1. business and industrial
2. company
3. earnings

Regional Daily, 13 November 2014
5
Regional Daily
Ideas Troika
Top Stories
HC International (2280 HK)
Technology - Software & Services
BUY HKD9.10 TP: HKD15.36
Mkt Cap : USD783m
Pg3
HC’s 3Q14 result was in line with its previous profit alert. We reduce our TP
to HKD15.36 (from HKD 18.53) based on peers’ 0.5x FY15 PEG, implying
22x FY15 P/E. Management still sees above 30% topline growth and above
50% bottom line growth for FY15. Maintain BUY.
Analyst: Yujie Li ([email protected])
MPI (MPI MK)
Technology – Semiconductors
BUY MYR5.15 TP: MYR6.34
Mkt Cap : USD306m
Pg4
MPI’s 1QFY15 core earnings of MYR17.4m (+4.0% YoY) were well within
expectations. Management declared its first interim DPS of 7.0 sen, which
translates into a decent payout ratio of 66.7% for the quarter. Maintain BUY
with our TP unchanged at MYR6.34 (15.8x 2015 P/E, +23.1% upside).
Analyst: Kong Heng Siong ([email protected])
Genting Plantations (GENP MK)
Agriculture – Plantation
BUY MYR10.46 TP: MYR11.60
Mkt Cap : USD2,405m
Pg5
FFB production in 9M14 was stronger than expected, with expectations of an
even stronger 2015. For property, more launches will take place in 4Q14.
Maintain BUY, with MYR11.60 TP, as strong FFB growth will help offset
lower CPO prices.
Analyst: Hoe Lee Leng ([email protected])
Bumitama Agri (BAL SP)
Agriculture – Plantation
BUY SGD1.08 TP: MYR1.48
Mkt Cap : USD1,471m
Pg6
We maintain Bumitama as our top sector pick with TP raised slightly to
SGD1.48. 9M earnings were in line with expectations despite QoQ drop in
production driven by dry weather in Kalimantan as ASP was better than
expected.
Analyst: Alvin Tai, CFA ([email protected])
Pg7
Something Has Got To Give
Other Key Stories
Regional
Integrated Oil & Gas
NEUTRAL (Maintained)
Analyst: Kannika Siamwalla, CFA ([email protected])
Hong Kong
China Fibre Optic Network System (3777 HK)
Technology - Hardware & Equipment
BUY HKD2.42 TP: HKD3.00
Indonesia
Indo Tambangraya (ITMG IJ)
Basic Materials – Mining
NEUTRAL IDR20,075 TP: IDR21,700
Singapore
City Developments (CIT SP)
Property - Real Estate
NEUTRAL SGD9.36 TP: SGD9.47
Golden Agri (GGR SP)
Agriculture – Plantation
NEUTRAL SGD0.51 TP: SGD0.50
See important disclosures at the end of this report
Pg8
Robust Sales In 3Q14
Analyst: Christopher Tse ([email protected])
Pg9
Guiding For No Volume Growth In 2015
Analyst: Shekhar Jaiswal ([email protected])
Pg10
Give It Time To Diversify
Analyst: Ivan Looi ([email protected])
Pg11
Results Still Poor, Downgrade To NEUTRAL
Analyst: Alvin Tai, CFA ([email protected])
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Regional Daily, 13 November 2014
MoneyMax Financial Services (MMFS SP)
Financial Services - Non-Bank Financials
NEUTRAL SGD0.30 TP: SGD0.31
Pg12
Petra Foods (PETRA SP)
Consumer Non-cyclical
BUY SGD3.69 TP: SGD4.25
Pg13
ValueMax Group (VMAX SP)
Financial Services - Non-Bank Financials
BUY SGD0.44 TP: SGD0.57
Pg14
Vard Holdings (VARD SP)
Energy & Petrochemicals - Oil & Gas Services
SELL SGD0.68 TP: SGD0.58
Pg15
Thailand
Namyong Terminal (NYT TB)
Transport – Transportation
BUY THB14.50 TP: THB18.70
See important disclosures at the end of this report
Expansion Costs Kick In
Analyst: Jarick Seet ([email protected])
Sweet Spot Remains
Analyst: James Koh ([email protected])
Falling Gold Prices And Expansion Costs Weigh In
Analyst: Jarick Seet ([email protected])
Overhang On Likely Consensus Downgrades
Analyst: Lee Yue Jer, CFA ([email protected])
Pg16
9M14 Core Earnings Up 5.2% YoY
Analyst: Veena Naidu ([email protected])
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2
Results Review, 13 November 2014
HC International (2280 HK)
Buy (Maintained)
Technology - Software & Services
Market Cap: USD783m
Target Price:
Price:
HKD15.36
HKD9.10
Macro
Risks
Recovering Finally Taking Hold
Growth
Value
HC International (2280 HK)
Price Close
Relative to Hang Seng Index (RHS)
25.2
273
23.2
251
21.2
229
19.2
206
17.2
184
15.2
162
13.2
140
11.2
95
7.2
14
73

12
10
8
6
Sep-14
Jul-14
May-14
Jan-14
Mar-14
2
Nov-13
Vol m
4

Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Digital China
Guo Fansheng
Jayhawk
34.9m/4.50m
111.0
68.8
8.63 - 22.9
50
667
21.0
13.3
8.0
Share Performance (%)
YTD
1m
3m
6m
Absolute
(11.5)
(32.5)
(44.9)
(45.8)
12m
0.2
Relative
(13.7)
(35.6)
(41.3)
(52.7)
(3.8)

Results in line with previous profit alert. HC International (HCI)
booked 3Q14 recurring net profit of CNY58.2m (+25.7% YoY, -3.3%
QoQ) and revenue of CNY257.6m (+6.4 YoY, +6.7 QoQ) were both in
line with its previous positive profit alert (3Q14 revenue at least
CNY255m, net profit at least CNY46m). HCI’s gross margin was lowered
to 89.2% in 3Q14 vs 2Q14’s 96.7% on higher contribution from the low
margin seminars segment. Its operating margin stood at 23.5% (2Q14:
23.9%, 3Q13: 21.9%) while its net profit margin stood at 22.6% (2Q14:
24.9%, 3Q13: 19.1%) on improving operating leverage. Management
said that the revenue growth slowdown was due to the tailing effect of
the Minsheng Bank loan cut-off for new customers and over 100 sales
people leaving the company at the beginning of 2Q14, and that recovery
takes time.
Recovery in 4Q14 and FY15F. Management said in its earnings call
that HCI would still need a few months to fully recover from the negative
impact of the aforementioned issues. For FY14, HCI expects at least
20% revenue growth and 50% bottomline growth. For FY15, it is still
confident of achieving 30% topline growth and 50% bottomline growth.
We expect HCI’s topline to grow 20% and recurring earnings to rise 29%
in 4Q14. Its FY14F full-year growth will then be 20% on topline and 53%
on recurring earnings. We expect HCI’s FY15F revenues growth rate to
recover to 30% and FY15F recurring earnings to grow 55%.
Maintain BUY with lower HKD15.36 TP (from HKD18.53). We cut our
FY14F/FY15F/FY16F recurring earnings by 9%/12%/6% respectively,
mainly on more conservative revenue estimates. Our TP is based on
peers’ 0.5x FY15 PEG, implying 22x FY15F P/E. We think
management’s guidance for FY15 in the earnings call was positive, and
that it will help remove uncertainties and restore some investor
confidence.
Forecasts and Valuations
Dec-12
Dec-13
549
838
1,008
1,314
1,709
Reported net profit (CNYm)
67
153
231
357
522
Recurring net profit (CNYm)
64
151
231
357
522
Recurring net profit growth (%)
55.3
135.1
52.7
54.8
46.1
Recurring EPS (CNY)
0.12
0.26
0.35
0.54
0.79
Recurring P/E (x)
62.0
27.7
20.6
13.3
9.1
P/B (x)
11.5
4.7
4.1
3.0
2.1
P/CF (x)
38.1
12.1
17.9
8.7
6.0
EV/EBITDA (x)
55.6
19.5
15.6
9.1
5.1
Return on average equity (%)
21.6
24.7
22.3
25.8
27.2
Total turnover (CNYm)
Shariah compliant
Yujie Li +852 2103 5680
[email protected]
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
Dec-14F Dec-15F Dec-16F
net cash net cash net cash net cash net cash
(5.8)
(5.3)
(5.0)
Source: Company data, OSK-DMG
See important disclosures at the end of this report

