1. business and industrial
2. company
3. earnings

Regional Daily, 18 December 2014
5
Regional Daily
Ideas Troika
Top Stories
Indonesia Construction Sector
OVERWEIGHT
Pg2
We have a more positive view on the construction sector following the recent
hike in subsidised fuel prices. We believe the Government will have
additional funds that can be allocated for infrastructure spending.
Furthermore, there are several projects that will be initiated in 2015- 2019.
Analyst: Yualdo T Yudoprawiro ([email protected])
Goldpac Group (3315 HK)
Technology - Technology
BUY HKD5.04 TP: HKD9.50
Mkt Cap : USD540m
Pg3
We believe the recent share price correction offers a good entry opportunity
its current share price is even lower than its IPO price of HKD5.39. Goldpac
has the most market share in domestic IC card shipments in both value and
volume.
Analyst: Jackson Yu CFA ([email protected])
Pg4
A Strong Start To FY15
Other Key Stories
Malaysia
VS Industry (VSI MK)
Consumer Non-cyclical - Packaging
BUY MYR2.17 TP: MYR2.95
Analyst: Fong Kah Yan ([email protected])
Hiap Teck Venture (HTVB MK)
Basic Materials - Metals
BUY MYR0.55 TP: MYR0.72
Pg5
Scientex (SCI MK)
Consumer Non-cyclical - Packaging
BUY MYR6.84 TP: MYR8.64
Pg6
See important disclosures at the end of this report
Jointly-Controlled Entity Drags Down Net Profit
Analyst: Jerry Lee ([email protected])
Decent Start To FY15
Analyst: Kong Heng Siong ([email protected])
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1
Sector Update, 17 December 2014
Construction
Overweight (from Neutral)
Macro
Risks
Expecting Realisation
Growth
Value






3

3

2
3
Infrastructure budget from State Budgets
IDRtrn
2,500
2,039
2,039
1,877
2,000
1,651
1,491
1,500
1,295
986
1,000
500
510
361
667
440
758
505
60
54
26
1,042
937
693
79
1,011
884
629
1,137
1,280
1,392 1,392
697
91
99
204
175
129
210
268
400
2015F
2015F budget
according to JK
2014F
2013
2012
2011
2010
2009
2008
2007
2006
2005
-
Total APBN Expenditures
Central Government Expenditures
Inf rastructure budget f rom APBN
We have a more positive view on the construction sector following the
recent hike
in subsidised fuel prices. We believe the Government will
Title:
Source:
have additional
funds that can be allocated for infrastructure spending.
Furthermore,
there
are
projects
that will be initiated in 2015Please fill
in the values
aboveseveral
to have them entered
in your report
2019. Nonetheless, challenges like the revision of the State Budget,
extra fund allocations for infrastructure and projects realisation remain.

Source: Ministry of Finance, Media, RHB
Construction sector forward P/E (x) (12 Dec)
25

23.1
23
21
20.1
19.92
19
17.1
17
14.11
15
13
11.1
11
Average
+1SD
-1SD
Sector P/E- Roll
+2SD
-2SD
Nov-14
Sep-14
Jul-14
May-14
Jan-14
Mar-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
9
Source: Bloomberg


