Isnin, 16 Disember 2013

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The Star Online: Business

Potential re-rating for HLB, exciting year ahead



By Affin Research

Add (maintain)

Target price: RM15.10

AFFIN Research reiterates its "add" rating with an unchanged price target of RM15.10, valuing Hong Leong Bank (HLB) at a price-to-book multiple of 1.8 times based on a calendar year 2014 return on equity of 14.7%, premised on a 5% growth rate and a 10.2% cost of equity.

The year ahead remains exciting for HLB as there is room for further re-rating.

HLB is well-positioned to benefit from the recovery in regional and domestic growth (2014 forecast: 5.5% versus 2013 forecast of 4.8%).

Despite headwinds arising from tighter regulation on the domestic front, we remain upbeat on management's focus to beef up its regional business while seeking organic transformational growth opportunities.

HLB's earnings prospects in financial year 2014 to 2016 (FY14-16) will be driven largely by management's focus to continue expanding its capacity and beefing up its competitiveness in the personal financial services division which is still the main contributor, at 40% of HLB's pre-tax profit as at the first quarter of financial year 2014.

New areas of growth include leveraging on the priority banking, given a strong potential to further widen the customer base (up 19% year-on-year in FY13), while revenue per customer improved by 10% y-o-y, business and corporate banking (BCB).

The BCB segment contributed about 31% to group pre-tax profit for the first quarter FY14. Key focus areas under this division include the small medium enterprise market, aided by HLB's 288 branch networks as well as its close working relationship with the trade associations, and development of new structured finance products to corporate clients, as well as overseas units.

The earnings outlook for the overseas operations, namely in Chengdu (China), Vietnam and Cambodia are expected to be more rosy in FY14 owing to a gradual recovery in the external sector, as well as due to government initiatives and resilient domestic economies.

Going into 2014, expectation of a recovery in the external sector, sustainability in domestic demand and the impact of a potential hike in the overnight policy rate (OPR) will be the key focus.

Although further moderation in system loans growth is inevitable, from a projected 10% in 2013 to 9.5% in 2014, the sector's earnings prospects still remain favourable given improving cost management and rising non-interest income contribution amid accommodative monetary policy.


By Hwang DBS Vickers Research

Target price: RM4.60

SECOND-quarter (Q2) of FY14 net profit ex-exceptionals came in at RM99mil (-12% y-o-y), +6% quarter-on-quarter), bringing the first half of FY14 earnings to 51% of our full-year estimate.

As Berjaya Sports Toto Bhd (BToto) has aborted the listing of STM Trust in Singapore (weak demand for business trusts/ Singapore REITS in view of rising bond yields), RM19mil of listing expenses was written off during the quarter.

Second-quarter FY14 revenue/draw continued to decline for the second consecutive quarter by 2.1% y-o-y due to one less draw, slower lotto sales due to smaller jackpot size (Power Toto 6/55 jackpot hit RM25mil as at end-July versus RM5mil as at end-October), and lower lease rental income in the Philippines.

This was further exacerbated by higher prize payout of 60.5% (Q2FY13/Q1FY14: 58%).

BToto is still the market leader with 42% revenue share versus Multi Purpose Holdings Bhd 's 34%. It can continue to leverage on its advantage of higher number of games and outlets.

We expect stronger lotto sales next quarter as Supreme 6/58 jackpot has breached RM20mil this weekend.

While the aborted STM-Trust listing is a negative development, BToto will maintain full control of its Malaysian numbers forecast operation against proposed 86.5% via STM Trust.

We had highlighted earlier that BToto's risks were being overlooked as a mere holding company with much lower earnings as investors will likely prefer to invest directly into STM Trust.

We maintain "buy" and discounted dividend model-based target price of RM4.60.

BToto offers an attractive calendar year 2014 dividend yield of above the Kuala Lumpur Composite Index average.


By Kenanga Research

Market perform

Target price: RM3.50

PUNCAK Niaga Holdings Bhd (Puncak) announced that its wholly-owned subsidiary GOM Resources had been awarded one of the four packages (Package B) of the Pan Malaysian Integrated Offshore Installation Contract from Petronas.

It will be a three-year contract (2014 –2016) with a one-year extension option.

Petronas, on its website, reported that all four packages were worth RM10bil.

Besides GOM Resources, Petronas awarded contracts to other players such as Barakah and SKPETRO's subsidiary, PBJV Group Sdn Bhd and TL Offshore Sdn Bhd.

