricing to BAuto in MYR terms without sacrificing its profit margin.
New model launches on schedule. BAuto will kick off 2015 with a
bang, introducing both the Mazda 2 (assembled in Thailand) and the
complete knock down (CKD) Mazda 3 next January. Other new Mazda
models in the pipeline in 2015 include the facelift Mazda 6 and CX-5,
before the debut of the CX-3 baby SUV towards end-2015. We are
conservatively forecasting a FY14-17 3-year volume sales CAGR of
38.2%, driven by a strong new model pipeline and a supportive principal.
Forecasts and risks. We lift our FY15 and FY16 net profit forecasts by
5% and 15.3% respectively after updating our JPY/MYR assumptions.
We also introduce our FY17 forecast. Key risks to our recommendation
are: i) unfavorable forex trends, ii) supply chain disruption, iii) weaker
consumer discretionary spending, and iv) irrational price competition.
Maintain BUY. BAuto is attractive for its undemanding valuations of just
9.2x FY16 coupled with a 3-year FY14-17 EPS CAGR of 34.2%.
Applying a PEG of 0.4x suggests a target P/E of 13.7x (from 12.5x)
applied to CY15 EPS to derive a revised TP of MYR4.50 (from
MYR3.60). We believe Mazda’s strong product suite will ensure
continued market share gains. BAuto is in a net cash position and highly
cash-generative, which could mean higher dividends or new earningsaccretive business streams.
Apr-13
Apr-14
Apr-15F
Apr-16F
Apr-17F
1,064
1,449
2,147
2,780
3,366
Reported net profit (MYRm)
52
132
224
284
337
Recurring net profit (MYRm)
52
139
224
284
337
Recurring net profit growth (%)
26.1
169.9
60.7
26.9
18.5
Alexander Chia +603 9207 7621
Recurring EPS (MYR)
0.06
0.17
0.28
0.35
0.42
[email protected]
DPS (MYR)
0.00
0.05
0.10
0.12
0.14
Recurring P/E (x)
50.5
18.8
11.7
9.2
7.8
P/B (x)
16.4
7.6
5.5
3.9
3.0
P/CF (x)
49.2
31.5
10.3
11.2
9.0
0.0
1.6
3.1
3.7
4.3
EV/EBITDA (x)
27.9
13.0
6.9
5.2
4.1
Return on average equity (%)
38.7
52.5
54.3
49.6
43.3
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Dividend Yield (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
net cash net cash net cash net cash net cash
6.9
12.7
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12.5
10
Company Update, 11 November 2014
IOI Properties Group (IOIPG MK)
Buy (Maintained)
Property- Real Estate
Market Cap: USD2,626m
Target Price:
Price:
MYR3.10
MYR2.70
Macro
Risks
Building Up War Chest For Future Opportunities
Growth
Value
IOI Properties Group (IOIPG MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.20
105
3.10
101
3.00
97
2.90
93
2.80
89
2.70
86
2.60
82
2.50
78
2.40
74
2.30
70
70
60


40
30
Oct-14
Aug-14
Jun-14
Apr-14
Mar-14
10
Jan-14
Vol m
20
Source: Bloomberg
10.2m/3.15m
22.6
14.8
2.38 - 3.15
50
3,239
48.7
8.4
Share Performance (%)
1m
3m
6m
Absolute
YTD
3.4
9.8
1.5
Relative
2.6
10.7
3.8
12m


Equity fund-raising. IOI Properties Group (IOIPG) announced its
proposed rights issue exercise on the basis of one rights share for every
six existing IOIPG shares at an issue price of MYR1.90 per rights share
(at a 30% discount to yesterday’s closing price). In the meantime, it also
proposes an employee share option scheme (ESOS) of up to 10% of the
enlarged share capital. The rights are expected to raise MYR1.03bn.
Utilisation of proceeds. While the market may be surprised with the
fund-raising exercise, given that the company was only listed in January
this year, with its current net gearing of only 13%, management indicates
that no cash was raised during the IPO, as shares were distributed as
dividend-in-specie to IOI Corp’s (IOI MK, NEUTRAL, TP: MYR4.50)
shareholders. Hence, financing is needed mainly to support the
construction of infrastructure and development of investment properties
(MYR500m), such as IOI City Mall Putrajaya, and the offices and hotels
in IOI Resort City. Meanwhile, MYR325m is allocated for working capital,
mainly for the new township projects such as Bandar Puteri Bangi and
Bandar Puteri Warisan. The remaining MYR200m will be the company’s
war chest for future investment opportunities, such as landbanking
exercise. Equity funding is generally a preferred choice, especially in a
rising interest rate environment.
EPS revision to reflect dilution. The exercise is expected to be
completed by 1QFY15. As such, we lower our EPS estimate by 4% for
FY15, and 14% for FY16-17. Note that we do not factor in the impact of
ESOS as the exercise price has yet to be determined and it has tenure
of five years, and hence, the conversion will not be immediate.
Maintain BUY. Correspondingly, our TP is lowered to MYR3.10 (from
MYR3.38), based on an unchanged 30% discount to RNAV. Given a
14.8% upside, we maintain our BUY rating. We believe downside to
RNAV will be mitigated once new landbank is secured and/or the IOI City
Mall Putrajaya is revalued.
Forecasts and Valuations
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
1,323
1,454
1,528
1,769
1,934
Reported net profit (MYRm)
694
913
470
544
558
Recurring net profit (MYRm)
694
425
470
544
558
Recurring net profit growth (%)
15.6
(38.7)
10.6
15.8
2.6
Recurring EPS (MYR)
0.21
0.13
0.14
0.15
0.15
DPS (MYR)
0.00
0.08
0.08
0.08
0.08
Recurring P/E (x)
12.6
20.6
19.0
17.7
18.3
P/B (x)
0.85
0.78
0.79
0.84
0.82
0.0
3.0
3.0
3.0
3.0
Return on average equity (%)
13.4
8.5
4.1
4.6
4.5
Return on average assets (%)
11.6
6.8
3.2
3.5
3.5
0.6
12.7
10.2
5.9
4.3
(35.4)
(30.8)
(32.8)
Total turnover (MYRm)
Shariah compliant
Loong Kok Wen, CFA +603 9207 7614
[email protected]
Dividend Yield (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


3

.
3
0
.
2
0
0
.
3
0
0
We are neutral on IOIPG’s equity fund-raising exercise, as the dilution .
0
impact on RNAV and earnings could be mitigated once new landbank is 0
secured and/or IOI City Mall Putrajaya is revalued. Maintain BUY and 0
lower TP for now on the immediate impact to MYR3.10 (14.8% upside).
50% of the proceeds will be used to fund the development of
investment properties, which should enhance the assets’ future value.
50
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Vertical Capacity S/B
EPF




Source: Company data, RHB
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11
Corporate News Flash, 11 November 2014
Kuala Lumpur Kepong (KLK MK)
Neutral (Maintained)
Agriculture - Plantation
Market Cap: USD7,270m
Target Price:
Price:
MYR21.30
MYR22.80
Macro
Risks
Disposes Of 50% Stake In Refinery Company To AALI
Growth
Value
Kuala Lumpur Kepong (KLK MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
26.0
108
25.0
104
24.0
101
23.0
97
22.0
94
21.0
90
20.0
87
19.0
3
83
0
0
.
2
0
0
KLK has entered into a joint venture agreement (JVA) with PT Astra .
0
Agro Lestari (AALI), in which KLK will dispose of its 50% stake in JV 0
Co, a company which owns a 2,000 tonnes/day refinery in Dumai, 0
Indonesia. AALI’s outlay for its 50% stake is MYR101.8m, or about
MYR308/tonne, which is in line with industry averages. We keep our
NEUTRAL recommendation and MYR21.30 TP (6.6% downside).

