Malaysia's Mah Sing among Nomura top picks in Asean

PETALING JAYA: Property developers Mah Sing Group Bhd and Thailand’s Quality Houses (QH) are Nomura Research’s Asean property yield picks that are expected to offer above-average yields and dividend growth in 2015 and 2016. 

In a report on Asean property, it identified three out of the 28 property stocks, including 11 real estate investment trusts (Reits), that it covered which fulfilled two conditions. 

The conditions are that the stock’s 2015 forecast dividend yields would be higher than the market’s as well as the sovereign 10-year bond yield, and that the dividend per share (DPS) or unit (DPU) is projected to grow faster than the market in 2015 and 2016 forecasts.

It said that the report “aims to identify candidates amongst property stocks under our coverage in Asean for income-focused investors that are still looking for dividend yield ideas.”

Setting a RM3 target price for Mah Sing with a “buy” call, Nomura said its 2015 forecast yield was 5% versus the KLCI’s 3.6% and Malaysia’s 10-year bond yield of 4.2%. 

Additionally, it said Mah Sing’s forecast DPS for 2015 and 2016 were projected to grow 22.2% and 27.3% respectively, versus the KLCI’s 6.8% and 7.2% respectively.

“The projected growth in dividend is underpinned by unbilled sales of RM4.8bil, which should drive earnings to expand 22% (compound annual growth rate) over financial years 2013 to 2016 forecast,” it said.
As for QH, which has a target price of 4.40 baht and a “buy” call, Nomura said it had a projected 2015 forecast yield of 4.8% versus Stock Exchange of Thailand’s (SET) 3.4% and Thailand’s 10-year yield of 2.8%. 

Its DPS is projected to grow 12.5% and 16.7% in 2015 and 2016 versus the SET’s 11.4% and 12% respectively, underpinned by high earnings visibility due to resilient real demand for landed housing.

Nomura noted that Sunway Reit was its third stock that met the two conditions but retained its “neutral” call as it believed the robust DPU growth forecast in 2015 and 2016 was already largely reflected in the unit price. 

It also noted that none of the Singapore Reits it covered managed to qualify on account of overall pedestrian DPU growth in 2015 and 2016 forecasts (average 1.5% to 1.6%).

Meanwhile, RHB Research downgraded the Malaysian property sector to “neutral”, expecting property transaction volumes to decline 3% to 5% in 2015 on the back of slower economic growth and a high loan rejection rate.
It also anticipated 
property prices to remain flat as developers would have difficulty passing on incremental costs during weakening demand, while all parties would be likely to adopt a wait-and-see stance as the impact of the goods and services tax kicked in. 

“For the stocks under our coverage, we estimate new sales to drop by an average 10% to 20% year-on-year (y-o-y) versus -25% y-o-y in 2014 and +41% y-o-y in 2013,” it said. 

RHB Research maintained “buy” on Tambun Indah Land with a reduced target price of RM2, noting that affordable housing players should fare better while the company’s fundamentals remained solid with zero gearing.

It downgraded Eastern & Oriental, UEM Sunrise and UOA Development to “neutral” with respective target prices of RM2.27, RM1.65 and RM1.84 respectively. 

It downgraded Glomac to “sell” with a lower target price of 88 sen (6.5% downside), as it believed management’s 2015 (April) new sales target of RM504mil was a tall order given new launches would likely be delayed into the first quarter.

Masterskill aborts RM75m property disposal

KUALA LUMPUR: Masterskill Education Group Bhd has aborted its plan to dispose of its Cheras, Kuching, Kota Kinabalu and Johor campuses, after its board was unable to mutually agree on a revised sale consideration based on the property valuation done by independent valuer Cheston International (KL) Sdn Bhd.

Cheston had ascribed an indicative market value of RM110.4 million for the properties, higher than the initial indicative sale consideration of RM75 million offered by the group’s major shareholder Siva Kumar M Jeyapalan.

It is understood that the deal was aborted due to the valuation being too high. In a Bursa Malaysia filing yesterday, Masterskill said it would seek alternatives to implementing its asset light strategy and raising funds for the group.

