Member Profile
Jenny Loo  |
| Total Cumulative Posts |
15 |
| Joined |
Dec 2018 |
Comments
| | User Comments |
 |  27 Feb 2019, 4:31:33 PM
good performance from aturmaju! share price goes up a lot today
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 | 22 Feb 2019, 11:35:28 AM
Maintain NEUTRAL. For FY19, we view that MSM would be facing some headwinds especially from the domestic market as policies emerge are not in the favour of the company where domestic segment accounted for 52% of the company’s sales revenue. The new sugar refinery in Johor Bahru might provide MSM economies of scale and ramp up production, however, the current demand condition is not that promising. On the flip side, production seem to began tapering in sugar-producing countries such as Brazil, EU and Thailand which will probably give rise to a deficit in 2H19. While this might provide an export opportunity for MSM to expand its businesses, the downside would be the increase in cost of sales (as raw sugar price increases) and lower ceiling price in the local market. All in, we are maintaining our NEUTRAL recommendation on the stock.
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| 22 Feb 2019, 11:35:21 AM
Target Price. Subsequent to our earnings adjustment, we lower our target price to RM2.19 (previously RM3.03). Valuation is based on unchanged Forward PE of 21x to FY20 EPS forecast. The 21x forward PE valuation is based on a 2-year historical average.
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| 22 Feb 2019, 11:35:15 AM
Earnings estimate reduced for FY19. FY19 core earnings has been cut by -50.0% to RM50.5m in regard to the current tightening domestic competition and government intervention amid a downtrend of the demand growth for sugar. We have lowered our assumption of sales volume and average selling price (ASP) for each segment.
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| 22 Feb 2019, 11:35:08 AM
Unfavourable government policies. Under the Pakatan Harapan (PH) Government, food and beverages (F&B) manufacturers in Malaysia can apply for sugar import permits. Recently, a Sarawak manufacturer received first AP to import sugar directly from other countries and a few other applications are being assessed by the Government. This AP would act a battering ram to new avenue in purchasing refined sugar directly from markets that potentially offer cheaper rate and MSM might probably lose out market share. On another note, during Budget 2019, an excise duty of 40 sen per litre on sweetened beverages will be implemented from 1 April 2019. This would potentially lessen the demand for sugar domestically. Meanwhile, we expect the average selling price for sugar to be lower as the Government set the ceiling price for granulated sugar and refined granulated sugar to be reduced by 10 sen per kg effective September 1 to RM2.85 per kg and RM2.95 per kg respectively. We opine that all these government interventions might be a drag to MSM’s sales revenue and volume.
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| 22 Feb 2019, 11:35:00 AM
Profit margin improved. MSM’s FY18 gross profit margin and net profit margin have both improved by +213%yoy and +220%yoy to 8.49% and 1.63% respectively. This was premised on the cost of sales contracted at a faster pace at +21.1%yoy than the drop in revenue of - 16.0%yoy. This was due to the deterioration of the price of raw sugar amid oversupply conditions, coupled with stronger ringgit against USD making the cost of production considerably low. However, on a quarterly basis, 4QFY18 swung into red with earnings slid by - 212.0%yoy. 4QFY18 revenue declining at a faster pace than a drop in cost of sales as the price of raw sugar on a recovery mode amid optimism that supply might get tighten in FY19.
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| 22 Feb 2019, 11:34:53 AM
Sales volume and revenue dwindled. On a year-on-year basis, FY18’s sales volume declined by -5.0%yoy to 947,848mt. This was predominantly due to the fall in the domestic and export segment sales volume by -7.4%yoy and -21.4%yoy to 440,000mt and 398,000mt respectively. Coupled with a lower average selling price as increased domestic competition seen in FY18, total sales revenue has decreased by -17.2%yoy to RM2,145m. We view that the domestic competition and lower exports was in view of: (i) cheaper smuggled refined Thai sugar as substitute (ii) temporary approved permits (AP) to import refined sugar were awarded to meet shortage in FY18 and, (iii) oversupply of sugar globally which weigh on price.
