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Reports Malaysia

Malaysia stock market and companies daily report (January 07, 2014)

January 7, 2014, Tuesday, 07:38 GMT | 02:38 EST | 12:08 IST | 14:38 SGT
Contributed by Shares Investment

Maybank: Malaysia’s Aviation Sector On Track For Earnings Recovery
- The airline industry in Malaysia is on track for earnings recovery in 2014 on improving yields and lower cost, according to Maybank Investment Bank. Both factors are expected to help the sector achieve earnings of some RM652.7 million during the year compared to a loss of RM361 million in 2013.
- The industry earnings figures are based on Maybank’s forecast, much of the earnings will stem from Malaysian Airport Holdings’ (MAS) 76 percent reduction in losses. Excluding MAS, the industry earnings will rise by 24.5 percent year-on-year to RM913.1 million.
- Capacity is expected to grow 9 percent to 10 percent this year that should be absorbed by the market comfortably and the yield outlook should gradually improve as supply-demand dynamics are in balance and airlines no longer need to engage in fare war.
Significance: Maybank has an “Overweight” call on the sector and is optimistic on the more balanced capacity deployment plans by the airlines. Notably, AirAsia X could deliver the strongest earnings growth due to maturity of its existing routes and economies of scale.
HwangDBS Ups Public Bank To “Buy”
- HwangDBS Vickers Research has revised Public Bank’s valuation upwards to “Buy” and increased its target price to RM23 from “Hold” with a target price of RM18. This move was on the back of sustainable earnings, backed by stable loan growth, robust asset quality and best in class cost-to-income ratio.
- The house noted that the bank’s consumer loan growth did not weaken following Bank Negara Malaysia’s tightening measures over the last three years.
- The bank is expected to maintain its financial performance and would not have earnings surprises, in terms of growth, and sustainability of market share, especially in the mortgages, auto and small and medium enterprise segments.
Significance: Notably, HwangDBS highlighted that sustainable contribution from the bank’s asset management business will continue to differentiate it from the peers. Also, given Public Bank’s key portfolio in the mass market, loan growth is expected to remain resilient.
MKH In the Spotlight As Kalimantan Plantation Bears Fruits
- MKH is expected to benefit from its 14,400 hectares of palm oil estates in East Kalimantan, given an uptrend in crude palm oil (CPO) prices. Also, its venture in palm oil cultivation in Indonesia since 2008 had driven up core profit by 96 percent in FY13.
- Despite a young age profile of around four years for its oil palm estates, the segment booked RM29 million in earnings before interest and tax in FY13.
- HwangDBS Vickers Research expects the plantation contribution to increase to 29 percent and 39 percent of its earnings in FY14 and FY15 respectively.
Significance: HwangDBS projects a 31 percent three-year compound annual growth rate driven by plantation and property, adding that it rated MKH “Buy” with a target price of RM5.40.