Yualdo T Yudoprawiro +6221 2598 6888
2015 is the decisive year. A few days after Joko Widodo (Jokowi) took
office, significant events like the subsidised fuel price hike commenced.
Looking at this level of aggressiveness, we believe the majority of
infrastructure projects will start in 2H15. With an initial estimation of
~IDR100trn of extra funds from the fuel subsidy savings, we believe
there should be more allocations for the infrastructure spending budget,
which will be allocated in the revised 2015 State Budget (APBN-P 2015).
Title:
Source:
Government
commitments. Aside from the fuel subsidy cut, another
fill in the values above to have them entered in your report
form ofPlease
commitment
from the Government was the announcement of
incentives given to state-owned enterprises (SOEs) in infrastructurerelated sectors and the foreign-friendly investment invitation during the
recent Asia-Pacific Economic Cooperation 2014 (APEC 2014) forum in
Beijing, China. Furthermore, President Jokowi recently announced that
he will issue a Presidential Decree (Inpres) to ensure that all tenders on
government projects/events are to be completed by Mar 2015.
Additional proposed funding for infrastructure. As discussions on
APBN-P 2015 continue, the Government will allocate more spending on
infrastructure, initially amounting to ~IDR40trn. As a result, the total
budget for infrastructure will be around IDR250trn, or approximately a
19% increase from 2014’s IDR210trn budget. Nonetheless, we view this
as one of the challenges. This is because APBN-P 2015 needs
parliamentary approval and the majority of the members of Parliament
come from the opposition bloc.
Upgrade to OVERWEIGHT. The Land Acquisition Law, revision on
APBN-P 2015, and commitment from the Government will definitely
boost market confidence towards the industry. With such optimistic
views, as a result of the factors mentioned above, we upgrade the
sector’s recommendation to OVERWEIGHT (from Neutral). Of the
counters under our coverage, we prefer Pembangunan Perumahan
(PTPP IJ, BUY, TP: IDR3,600) (see our report Beneficiary Of Port
Projects dated 27 Nov). This is because the company has a higher
chance of winning port-related projects. We believe sea port-related
projects will be one of the Government’s main focuses starting next year.
Furthermore, we believe the stock will have higher CAGR revenue
growth of 32% in FY14-17 vs the 26% average of its peers.
[email protected]
Agus Pramono, CFA +6221 2598 6765
[email protected]
Com pany Nam e
Adhi Karya
Price
Target
P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
Rating
IDR3,030
IDR3,240
19.9
3.0
0.5
NEUTRAL
Pembangunan Perumahan Persero TbkIDR3,315
PT
IDR3,600
27.7
5.8
0.8
BUY
Wijaya Karya Beton
IDR1,225
IDR1,400
29.0
4.3
0.9
BUY
Wijaya Karya Persero
IDR3,295
IDR3,860
24.4
4.2
1.1
BUY
Source: Company data, RHB
See important disclosures at the end of this report
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2
Company Update, 18 December 2014
Goldpac Group (3315 HK)
Buy (Maintained)
Technology - Technology
Market Cap: USD540m
Target Price:
Price:
HKD9.50
HKD5.04
Macro
Risks
Share Price Decline Brings Buying Opportunity
Growth
Value
Goldpac (3315 HK)
Price Close
What's new
Relative to Hang Seng Index (RHS)
10.50
134
9.50
122
8.50
111
7.50
99
6.50
87
5.50
76
4.50
70
64


50
40

30
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
10
Dec-13
Vol m
20
Source: Bloomberg
13.0m/1.67m
75.8
88.5
5.04 - 9.50
25
830
43.4
18.4
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(32.8)
(29.8)
(31.6)
(31.3)
(33.5)
Relative
(31.6)
(26.6)
(26.1)
(30.5)
(33.3)
We spoke with Goldpac's management after its share price depreciated
by 30% in the past month.
Our view
60
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Mr. Lu Run Ting
Gemalto