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2
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.
3
0
.
3
0
0
.
3
0
0
3Q14’s CNY58.2m recurring earnings (+26% YoY) and CNY257.6m .
0
revenue (+6% YoY) were in line with its previous profit alert. Maintain 0
BUY, with HKD15.36 TP (from HKD18.53, 68.8% upside) based on peers’ 0
0.5x FY15F PEG, implying 22x FY15F P/E. We cut FY14F/FY15F/FY16F
recurring earnings by 9%/12%/6%, mainly on more conservative
revenue estimates. Management still sees above 30% topline growth
and over 50% bottomline growth for FY15.
117
9.2
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Results Review, 13 November 2014
MPI (MPI MK)
Buy (Maintained)
Technology - Semiconductors
Market Cap: USD306m
Target Price:
Price:
MYR6.34
MYR5.15
Macro
Risks
Decent Start to FY15
Growth
Value
MPI (MPI MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
7.00
247
6.50
229
6.00
211
5.50
194
5.00
176
4.50
158
4.00
140
3.50
123
3.00
105
2.50
2
1
1
1
1
1
87
0
0
.
2
0
0
MPI’s 1QFY15 (Jun) core earnings of MYR17.4m (+4.0% YoY) were well .
0
within both our and consensus expectations at 22.7% and 21.7% of the 0
full-year forecasts respectively. Maintain BUY with our TP unchanged at 0
MYR6.34 (15.8x 2015 P/E, 23.1% upside). Management declared its first
interim DPS of 7.0 sen, which translates into a decent payout ratio of
66.7% for the quarter. We make no changes to our forecasts.

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 (%)
1.37m/0.42m
26.4
23.1
2.87 - 6.45
47
199
Hong Leong Manufacturing Group
52.7


2

.
2
0
.
2





Largely in line. Malaysian Pacific Industries’ (MPI) 1QFY15 (Jun)
revenue reached MYR327.7m (+1.8% QoQ, -0.9% YoY), as higher
contribution from its segmental Asia (+12.9% QoQ, +19.8% YoY) sales
was partly offset by weaker showing from its US (-24.5% QoQ, -32.7%
YoY) and Europe (+9.0% QoQ, -1.5% YoY) divisions. We estimate that
1QFY15 sales would have increased by a larger quantum at 3-4% QoQ
and 1-2% YoY in USD, as the USD averaged at MYR3.19 (vs MYR3.23
in 4QFY14 and MYR3.24 in 1QFY15). All in, core earnings closed 4.0%
higher YoY at MYR17.4m but shed 19.2% QoQ due to higher opex and a
higher effective tax rate during the quarter.
Dividend declared. Management declared its first interim DPS of 7.0
sen (5.0 sen in 1QFY14). This translates into a decent payout ratio of
66.7% for the quarter (53.0% in 1QFY14).
Forecasts and risks. With the results largely in line, we make no major
changes to our core assumptions. Key risks to our earnings estimates
include: i) strengthening of the MYR against the USD, ii) higher raw
material costs, and iii) a potential slowdown in the semiconductor market
should consumer spending tighten.
Maintain BUY. We continue to advocate investors to accumulate on the
stock on improved earnings visibility going into 2015. Maintain BUY with
our TP unchanged at MYR6.34 (15.8x 2015 P/E, 23.1% upside). Our
valuation methodology is pegged at a 10% discount to our target multiple
for its peers in Inari Amertron (INRI MK, BUY, TP: MYR3.82) and
Globetronics Technology (GTB MK, NEUTRAL, TP: MYR4.75), which we
deem justified taking into account the duo’s relatively less volatile
profitability track record as well as larger presence within the betteryielding smart devices component segment.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
61.9
(6.9)
(17.1)
12.7
79.4
Relative
64.2
(7.8)
(15.7)
14.9
77.7
Forecasts and Valuations
Jun-13
Jun-14
Jun-15F
Jun-16F
Jun-17F
1,226
1,292
1,382
1,480
1,562
Reported net profit (MYRm)
11
45
77
92
110
Recurring net profit (MYRm)
15
53
77
92
110
243.9
43.9
20.7
18.7
Total turnover (MYRm)
Recurring net profit growth (%)
Shariah compliant
na
Recurring EPS (MYR)
0.07
0.25
0.36
0.44
0.52
DPS (MYR)
0.10
0.15
0.18
0.20
0.23
Kong Heng Siong +603 9207 7666
Recurring P/E (x)
69.8
20.3
14.1
11.7
9.8
[email protected]
P/B (x)
1.51
1.48
1.39
1.30
1.21
P/CF (x)
7.25
4.11
3.90
3.49
3.15
2.0
2.9
3.4
3.9
4.4
7.03
4.80
3.93
3.36
2.78
1.5
6.2
16.2
1.7
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
10.2
11.5
net cash
net cash
(4.5)
(3.3)
12.7
net cash
0.4
Source: Company data, OSK-DMG
See important disclosures at the end of this report
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Company Update, 13 November 2014
Genting Plantations (GENP MK)
Buy (Maintained)
Agriculture - Plantation
Market Cap: USD2,405m
Target Price:
Price:
MYR11.60
MYR10.46
Macro
Risks
Still Looking Good In FY15
Growth
Value
Genting Plantation (GENP MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
12.0
108
11.5
103
11.0
98
10.5
93
10.0
88
9.5
4
83
0
0
.
2
0
0
FFB production in 9M14 was stronger than expected, with expectations .
0
of an even stronger 2015. Maintain BUY, with a slightly higher TP of 0
MYR11.60 (10.9% upside), as we believe the company’s strong FFB 0
production growth would help offset the lower CPO prices somewhat.
On the property front, more property launches will take place in 4Q14,
allowing earnings to catch up to FY13’s levels by year-end.


3
3
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 (%)
4.61m/1.43m
4.8
10.9
9.70 - 11.7
30
770
Genting Berhad
EPF
Kumpulan Wang Persaraan
(Diperbadankan)
53.6
14.9
3.1
Share Performance (%)