2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-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 (%)
13.0m/4.03m
0.0
-6.6
20.0 - 25.0
40
1,065
Batu Kawan Bhd
Employees Provident Fund
46.6
13.6


2

.
2
0
.
2





Selling 50% stake in Indonesian refinery. Kuala Lumpur Kepong
(KLK) has entered into a joint venture agreement (JVA) with PT Astra
Agro Lestari (AALI IJ, BUY, TP: IDR30,003), in which KLK will dispose of
a 50% share in JV Co, a company which owns a 2,000 tonnes/day
refinery in Dumai, Indonesia. This transaction is conditional upon
fulfillment of certain conditions including, amongst others: i) the
execution of a loan agreement between AALI and JV Co for the
extension of a shareholders loan for IDR296bn (MYR81.2m) by AALI,
and ii) an increase in the authorised share capital of JV Co, and the
issuance and allotment of 68,500 and 75,000 new JV Co shares of
IDR1m each in favour of KLK and AALI, respectively. All in, AALI’s outlay
for the 50% stake in JV Co is approximately MYR101.8m.
Pricing at reasonable price. Pricing-wise, we estimate that KLK is
selling its 50% stake in its Dumai refinery for MYR308/tonne, which is in
line with the current replacement cost and industry averages. We
highlight that KLK’s Dumai refinery is relatively new and started
operations in Sep 2014. AALI has no refinery in Sumatra and having
AALI as a 50% partner will ensure that the refinery gets to full utilization
immediately.
Maintain NEUTRAL. With the peak season almost over, we believe
CPO prices have a window of opportunity to strengthen between now
and 1Q15 – which would bode well for plantation companies like KLK
with decent sensitivity to fluctuations in CPO prices. We estimate that
every MYR100/tonne change in CPO price could affect KLK’s net
earnings by 4-6% per annum. We maintain our SOP-based TP of
MYR21.30 and our NEUTRAL recommendation.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(8.3)
9.3
(4.3)
(5.5)
(2.4)
Relative
(6.4)
9.4
(2.4)
(4.0)
(3.8)
Shariah compliant
Forecasts and Valuations
Sep-12
Sep-13
Sep-14F
Sep-15F
Sep-16F
10,570
9,147
11,679
13,231
13,799
Reported net profit (MYRm)
1,211
918
1,037
1,202
1,264
Recurring net profit (MYRm)
1,102
918
1,037
1,202
1,264
Recurring net profit growth (%)
(23.7)
(16.7)
13.0
15.8
5.2
Recurring EPS (MYR)
1.03
0.86
0.97
1.13
1.18
Total turnover (MYRm)
DPS (MYR)
0.65
0.50
0.55
0.65
0.65
Hoe Lee Leng +603 9207 7605
Recurring P/E (x)
22.1
26.5
23.5
20.3
19.3
[email protected]
P/B (x)
3.43
3.24
3.05
2.87
2.69
P/CF (x)
14.8
18.9
18.2
18.4
15.4
2.8
2.2
2.4
2.8
2.8
EV/EBITDA (x)
13.5
14.8
13.0
11.3
10.7
Return on average equity (%)
17.1
12.5
13.4
14.6
14.4
1.6
7.3
7.6
9.0
7.6
(12.5)
(7.7)
(7.5)
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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12
Results Review, 11 November 2014
Malaysia Smelting Corp (SMELT MK)
Buy (Maintained)
Basic Materials - Mining
Market Cap: USD95.5m
Target Price:
Price:
MYR3.88
MYR3.18
Macro
Risks
Look Beyond Near-Term Weakness
Growth
Value


2

.
2
0
.
2
3.90
123
3.70
117
3.50
112
0
0
.
3
0
0
MSC’s 9M14 core profit of MYR44m represented 80% of our full-year .
0
projection, but we deem it below our estimate as we expect a weaker 0
4Q. Following a loss from the disposal of PT Koba Tin, an impairment of 0
receivables and a full provision for financial guarantee in 1H, we are
hopeful that the company may move to a new chapter going forward.
Maintain BUY with a lower TP of MYR3.88 (22% upside).
3.30
106

3.10
100
2.90
94
2.70
89
2.50
350
83
Malaysia Smelting Corp (SMELT MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
300
250
200
150

100
Sep-14
Jul-14
May-14
Mar-14
Jan-14
50
Nov-13
Vol th




Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
0.16m/0.05m
22.0
22.0
2.70 - 3.71
43
100.0
Straits Trading Co. Ltd
54.9
Share Performance (%)

Core numbers slide. Excluding a mark-to-market loss of MYR5.8m for
pipeline inventory at its smelter operation, Malaysia Smelting Corp
(MSC) posted a core net profit of MYR10.5m in 3Q14, down 42.9% QoQ.
The decline was attributed to lower tin prices at the average of
USD21,913 a tonne in 3Q (-5.3% QoQ). This prompted Rahman
Hydraulic Tin SB’s mining operations to record a lower profit whilst the
tin smelting division to post a stable core profit. Going forward, we
expect a weaker 4Q14 on falling tin prices which have breached
USD20,000 per tonne. Thus, we deem the results below our
expectations although 9M14 core profit made up 80% of our full-year
estimate.
Tin market fundamentals likely remain positive in medium term. Tin
production remains constrained in key tin-producing countries globally,
save for China, where we believe production growth should moderate
over the next few years. On the demand side, global semiconductor
sales and China’s semiconductor production are rising due to growing
use of solders in electronics. Therefore, tin market fundamentals are
likely to remain healthy in the medium term, supported by limited supply.
However, we decided to trim our tin price assumptions to USD22,169/
USD22,750/USD23,500 a tonne for 2014/2015/2016, following the broad
weakness in the commodity market. Accordingly, we trim our earnings
estimates by 7.2%/7.8% for FY14/FY15 and introduce our FY16
projection.
Maintain BUY. Following our earnings cut, we reduce our TP to
MYR3.88 (from MYR4.20), pegged to an unchanged 7x FY15 P/E, which
is at the lower range of P/E multiple for manufacturers’ 7-10x. That said,
we urge investors to look beyond the short-term weakness as MSC’s
various writedowns in 1H may eventually move the company to a new
chapter going forward, along with the still positive tin fundamentals.
Maintain BUY on the stock.
YTD
1m
3m
6m
12m
Absolute
16.5
1.9
(1.3)
(9.9)
8.2
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Relative
18.8
1.1
(0.4)
(7.6)
7.1
Total turnover (MYRm)
2,329
1,582
1,989
2,116
2,262
Reported net profit (MYRm)
(172)
(44)
51
55
61
Recurring net profit (MYRm)
(26.6)
(36.9)
51.1
55.4
60.8
Shariah compliant
Recurring net profit growth (%)
Ng Sem Guan, CFA +603 9207 7678
[email protected]
Recurring EPS (MYR)
DPS (MYR)
Recurring P/E (x)
38.7
8.5
9.8
(0.27)
(0.37)
0.51
0.55
0.61
0.00
0.00
0.13
0.14
0.15
6.26
5.74
5.23
na
na
na
P/B (x)
1.37
1.44
1.22
1.05
0.91
P/CF (x)
5.41
8.26
3.00
4.19
3.97
0.0
0.0
4.0
4.4
4.8
3.71
3.29
2.83
Dividend Yield (%)
EV/EBITDA (x)
na
na
Return on average equity (%)
(52.2)
(19.2)
21.1
19.7
18.7
Net debt to equity (%)
149.8
146.3
87.2
57.5
34.8
0.0
0.0
0.0
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
(131.0)
Source: Company data, RHB
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13
Results Review, 10 November 2014
MISC (MISC MK)
Buy (from Neutral)
Transport - Shipping
Market Cap: USD9,845m
Target Price:
Price:
MYR8.15
MYR7.38
Macro
Risks
Upbeat On Prospects In 2015
Growth
Value
MISC (MISC MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
7.80
145
7.30
137
6.80
128
6.30
120
5.80
112
5.30
103
4.80
45
40
35
30
25
20
15
10
5
95
0
0
.
2
0
0
MISC’s 9M14 earnings were better than we estimated, made on the back .
0
of lower-than-expected losses from its petroleum and chemical units. 0
Management is upbeat on a sustainable freight rate environment for 0
petroleum tankers, for which we forecast higher profits in FY15. We
upgrade MISC to BUY post a 4-5% upward earnings revision, and lift our
SOP-based TP to MYR8.15 (from MYR7.21), offering a 10.4% upside.

