Friday, May 25, 2018

Lii Hen Industries - Dragged by higher raw material cost

Author: HLInvest | Publish date: Fri, 25 May 2018, 10:51 AM

Lii Hen’s 1Q18 core earnings of RM11.6m (-24.5%QoQ, -49.7%YoY) came in below our expectation, accounting for 20% of our full year forecast. The group posted higher sales volume but was weighed down by i) higher raw material cost, ii) higher labour cost, iii) stronger ringgit. Moving forward, under the higher cost environment, we opine that it may be a tough year ahead. A lower DPS of 2.5sen was declared as compared to 1Q17:4sen. We cut our FY18-20 earnings by 18-22% mainly to account for higher raw material cost. We downgrade to HOLD from BUY with a lower TP: RM2.62 (previously: RM3.25).

Below expectation. Lii Hen’s 1Q18 core earnings of RM11.6m (-24.5%QoQ, -49.7% YoY) came in below our expectation, accounting for 20% of our full year forecast.

Deviations. Higher-than-expected cost of raw material.

Dividend. Declared first interim DPS of 2.5sen (ex-date: 11 Jun 2018) vs 1Q17: 4 sen.

QoQ. Despite the stronger MYR against US$ (1Q18: RM3.90/US$; 4Q18: RM4.15/US$), 1Q18 revenue increased by 5% as lower ASP (in MYR terms) was more than offset by higher sales volumes. Core net profit, on the other hand, fell by 24.5% to RM11.6m mainly attributable to higher raw material costs (which include, amongst others, coating spray and plastic packaging), and higher labour cost (arising from foreign labour levy).

YoY. 1Q18 revenue rose 12% to RM193.8m, but core net profit declined by 49.7% to RM11.6m as higher sales volume was weighed down by the stronger MYR against the US$ (1Q18: RM3.90/US$; 1Q17: RM4.44/US$, which in turn translated to lower sales proceeds). The group’s PBT margin declined by 11%-pts to 16.7% as it was affected by i) higher raw material cost and ii) foreign labour levy.

Outlook. Apart from wood costs (which accounts for 32% of total production cost, based on our estimates), Lii Hen’s other cost components, which include plastic packaging and coating spray, and labour costs (which account for 11% and 19% of total production costs) were also on the rise. We are expecting plastic and spray prices stay high given their positive correlation to crude oil price. Hence, we opine that given the higher cost environment it may be a tough year ahead for Lii Hen.

Forecast. We cut our FY18-20 earnings forecast by 18-22% mainly to account for higher raw material cost. Post earnings revision, we cut our DPS assumption to 15sen (based on dividend payout assumption of 59%) from 18sen and this translates to a dividend yield of 5.7%. Post earnings forecast adjustment, we downgrade to our call to HOLD from BUY, with a lower TP of RM2.62 (previously: RM3.25) based on a 10x revised FY19 EPS of 26.2 sen.

Source: Hong Leong Investment Bank Research - 25 May 2018

Apex Healthcare Berhad - Off To A Good Start

Author:   |    Publish date: 

Apex Healthcare Berhad (ApexH) reported a healthy 1QFY18 net profit of RM13.2m (+30.6% YoY), which met 29% of our full-year estimates. The higher earnings were attributed to stronger performance from manufacturing of own products, as well as the marketing and distribution of pharmaceuticals and consumer healthcare products. We adjust our earnings estimates higher by 6% to 9% for FY18F-20F, and maintain our Outperform call with a higher target price of RM6.77 premised on 15x multiple to a rolled-over FY19 EPS. We continue to like ApexH for i) additional capacity from its new Oral Solid Dosage (SPP NOVO) manufacturing facility to be ready in 2018, ii) strong balance sheet with net cash position of 73.3sen/share, and iii) synergistic relationship with a number of multinational drug companies and wide distribution network for pharmaceuticals, over-the-counter and consumer products in Malaysia.
  • 1QFY18 revenue was stronger at RM168.4m (+8.9% YoY), attributed to increased contributions from Group-branded pharmaceutical sales to the Government sector in Malaysia and Singapore, exports and contract manufacturing services. Segment-wise, external 1QFY18 revenue for Manufacturing and Marketing division rose by 110.1% YoY while Wholesale and Distribution increased by 5.2% YoY. Improvement was also noted in share of results from its associate company Straits Apex, which increased 61.1% YoY to RM1.6m (1QFY17: RM1.0m) as initiatives taken to broaden its customer base gain traction. Going forward, we are conservatively looking at an 8-11% growth in FY18F-20F, on the back of trading strength and emphasis on R&D initiatives resulting in quality pharmaceutical product formulations. We also look forward to the new SPP NOVO coming on board in 4QFY18, which should provide ApexH with ample capacity to drive production growth in the years to come.
  • Margin improvements. Operating, pretax and net margins were better at 8.8%, 9.8% and 7.8% respectively (compared to 7.7%, 8.3% and 6.5% in 1QFY17), in line with positive performance from its subsidiaries and associates. As ApexH continues to concentrate efforts on Group-branded pharmaceuticals, we expect the increased margin levels to be sustainable in the coming quarters.
Source: PublicInvest Research - 25 May 2018

