Investment Analysis on Oil and Gas Industry (KL and Penang)

Course: Investment Analysis on Oil and Gas Industry

Organizer: Investalks Academy

Kuala Lumpur

Venue: Investalks Academy, 12-1, Jalan Perubatan 3, Pandan Indah, 55100 KL.

Date: 27 Aug 2016 9am to 5pm

Penang

Venue: GLOW Penang, 01, Jalan Macalister, George Town, 11400 George Town, Pulau Pinang, Malaysia

Date: 4 Sep 2016 9am to 5pm
Fee
a. RM488.00 for public
b. RM338.00 for Investalks Academy members (who attended our other classes before)
c. RM338.00 for students

The course will be delivered in English if there are students who can’t comprehend Mandarin. Slides and material will be in English.

Course Objectives
1. Describe landscape of O&G industry.
2. Discuss the current market conditions in O&G sector.
3. Discuss factors that impact crude oil prices.
4. Discuss where are crude prices headed next.
5. Describe the current growth drivers, risks/challenges and future of O&G sector.
6. Describe the broad-based aspects of value chain in in O&G industry: upstream, oilfield services, midstream, and downstream.
7. Describe valuation models specifically for upstream companies, such as DCF and NAV models.
8. Describe valuation models for oilfield services, midstream, and downstream companies.
9. Case study – Over 30 companies to be covered in the workshop.

Course Prerequisites
1. Interpreting financial statements
2. Hands on experience in fundamental analysis
3. Solid knowledge in financial measures, such as EBITDA, EBIT, Enterprise Value, Free Cash Flow, ROE, ROIC, CROIC, Debt/EBITDA, EBITDA/Interest, etc…

Registration
1. Bank in
a. Bank: Maybank
b. Account No.: 514383562062
c. Account Name: Ivestalks Enterprise

  1. Send the payment receipt to investalksacademy@gmail.com

  2. Register here: https://docs.google.com/forms/d/1Hn9uLNAl8dKldiy_LkG1Ac7mPBTz3SmraXmyqFLe-OA/edit

TENAGA–Fundamental Analysis (4 Aug 2016)

Excel – Download the analysis file

Latest Financial – Q3 2016 Financial Report (28 Jul 2016) and Analyst Briefing Presentation – 2016 – Q3

FY16 Q3 Results Highlight:

  • Peninsular Malaysia electricity demand grew 6.2% yoy in 3QFY16 (9MFY16: +4.5%).
  • Higher yoy in 9MFY16 mainly on higher nonfuel costs such as general expenses (+32.2% yoy) due to provisions for bad debt for certain industrial customers in the steel and iron industry.
  • 9MFY16 revenue rose by 5.6% yoy, driven by new electricity peak demand of 17,788MW in Apr-16 (+5.2% vs. previous peak of 16,901MW in Jun-14) due to El Nino. TENAGA’s 9MFY16 EBITDA improved 1.3ppts yoy to 33.6% on higher revenue despite higher general expenses (+32.2% yoy) involving a bad-debt provision for the steel and iron sector.
  • TENAGA registered strong electricity demand growth of 4.5% yoy in 9MFY16 (9MFY15: +2.5% yoy), mainly driven by 6.2% yoy growth in 3QFY16.

 

Going Forward:

  • (FFO – Dividends) / Debt in FY15 was 36% which is above global industry average (35%). I think TENAGA should consider to increase its dividend payout in view of its strong cash position.
  • In my opinion, fair value of TENAGA is from 16.7 to 17.2 (Uncertainty Risk is MEDIUM).
  • I will continue to hold this share, and accumulate it.

At the time of writing, I owned shares of TENAGA.

MAYBANK – Fundamental Analysis (3 Aug 2016)

 

Excel – Download the analysis file

Latest Financial – Q1 2016 Financial Report (27 May 2016)

FY16 Q1 Results Highlight:

  • In 1QFY16, Maybank reported an adjusted net profit of RM1,427m (-16% YoY, -5% QoQ). The 12% earning miss was mainly a result of punchy loan loss provisions. High loan loss provisions were mainly driven by rescheduled and restructured loans from a few large exposures in the shipping, oil & gas and manufacturing segments mainly in Singapore.
  • eadline asset quality figures look disappointing. However, there was no broad based asset quality deterioration but several exposures – primarily in the shipping, oil & gas and manufacturing sector – were rescheduled and restructured and therefore classified as impaired. As a result, new non-performing loan (NPL) formation was high at 2.1% (annualized) and the NPL ratio for Maybank jumped to 2.1% from 1.9% a quarter ago. NPL coverage declined to 70% vs 72% a quarter ago. On the positive side, the fully loaded common equity tier 1 ratio (CET1) of Maybank increased to 12.4% (+40bp QoQ) which is a very healthy level.
  • Maybank has a guarded outlook for Singapore where 25% of its total loans are booked. Outlook on Singapore: Asset quality likely to deteriorate further as credit cycle turns with new non-performing asset (NPA) formation.
  • Group was behind its FY16 KPI targets for ROE, loan and deposit growth. The Group’s loan growth decelerated and was behind its target of 8-9% for FY16.This was also the case for its deposit growth which fell behind its growth target of 10-11%. Meanwhile, its annualised ROE is 9.3%. Management is maintaining its FY16 guidance for ROE, loan and deposit targets.

