Genting Malaysia (HOLD)
GenUK Shows Improvement on 3QFY11
§ GenM's 3QFY11 results came in line with expectation, with total net profit of RM347.1m, accounting for accounting for 73.8% of HLIB's estimate and 72.3% of consensus full year estimates.
§ The Group recorded increase of 10.7% and 3.2% in net profit QoQ and YoY respectively, mainly contributed by overall higher volume of business and hold percentage in RWG, improvement on GenUK's operations and a construction profit generated from progressive development ofvideo lottery facility at RWNY.
§ Management opined that the excellent performance of RWNY for the first few weeks after its opening could be due to novelty effect. However, performance might ramp up after the full opening of 4,525 of VLTs and 475 ETGs by end-2011.
§ GenM announced that Genting Casinos UK Ltd had entered in a S&P agreement to acquire Fox Poker Club Ltd for RM38.5m. No detailed information was given on this purchase as management says it is still in an early stage.
§ Maintain target price of RM4.07 based on SOP valuation. Given its recent surge in share price and potential upside of less than 10%, downgrade to HOLD.
Genting Berhad (HOLD)
3QFY11 Beats Expectation
§ GenT's 3QFY11 results came above our expectation but in line with consensus, with total net profit of RM597.2m, accounting for 80.1% of HLIB's estimate and 74.6% of consensus full year estimates.
§ The group recorded net profit increase of 43% for 9MFY11 to RM3,730.2m, contributed by leisure & hospitality, power and plantation division
§ RWG and RWS achieved better performance in the current quarter mainly attributed to the favourable win percentage and overall higher volume of business.
§ Power division's revenue increased mainly due to better dispatch and higher 2011 tariff rate in Meizhou Wan power plant and higher energy charge in Kuala Langat plant. However, EBITDA is lower due to the higher coal prices of RMB651/tonne for 9MFY11 (9MFY10: RMB597/tonne).
§ GenP's 3Q net profit rose 40.8% yoy mainly due to margin expansion from higher output and palm product prices.
§ TP raised by 2% to RM11.19 based on SOP valuation, to reflect the higher target price on Genting Plantation. Maintain Hold.
TM (HOLD)
3Q11 Results: In Line
§ 9MFY11 reported core net profit of RM502.6m came in within our expectation, accounting for 76.4 % of our full-year forecast and 87.9% of consensus.
§ 3QFY11: Revenue RM2,321.7m (+6% yoy, +4% qoq), EBITDA RM812.5m (+1% yoy, +8% qoq) and PATAMI RM137.3m (+8% yoy, +2% qoq).
§ Internet: Registered strong revenue growth with +26.3% yoy and +6.4% qoq as the main driver behind TM's growth.
§ As of 21 Nov, TM's UniFi has passed 1.096m premises covering 77 exchanges and activated more than 202k subscribers, representing 18.4% take up rate. HSBB's blended ARPU as at 30 Sept is RM184.
§ TM is not too concern over other fixed telco players as their reachability is not as wide and not too aggressive. TM has no plan to enforce the download capping in the near term and view this as their strong value proposition over other competitors.
§ TM also observes that Streamyx users are upgrading to the lowest package of UniFi and is positive to TM as UniFi commands a higher ARPU.
§ Due to the recent price rally, we downgrade our call to HOLD with unchanged target price of RM4.54 (based on DDM, WACC of 6.4%, TG 0.1%). The stock is likely to continue attract investors due to its defensive nature amidst strong swings in global equity market.
Sunway (BUY)
A much improved quarter
§ Sunway's 3Q core earnings of RM94m grew by 22% from the previous quarter, bringing its 9M11 core earnings to RM226m or 17.5 sen/share (QoQ: +22%), making up 75% and 73% of ours and street's estimates respectively.
§ The strong 3Q performance was due to improved earnings margin whereby core PBT margins expanded from 5.1% in the previous quarter to 6.3%. Earnings were also lifted by strong contribution from the Singapore and Australia property developments.