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Petronas
EPF
PNB
14.7m/4.55m
-2.6
10.4
5.05 - 7.38
12
4,464
62.7
7.4
6.0
Share Performance (%)


9M14 was better than expected. MISC booked 9M14 earnings of
MYR1.27bn (+27.3% YTD), which made up 68% of our full-year FY14
forecast (vs 9M13 comprising 58% of our FY13 forecast). As we expect
seasonally stronger earnings in 4Q14, we deem earnings as above
expectations. For 3Q14, the company posted core earnings of
MYR481m (+56.6% QoQ, +8.7% YoY). The improved earnings came on
the back of lower losses from its chemical and petroleum divisions.
Briefing highlights. Management expects a better performance from its
petroleum tanker unit, due to improved rates amidst higher tonnage mile
demand coupled with the tighter supply of Aframaxes and very large
crude carriers (VLCCs). Its chemical unit could see better-than-expected
improvement, provided bunker prices stay at this level. We expect its
petroleum tanker division to be profitable by next year and its chemical
shipping unit to be in the black only by 2016. While the lower crude oil
price environment has not impacted MISC’s tanker shipments, it has
affected the volume turnover of its tank terminal business. Management
also guided that there will be a one-off impairment to reflect the lower
rates secured on the time charter renewals in 4Q14, thereby alluding to
the high likelihood of securing a time charter renewal from Petronas.
Forecasts. We lower our estimated losses from both its tanker divisions
(petroleum and chemical) in FY14 on our expectation of much-improved
tanker rates in 4Q, due to the recent strength of the winter rally in freight
rates across the board. We also lift our overall earnings estimates for
FY14/FY15/FY16 by 5%/5%/4% to MYR1.96bn/MYR2.19bn/MYR2.43bn.
Upgrade to BUY. We upgrade MISC to a BUY from Neutral following
our upward revision in earnings. Our SOP-based TP is now at MYR8.15
(from MYR7.21), after factoring in: i) higher valuations for its tanker fleet
following the strength in asset prices, and ii) the higher multiples we
have pegged to its offshore and tank terminal divisions.
YTD
1m
3m
6m
12m
Absolute
29.5
9.0
10.1
15.3
47.3
Forecasts and Valuations
Relative
31.4
9.1
12.0
16.8
45.9
Total turnover (MYRm)
Shariah compliant
Dec-12
Dec-13
9,050
8,972
9,100
8,991
8,992
Reported net profit (MYRm)
770
2,085
1,963
2,194
2,432
Recurring net profit (MYRm)
1,231
1,713
1,963
2,194
2,432
39.2
14.6
11.8
10.8
Recurring net profit growth (%)
Ahmad Maghfur Usman 603 9207 7654
[email protected]
na
Dec-14F
Dec-15F
Dec-16F
Recurring EPS (MYR)
0.28
0.38
0.44
0.49
0.54
DPS (MYR)
0.00
0.05
0.11
0.12
0.14
Recurring P/E (x)
26.8
19.2
16.8
15.0
13.5
P/B (x)
1.56
1.33
1.25
1.17
1.10
P/CF (x)
24.2
16.4
13.9
12.3
11.3
0.0
0.7
1.5
1.7
1.8
14.0
11.7
9.9
8.8
7.9
7.3
9.1
7.7
8.0
8.4
22.5
21.2
17.0
12.8
8.2
11.0
10.5
18.2
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report


2

.
2
0
.
2




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14
Results Review, 11 November 2014
AusGroup (AUSG SP)
Neutral (from Sell)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD173m
Target Price:
Price:
SGD0.36
SGD0.35
Macro
Risks
Slow Start To FY15 As Margins Slide
Growth
Value
Ausgroup (AUSG SP)
Relative to Straits Times Index (RHS)
0.54
190
0.49
173
0.44
155
0.39
138
0.34
120
0.29
103
0.24
85
0.19
68
0.14
180
160
140
120
100
80
60
40
20
50

Sep-14
Jul-14
May-14
Mar-14
Jan-14
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Ezion Holdings
Wang Yu Huei
1.04m/0.83m
2.9
4.3
0.18 - 0.51
90
648
6.2
5.6

Weak results as expected; do not count on strong earnings from
the orderbook. AusGroup’s results were weak with 1QFY15 PATMI
meeting 16.5% of our FY15 forecast as: i) margins slid, and ii) the
marine base has not yet begun operations. Although the orderbook looks
relatively healthy at AUD455m, AusGroup’s recent track record has been
of dismal gross and operating margins and we believe that some
contracts secured in recent quarters when the company was under
pressure financially and operationally may not yield high margins in
future.
Potential 18% dilution from options this year. Ezion (EZI SP, BUY,
TP: SGD2.65) holds 110m options exercisable today, and the new
directors Captain Larry Johnson and Mr Eng Chiaw Koon hold a total of
55m options with a quarter vesting every year starting 10 Jul 2015. We
see a potential 18% dilution from the Ezion options and the directors’
options vesting this year.
Current valuations of 15x/10x FY15/FY16F P/Es are fair. We leave
our estimates largely unchanged as we await clarity on the impact of the
marine base/port business. We have pencilled in AUD40m/AUD84m of
revenue for FY15/FY16F from this new segment at 25% gross margins
(vs AusGroup’s current operations’ gross margins of 8-12%), which
contribute strongly to the forecast growth. Even so, the ROE is likely to
be below cost of equity this year and a mere 9.4% next year. We value
AusGroup at a 10x FY16F P/E for a SGD0.36 TP (from SGD0.38),
implying a rather generous 1.04x P/BV considering the company is
generating returns below cost of equity. Upgrade to NEUTRAL (from
Sell) as the stock has fallen below our TP.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
82.5
(2.8)
(11.5)
(18.8)
19.0
Relative
78.6
(4.9)
(11.6)
(20.0)
15.4
Forecasts and Valuations
Jun-13
Jun-14
Jun-15F
Jun-16F
Total turnover (AUDm)
583
302
485
572
595
Reported net profit (AUDm)
9.7
(11.9)
15.0
24.5
25.8
14.5
24.5
25.8
Recurring net profit (AUDm)
Recurring net profit growth (%)
Shariah compliant
Recurring EPS (AUD)
DPS (AUD)
8.2
(21.6)
(64.9)
(363.5)
0.02
(0.04)
0.000
0.000
Lee Yue Jer, CFA +65 6232 3898
Recurring P/E (x)
18.2
[email protected]
P/B (x)
0.86
P/CF (x)
Jesalyn Wong +65 6232 3872
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
0.0
5.04
na
na
1.02
na
0.0
na
5.8
(6.4)
10.6
net cash
Jun-17F
69.2
5.1
0.02
0.03
0.03
0.004
0.006
0.007
15.1
9.8
9.4
0.95
0.88
0.82
14.1
6.8
na
1.3
2.0
2.1
6.43
4.85
4.27
6.7
9.4
net cash
net cash
(3.2)
0.0
9.0
net cash
0.0
Source: Company data, RHB
See important disclosures at the end of this report


3

.
3
0
.
1
0
0
.
1
0
0
1QFY15’s (Jun) core PATMI of AUD2.5m was weak, meeting only 16.5% .
0
of our FY15 forecast as gross margin slid QoQ to 10.0% from 11.1%. As 0
the stock has fallen below our TP, we upgrade to NEUTRAL with a 0
revised SGD0.36 TP (4.3% upside). Orderbook stands at AUD455m. Our
forecasts incorporate an AUD40m topline from the marine base at 25%
gross margins for FY14F. The stock now looks fairly valued at 15x/10x
FY15/FY16F P/Es.