This much-awaited news has finally materialised and we are positive on Puncak securing a piece of the action.

We understand that the contract is the "continuation of soon-to be offshore and installation construction (OIC) contract" from Petronas by end-2014. Based on its lift capacity of 1,100 tonne, we assume Puncak's portion is 25%-30% of the RM10bil or RM2.5bil –RM3bil.

This would make up about RM700mil-RM1bil worth of orders per annum.

Assuming 10% net margin (which they managed to deliver in FY12 with the same job scope and client), Puncak could deliver a net profit of RM70mil to RM100mil per annum.

Puncak's visible earnings from the oil and gas (O&G) segment offsets the overhanging water consolidation issues (recent attempt by Kumpulan Darul Ehsan Bhd (KDEB) to take over all the water concessionaires have been futile).

Nonetheless, we believe the water consolidation is crucial for Puncak to move forward and further expand its lucrative O&G business.

We believe besides a special dividend, part of the proceeds from its sale of water assets will be channelled towards the O&G division.

We believe that Puncak can only be re-rated if KDEB, Pengurusan Aset Air Bhd (PAAB) and all the water concessionaires reach an agreed "point" of pricing for their valuation of their assets and equities.

Tiger with US$78mil heads 10 biggest sports earners in 2013


NEW YORK: Following is a list of the 10 biggest sports earners in 2013.

Total Salary/winnings Endorsements Sport

1. Tiger Woods $78 million $13m $65m Golf

Tiger rediscovered his killer instinct in 2013, surging back to the top of the world rankings after a blistering start to the season when he won five of his first 11 events.

Although he failed to add to his haul of 14 major victories his off-course income perked up, according tothe Forbes annual sporting survey, thanks to sponsorship bonuses with Nike and Rolex tied to success.

He also collected sizeable appearance fees for competing in Abu DhabiChinaMalaysia and Turkey.

2. Roger Federer $72m $7m $65m Tennis

He slipped down the rankings and suffered his leanest season since 2001 but when it comes to endorsements Federer remains one of sport's most bankable assets.

The 17-times grand slam winner's reflexes may have slowed and the picture-perfect backhand has lost its bite but he retains an impressive portfolio of sponsors including deals with Nike and Rolex.

3. Kobe Bryant $62m $28m $34m Basketball

A 15-times All-Star, Bryant's $28 million salary made him the highest-paid player in the NBA in the 2012-13 season and the future Hall of Famer signed a two-year contract extension with the Los Angeles Lakers in November.

4. LeBron James $60m $18m $42m Basketball

The man nicknamed 'King James' crowned a memorable 2013 with his second NBA title, putting in a regal 37-point performance in the decisive game of the finals to sink the San Antonio Spurs.

Having scooped a fourth Most Valuable Player award, it comes as no surprise that he is the sport's biggest endorsement attraction, according to Forbes, thanks to deals with Nike, McDonald's and Coca-Cola among others.

5. Drew Brees $51m $40m $11m NFL

With six Pro Bowl selections and a Super Bowl title to his credit since joining the New Orleans Saints in 2006, the quarterback commands a salary befitting his status as one of the NFL's most successful players.

Gifted with a strong arm and outstanding vision, Brees has endorsement deals with companies including Nike, Procter & Gamble and Verizon Wireless.

6. Aaron Rodgers $49m $43m $6m NFL

The three-times Pro Bowler and Super Bowl Most Valuable Player in 2011 signed a five-year, $110 million deal in April that made him the highest-paid player in the NFL.

A broken collarbone in November, however, meant he suffered a painful end to 2013.

7. Phil Mickelson $49m $5m $44m Golf

Nicknamed 'Phil the Thrill', Mickelson clinched his fifth major title in commanding fashion in 2013, winning the British Open with a scintillating five-under 66 in the final round.

One of the biggest drawcards in the game, capable of driving up television ratings almost single-handedly, he earns more than $40 million annually from endorsement partners.

8. David Beckham $47m $5m $42m Soccer

The world's most marketable footballer called time on a career that combined glitz and glamour with some sparkling silverware in 2013, signing off with a league title at Paris St Germain.

Endorsements make up the bulk of his earnings and his bankability is reflected in the Forbes rich list as he tops shining lights like Lionel Messi and Cristiano Ronaldo.

