Axiata shares retreat on challenging outlook

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD

Research House: MAYBANK

Price Call: HOLD

Target Price: 5.50

KUALA LUMPUR: Axiata Group Bhd shares dipped on Wednesday, Aug 24 after its president and group chief executive officer Datuk Seri Jamaludin Ibrahim said difficult operating conditions such as softening markets and the strengthening of the ringgit against most other currencies had continued in the second quarter of the year

The company said on Aug 23 that its net profit ''for the six months ended June 30, Axiata's fell 19% to RM1.21 billion from RM1.49 billion in the previous corresponding period.

This was despite its revenue increasing by 4.2% to RM7.99 billion from RM7.66 billion.

At 11.20am, Axiata fell seven sen to RM4.91 with 7 million shares traded.

Maybank Investment Bank Bhd in a note Aug 24 said that while Axiata's free cashflow generating capability remains strong, the outlook has turned more challenging than expected, both domestically and abroad.

'In the current environment of subdued revenue growth, and higher capex, we downgrade our call on Axiata to a Hold.

'With the downgrade in earnings, we have also lowered our sum-of-parts TP to RM5.50 (RM5.80 previously),' it said.

UOB Kay Hian Research maintains Sell on AirAsia

Stock Name: AIRASIA
Company Name: AIRASIA BHD

Research House: UOB

Price Call: SELL

Target Price: 3.50

KUALA LUMPUR: UOB Kay Hian Malaysia Research is maintaining its Sell recommendation on AIRASIA BHD [] and its target price of RM3.50.

It said on Wednesday, Aug 24 the target price was based on 7.5 times enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA), adjusted for the value of its Thailand and Indonesian associates.

'We lower our 2011 and 2012 net profit forecasts by 19.4% and 10.8% respectively, adjusting for lower average ticket prices and higher taxation,' it said.

UOB Kay Hian Research said net ticket prices including base fares, fuel surcharges and ancillary income fell 1% in 2Q11. Higher lease income compensated for that and revenue growth consequently matched passenger traffic growth at 15% on-year.

Operating margin was lower in 2Q11 as the higher fuel cost was not matched by the increase in revenue as AirAsia only implemented fuel surcharges in early May. Lower forex gains and a deferred tax charge led to net profit falling 48% on-year.

UOB Kay Hian Research downgrades Axiata to Hold

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD

Research House: UOB

Price Call: HOLD

Target Price: 5.50

KUALA LUMPUR: UOB Kay Hian Malaysia Research has downgraded Axiata Group Bhd to a Hold and it also lowered its sum-of-parts target price to RM5.50. The previous target price was RM6.

The research house said on Wednesday, Aug 24 that at RM5.50, this implied 15 times 2012F price earnings and 6.0 times enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA).

'The stock offers a potential 2% dividend yield. Larger dividend payout is a catalyst,' it said.

Axiata's normalised 1H11 net profit was 20% and 14% below the research house and market consensus respectively.

UOB Kay Hian Research said revenues grew by only 4% on-year versus an internal target of 10%, in the face of softening voice markets in Malaysia and Indonesia.

Despite higher network costs for increased data traffic in the 2Q11, the group managed to keep costs under control and maintained EBITDA margin on-quarter at 43.5%.

'Malaysia and Indonesia remain as key drivers. Celcom in Malaysia (not listed) contributed 44% of Axiata's group revenue in Ringgit terms while Excelcomindo in Indonesia (XL) contributed 39%. However XL contributes a larger 46% of EBITDA to Axiata due to its higher margin of 52% vs 44% by both Celcom and Axiata,' it said.

The research house said Celcom disappointed, with a mere 2% on-year rise in 2Q11 revenue to RM1.8b. EBITDA margin was squeezed 1ppt to 45%, by cost for network upgrades and handset subsidies.

'We understand that the company was upgrading its network, which hampered its ability to grow its broadband segment aggressively. Celcom now has a total of 11.7 million subscribers (+4% on-quarter, +11% on-year), with a blended ARPU of RM49 (-2% on-quarter, -3% on-year),' it said.

As for XL, UOB Kay Hian Research said it faced competitive pressures in 2Q11. The company registered only 1% on-quarter net profit growth on the back of 2% revenue increase and 1% EBITDA growth.

It managed to maintain EBITDA margin at 52%.

'Fortunately, competitive pressure from Telkomsel started to ease in 2Q11, and this could lead to a better 2H11. Like most parts of this region, data growth continues to drive the Indonesian market,' it said.