Nov-13
Vol m
Price Close




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15
Results Review, 10 November 2014
CapitaLand (CAPL SP)
Buy
Property - Real Estate
Market Cap: USD10,383m
Target Price:
Price:
SGD3.54
SGD3.15
Macro
Risks
Housekeeping In Progress
Growth
Value
CapitaLand (CAPL SP)
Price Close
Relative to Straits Times Index (RHS)
3.50
110
3.40
108
3.30
106
3.20
103
3.10
101
3.00
99
2.90
97
2.80
94
2.70
92
2.60
60
90
0
0
.
2
0
0
CapitaLand’s 3Q14/9M14 results were largely in line with our .
0
expectations. Assume coverage with BUY and a RNAV-derived TP of 0
SGD3.54 (12% upside). The company sold 3,288 homes in China in 0
9M14 (3Q14:1,057 units) vs 5,786 units (3Q13: 1,646 units) a year ago.
We see sustained demand from upgraders and first-timers for the rest
of the year, bolstered by the recent relaxation of mortgage rules and
easing credit in China.


50
40
30
Sep-14
Jul-14
May-14
Mar-14
Jan-14
10
Nov-13
Vol m
20
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
26.3m/20.8m
22.9
12.4
2.72 - 3.45
60
4,258
Temasek Holdings Pte Ltd
Blackrock
Vanguard PLC

39.5
6.0
1.0
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
4.0
2.3
(6.8)
1.6
2.9
Relative
0.1
0.9
(6.1)
(0.1)
0.1
3Q14/9M14 results in line. CapitaLand recorded 3Q14/9M14 operating
PATMI of SGD129.5m/SGD421.8m (+37.0%/+32.4% YoY) respectively,
primarily driven by higher contribution from the shopping mall business,
development projects in China and Vietnam, and lower finance costs.
Sky Habitat and Sky Vue are 68% and 73% sold respectively. YTD,
CapitaLand sold about 237 residential units in Singapore (YTD Sep
2013: ~1,151 units), with a total sales value of SGD444m, compared
with SGD2.2bn a year ago. According to the Urban Redevelopment
Authority (URA), ASPs for Sky Vue and Sky Habitat are
SGD1,426/SGD1,482 psf respectively (see Figures 2-5), with smaller
units on average being sold at the former. In China, the company sold
3,288 residential units, compared with 5,786 units a year ago. Sales
were mostly from the following projects: La Botanica in Xi’an, The Loft in
Chengdu, The Metropolis in Kunshan, Vista Garden in Guangzhou and
The Paragon in Shanghai. In 4Q14, another 4,000 units are expected to
be ready for launch. For projects that have been launched, CapitaLand
expects to complete about 1,000 residential units in 4Q14. They are
mainly from Central Park City in Wuxi and International Trade Centre in
Tianjin.
Our view. CapitaLand remains long-term positive on Singapore and
China. The Raffles City portfolio is set to be another growth segment,
with another four Raffles Cities under construction (~75% of the
combined floor area) to be progressively completed in 2016-2019. We
are keeping our eyes on further cost-cutting ahead, with management
focusing on improving ROEs to 8-12% on a sustainable basis via longterm capital allocation. At a 0.58x P/RNAV, we maintain that the stock’s
valuation is undemanding. We assume coverage on CapitaLand with a
BUY recommendation and a RNAV-derived TP of SGD3.54, implying a
12% upside.

Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,301
3,977
3,196
3,839
4,137
Recurring P/E (x)
14.4
15.8
14.0
18.2
14.5
P/B (x)
0.89
0.83
0.80
0.78
0.76
Return on average equity (%)
6.2
5.4
5.8
4.3
5.3
Return on average assets (%)
2.5
2.1
2.2
1.7
2.1
44.7
39.4
56.1
54.1
50.0
0.0
0.0
0.0

Total turnover (SGDm)
Shariah compliant
Ivan Looi +65 6232 3841
[email protected]
Singapore Research +65 6533 0781
[email protected]


2

.
2
0
.
2




We are keeping our eyes on further cost-cutting ahead, with
960
736
926
management focus on improving 930
ROEs to850
8-12% on
a sustainable
basis
Recurring
net profit (SGDm)
736 that926
via long-term
capital allocation. At930
a 0.65x850
P/RNAV,960
we maintain
the
Recurring
net profit
growth (%)
(12.0)
(8.7)
13.0
(23.3)
25.7
stock’s
valuation
is undemanding.
We assume
coverage
of CapitaLand
Recurring
(SGD)
0.22
0.20
0.23
0.17
0.22
withEPS
a RNAV-derived
TP of SGD3.15.
Reported net profit (SGDm)
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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16
Results Review, 11 November 2014
Global Testing (GTC SP)
Buy (Maintained)
Technology - Technology
Market Cap: USD48.0m
Target Price:
Price:
SGD0.165
SGD0.09
Macro
Risks
Bags Full Of Cash
Growth
Value
Global Testing (GTC SP)
Relative to Straits Times Index (RHS)
0.12
143
0.11
133
0.10
123
0.09
113
0.08
103
0.07
93
0.06
50
45
40
35
30
25
20
15
10
5
83

Sep-14
Jul-14
May-14
Jan-14
Mar-14

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Yageo Corporation
Chen, Tie-Min
Chia, Soon Loi
0.04m/0.03m
88.9
89.7
0.07 - 0.11
60
715
27.9
12.6
4.1
Share Performance (%)

Strong performance from its main customer TSMC. Taiwan
Semiconductor Manufacturing Company (TSMC) (2330 TT, NR), which
contributes about 50% of Global Testing’s revenue, recently released
strong 3Q14 results with NPAT surging 34.5% YoY. In view of the
ongoing semiconductor sector recovery in 2014, we believe TSMC’s
turnaround is in place and Global Testing will continue to ride on the
former’s strong earnings going forward.
9M14 NPAT spiked 264.7% YoY. Global Testing announced bullish
results with 3Q14 NPAT rising 35.4% YoY to USD1.1m, while its 9M14
NPAT surged 264.7% YoY to USD2m from USD0.55m, making up 77%
of our full-year estimate, well in line. Going forward, we expect this
strong performance to continue along with the recovery in the
semiconductor space.
Net cash of SGD0.06/share coupled with steady share buybacks.
Global testing has a massive net cash position of SGD0.06 per share,
making up 71% of the entire market cap of the company. In addition, it is
supported by its steady share buybacks since 2008. From, Apr 2014,
4.23m shares have been acquired for this period alone and we expect
this to continue going forward.
Maintain BUY with SGD0.165 TP, based on peer average of 1.1x
FY14 P/BV. Analyst Jarick Seet will assume coverage for this counter.
With depreciation expenses likely to decrease further due to its
historically aggressive depreciation policy, we expect margins to improve
further. We also believe Global Testing is currently trading at a steepdiscounted valuation of 0.56x FY14 P/BV compared with the peer
average of 1.1x. In addition, it is currently trading at an attractive FY14
ex-net cash P/E of 4.8x and enjoys a free cash flow yield of 16%.
YTD
1m
3m
6m
12m
Absolute
8.8
2.4
2.4
8.8
8.8
Forecasts and Valuations
Relative
4.9
0.3
2.3
7.6
5.2
Total turnover (USDm)
Shariah compliant
Jarick Seet +65 6232 3891
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
41.1
37.2
36.3
43.6
49.6
Reported net profit (USDm)
(6.19)
(3.56)
0.75
2.61
3.42
Recurring net profit (USDm)
(6.19)
(3.56)
0.75
2.61
3.42
Recurring net profit growth (%)
(555.3)
(42.4)
Recurring EPS (USD)
(0.008)
(0.005)
Recurring P/E (x)
30.8
0.001
0.004
0.005
66.6
18.4
14.0
0.62
0.60
0.56
0.54
P/CF (x)
2.46
2.95
2.83
2.67
2.88
Terence Wong CFA +65 6232 3896
EV/EBITDA (x)
1.83
1.89
1.19
0.52
(0.02)
[email protected]
Return on average equity (%)
(6.6)
(4.1)
0.9
3.1
3.9
Our vs consensus EPS (adjusted) (%)
na
247.6
0.61
Net debt to equity (%)
na
na
P/B (x)
[email protected]
net cash net cash net cash net cash net cash
0.0
0.0
Source: Company data, RHB
See important disclosures at the end of this report


3

.
2
0
.
2
0
0
.
3
0
0
Global Testing announced favourable results with 3Q14 NPAT rising .
0
35.4% YoY to USD1.1m. 9M14 NPAT surged 264.7% YoY to USD2m from 0
USD0.55m, making up 77% of our full-year estimate, well in line. 0
Maintain BUY and SGD0.165 TP, backed by: i) the ongoing turnaround
of its main customer TSMC, ii) its net cash position of SGD0.06/share,
iii) continued share buybacks, and iv) lower depreciation expenses.