9. Cristiano Ronaldo $44m $23m $21m Soccer

This could be the year that Ronaldo finally steps out of the shadows of Lionel Messi after a stunning hat-trick performance helped send Portugal to the World Cup finals and made him favourite to win the World Player of the Year title.

Four years of playing second fiddle to the Argentine for the coveted Ballon D'Or has not constrained his earning power, however, with nearly half of his $44 million earnings coming from endorsements.

10. Lionel Messi $41m $20m $21m Soccer

Having won the accolade for the best soccer player on the planet since 2009, Messi has already guaranteed his place among the sport's pantheon of greats.

After smashing several goalscoring records in 2012, this year has rung alarm bells as he has suffered significant injury problems for the first time in his career.- Reuters

Following is a list of 10 sporting flops in 2013:

- -

Rory McIlroy (Golf)

The Northern Irishman ended 2012 at the top of the rankings after a second major win, at the U.S. PGA Championship, and he was the leading money-earner on both sides of the Atlantic. But the 24-year-old slumped this year because of new equipment, off-course distractions including his relationship withCaroline Wozniacki and a first lengthy dip in form since turning professional. McIlroy, now number six, finally tasted victory after edging Adam Scott at the Australian Open this month.

- - - -

Formula One (Motor racing)

Sebastian Vettel clinched a fourth successive world title by winning the last nine races of the year. For most fans, however, the season was a turn-off after the European summer break because Vettel was significantly faster than his rivals on tyres that were perfect for his Red Bull. Races in the second half of the season followed an all-too-familiar pattern of Vettel qualifying on the front row, establishing an early lead, pulling well clear and managing his tyres and pitstops to the finish.

- - - -

Bradley Wiggins (Cycling)

Backing up a season that produced Britain's first Tour de France victory and an Olympic gold medal was never going to be an easy task and Wiggins seemed to buckle under the weight of expectation in 2013. Dumped as Team Sky leader for the Tour de France, Wiggins targeted the Giro d'Italia. But crashes and a chest infection forced an early retirement and a knee injury ruled out a defence of his Tour title. He won the Tour of Britain victory in September but his season ended when he abandoned the world championship road race after just one lap.

- - - -

Roger Federer (Tennis)

Being an all-time great makes life hard for anyone who competes after passing their peak. While Federer is considered a veteran at 32, he will be disappointed by a poor campaign this year after ending 2012 as Wimbledon champion and ranked number two in the world. The Swiss won just one title, failed to reach a grand slam final for the first time since 2002, saw his majors' quarter-finals streak halted at 36 by Sergiy Stakhovsky at Wimbledon and ended the year ranked sixth.

- - - -

Manchester City (Soccer)

The big-spending 2012 Premier League champions put up a poor defence of their title. They finished 11 points behind city rivals United after their away form deserted them in the second half of the season. An early Champions League exit and FA Cup final loss to relegated Wigan Athletic triggered the departure of manager Roberto Mancini but replacement Manuel Pellegrini's side are also struggling to win away from the Etihad Stadium this season.

- - - -

Jose Mourinho (Soccer)

Mourinho's meteoric rise through the managerial ranks hit the buffers when the self-proclaimed "Special One" endured what he called the "worst season of my career" at Real Madrid. The Portuguese suffered a breakdown in relations with key players in the Madrid dressing room and failed to deliver the 10th European title the club hierarchy demanded. After Barcelona reclaimed the league title from Madrid and city rivals Atletico beat Real to win the Spanish Cup in the Bernabeu, Mourinho left the club by "mutual agreement" and headed back to London to manage Chelsea.

- - - -

Pittsburgh Penguins (Ice hockey)

Pittsburgh dominated the Eastern Conference in a lockout-shortened regular season, winning 36 of 48 games with a power-packed lineup that included All-Stars Sidney Crosby, Evgeni MalkinKris Letang and standout goalie Marc-Andre Fleury. A trip to the Stanley Cup appeared a formality heading into the post-season but a dream showdown against the Chicago Blackhawks was denied them when they were swept in four games by the fourth-seeded Boston Bruins in the Eastern Conference Finals.

- - - -

Dwight Howard (Basketball)

Howard was a leading light for the Orlando Magic for eight seasons and when he joined the Los Angeles Lakers, many were predicting great things. Nicknamed 'Superman', Howard failed to gel with his team mates, especially Kobe Bryant, and struggled for form and fitness all season as the Lakers limped into the playoffs before being swept by the San Antonio Spurs. Howard finished the season with his lowest scoring average since his second year in the NBA. After just one campaign with the Lakers, Howard opted to join the Houston Rockets.

