Today's Market Preview (25-06-2010)
Thursday, June 24, 2010
Wednesday, June 23, 2010
Berjaya Sports Toto, Raising debt = bumper dividends?
Berjaya Sports Toto (BST) has received the approval from Securities Commission to undertake a medium-term note (MTN) programme of up to RM800m (tenure may range between >1 to 10 years). The initial drawdown will likely be around RM500m, which proceeds will be used to refinance its remaining RM450m debt and for working capital.
BST’s net gearing has improved from 174% in 1QFY10 to 43% in 4QFY10. Its last debt raising exercise was mainly to finance bumper dividends declared in 4QFY09 (final dividend of 11 sen + advance FY10 interim dividend of 19 sen), in preparation for potential exercise of a put option for early redemption by parent Berjaya Land’s bondholders. BST has just declared a 8 sen second interim dividend in 4QFY10, which works out to ~RM107m. We do not discount the possibility of surprise bumper dividends as Berjaya Land’s RM711m convertible bonds will be due in Aug 2011.
On a worst case scenario, the initial RM500m MTN drawdown will increase net gearing to 155% and interest expense by RM25m (assuming 5% interest rate) or 5% of FY11 net profit. But the actual impact should be much lower as some existing debt will be refinanced, while repayment should be fairly quick given BST’s strong operating cashflows of RM400-500m p.a.
Maintain Buy on BST, and our TP of RM4.80, based on dividend discount model.
Report from
HWANGDBS Vickers Research Sdn Bhd (128540 U)
BST’s net gearing has improved from 174% in 1QFY10 to 43% in 4QFY10. Its last debt raising exercise was mainly to finance bumper dividends declared in 4QFY09 (final dividend of 11 sen + advance FY10 interim dividend of 19 sen), in preparation for potential exercise of a put option for early redemption by parent Berjaya Land’s bondholders. BST has just declared a 8 sen second interim dividend in 4QFY10, which works out to ~RM107m. We do not discount the possibility of surprise bumper dividends as Berjaya Land’s RM711m convertible bonds will be due in Aug 2011.
On a worst case scenario, the initial RM500m MTN drawdown will increase net gearing to 155% and interest expense by RM25m (assuming 5% interest rate) or 5% of FY11 net profit. But the actual impact should be much lower as some existing debt will be refinanced, while repayment should be fairly quick given BST’s strong operating cashflows of RM400-500m p.a.
Maintain Buy on BST, and our TP of RM4.80, based on dividend discount model.
Report from
HWANGDBS Vickers Research Sdn Bhd (128540 U)
Tuesday, June 22, 2010
Axiata - Dividend and capex guidance
Axiata told the media after its AGM yesterday that it would announce a dividend policy by 3Q10. The company guided FY10F capex of RM3.6b, which includes RM1b for Celcom in Malaysia, USD500m for Excelcomindo in Indonesia, USD100m for Dialog in Sri Lanka and USD100m for Robi in Bangladesh. Further, Axiata plans to issue RM4.2b in Islamic debt by next month to refinance its existing loans. As the Islamic debt replaces existing facilities, there wouldbe negligible impact on our forecasts.
We had already factored in a slightly more conservative capex of RM3.7b for FY10F, which we see no need to update at this moment as the impact on earnings and valuation of Axiata is minimal. Since Axiata is announcing a dividend policy in 3Q10, which need not necessarily mean a payout, we had omitted a dividend payout for FY10F, but have assumed dividend payouts to start in FY11F. We have imputed a token amount of 10% only vs. a previous target of 30%,
which we intend to review once the official policy is announced.
We are keeping our forecasts, sum-of-parts price target of RM4.50 and BUY recommendation on Axiata. Further cost reduction in both operating and network costs are catalyst for future re-rating of Axiata.
Published by HWANGDBS Vickers Research Sdn Bhd (128540 U)
Sunday, June 20, 2010
Weekly Market Preview (21 June 2010 To 25 June 2010)
From the Chartroom
A replay of our Malaysian bourse performance being stuck in a tight trading pattern is on the cards unless fresh catalysts show up quickly. So please excuse us if we have to recycle contents from our previous writeups for this week.
After swinging inside a 23.1-point range throughout the week, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) settled at its intra-week high of 1,317.69 on Friday, a weekly increase of 23.0-point (+1.8%). Both the FBM 70 Index and the FBM ACE Index also climbed (by 2.1% each) for the week. Trading activity remained slow though, averaging at 545.6m shares in volume and RM854.6m in value (versus the daily average of 575.5m units worth RM774.5m traded the preceding week).