Nov-13
Vol m
Price Close




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17
Sector News Flash, 11 November 2014
Singapore Real Estate


1

1

1
The Real Estate Pulsebeat: Journey to the West –
“Sutras” seekers in Jurong Lake District
1
Rental pulsebeat:
2Q/3Q14
SGD psf/mth/Index QoQ (%) YoY (%)
Office Grade A
Retail Orchard Rd
10.60
34.20
3.4
0.0
11.0
3.3
Biz Park (City Fringe)
Multi-user factory (B1)
median rent
5.50
1.9
3.8
2.15
(2.2)
(2.3)
Warehouse median rent
Residential median rent
2.05
3.74
0.0
(1.1)
(1.3)
(2.2)
SRX Rental Index (Sep)
124.3
(0.2)
(5.3)
We are overall positive on the mid-to long term prospects of the Jurong
area, and believe in government’s push to make Jurong the biggest
destination for business and leisure outside the CBD. The recent
steering committee set up in Oct 14 and led by Minister Lawrence Wong
to drive development plans for Jurong Lake District (JLD) clearly
demonstrates government’s commitment to scale Jurong to new heights
For investors who will like to ride early on the coattails of government’s
efforts, we recommend our ‘Sacred Seven’ stock picks for consideration.

Source: OSK-DMG, URA, HDB, CBRE
Price pulsebeat:
2Q/3Q14
Office Grade A
Retail Orchard Rd
SGD psf/Index
2,750
7,200
QoQ (%) YoY (%)
0.0
12.2
0.0
2.9
Multi-user factory (B1)
637
(1.8)
3.4
Warehouse median
URA Residential PPI
HDB Resale
SRPI Price Index
(Sep)
857
207.9
192.5
168.7
3.2
(0.7)
(1.6)
(0.3)
(11.3)
(3.9)
(6.0)
(4.6)

Source: OSK-DMG, URA, HDB, CBRE
Residential price & rental indices (4Q98 = 100)
250
207.9
200
160.6
150
100
50
4Q98
3Q99
2Q00
1Q01
4Q01
3Q02
2Q03
1Q04
4Q04
3Q05
2Q06
1Q07
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
0
Residential Price Index

Residential. In the residential segment, we think that the smaller local
developers such as Heeton (Non-rated) are taking the bigger bite. Larger
local developers have, thus far, not won any GLS bids in the Jurong area,
perhaps due to initial reservations on the takeup rate of JLD and hence the
less aggressive offer and more a wait-and-see approach. With the success
of recent launches such as Lake Life, we think the competitive landscape
in the Jurong area may just heat up further.
Retail. Despite the advent of new retail malls in JLD, we think competitive
pressures are likely near-term until the new residential/office developments
come on-board. The current trend for co-existence amongst malls appears
to be individual malls owning its unique branding, and serving different
target audiences for different purposes. Near term cannibalization will
eventually fade and we remain mid to long-term positive for the retail
landscape in Jurong, which will go from strength to strength as Singapore’s
largest regional centre. In this space, we like CMT/CAPL (both BUY, TP:
SGD2.10/SGD3.54), Lee Kim Tah (BUY, RNAV:SGD1.28) and TT
International (Non-rated).
Hotel and Office. Government took the first lead in office leasing in Jurong
with the MND, AVA and BCA taking up 100% of the space at Lend Lease’s
Jem. This was followed by GLCs such as CPG at Westgate Tower.
Progressively, we think more private entities will be swayed by the
government’s push, especially those that have extensive dealings with the
relocating agencies. The tourism landscape at JLD is still at its ‘infant’
stage of development, but we think herein lies the opportunity. With the
possible added boost from the SG-KL high speed rail, the burgeoning
office take-up and the upcoming Jurong Lake Gardens and new Science
Centre attractions, the development plans are indeed in place to create the
ecosystem conducive for leisure and business travelers. For exposure, we
recommend Low Keng Huat (Non-rated), Sim Lian (Non-rated) and
Genting Singapore (NEUTRAL, TP: SGD1.39).
Residential Rental Index
Source: URA
Ivan Looi +65 6232 3841
[email protected]
Goh Han Peng +65 6232 3895
[email protected]
Singapore Research +65 6133 0781
[email protected]
Source: URA, Twitter, OSK-DMG
See important disclosures at the end of this report
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18
Results Review, 11 November 2014
Super Group (SUPER SP)
Sell (from Neutral)
Consumer Non-cyclical - Food & Beverage Products
Market Cap: USD922m
Target Price:
Price:
SGD0.90
SGD1.07
Macro
Risks
Not a Superb Year
Growth
Value
Super Group (SUPER SP)
Relative to Straits Times Index (RHS)
2.30
104
2.10
95
1.90
87
1.70
78
1.50
70
1.30
61
1.10
53
0.90
20
18
16
14
12
10
8
6
4
2
44
0
0
.
2
0
0
Super posted a disappointing set of results, with 3Q14 net profit down .
0
45.8% YoY to SGD10.3m. Its 9M14 recurring net profit of SGD42.4m 0
made up only 59% of consensus estimates. Raw material prices may 0
provide some respite over the next few quarters, but competition
remains intense and a higher tax rate is a key risk. Downgrade to SELL
from Neutral, with a lower TP of SGD0.90 (16% downside).

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m
Price Close

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
2.21m/1.75m
46.7
-15.5
1.07 - 2.08
40
1,115
June Te Lay Hoon
David Teo Kee Bock
YHS Investment
12.2
11.7
11.7
Share Performance (%)