Visit highlights: i) The company’s FFB production growth was stronger
than expected in YTD-Sep 2014, ii) new planting in Indonesia is slowing,
iii) the worst is over for CPO prices, iv) production costs may rise slightly
next year, v) biodiesel plants are still profitable, and vi) the property
division playing catch-up in 4Q14.
FFB production stronger than expected while property will likely
play catch-up in 4Q14. Genting Plantations’ FFB production in YTDSep 2014 was up 11.5% YoY, higher than management’s previous
projection of 10%, but slightly below our projected 12% for FY14.
Management expects to close the year at 10-12% growth, as it only
expects FFB production to peak in October/November. For FY15, it
expects FFB growth of 15% YoY, from 8,000ha of new areas coming into
maturity during the year, which is in line with our expectations. On the
property front, in the first nine months of FY14, Genting Plantations only
launched about 300 units, but will likely play catch-up in 4Q14, with
some 350 units to be launched. Management is confident of at least
matching FY13’s sales in FY14, not including some industrial lot land
sales worth c. MYR140m, which will be recognised in 4Q14.
Earnings forecasts tweaked upwards. We tweak our earnings
forecasts up by 4-6% for FY14 and FY15 after making the
abovementioned changes and introduce our FY16 forecast. We highlight
its earnings sensitivity to CPO prices, whereby every MYR100/tonne
change in CPO price could affect its earnings by 5-7% per annum.
Maintain BUY. Post-earnings revision, we lift our SOP-based TP slightly
to MYR11.60 (from MYR11.15), on an unchanged 18x CY15 target P/E
for the plantation division and RNAV of property development landbank.
Maintain BUY, as we believe Genting Plantations’ strong FFB production
growth would help offset the lower CPO prices somewhat. We also
highlight that stripping off the RNAV of the company’s property landbank
from its current market capitalisation would bring its P/E down by 5-6x.
YTD
1m
3m
6m
12m
Forecasts and Valuations
Absolute
(5.3)
6.7
(1.7)
(5.8)
(3.7)
Total turnover (MYRm)
Relative
(3.2)
5.6
(0.5)
(3.7)
(5.0)
Shariah compliant
Hoe Lee Leng +603 9207 7605
[email protected]
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
1,233
1,384
1,555
1,753
1,906
Reported net profit (MYRm)
361
228
306
390
448
Recurring net profit (MYRm)
355
299
306
390
448
(18.8)
(15.9)
2.5
27.3
15.0
Recurring EPS (MYR)
0.47
0.39
0.40
0.51
0.59
DPS (MYR)
0.09
0.36
0.09
0.10
0.12
Recurring P/E (x)
22.3
26.6
25.9
20.4
17.7
P/B (x)
2.32
2.32
2.17
2.02
2.06
P/CF (x)
35.4
23.9
65.1
18.6
15.8
0.9
3.4
0.8
1.0
1.1
17.6
18.8
17.9
14.3
12.9
10.9
6.7
8.6
10.3
11.5
1.0
9.9
11.6
22.3
(8.3)
(3.1)
(7.7)
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Recurring net profit growth (%)
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

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2

.
2
0
.
2

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Source: Company data, OSK-DMG
net cash
Results Review, 13 November 2014
Bumitama Agri (BAL SP)
Buy (Maintained)
Agriculture - Plantation
Market Cap: USD1,471m
Target Price:
Price:
SGD1.48
SGD1.08
Macro
Risks
Impacted By Kalimantan Drought
Growth
Value
Bumitama Agri (BAL SP)
Price Close
Relative to Straits Times Index (RHS)
1.30
130
1.25
126
1.20
122
1.15
118
1.10
114
1.05
110
1.00
106
0.95
102
0.90
98
0.85
94
0.80
6
90
5

3
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
2
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Hariyanto family
IOI Corp
0.70m/0.56m
25.0
37.0
0.89 - 1.27
19
1,758


50.9
30.4
Earnings in line. Bumitama Agri’s (Bumitama) 9M14 core earnings of
IDR938.5bn were in line with our forecast and consensus, making up 7778% of full-year numbers. 3Q14 production showed impact from a
rainfall deficit since July, falling by 10.4% QoQ against a traditionally
stronger 3Q. Despite that, earnings remain in line due to lower built-in
production growth assumptions and stronger than expected palm oil
price in IDR terms.
Key assumptions adjustment. Management guided that production
1H:2H will be 50:50 this year due to the ongoing drought. This implies
that production will grow at 23% rather 25%. We are cutting our 2014
nucleus FFB production forecast to 23% from the current 27.2%. We are
also reducing our FY15 production to 1.605m tonnes, which still
represents growth of 18.4%. We raise our effective CPO price
assumption to IDR8,398/kg from IDR8,048 for FY14, based on a
narrower 4% discount (8% before) vs West Malaysian prices. FY15 price
is raised to IDR9,169 from IDR8,787.
Earnings forecasts largely unchanged. The abovementioned changes
resulted in a marginal change to our FY14-15 earnings forecasts. Our TP
is lifted slightly to SGD1.48 (from SGD1.45), based on 16x FY15
earnings. We have also introduced our FY16 earnings forecast at
IDR1,733bn.
Consolidation phase. New planting YTD has been slow at 1,937ha,
largely made up of 1,828ha of plasma area. Nucleus planting was
deliberately slowed down to consolidate the rather rapid planting of the
past two years.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
14.9
4.9
(10.4)
(8.5)
8.5
Total turnover (IDRbn)
Relative
11.0
2.8
(10.0)
(10.7)
5.0
Shariah compliant
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,526
4,063
5,242
6,333
7,187
Reported net profit (IDRbn)
777
855
1,249
1,588
1,733
Recurring net profit (IDRbn)
697
868
1,249
1,588
1,733
22.0
24.6
43.9
27.1
9.1
790
494
711
903
986
Recurring net profit growth (%)
Recurring EPS (IDR)
Alvin Tai, CFA +603 9207 7628
Recurring P/E (x)
12.9
20.7
14.4
11.3
10.4
[email protected]
P/B (x)
3.67
3.19
2.60
2.11
1.75
P/CF (x)
15.2
16.6
11.8
8.9
8.1
8.0
15.0
10.7
8.4
7.5
Return on average equity (%)
20.5
16.3
19.9
20.6
18.5
Net debt to equity (%)
32.1
59.6
54.8
45.5
36.4
3.9
12.2
(0.7)
EV/EBITDA (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, OSK-DMG
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
2
0
0
Bumitama’s 9M14 core earnings were in line with expectations despite .
0
production being impacted by a rainfall deficit in Kalimantan since July. 0
Maintain BUY and our sector Top Pick call. Production and ASP YTD 0
are both ahead of our conservative forecast. Our earnings estimates
have been marginally tweaked to account for these, resulting in a
slightly higher TP of SGD1.48 (from SGD1.45), a 37% upside.

4




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6
Sector Update, 13 November 2014
Integrated Oil & Gas
NEUTRAL (Maintained)
Macro
Risks
Something Has Got To Give
Growth
Value






3

3

3
3
As a result of the fundamental change in the crude oil landscape, this
report addresses the impact of the lower crude oil price environment on
the companies under our coverage. For our Top Picks, we have chosen
companies that are not materially affected by the lower crude oil price
environment. Our top BUYS are Dialog, Ezion, Logindo, Nam Cheong,
and PTT. Our top SELLs are MMHE and Vard.



Kannika Siamwalla, CFA 66 2862 9744
[email protected]
This time it is different. The lower crude oil price environment is not
new to the global scene. The fundamental reasons for the major swings
in crude oil prices are: i) economic, ii) geopolitics, and iii) natural
disasters. These events/situations, given time, will rectify themselves
and allow commodity prices to revert back to norm, under the given
demand and supply situation. This time, though, it is different. As a result
of the US shale oil revolution, we are facing a change in the
fundamentals in the dynamics of crude oil supply.
Something has got to give. At the moment, it seems that some of the
higher cost producers are cutting capex/production. At the same time, it
seems that calls from weaker Organisation of the Petroleum Exporting
Countries (OPEC) members to cut production quotas are also coming
into play. Whatever happens, something has got to give. We believe that
crude oil prices will see some positive movements, possibly over the
next three to six months, as supply is lowered – either from the higher
cost producers or from the OPEC members cutting production quotas.
We expect that crude oil price will trade in the USD90-100/barrel (bbl)
range, averaging USD95/bbl over the next 12-24months.
The lower crude oil price environment impact. The bulk of the
companies under our ASEAN oil and gas (O&G) coverage universe are
in the services segment and will be relatively unaffected by the shortterm crude oil price volatilities. This is because these companies have
short- to medium-term services contracts. For Thailand, though, the
companies under our coverage are directly affected by the crude oil price
volatility via their revenue streams – for exploration and production
(E&P) business – and through stock gains/losses for their refineries.
Regional O&G Team
Malaysia: Kong Ho Meng
[email protected]
Malaysia: O&G Team
P/B (x)
Yield (%)
Dec-15F
4.6
Dec-15F
1.0
Indonesia: Willi Sitorus
Ezion Holdings
SGD1.48
SGD2.65
6.1
1.2
[email protected]
Logindo Samudramakmur
IDR4,175
IDR6,200
8.1
1.5
Singapore: Lee Yue Jer, CFA
Malaysia Marine and Heavy Eng
MYR2.04
MYR2.01
16.4
1.3
4.7
SELL
[email protected]
Nam Cheong
SGD0.41
SGD0.58
6.1
1.5
4.1
BUY
THB379.00 THB376.00
9.4
1.4
3.7
BUY
10.5
1.1
2.9
SELL
Singapore: Jesalyn Wong
[email protected]
See important disclosures at the end of this report
Vard Holdings
SGD0.68
Target
MYR2.25
P/E (x)
[email protected]
PTT
Price
MYR1.55
Dec-15F
25.8
Company Name
Dialog Group
SGD0.57
0.1
Rating
BUY
BUY
-
BUY
Source: Company data, OSK-DMG
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7
Corporate News Flash, 13 November 2014
China Fibre Optic Network System Group
Buy (Maintained)
(3777 HK)
Technology - Hardware & Equipment
Market Cap: USD545m
Target Price:
Price:
HKD3.00
HKD2.42
Macro
Risks
Robust Sales In 3Q14
Growth
Value
China Fibre Optic Network System Group (3777 HK)
Relative to Hang Seng Index (RHS)
222
2.90
208
2.70
194
2.50
180
2.30
166
2.10
152
1.90
138
1.70
124
1.50
110
1.30
96
1.10
450
400
350
300
250
200
150
100
50
82
- Domestic patch cord sales grew 40% YoY, making up 66% of total
sales.
- Overseas revenue grew slower at just 2% YoY, accounting for 8% of
total sales.

