Left Brain Right B - the DBS Vickers Securities Equities Research
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Left Brain Right B - the DBS Vickers Securities Equities Research

Left Brain Right B - the DBS Vickers Securities Equities Research Left Brain Right B - the DBS Vickers Securities Equities Research

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Income Statement (RM m) Balance Sheet (RM m) Regional Equity Strategy 4Q 2009 Hong Leong Bank FY Jun 2009F 2010F 2011F 2012F FY Jun 2009F 2010F 2011F 2012F Net Interest Income 1,353 1,447 1,521 1,634 Cash/Bank Balance 18,344 19,474 21,400 23,563 Non-Interest Income 570 614 675 743 Government Securities 369 1,510 1,644 1,790 Islamic Banking Income 176 194 213 235 Inter Bank Assets 5,417 5,959 6,555 7,210 Operating Income 2,099 2,255 2,410 2,612 Total Net Loans & Advs. 34,795 36,462 39,396 42,559 Operating Expenses (877) (903) (930) (958) Investment 17,517 19,269 21,195 23,315 Pre-provision Profit 1,222 1,352 1,480 1,654 Associates 0 0 0 0 Provisions (190) (190) (211) (227) Fixed Assets 319 325 332 339 Associates 99 110 121 133 Goodwill 30 30 30 30 Exceptionals 0 0 0 0 Other Assets 2,397 2,442 2,488 2,534 Pre-tax Profit 1,132 1,272 1,390 1,560 Total Assets 79,405 85,710 93,302 101,629 Taxation (228) (318) (348) (390) Customer Deposits 67,583 72,990 79,559 86,719 Minority Interests 0 0 0 0 Inter Bank Deposits 2,404 2,524 2,651 2,783 Preference Dividend 0 0 0 0 Debts/Borrowings 730 730 730 730 Net Profit 905 954 1,043 1,170 Others 2,693 2,826 2,964 3,110 Minorities 43 43 43 43 Shareholders' Funds 5,734 6,380 7,138 8,026 Total Liab& S/H’s Funds 79,405 85,710 93,302 101,629 Profitability & Efficiency Ratios (%) Financial Stability Measures (%) FY Jun 2009F 2010F 2011F 2012F FY Jun 2009F 2010F 2011F 2012F Margins, Costs & Efficiency Balance Sheet Structure Yld. On Earnings Assets 3.92 3.87 3.83 3.80 Loan-to-Deposit Ratio 52.7 51.2 50.7 50.3 Avg Cost Of Funds 2.24 2.17 2.17 2.17 Net Loans / Total Assets 43.8 42.5 42.2 41.9 Spread 1.68 1.71 1.66 1.63 Investment / Total Assets 22.1 22.5 22.7 22.9 Net Interest Margin 1.81 1.84 1.79 1.76 Cust . Dep./Int. Bear. Liab. 95.6 95.7 95.9 96.1 Cost-to-Income Ratio 41.8 40.0 38.6 36.7 Interbank Dep / Int. Bear. 3.4 3.3 3.2 3.1 Employees ( Year End) 0 0 0 0 Asset Quality Effective Tax Rate 20.1 25.0 25.0 25.0 NPL / Total Gross Loans 2.2 2.4 2.3 2.0 Business Mix NPL / Total Assets 1.0 1.0 1.0 0.9 Net Int. Inc / Opg Inc. 64.5 64.2 63.1 62.6 Capital Strength Non-Int. Inc / Opg inc. 27.1 27.2 28.0 28.4 Total CAR 15.9 16.4 16.9 17.5 Fee Inc / Opg Income 14.2 14.6 15.0 15.2 Tier-1 CAR 15.8 16.3 16.8 17.4 Oth Non-Int Inc/Opg Inc 12.9 12.7 13.0 13.2 Growth Profitability Total Net Loans 1 5 8 8 ROAE Pre Ex. 16.7 15.8 15.4 15.4 Customer Deposits 8 8 9 9 ROAE 16.7 15.8 15.4 15.4 ROA Pre Ex. 1.2 1.2 1.2 1.2 ROA 1.2 1.2 1.2 1.2 Quarterly / Interim Income Statement (RMm) FY Jun 1Q2009 2Q2009 3Q2009 4Q2009 Net Interest Income 357 363 328 305 Non-Interest Income 150 163 129 129 Operating Income 550 564 491 494 Operating Expenses (217) (217) (218) (224) Pre-Provision Profit 333 347 273 270 Provisions (44) (26) (28) (91) Associates 27 19 24 29 Exceptionals 0 0 0 0 Pretax Profit 316 340 269 208 Taxation (74) (83) (62) (9) Minority Interests 0 0 0 0 Net Profit 242 257 207 199 Rolling forward PBV band 3.0 2.5 2.0 1.5 1.0 0.5 0.0 97 98 99 00 01 02 03 04 05 06 07 08 09 2nd Dev 1st Dev Mean 1st Dev 2nd Dev Source: Company, DBS Vickers Page 107