§ During the quarter Sunway, achieved new property sales of RM454m compared to RM481m in 2Q and RM403m in 1Q, bringing YTD new property sales to RM1,3bn. Majority of new sales were from Singapore, Velocity, Vivaldi and South Quay. Meanwhile, the Raya festive season and summer holidays affected the construction division which saw a sharp slowdown in construction activities based in the Middle East.
§ Maintain BUY call in view of deep values with TP of RM3.12 based on SOP valuation.
DRB (BUY)
Facing Another Bump
§ Below expectations – 2Q12 results were behind both HLIB's number and consensus. Reported 2QFY3/12 core earning of RM129.6m, taking 1H12 to RM219.8m, achieving 45.1% of HLIB estimates and 46.2% of consensus.
§ The impact of Japanese crisis on DRB automotive division remained visible in 2Q12, as supply constraint only started to ease off in July. Yet, DRB faced another crisis when Thailand was heavily flooded. DRB's 34% owned Honda Malaysia shut down its Melaka assembly plant since 25 Oct, and there is still no clear timeline for the plant to resume operations.
§ Volkswagen CKD assembly remained on track with the recent production roll out of the CKD Passat 1.8 in Pekan plant. Initially, DRB will assemble 5,000 units of VW p.a. and gradually ramped up to 50,000 units p.a. by 2018.
§ Maiden contribution of ~RM9m from POS Malaysia in 2Q12. POS remained as an important catalyst to drive the Group's earning growth going forward, with synergistic opportunities with Muamalat, Uni.Asia and KLAS.
§ Maintain BUY with revised TP of RM2.90.
MISC (SELL)
Its Time to Remove Bad Seed
§ In line – Reported 2Q FY12/11 core earning of RM25m, taking 6M FY12/11 core earning to RM156.6m, 55.3% of HLIB's number. We expect stronger 3Q FY12/11 due to seasonally higher petroleum charter rate.
§ Continued losses incurred in Petroleum, Chemical and Liner divisions, impacted by low charter rates and high bunker costs.
§ Expect continued challenging business environment for Petroleum, Chemical and Liner divisions due to overcapacity situations, while MMHE and Offshore divisions to benefit from the booming oil and gas industry.
§ Exit Liner business by mid-2012. Expect one-of-loss provisions of US$400m (~RM1.2bn) in 3Q FY12/11 (non-cash items). Included also US$30m (~RM90m) cash for the miscellaneous items such as employee compensation and winding-up expenses.
§ Positive on the exit strategy, as MISC will reduce cash burn, and able to focus resources into developing other core divisions i.e. LNG and Offshores, as well as turnaround its Petroleum tanker division. We estimated the Liner's book value at RM915m, assuming 50% (16 units owned, 16 in-charters) of the provision is for asset impairments, Liner's book value will deteriorate to ~RM300m!.
§ Maintain SELL with higher TP of RM5.57.
Ann Joo (SELL)
3Q11 hit by provisions
§ Stripping out exceptional items, 9M11 core net profit of RM102.4m came in within our expectation, accounting for 86.3% of our full-year forecast (as we expect 4Q performance to remain uninspiring). Against the market consensus, the results came in below expectations, at 75.2% of the full-year estimates.
§ Management has turned cautious on the sector's near-term outlook, as the global economic uncertainties (arising from the Eurozone debt crisis) and monetary tightening measures by the Chinese government will affect demand and prices for steel products internationally. Given its less-than-optimistic view on the sector's near-term outlook, management indicated that it will not embark on aggressive inventory replenishing activities in the near term.
§ Management indicated that its mini blast furnace has achieved capacity utilization of 60-65%, and the blast furnace expenses will not be recognised in 2011's income statement, as it is still running at pre-operating level.
§ 2012-13 net profit forecasts cut by 15.1-32.6% largely to reflect lower sales volume (in anticipation of lower export volume) and lower selling price assumptions.
§ Following the downward revision in our net profit forecasts, our TP for Ann Joo is cut by 26.5% from RM1.83 to RM1.34 based on 9x revised 2012 FD EPS of 14.9 sen.