Sep-14
Jul-14
May-14
Jan-14
Mar-14

Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
58.1m/7.55m
38.4
24.0
1.31 - 2.92
64
1,746
Zhao Bing (Chairman)
In 3Q14, domestic patch cord sales surged by 104% YoY (1Q14/2Q14:
+16%/+8%) while overseas sales decreased by 18% YoY (1Q14/2Q14:
+14%/+14%).
Our view:

Source: Bloomberg

The 28% YoY topline growth was slightly above our +25% YoY full-year
FY14 forecast.
In 9M14, sales mix of domestic patch cords reached 66% and was
higher than our 56% FY14 forecast. This may mean that our GPM
forecast of 29.8% may be too high as the GPM of domestic patch cord
sales was much lower at 26% vs 60% for overseas sales.
We believe strong domestic patch cord sales should continue in 4Q14
due to strong demand from 4G capex running ahead of schedule, eg
China Mobile (941 HK, NR) has already reached its 4G base station
year-end target of 500k in October. Overall, we remain comfortable with
our FY14 recurring earnings forecast of HKD428m (+27% YoY).
Maintain BUY with an unchanged TP of HKD3.00 (24% upside), based
on a 7x FY15F P/E (peers' average).
36.5
Share Performance (%)
Dec-12
Dec-13
1,494
1,776
2,227
2,858
3,428
Reported net profit (CNYm)
272
333
428
590
715
Recurring net profit (CNYm)
272
336
428
590
715
Recurring net profit growth (%)
7.3
23.5
27.3
37.8
21.2
Recurring EPS (CNY)
0.22
0.26
0.28
0.34
0.41
DPS (CNY)
0.01
0.04
0.05
0.07
0.08
Christopher Tse +852 2103 9415
Recurring P/E (x)
8.55
7.27
6.93
5.66
4.67
[email protected]
P/B (x)
1.56
1.37
1.13
0.97
0.83
6
356
9
6
5
0.4
2.1
2.6
3.5
4.3
YTD
1m
3m
6m
12m
Absolute
57.1
6.6
(17.1)
41.5
83.3
Relative
55.2
3.8
(13.3)
34.8
79.6
Shariah compliant
Forecasts and Valuations
Total turnover (CNYm)
P/CF (x)
Dec-14F Dec-15F Dec-16F
Kong Yong Ng 852 2103 5844
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
4.61
4.24
3.69
3.14
2.45
Return on average equity (%)
20.1
18.9
17.2
18.5
19.1
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(4.3)
(11.1)
(7.6)
Source: Company data, OSK-DMG
See important disclosures at the end of this report


2

.
2
0
.
2
0
0
.
3
0
0
What’s new?
.
0
0

On 12 Nov, China Fiber Optic Network (CFON) announced that its 0
9M14 revenue climbed 28% YoY.

Nov-13
Vol m
Price Close
3.10




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8
Results Review and Company Update, 13 November 2014
Indo Tambangraya (ITMG IJ)
Neutral (Maintained)
Basic Materials - Mining
Market Cap: USD1,856m
Target Price:
Price:
IDR21,700
IDR20,075
Macro
Risks
Guiding For No Volume Growth In 2015
Growth
Value
Indo Tambangraya (ITMG IJ)
Price Close
Relative to Jakarta Composite Index (RHS)
34,000
110
32,000
101
30,000
93
28,000
84
26,000
75
24,000
66
22,000
58
20,000
49
18,000
14
40


8
6
Sep-14
Jul-14
May-14
Jan-14
Mar-14
2
Nov-13
Vol m
4
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
39,497m/3.28m
38.5
8.1
19,500 - 32,400
35
1,130
Banpu
Eastspring Investments
Blackrock
65.0
1.6
1.2
Share Performance (%)
Absolute
Relative


No volume growth. Following a year of no volume growth in 2014, Indo
Tambangraya is now guiding for an almost flat coal output in 2015. Coal
reserves at its Tandung Mayang mine will probably be fully depleted by
2015 and reserves at its Jorong mine will probably be exhausted by
2017. While it is guiding for a 4% volume CAGR over 2014-2016, an
increase in coal output remains highly dependent on a rise in benchmark
coal prices.
Should be able to maintain margins. Indo Tambangraya intends to
focus on reducing costs through gradually moving operations from high
SR, and hence high-cost operations, to low SR mines. In addition, the
commissioning of in-pit crushers and conveyor (IPCC) project and lower
mining contractor rate should enable it to adjust costs in response to
weak coal prices. EBITDA margin could probably remain stable at 1719% during 2014-2016F.
75% dividend payout sustainable without the need to borrow. Its
ability to maintain EBITDA margins and a drop in capex could enable
Indo Tambangraya to generate USD240m-300m of annual free cash flow
in 2015-2016F. While the absolute dividend amount will probably fall, the
positive FCF should well enable it to pay 70-75% of its profit as
dividends while maintaining USD330m-380m of annual net cash balance
during the same period.
Reduce EPS, maintain NEUTRAL. We lower our 2014/2015/2016 EPS
by 16%/18%/10% respectively to account for lower output guidance.
Despite its high ROE and sector-leading dividend yield of 6-7%, its
depleting coal reserve and high exposure to slowing Chinese coal import
market remains the key concern. Maintain NEUTRAL with a lower
IDR21,700 TP (from IDR28,250).
YTD
1m
3m
6m
12m
(29.6)
(18.5)
(26.7)
(19.5)
(34.3)
Forecasts and Valuations
(46.1)
Total turnover (USDm)
(45.8)
(18.5)
(23.8)
(20.9)
Shariah compliant
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
2,439
2,179
1,975
2,050
2,339
Reported net profit (USDm)
432
230
215
196
248
Recurring net profit (USDm)
397
227
193
196
248
(23.8)
(42.8)
(14.8)
1.2
26.6
Recurring net profit growth (%)
Recurring EPS (USD)
0.35
0.20
0.17
0.17
0.22
Shekhar Jaiswal +65 6232 3894
DPS (USD)
0.45
0.24
0.14
0.14
0.14
[email protected]
Recurring P/E (x)
4.68
8.19
9.60
9.49
7.50
P/B (x)
1.85
1.93
1.95
1.87
1.72
4.5
11.7
7.0
7.1
6.1
Dividend Yield (%)
27.2
14.5
8.7
8.4
8.7
EV/EBITDA (x)
2.20
3.81
4.60
4.20
3.40
41.5
23.4
22.5
20.1
23.9
P/CF (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