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| 22 Feb 2019, 11:34:44 AM
FY18 earnings came in below expectation. MSM Malaysia Holdings Berhad’s (MSM) FY18 core earnings of RM35.1m came in below expectations. This translated into 59% and 60% of ours and consensus earnings forecast respectively. The poorer-than-expected results was mainly exacerbated by the first quarterly losses experienced in 4QFY18 results of RM-10.4m (-212.0%yoy) since June 2017 as the group incurred a loss at -RM10.5m in its Johor operations and higher finance cost. In addition, MSM was also grappled with the lower average selling price in FY18.
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| 22 Feb 2019, 11:34:34 AM
- FY18 core earnings of RM35.1m came in below ours and consensus expectations
- The lower-than-expected earnings was attributed to lower ASP and reduced domestic and export sales
- Unfavourable government policies have threatened the status quo of the group
- Nonetheless, FY18 earnings returned to black compared to the same period last year due to lower raw material costs
- Maintain NEUTRAL with lower TP of RM2.19
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| 22 Feb 2019, 11:34:01 AM
Maintain BUY with unchanged TP of RM11.30
Group gearing ratio stood at to 0.2x which is low and healthy and has ample room to gear for growth should opportunity arises. We maintained our earnings forecast and BUY recommendation with unchanged TP of RM11.30 based on 10.7x on our estimated EPS for FY19F.
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| 22 Feb 2019, 11:33:54 AM
Equipment Segment revenue up 20.9% and EBIT up 13.2% yoy
Equipment Segment posted higher revenue and EBIT yoy by 20.9% and 13.2% respectively due to better contribution from HDD businesses nonetheless the management expect equipment segment to register lower revenue in coming quarters due to softer demand from semiconductor and HDD industry and expect the hard disk drive storage segment to recover in next financial year.
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| 22 Feb 2019, 10:24:41 AM
Cumulative FY18 earnings within expectations. British American Tobacco (M) Bhd’s (BAT) 4QFY18 normalised net profit - after stripping out one-off GST benefit and refund on tax stamps and 2017 provision for impairment of prepaid excise duties; came in at RM81.4m. This lead to FY18 normalised earnings of RM433.6m, which is within ours and consensus’ full-year FY18 earnings estimates at 99% and 97% respectively. Comparing against 4QFY17, revenue grew by +12.5%yoy to RM770.6m whilst the respective normalised earnings grew marginally by <1.0% on a year-over-year basis. On a quarterly sequential basis, revenue staged an encouraging improvement of +4.8%yoy despite the contraction in earnings. Volume sold also improved by +2.2% in the fourth quarter largely due to seasonality and speculation prior to pricing.
Illicit cigarettes market remains stagnant at 64%. The dip in BAT’s FY18 overall revenue and, thus, earnings year-over-year was mainly attributable to the lower domestic and duty-free volumes which slumped by -5.8%yoy. The lower domestic volume was mainly impacted by the legal market volume which contracted by -3.5%yoy in comparison to 4QFY17. Additionally, the illicit cigarettes volume share remains stagnant at a record high of 64% since 1QFY18 which consists of smuggled cigarettes at 60% and quasi legal cigarettes with fake tax stamps at 4%. This, in return, has impacted the group’s volume, translating to a decline by -4.6%yoy in terms of the group’s overall volume sold.
Declared 47sen dividend for 4QFY18. BAT declared a fourth interim dividend of 47sen per share for 4QFY18. This is as opposed to 43sen declared during the same period last year. YTD dividend declared for FY18 of 155sen is within our dividend forecast of 149sen for the year which represents a full-year payout ratio of 94%. As such, we are maintaining our dividend forecasts at this juncture.
Earnings estimates maintained. We are maintaining our F19F earnings forecasts at this juncture. That said, we have factored in conservative assumptions in our earnings forecasts previously such as: (i) gradual recovery in sales due to high illicit cigarette trade; (ii) continued weak consumer spending power as well as; (iii) growth in lower price segment (VFM) within the legal market.
