BIMB 'buy', PPB 'outperform', AWC 'add', Aeon 'buy'


By RHB Research

Buy (maintained)

Target price: RM4.80

RHB Research remains positive on Islamic financial services group BIMB Holdings Bhd for its resilient earnings growth and higher-than-industry asset quality.

In its published note, the research house said that BIMB’s earnings in the financial year of 2017 (FY17) made up 100% and 99% of its and consensus’ full-year forecasts respectively.

The group posted a net profit of RM620mil in FY17, which has risen by nearly 11% year-on-year (y-o-y).

“The group’s stellar performance was largely due to both higher operating income and write-back of provisions.

“BIMB’s operating income was higher by 4% y-o-y in 2017, driven by both strong loan growth and higher contribution from non-interest income.

“BIMB’s 2017 loan growth of 7% y-o-y far surpassed that achieved by the industry while asset quality remained resilient with gross impaired loan ratio ticking down further to 0.93%,” it said.

RHB Research projects the group to be at the tail end of its loan recovery moving forward. As for BIMB’s credit cost, it is expected to range between 21-23 basis points during FY18-20.

“The group’s loan impairment in the first half of FY17 (1H17) was offset by write-backs of RM49.2mil in 2H17, bringing cumulative FY17 loan write-back to RM15mil. This compares with FY16’s loan provisions of RM92mil,” it said.

On BIMB’s deposit, the research house said that growth was marginal at 0.8% y-o-y in FY17, driven largely by growth in the group’s demand deposits.

“The group’s continuous effort to focus on its investment account has led to the group’s higher cost of funds but this was partially mitigated by a stronger current and savings account ratio of 31%,” it said in the note.

BIMB’s loan-to-deposit ratio was lower at 84.5% in the fourth quarter of FY17, as compared to 88% in the previous quarter.

RHB Research has maintained its “buy” call on BIMB, but lowered its target price to RM4.80 from RM4.90 previously. Earnings forecasts were also left untouched.



By Kenanga Research

Outperform (maintained)

Target price: RM19.85

PPB’s core net profit (CNP) of RM1.22bil in the financial year of 2017 (FY17) has trumped consensus’ expectation at 110% and is within Kenanga Research’s forecast at 104%.

Kenanga Research has also raised its CNP of FY18 for PPB by 4% to RM1.22bil, as it tweaked the company’s grains revenue growth and associate earnings assumptions to reflect on-going expansions.

The CNP forecast for FY19 was also introduced at RM1.23bil, representing an earnings growth of approximately 1%.

In FY17, PPB’s CNP was up by 18% y-o-y, backed by higher share of contribution from its Singapore-listed subsidiary, Wilmar International Ltd’s contribution.

However, PPB’s own businesses namely grains, film, property and environmental engineering posted decline in earnings by between 8% to 64%.

Its grains business saw the highest decline of 36% as margins tightened on unfavourable forex and higher raw material prices.

However, Kenanga Research remains “positive” on the group’s performance, moving forward.

“We believe prospects remain overall favourable with expansions in PPB’s grains business (new plant in Pasir Gudang), films (expansions in Malaysia and Vietnam) and property (launch of Megah Rise project in Petaling Jaya in Nov 2017).

“Wilmar’s prospects are also decent in the first quarter of FY18 with the possibility of lower sugar segment’s earnings volatility on their shift in marketing strategy.

“Tropical oils business should see better performance in the second half should the Indonesian government expand biodiesel quotas, while oil and gas outlook remains favourable on positive crush margins in China,” said the research house in a note.

Kenanga Research has maintained its “outperform” call on the stock and raised the target price to RM19.85, from RM19.25 previously.



By CIMB Research

Add (No change)

Target price: RM1.28

AWC plans to acquire a 60% stake in Trackwork & Supplies S.B for RM43.5mil, with a 40% stake retained by its current owners (Trakniaga).

This acquisition is valued at 8.1 times calendar year 2018 price-earnings ratio, based on profit guarantee of RM8mil in FY18 and RM12mil in FY19.

This purchase is expected to be completed by the second quarter of 2018 and will be funded by RM20mil cash with the remainder by issuance of new shares in tranches.

The first tranche of 11.5 million shares will be issued at RM1.00 per share, representing a 26.6% premium to current share price.

The rest of the new shares will be issued upon achieving profit guarantee target of each financial year.

Trackwork is a company with over 18 years of experience, mainly involved in rail-related industry services.

It is principally involved in supplying of track materials and rolling stocks, maintenance works for railway tracks, supplying and commissioning of various equipment and machineries used for track maintenance, and supply of depot equipment.

CIMB Research gathers that Trackwork has worked on rail-related projects with notable names such as George Kent, Fajarbaru, CHEC, and Siemens over the years.

“We are positive on this acquisition as it will be earnings accretive for AWC.

“After accounting for lower interest income (AWC is in a net cash position) and a larger share base (by tranches), our back-of-the-envelope calculations indicate that AWC’s FY18 to FY20 earnings per share (EPS) could potentially increase by 16.3% to 23%.

“Post acquisition, AWC will still be a net cash company with estimated cash reserves of RM59.8mil, based on end-first half of FY18 results,” said CIMB Research.

The research house added that with this acquisition, AWC would be able to make inroads into rail-related services, especially rail maintenance works.

It is able to tap into Trackwork’s strong market position in this industry as compared to organically setting up from scratch.

In addition, AWC can leverage on the expertise of Trackwork’s current owners, with its existing management team staying at the helm of Trackwork’s operations.


By MIDF Research

Buy (Upgrade)

Target price: RM2.04

AEON Co (M) Bhd’s fourth quarter financial year 2017 (Q4FY17) earnings increased by 65.5% year-on-year (y-o-y) to RM39.2mil which brings its full-year FY17 earnings to RM105mil.

After taking into account exceptional items of RM1.1mil, cumulative normalised earnings came in at RM106.1mil.

This is above MIDF Research’s and consensus’ expectations, accounting for 125.9% and 117.9% of full year FY17 earnings forecasts respectively.

The stronger than expected FY17 performance was due to the better than expected profit margin of the retailing segment and continued strong performance of property management services.

Full year FY17 retailing segment revenue increased marginally by 0.2% y-o-y to RM3.42bil.

Nevertheless, the operating profit (OP) grew by more than double to RM39.3mil from RM14.7mil recorded in FY16 premised on the improvement in OP margin.

This was mainly due to the contribution from the new stores/supermarket launched at Aeon Bandar Dato’ Onn, Johor Bahru, full year contribution from stores which was launched or renovated in FY16, like Aeon Tebrau City, as well as better pricing strategies as the newly gazetted Price Control and Anti-Profiteering Act 2017 focuses more on regulating prices of food and beverage products and not on hardlines and softlines products.

The property management services’ revenue and OP increased strongly by 10.5% y-o-y and 14.7% y-o-y, respectively.

This was mainly due to the contribution from the rental and property management services provided at Aeon Bandar Dato’ Onn, Johor Baru which started operation in September 2017 and full-year contribution from new shopping malls opened in FY16, such as Aeon Shah Alam and Aeon Kota Baru.

“Post earnings announcement, we are revising our FY18 and FY19 earnings estimates upward by 29.3% and 35.7% respectively.

“This is mainly to account for the faster-than-expected recovery and improved operating profit margins for the retailing segment,” said MIDF Research.

The research house’s target price is based on 2018 forward price-earnings ratio and earnings per share of 27 times and 7.6 sen, respectively.