3

.
2
0
.
1
0
0
.
1
0
0
Indo Tambangraya is guiding for no growth in volume in 2015. Maintain .
0
NEUTRAL with a lower IDR21,700 TP (8% upside). While its ability to 0
maintain strip ratio (SR) and commissioning of IPCC project will enable 0
it to maintain margins, we expect negligible EPS growth in 2015. Large
cash outflows as dividend payouts could limit its ability to replenish the
falling coal reserve amid the weak coal price environment. Despite a 67% dividend yield, its valuations seem fair. We lower EPS by 10-18%.
12
10




Source: Company data, OSK-DMG
net cash net cash net cash net cash net cash
(20.1)
(13.5)
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(2.2)
9
Results Review, 13 November 2014
City Developments (CIT SP)
Neutral
Property - Real Estate
Market Cap: USD6,576m
Target Price:
Price:
SGD9.47
SGD9.36
Macro
Risks
Give It Time To Diversify
Growth
Value
City Developments (CIT SP)
Price Close
Relative to Straits Times Index (RHS)
11.4
112
10.9
108
10.4
104
9.9
100
9.4
95
8.9
91
8.4
3
87
0
0
.
2
0
0
City Developments (CDL) is trading at a 25% discount to RNAV, which .
0
is below its historical mean. At this price level, we think valuations are 0
undemanding. We assume coverage with NEUTRAL and a RNAV- 0
derived TP of SGD9.47 (1.2% upside). We believe the market has likely
priced in too excessive a discount on its SG residential exposure, and
not affording time for its overseas diversifications to bear fruit.


3
2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
8.62m/6.86m
7.9
1.2
8.68 - 11.1
65
909
Hong Leong Holdings
Aberdeen
Vanguard
Absolute
Relative
YTD
1m
3m
6m
12m
(2.5)
0.8
(5.8)
(13.2)
(7.2)
(6.7)

35.3
13.0
0.1
Share Performance (%)
(1.6)
(5.7)
(15.6)
(11.0)
Shariah compliant


2

.
2
0
.
2




3Q14/9M14 results in line. CDL reported 9M14 PATMI of SGD387.7m,
down 17.1% primarily due to the absence of divestment gains from noncore investment properties last year. Excluding these gains, PATMI
would have increased 25.5% for YTD Sep 2014.
Coco Palms and Commonwealth Towers are 77% and 41% sold
respectively. 9M14 profits were booked in from H2O Residences, Jewel
@ Buangkok, UP@Robertson Quay, The Venue Residences Buckley
Classique (temporary occupation permit “TOP” was obtained in Aug
2014) and Blossom Residences EC (TOP was obtained in Sep 2014).
Coco Palms and Commonwealth Towers, launched in May 2014, are
registering healthy sales. According to the Urban Redevelopment
Authority (URA), ASPs for Coco Palms and Commonwealth Towers are
SGD1,003/SGD1,615psf respectively (see Figures 4-5), with smaller
units on average being sold at the latter.
South Beach development progressing well with 90% precommitment by end-2014. The first tenant is expected to commence
business in 1Q15. Leases have been secured for one-third of the prime
office space. Another 50% of leases are being firmed up and South
Beach Consortium is currently in advanced negotiations with potential
tenants to take up another 10%. CDL is confident of hitting ~90%
occupancy by the end of the year.
Takes time to diversify. We expect it will take some time before CDL’s
overseas residential projects start to contribute to earnings. In China,
CDL is still pending the launch of Eling Residences and Suzhou HLCC,
dependent on market conditions. In Japan, CDL plans to develop
luxurious high-end condominiums at the former residence of Seiko’s
founder, Mr Kintaro Hattori’s freehold land site in Tokyo.

Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
3,354
3,162
3,259
2,938
2,900
Reported net profit (SGDm)
818
683
606
603
762
Recurring net profit (SGDm)
691
530
606
603
762
(13.5)
(23.3)
14.3
(0.4)
26.3
Total turnover (SGDm)
Recurring net profit growth (%)
Recurring EPS (SGD)
0.72
0.56
0.63
0.63
0.80
Ivan Looi +65 6232 3841
Recurring P/E (x)
12.9
16.9
14.8
14.8
11.7
[email protected]
P/B (x)
1.22
1.16
1.09
1.04
0.97
P/CF (x)
137
17
16
19
18
Singapore Research +65 6533 0781
EV/EBITDA (x)
7.7
10.0
7.7
7.2
7.0
[email protected]
Return on average equity (%)
11.6
9.1
7.6
7.2
8.5
Net debt to equity (%)
24.6
24.8
25.0
26.4
24.4
0.0
0.0
0.0
Our vs consensus EPS (adjusted) (%)
Source: Company data, OSK-DMG
See important disclosures at the end of this report
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10
Results Review, 13 November 2014
Golden Agri (GGR SP)
Neutral (from Buy)
Agriculture - Plantation
Market Cap: USD5,075m
Target Price:
Price:
SGD0.50
SGD0.51
Macro
Risks
Results Still Poor, Downgrade To NEUTRAL
Growth
Value
Golden Agri (GGR SP)
Price Close
Relative to Straits Times Index (RHS)
0.65
115
0.60
108
0.55
101
0.50
94
0.45
87
0.40
160
140
120
100
80
60
40
20
80
0
0
.
1
0
0
We downgrade Golden Agri to NEUTRAL from Buy, after slashing our .
0
earnings forecast – which also resulted in our new TP offering a 1.6% 0
downside from its current trading price. The company delivered another 0
quarter of disappointing results as its refining margin continued to be
poor and its oilseed business incurred further losses. Although there is
some improvement in crushing margin, visibility remains poor.
Sep-14
Jul-14
May-14
Mar-14
Jan-14

Nov-13
Vol m


Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Widjaja family
12.7m/10.0m
19.6
-1.6
0.47 - 0.62
50
12,838
50.0


2

.
2
0
.
2





Another poor quarter. Golden Agri’s performance deteriorated further
with core earnings falling by 46.7% QoQ due to weakness across all
operating segments. Lower palm oil prices in the quarter, poorer
downstream margins and a still-lossmaking oilseed segment resulted in
the earnings weakness. There was also an increase in inventory during
the quarter by about 100k tonnes, which carried an unrealised profit of
some USD12m. Core earnings for the 9M period only made up 55% of
our full-year forecast.
Decreasing our earnings forecast. We slash our earnings forecast for
FY14 to USD198m from USD319m previously, and also cut our FY15F
earnings to USD323m vs USD369m previously. We factored in a thinner
refining margin and a loss of USD81m for the oilseed segment for our
FY14 estimate.
Upstream maintained. No changes to our assumptions for Golden
Agri’s plantation upstream business. Our assumptions are sufficiently
conservative in light of the current dry weather in Kalimantan, whereby
management indicated that about half of its total estates have been
affected.
Downgrade to NEUTRAL. As we cut our estimates, our TP slips to
SGD0.51 from SGD0.57, which offers no upside from its current levels.
As such, we downgrade our recommendation to NEUTRAL from Buy.
Although we expect palm oil prices to strengthen from now to Feb/Mar
2015, Golden Agri’s stock price may lag given the drag from oilseed and
palm oil downstream. There will also be an impairment on its biological
assets in 4Q, as the palm oil ASP used in its biological asset valuation is
at USD960/tonne vs the prevailing palm oil price of c.USD700/tonne.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(6.4)
3.0
(2.9)
(15.0)
(9.7)
Relative
(10.3)
0.9
(2.5)
(17.2)
(13.2)
Shariah compliant
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover (USDm)
5,953
6,052
6,585
6,797
7,335
Reported net profit (USDm)
1,268
410
311
198
323
Recurring net profit (USDm)
586
404
317
198
323
Recurring net profit growth (%)
46.8
(31.0)
(21.7)
(37.5)
63.4
Recurring EPS (USD)
0.05
0.03
0.02
0.02
0.03
DPS (USD)
0.01
0.01
0.01
0.00
0.01
8.2
12.2
16.0
25.6
15.7
0.60
0.60
0.58
0.59
0.57
7
14
276
3.6
2.5
1.4
0.9
1.4
12.1
Alvin Tai, CFA +603 9207 7628
Recurring P/E (x)
[email protected]
P/B (x)
P/CF (x)
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
10
5.9
7.5
10.3
16.6
17.1
4.9
3.6
2.3
3.7
9.0
13.6
22.7
34.0
35.3
(44.9)
(25.9)
Source: Company data, OSK-DMG
See important disclosures at the end of this report
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11
Results Review, 12 November 2014
MoneyMax Financial Services (MMFS SP)
Financial Services - Non-Bank Financials
Market Cap: USD80.6m
Neutral (Maintained)
Target Price:
Price:
SGD0.31
SGD0.30
Macro
Risks
Expansion Costs Kick In
Growth
Value