Share price drop is not based on fundamentals. Its management
said that business operations remain normal and there are no negative
developments. We believe that the share price decline is mainly due to:
i) a broad market sector rotation towards large-cap sectors, ii) the
lingering effect from BOC International Holdings' share sale in late Oct
2014, iii) market concerns over slower integrated circuit (IC) card
migration due to smaller banks' cost concerns on more expensive IC
cards, and iv) newly-issued PBOC 3.0 standards, a higher security
standard that all banks must comply with in 1H15.
Strong growth prospects intact. As we mentioned in our initiation
report dated 12 Nov, we expect smaller banks to slow the issue of IC
cards – but only in 2H14. However, starting Jan 2015, all new cards
issued must be IC cards according to the PBOC. We share the view
that the newly-issued PBOC 3.0 standard from the People’s Bank of
China might slow the shipments of IC cards in 1Q15 as banks may
need more time to upgrade their internal IT systems. However, we
believe that this is only temporary and should not affect shipments in
2015, which we expect to remain strong – underpinned by the robust
demand for financial cards in China. We maintain our IC card volume
growth forecasts of 65%/81%/31% in FY14-16, respectively.
Reiterate BUY, HKD9.50 TP. We believe the recent share price
correction offers a good entry opportunity its current share price is even
lower than its IPO price of HKD5.39. Goldpac has the most market
share in domestic IC card shipments in both value and volume. For
FY13-16, we forecast CAGRs of 40% in turnover and 42% in recurring
net profit. Maintain BUY, with TP of HKD9.50 (88.5% upside). Goldpac
now trades at a 9.2x 2015F P/E, substantially below its A-share listed
peers’ 30x P/E, and strategic shareholder Gemalto's 15x P/E.
Forecasts and Valuations
Dec-12
Dec-13 Dec-14F Dec-15F Dec-16F
Total turnover (CNYm)
677
1,112
1,546
2,478
3,082
Reported net profit (CNYm)
115
141
227
362
471
Recurring net profit (CNYm)
103
168
257
379
481
Recurring net profit growth (%)
67.8
63.6
53.0
47.1
27.0
Recurring EPS (CNY)
0.20
0.30
0.30
0.44
0.56
DPS (CNY)
0.10
0.17
0.07
0.11
0.14
Jackson Yu, CFA +852 2103 9424
Recurring P/E (x)
20.0
13.6
13.5
9.2
7.2
[email protected]
P/B (x)
9.61
1.54
2.13
1.82
1.52
P/CF (x)
8.9
21.7
10.1
7.5
5.6
Dividend Yield (%)
2.4
4.3
1.7
2.7
3.5
EV/EBITDA (x)
12.7
3.9
6.7
4.0
2.5
Return on average equity (%)
63.9
17.5
15.3
21.2
23.4
Shariah compliant
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(6.6)
(5.5
)
(1.2)
Source: Company data, RHB
See important disclosures at the end of this report
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3


2

.
2
0
.
3
0
0
.
1
0
0
.
0
0
0
Results Review, 18 December 2014
VS Industry (VSI MK)
Buy (Maintained)
Consumer Non-cyclical - Packaging
Market Cap: USD125m
Target Price:
Price:
MYR2.95
MYR2.17
Macro
Risks
A Strong Start To FY15
Growth
Value
VS Industry (VSI MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
2.40
179
2.20
164
2.00
149
1.80
134
1.60
119
1.40
104
1.204
4
3
3
2
2
1
1
89
Jun-14


Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Datuk Beh Kim Ling
Datin Gan Chu Cheng
BNP Paribas Wealth
Management Singapore
1.45m/0.44m
40.1
35.9
1.38 - 2.59
44
200
29.5
29.5
15.2

