RHB research gives its stock pick for the day.
Tenaga Nasional (TNB MK, BUY, TP: MYR11.50)
Strong Electricity Demand; Keep BUY
Results Review
Keep BUY and MYR11.50 TP, 24% upside and 5% yield. 1Q22 core profit came in within our expectations (-34% YoY). Earnings were down 34% YoY due to weaker generation contribution, higher tax expenses and Malaysian Financial Reporting Standards 16’s net movements. West Malaysia electricity demand continued to recover in 1Q22 (+4% YoY), led by better commercial and domestic consumption while its ambitious renewable energy targets could fuel medium- to long-term growth.
Hong Leong Bank (HLBK MK, BUY, TP: MYR23.70)
On Course To FY22 Targets; Keep BUY
Results Review
Stay BUY with new MYR23.70 TP from MYR23.50, 12% upside and c.3% yield. 9MFY22 (Jun) results were broadly in line, supported by healthy NII growth, lower credit costs and strong contributions from Bank of Chengdu. Hong Leong Bank remains on track to its FY22 targets as business momentum is regaining pace after a softer 3QFY22. It is one of our Top Picks for Malaysian banks given its solid fundamentals, healthy loan growth, and digital initiatives.
RCE Capital (RCE MK, BUY, TP: MYR2.00)
Still a Consistent Performer; Keep BUY
Results Review
Maintain BUY, higher MYR2.00 TP from MYR1.90, 14% upside and c.4% yield. Results were broadly in line with expectations, at 102-103% of our and Street’s estimates. A second interim DPS of 4 sen was declared, bringing FY22 (Mar) total DPS to 11 sen, or a 41.2% dividend payout ratio. We understand that funding cost is actively managed through the utilisation of revolving credits as a comparatively cheaper cost of funds, and there is no immediate need for sukuk issuance. We continue to like its resilient asset quality, consistent earnings, and dividend deliveries.
Public Bank (PBK MK, NEUTRAL, TP: MYR4.90)
Slightly More Upbeat On Loans And NIM
Results Review
Maintain NEUTRAL, with new MYR4.90 TP from MYR4.70, 7% upside. Public Bank’s 1Q22 results were within expectations. While still cautious on asset quality, management turned slightly more positive on loan growth and NIM outlook. Stock is up 10% YTD – investors sought refuge in the bank’s defensive attributes as rising economic headwinds threaten global recession. That said, at 1.75x FY22F P/BV, we deem the stock’s risk-reward ratio to be well balanced.
Press Metal (PMAH MK, BUY, TP: MYR7.90)
Better Prospects Ahead; Still BUY
Results Review
Still BUY, new MYR7.90 TP from MYR8.25, 44% upside and c.2% yield. 1Q22 core net profit surged >100% YoY on stronger LME aluminium prices and Samalaju Phase 3 volume contributions. Results were lower than our and Street’s estimate, but the coming quarters are set to be stronger on higher utilisation rates and elevated value added premium upcharges. This report marks the transfer of coverage to Alexander Chia.
Guan Chong (GUAN MK, BUY, TP: MYR4.15)
Solid Margin Recovery Amid Growing Demand
Results Review
BUY, new MYR4.15 TP from MYR4.00, 86% upside with FY22F 3% yield. Guan Chong’s 1Q22 earnings surged by 57% YoY. Its results are in line, on stronger margins due to higher ASPs and improved economies of scale. We expect it to chalk sturdier numbers this year from pent-up global demand, higher production capacity, and expansion drives. The stock is trading at 8x FY23F P/E – presenting an attractive level to buy into Asia’s largest cocoa grinder, with a solid earnings base secured by its forward-selling mechanism and unique exposure to the growing global demand for chocolate.
Time dotCom (TDC MK, BUY, TP: MYR5.00)
Extended Lead Times For Data Center; Keep BUY
Results Review
Maintain BUY and DCF-derived MYR5.00 TP, 13% upside, with c.3% yield. Time dotCom’s results were line, with double-digit expansions in core earnings and revenue. We continue to see the data centre and retail (fiber broadband) segments as key growth drivers, on the back of robust structural demand and capacity expansion. Stock valuation remains undemanding, at -1.5SD below the historical EV/EBITDA mean, supported by its industry leading earnings growth, net cash balance sheet, and strong management execution. TDC is among our preferred sector picks. Our TP has factored in a parity ESG score, in line with the country median.
OCK Group (OCK MK, BUY, TP: MYR0.56)
1Q22: A Good Start; Keep BUY
Results Review
Maintain BUY and SOP-derived TP of MYR0.56, 40% upside with c.2% FY22F yield. OCK’s 1Q22 results met expectations. We see the strong contracting orderbook (>MYR280m) driving a rebound in contracting revenue for FY22, with steady site-leasing revenues offering good recurring earnings. Our TP has a 2% ESG discount built in, based on our proprietary methodology. Key share price re-rating catalysts are stronger-than-expected earnings and margins, earnings-accretive M&A, and value unlocking of its towerco assets.