2

.
1
0
.
2




0
0
.
1
0
0
Moneymax’s 3Q14 results were largely impacted by its expansion costs .
0
in Singapore and Malaysia. Revenue rose 18.6% YoY to SGD19.2m while 0
NPAT reversed from a loss of SGD0.9m to SGD0.08m, substantiating 0
the turnaround. However, costs incurred from its aggressive expansion
plans in Singapore and Malaysia hurt its bottomline. Thus, we slash our
FY14 NPAT estimate by 61% to SGD1.31m and lower our TP to SGD0.31
(3.3% upside, 1.9x FY14F P/BV). Maintain NEUTRAL.
L
MoneyMax Financial Services (MMFS SP)
Price Close
Relative to Straits Times Index (RHS)
0.42
109
0.40
104
0.38
99
0.36
94
0.34
89
0.32
84
0.30
79
0.28
74
0.26
1
69

1
1
1
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Vol m

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Money Farm Pte Ltd
Lim Yong Guan
Lim Yong Sheng
0.01m/0.01m
3.3
3.3
0.28 - 0.40
15
354
60.2
12.5
10.8
Share Performance (%)

Expansion costs hurt bottomline. Moneymax Financial Services’
(Moneymax) 3Q14 revenue rose 18.6% YoY to SGD19.2m, mainly due
to higher revenue from the retail and trading of pre-owned jewellery and
watches segment. NPAT reversed from a loss of SGD0.9m in 3Q13 to
SGD0.08m, substantiating the turnaround. However, employee benefits
expenses continued to surge 25.3% YoY to SGD2.3m, due to higher
number of employees needed for the new retail outlets as well as
increased corporate headquarter activities relating to the Malaysian
investment.
Depreciation and amortisation (D&A) expenses on the rise. D&A
expenses surged 44.5% YoY, driven by higher depreciation in renovation
and plant and equipment due to the launch of new retail outlets and the
refurbishment of existing outlets. Going forward, we expect D&A
expenses to continue to increase due to its aggressive expansion plans
in Malaysia.
Likely to see light only in FY16. With a total of 45 retail outlets in
Singapore and Malaysia, MoneyMax’s bottomline has been hit by higher
D&A and admin expenses. After incorporating higher operating costs into
our forecasts, we lower our FY14 recurring net profit forecast by a further
61% to SGD1.3m. We also lower our TP to SGD0.31 (from SGD0.32),
pegged to a peer average of 1.9x FY14F P/BV, as we anticipate higher
operating costs from its aggressive expansion plan in Malaysia being
likely to limit the company’s earnings growth over the next two years
before its new pawnshops turn profitable. However, revenue contribution
from its Malaysian investment has commenced and there might be
potential improvement on this front. Maintain NEUTRAL, with Valuemax
Group (VMAX SP, BUY, TP: SGD0.60) still our Top Buy among
Singapore pawnbrokers.
YTD
1m
3m
6m
12m
Absolute
(10.6)
(3.3)
(7.8)
(7.8)
(19.2)
Forecasts and Valuations
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
(14.8)
(5.1)
(7.4)
(9.8)
(22.3)
Total turnover (SGDm)
62.9
75.6
65.6
73.7
79.7
Reported net profit (SGDm)
3.50
5.83
1.77
1.31
1.81
Recurring net profit (SGDm)
3.50
5.83
1.77
1.31
1.81
202.2
66.6
(69.6)
(26.3)
39.0
Recurring EPS (SGD)
0.01
0.02
0.01
0.00
0.01
Recurring P/E (x)
29.8
17.9
58.9
79.9
57.5
P/B (x)
3.11
2.65
1.80
1.79
1.74
Shariah compliant
Recurring net profit growth (%)
Jarick Seet +65 6232 3891
[email protected]
Terence Wong CFA +65 6232 3896
[email protected]
P/CF (x)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
22.0
na
16.9
na
30.1
12.3
27.4
na
26.6
13.3
16.0
3.6
2.2
3.1
162.2
204.1
146.4
147.5
159.4
0.0
0.0
Source: Company data, OSK-DMG
See important disclosures at the end of this report
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12
Results Review, 13 November 2014
Petra Foods (PETRA SP)
Buy (Maintained)
Consumer Non-cyclical - Food & Beverage Products
Market Cap: USD1,748m
Target Price:
Price:
SGD4.25
SGD3.69
Macro
Risks
Sweet Spot Remains
Growth
Value




0
0
.
2
0
0
Petra’s 3Q14 results came in below expectations, partly due to the forex .
0
effect. Maintain BUY with a reduced DCF-based TP of SGD4.25 (15% 0
upside). 9M14 PATMI of USD37.6m made up 63% of consensus 0
estimate. Despite ongoing challenges, we believe Petra remains in a
sweet spot to capture sales in ASEAN’s two biggest growth markets.
Having highlighted IDR weakness as a key risk earlier, we cut our FY1416 earnings forecasts by 11-14%.
ea
Petra Foods (PETRA SP)
Price Close
Relative to Straits Times Index (RHS)
4.30
123
4.10
118
3.90
113
3.70
108
3.50
103
3.30
98
3.10
93
2.90
3
88


3
2
2
Sep-14
Jul-14
May-14
Mar-14
Jan-14
1
Nov-13
Vol m
1
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
John Chuang
Aberdeen
Prudential PLC
0.48m/0.38m
4.9
15.3
3.10 - 4.20
33
611
51.1
9.0
5.0