Siva Kumar first proposed to make an offer for the four campuses on Nov 6, and then lease them back to the group for 10 years, with the option to extend for another five years.

Following that, on Nov 10, education provider SMRT Holdings Bhd and Creador II LLC announced the proposed acquisition of a 32.9% equity interest in Masterskill belonging to Siva Kumar at 60 sen apiece.
The acquisition will be done together with Rahpia Ltd, a wholly-owned subsidiary of Creador. SMRT will take up a maximum of 23% interest in Masterskill while Rahpia will acquire the remainder of Siva Kumar’s stake.

Rahpia is an existing shareholder of Masterskill with a 16.26% stake while Creador founder Brahmal Vasudevan holds a 6.15% stake in SMRT. The stock shed 0.5 sen or 0.8% to close at 59.5 sen yesterday, with a market capitalisation of RM223.77 million.

This article first appeared in The Edge Financial Daily, on December 17, 2014.

Hai-O 2Q net profit falls 32% to RM7.17m on weaker wholesale and MLM earnings

KUALA LUMPUR (Dec 16): Hai-O Enterprise Bhd's net profit fell 32% to RM7.17 million in the second quarter ended Oct 31, 2014 (2QFY15) compared to RM10.54 million in the previous corresponding period, primarily because of lower profit from its wholesale and multi-level marketing (MLM) divisions.

However, it should be noted that there was an exceptional gain on disposal of a property amounting to RM600,000 in 2QFY14, its filings to Bursa Malaysia this evening showed.

Despite the weaker earnings, the group still declared an interim single-tier dividend of 4 sen per share.
The group recorded a revenue of RM57.73 million for the quarter under review, down 12% from RM65.6 million a year ago.
Segmentally, its MLM division saw a pre-tax profit decline of about 19% for the quarter due to drop in sales of "big ticket" items which had offset the higher contribution from "small and medium ticket" items.

Its wholesale division's external revenue was flat at about RM14 million compared to 2QFY14, but pre-tax profit for the division declined from RM3.4 million to RM950,000, mainly due to lower inter-segment sales to MLM division, coupled with lower revenue from its Chinese medicated tonic and tea. 

The weakening of the ringgit against the dollar has also resulted in higher import costs for the division, thus further eroding its profit margin.

Retail revenue also fell, although by a marginal 4% to RM9.8 million versus the previous year, while pre-tax profit declined from RM1.1 million to RM950,000 due to lower revenue.

Meanwhile, its cumulative nine months (1HFY15) net profit was at RM13.39 million, down 30.73% from 1HFY14's RM19.33 million, as revenue shrunk 10.62% to RM107.51 million from RM120.28 million, also primarily because of lower profit from its wholesale and MLM divisions. 

Moving forward, the group said it will re-look its current strategies to mitigate the negative impact that arise from the uncertainties in the current economy, plunging crude oil price, as well as the weakening of the ringgit against the US dollar. It foresees these phenomenons will continue to impact domestic consumers sentiments for the remaining half of the financial year. 

"The board of directors remains confident and is of the opinion that the group will continue to perform profitably in the next quarter," it added. 

The edge: Market Preview- KLCI likely to remain below 1,700-level, external worries weigh

KUALA LUMPUR (Dec 17): The FBM KLCI is likely to remain below the crucial 1,700-point level today as global economic worries continute to weigh on international investor sentiment.

At the global markets, oil prices pared losses and global equity markets eased on Tuesday in roller-coaster trading as investors snapped up beaten-down energy stocks and wagered the Federal Reserve will be cautious amid the turmoil sparked by crude's collapse, according to Reuters.

Russia's huge emergency rate hike overnight failed to stabilize the ruble's decline, which jolted markets, and German Bund yields hit a new low as a collapse in Russian financial markets sent investors scurrying for top-rated assets, it said.

Meanwhile, U.S. stocks fell for a third day in a volatile session Tuesday, led by declines in consumer discretionary and technology shares, while another drop in the Russian rouble added to worries about the global economy.

