Posted by huat2628 > 2014-07-16 11:04 | Report Abuse

人呢?

Posted by johnny cash > 2014-07-22 07:37 | Report Abuse

Sector top pick

QL enjoys economies of scale, thanks to its large size in the industry.
The company’s ongoing expansion and turnaround of its new
businesses will drive its FY15-17 earnings growth. We believe QL’s
earnings will remain resilient despite the slower consumer spending.

We lift our FY15-17 EPS forecasts as
we update our FY14 numbers. We
keep our Add rating and target price,
still based on the consumer sector
average of 23x CY15 P/E. We continue
to favour QL for its: 1) uninterrupted
27-year earnings growth, 2) strong
potential earnings growth due to its
aggressive expansion plan, and 3)
resilient demand for its products.
Marine product business
Even though its largest MPM plant
has only just started operating, QL is
looking to acquire another piece of
land for expansion in Johor due to the
strong demand. Its total expansion
capex in 3-4 years is estimated to
reach about RM50m. This new plant
which has a higher production
capacity will slowly take over its old
plants' capacity in Johor to boost
operating efficiency. In Surabaya,
Indonesia, the group is still waiting
for the approval of the authorities to
venture into surimi-based product
manufacturing. Currently, it has only
fishmeal and surimi manufacturing
plants in the country. As for its new
prawn-farming venture, the first few
ponds will be ripe for harvesting in
Jun/Jul 2014 and the group expects
to harvest 1,100mt by FY15 and
2,200mt by FY16 when it completes
80 ponds.
Livestock farming
QL’s egg production in Indonesia hit
800k eggs per day in FY14 and it
targets to hit 960k eggs per day by
end-Dec 2014. With the increasing
sales volume, we believe that the
poultry business in Indonesia could
turn profitable with the completion of
its own feedmill in 4QFY15, which will
help reduce the cost per egg by at least
half a sen per egg. In Vietnam, eggs
produced per day hit 500k in Mar
2014 and are slated to rise to 600k by
Dec 2014. For the next phase of
expansion in Vietnam, it has
identified a piece of land near its
existing plant.
Palm oil activities
After a long gestation period, QL is
expecting its palm oil activities to
break even in FY15 due to the
increasing maturity of crops. As at
end-Dec 2013, out of the total 20k ha
landbank in eastern Kalimantan, QL
has planted 10k ha – of which 50%
has matured.

Posted by johnny cash > 2014-07-22 07:41 | Report Abuse

OLD CIMB TARGET 3.72,,,NEW ONE IS 3.94 FROM ABOVE REPORT

Posted by johnny cash > 2014-07-22 07:43 | Report Abuse

Belt-tightening times
Given the inelastic demand for F&B products, we expect the sector to
outperform the brewery, tobacco and retail sectors. Brewery and
tobacco will be the worst hit as consumers cut spending or downtrade
to cheaper products. We remain Neutral on the overall consumer
sector and recommend a switch to F&B or REITs for better yields.

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1.2 Headline inflation on the uptrend
Due to the ongoing subsidy rationalisation, headline inflation rose from Sep
2013 to Mar 2014 when it peaked at 3.5% yoy. It has inched lower to 3.3% yoy in
Jun 2014, but remains above the long-term historical average of 3%.

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1.4 Unemployment rate remains healthy
The unemployment rate remained healthy at 2.9%, below the threshold of 3%,
in Apr 2014. The number of persons employed and unemployed remained
steady at 13.5m and 407k, respectively, in Apr 2014.

Posted by johnny cash > 2014-07-22 07:47 | Report Abuse

1.5 But consumer sentiment has weakened
Although the unemployment rate remains healthy, the high inflation rate has
dented consumer sentiment as the higher cost of living has crimped disposable
incomes. MIER’s consumer sentiment index now stands at 96.8 pts. It fell below
the threshold level of 100 pts in 4Q13, the first time in five years after the plunge
in 2008 during the Asian financial crisis. While the index rebounded in 1Q14,
the confidence level remains below the threshold of 100 points, indicating that
confidence has yet to turn the corner.

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1.6 Retail sales still growing but at a slower rate
In tandem with the poorer consumer sentiment, retail sales growth slowed
down in the past 12 months although it was still registering positive growth.
Aside from this, we found out that a few of the suburban malls in Selangor and
malls in other cities experienced lower traffic in FY13, which the companies
blamed on the softer retail environment.