Valuation:

  • In my opinion, fair value of MAYBANK range from 9.1 to 9.4. Uncertainty risk of fair value is MEDIUM.

Going Forward:

  • FY16 Guidance – For 2016, Maybank is guiding for slower loan growth of 8-9% (Malaysia 6-7%, Singapore 3-4%, Indonesia 11-13%), and slower deposit growth of 10-11%. In addition, with the challenging operating environment, ROE is also guided to be lower at 11-12%. NIM would likely edge lower on stiff deposit competition while credit costs are likely to remain elevated at current levels (40-50bps).
  • In my opinion, fair value of MAYBANK is from 8.8 to 9.3 (Uncertainty Risk is from MEDIUM to HIGH).
  • Due to its attractive dividend yield, healthy liquidity and strong capital position, I will continue to hold MAYBANK, and accumulate MAYBANK without increasing my average price too much.

At the time of writing, I owned shares of MAYBANK.

PBBANK – Fundamental Analysis (2 Aug 2016)

 

Excel – Download the analysis file

Financial Report – Quarterly Report FY16 Q2 (1 Aug 2016)

FY16 Q2 Results Highlight:

  • PBBANK reported a 2QFY16 net profit of RM1,256.2m (+5.0% yoy) with the annualised net profit largely within our and market expectations. Its net profit was mainly supported by strong growth in net interest income (9.3%yoy) which was in turn underpinned by a better net interest margin (NIM) and higher average loan balance. This was, however, mitigated by weaker non-interest income (-9.7% yoy) and higher operating expenses (+11.2% yoy). Cost-to-income ratio (CIR) saw an uptick to 31.1% in the quarter (2QFY15: 31.2%), but remained the lowest in the industry.
  • Group loans growth was 9.5% yoy, 2.3% qoq. Deposit base grew 5.5% yoy and 1.6% qoq.
  • Despite an increase in absolute amount for impairment allowance, credit cost remained largely flat on yoy and qoq basis.

Going Forward:

Despite unexpected good results of PBBANK in FY15, moving forward, I believe that PBBANK result will be stable or a bit slow down. This is because loan applications will continue to be slow marginally and NIM compression will be higher in the future. PBBANK believes that its asset quality position will remain robust, in line with continued employment and income growth notwithstanding the rising cost of living and a moderated economic environment.

PBBANK announced its FY16 KPI targets which were slightly lower than FY15:

  • ROE>15
  • RWCR of >13%
  • GIL ratio < 1%
  • CI ratio < 33.0%
  • Group loan growth of 8-9%
  • Group deposit growth of 7-8%.

In my opinion, fair value of PBBANK is from 19.5 to 20.2 (Uncertainty Risk is HIGH).

I will continue to hold this share, and will not accumulate it for the time being.

At the time of writing, I owned shares of PBBANK.

BURSA – Fundamental Analysis (1 Aug 2016)

Excel – Download the analysis file

Latest Financial – Q2 2016 Financial Report (25 Jul 2016)

FY16 Q2 Results Highlight:

  • 2QFY16 vs. 2QFY15
    • 2QFY16 revenue climbed to RM129.72m (2QFY15: RM127.02m).
    • 2QFY16 net profit fell to RM49.48m (2QFY15: RM49.49m) as equities transaction value declined while derivative trades rose.
    • Average daily trading value for on-market equity transactions moderated to RM1.84 billion in 2QFY16. Derivative market average daily contracts increased 21.7% to 61,611 contracts.
  • 1HFY16 vs. 1HFY15
    • Revenue climbed to RM263.65 million from RM254.11 million (1HFY15).
    • 1HFY16 net profit rose to RM99.41m (1HFY15: RM96.54m).
  • Derivative market average daily contracts grew 8.1% to 59,790 contracts during 1HFY16. On-market equity transactions’ average daily trading value fell 4.2% to RM1.91 billion.
  • The decent performance was anchored by both:
    • Higher growth from Bursa Suq Al-Sila (BSAS; +18%), on the back of higher adoption of the Murabaha concept as well as
    • Better listing and issuer services revenue (+5%) on higher initial and additional listing fees from the transfer of listing status and higher number of corporate exercises in 1H16.
  • For 2QFY16, Bursa Malaysia declared a dividend of 17 sen a share. The ex and payment dates fall on Aug 5 and 19 respectively.