- - - -

Albert Pujols (Baseball)

The 33-year-old slugger from the Dominican Republic was lured away from the St Louis Cardinals in 2011 by a $254 million 10-year contract offer from the LA Angels, who were hoping his power would help blast them to a World Series. After steady improvement in 2012, he hobbled through to August before ending his season due to a foot injury after batting just .258 with a paltry 17 home runs and 64 RBI. Pujols had never hit less than 32 homers before joining the Angels.

- - - -

McLaren (Motor racing)

Many felt Lewis Hamilton had made a mistake when he walked away from McLaren at the end of 2012 to join Mercedes after McLaren had won five races. But Hamilton's decision proved inspired as his former team struggled to make inroads after a slow start to the season, amassing just 122 points to slip down to fifth in the constructors' standings. Jenson Button's fourth place in the final grand prix was the team's best result and Hamilton's replacement, Sergio Perez, is to be replaced by Kevin Magnussen in 2014 after failing to impress in his one season.

- Reuters

Boeing announces US$10bil buyback, raises dividend


SEATTLE: Boeing Co's board raised the company dividend about 50 percent on Monday and approved $10 billion in new share buyback authority that the company said it would use in the next two to three years.

The share repurchase represents about 10 percent of Boeing's outstanding stock, ranking it in the middle of buybacks by large U.S. companies, which are on a stock-buying spree this year.

Boeing shares rose about 2 percent in extended trading after the news. They closed at $134.72 on the New York Stock Exchange on Monday.

The increases in dividends and share repurchases "reflect sustained, strong operational performance by our businesses, increasing cash flow, and our confidence in the future," Boeing Chief Executive Jim McNerney said in a statement.

The new repurchase amount adds to about $800 million remaining from the company's 2007 stock repurchase authorization, and buying will begin in 2014, Boeing said. The quarterly dividend is 73 cents per share, up from 48.5 cents.

Boeing is enjoying a surge in revenue and cash as it ramps up commercial jet production, with a target of delivering a record 635 to 645 aircraft this year. Those gains help offset declining U.S. military spending, which is hampering Boeing's defense businesses.

The company is also preparing to invest billions of dollars in two new models, the narrow-body 737 MAX and the wide-body 777X.

The increased payouts come as the company tries to clinch a labor contract with its unionized machinists that would ensure the 777X is built in the Seattle area. The 31,000 local union members have rejected Boeing's offer, largely because it would switch their defined-benefit pension to a 401(k)-style plan.

"Boeing is looking forward to a period of long-term financial stability made possible primarily by the men and women of District 751," said Tom Wroblewski, president of the International Association of Machinists, District 751, which represents the Seattle-area workers.

"While other production sites have failed to hit their targets, we have delivered record numbers of airplanes at record profit margins this year, helping drive the stock price to record highs," he added. "Given this, I feel it's wrong for the company to try to take away pension benefits that provide our members with their own future financial stability."

For investors, the rise in returns "speaks to the belief that the company has line of sight to improving its operating performance," said Howard Rubel, an analyst at Jefferies & Co. Inc. The buyback amount matched his forecast, and the dividend was larger, he said.

Robert Stallard, an analyst at RBC Capital Markets, said the $10 billion repurchase over two or three years was below the $6.5 billion in repurchases he expected in 2014.

"So although this news will probably be welcome, the impact on consensus EPS estimates may not be as positive as expected," Stallard added in a note to clients.

U.S. companies in the Standard and Poor's 500 authorized nearly $123 billion in buybacks in the second quarter, the most since the third quarter of 2011, according to FactSet Research Systems Inc <FDS.N>.

Among Dow Industrial Average companies, Boeing's $10 billion repurchase was in line with General Electric Co <GE.N>, Pfizer Inc <PFE.N>, Intel Corp <INTC.O> and Goldman Sachs Group Inc <GS.N>. But was far smaller than $40 billion for Microsoft Corp <MSFT.O> and $17 billion for Home Depot Inc <HD.N>.

But among peer companies authorizing buybacks of $10 billion or more, Home Depot is giving shareholders a much larger boost. It is buying back 15 percent of its outstanding shares. In comparison, GE's $10 billion buyback will purchase just 4 percent of outstanding shares.- Reuters


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