Regional Equity Strategy 4Q 2009 MISC Bloomberg: MISF MK | Reuters: MISC.KL BUY RM8.95 KLCI : 1,218.80 Price Target : 12 months RM 9.60 Potential Catalyst: Higher tanker and container rates, new oil & gas contract wins Analyst Juliana Ramli +603 2711 2222 juliana@hwangdbsvickers.com.my Improved outlook • We believe downside to container and tanker rates is limited after hitting record lows • Expect FY11F-12F earnings to grow 25% and 9% respectively y-o-y, driven by smaller liner losses and higher tanker rates • Maintain BUY with TP of RM9.60 based on sumof-parts method. Price Relative RM 11.00 10.50 10.00 9.50 9.00 8.50 8.00 7.50 7.00 6.50 2005 2006 2007 2008 2009 MISC (LHS) Relative KLCI INDEX (RHS) Forecasts and Valuation Relative Index FY Mar (RM m) 2009A 2010F 2011F 2012F Turnover 15,783 13,543 15,034 16,025 EBITDA 3,668 3,848 4,323 4,558 Pre-tax Profit 1,595 1,713 2,066 2,213 Net Profit 1,405 1,432 1,789 1,956 Net Pft (Pre Ex.) 1,405 1,432 1,789 1,956 EPS (sen) 37.8 38.5 48.1 52.6 EPS Pre Ex. (sen) 37.8 38.5 48.1 52.6 EPS Gth Pre Ex (%) (37) 2 25 9 Diluted EPS (sen) 37.8 38.5 48.1 52.6 Net DPS (sen) 35.0 35.0 35.0 35.0 BV Per Share (sen) 563.3 566.8 579.9 597.5 PE (X) 23.7 23.3 18.6 17.0 PE Pre Ex. (X) 23.7 23.3 18.6 17.0 P/Cash Flow (X) 10.8 10.7 9.2 8.6 EV/EBITDA (X) 11.4 10.8 9.7 9.0 Net Div Yield (%) 3.9 3.9 3.9 3.9 P/Book Value (X) 1.6 1.6 1.5 1.5 Net Debt/Equity (X) 0.4 0.4 0.4 0.3 ROAE (%) 7.1 6.8 8.4 8.9 Earnings Rev (%): - - - Consensus EPS (sen): 36.6 47.2 61.1 ICB Industry : Industrials ICB Sector: Industrial Transportation Principal Business: LNG, petroleum, bulk, chemical and container shipping and related business. Source of all data: Company, DBS Vickers, Bloomberg 216 196 176 156 136 116 96 76 56 Tanker and container rates may have bottomed out after hitting record lows. We believe downside risks for rates are now limited, given improved demand-supply growth balance outlook for next year. We expect tanker rates to rise by 25% in FY11F on slower tonnage supply growth and recovering global oil demand. Meanwhile, the liner division could post smaller losses going forward, as MISC reduces capacity and withdraws from the Grand Alliance consortium. Offshore and heavy engineering segments will cushion earnings. We expect these divisions to account for 37%-44% of MISC’s pre-tax profit in FY10F- FY11F. Existing long-term offshore contracts and its current large heavy engineering orderbook provide good earnings visibility for the divisions for at least 2-3 years. The heavy engineering division should remain busy for the next 2-3 years with its current orderbook at c.RM9.3bn (average completion of 12-30 months). A laggard. Apart from better earnings outlook, we believe MISC is worth a buy because it is still lagging the market despite its 3.7% weighting in the FBM KLCI. MISC’s share price YTD-09 has underperformed the market, rising only 7% against the FBM KLCI’s 36%. At A Glance Issued Capital (m shrs) 3,720 Mkt. Cap (RMm/US$m) 33,292 / 9,591 Major Shareholders Petronas (%) 62.4 EPF (%) 5.8 Free Float (%) 31.8 Avg. Daily Vol.(‘000) 586 Page 108 www.dbsvickers.com Refer to important disclosures at the end of this report ed:LM / sa: WMT

Income Statement (RM m) Balance Sheet (RM m)<br />

Regional Equity Strategy 4Q 2009<br />

Hong Leong Bank<br />

FY Jun 2009F 2010F 2011F 2012F FY Jun 2009F 2010F 2011F 2012F<br />

Net Interest Income 1,353 1,447 1,521 1,634 Cash/Bank Balance 18,344 19,474 21,400 23,563<br />

Non-Interest Income 570 614 675 743 Government <strong>Securities</strong> 369 1,510 1,644 1,790<br />

Islamic Banking Income 176 194 213 235 Inter Bank Assets 5,417 5,959 6,555 7,210<br />