Results adversely impacted by IDR depreciation. Petra Foods’
(Petra) 3Q14 revenue declined 6.5% YoY, while recurring profit declined
29% YoY to USD10.6m. During the quarter, the IDR declined around
13% on average YoY. This had both actual as well as translational
impact on operating margins. On a constant exchange rate basis, net
profit fell by 18.7% mainly as a result of higher operating expenses.
3Q14 revenue flattish. The weak 4% YoY growth in Indonesia sales in
IDR terms was attributed to seasonality. Lebaran festive sales were
already captured in 2Q14, vs in third quarter last year. On a 9MYTD
basis, sales growth in IDR terms remained strong, up 15% YoY. A
reduction of agency brands also impacted sales, especially in the
regional markets. We believe this is a conscious decision to focus on
core brands. Management revealed that revenue from the Philippines
grew more than 17% YoY, excluding discontinued agency brands.
Stable gross margin but higher operating costs. Petra’s forward
purchase programme has worked well with its gross margin maintained
at 31.7% despite higher cocoa prices YoY. However, selling and
distribution costs are likely to increase further as Petra continues to
invest in its distribution infrastructure and warehouse. On a 9MYTD
basis, EBITDA margin has declined about 100bps.
Maintain BUY with a lower TP of SGD4.25. IDR depreciation remains a
key investment risk. We cut our FY14-16 earnings forecasts by 11-14%
and reduce our DCF-derived TP to SGD4.25 from SGD4.50, implying a
31.4x FY15F P/E. We now expect a net profit CAGR of 25% over FY1516, driven mainly by continued growth in existing markets.
Share Performance (%)
Dec-12
Dec-13
Dec-14F
Dec-15F
472
509
509
593
710
Reported net profit (USDm)
25.7
20.5
51.6
64.2
80.2
Recurring net profit (USDm)
54.3
59.3
51.6
64.2
80.2
Recurring net profit growth (%)
38.9
9.1
(12.9)
24.3
24.9
Recurring EPS (USD)
0.09
0.10
0.08
0.11
0.13
DPS (USD)
0.04
0.06
0.04
0.05
0.06
James Koh +65 6232 3839
Recurring P/E (x)
32.2
29.5
33.9
27.2
21.8
[email protected]
P/B (x)
5.35
6.02
5.49
4.94
4.39
1.9
19.1
23.6
20.0
1.4
2.2
1.3
1.7
2.1
22.1
18.5
19.5
15.9
12.7
YTD
1m
3m
6m
12m
Absolute
14.6
(6.8)
(3.9)
3.7
7.0
Relative
10.7
(8.9)
(3.5)
1.5
3.5
Shariah compliant
Forecasts and Valuations
Total turnover (USDm)
P/CF (x)
Juliana Cai +65 6232 3871
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
na
8.3
6.7
120.5
net cash
17.0
19.1
Dec-16F
21.3
net cash
net cash
net cash
(19.6)
(17.3)
(17.0)
Source: Company data, OSK-DMG
See important disclosures at the end of this report


2

.
1
0
.
3
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13
Results Review, 13 November 2014
ValueMax Group (VMAX SP)
Buy (Maintained)
Financial Services - Non-Bank Financials
Market Cap: USD180m
Target Price:
Price:
SGD0.57
SGD0.44
Macro
Risks
Falling Gold Prices And Expansion Costs Weigh In
Growth
Value
ValueMax Group (VMAX SP)
Price Close
Relative to Straits Times Index (RHS)
0.54
105
0.52
101
0.50
96
0.48
92
0.46
88
0.44
84
0.42
79
0.40
12
75
0
0
.
2
0
0
While Valuemax’s pawnbroking business in 3Q14 slowed as gold prices .
0
fell below USD1,200 per ounce in early October, we maintain BUY with a 0
new SGD0.57 TP (1.9x FY15 P/BV, 29.5% upside) as we expect its 0
property loans to pick up, especially in FY15. Meanwhile, since its 3Q14
NPAT fell 45.4% YoY to SGD1.81m from rising expenses attributed to
expansion, we trim our FY14 NPAT estimate by 10.5% to SGD11m.

10

8
6
Sep-14
Jul-14
May-14
Mar-14
Jan-14
2
Nov-13
Vol m
4
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Yeah Holdings
Yeah Hiang Nam
Tan Hong Yee
0.41m/0.32m
36.4
29.5
0.42 - 0.52
26
533
59.3
7.4
7.4
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(5.4)
(2.3)
(5.4)
(1.1)
(15.5)
Relative
(9.3)
(4.4)
(5.0)
(3.3)
(19.0)


2

.
2
0
.
2





A weak quarter on falling gold prices and expansion costs. Despite
revenue rising 7.5% YoY to SGD87.6m from SGD81.4m, ValueMax
Group’s (Valuemax) 3Q14 NPAT plunged by 45.4% YoY to SGD1.8m
due to fewer pawnbroking loans given out as a result of falling gold
prices and a rise in manpower and rental expenses from its new outlets.
Due to fewer pawnbroking loans which yield higher margins, gross
margin declined to 7% in 3Q14 from 8.5% in 3Q13.
Property loans a potential catalyst for earnings. Despite acquiring the
money lending licence earlier, we expect the property loans segment to
contribute significantly only from FY15 onwards. We expect Valuemax to
add conservative estimates of about SGD25m and SGD30m of loans
from this new business segment in FY15 and FY16 respectively. Going
forward, we also expect potential strong EPS growth of 20.6% and
12.5% in FY15 and FY16 respectively, coupled with the opening of new
pawnbroking outlets in Malaysia and Singapore.
Maintain BUY with a revised TP of SGD0.57. Despite a disappointing
3Q14, we expect a better 4Q, which is traditionally the strongest quarter
of the year. With two more outlets in Malaysia commencing business by
the end of FY14, Valuemax will operate a total of 30 outlets by then. We
expect costs to increase further, which might be a drag on its bottomline
in the near future. As a result, we lower our FY14 and FY15 NPAT
estimates by 10.5% and 21%, to SGD11m and SGD13.2m respectively.
In addition, we lower our TP to SGD0.57 from SGD0.60, pegged to 1.9x
FY15F P/BV. Despite a weak quarter, we still like Valuemax as it is still
performing significantly better than its local listed peers. It remains our
Top Pick for the pawnbroking sector in Singapore. Maintain BUY with a
SGD0.57 TP.
Forecasts and Valuations
Total turnover (SGDm)
Reported net profit (SGDm)
Dec-12
Dec-13
Dec-14F
Dec-15F
509
353
383
414
Dec-16F
441
14.3
9.4
11.0
13.2
14.9
Recurring net profit (SGDm)
14.3
9.4
11.0
13.2
14.9
Recurring net profit growth (%)
(0.9)
(34.8)
17.1
20.6
12.5
Recurring EPS (SGD)
0.04
0.02
0.02
0.02
0.03
DPS (SGD)
0.00
0.01
0.01
0.01
0.01
Jarick Seet +65 6232 3891
Recurring P/E (x)
12.0
21.6
21.2
17.6
15.6
[email protected]
P/B (x)
2.38
1.58
1.53
1.47
1.38
Shariah compliant
P/CF (x)
Terence Wong CFA +65 6232 3896
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
18
na
23
na
682
0.0
2.0
2.4
2.8
3.2
15.2
24.1
20.6
18.0
16.4
22.0
8.6
7.3
8.5
9.1
118.1
18.9
17.1
23.0
23.5
0.0
0.0
0.0
Source: Company data, OSK-DMG
See important disclosures at the end of this report
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14
Results Review, 12 November 2014
Vard Holdings (VARD SP)
Sell (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD615m
Target Price:
Price:
SGD0.58
SGD0.68
Macro
Risks
Overhang On Likely Consensus Downgrades
Growth
Value
VARD Holdings (VARD SP)
Relative to Straits Times Index (RHS)
1.20
140
1.10
130
1.00
120
0.90
110
0.80
100
0.70
90
0.60
80
0.50
90
80
70
60
50
40
30
20
10
70

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 (%)
Fincantieri
4.58m/3.61m
36.8
-14.7
0.64 - 1.16
44
1,180
55.6
Share Performance (%)