Tasco Bhd - FY19F: Stronger earnings

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  • Tasco Bhd (TASCO) reported a net profit of RM5.1m in 4QFY18 which tumbled 38.2% qoq and 32.5% yoy as revenue down 11.6% qoq but up 15% yoy.
  • Unfavourable QoQ performance was attributed to seasonal lower revenue in 4Q with both International Business Solutions (IBS) and Domestic Business Solutions (DBS) registered negative revenue growth QoQ coupled with higher tax expenses.
  • Lacklustre YoY performance was bogged down by higher finance costs despite higher revenue.
  • Cumulatively, 12MFY18 net profit slid 3.9% yoy to RM29.7m despite surge in revenue of 21.5% yoy. Better revenue was a result of growths in both IBS and BDS that further lifted by Cold Supply Chain (CSC) division’s contribution (about 8 months revenue recognition for FY18). However, earnings was eroded by elevated finance costs in view of the borrowing incurred for Cold Supply Chain acquisition, coupled with increased professional and compliance expenses for corporate merger & acquisition exercise.
  • Within expectations. 12MFY18’s net profit within our expectation but below consensus by matching 97.6% and 89.2% of full year earnings estimates respectively.


  • Both IBS and DBS registered lower QoQ revenue but DBS posted higher PBT. IBS’s 4QFY18 PBT tumbled 43.6% qoq as revenue decreased 14.4% qoq as well as lower PBT margin achieved in Air Freight Forwarding division. Meanwhile, DBS’ PBT surged 32.7% qoq despite revenue dropped 9.9% qoq, thanks to higher margin achieved in Contract Logistics Division.
  • Weaker YoY performance for IBS but better YoY performance for DBS in 4QFY18. Unfavourable IBS performance was a result of lower revenue (-15.2% yoy) and lower margin. As such, IBS’ PBT down 59.4% yoy. Meanwhile, DBS performance was mainly lifted by recognized CSC business segment and better margin posted in Contract logistics division.
  • IBS posted higher revenue (+5.7% yoy) but lower PBT (-12.7% yoy) for 12MFY18. Higher revenue was backed by higher sales in both Air and Ocean Freight Forwarding divisions but dragged down by lower margin in Ocean Freight forwarding in view of competitive freight rates as well as surcharges.
  • 12MFY18 DBS performance boosted by Contract logistic division and contribution from CSC division. DBS PBT surged 74.1% yoy, underpinned by 34.4% yoy increase in revenue. Higher revenue was a result of higher revenue registered in Contract logistic division (+20.8%) and RM61.4m revenue contribution from CSC division.
  • Contribution from CSC division to be fully recognised in FY19. Looking forward, we envisage Tasco to fully recognise its CSC business segment in FY19 with an estimated revenue of c.RM100m. As such, we believe CSC division is able to contribute PBT of RM10-12m to Tasco in FY19.
  • Possibly obtaining approval on Investment Tax Allowance (ITA) – We understand that Tasco is in the midst of applying for an Investment Tax Allowance. If Tasco successfully secures the approval, we foresee a tax saving of RM15-20m and probably recognise it as early as FY19F. To recap, Tasco recognised such tax allowance in FY2011 with a tax saving of RM3.9m, which translated into an effective tax rate of 14.6% (vs statutory tax rate of 25%). In addition, we also understand that total ITA claimed by Tasco during FY2003 to FY2007 was RM21m.
  • Looking forward, we believe Tasco to continue its growth trajectory, backed by strong GDP growth in Malaysia for this year with our in-house forecast of 5.3% and IMF’s projected global growth of 3.9% for 2018 and 2019.
  • Declared single-tied dividend of 2.5 sen with entitlement date and payment date yet to be determined. As such, total dividend for FY18 will be 4.5 sen, which translates into a dividend yield of 2.3% based on current share price.

Earnings Outlook

  • We keep our earnings forecast unchanged for FY19 and FY20.
  • Major risks: 1.) Higher fuel price, 2.) Change in government policy, 3.) Hiccup in performance due to loss of major customers, and 4.) Slowdown in domestic and overseas economy.