Posted by johnny cash > 2014-07-22 07:47 | Report Abuse

1.7 Breweries and tobacco companies did not do well
Breweries and tobacco companies were not spared the weaker consumer
spending.
Double whammy for tobacco. In 2013, the tobacco manufacturers were hit
by both slower consumer spending and an excise duty hike. Due to the excise
duty increase in September 2013, the companies were left with little choice but
to raise selling prices although sales volume has already been hurt by the slower
consumer spending. This caused 4Q13 sales volume to fall by double digits yoy
though it recovered qoq in 1Q14 as (i) the government cracked down on the
illicit market in March by launching the “Ops Outlets” operation, and (ii)
smokers adapted to the new pricing. Net profit however continued to show
growth in 2013 as higher selling prices more than offset the volume decline.
Brewers saw weaker consumption. Both Carlsberg and Guinness were
affected by weaker consumption in the past few quarters. Though Carlsberg
reported better earnings yoy (+3.6%) in 1QFY14, it was not due to the stronger
sales volume but was boosted by better pricing and lower operating costs.

Posted by johnny cash > 2014-07-22 07:48 | Report Abuse

1.8 But F&B companies continued to deliver strong results
F&B companies, however, did well, notching up double-digit earnings growth
except Nestle due to the timing difference of A&P incurred. The strong
bottomline growth is no surprise given that F&B is deemed a necessity and will
be the last item that consumers cut back on.

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2.2 Subsidy rationalisation will continue
Even after many rounds of subsidy cuts for various items, we believe that the
government will continue its subsidy rationalisation programme to reduce the
country’s budget deficit. Our house view is that there will be another fuel price
hike in 2H14, while the electricity and natural gas prices will be increased
sooner or later as electricity tariffs have to be raised to close the gap between the
true cost of generating power and the current subsidised tariffs.
2.3 Inflation to stay elevated
Due to the anticipated further cuts in subsidies, our economist believes that the
inflationary pressure will remain elevated. Aside from the further cuts in
subsidies, the introduction of the GST will also induce temporary spike in
inflation, once it is implemented. All in, our economic team is forecasting the
full-year inflation to average 3% this year and 3.5% in 2015 versus an average of
2.1% in 2013.

Posted by johnny cash > 2014-07-22 07:49 | Report Abuse

2.4 Higher OPR rate increases loan payments
The recent rise in OPR rate will raise property loan repayments as property
loans have floating interest rates. Based on our analysis, a 25bp increase in the
interest rate would reduce consumers’ disposable incomes by 1.5-2.1%,
depending on the tenor of the property loan. Our economist thinks that there
could be another hike in 2H14 which would further increase loan payments.

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Posted by johnny cash > 2014-07-22 07:50 | Report Abuse

3. BUT…. We do not think it is all doom and gloom
3.1 Poor sentiment but buying is resilient
During the last economic crisis, although the consumer sentiment dropped to
70 pts, retail sales still registered 0.8% growth. This time, although consumer
sentiment has fallen below the 100 pts threshold level, it is much stronger than
the levels seen in 2008-09. Hence, the impact on consumer spending will be
much smaller. We are expecting consumer spending to continue to grow but at a
slower rate of 5.5-6.5% in 2014-15 vs. 7.2% in 2013. If the government were to
increase electricity tariff every six months, consumers will adapt to it gradually.

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Posted by johnny cash > 2014-07-22 07:53 |

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4.3 Little impact from the lower raw material prices
Although malt and wheat prices have declined in the past few months, the
higher operating costs from higher electricity tariffs and natural gas prices will
partially offset the benefit of the lower raw material costs. Furthermore, the
companies usually lock in raw material prices 6-18 months in advance.

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4.5 Persistent regulatory risks
The industry was spared an excise duty hike for the eighth consecutive year in
2014. While we note that excise duty hikes only accounted for 4.4% of the
government’s total indirect tax collection in 2013 and thus the government may
be less tempted to raise the excise duty on beer, we are still concerned that the
government may decide to raise it to increase its tax revenue to help it address
the budget deficit, especially since the industry has been spared for eight years.
In 2004-06 when the excise duty was raised for three consecutive years, the
industry volume dropped by 5-7% despite the fact that the contraband and
saturation levels were lower at that time.

Posted by johnny cash > 2014-07-22 07:54 | Report Abuse

4.6 Dividend yields too low for the risks
Guinness and Carlsberg currently offer dividend yields of 4-5%. Although this
represents a premium over MGS’ 3.9%, the KLCI average of 3.3% and consumer
stocks’ (under our coverage) 1-4%, we think that the brewers should offer higher
yields as the downside earnings risks for them are greater, especially now that
the industry is facing volume pressure from slowing consumer spending, higher
availability of contraband and saturated consumption levels. The current
dividend yields offered by the companies are also low compared to their
respective historical yields.

