Download Panasonic Manufacturing Malaysia Berhad Maintain NEUTRAL

19 June 2017 | Visit note
Panasonic Manufacturing Malaysia Berhad
Striving to maintain its profit margins
Maintain NEUTRAL
Unchanged Target Price (TP): RM32.40
INVESTMENT HIGHLIGHTS
RETURN STATS
• Underperforming home appliance segment
• Fixed dividend payout despite higher cash balance
Price (16 June 2017)
RM35.20
• Some products will see a stronger performance in FY17
Target Price
RM32.40
• Maintain NEUTRAL with a unchanged TP of RM32.40
Underperforming home appliance segment. To recall, the home
appliance segment’s FY17 earnings were impacted by lower PBT margin
as operating costs increased at a faster pace which resulted in FY17
performance coming in lower than expectation. The poor result of the
segment is due the underperformance of its products such as: (i) rice
cookers segment which is struggling to reach breakeven level due to
the higher cost of production as a result from the transfer of
manufacturing activities from Thailand to Malaysia and; (ii) vacuum
cleaner and iron segment recorded a lower sales as its main market i.e.
the middle east sales (accounted for 80% of total sales) which has not
fully recovered in FY16.
Dividend payout will remain fixed despite higher cash balance.
As at 4QFY17, the cash and cash equivalents stands at RM602.43m
(+0.1%yoy) which is a significant 60% of total assets. In addition, all of
its subsidiaries are in net cash positions, hence intercompany lending is
unnecessary at this juncture. Approximately 80% or RM500m of the
cash is placed in fixed deposit instruments at local financial institutions
(FIs) yielding average interest income of 3.5% annually. The reason for
such high cash hoarding is due to: (i) the expansion project where
RM100m is needed in the next two years and; (ii) as part of the group
strategy in hedging activities as well negotiating better interest rates
from FIs. Therefore, despite the cash pile build-up, the company’s
dividend payout ratio will still be fixed at 60% of PAT.
Future outlook. Despite the lacklustre FY17 results, we opine that
there will be an improvement in FY18 financial performance as rice
cookers segment is targeted to breakeven from losses incured in FY17
while vacuum cleaner could see some recovery as of 1QFY18. In
contrast, the sales from Fans segment might slow down this year due
to lower project sales from the government for the installation of fans.
In addition, given that 60% of sales is to the overseas market, a
stronger Ringgit this year will reduce the FOREX gain albeit lowering
the cost of purchasing raw materials. Nonetheless, recent rise in prices
of aluminium and copper reduce the benefit of having a stronger
Ringgit. Hence, we remain neutral on the company’s future prospects.
Expected Share Price Return
-7.9%
Expected Dividend Yield
+4.0%
Expected Total Return
-3.9%
STOCK INFO
KLCI
1791.31
Bursa / Bloomberg
3719/PMM MK
Board / Sector
Main/Consumer
Syariah Compliant
Yes
Issued shares (mil)
60.75
Market cap. (RM’m)
2138.25
Price over NA
2.60x
52-wk price Range
RM29-RM39.9
Beta (against KLCI)
0.41
3-mth Avg Daily Vol
0.01m
3-mth Avg Daily Value
RM0.54m
Major Shareholders (%)
Panasonic Mgmt M’sia
47.45
Aberdeen Asset Mgmt
10.20
EPF
7.15
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK
Kindly refer to the last page of this publication for important disclosures
MIDF EQUITY BEAT
Monday, 19 June 2017
Maintain NEUTRAL with an unchanged TP of RM32.40. Maintain NEUTRAL with unchanged Target Price of
RM32.40. Post-meeting, we are making no changes to our earnings forecast and TP, which is based on pegging forward
PER of 13.5x against FY18 EPS pf 240sen per share. The assigned PER multiple is the group’s three year average
historical PER.
INVESTMENT STATISTICS
FYE 31st March (RM'm)
2015
2016
2017
2018F
2019F
931
1,086.7
1,123.0
1,179.5
1,217.9
Profit before tax
129.8
185.2
158.1
186.6
199.2
Net Profit
99.5
146.9
127.1
145.6
157.4
-
137.4
134.0
145.6
157.4
Pre-tax Profit margin (%)
13.9
17
14.1
15.8
16.4
Net Profit margin (%)
10.7
12.6
11.9
12.3
12.9
Normalised EPS (sen)
164
226
221
240
259
EPS Growth (%)
23.3
47.6
-2.5
8.6
8.1
PER (x)
22.2
16.1
16.5
15.2
14.0
Net Dividend (sen)
142
139
123.3
143.8
155.4
Dividend yield (%)
3.9
3.8
3.4
4.0
4.3
Revenue
Normalised Net Profit
Source: Company, Forecasts by MIDFR
DAILY PRICE CHART
Nabil Zainoodin, CA
[email protected]
03-2772 1663
2
MIDF EQUITY BEAT
Monday, 19 June 2017
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for
distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The opinions contained in
this report are based on information obtained or derived from sources that we believe are reliable. MIDF
AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to
the accuracy, completeness or reliability of the information contained therein and it should not be relied
upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities or other financial
instruments. The analysis contained herein is based on numerous assumptions. Different assumptions
could result in materially different results. All opinions and estimates are subject to change without
notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF
AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have
interest in any of the securities mentioned and may benefit from the information herein. Members of the
MIDF Group and their affiliates may provide services to any company and affiliates of such companies
whose securities are mentioned herein This document may not be reproduced, distributed or published
in any form or for any purpose.
MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has
been assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Total return is expected to be <15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has
been assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
3