  • Maintain BUY call for Tasco with an unchanged target price of RM2.49. We pegged our valuation at PE of 13x FY19F EPS. Our target PE valuation is slightly higher than the average forward PE of its peers of 12.8x in view of its commanding position in the sector and at the range of upcycle forward PE.
  • Overall, we are sanguine on its future growth following its venture into cold chain market. With this, TASCO is able to generate synergies across all of its divisions and provide integrated logistics services for its clients. Furthermore, the soon-to-be-launched trading business (by YLTC Sdn Bhd, a 60:40 JV between Yee Lee Corporation Bhd and Tasco Bhd) will create further synergy to its existing businesses such as
Source: JF Apex Securities Research - 25 May 2018

HeveaBoard Berhad - Huge Disappointment

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  • Earnings significantly below our expectation. HeveaBoard Berhad (Hevea) registered 1Q18 core net profit of RM1.8m (after excluding realised and unrealised forex gain of RM0.8m during the quarter), which tumbled 92.9% yoy and 89.9% qoq. The dismal results were mainly due to significantly lower revenue achieved (-27.2% yoy, -13.0% qoq) and margins (PBT margin: -16.6ppts yoy, -5.6ppts qoq) by both of its Particleboard and RTA segments.


  • Loss in RTA segment. The weaker yoy and qoq results in 1Q18 were mainly due to lower sales by its Particleboard segment (-23.6% y7y, -26.5% qoq) and RTA division (- 29.5% yoy, -0.6% qoq). This was also further aggravated by slump of margins for both segments as Particleboard’s PBT margin tumbled 11.5ppts yoy and 4.5ppts qoq whilst RTA posted a net loss of RM1.4m (vs 1Q17 net profit of RM17.4m and 4Q17 net profit of RM2.6m).
  • Unfavourable forex and labour issues weighed on earnings. The weaker performance posted by Particleboard segment was mainly due to weakening of USD against MYR by almost 12% during the period, lower production volume and higher raw material costs (rubber wood prices, and glue and chemicals). Meanwhile, the disastrous showing by RTA segment was due to the continued shortage of foreign workers which resulted in high operational costs as the Group failed to achieve optimum production capacity. Also, the weakening of USD against MYR weighed on its top line and bottom line.
  • Tough operating environment. We envisage the Group’s 2018F earnings continue to be affected by: 1) lower production and higher operational costs as failure to achieve optimum production capacity for RTA Furniture as a result of shortage of foreign workers; 2) lower utilisation rate and ASP expected for particleboard production due to overcapacity and price war; 3) fluctuation in forex as raw material costs are mainly denominated in MYR whilst export proceeds are in USD; and 4) prevailing high rubber wood and glue prices following rainy season and hike in crude oil prices.

Earnings Outlook/Revision

  • We slash our core net earnings estimates for 2018F and 2019F by respective 41.1% and 23.6% to RM42.4m and RM67.7m following cut in our sales and margin assumptions for the both segments due to the abovementioned headwinds.


  • We downgrade our call to HOLD from BUY with a lower target price of RM0.95 (RM1.27 previously) following our earnings cut. Our target price is now based on 8x 2019F fully-diluted PE.
Source: JF Apex Securities Research - 25 May 2018

Vitrox expects 2018 to be another growth year

Friday, 25 May 2018
by david tan

Group chief executive officer Chu Jenn Weng told StarBiz that the growing telecommunications infrastructure, server and automotive markets in these markets would generate strong demand for the group’s products this year

GEORGE TOWN: Vitrox Corp Bhd which expects 2018 to be another growth year for the company, is extending its reach in emerging markets like India, China, Mexico and South-East Asia.

Group chief executive officer Chu Jenn Weng told StarBiz that the growing telecommunications infrastructure, server and automotive markets in these markets would generate strong demand for the group’s products this year.

“In the first three months of 2018, we have secured accumulated sales orders of about RM105mil, which will keep us busy for the next three months.

“The March book-to-bill ratio is 1:2, which means that for every 100 units of products we ship out, we receive 120 units of new orders in the same period. The current book-to-bill ratio is even higher,” he said after the company’s AGM.

He said the company would start operations at its new RM120mil plant in Batu Kawan in July.

He said the new facility would serve as the company’s headquarters as well as research and development hub.

“The plant will more than double our capacity to produce automated inspection equipment,” Chu said.

Vitrox has recently been added into the Morgan Stanley Capital International (MSCI) Malaysia Small-Cap Indexes.

“This will give us an edge in attracting foreign funds,” he added.



