Corporate Highlights
Sime Darby : FY10 KPIs to surprise on upside? Outperform
Visit Note
- Five key takeaways:
1) Strong recovery from Indonesian plantations’ yield;
2) Downstream expansion still ongoing;
3) Heavy equipment division going strong - one of the core growth drivers;
4) Oil and gas division orderbook rundown – to be replenished soon?: and 5) FY10 KPIs to surprise on the upside?
- Sime intends to only announce its FY10 KPIs and its achieved merger synergies for FY09 upon the release of the 1QFY06/10 results at end-November. However, we believe the KPI target may potentially surprise on the upside, despite the relatively flat CPO price assumptions given by management for FY10 of RM2,100-2,200/tonne (similar to FY09’s RM2,177/tonne average CPO price achieved), on the back of improvements expected from other divisions. As such, we believe Sime would not have any problems achieving our net profit (ex-EI) growth projections of 15.4% for FY06/10.
- We have revised our forecasts slightly upwards by 2.4-3% for FY10-11, after: 1) raising our FFB yield assumptions; 2) adjusting for a delay in the completion of its Port Klang refinery; and 3) slightly tweaking our heavy equipment and oil and gas division projections. As a result of our revised forecasts, we have raised our SOP-based fair value for Sime to RM9.70 (from RM9.50). Maintain Outperform.
Adventa : More expansion in store for surgical gloves Outperform
Company Update
- Given that Adventa is currently operating at full capacity for its surgical gloves, management plans to aggressively expand its surgical glove production capacity to 350m pairs by early-2010 (from 250m pairs currently) and further to 450m pairs by end-2011.
- -Adventa is also currently building a new factory in Kluang, Johor, which will house 7 double-former production lines (+1.5 bn pieces) for the production of dental and examination gloves and plans to add another 5 double-former lines by end-2011.
- -All-in, this will increase Adventa's current annual capacity production of dental and examination gloves of 3bn pieces to 4.5bn pieces by end-2010 and 5.5bn pieces by end-2011.
- Management expects to incur further forex hedging losses until 1QFY10. Given that the US$ is currently weakening against RM, we note that Adventa's forex losses could narrow for these two quarters.
- We have raised our FY10 and FY11 revenue projections by 6.3% and 8.3% respectively to reflect the change in installed capacity assumptions for surgical gloves. As a result, our FY10 and FY11 earnings have been raised by 18.4% and 33.5% respectively.
- Our fair value has been raised to RM2.79 based on target CY10 PER of 8x (from RM2.01 based on target CY10 PER of 7x) and Outperform call on the stock remains unchanged.
AirAsia : Formalises partial deferment of FY12/11 new aircraft delivery Underperform
News Update
- AirAsia has signed an amendment agreement with manufacturer Airbus SAS to reschedule the delivery of eight A320 from Feb-Dec 2011 to Sep 2014 – Oct 2015, reducing new aircraft delivery in FY12/10 to 15 from 25 originally.
- We already in Jul 09 cut FY12/10-11 net profit forecasts by 12-28%, having reduced our capacity growth in terms of available seat km (ASK) to 14% from 20% previously to pre-empt the lower aircraft delivery.
- Indicative fair value is RM1.23. Maintain Underperform.
Kurnia Asia : Better portfolio mix, better results Outperform
Results Note
- Kurnia Asia recorded net profit of RM32.2m (vs. loss RM12m in 1QFY06/09), above ours and consensus annualised full-year forecasts. Main variance was mainly due to MTM gain on its investment amounting RM10.5m, resulting in higher surplus transfer from its general insurance subsidiary.
- Combined ratio improved due to lower management expenses, as the company has been reducing its headcount, to improve underwriting and claims management efficiently. Even though the claims ratio is higher (70.3% vs. 68% in 1QFY106/09), we note that this was due to seasonal factor.
- FY12/09-11 forecasts raised by 12.4-21% following revision in management expense and inclusion of RM10.5m MTM gain in our annualised FY12/09 forecasts.
- Maintain Outperform. Fair value is increased to RM0.98 from RM0.87 previously, (based on unchanged 11x FY12/10 EPS) following the expansion in earnings.
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