Whether our local stock market will stage a sustained breakout on the chart – either way – anytime soon will likely be triggered by overseas (rather than local) developments. And for the coming week, investors may react to the outcome of the U.S. Federal Open Market Committee (FOMC) meeting scheduled on Tuesday and Wednesday (22-23 Jun).
While the policymakers are expected to keep the federal funds rate close to zero for the time being, their rhetoric on the current economic and monetary affairs could shift the probable timing of future interest rate hikes in the U.S., which has already been pushed back from the second half of 2010 previously to the first two quarters of 2011 following the fallouts from the European sovereign debt crisis. The interest rate differentials outlook may then reshape foreign exchange expectations, which would also be taking into consideration China’s latest initiative to gradually make its Yuan more flexible. Any changes, in turn, will cause wider implications on portfolio funds flows around the world.
Meanwhile, it could still be fairly quiet on the domestic scene this week, notwithstanding possible window dressing activity ahead of mid-year book closing for some funds. Other than a new listing on Wednesday (23 Jun) – Shin Yang Shipping Corporation, a company that provides shipping services and shipbuilding with a market cap size of RM1.26b based on its retail offer price of RM1.05 per share – not much else (in terms of news flows) is in the pipeline.
Technically speaking, a breakout could be on the way if the FBM KLCI either: (i) penetrates above the 1,340 resistance threshold with a follow-up move to challenge the high of 1,349.92 achieved (on 4 May) since the market rally started in Mar last year; or (ii) slices below the resistance line of 1,280, which is approximately where the 200-day moving average line currently stands on.
With no technical signal appearing just yet, it remains to be seen which route the bellwether will take when an eventual breakout occurs. Nevertheless, judging by its resilient performance lately, the chance for a positive breakout is getting increasingly better now. Let’s keep our fingers crossed.
Report is from HWangDBS
A replay of our Malaysian bourse performance being stuck in a tight trading pattern is on the cards unless fresh catalysts show up quickly. So please excuse us if we have to recycle contents from our previous writeups for this week.
After swinging inside a 23.1-point range throughout the week, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) settled at its intra-week high of 1,317.69 on Friday, a weekly increase of 23.0-point (+1.8%). Both the FBM 70 Index and the FBM ACE Index also climbed (by 2.1% each) for the week. Trading activity remained slow though, averaging at 545.6m shares in volume and RM854.6m in value (versus the daily average of 575.5m units worth RM774.5m traded the preceding week).
Whether our local stock market will stage a sustained breakout on the chart – either way – anytime soon will likely be triggered by overseas (rather than local) developments. And for the coming week, investors may react to the outcome of the U.S. Federal Open Market Committee (FOMC) meeting scheduled on Tuesday and Wednesday (22-23 Jun).
While the policymakers are expected to keep the federal funds rate close to zero for the time being, their rhetoric on the current economic and monetary affairs could shift the probable timing of future interest rate hikes in the U.S., which has already been pushed back from the second half of 2010 previously to the first two quarters of 2011 following the fallouts from the European sovereign debt crisis. The interest rate differentials outlook may then reshape foreign exchange expectations, which would also be taking into consideration China’s latest initiative to gradually make its Yuan more flexible. Any changes, in turn, will cause wider implications on portfolio funds flows around the world.
Meanwhile, it could still be fairly quiet on the domestic scene this week, notwithstanding possible window dressing activity ahead of mid-year book closing for some funds. Other than a new listing on Wednesday (23 Jun) – Shin Yang Shipping Corporation, a company that provides shipping services and shipbuilding with a market cap size of RM1.26b based on its retail offer price of RM1.05 per share – not much else (in terms of news flows) is in the pipeline.
Technically speaking, a breakout could be on the way if the FBM KLCI either: (i) penetrates above the 1,340 resistance threshold with a follow-up move to challenge the high of 1,349.92 achieved (on 4 May) since the market rally started in Mar last year; or (ii) slices below the resistance line of 1,280, which is approximately where the 200-day moving average line currently stands on.With no technical signal appearing just yet, it remains to be seen which route the bellwether will take when an eventual breakout occurs. Nevertheless, judging by its resilient performance lately, the chance for a positive breakout is getting increasingly better now. Let’s keep our fingers crossed.
Report is from HWangDBS
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