2

.
2
0
.
1





Profit down sharply on lower sales and margin pressures. Super
Group’s (Super) 3Q14 revenue declined 2.6% YoY. Branded consumer
(BC) sales fell 6% YoY, partially offset by a 3% rebound in food
ingredients (FI) sales. Gross margins declined 5ppts to 32% while
operating costs increased 8%. Part of the increase in operating cost was
a result of a 46% increase in depreciation charges after the completion
of several new plants.
BC faces one obstacle after another. Rebranding exercises and new
product innovation have helped achieve approximately 5% sales growth
across Thailand, Malaysia and Myanmar. However, the Philippines’
sales again fell 20% from the delisting of non-performing products.
Technical and logistical issues from the relocation of its packaging plant
also caused a 10% drop in sales from Singapore and export markets.
However, we expect this to normalise in 4Q14.
Gross margins to pick up in 4Q14. Gross margins fell to its lowest
levels since 2011, largely due to a big spike in raw material prices since
the beginning of the year. In recent months, prices of palm kernel oil and
sugar have been coming off while Robusta coffee price seemed to be
stabilising. With increasing capabilities in botanical herbal extracts, liquid
glucose syrup solids and nutritional powder oil, we believe FI gross
margins could be enhanced in the long run.
Downgrade to SELL with a lower THB0.90 TP. We cut our FY14-16
earnings forecasts by 21-25% and reduce our TP to SGD0.90 from
SGD1.34. Higher tax expense may be a risk going forward. Over the last
three years, Super has enjoyed an effective tax rate of <10%, which may
normalise eventually to 15-20%. Our TP of SGD0.90 is now pegged to a
15x FY15F P/E, which reflects its lower growth and earnings risk, in our
view.
Dec-12
Dec-13
Dec-14F
Dec-15F
519
557
536
579
629
Reported net profit (SGDm)
79.1
99.9
57.8
66.4
73.9
Recurring net profit (SGDm)
78.0
82.7
57.3
66.4
73.9
Recurring net profit growth (%)
44.0
6.0
(30.7)
15.9
11.3
Recurring EPS (SGD)
0.07
0.07
0.05
0.06
0.07
DPS (SGD)
0.04
0.05
0.03
0.03
0.03
James Koh +65 6232 3839
Recurring P/E (x)
15.2
14.4
20.7
17.9
16.1
[email protected]
P/B (x)
2.98
2.54
2.40
2.24
2.10
P/CF (x)
13.9
18.9
14.9
15.6
14.9
3.3
4.2
2.4
2.8
3.1
YTD
1m
3m
6m
12m
Absolute
(44.0)
(16.8)
(28.5)
(37.2)
(51.2)
Relative
(47.8)
(18.7)
(28.4)
(38.3)
(54.6)
Shariah compliant
Forecasts and Valuations
Total turnover (SGDm)
Dec-16F
Juliana Cai +65 6232 3871
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
10.7
8.3
12.7
10.9
9.8
Return on average equity (%)
20.7
23.1
12.0
13.0
13.5
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(20.9)
(17.3)
(18.2)
Source: Company data, RHB
See important disclosures at the end of this report
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19
Results Review, 10 November 2014
Yangzijiang (YZJSGD SP)
Buy (Maintained)
Industrial - Shipbuilding
Market Cap: USD3,426m
Target Price:
Price:
SGD1.68
SGD1.16
Macro
Risks
Enjoys Government White List Support
Growth
Value
Yangzijiang Shipbuilding (YZJSGD SP)
Relative to Straits Times Index (RHS)
108
1.25
104
1.20
101
1.15
97
1.10
93
1.05
89
1.00
86
0.95
82
0.90
100
90
80
70
60
50
40
30
20
10
78

Sep-14
Jul-14
May-14
Mar-14
Jan-14

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
10.3m/8.13m
18.1
44.8
1.01 - 1.24
64
3,832
Ren Yuanlin
Lido Point Investments
Hong Kong Hengyuan Invt
26.0
10.3
8.7
Share Performance (%)

Margins and PATMI remain strong. YZJ has again proved skeptics
wrong by delivering a healthy 3Q14 with gross shipbuilding margins
maintained at 20%, translating into a healthy PATMI of CNY811m. The
QoQ fall in PATMI was largely due to a small spike in shipbuilding
revenue in 2Q14 combined with a tax writeback which elevated the
bottomline. YZJ is solidly on track to deliver FY14F core PATMI of
CNY3.1bn, with 9M14 figure at c.CNY2.3bn.
Held-to-maturity (HTM) assets under control. YZJ has reduced its
HTM assets slightly QoQ, with the quantum now standing at CNY12.6bn
from CNY13.0bn. We expect a slow decline in this figure in inverse
relation with the overall health of the shipbuilding industry, as funds are
gradually redirected towards YZJ’s core shipbuilding business.
One of 51 yards on China’s “White List”. YZJ is one of only 51 (out of
>1,500) yards in China which have made it to the Central Government’s
“White List”, having met requirements in environmental protection and
production efficiency. These yards will receive policy support, making it
easier for them to secure financing, and therefore new orders. We
expect YZJ to make full use of this new status to remain at the forefront
of Chinese shipbuilding. Recall that YZJ was the first shipyard in China
to secure orders for 10,000 twenty-foot equivalent unit (TEU)
containerships – we expect the company to move towards 14,000TEU
vessels and liquid petroleum gas (LPG) carriers next.
Still the most profitable yard in China. YZJ stands out as the single
most profitable shipyard company in China, on top of being one of the
most technologically-advanced. Maintain BUY with a SOP-based TP of
SGD1.68, which values the shipbuilding business at 8x FY14F trough
earnings.
YTD
1m
3m
6m
12m
Absolute
(2.5)
0.4
5.5
0.9
(4.2)
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
(6.3)
(0.7)
6.5
(0.4)
(6.8)
Total turnover (CNYm)
15,706
14,799
14,339
14,532
16,988
Reported net profit (CNYm)
3,977
3,581
3,096
3,452
3,466
Recurring net profit (CNYm)
3,977
3,581
3,096
3,103
3,466
Recurring net profit growth (%)
34.6
(10.0)
(13.5)
0.2
11.7
Recurring EPS (CNY)
1.04
0.93
0.81
0.81
0.90
DPS (CNY)
0.28
0.24
0.24
0.24
0.24
Recurring P/E (x)
5.27
5.86
6.77
6.76
6.05
P/B (x)
1.62
1.35
1.18
1.03
0.92
6.9
6.9
Shariah compliant
Lee Yue Jer, CFA +65 6232 3898
[email protected]
Jesalyn Wong +65 6232 3872
P/CF (x)
[email protected]
Dividend Yield (%)
na
11.3
na
5.2
4.4
4.4
4.4
4.4
EV/EBITDA (x)
3.68
3.56
3.52
4.06
3.26
Return on average equity (%)
34.7
25.1
18.6
18.1
8.3
7.0
19.3
8.7
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
1
0
.
2
0
0
.
3
0
0
Yangzijiang’s (YZJ) 3Q14 PATMI was healthy at CNY811m (-1% YoY, - .
0
34% QoQ), with 9M14 core PATMI meeting 75% of our FY14 forecast. Its 0
orderbook stands strong at USD4.6bn. YZJ has been included in the 0
Chinese Government’s White List of shipyards, which avails it policy
support, making it easier to secure financing and therefore orders. We
still find YZJ the strongest shipbuilder in China in a recovering
industry. Maintain BUY with a SOP-based TP of SGD1.68 (45% upside).

Nov-13
Vol m
Price Close
1.30




Source: Company data, RHB
18.1
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16.1
net cash
27.9
20
Results Review, 11 November 2014
Bumrungrad Hospital PCL (BH TB)
Neutral (Maintained)
Consumer Non-cyclical - Healthcare
Market Cap: USD3,011m
Target Price:
Price:
THB125.00
THB136.00
Macro
Risks
9M14 Core Earnings Grew 7.8% YoY
Growth
Value
Bamrungrad Hospital (BH TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
155
154
145
147
135
139
125
132
115
124
105
117
95
109
85
102
75
30
94
0
0
.
1
0
0
9M14 core earnings rose 7.8% YoY to THB2.04bn on increased volume .
0
post the UBSD buy. We maintain NEUTRAL as the shares currently 0
trade at 31x FY15F P/E, but we raise TP to THB125.00 (vs THB115.00, 0
8.1% downside), anticipating stronger FY15 growth. Outpatient and
inpatient YoY volumes grew 5.1% and 8.3% respectively while YoY
revenue intensity declined 9.6%/5.7% for outpatient/inpatient services.