Above expectations. VS Industry’s 1QFY15 (Jul) earnings of
MYR35.2m were above expectations. They were up 268.4% YoY on the
back of: i) a 24.5% YoY rise in sales – largely contributed by Keurig
coffee machines, ii) EBIT margin expansion from higher utilisation rate
and improved product mix, and iii) tax incentives relating to the
enhanced export incentive for the quarter under review. By comparison,
in 4QFY14, earnings eased 3.4% QoQ. However, we note that the
higher earnings in the preceding quarter were due to higher utilised tax
incentives of MYR18m (1QFY15: ~MYR3.9m). Stripping off these
incentives, 1QFY15’s core earnings rose 68.6% QoQ, driven by higher
sales and EBIT margin expansion from increased utilisation rates as well
as improved product mix from the production of the new Keurig coffee
machine model that began in May. An interim dividend of 3 sen per
share was declared for the quarter under review.
Forecasts. As 1QFY15 earnings were above expectations, we raised
our FY15-16 EPS forecasts by 3-8% respectively after updating our
sales and margins assumptions, the enlarged share base from
conversion of ESOS and taking into account the seasonal sales
weakness from November-April. We also take the opportunity to
introduce our FY17 projections. Key risks to our recommendation include
a weaker-than-expected global economic environment that could
dampen sales and dependence on orders from key customers.
Investment case. We maintain our BUY call with a revised MYR2.95 TP
(from MYR2.92), which is based on a recurring FY16F P/E of 10x. This is
broadly in line with its closest peer, SKP Resources’ (SKP MK, BUY, TP:
MYR0.85) 11x valuation. The stock is currently trading at an
undemanding FY16F P/E of 7.8x relative to its 3-year earnings CAGR of
21.3%.
Share Performance (%)
YTD
1m
3m
6m
12m
Forecasts and Valuations
Absolute
55.0
(6.9)
(0.9)
37.3
55.0
Total turnover (MYRm)
Relative
65.3
0.4
8.3
48.0
64.6
Jul-13
Jul-14
Jul-15F
Jul-16F
Jul-17F
1,164
1,715
1,970
2,164
2,231
Reported net profit (MYRm)
43.9
53.6
68.2
59.5
63.6
Recurring net profit (MYRm)
15.5
35.6
52.7
59.5
63.6
(54.6)
130.5
47.8
12.9
6.9
Recurring EPS (MYR)
0.08
0.19
0.26
0.30
0.32
DPS (MYR)
0.05
0.12
0.11
0.12
0.13
Recurring P/E (x)
25.6
11.3
8.3
7.4
6.9
P/B (x)
0.82
0.77
0.74
0.70
0.66
P/CF (x)
20.1
8.7
5.9
6.1
4.8
2.3
5.4
4.9
5.6
6.0
10.6
5.9
4.7
4.3
3.9
9.9
10.7
12.2
9.8
9.9
44.3
44.7
35.3
30.6
23.9
(7.7)
0.0
(0.0)
Recurring net profit growth (%)
Fong Kah Yan +603 9207 7668
[email protected]
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
2
0
0
VS Industry’s MYR35.2m 1QFY15 earnings were above our .
0
expectations. Maintain BUY with revised MYR2.95 TP (vs MYR2.92, 0
35.9% upside). Earnings rose 268.4% YoY on the back of higher sales, 0
EBIT margin expansion and tax incentives from its enhanced exports
initiatives. An interim dividend of 3 sen per share was declared for the
quarter under review.
Oct-14
194
Aug-14
2.60
Apr-14
209
Feb-14
2.80
Dec-13
Vol m
Price Close




Source: Company data, RHB
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Results Review, 18 December 2014
Hiap Teck Venture (HTVB MK)
Buy (Maintained)
Basic Materials - Metals
Market Cap: USD112m
Target Price:
Price:
MYR0.72
MYR0.55
Macro
Risks
Jointly-Controlled Entity Drags Down Net Profit
Growth
Value
Hiap Teck Venture (HTVB MK)
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
108
0.75
103
0.70
98
0.65
93
0.60
88
0.55
83
0.508
7
6
5
4
3
2
1
78
Aug-14
Jun-14
Oct-14
0.80
Apr-14
113
Feb-14
0.85
Dec-13
Vol m
Price Close


0.31m/0.09m
74.5
30.9
0.54 - 0.82
30
713
26.5
9.0
6.8
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(23.6)
(17.9)
(28.1)
(24.1)
(26.2)
Relative
(13.3)
(10.6)
(18.9)
(13.4)
(16.6)

