Period

4Q15/FY15

Actual vs. Expectations

Within house but below consensus. The group reported a 4Q15 core net profit (NP) of RM21.2m (>100% QoQ; -44% YoY), bringing FY15 CNP to RM83.6m (-29% YoY) which made up 97%/91% of our /consensus estimates. (Please refer to the “Results highlight” for details on core NP adjustment).

Dividends

Broadly inline. A second interim tax-exempt dividend of 3.0 sen was declared, bringing FY15 NDPS to 10.0 sen (inclusive of a special dividend of 3.0 sen declared in 2Q15), vs. our FY15E DPS of 11.0 sen. This translates into a net dividend yield of 4.3%. Key Result

Highlights

YoY, FY15 revenue inched up by 2% despite the much weaker 2Q15 revenue (-24%, which was dragged by the weaker consumer demand on the implementation of GST in April). The silver lining for the marginal growth was the recognition of one-off revenue from Menara MBMR development (RM139.8m) during 1Q15. Netting off the recognition of the one-off Menara MBMR development revenue, core business revenue would have dropped by 5% owing to the lower sales from its Motor trading segment (-7%). On a closer look at its motor trading segment; while the largest units volume and revenue contributor- DMMS which trades Perodua vehicles recorded a decent 16% sales growth, weaker sales in both DMSB (Daihatsu & Hino trucks: -21%) and Federal Auto (continental makes: -22%) negated the decent contribution. Meanwhile, core PATAMI decreased by 29% to RM83.6m, dragged by weaker earnings contribution from 20%-owned associate Perodua (impacted by adverse currency fluctuations) and JV unit- Autoliv (lower sales caused by its customer’s weaker vehicle production).

QoQ, the group 4Q15 revenue improved by 7%, driven predominantly by stronger sales in Motor trading segment (+7%). We attribute the non-eventful growth to the customers’ front-loading vehicle purchases in anticipation of price hikes in 2016. While reported PBT was down by 8% after charging the provision for slow moving stocks and receivables during the quarter, core PBT improved by 76% helped by the recovery in associates’ earnings which we believe was from 20%- owned associate Perodua.

Outlook

We expect headwinds to continue in FY16 for its motor trading segment and auto parts manufacturing alongside with bleak outlook for TIP and TIV and unfavourable currency movement.

Change to Forecasts

We maintain our FY16E earnings for now pending further details from the briefing today.

Rating

Maintain MARKET PERFORM

Valuation

We maintain our TP of RM2.92 (with downside bias) pending further details from the briefing today.

Our TP is derived from a targeted 10.0x FY16E PER (at its 3-year mean forward PER).

Risks to Our Call

Upside risks are: (i) higher-than-expected sales volume, (ii) favourable currency fluctuations.

Source: Kenanga Research - 25 Feb 2016