Stocks In Focus MY (CIMB Grp Hldgs, Dialog Grp, DiGi.Com) – 10/02/15
CIMB (1023), DIALOG (7277), DIGI (6947)
Reorganisation Could See Near Term Earnings Weakness For CIMB
CIMB Group Holdings recently announced that it would undergo a major reshuffling, coined T18, to bring its cost-to-income ratio down to less than 50 percent by 2018, from 58 percent currently. Analysts reflected that this ambitious target to cut cost and reorganise its business divisions could result in near-term pain for investors.
Investors would see a shake-up in the group’s top management, with some division heads taking on advisory roles, as well as the creation of new divisions. The plan also aims to help the bank achieve return on equity of more than 15 percent and for consumer banking to contribute about 60 percent of its income by 2018.
Though HLIB Research is positive on CIMB’s initiatives as the reorganisation will enhance effectiveness and efficiency as well as synergy and more focus on customer interface, other research houses are less optimistic. Alliance DBS Research noted that there is no doubt that there will be near-term earnings weakness starting from the upcoming 4Q14 results that is likely to be felt through 2015, while Kenanga Research expects T18 to be an uphill task for group.
Significance: According to the research houses, the announcement did not come as a total surprise and the market had partly priced this in. Six research firms have maintained their rating recommendation on CIMB, with Alliance DBS, HLIB, Kenanga and Maybank IB Research having the equivalent of a ‘Hold’ rating on the stock whereas Affin Hwang Capital and RHB Research have the equivalent of a ‘Sell’ rating.
Dialog Group 2Q15 Earnings Surge 20%
Despite a 12.1 percent decline in turnover to RM570.3 million, Dialog Group posted a 20 percent leap in net profit to RM79.7 million for the second quarter ended 31 December 2014, due to better margin by the upstream activities in Malaysia and a gain on the disposal of the group’s other investment.
The lower top line was a result of lower engineering and construction activities in Malaysia as well as 19 percent drop in international revenue, on the back of low activities in engineering and construction in Singapore, fabrication in Australia and New Zealand, and lower sales of specialist products and services in India and Brunei.
Similarly, for the six-month period, the firm recorded a 13.6 percent rise in earnings to RM129.7 million even as revenue fell 12.4 percent to RM1.1 billion. Dialog pointed out that lower oil prices would have a positive impact on the midstream and downstream sectors of oil and gas industry overall costs of production of a wide range of petroleum and petrochemical products are reduced.
Significance: The group noted that the current oil price development has reinforced its strategy to develop and invest in the Pengerang deepwater terminal. It added that demand for storage facilities was expected to increase while further development of the Pengerang deepwater terminal would provide opportunities for the group’s engineering and construction services, while also benefiting from long-term recurring income once the terminal’s tank facilities become operational.
DiGi Aims For More Spectrum To Boost Revenue
For the fourth quarter ended 31 December 2014, DiGi.Com posted a 3.8 percent and 2.1 percent increase in top and bottom lines, to RM1.8 billion and RM560 million respectively. For FY14, the firm’s revenue rose 4.2 percent to RM7 billion while net profit jumped 19 percent to RM2 billion.
The better performance was attributed to solid growth across revenue streams, particularly in Internet revenue, with the group’s internet subscribers surging 31 percent to 6.5 million in the last quarter.
The company is eyeing for more spectrum allocation to help boost revenue. Talks of a planned spectrum refarming are heating up in the mobile telecommunications space and analysts said that the potential exercise may see DiGi, which is the smallest listed telco being a beneficiary as the group could be allocated more spectrum to provide their services considering how much their customer base has grown.