Posted by johnny cash > 2014-07-22 07:55 |

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4.8 CAB could be more vulnerable to slower spending
We believe that Carlsberg which has 40% market share will be more vulnerable
to the slower consumer spending than Guinness (60% market share) as it has
higher exposure to the off-trade channel domestically, for which demand is
more elastic. We believe that consumers in the off-trade channel are more
sensitive to rising living costs and there is more impulse buying in the off-trade
channel than the on-trade segment where customers are heavier drinkers and
have higher spending power.
However, in the on-trade channel, Carlsberg’s higher sales contribution from
the traditional channel will also make it more vulnerable. Although the on-trade
traditional channel commands higher margin, business is generally slowing
down due to the influx of modern pubs.

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Posted by johnny cash > 2014-07-22 07:56 | Report Abuse

5.2 Price increase is the only way to increase net profit but it
is not a long-term solution
In a declining industry volume situation, price increase seems to be the only way
to increase net profit for now but this is not a long term solution. After the price
increases in end-2013, illicit cigarettes became more prevalent as smokers
looked for cheaper alternatives. Its market share jumped 4.5% pts in Oct-Dec
2014 to 38.9%. To tackle this, the government recently tightened the
enforcement and came out with new strategies to seize the illicit cigarette
distributors. Under the “Ops outlet” operation spanning March to May 2014, we
understand that the government seized 131m illicit sticks worth RM7.1m in
value and RM66.6m in tax from 999 outlets and 686 outlets’ owners. This
helped to bump up the legal volume substantially in 1Q14 (Figure 57).

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5.3 Smokers said to downtrade
Based on a survey conducted by us recently, 52% of the smokers will smoke less
due to the higher selling prices. Though 34% said that the price increase will not
affect them, double the number said that they will smoke less or downtrade,
which suggests that industry volume will continue to decline. With the
expectation that living expenses will increase, the possibility of this happening is
even greater.

Posted by johnny cash > 2014-07-22 07:57 | Report Abuse

5.4 JTI to be more aggressive after going private
JTI was taken private recently at an offer price of RM8.20/share. The rationale
for the move is the need for JTI to strengthen its position by investing heavily,
which will reduce the cashflow available for distribution to the shareholders.
This is a strong signal that JTI will be much more aggressive in order to gain
market share after it is taken private. This points to a more difficult time ahead
for BAT which is already operating in a tough environment.
5.5 A sunset industry – Maintain Underweight
We believe that industry volume will continue to be weak given the expected
weaker consumer spending. This is not helped by the higher availability of illicit
cigarettes due to higher demand from smokers looking for cheaper alternatives.
Even without a slowdown in consumer spending, we think that this industry is a
sunset industry given the government’s continuous efforts to clamp down on
smoking. Other than 2012, industry volume has been on a downtrend since
2006. In a declining volume environment, the only way to increase net profit is
to increase selling prices but this is not a long term solution for now as any price
increase will cause illicit trade to spike. In light of the risks and the dividend
yield which is insufficient to compensate for the risks taken, we maintain a
Reduce on BAT and an Underweight on the industry.

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Posted by johnny cash > 2014-07-22 07:57 | Report Abuse

6. SUBSECTOR OUTLOOK- Food and Beverage – Upgrade to
Overweight
6.1 No large concern for F&B companies
We believe that F&B companies such as Nestle, F&N and QL Resources will not
be affected substantially by the higher living cost. For Nestle and F&N, we
believe they can sustain their earnings growth by engaging in more A&P
activities. This is because their products are necessities. When there are
promotions, we believe that consumers will still stock up.
Between Nestle and F&N, we think that Nestle will be more resilient than F&N
given that Nestle’s products such as dairy products, cooking aids and biscuits
are supportive of healthy lifestyles as opposed to the soft drinks sold by F&N.
Furthermore, consumers may eat out less frequently which could affect F&N’s
condensed milk business. As for QL, its eggs and surimi-based products are
cheap and are basic necessities that consumers need in good times and bad.
Furthermore, 40% of its surimi products are exported and will not be impacted
by the slower domestic consumer spending.

