Page 13 - PowerPoint

12 BROKERS’ CALL THURSDAY JULY 26, 2018 • THEEDGE FINANCIAL DAILY

Policy reviews Inari Amertron Bhd 1,176.3 1,449.9 1,831.6 2,407.9

2020F
2019F
FYE JUNE (RM MIL)
2018F
2017
Revenue
unlikely to aff ect Core net profit 199.6 276.3 333.9 463.7
353.7
FD core EPS (sen)
8.8
6.4
14.8
11.3
38.4
21.0
FD core EPS growth (%)
28.0
31.1
377.5
-
Consensus net profit
273.1
9.0
8.0
5.4
6.5
TNB, YTL Power DPS (sen) 24.4 18.0 14.4 16.2
27.1
37.6
PER (x)
21.2
EV/Ebitda (x)
11.1
2.3
Dividend yield (%)
2.7
3.8
3.3
ROE (%) 29.2 30.2 34.9 39.5
Source: AmInvestment Bank
Higher revenue from RF
Power sector We believe the risk in SIPP (2017), indicating appropri-
Maintain overweight: We believe is minimal for TNB’s ate returns for these IPPs.
Tenaga Nasional Bhd (TNB) and nancial year (FY17), YTL Power’s segment expected for Inari
Post disappointments in fi-
YTL Power International Bhd will IPPs being part of the
not be affected by the recent change list being cancelled/ nine-month of FY18 (9MFY18) core

of government and ongoing policy reviewed. earnings have rebounded due to
review exercises. We maintain “buy” commencement of the Paka power Inari Amertron Bhd potentially generate more rev-
on TNB with an unchanged target purchase agreement extension and (July 25, RM2.44) enue than its bread-and-butter
price (TP) of RM17.50, on stable stable contribution from Wessex Wa- Maintain buy with a higher fair RF business.

earnings and cash flow with new on the immaterial net change in ter. We believe the drag from Seraya value of RM2.61: We have revised Management also reaffi rmed
contribution from Jimah East (2019) electricity tariff s. Power will subside with the insol- our fi nancial year 2019 forecast plans to consolidate operations to
and SIPP (2020). We also maintain The Electricity Industry Fund vency of Tuaspring Power (Hyfl ux). (FY19F) and FY20F earnings mar- improve efficiency. To this end, the

“buy” on YTL Power with a higher (KWIE) balance was RM760 million We expect YES to gain from increas- ginally upwards by 4.1% and 4.2% group is relocating its Philippine
TP of RM1.45 (from RM1.25), on when the government announced ing subscriber base and lower traffi c respectively after factoring in a operations in Paranaque to exist-

its limited earnings downside with a RM114 million tariff subsidy (do- costs from the regulated Mandatory slightly higher utilisation rate for ing plants in Clark Field (CK). Th e
upcoming new contributions from mestic users only) for the second Standard on Access Pricing price its radio frequency (RF) segment. move will allow its wholly-owned
45%-owned Jordan Attarat Power half of 2018 (2H18), indicating left- reduction starting 2018. Earnings We believe that the segment will Amertron Inc to reap a fair amount
(2020) and 80%-owned Indonesia over of RM646 million (or higher) growth can be expected from the continue to grow sturdily on the of cost savings as CK plants are
Tg Jati Power (2022). by end-2018. Assuming coal prices operation commencement of Attarat back of rising RF content in smart- situated in the Clark Freeport
The recent announcement of to hover at the US$100 (RM406) (2020) and Tg Jati (2022). phones, which is needed to facil- Zone, which entitles investors to

higher effective electricity tariff s un- to US$120 per tonne level and the YTL Power has exercised sub- itate the transition from 4G LTE certain tax incentives. In addition,
der the imbalance cost pass-through government to maintain the subsi- stantial share buy-backs since June to 5G. the group also intends to relocate
(ICPT) mechanism has fi rmed up dy policy (domestic users only), the 2018 and today has accumulated Aside from that, Inari is work- operations in its P8 plant to P13
our view on the continuation of government may disburse RM120 4.92% of total outstanding shares ing with its German customer to as both are producing RF com-
incentive-based regulation (IBR)/ million to RM150 million for every (2.8% prior to June). Moreover, ma- develop several new products: i) ponents. Collectively, we believe
ICPT mechanisms. Given “zerorisa- six-month ICPT review and KWIE jor shareholders YTLC and YTL fam- fine-pitch LED (less than 2mm the group will be able to save la-

tion” of the goods and services tax, funds are sufficient to cover for an- ily have also been acquiring stakes pixel pitch) used for billboards bour cost and rental expenses of
the net impact of electricity charges other four ICPT reviews into end- in YTL Power. We believe there is and other public display panels; more than RM500,000 per month
to end users vary between -3% and 2020. a high chance that YTL Power will and ii) health sensor as well as (around 2% of FY19F earnings)
+2%. Nonetheless, TNB will remain We believe the risk is minimal distribute treasury shares in FY19 vertical-cavity surface-emitting from the exercise.

neutral from the fluctuation of fuel for TNB’s independent power pro- and FY20, as YTL Power’s treasury laser components for both 2D and Inari is currently building a

prices (gas, liquefied natural gas and ducers (IPPs) being part of the list shares surpass the level of 5% of 3D sensing applications. 640,000 sq ft facility in Batu Ka-

coal) under cost past-through to being cancelled/reviewed. TNB has total outstanding shares, as a re- We believe meaningful earn- wan. Th e first phase comprising
end users under ICPT (in terms of already exerted due diligence evalu- ward for long-term shareholders. ings contributions from the new a 200,000 sq ft factory is set to be
rebates or surcharges), while elec- ation when acquiring the 70% stake — Hong Leong Investment Bank products will start showing in six completed by September to Oc-
tricity demand will remain healthy in Jimah East (2015) and 51% stake Research, July 25 to nine months’ time. For now, raw tober 2018. This new facility is
materials are being consigned to to cater for additional jobs from
Inari for processing. After a three- its German optoelectronics cus-
Power sector peer comparison
to-six-month observational peri- tomer, as well as potential new
MKT CAP PRICE TARGET PER (X) P/B (X) ROE (%) YIELD (%) od, if volume picks up, Inari would jobs from prospective customers.
STOCK (RM MIL) (RM) (RM) RATING FYE FY18 FY19 FY18 FY19 FY18 FY18
start purchasing raw materials for Note that we have not factored in
Tenaga 83,640.2 14.78 17.50 Buy Dec 10.3 10.1 1.3 1.2 13.5 4.1 its customer. This allows the group any earnings contribution from

YTL Power 10,341.7 1.27 1.45 Buy June 15.1 13.5 0.8 0.7 5.2 3.9 to book higher revenue due to a its Batu Kawan facility into our

Malakoff 5,000.0 1.00 NR NR Dec 18.2 16.4 0.8 0.8 4.5 5.3 higher bill of materials. Th e new profit forecasts. — AmInvestment
products, if fully ramped up, can Bank, July 25
Source: Hong Leong Investment Bank Research