Below expectations. Hiap Teck Venture’s (Hiap Teck) 1QFY15
MYR2.8m earnings (-80% YoY) were below our and consensus
estimates. Although its topline (+14% YoY) is in line with our forecast, it
was driven by higher sales in its trading unit (+35% YoY), which fetches
lower margins. The sales volume in the trading unit grew 48% YoY but
revenue only rose 35%, as its average selling price fell from intensified
competition in the market. Revenue from its manufacturing division
slipped 1.2% YoY (1QFY15: MYR146.9m vs 1QFY14: MYR148.8m).
The sharp decline in net earnings was mainly due to the share of the
MYR5.0m loss booked by its jointly-controlled entity, Eastern Steel SB,
which had contributed MYR2.9m in earnings in 1QFY14. The significant
change in the performance for the period under review was mainly due
to the forex impact, as USD has strengthened against the MYR.
Going forward. We earlier expected FY15F to be a consolidation year
for Hiap Teck as Eastern Steel SB’s blast furnace plant will incur start-up
losses. Nonetheless, the recent significant strengthening of the USD
against the MYR may widen the share of losses as Eastern Steel SB has
USD-denominated borrowings. We expect the trading and manufacturing
divisions to remain stable but Eastern Steel SB may impact its overall
performance. Thus, we trim our earnings forecast for HiapTeck’s FY15F
and FY16F by 11% and 10% respectively, as we incorporated wider
losses from its jointly-controlled entity (MYR22m in FY15F vs MYR15m
previously and MYR8m in FY16F vs MYR5m previously).
Maintain BUY. We pare down our TP to MYR0.72 (from MYR1.00) as
we revise our earnings forecast and lower our P/BV to 0.52x (from 0.72x)
– which is the mean of its historical trading band – to reflect the currently
negative sentiment in the market. We maintain our BUY
recommendation as we continue to like its prudent management and the
fact that it could benefit from impending infrastructure projects in the
nation moving forward.
Jul-13
Jul-14
Jul-15F
Jul-16F
Jul-17F
1,107
1,110
1,164
1,192
1,220
Reported net profit (MYRm)
24.1
45.4
41.7
53.4
60.7
Recurring net profit (MYRm)
24.1
45.4
41.7
53.4
60.7
Recurring net profit growth (%)
46.5
88.0
(8.2)
28.1
13.7
Jerry Lee 603 9207 7622
Recurring EPS (MYR)
0.03
0.06
0.06
0.08
0.09
[email protected]
DPS (MYR)
0.006
0.006
0.006
0.007
0.009
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Recurring P/E (x)
16.1
8.6
9.4
7.3
6.4
P/B (x)
0.43
0.41
0.39
0.38
0.36
5.3
P/CF (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


3

.
3
0
.
2
0
0
.
2
0
0
We keep our BUY call on Hiap Teck with a revised TP of MYR0.72 (from .
0
MYR1.00, 0.52x P/BV, 30.9% upside). Its 1QFY15 (Jul) earnings came in 0
below expectations, dragged down mainly by the share of losses from 0
its jointly-controlled entity due to the forex impact. We expect FY15 to
be a year of consolidation but the weakening of the MYR against the
USD could spell more challenges ahead.
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
TS Law Investments
Shougang International
Singapore
Lembaga Tabung Haji




Source: Company data, RHB
8.7
21.1
6.0
1.1
na
1.2
1.1
1.4
1.5
9.43
7.06
6.63
6.08
5.30
2.7
4.9
4.3
5.3
5.7
50.4
41.3
39.7
33.5
27.0
(18.3)
(7.0)
(4.8)
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Results Review, 18 December 2014
Scientex (SCI MK)
Buy (Maintained)
Consumer Non-cyclical - Packaging
Market Cap: USD442m
Target Price:
Price:
MYR8.64
MYR6.84
Macro
Risks
Decent Start To FY15
Growth
Value
Scientex (SCI MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
7.70
147
7.20
137
6.70
127
6.20
117
5.70
107
5.20
97
4.702
2
1
1
1
1
1
87
0
0
.
2
0
Scientex’s 1QFY15 (Jul) core earnings of MYR35.5m met our 0
.
expectations. Maintain BUY, with our SOP-based TP unchanged at 0
0
MYR8.64 (26.3% upside). We continue to like the stock for: i) its long- 0
term earnings prospects leveraging on its expansion strategy to
quadruple its consumer packaging capacity by 2017, ii) relatively sturdy
balance sheet, and iii) committed management team.

Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Vol m

Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Lim's Family
Sim Swee Tin
2.13m/0.64m
21.3
26.3
5.00 - 7.55
39
221
55.0
5.6


2

.
1
0
.
2






Largely in line. 1QFY15 revenue closed at MYR431.1m (+18.2% YoY),
driven by both its packaging arm (+10.8% YoY) as well as its property
development segment (+46.5% YoY). EBIT, meanwhile, grew by a
smaller 15.5% YoY to MYR44.9m due to: i) higher depreciation in
tandem with its capacity expansion, and ii) revised pricing under its
packaging arm to increase market penetration to fully utilise its new
capacity. All in, 1QFY15 core earnings of MYR35.5m came in at 19.7%
and 19.9% of consensus and our full-year estimates respectively. We
deem this in line with our expectations, as 2H is seasonally stronger.
Sturdy balance sheet. Recall that Scientex has proposed to invest over
MYR240m in capex over the next two years to quadruple production
capacity under its consumer packaging segment to 120,000 tonnes
come 2017 from 54,000 tonnes currently. We continue to believe funding
should not be an issue, given: i) its relatively manageable net gearing
level of 0.34x currently, ii) operating cash flow of over MYR200m per
year, and iii) an additional MYR40m cash inflow from FutChem’s
subscription of 5% stake in its consumer packaging arm.
Forecasts and risks. With the results coming largely in line, we make
no changes to our FY15F-17F forecasts. Key risks include a potential
slowdown in property sales amidst rising costs of living and potential
fluctuations in the prices of resin, which is its core production input.
Maintain BUY. Scientex’s share price has retraced by over 11%, in
tandem with the recent market selldown. We see this as an appealing
opportunity for investors to accumulate, as we continue to like the stock
for: i) its long-term earnings prospects leveraging on its expansion
strategy to quadruple its consumer packaging capacity by 2017, ii)
relatively sturdy balance sheet, and iii) committed management team.
Maintain BUY with our SOP-based TP unchanged at MYR8.64.
Share Performance (%)
Jul-13
Jul-14
Jul-15F
Jul-16F
Jul-17F
1,229
1,590
1,717
2,016
2,352
Reported net profit (MYRm)
110
148
178
207
260
Recurring net profit (MYRm)
122
146
178
207
260
Recurring net profit growth (%)
45.9
19.1
22.2
16.4
25.6
Recurring EPS (MYR)
0.57
0.67
0.81
0.94
1.18
DPS (MYR)
0.27
0.21
0.24
0.28
0.35
Kong Heng Siong +603 9207 7666
Recurring P/E (x)
12.0
10.3
8.5
7.3
5.8
[email protected]
P/B (x)
2.35
2.12
1.81
1.55
1.31
P/CF (x)
6.91
9.74
6.50
5.28
4.57
3.9
3.1
3.5
4.1
5.2
EV/EBITDA (x)
8.99
7.39
5.77
4.80
3.44
Return on average equity (%)
19.1
22.1
23.0
22.9
Net debt to equity (%)
28.3
34.9
21.7
7.0
(1.2)
5.9
YTD
1m
3m
6m
12m
Absolute
20.2
(3.3)
3.6
20.8
21.9
Relative
30.5
4.0
12.8
31.5
31.5
Shariah compliant
Forecasts and Valuations
Total turnover (MYRm)
Dividend Yield (%)
Our vs consensus EPS (adjusted) (%)
24.4
net cash
6.3
Source: Company data, RHB
See important disclosures at the end of this report
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RHB Guide to Investment Ratings
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