An unexciting quarter and likely unexciting years ahead. Vard’s
3Q14 PATMI loss of NOK37m was somewhat smaller than feared, even
as losses in Brazil widened to c.NOK250m from c.NOK70m in 2Q14.
With the unprofitable projects soon to be completed, Brazil should see a
slow turnaround to break even over FY15F, which should reduce the
earnings drag, but we think EBITDA margins are likely to stay at suboptimal levels of 5-6% for the next two years.
Order win outlook likely below replacement levels. Management has
guided for “below average new order intake expected in the near to
medium term” as the deepwater segment faces uncertainties over
investment levels, asset utilisations and charter rates. We believe Vard
could secure one or two more orders this year, but a slowing order
momentum could delay a return to healthy profitability that would be
necessary for the stock to recover. Given that the average order wins in
the last three years were NOK11.6bn, management could be guiding for
order wins below replacement levels for the next two years.
Consensus downgrades present a near-term overhang. At >40%
below consensus, we believe our forecasts have conservatively taken in
most expected losses and zero-margin contracts in the orderbook. We
see consensus downgrades of c.40% in the near term as Vard’s
operations are unlikely to rebound quickly, which should limit stock
performance.
Valuations look high relative to peers with strong growth. Vard’s
valuations of 14x/11x FY14/FY15F P/Es respectively are at best fair,
though we think the premium over its peers with strong growth, which
trades at 7x FY14F P/E, is undeserved. Our SGD0.58 TP (from
SGD0.57) is based on a 10x FY14F/FY15F blended P/E, with a premium
already imputed for its higher technology and specialised skill-sets.
YTD
1m
3m
6m
12m
Absolute
(17.2)
(19.2)
(32.8)
(33.2)
(18.7)
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Relative
(21.4)
(21.6)
(32.6)
(34.7)
(22.3)
Total turnover (NOKm)
11,129
11,155
11,323
13,148
12,666
Reported net profit (NOKm)
804
357
290
376
406
Recurring net profit (NOKm)
804
357
290
376
406
(49.6)
(55.6)
(18.7)
29.5
8.0
Recurring EPS (NOK)
0.68
0.30
0.25
0.32
0.34
DPS (NOK)
0.59
Shariah compliant
Recurring net profit growth (%)
Lee Yue Jer, CFA +65 6232 3898
[email protected]
Jesalyn Wong +65 6232 3872
[email protected]
0.07
0.10
0.10
5.2
11.8
14.5
11.2
10.4
P/B (x)
1.33
1.14
1.06
0.98
0.92
P/CF (x)
4.23
Dividend Yield (%)
16.6
0.0
2.1
2.7
2.9
3.4
10.7
13.8
9.5
8.4
Return on average equity (%)
24.1
10.4
7.6
9.1
9.2
Net debt to equity (%)
46.4
106.3
87.9
92.3
74.6
(42.3)
(45.0)
(49.2)
Recurring P/E (x)
EV/EBITDA (x)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


3

.
3
0
.
1
0
0
.
1
0
0
In line with its profit warning, 3Q14 PATMI was a NOK37m loss as .
0
Brazil’s losses widened and some European projects suffered cost 0
overruns. Maintain SELL with a SGD0.58 TP (a 14.7% downside). We 0
expect a breakeven performance from Brazil next year and a small
recovery back to FY13 levels. We believe valuations at 14x/11x
FY14F/FY15F P/Es are still high relative to peers and consensus
forecasts are likely to fall c.40%.

Nov-13
Vol m
Price Close




Source: Company data, OSK-DMG
na
4.87
na
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5.19
15
Results Review, 13 November 2014
Namyong Terminal (NYT TB)
Buy (Maintained)
Transport - Transportation
Market Cap: USD274m
Target Price:
Price:
THB18.70
THB14.50
Macro
Risks
9M14 Core Earnings Up 5.2% YoY
Growth
Value
Namyong Terminal (NYT TB)
Price Close
Relative to Stock Exchange of Thailand Index (RHS)
21.0
182
20.0
173
19.0
164
18.0
155
17.0
146
16.0
137
15.0
128
14.0
119
13.0
110
12.0
101
11.0
350
92
300


200
150
Sep-14
Jul-14
May-14
Mar-14
Jan-14
50
Nov-13
Vol m
100

Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Share outstanding (m)
Shareholders (%)
11.6m/0.36m
29.0
29.0
11.9 - 20.0
33
620
Nam Yuen Yong Shipping
Noree Suksawath
Theparak Leungsuwan
20.3
19.5
15.6
Share Performance (%)
YTD
Absolute
Relative
(14.7)
(35.4)
1m
(7.7)
(8.6)
3m
(8.2)
(11.3)
6m
12m

Net profit in line with our forecast. Namyong Terminal’s (Namyong)
9M14 core earnings were in line, at 73% of our FY14 forecast, as
revenue recovered from 2Q14’s low season and delayed orders being
booked in 3Q14. Gross margin for the quarter under review hit a new
high as sales picked up 41.8% vs 36.5% in 2Q14 and 40.6% in 1Q14.
Car export units slowly improving. While 9M14 car exports dropped
1% YoY to 838,952 units – making up 80% of our 1.1m full-year forecast
– we believe automotive exports bottomed out in April and will remain at
the nearly 100,000 units/month mark from 4Q14 onwards (see Figure 2).
With the increasing number of car exports, our analysis indicates that
every 10,000 units through Namyong’s terminal within a quarter could
boost its net profit by 3.6%. Thus, we forecast for FY15 car exports to
grow 10.5% to 1.2m units.
Impact of new accounting standard. Namyong’s share of profit from
associates was a negative THB4.9m (2Q14: THB3.29m losses) on
adjustments to comply with the new accounting standards. Thus, the
amortisation of its terminal concession was front-loaded instead.
However, with the strong recovery in FY15, we believe the sturdy car
export growth numbers in 2015 will cover its losses and turn into profit
with the new accounting standard.
Maintaining FY15 growth. We maintain our FY14 earnings forecast but
lower our FY15 net profit estimates by 5.7%. Maintain BUY, with our
THB18.70 TP (from THB19.70) pegged to 24.9x FY15F P/E. We expect
Namyong to enjoy earnings growth of 7% and 14.5% for FY14 and FY15
respectively, driven by a recovery in the global economy and Thailand’s
role as South-East Asia’s automobile manufacturing hub.
Dec-11
Dec-12
Dec-13
Dec-14F
Dec-15F
(15.2)
Total turnover (THBm)
852
1,159
1,253
1,355
1,481
(29.0)
Reported net profit (THBm)
208
325
380
405
464
Recurring net profit (THBm)
208
325
380
405
464
(17.5)
56.6
16.8
6.7
14.5
Recurring EPS (THB)
0.72
0.79
0.61
0.65
0.75
DPS (THB)
0.00
0.00
0.35
0.36
0.45
Recurring P/E (x)
20.2
18.5
23.7
22.2
19.4
P/B (x)
6.47
6.14
2.51
2.56
2.39
P/CF (x)
12.3
11.1
27.1
14.2
14.0
0.0
0.0
2.4
2.5
3.1
(7.84)
(7.68)
1.63
1.04
0.02
28.5
40.0
6.6
52.2
Shariah compliant
Veena Naidu License No. 24418, 66 2862 9752
[email protected]
Forecasts and Valuations
Recurring net profit growth (%)
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
16.6
net cash
11.4
net cash
0.0
12.8
net cash
0.0
Source: Company data, OSK-DMG
See important disclosures at the end of this report


2

.
1
0
.
3
0
0
.
2
0
0
Namyong’s 9M14 core earnings rose 7.9% YoY and made up 73% of our .
0
FY14 forecast. Maintain BUY, with a lower THB18.70 TP (from 0
THB19.70), a 29% upside, based on 24.9x FY15F P/E. 3Q14 earnings 0
rose 26.5% QoQ and 9.9% YoY to THB109.1m while total revenue
remained solid at THB335.7m, up 6.7% QoQ and 5.2% YoY. We opine
car exports bottomed out in April and are slowly picking up, with
Namyong gaining from this growth.
250
Source: Bloomberg
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RHB Guide to Investment Ratings
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading
Buy:
Share
may10%
exceed
over 12
themonths
next 3 months, however longer-term outlook remains uncertain
Buy: Share
price
mayprice
exceed
over15%
the next
Neutral: Buy:
ShareShare
price price
may fall
within
the 15%
rangeover
of +/the next
12 months
Trading
may
exceed
the10%
nextover
3 months,
however
longer-term outlook remains uncertain
Take Profit:
Target
been attained.
accumulate
lower
Neutral:
Share
priceprice
may has
fall within
the rangeLook
of +/-to10%
over theatnext
12 levels
months
Sell: Share
may
fall has
by more
10% over
next 12 months
Take
Profit:price
Target
price
beenthan
attained.
Look the
to accumulate
at lower levels
Not
is not
regular
coverage
Sell:Rated:
Share Stock
price may
fallwithin
by more
thanresearch
10% over
the next 12 months
Not Rated: Stock is not within regular research coverage
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