Energy shares rebounded, keeping the S&P 500 and Dow mostly in positive territory until a bout of late-day selling took indexes lower. The S&P 500 moved more than 44 points from its high of the day to its low, while the CBOE Volatility index jumped 15.4 percent, according to Reuters.

AllianceDBS Research in its evening edition Tuesday said that dampened by the weak down close in the preceding day, the FBM KLCI had on Dec 16 traded lower to settle at the lowest low of a low of 1,673.94 as market participants continued to play on the selling side in anticipation of a lower market  (- 23.23, - 1.38%).

It said that in the broader market, losers outnumbered gainers with 572 stocks ending lower and 296 stocks finishing higher.

That gave a market breadth of 0.51 indicating the bears were in control, said the research house.

AllianceDBS Research said the benchmark index has lost 172 points over the past 14 market days (1,845 (27 Nov 2014) minus 1,673 (16 Dec 2014)) with 12 down closes and only 2 up closes.

It said following the down close on Dec 16, the market was expected to test lower ground again with immediate support seen at 1,670.

It said a fall below 1,670 would put pressure on the market down to the subsequent support zone between 1,600 and 1,610.

Indicator wise, the MACD is below the 9-day moving average line, it said.

“The analysis of overall market action on Dec 16 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,673.94 level on Dec 17,” said AllianceDBS Research.

Aeon Credit posts higher earnings on bad debt recovery, processing fees

KUALA LUMPUR: Aeon Credit Service (M) Bhd’s earnings rose 12.1% to RM48.29mil in the third quarter ended Nov 20, 2014 from RM43.05mil a year ago, boosted by an increase in the bad debts recovered and AEON Big loyalty programme processing fee.

It said on Tuesday its revenue increased by 21.4% to RM216.21mil from RM178.03mil a year ago. Earnings per share were 32.50 sen compared with 29.9 sen.

For the nine months ended Nov 20, 2014, its earnings increased by 19.2% to RM152mil from RM127.53mil in the previous corresponding period. Revenue rose 29.2% to RM626.43mil from RM484.77mil.

Aeon Credit said total transaction and financing volume in the third quarter and nine months ended Nov 20, 2014 was RM848mil and RM2.559bil, a growth of 3.6% and 3.4% respectively from previous year corresponding period. 

“Higher growth was recorded for auto financing operations. The financing receivables as at Nov 20, 2014 was RM4.354bil, representing an increase of 29.5% from RM3.361bil in the previous year quarter ended Nov 20, 2013,” it said. 

Aeon Credit’s non-performing loans (NPL) ratio was 3.07% as at November 2014 compared to 2.02% as at November 2013. 

“Other operating income recorded of RM14.19mil and RM40mil for the third quarter and nine months ended Nov 20, 2014 was 64.6% and 46.6% higher than previous year corresponding period respectively. This is mainly contributed by increase in bad debts recovered and AEON Big loyalty programme processing fee,” it said.

Aeon Credit said receivables amounting to RM38.641mil and RM115.053mil (Nov 20, 2013: RM25.775mil and RM72.526mil) were written off against allowance for impairment losses on

receivables for the current quarter and nine months ended Nov 20, 2014 respectively.

Gamuda Q1 earnings up 12% to RM185.8mil

KUALA LUMPUR: Gamuda Bhd’s earnings in the first quarter ended Oct 31, 2014 rose 12.3% year-on-year to RM185.8mil from RM165.5mil, as its revenue improved 17.2% to RM569.6mil from RM486mil.


Earnings per share in the quarter went up to 8 sen from 7.25 sen in the corresponding quarter a year earlier.

The company, which is involved in construction, property, and water and highway concessions, declared a dividend of 6 sen per share, payable on Jan 28, 2015.


Gamuda said the increase in revenue was mainly due to recognition of revenue from Kesas Sdn Bhd, concession holder of the Shah Alam Expressway, for which it had upped its stake. 


The company said its property division and its water and expressway divisions recorded higher revenue and profits in the quarter under report. However, the construction division recorded lower revenue following the completion of the electrified double-tracking railway project in early November 2014.


