- From the market’s standpoint, Budget 2015 is a non-event. We have tweaked our end-2014’s fair value for the FBM KLCI to 1,800 as we trim our corporate earnings growth estimate to only 1.8% for this year (2013: 10%). Although we are currently projecting corporate earnings growth to reaccelerate by 9.9% moving into 2015, we are introducing a modest 2015’s fair value for the FBM KLCI at 1,880 – based on 16x PE, implying a limited upside potential from the current level of 1,809. We expect to see elevated volatility as a stronger US economy with the associated robust macro data points collide with growing concern of a sooner-than-expected reversal in liquidity from a hike in the US Fed Funds rate. This is now being played out.
- While the risk of a pullback in external liquidity is a lingering concern, we do not believe that the exit of foreign funds would have a significant impact on the FBM KLCI. This is because foreign ownership of the market is already very low at only 23.6% as at end-August 2014. This level of foreign ownership is a tad higher than its all-time low of 20.4% as at end-December 2009. Furthermore, domestic liquidity is very robust, which would be more than enough to offset the outflow of foreign funds. The risk is in the MGS market where foreign ownership is very high at 47.3% (RM148 bil) as at end-August 2014, which may have some repercussions on the cost of funds further out.
- The key challenge for the market is the lack of conviction over its earnings momentum to improve current valuations. The earnings revision cycle continues to contract from rising cost pressure and slowing sales. There is not enough visibility to pinpoint a bottoming of the negative earnings revision cycle. We continue to advocate a bottom-up stock picking approach, guided by attractive valuations and stock-specific catalysts and newsflow.
- In 2015, several infrastructure projects that would be implemented include the construction of the 56km Second MRT line (RM23bil) from Selayang to Putrajaya, as well as the LRT 3 project (RM9bil) which will link the Bandar Utama suburb to Shah Alam and Klang in the Western Corridor of the Klang Valley. The MMC-Gamuda JV may be awarded a significant portion of the MRT 2 project given its current track record as both the Project Delivery Partner and tunnelling contractor for MRT 1. Likewise, Econpile is in a strong position to bid for the piling works for MRT2 because of its experience in MRT 1.
- Budget 2015 proposes several incentives to increase first-time homeownership and affordable homes but we do not believe that the impact is significant for the listed developers as these initiatives would be directly undertaken by government entities. Nonetheless, the various infrastructure projects – MRT 2, LRT 3, West Coast Expressway and DASH – to be implemented in 2015 would surely underpin property prices because of improved accessibilit and greater urbanisation. These infrastructure projects would also enhance the development potential of outlying areas, creating landbanking opportunities for developers. We remain BUYers of Mah Sing and E&O. The government’s targeted initiatives for youth and first time homeowners that involve funding limit not exceeding RM500k for married youth between 25-40 years with household income not exceeding RM10k should benefit Mah Sing; 70% of its buyers are aged 40 years and below, and 45% of its pre-sales are priced below RM500k. We remain committed to our investment thesis on E&O where we see significant accretion to its NAV from STP 2 given the lucrative margin between its breakeven land cost and the realisable land values. Reclamation works are expected to commence in 1Q 2015.
- The Youth Financing Scheme (which is a smart partnership between the government, Bank Simpanan Nasional, Employees Provident Fund and Cagamas) will provide home financing subject to certain terms. This is limited to “first come-first-served” basis for 20,000 units only. Given the limitation, we do not expect a major negative impact to the industry’s mortgage loans. We maintain a NEUTRAL stance on the sector, while our top pick is Hong Leong Bank.
- For telcos, the GST implementation paves the way for them to pass on the existing 6% prepaid service tax to subscribers. DiGi (BUY, FV: RM6.30/share) is the biggest beneficiary given that it has the largest proportion of prepaid subscribers (84% of total) compared to Maxis (73%) and Celcom (78%). Assuming the tax pass through materialises, we estimate a full-year impact of 10% to Digi’s bottomline, 9% for Maxis and 6% for Axiata. However, the prepaid segment is quite price sensitive and there could be impact to usage or telcos having to adjust underlying price points to maintain usage volume. The plan to construct 1,000 new telco towers could benefit two major players in this subsegment namely OCK (Non-Rated) and Instacom (Non-Rated). Both players are experienced in telco tower construction and ownership. Axiata’s eDotCo is a specialised tower owner and operator but it is uncertain whether it has sufficient track record in actual tower construction.
Source: AmeSecurities
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MAXISCreated by kiasutrader | Dec 08, 2015
Created by kiasutrader | Dec 07, 2015
Created by kiasutrader | Dec 04, 2015
Created by kiasutrader | Dec 03, 2015
calvintaneng
Digi?
Oh DIGI! I Remember Calvin bought Digi at RM4.40
Digi Shot Up To Over RM20.00!
Very Nostalgic indeed.
Today telcos are so so only.
Watch out for Next Telco to List
U MOBILE!
BUT U MOBILE MIGHT LIST IN USA BY BJ CORP
BJ CORP?
YES! VT SOLD AWAY DIGI
BUT NEXT ONE IS COMING - U MOBILE BY BJ CORP
SO DON'T MISS
LOAD UP ON BJ CORP NOW!
2014-10-13 10:52