Maintain BUY. We are maintaining our BUY recommendation on BAT with a revised target price of RM39.50
(previously RM37.70) as we roll forward our valuation base year to FY20. Our valuation is derived from a dividend discount model valuation with a cost of equity of 6.5% and a long term expected dividend growth rate of 1.25%. We opine that while business environment will continue to remain challenging for BAT. However, we are comforted by the fact that BAT’s VFM brand Rothmans in 4Q17 remains the fastest growing brand which we opine will assist in sustaining its position as a market leader in the legal cigarettes’ domain. Additionally, the revenue and volume contraction has narrowed to low single digit from low double digits earlier this year and previous FY. This narrowing contraction which is mainly attributable to BAT’s ongoing cost rationalisation initiatives has translated to the recovery in BAT’s earnings and profit margin over the past few quarters. We understand from the Management that, this will be an ongoing process to cushion the effect of the decline in legal cigarette volume. As the share price of BAT has taken a beating last year due to the announcement of an increase in tobacco-related items tax and price, we opine that all the negatives have been priced; share price has bottomed out and; current price presents a good opportunity for accumulation of the stock. Aside from the recovery in earnings, its dividend yield remains attractive at 4.9% FY20F.
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| 22 Feb 2019, 10:24:16 AM
Weaker 2FY19 normalised earnings. Inari Amertron Bhd’s (Inari) normalised earnings reduced to RM56.7m (-28.6%yoy). This was mainly attributable to lower production volume and changes in product mix. Note that there is lower volume loading on a major sensor product. This lead to lower cumulative 1HFY19 normalised earnings of RM107.9m (-28.6%yoy). All in, the group’s 1HFY19 financial performance trailed behind ours and consensus expectations, accounting for 41.4% and 44.7% of full year FY19 earnings forecasts.
Dividend. Inari announced lower 2QFY19 dividend of 1.5sen (2QFY18: 2.5sen), in-line with the lower earnings recorded during the quarter. This translates to a dividend payout of 86.7% in comparison with 112.1% in 1QFY18. Cumulative 1HFY19 dividend amounted to 3.1sen as compared to 1FHY18 dividend of 4.8sen.
Impact on earnings. We are reducing FY19 and FY20 earnings forecasts lower to RM194.1m and RM218.9m to be on the conservative end after adjusting downward the contribution primarily from the RF segment.
Target Price. We are revising our target price to RM1.41 (previously RM1.79). This is premised on FY20 EPS of 6.7sen pegged to unchanged forward PER of 21x. Our target PER is based on its five year historical high rolling PER.
Maintain NEUTRAL. The group is facing challenges in the demand of its RF product mainly due to the lower demand of its major customer product. In the near term, we expect the challenges will not alleviate anytime soon as we view that the demand of the flagship smartphone of the group’s customer to remain weak. Fortunately, the optoelectronic segment shows resilience.
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| 22 Feb 2019, 10:23:51 AM
9MFY19 normalised PATAMI below estimates. Tasco recorded 3QFY19 normalised PATAMI of RM2.7m (-68.0%yoy), bringing its 9MFY19 normalised PATAMI to RM10.4m (-57.7%yoy). This was below ours and consensus’ estimates by a variance of more than -10%. The deviation was mainly attributable to higher borrowing costs to finance for the cold supply chain (CSC) business and the land warehouse in Pulau Indah.
Subdued international segment PBT in 3QFY19. The marginal growth in PBT for the segment was mainly stem from the ocean freight forwarding business which recorded a loss before tax of -RM0.4m amidst: (i) the drop volume especially from a solar panel customer; and (ii) the preference of existing clients for direct sea shipment booking. Nonetheless, the discontinuation of a loss making business with an E&E customer in the air freight forwarding business coupled with spot shipment helped to pare the decline in PBT of the segment. Looking ahead, Tasco’s appointment as AirAsia’s first direct logistics partner early this year will provide support for the air freight segment in the long run.
Domestic segment buttressed by CSC business. The main driver for the segment in 3QFY19 was the cold supply chain (CSC) business which recorded a post-acquisition revenue and PBT of RM25.8m (+22.0%yoy) and RM3.4m (+27.0%yoy) respectively. This translates into a reasonable PBT margin of 13%, marking its fifth consecutive quarter of being above 10%. To recall, the CSC business handles approximately 80% of all the domestic ice cream market in Malaysia. Losses before tax for trucking services, meanwhile, narrowed down by -56.7%yoy due to continuous cost-saving measures.
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