HLIB Research 24 August 2011 (CIMB; AirAsia; Axiata; Pos; Mudajaya; KSL; KLCCP; MAS; Traders Brief) Part2

Stock Name: KSL
Company Name: KSL HOLDINGS BHD

Research House: HLG

Price Call: BUY

Target Price: 2.16

Stock Name: KLCCP
Company Name: KLCC PROPERTY HOLDINGS BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.46

Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD

Research House: HLG

Price Call: SELL

Target Price: 1.19

KSL (BUY)

Strong billings ahead

'''' 2Q net profit rose 126% qoq and 72% yoy to RM29.1m.'' 1H net profit was RM42m, significantly ahead of our estimates (72% of our full year estimate), but lower than consensus (only 45%).

'''' Management has started ramping up earnings recognition for KSL City apartments.'' We understand that they have recognised another 10% in Q2, with work progress at 50% and takeup rate of 70%, so future progress billing in 2H should continue to be stronger.

'''' The Klang flagship project, which was initially targeted to launch in 4Q10, is now expected to be finally launched in Nov once the show unit is ready.'' We believe Phase 1 could comprise up to 380 units with asking price of RM700k/unit.

'''' We raise our net profit forecast for FY11-12 by 60-62% to factor in their lumpy earnings recognition from KSL City.

'''' FY12 is a "transition year" as KSL will need to rely on the Klang project to sustain earnings once KSL City is completed in 1Q 2012.

'''' No change to our price target of RM2.16 (based on 30% discount to RNAV), implying 56% upside.'' Maintain BUY.

''

KLCC Property (HOLD)

Results in-line

'''' 1QFY11 results was in-line with HLIB and consensus estimates.'' Reported earnings for the latest quarter rose 5.8% yoy and 5.0% qoq to RM240.3m, making up 22.3% of our estimate and 24.7% of consensus (both annualised).

'''' Earnings growth was driven by maiden earnings contribution from retail element of Lot C, positive rental reversions from Suria KLCC and Kompleks Dayabumi, and better yields from Mandarin Oriental.

'''' KLCC Property's parent company, PETRONAS has also been officially confirmed to be the tenant for Menara 3 PETRONAS.'' We expect the office portion to make its maiden earnings contribution in 2012.

'''' The RCULS issue needs to be resolved before KLCC Property can enjoy significant re-rating.

'''' In the absence of major catalysts, we maintain our HOLD rating and maintain our target price of RM3.46 (15% discount to RNAV).''

''

MAS (SELL)

Unstoppable Bleeding

'''' 2QFY11 results were below our expectations and consensus.

'''' Expect 2H11 to continue report losses due to sluggish forward bookings especially on US, Europe, Japan and Middle East.

'''' Active management on capacity and routes, in order to improve yields and minimize losses.

'''' Delivery of A380s on schedule. Initial deployment to Kangaroo routes i.e. Australia and Europe.

'''' High possibility of cash call exercise due to huge losses and high restructuring cost.

'''' Maintain SELL with lowered TP of 1.19.

''

FBM KLCI - Relief rally targets at 1510-1530

'''' The robust 3% rally on Dow overnight will drive regional markets and Bursa Malaysia higher today. However, we would like to caution investors that current rebound could be disappointed if Bernanke speech this Friday fails to live up to market expectations for stimulus measures.'' Coupled with long holiday week ahead, we advocate investors to capitalize any rallies to trim their position. Alternatively, for risk-takers, adopt a short term trading oriented approach to take profit into any rebound

''