Significance: For the quarter, the group has announced a dividend of RM0.072, bringing full-year dividend to RM0.26, representing a 22 percent growth. Moving forward, DiGi plans to maintain its 2014 capital expenditure level of RM904 million in 2015 to support its continued aim to drive mobile internet in the latest 4G technology for base stations and fiber lines.
http://www.sharesinv.com
CIMB (1023), DIALOG (7277), DIGI (6947)
Reorganisation Could See Near Term Earnings Weakness For CIMB
CIMB Group Holdings recently announced that it would undergo a major reshuffling, coined T18, to bring its cost-to-income ratio down to less than 50 percent by 2018, from 58 percent currently. Analysts reflected that this ambitious target to cut cost and reorganise its business divisions could result in near-term pain for investors.
Investors would see a shake-up in the group’s top management, with some division heads taking on advisory roles, as well as the creation of new divisions. The plan also aims to help the bank achieve return on equity of more than 15 percent and for consumer banking to contribute about 60 percent of its income by 2018.
Though HLIB Research is positive on CIMB’s initiatives as the reorganisation will enhance effectiveness and efficiency as well as synergy and more focus on customer interface, other research houses are less optimistic. Alliance DBS Research noted that there is no doubt that there will be near-term earnings weakness starting from the upcoming 4Q14 results that is likely to be felt through 2015, while Kenanga Research expects T18 to be an uphill task for group.
Significance: According to the research houses, the announcement did not come as a total surprise and the market had partly priced this in. Six research firms have maintained their rating recommendation on CIMB, with Alliance DBS, HLIB, Kenanga and Maybank IB Research having the equivalent of a ‘Hold’ rating on the stock whereas Affin Hwang Capital and RHB Research have the equivalent of a ‘Sell’ rating.
Dialog Group 2Q15 Earnings Surge 20%
Despite a 12.1 percent decline in turnover to RM570.3 million, Dialog Group posted a 20 percent leap in net profit to RM79.7 million for the second quarter ended 31 December 2014, due to better margin by the upstream activities in Malaysia and a gain on the disposal of the group’s other investment.
The lower top line was a result of lower engineering and construction activities in Malaysia as well as 19 percent drop in international revenue, on the back of low activities in engineering and construction in Singapore, fabrication in Australia and New Zealand, and lower sales of specialist products and services in India and Brunei.
Similarly, for the six-month period, the firm recorded a 13.6 percent rise in earnings to RM129.7 million even as revenue fell 12.4 percent to RM1.1 billion. Dialog pointed out that lower oil prices would have a positive impact on the midstream and downstream sectors of oil and gas industry overall costs of production of a wide range of petroleum and petrochemical products are reduced.
Significance: The group noted that the current oil price development has reinforced its strategy to develop and invest in the Pengerang deepwater terminal. It added that demand for storage facilities was expected to increase while further development of the Pengerang deepwater terminal would provide opportunities for the group’s engineering and construction services, while also benefiting from long-term recurring income once the terminal’s tank facilities become operational.
DiGi Aims For More Spectrum To Boost Revenue
For the fourth quarter ended 31 December 2014, DiGi.Com posted a 3.8 percent and 2.1 percent increase in top and bottom lines, to RM1.8 billion and RM560 million respectively. For FY14, the firm’s revenue rose 4.2 percent to RM7 billion while net profit jumped 19 percent to RM2 billion.
The better performance was attributed to solid growth across revenue streams, particularly in Internet revenue, with the group’s internet subscribers surging 31 percent to 6.5 million in the last quarter.
The company is eyeing for more spectrum allocation to help boost revenue. Talks of a planned spectrum refarming are heating up in the mobile telecommunications space and analysts said that the potential exercise may see DiGi, which is the smallest listed telco being a beneficiary as the group could be allocated more spectrum to provide their services considering how much their customer base has grown.
Significance: For the quarter, the group has announced a dividend of RM0.072, bringing full-year dividend to RM0.26, representing a 22 percent growth. Moving forward, DiGi plans to maintain its 2014 capital expenditure level of RM904 million in 2015 to support its continued aim to drive mobile internet in the latest 4G technology for base stations and fiber lines.
http://www.sharesinv.com