25
20

15
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-13
Vol m
10
Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Bangkok Dusit Medical
Bangkok Insurance
90.9m/2.81m
-16.9
-8.1
82.0 - 143
41
729
23.9
14.7


2

.
2
0
.
2






In line. Bumrungrad Hospital’s (Bumrungrad) 9M14 core earnings grew
7.8% YoY, accounting for 75% of our full-year forecast and consensus
estimates. The strong earnings were mainly driven by higher patient
volume (outpatients: +5.1%, inpatients: +8.3%), which was contributed
by Ulaanbaatar Songdo Hospital (UBSD) in Mongolia. Excluding UBSD,
outpatient and inpatient volumes fell 3.2% and 0.1% YoY respectively.
As a result, Bumrungrad’s 9M14’s revenue intensity declined 9.6% and
5.7% for outpatients and inpatients respectively.
Key highlights. The company’s 3Q14 revenue increased 7.2% QoQ
and 9.8% YoY to THB4.13bn. Income from hospital operations increased
7.8% QoQ and 10.8% YoY to THB4.05bn on YoY outpatient/inpatient
volume growth of 12.7%/13.7% respectively. However, excluding
UBSD’s contributions, outpatient visits and inpatient admission actually
slipped 1.1% and 1.2% respectively. Therefore, YoY outpatient and
inpatient revenue intensity declined significantly by 8.5% and 7.2% to
THB6,825.00 and THB218,069.00 respectively. 3Q14 EBITDA margin
improved 0.7ppts to 29.8% from 3Q13’s 29.1% due to lower cost of
operating hospitals while net margin was steady at 18.6%
Outlook. Management maintained its hospital revenue guidance growth
of 10% YoY. However, we expect Bumrungrad’s FY14 revenue to grow
only 5%, ie less than its target, because the lower revenue intensity from
its Mongolian hospital outweighed the volume increase.
Forecasts and risks. We keep our earnings forecasts unchanged and
increase our TP to THB125.00, implying FY15F P/E of 31x. We maintain
our NEUTRAL call as the share price has already factored in the strong
growth from better economic sentiment next year.
Share Performance (%)
12m
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
52.7
Total turnover (THBm)
11,276
13,153
14,497
15,199
17,396
40.4
Reported net profit (THBm)
1,591
2,559
2,521
2,701
3,183
Recurring net profit (THBm)
1,591
1,957
2,521
2,701
3,183
Recurring net profit growth (%)
27.3
23.0
28.8
7.1
17.9
Recurring EPS (THB)
2.18
2.69
3.46
3.71
4.37
DPS (THB)
1.10
1.25
1.90
2.04
2.40
Veena Naidu License No. 24418, 66 2862 9752
Recurring P/E (x)
62.0
50.4
39.1
36.5
31.0
[email protected]
P/B (x)
15.4
12.4
10.9
9.5
8.2
P/CF (x)
59.3
36.8
31.3
22.7
23.4
YTD
Absolute
Relative
54.4
32.9
1m
5.9
4.2
3m
6.7
2.9
6m
34.8
20.2
Shariah compliant
Vikran Lumyai +66 2862 9999 Ext 2028
Dividend Yield (%)
0.8
0.9
1.4
1.5
1.8
[email protected]
EV/EBITDA (x)
13.3
28.5
23.8
21.0
18.2
Return on average equity (%)
26.6
Net debt to equity (%)
53.1
Our vs consensus EPS (adjusted) (%)
35.7
29.6
net cash
net cash
27.8
net cash
5.4
28.4
net cash
4.1
Source: Company data, RHB
See important disclosures at the end of this report
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21
Company Update, 10 November 2014
Major Cineplex (MAJOR TB)
Buy (Maintained)
Communications - Media
Market Cap: USD647m
Target Price:
Price:
THB27.00
THB23.90
Macro
Risks
3QFY14 Revenue And EBITDA Still Growing YoY
Growth
Value
Major Cineplex (MAJOR TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
25.0
123
24.0
120
23.0
116
22.0
113
21.0
109
20.0
106
19.0
102
18.0
99
17.0
95
16.0
92
15.0
14
88
12
0
0
.
2
0
0
Major Cineplex’s (Major) 3QFY14 earnings slipped QoQ vs their 2QFY14 .
0
peak but revenue and EBITDA grew 23% and 19% YoY. Bottomline 0
surged 46% YoY from divestment gains. We keep our BUY call and TP 0
of THB27.00 (13% upside). We raise our 2014 earnings forecast slightly
to THB1.036bn. A gradual recovery in private consumption given higher
GDP growth could be the main catalyst for next year’s growth.


10
8
6
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m
4

Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Vicha Poonwaralak
State Street Bank and Trust
Thai NVDR
54.6m/1.69m
-14.2
13.0
15.9 - 24.2
46
890
36.1
9.0
8.2
Share Performance (%)


1

.
2
0
.
2






Revenue growth in all business units (Figure 3). The reasons are: i)
more box office hits compared with last year, ii) higher rental income
given improved occupancy rate with WE Fitness to replace the lossridden California WoW, and iii) more bowling lanes with higher game
fees. Nevertheless, its QoQ performance slipped from its peak in
2QFY14.
GPM increased to 37%. The company also had higher overall GPM of
37.3% in 3QFY14 vs 34.5% in 3QFY13, thanks to efficient cost controls
(Figure 2). GPM for cinema business (admission) increased to 17% in
3QFY14 from 14% in 3QFY13 after using digital projectors and installing
automatic ticket machines. Other businesses (concession, advertising
and movie rights) also saw an improvement in their GPM YoY.
Net profit surged to THB293m. While EBITDA grew 19% YoY to
THB578m, net profit grew faster by 46% to THB293m thanks to a onetime extra gain from the sale of SF (SF TB, NR) and PVR Ltd (PVRL IN,
NR) worth THB63m. We therefore raise our earnings forecast by 6.5% to
THB1,036m, of which 85% was 9MFY14 net profit.
4QFY14 performance to soften. We expect Major’s revenue to soften
compared with the last two quarters as it will likely have fewer
blockbuster hits (only Hunger Games and The Hobbit). Nevertheless, we
expect it to generate revenue in the range of THB1,400m-1,600m in
4QFY14.
Maintain BUY. Our TP of THB27.00 comprises: i) THB25.20 from its
core business, pegged to a 2015F P/E of 20x (+1SD), and ii) THB1.80,
from potential gains on its investment portfolio. We estimate revenue
and core profit to grow 18% and 14% YoY respectively next year. Major
is trading below its peers in both the media and consumer sectors, with
attractive dividend yield of 4-5% per annum.
YTD
1m
3m
6m
12m
Absolute
36.6
4.4
21.3
23.8
30.6
Forecasts and Valuations
Relative
14.9
1.7
17.5
11.1
19.7
Total turnover (THBm)
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
6,730
6,963
7,709
7,824
9,212
Reported net profit (THBm)
782
846
1,052
1,036
1,118
Recurring net profit (THBm)
775
682
880
983
1,118
Recurring net profit growth (%)
9.6
(12.0)
28.9
11.7
13.8
Recurring EPS (THB)
0.88
0.77
0.99
1.11
1.26
DPS (THB)
0.82
0.87
1.00
0.99
1.13
Recurring P/E (x)
27.2
31.0
24.1
21.6
19.0
P/B (x)
3.57
3.61
3.48
3.39
3.30
Naruedom Mujjalinkool
P/CF (x)
13.7
11.7
10.2
11.8
11.2
Research Associate
Dividend Yield (%)
3.4
3.6
4.2
4.1
4.7
EV/EBITDA (x)
9.4
10.1
8.5
8.4
7.4
Return on average equity (%)
13.7
14.4
17.6
16.8
17.6
Net debt to equity (%)
40.9
39.8
70.5
74.3
78.2
7.4
5.8
Shariah compliant
Wanida Geisler 66 2862 9748
[email protected]
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Source: Company data, RHB
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Results Review, 11 November 2014
Pruksa Real Estate (PS TB)
Buy (Maintained)
Property - Real Estate
Market Cap: USD2,268m
Target Price:
Price:
THB43.00
THB33.50
Macro
Risks
So Far So Good
Growth
Value
Pruksa Real Estate (PS TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
39.0
155
34.0
139
29.0
123
24.0
107
19.0
91
14.0
25
75




0
0
.
3
0
0
Although Pruksa’s 3Q14 revenue grew 7.2% QoQ, earnings dipped .
0
slightly due to higher SG&A expenses to boost quarterly presales to a 0
record high of THB13.4bn. 9M14 earnings grew 35% YoY to THB4.8bn, 0
at 84% of our full-year forecast. We may have another round of earnings
adjustment given its better-than-expected YTD performance in topline
and margins. Maintain BUY and THB43.00 TP, pegged to a 13x 2015F
P/E (+0.5SD to its long-term mean, 28.4% upside).