Axiata Group Bhd - 2Q11 results within expectation

Stock Name: AXIATA
Company Name: AXIATA GROUP BERHAD

Research House: JF APEX

Price Call: HOLD

Target Price: 5.29

JF Apex Securities ' HOLD ' TP RM 5.29

Highlights

• Marginal decline in normalised profit ' Axiata's 2Q11 net profit rose 15% YoY and 21% QoQ to RM663m. However, normalized net profit for the quarter fell 6% YoY and 0.5% QoQ.
• Revenue hit by higher ringgit ' 2Q11 revenue grew 5% YoY and 3% QoQ to RM4.05bn. The strengthening RM resulted 1H11 revenue to increase only 4% YoY instead of 8% (at constant currency).
• Consistent subscriber growth - Total regional subscribers hit 175.7m level in 2Q11, up 4.4% QoQ and 27% YoY., mainly due to its Indian market.
• Celcom ARPU lower ' Blended ARPU was lower at RM49 (vs 1Q11 RM50), postpaid ARPU fell to RM92 (1Q11: RM94) while prepaid ARPU also declined to RM36 (1Q11: RM37). Total subscribers increased 400k or 11% YoY and 1.13m or 4% QoQ to 11.73m.
• Celcom broadband sees slower growth ' Revenue from broadband was flat RM186m while subscribers added 3% QoQ to 900k. The management attributed the slower growth to competition.
• Turnaround in Indonesia ' XL's 2Q11 revenue added 2% QoQ to IDR4,608bn while net profit gained 1% QoQ to IDR767bn. The improvement came after a decline in 1Q11 due to seasonality. However, total subscribers slipped 1% QoQ to 38.9m.
• KPIs in doubt. Management said that exchange rates will continue to pressurize margins and therefore be challenging to achieve KPIs of 10% revenue growth and 10.3% EBITDA growth.
• Capex to weigh on cash and profit. Capex budget was raised to RM3.9bn from RM3.3bn previously due to network expansion. Management noted that Axiata's ability to pay out future dividends mainly depend on the performance of Celcom, which we see as stable.
• We keep our DPS forecast at 12 sen.
• Axiata has improved QoQ and we expect 2H11 to be better with higher contribution from non-voice revenue, namely data and broadband. As such, we are maintaining our FY11 earnings forecast.
• HOLD with target price of RM5.29 ' In our Sum Of Parts (SOP) valuation, we value Axiata at RM5.29. This implies a possible upside of 6.2% from the current price of RM5.00.

LBS Bina Group Berhad - New lease of life

Stock Name: LBS
Company Name: LBS BINA GROUP BHD

Research House: JF APEX

Price Call: BUY

Target Price: 2.03

JF Apex Securities ' BUY ' TP RM 2.03

 

Investment Highlights

• Transforming into a significant medium to high-end developer. LBS Bina Group Berhad (LBS) has long been recognised as a low-to-medium cost developer. The Group has recently rebranded its corporate image and reposition itself to become one of the significant medium-to-high end property players after realising that its previous business model failed to withstand the financial crisis in 2008. We believe the stock will be back into investors' radar screen once it posts more convincing earnings this year and its successful launches of high-profile project, D'Island, in Klang Valley.
• Strong turnaround. LBS has successfully returned to the black in 2010 by achieving RM16.5m net profit against losses of RM17.2m posted in 2009 thanks to strong sales and higher margin achieved from its medium-to-high end projects. Going forward, we estimate the Group to record net profit of RM40.1m in 2011F, a whopping jump of 142.6% yoy and maintaining its profit momentum for 2012F and 2013F with net profit of RM83.4m and RM119.7m respectively.
• RM9.1b sizeable GDV to sustain the Group's earnings over the next 10-15 years. LBS has a total undeveloped land bank of 2,400 acres in Klang Valley, Cameron Highlands, Perak, Johor and China yielding total GDV of RM9.1b (ex-China). The Group targets to launch its flagship high-end project, D'Island, in Puchong in September 2011. The response for the pre-sales is encouraging with 90% take-up for the 122 units of 3-storey superlink houses being launched, pricing over a million or RM370-400psf.
• Strong unbilled sales. The Group has successfully chalked in about RM591m unbilled sales which provides earnings visibility of almost 1.7x of the Group's 2010 revenue of RM341m. Going forward, LBS is expected to continue to achieve impressive new sales with its strategy of focusing middle to high income level house buyers, which is less prone to rising cost of living.

 

Recommendation

Attractive valuation with potential 165% upside. Our non-rated target price for LBS is RM2.03, which is based on 50% discount to its RNAV/share of RM4.07 in view of LBS being a small cap stock. Our target price also implies 9.4x 2012F and 6.5x 2012F PER. Current valuations look attractive as it is trading at 7.4x 2011F and 3.6x 2012F PER, which is significantly lower than the sector average of 13-14x.