Going Forward:

  • This financial year will remain challenging in view of expected softer trading activities in the near term as sentiments remain depressed by broad macro uncertainties and concerns over potential outflow in foreign funds in the 2H.
  • BURSA’s attractive dividend will the main catalyst for the stock.
  • In my opinion, fair value of BURSA is from 8.5 to 9.5 (Uncertainty Risk is from MEDIUM to HIGH).
  • I will continue to hold, but will not accumulate BURSA for the time being.

At the time of writing, I owned shares of BURSA.

HEIM – Fundamental Analysis (20 Jul 2016)

Excel – Download the analysis file

Latest Financial Report – Q4 2016 Financial Report (18 Jul 2016)

FY16 Q4 Results Highlight:

  • Q4FY16 versus Q4FY15
    • Revenue grew 15.6% from RM398m to RM460m due to as the strong sales led by Chinese New Year festival in 3QFY16 was sustained by the event of UEFA Euro 2016 in 4QFY16.
    • Profit before tax increased 21.5% from RM66m to RM80m.
    • Net profit increased 38.3% from RM44m to RM61m.
    • Earnings per share increased from 14.57 sen to 20.15 sen.
  • 12MFY16 versus 12MFY15
    • Revenue grew 5.7% from RM1.75b to RM1.85b.
    • Profit before tax for the period increased 20.4% from RM292m to RM352m.
    • Net profit increased 24% from RM214m to RM266m.
    • Earnings per share increased from 70.90 sen to 87.94 sen.
    • The improvement is mainly driven by higher sales and favourable product mix, while the enhancement efforts by the authorities to tackle contrabands have also helped.

Going Forward:

  • HEIM management (and I) remains confident that it will deliver commendable results for FY16 even if there are many uncertainties in the global economy.
  • In my opinion, fair value of HEIM is from 18 to 19 (Uncertainty Risk: HIGH).
  • I will continue to hold, but will not accumulate HEIM for the time being. Let it ride!

At the time of writing, I owned shares of HEIM.

DIGI – Fundamental Analysis (13 Jul 2016)

Excel – Download the analysis file

Latest Financial Report – Q2 2016 Financial Report (11 Jul 2016) and Management Discussion And Analysis 2Q 2016

FY16 Q2 Results Highlight:

  • DIGI’s net profit for 2QFY16 fall 9.4% to RM420.61m, or 0.0541 eps (1QFY15: RM464.36m, 0.0597 eps), due to unrealised foreign exchange and derivatives losses of RM12.72 million. Its EBITDA fell 6.7% YoY to RM735m in 2QFY16, while its Ebitda margin slid 1.3 percentage points to 44%.
  • Revenue also came in 3.9% lower at RM1.66b, from RM1.72n in 2QFY15.
  • For 1HFY16, DIGI posted a 13.1% decline in net profit to RM819.65m or 0.1054 eps, from RM943.58m or 0.1214 eps in 1HFY15, due to aggressive high-speed data quota bundling and heavy discounts. Revenue stood at RM3.31b, down 5.7% from RM3.51b.
  • Its service revenue dropped 2% y-o-y to RM1.56b, even though its active Internet subscribers rose to eight million along an increase in smartphone penetration to 62%, while 4G LTE subscribers grew to 3.3m, from 1.3m a year ago.
  • Internet revenue made up a total of 36.1% of service revenue for 2QFY16, and continued to grow as smartphone adoption rose to 62% and active Internet subscribers up to 64.5% of the total subscriber base. ARPU was steady at RM42, backed by 12.3 million subscribers.
  • Despite being challenged by the industry’s aggressive Internet quotas and heavy discounts, DIGI’s postpaid ARPU strengthened to RM82 on a larger subscriber base, while prepaid ARPU dipped marginally to RM34, on the back of relatively stable prepaid subscribers.
  • Its 4G LTE and 4G LTE-A network footprint now stands at 76% and 34% of the population nationwide respectively

 

Going Forward:

  • Management has maintained an unchanged guidance for service revenue and EBITDA (similar to 2015 levels), but revised capex intensity guidance upwards to 13-14% of service revenue, from 11-12%. Nonetheless, management has guided that there is no change in plans for network roll-outs, where the capex intensity revision is due to costing estimations.
  • In my opinion, fair value of DIGI range from 5.1 to 5.3. Uncertainty risk of fair value is MEDIUM.
  • I will continue to hold this share, and accumulate it.

At the time of writing, I owned shares of DIGI.