发表于 今天09:00 | 更新于 今天09:08









祖多斯声称,他原本跟PSI创办人兼执行长达列奥拜(Tarek Obaid)是好友,但两人后来闹翻,他也因此离职。

















《砂拉越报道》于2015年2月揭露,一马公司跟PSI的总值25亿美元联营计划十分可疑,因为一马公司给联营公司注入的首笔10亿美元启动资金, 7成竟然被挪作还债之用。










此后,祖多斯尝试重建自己的人生,同时设法透过瑞士司法体制,刑事起诉达列奥拜和另一名PSI董事玛浩尼(Patrick Mahony)。



譚新強:馬哈蒂爾強勢回歸 但亞洲無金融風暴


【明報專訊】Blast from the Past!馬哈蒂爾以92歲高齡再次當上馬來西亞總理!真厲害,相信是世界紀錄吧!連容貌都跟廿年前沒什麼分別,比他小幾歲的李嘉誠都在昨天正式退任長江集團主席。馬哈蒂爾領導希望聯盟,以反貪腐為口號,在周三的選舉中大挫他從前自己一手提拔出來的總理納吉布(Najib Razak),和自從獨立以來一直執政的國民陣線(BN)。

馬哈蒂爾號稱他是位短期過渡性的總理,只要等到安華(Anwar Ibrahim)在6月再次出獄(又係雞姦罪),他會爭取特赦(原本5年不准從政),然後讓位給安華。在這一點上,走着瞧吧,理論上應會履行諾言,但這位老人家明顯老當益壯,且非常眷戀權位;大家不要忘記在1998年,就是他以雞姦罪名把也是他一手提拔的時任副總理安華拉下台,從此他就墮入不斷進出法庭和監獄的20年噩夢!雖然馬哈蒂爾口頭上答應準備把權力交給安華,但至今從未向安華道歉,安華也在傳媒訪問中說他非常清楚馬哈蒂爾的性格,是個從來不會認錯的人。

大馬股巿選舉前創新高 下周勢波動

因為這次選舉結果太過出人意表,可說是民粹推動,本以為就算如2013年大選一樣,就算反對黨勝出普選票數也沒用,納吉布領導的BN仍將以贏得較多議席而勝出。但結果點票至周四凌晨,驚人的結果出來,馬哈蒂爾領導的反對派贏得過半數議席,將組成聯合政府。美國交易的馬來西亞ETF EWM馬上應聲倒地,曾跌超過7%,收市仍跌6%(編按:昨美市初段回升4%)。馬哈蒂爾宣布股市周四、五休息(他有干預市場的不良紀錄),下周一重開時必然頗波動,選舉前大馬股巿受到政府因拉票的一些派糖承諾刺激,才剛創下歷史新高。



政綱反中資 不少華企或受累


我的個人經歷也跟馬來西亞有些淵源。1990年代初從美國回港時,在美林負責拓展衍生工具業務,奇怪地當時很多同事和老闆都是馬拉和新加坡華僑。直屬老闆雖是美國人,但他的一位好友是Nazir Razak,當時也是剛從外國留學回到馬來西亞,在CIMB工作的年輕銀行家(後來成為了CEO)。後來才知道他是個官二代,他的父親為馬來西亞第二任總理Abdul Razak,而他哥哥就是剛落選的納吉布!

因為公司的人跟馬拉關係好,所以我最初在亞洲發行的窩輪,竟是跟馬來西亞企業如Tanjong、Tenaga和Sime Darby等相關的盧森堡掛牌窩輪!因此亦經常去KL出差。後來發現Jardine Flemming和百富勤(俱往矣!)發行的香港窩輪規模和流通量都大得多,利潤更豐厚。對比Flemming和百富勤,美林當時財雄勢大,所以就極力建議公司加入此業務,經一輪游說後終首肯,就開始發展香港窩輪。但過了不久就轉到里昂去,可說比在美林時更成功,但此為後話。



當時IMF的援助條件苛刻,都受了經濟學家Jeffrey Sachs的很大影響,認為這些亞洲國家都是「罪人」(有點宗教色彩),犯了貪腐和過度揮霍之罪,所以必須以嚴厲財政節約政策來「贖罪」。泰國、印尼和韓國等就勉強接受了IMF援助,但情况仍然非常痛苦,在印尼更出現不少暴亂和甚至屠殺華人的淒慘場面!


20年前夠膽拒絕IMF 限制外資流出


近日因阿根廷問題,再加上美元終於反彈,又有不少人擔心整個新興市場即將面臨危機,我認為有點杞人憂天。阿根廷是個所謂basket case(絕望垃圾),歷史上已8次借貸違約,極可能將有第九次。通脹升至超過20%,利率更已加至40厘,經濟怎可能不崩潰?但這風波會否蔓延至亞洲呢?答案是小小影響會有,例如長期企業債已跌了不少,大部分股市仍在整固,但大的危機出現機會極微。

阿根廷違約風波 對亞洲影響不大





[譚新強 中環新譚]