Top Glove Corporation Berhad (7113)
Target Price: RM7.80 (Buy)
Top Glove announced that the dual primary listing exercise on the Main Board of The Stock Exchange of Hong Kong Limited involved the issuance of up to 1.495bn new shares, representing up to 18.65% of the group’s issued shares. As such, this exercise could raise up to RM7.7bn, at an issue price to be determined at a later date. The proposals are expected to be completed by 2Q21. We estimate EPS dilution of circa-15% in FY21 post completion of dual-listing exercise. Maintain earnings forecast pending completion of this exercise. Maintain Buy.
Via CLSA
* Malaysia - Top Glove - Trifecta listing
Top Glove proposed to issue up to 1,495m new shares (18.7% of share base) for its upcoming listing on the Hong Kong Exchange (HKEX), which could raise up to HK$14.95bn, or RM7.77bn, for the group. The proposal targets completion by 2Q21. The issuance is surprisingly large to us, which we see as unnecessarily dilutive as most of the proposed initiatives could have been funded internally. We incorporate the impact of the dilution into our forecast, resulting in a cut in our target price from RM7.20 to RM5.50 and a downgrade of our rating from BUY to Underperform.
* Malaysia - Malaysia Banks - Bank 4Q20 wrap
Malaysia’s four banks, CIMB, RHB, HLBK and Alliance, reported results last Friday. HLBK was the best, while CIMB’s earnings missed on non-loan impairments. All four banks upped their provision guidance (versus last quarter), despite indicating underlying portfolios had not seen significant growth in loans requiring help. On balance, banks envisage scope for NIM expansion this year given funding mix improvement. Our top pick is Maybank (previously RHB) on higher dividend conviction. AMMB, which just agreed to a fine by the Ministry of Finance AMMB - O-PF (Making final AMM-ends) reports its quarterly results Monday.
* Malaysia - Malaysia Utilities - Looking attractive
Demand for electricity and gas continued to recover in 4Q20 after disruptions caused by Covid-19 in 1H20. On top of this, the government continued to honour the Regulated Asset Base (RAB) regime for Tenaga and Gas Malaysia, which naturally protects earnings from volatility and hence ensures more sustainable dividends. We continue to have BUY ratings on both given undemanding valuations & attractive dividend yields. We rate Petronas Gas O-PF, also supported by its dividend yield.
* Malaysia - IHH - Coming out stronger from Covid-19
IHH’s 4Q20 Ebitda of RM1,042m (+25% QoQ/+16% YoY) rebound strongly as more cost containment efforts trickled through during the quarter. This led to FY20 core PATAMI of RM715m (-22% YoY), exceeding our/consensus forecasts at 157%/248%. IHH’s share price has declined 8% YTD and it remains a more unassuming play for border reopening, in our view. Should the group sustain its 4Q20 momentum coupled with continued cost efficiency, the stock is trading at an undemanding 13x 22CL EV/Ebitda, below -1 std. of its mean. Thus, we upgrade our recommendation from Outperform to BUY on a higher target price of RM6.60 (previously RM6.30).
* Malaysia - Maxis - Uncertainty prevails
Maxis’ 2020 earnings (-8% YoY) were within expectations. Although guidance continued to be withheld, we take our cue from Digi, in that it sees 2021 mobile service revenue declining in the low-to-mid-single digits. On a lower post-paid Apru, we lower our earnings estimates 6%-7%. As its 4Q20 dividend of 5 sen includes a 1 sen special dividend, we believe its quarterly dividend is likely to remain at 4 sen for the near future, for an implied dividend yield of 3.4%. We retain our SELL rating at a lower target price of RM4.55 (previously RM4.70).
* Malaysia - Malaysia Airports - Clearer recovery runway
Malaysia Airports’ (MAHB) core loss (excluding impairment and accelerated depreciation) of RM589m was below our RM500m loss estimate. Even so, front-loading costs & depreciation in FY20 should allow a clearer P&L recovery runway, and cashflow concern has been further allayed with rescheduling obligations/debt. Cost savings exceeded its target and on the assumption that these could sustain somewhat after a recovery, and benefiting such a stronger margin, underpins the lift in our target price from RM5.60 to RM6.90 and rating from Underperform to Outperform.
* Malaysia - AMMB - Making final AMM-ends
AMMB (AMM MK) revealed a negative surprise Friday with it agreeing to a fine of RM2.83bn to the Ministry of Finance following a review by relevant authorities of past dealings by 1Malaysia Development Berhad (1MDB) and related entities. While more explanation may be forthcoming (likely in conjunction with its 3QFY21 results to be announced Monday), the finalised penalty necessitates us to adjust our book value estimate. This results in a 13% lower target price of RM3.50 (previously RM4.00). Our valuation multiple of 0.6x and O-PF rating remain unchanged. The silver lining from this is that there could be a greater focus on the business and fewer distractions should it consider M&As in the future.
* Malaysia - Pentamaster - Back to the old ways
An uptick in the book-to-bill ratio to 1.2x reinforces expectations of a return to 21CL earnings growth (+27% YoY). We expect next generation sensors to drive demand for electro-optical equipment. Adoption of silicon carbide (SiC) power semiconductors continues to rise and now forms 20% of automotive revenues. Its expansion into manufacturing of medical devices is on track and will play a meaningful role in 2022. Retain O-PF at an unchanged target price of RM7.40.
* Malaysia - Sime Darby Property - Stronger targets ahead
Sime Darby Property’s 2021 sales target of RM2.4bn (+20% YoY) will be supported by planned launches of RM2.5bn (+67% YoY) and unsold GDV of RM2.2bn (completed inventory comprises RM738m). Nonetheless, we take this opportunity to tweak our earnings to reflect the delay in completion of Battersea Power Station (BPS) phase 3A (£879m gross development value) that has been pushed back to 4Q21/1Q22 (initially expected for 3Q21) alongside lower margin assumptions. We reiterate BUY and an unchanged target price of RM0.69.