Gamuda said it was anticipating a good performance this year from on-going construction projects, substantial unbilled sales of the property division and steady earnings from the water and expressway concessions division.

Petronas Gas becomes controlling shareholder of Dialog's PLNG-2 unit

KUALA LUMPUR (Dec 16): Petronas Gas Bhd (PetGas) is now the controlling shareholder in Pengerang LNG (Two) Sdn Bhd (PLNG-2), a special vehicle which used to be wholly owned by Dialog LNG Sdn Bhd, which is in turn a wholly owned unit of Dialog Group Bhd. 

In a Bursa Malaysia filing this afternoon, Dialog said PLNG-2 has ceased to be a subsidiary of Dialog Group following PetGas' subscription of 780,000 ordinary shares - representing a 72.22% stake in PLNG-2 - for RM780,000, cash. This means that Dialog LNG now only holds 27.78% in PLNG-2.

"The intended equity shareholding of PetGas of 65% and Dialog LNG of 25% in PLNG-2, as earlier announced, will be achieved upon subscription by State Secretary, Johor (Incorporated) (SSI) of its 10% shareholding, which is expected in 2015," said Dialog in its filing. 

According to the shareholders' agreement signed on Nov 14 this year, PLNG-2 will be restructured whereby PetGas will acquire 65%, Dialog LNG to hold 25% and the SSI to hold the remaining 10%.

PLNG-2 will develop the liquefied natural gas (LNG) regasification facilities comprising of a regasification unit and two units of 200,000 m3 LNG storage tanks with an initial send out capacity of 3.5 million tonnes per annum of natural gas at Pengerang, Southern Johor, for about RM2.7 billion. 

As at 3pm, Dialog shares were four sen lower at RM1.28 with a market capitalisation of RM6.34 billion. PetGas was four sen down at RM21.20, giving it a market capitalisation of RM42.07 billion. 

SP Setia Q4 earnings slightly higher at RM131.3m

KUALA LUMPUR: SP Setia Bhd’s earnings rose nearly 1.3% to RM131.31mil in the fourth quarter ended Oct 31, 2014 from RM129.64mil a year ago underpinned by the strong sales for its international projects.

“The group achieved RM922mil sales in Q4 of FY2014, bringing total sales for the group for the full financial year to RM4.62bil and total unbilled sales to RM11.10bil,” it said on Tuesday.

The property developer reported revenue rose 27.7% to RM1.233bil from RM965.68mil a year ago. Its earnings per share was 5.19 sen compared with 5.27 sen.

It rewarded shareholders with a dividend of 5.7 sen a share.

SP Setia said the international projects contributed RM1.80bil (39%) towards the group’s total sales for the current financial year. 

Sales contribution from the group’s international projects continue to be strong and further underscores the management’s deep conviction to venture into international projects in established global cities like London and Melbourne. 

On the Malaysian projects, it said despite the period of softness following the implementation of the property cooling measures implemented by Bank Negara Malaysia at the beginning of the financial year, the group posted a satisfactory result of RM2.82bil sales. 

SP Setia said there was strong support for its launches during the financial year focusing on land banks with ready infrastructure and amenities like Setia Alam and Setia Eco Park. 

“Projects such as Setia EcoHill and Setia Eco Glades will benefit from new infrastructure projects including the Klang Valley Mass Rapid Transit (KVMRT) project,” it said.

For the financial year ended Oct 31, 2014, its earnings were RM405.67mil, which was 3% lower when compared with RM418.35mil in the previous financial year. However, its revenue rose 16.8% to RM3.810bil from RM3.261bil a year ago.

SP Setia’s acting president and CEO Datuk Voon Tin Yow said its sales performed well due to the strong and loyal customers who continue to believe in our brand. 

“On the international front, S P Setia continues to obtain high brand acceptance among the locals in London, Melbourne and Singapore. 

“As for Malaysia, we are confident that once the market stabilises, aggressive demands for properties will return as Malaysia is a young nation with a growing population,” he said.