3Q14 revenue continued to grow 7.2% QoQ to THB11.6bn. This was
mainly attributable to an increase in realised condominium (condo) sales.
Four newly-completed condo projects namely Ivy Ampio, Plum Ladprao,
Plum Bangkae and The Privacy Rewadee 18 – with a combined project
value of THB3.2bn – were transferred to buyers in 3Q14. Landed
property sales in 3Q14 dipped 4% QoQ from lower townhouse sales
(see Figure 2).
20

15
Sep-14
Jul-14
May-14
Mar-14
Jan-14
5
Nov-13
Vol m
10
Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
137m/4.24m
8.1
28.4
16.6 - 37.0
26
2,227
Vijitpongpun Family
UBS AG Singapore
66.0
4.5



Well-maintained gross margin at 36.8% for 9M14 but SG&A
expense-to-sales ratio ticked up in 3Q14. As Pruksa Real Estate
(Pruksa) boosted its quarterly presales to a record high of THB13.4bn
(+21% YoY, +37.5% QoQ) in 3Q14, its selling, general and
administrative (SG&A) expense-to-sales ratio increased to 16% from
15% in 2Q14. Net margin, on the other hand, dipped to 15.9% in 3Q14
from 17.3% in 2Q14.
3Q14 net profit dipped 2% QoQ to THB1.84bn, but still grew 35%
YoY. We note that Pruksa’s actual 3Q14 earnings were slightly below
consensus estimates of THB1.9bn. 9M14 net profit, hence, stood at
THB4.8bn (+35% YoY), representing 84% of our full-year forecast.
Likely another round of earnings adjustment. We are considering
reviewing our earnings forecasts after today’s analyst meeting.
Presales in Oct 2014 softened to THB2.6bn, down 38% from Sep
2014 and 18% from Oct 2013. Landed property sales stood at THB2.1bn
(flat YoY, -7% MoM) while condo sales dipped to THB523m (-51% YoY,
-73% MoM). 10M14 presales came in at THB33.9bn (-8% YoY), at 75%
of its full-year target of THB45bn.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
84.1
1.5
(1.5)
46.9
41.4
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
62.4
(1.2)
(5.3)
34.2
30.5
Total turnover (THBm)
23,263
27,024
38,848
37,532
49,010
Reported net profit (THBm)
2,835
3,898
5,801
5,682
7,379
Recurring net profit (THBm)
2,835
3,898
5,801
5,682
7,379
Recurring net profit growth (%)
(18.7)
37.5
48.8
(2.0)
29.9
Recurring EPS (THB)
1.28
1.76
2.62
2.56
3.32
DPS (THB)
0.40
0.50
0.85
0.77
1.00
Recurring P/E (x)
26.1
19.0
12.8
13.1
10.1
P/B (x)
4.35
3.69
2.99
2.59
2.16
1.2
1.5
2.5
2.3
3.0
17.6
21.0
25.8
21.2
23.4
7.5
9.1
11.6
9.7
11.6
107.4
79.4
76.7
70.8
56.1
(8.1)
3.1
Shariah compliant
Wanida Geisler +66 2862 9748
[email protected]
Dividend Yield (%)
Return on average equity (%)
Return on average assets (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report


3

.
2
0
.
2
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23
Results Review, 10 November 2014
Somboon Advance (SAT TB)
Buy (Maintained)
Consumer Cyclical - Auto & Autoparts
Market Cap: USD237m
Target Price:
Price:
THB22.00
THB18.30
Macro
Risks
Revenue Rose 6.5% QoQ
Growth
Value
Somboon Advance (SAT TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
20.0
128
19.0
124
18.0
119
17.0
115
16.0
111
15.0
106
14.0
102
13.0
97
12.0
12
93
0
0
.
2
0
0
Somboon Advance’s 3QFY14 sales improved 6.5% QoQ, though down .
0
7.2% YoY. Net profit in 3QFY14 was THB142.53m (+11.4% QoQ, -16.1% 0
YoY). We maintain our BUY call at FY15 TP of THB22.00, pegged to a 0
2015F P/E of 11x, reflecting a 20.2% upside gain. Meanwhile, Thailand’s
car production was up 5% QoQ in 3QFY14. We expect the momentum of
quarterly profits to pick up in the coming quarters from a low-base
recovery in car sales.

10

8
6
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m
4

Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
Somboon Holding
Kitaphanich Family
Sompong
Cholkadeedamrongkul
15.4m/0.48m
-0.5
20.2
13.5 - 19.2
47
425
25.5
20.9
8.4


2

.
2
0
.
1





Somboon Forging Technology (SFT) started operations in 3QFY14.
SFT, Somboon’s new subsidiary which manufactures motor vehicle parts
from the Hot/Cold Forging process, started mass production in 3QFY14
with a 10% utilisation rate. The company expects this subsidiary to
generate revenue of about THB150m-200m with a 30% utilisation rate
next year. Meanwhile, management expects SFT to break even within
three years.
GPM dropped to 15.8%. The company’s overall GPM dropped to 15.8%
from 17.4% in 2QFY14 as the company started SFT operations and had
to recognise depreciation charges. Including SFT operations, utilisation
rate dropped to 63% in 3QFY14. However, if we exclude SFT, the overall
utilisation rate in 3QFY14 was 79% vs 73% in 2QFY14 (See Figure 2).
Lost orders from Mitsubishi (7211 JP, NR). Somboon will lose its
orders from Mitsubishi worth THB500m per year starting 4QFY14.
However, the lost orders from Mitsubishi are to be compensated by more
orders from Hino Motors (manufacturer of heavy-duty trucks), which
amount to about THB300m per year in 2015.
4QFY14 may grow slower than the last quarter. Although the Thailand
International Motor Expo at the end of this year will likely stimulate
domestic car sales to reach 0.9m units, we expect Somboon’s revenue
growth in 4QFY14 to recover slowly, as the company starts to lose its
orders from Mitsubishi, which amount to about THB125m. But overall,
we project Somboon’s 4QFY14 revenue to increase by about 7% QoQ to
THB2,143m, contributing to a full-year revenue of THB8,134m, which
may be lower than our full-year forecast of THB8,256m by about 1.5%.
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
6,420
9,410
8,973
8,256
9,017
Reported net profit (THBm)
408
804
966
657
847
Recurring net profit (THBm)
408
804
966
657
847
(47.2)
96.9
20.2
(32.0)
29.0
Recurring EPS (THB)
1.20
2.36
2.53
1.55
1.99
DPS (THB)
0.45
0.72
0.75
0.54
0.70
Recurring P/E (x)
15.2
7.7
7.2
11.8
9.2
Veena Naidu License No. 24418, 66 2862 9752
P/B (x)
1.49
1.50
1.60
1.50
1.34
[email protected]
P/CF (x)
7.20
3.52
3.77
4.84
4.42
2.5
3.9
4.1
3.0
3.8
8.38
5.21
5.32
5.90
4.91
9.9
19.3
21.4
13.1
15.4
64.4
56.4
45.2
34.7
26.3
0.0
0.0
Share Performance (%)
Absolute
Relative
YTD
1m
3m
6m
12m
Total turnover (THBm)
27.1
1.1
2.8
6.4
18.1
5.4
(1.6)
(1.0)
(6.3)
7.2
Shariah compliant
Recurring net profit growth (%)
Dividend Yield (%)
Naruedom Mujjalinkool
EV/EBITDA (x)
Research Associate
Return on average equity (%)
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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24
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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