Operating Income 2,099 2,255 2,410 2,612 Total Net Loans & Advs. 34,795 36,462 39,396 42,559<br />

Operating Expenses (877) (903) (930) (958) Investment 17,517 19,269 21,195 23,315<br />

Pre-provision Profit 1,222 1,352 1,480 1,654 Associates 0 0 0 0<br />

Provisions (190) (190) (211) (227) Fixed Assets 319 325 332 339<br />

Associates 99 110 121 133 Goodwill 30 30 30 30<br />

Exceptionals 0 0 0 0 O<strong>the</strong>r Assets 2,397 2,442 2,488 2,534<br />

Pre-tax Profit 1,132 1,272 1,390 1,560 Total Assets 79,405 85,710 93,302 101,629<br />

Taxation (228) (318) (348) (390) Customer Deposits 67,583 72,990 79,559 86,719<br />

Minority Interests 0 0 0 0 Inter Bank Deposits 2,404 2,524 2,651 2,783<br />

Preference Dividend 0 0 0 0 Debts/Borrowings 730 730 730 730<br />

Net Profit 905 954 1,043 1,170 O<strong>the</strong>rs 2,693 2,826 2,964 3,110<br />

Minorities 43 43 43 43<br />

Shareholders' Funds 5,734 6,380 7,138 8,026<br />

Total Liab& S/H’s Funds 79,405 85,710 93,302 101,629<br />

Profitability & Efficiency Ratios (%) Financial Stability Measures (%)<br />

FY Jun 2009F 2010F 2011F 2012F FY Jun 2009F 2010F 2011F 2012F<br />

Margins, Costs & Efficiency<br />

Balance Sheet Structure<br />

Yld. On Earnings Assets 3.92 3.87 3.83 3.80 Loan-to-Deposit Ratio 52.7 51.2 50.7 50.3<br />

Avg Cost Of Funds 2.24 2.17 2.17 2.17 Net Loans / Total Assets 43.8 42.5 42.2 41.9<br />

Spread 1.68 1.71 1.66 1.63 Investment / Total Assets 22.1 22.5 22.7 22.9<br />

Net Interest Margin 1.81 1.84 1.79 1.76 Cust . Dep./Int. Bear. Liab. 95.6 95.7 95.9 96.1<br />

Cost-to-Income Ratio 41.8 40.0 38.6 36.7 Interbank Dep / Int. Bear. 3.4 3.3 3.2 3.1<br />

Employees ( Year End) 0 0 0 0 Asset Quality<br />

Effective Tax Rate 20.1 25.0 25.0 25.0 NPL / Total Gross Loans 2.2 2.4 2.3 2.0<br />

Business Mix NPL / Total Assets 1.0 1.0 1.0 0.9<br />

Net Int. Inc / Opg Inc. 64.5 64.2 63.1 62.6 Capital Strength<br />

Non-Int. Inc / Opg inc. 27.1 27.2 28.0 28.4 Total CAR 15.9 16.4 16.9 17.5<br />

Fee Inc / Opg Income 14.2 14.6 15.0 15.2 Tier-1 CAR 15.8 16.3 16.8 17.4<br />

Oth Non-Int Inc/Opg Inc 12.9 12.7 13.0 13.2 Growth<br />

Profitability Total Net Loans 1 5 8 8<br />

ROAE Pre Ex. 16.7 15.8 15.4 15.4 Customer Deposits 8 8 9 9<br />

ROAE 16.7 15.8 15.4 15.4<br />

ROA Pre Ex. 1.2 1.2 1.2 1.2<br />

ROA 1.2 1.2 1.2 1.2<br />

Quarterly / Interim Income Statement (RMm)<br />

FY Jun 1Q2009 2Q2009 3Q2009 4Q2009<br />

Net Interest Income 357 363 328 305<br />

Non-Interest Income 150 163 129 129<br />

Operating Income 550 564 491 494<br />

Operating Expenses (217) (217) (218) (224)<br />

Pre-Provision Profit 333 347 273 270<br />

Provisions (44) (26) (28) (91)<br />

Associates 27 19 24 29<br />

Exceptionals 0 0 0 0<br />

Pretax Profit 316 340 269 208<br />

Taxation (74) (83) (62) (9)<br />

Minority Interests 0 0 0 0<br />

Net Profit 242 257 207 199<br />

Rolling forward PBV band<br />

3.0<br />

2.5<br />

2.0<br />

1.5<br />

1.0<br />

0.5<br />

0.0<br />

97 98 99 00 01 02 03 04 05 06 07 08 09<br />

2nd Dev<br />

1st Dev<br />

Mean<br />

1st Dev<br />

2nd Dev<br />

Source: Company, <strong>DBS</strong> <strong>Vickers</strong><br />

Page 107

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