RHBInvest Research Highlights 24th August 2011

Stock Name: DRBHCOM
Company Name: DRB-HICOM BHD

Research House: RHB

Price Call: BUY

Target Price: 2.95

Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD

Research House: RHB

Price Call: BUY

Target Price: 5.50

Stock Name: UMW
Company Name: UMW HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 7.35

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD

Research House: RHB

Price Call: HOLD

Target Price: 5.10

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD

Research House: RHB

Price Call: SELL

Target Price: 3.00

Stock Name: DIALOG
Company Name: DIALOG GROUP BHD

Research House: RHB

Price Call: BUY

Target Price: 3.90

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: RHB

Price Call: BUY

Target Price: 7.26

Stock Name: PETGAS
Company Name: PETRONAS GAS BHD

Research House: RHB

Price Call: BUY

Target Price: 14.47

24th August 2011

 

Top Story: Motor ' Saved by the New Myvi                                             Neutral

Sector Update

MBM Resources: Fair value maintained at RM3.25                              Market Perform

DRB-Hicom: Fair value maintained at RM2.95                                       Outperform

Tan Chong: Fair value maintained at RM5.50                                        Outperform

UMW: Fair value maintained at RM7.35                                                   Market Perform

APM: Fair value maintained at RM5.10                                                     Market Perform

Proton: Fair value maintained at RM3.00                                                Underperform

''       According to Malaysian Automotive Association (MAA) data, vehicle sales for Jul bounced back to 50,252 units, a sharp 20.2% mom gain.

 

Sector Call

 

Oil & Gas: RM15bn North Malay Basin project                            Overweight

Sector Update

Dialog: Fair value at RM3.90                                                         Outperform

Petronas Chemicals: Fair value at RM7.26                               Outperform

Petronas Gas: Fair value at RM14.47                                          Outperform

Dayang: Fair value at RM2.33                                                       Outperform

Petra Perdana: Fair value at RM1.15                                           Outperform

Wah Seong: Fair value at RM2.66                                                Outperform

RH Petrogas: Fair value at S$1.36                                              Outperform

Kencana: Fair value at RM2.99                                                     Market Perform

SapuraCrest: Fair value at RM4.56                                              Market Perform

KNM: Fair value at RM0.93                                                            Underperform

MMHE: Fair value at RM5.62                                                         Underperform

''       Yesterday, Petronas announced that together with its partners it will be re-embarking on a RM15bn project to extract gas from nine discovered gas fields located within Blocks PM301 and PM302 in the Bergading contract area, offshore Terengganu. The project includes a new 200km pipeline to transport gas from the fields to Kerteh. The implementation is on an accelerated basis and first delivery of gas is expected by early 2013.

 

Corporate Results

 

Axiata: Toning down expectations                                     Market Perform (down from OP)

2QFY11 Results / Briefing Note

''       Axiata's 2QFY11 core net profit of RM623.1m (-0.5% qoq, +3.5% yoy) was below our and consensus expectations, due to a stronger RM and soft earnings from Celcom.

 

CIMB: Expecting a better 2H                                              Market Perform

2QFY11 Results / Briefing Note

''       Although 1H net profit accounted for 45-46.5% of our and consensus full-year net profit estimates, we expect a better 2H as management said that the group's loan and IB deal pipeline remains strong.

 

AirAsia: 1HFY12/11 core PBT only grows 4% on high fuel cost                        Market Perform

2QFY11 Results / Briefing Note

''       1HFY12/11 core PBT came in within our forecast but missed market expectations.

 

MAS: A second consecutive quarter of losses in 2QFY12/11                            Market Perform

2QFY11 Results / Briefing Note

''       MAS reported losses that were larger than expectations in 1HFY12/11 due to its inability to grow its yields.

Media Prima seen posting stronger results

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD

Research House: ECMLIBRA

Price Call: BUY

Target Price: 3.31

ECM Libra Investment Research expects Media Prima Bhd to report stronger second quarter financial year 2011 results later today, driven by strong industry advertising expenditure (adex) growth.

"Given its leading integrated media play and the positive adex outlook, we remain upbeat on the company's prospects," it said in a research note today.

ECM Libra Research has raised Media Prima's financial year 2011-2013 earnings by 4.7 per cent to 12.8 per cent and reiterated a "buy" call with an upgraded target price of RM3.31 from the previous RM3.07.

It said the economic growth outlook remains the key risk for Media Prima going forward, as adex growth could taper off, given the positive correlation between gross adex growth and real gross domestic product (GDP) growth.

"Nonetheless, we believe that the upcoming adex friendly events such as the Olympics and General Election could mitigate the downside risk of the adex growth momentum going forward," it added. -- Bernama

Currency - The Main Culprit

Stock Name: JADI
Company Name: JADI IMAGING HOLDINGS BHD

Research House: TA

Price Call: HOLD

Target Price: 0.19

Consistent As Expected

Stock Name: PERISAI
Company Name: PERISAI PETROLEUM TEKNOLOGI

Research House: TA

Price Call: BUY

Target Price: 1.63