Astro 'add', Top Glove 'hold', Bursa 'neutral'

Astro Malaysia Holdings Bhd

By CIMB Research

Add (No change)

Target price: RM3.25

ASTRO Malaysia Holdings Bhd’s revenue fell 2.7% year-on-year (y-o-y) in the first quarter of financial year 2018 (Q1FY18) due to lower TV subscription revenue, decline in TV and radio adex, and decrease in licensing income due to the expiry of its sports channel’s sub-licensing agreement.

Despite the lower sales, average revenue per user (Arpu) rose 1.8% y-o-y from RM99 per month to RM100.80 per month, driven by higher take-up of value-added services. Overall, Q1FY18 core net profit rose to RM188mil, up 5% y-o-y.

CIMB Research said Astro declared an interim dividend per share of 3 sen, similar to Q1FY17 which was in line with its expectation.

Adex revenue dropped 21% q-o-q in Q1FY18 due to weak consumer sentiment amid an uncertain macroeconomic environment, while TV and radio adex fell 25% and 17% q-o-q, respectively.

Nevertheless, CIMB Research said it was encouraged to see y-o-y growth in Astro’s TV and radio market shares from 34% to 39% and 72% to 76%, respectively.

Astro expects a stronger adex pick-up in Q2FY18, driven by the recovery in consumer spending ahead of Aidilfitri.

The group is also looking to grow its household penetration from 71% to 75% by year-end.

In order to reach this goal, it plans to capture new customers through the individual spaces of a household via their smart mobile devices.

The research house believed that as household members spent more time on their individual mobile devices, there would be more demand for content given that different individuals would want to watch different content or programmes.

In addition, it added Astro was in the midst of a digital transformation.

Top Glove Corp Bhd

By Maybank IB Research


Target price: RM6.20

TOP Glove Corp Bhd’s upcoming third quarter financial year 2017 (Q3FY17) results could be softer quarter-on-quarter (q-o-q) on a weaker ringgit against the US dollar, higher raw material prices and lower sales volume.

However, results are still within Maybank IB Research’s expectation as the research house expects stronger sequential Q4FY17 earnings, given the sharp fall in raw material prices.

Maybank IB Research maintained its earnings per share forecasts but downgraded the stock to “hold” from “buy”, due to narrowed upside to an unchanged target price of RM6.20.

Top Glove’s Q3FY17 results are due to be released today and the research house expects softer q-o-q earnings given the weaker ringgit against the US dollar, higher latex and nitrile rubber costs at an increase of 16% and 28% q-o-q, respectively, as well as Maybank IB Research’s expectation of lower sales volume at an estimated 5% to 6% decline q-o-q considering the steep upward adjustments in average selling prices (ASPs) of an estimated 7% to 9% q-o-q as customers tend to delay glove procurement until ASPs stabilise or fall.

“We believe earnings will be stronger in Q4FY17 given the sharp fall in both latex and nitril rubber prices at 15% and 26% repectively, from Q3FY17.

“While ASPs are adjusted frequently to reflect the changes in the raw material costs, we note that Top Glove will still benefit temporarily from the time lag in passing on lower costs.

“We estimate that the latest ASPs are around 12% below the recent peak in February 2017, reflecting almost all of the changes in raw material costs and Ringgit against the US dollar,” said Maybank IB Research.

The research house maintained its earnings forecasts, which have imputed for a stronger Q4FY17.

Bursa Malaysia Bhd

By MIDF Research

Neutral (Maintain)

Target price: RM11.00

POSITIVE market sentiments led to continued strong fund flow while foreign buying streak has stretched to 18 straight weeks.

Foreign net purchases have now registered a cumulative amount of RM10.39bil in 2017, offsetting about 35% of the total cumulative net outflow recorded in 2014 to 2016.

Pursuant to this, MIDF Research believes that the continuing foreign funds’ participation reflects an upbeat outlook on Malaysian equities market.

Bursa Malaysia expects more initial public offerings (IPOs) this year, compared with 2016 which saw 11 companies raise a total of RM660mil.

“We are optimistic that fees will trend higher this year including from more foreign interest such as Bank Islam Brunei Darussalam, Brunei’s largest lender.

“We believe that Bursa will be able to continue attracting more IPOs due to its competitive services and pricing in the region,” said MIDF Research.

Apart from that, Bursa Malaysia noted that more younger investors aged 25 years and below were participating in the market, as evidenced by the 36% year-on-year jump in the number of Central Depository System (CDS) account holders, to circa 30,000 in 2016, as a direct result of its financial literacy programme at universities.

Bursa Malaysia has also indicated its commitment to continue rewarding shareholders by keeping the dividend payout at above 90%.

MIDF Research is bullish on the news of the proposed new small and medium enterprise (SME) as the introduction of new market will provide more funding opportunities for SMEs, to add to the existing main market and Ace market.

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