Posted by johnny cash > 2014-07-22 07:58 | Report Abuse

6.2 Rise in commodity prices not an issue if gradual
Commodity prices started to soften recently which will bode well for the F&B
companies. Even if raw material prices on the uptrend, we are not overly
concerned as the companies can pass on the cost easily. Despite the high raw
material prices in 2010-12, Nestle and QL have been posting quite resilient
EBITDA margins. QL’s selling prices depend on market forces and raw material
costs, i.e. its selling prices normally fluctuate in tandem with raw material prices.
Nestle and F&N adjust the prices for some of their bestselling products to cover
the overall cost increase when raw material prices go up.

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7. SUBSECTOR OUTLOOK - Discretionary Retail – Neutral
7.1 Some short term impact
In tandem with our expectation that consumer spending will continue to grow
but at a slower rate, we expect retail sales to register positive growth but at a
slower rate than the 4.5% achieved in 2013. The spending cut is mainly expected
to affect the discretionary products which will impact the retailers which are
involved in selling discretionary items, especially the luxury segment retailers.
In 2008-09, during the economic crisis, companies involved in selling
necessities posted consistent profit growth while the companies selling
discretionary items were impacted negatively. We think that the negative impact
will be milder this time given the stronger consumer sentiment as compared to
the sentiment in 2008-09, strong growth in household income in the past few
years and the healthy employment rate. Additionally, the expansion plans in
place and the lessons learnt during the last economic crisis which led to closing
down of non-performing stores, changing of business models and better
discounting strategies will help to mask the negative impact of slower consumer
spending and drive earnings growth.
7.2 More competition within the retail space
Aside from the slower consumer spending, retailers also need to brace for
higher competition within the industry, thanks to the huge shopping mall
supply in the Klang Valley where retailers are competing with each other to have
as much presence as possible.

Posted by johnny cash > 2014-07-22 08:00 | Report Abuse

36

Foreigners are generally allowed to open all types of retail formats in the
country. The main exceptions are (1) supermarket/minimarket (less than 3k sq
m floor area), (2) provision shop/general vendor, (3) convenience store that
opens for business for 24 hours, (4) medical hall, (5) fuel station with
convenience store or without convenience store, (6) permanent wet market
store, and (7) textile, restaurant (non-exclusive), bistro and jewellery shops

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8. VALUATION AND RECOMMENDATION
8.1 Maintain Neutral on overall consumer sector
In this report, we recommend investors to switch from brewery and
tobacco sectors to the more resilient F&B sector. In a challenging
consumer spending environment, we think that beer, which is regarded as a
discretionary item, will be impacted while F&B companies’ earnings are
expected to remain resilient. Although we believe that the demand for cigarettes
is rather inelastic, volumes of licit cigarettes are likely to be impacted as
smokers downtrade to cheaper illicit cigarettes.
Hence, we are now Overweight (previously Neutral) on F&B and Underweight
on Brewery (previously Neutral) and Tobacco (unchanged) and Neutral on
Retail. Due to the reasons mentioned above, we expect F&B companies to
outperform the brewery, tobacco and retail companies. Brewery and tobacco
companies will be the worst hit while the retail companies are likely to witness
some short term-negative impact from the slower consumer spending.
Overall, we remain Neutral on the consumer sector as we expect the spending to
continue to grow, albeit at a slower rate which will mainly impact the sales of
discretionary items. For dividend yields, we recommend investors to switch to
REITs which offer much better dividend yields and yet have better earnings
resiliency than the tobacco and brewery sectors.

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8.4 Maintain Underweight on tobacco sector
The tobacco industry shares the fate of the brewery industry, possibly an even
worse one. The industry volumes of licit cigarettes have been declining since
2006 due to illicit trade and higher excise duty as the government aims to curb
smoking. The record price increase in Oct last year exacerbated the situation.
Fortunately, the tobacco players managed to offset the lower sales volume with
higher selling prices. While increasing selling prices seems like the only way to
improve profit for now, it is not a long term solution as any price increase will
cause illicit trade to spike up which in turn will further hurt the sales volumes.
We do not see signs of recovery for the tobacco industry unless the government
successfully clamps down on the illicit market or stops raising excise duty,
which we believe is unlikely. Furthermore, JTI which was delisted recently is
likely to become more aggressive to gain market share as it has more leeway to
do so as a private company. This will make it even more difficult for BAT. BAT’s
dividend yield, which is lower than its historical yield and the yields offered by
the REITs, is also too low for the risks. Hence, we maintain an Underweight
rating on the sector and a Reduce recommendation on BAT. We recommend a
switch to F&B stocks or REITs for better yields