In this briefing:
- MAJOR: Impressive 4Q18 Earnings
- Delta Thailand’s Tender Offer: Updated Timetable
- Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
- Free Money Has Flown
- Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
1. MAJOR: Impressive 4Q18 Earnings
MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).
- 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
- Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
- SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.
We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.
2. Delta Thailand’s Tender Offer: Updated Timetable
With Form 247-3 (Intention to Make a Tender Offer) and the FY18 dividend (Bt2.30/share) for Delta Electronics Thai (DELTA TB) having been announced, this insight briefly provides an updated indicative timetable for investors.
The next key date is the submission of Form 247-4, the Tender Offer for Securities, which will provide full details of the Offer.
Date | Data in the Date | Comment |
1-Aug-18 | Announcement | |
13-Jan-19 | Pre-approvals fulfilled | |
18-Feb-19 | Form 247-3 submitted | |
18-Feb-19 | FY18 dividend announced | |
22-Feb-19 | Form 247-4 to be submitted | As per announcement |
25-Feb-19 | Tender Offer open | Assume 1 business day after 247-4 is submitted |
28-Feb-19 | Last day to buy to be on the 4 Mar register | T+2 settlement |
1-Mar-19 | Ex-date for dividend | As announced |
4-Mar-19 | Date to be on the registry to receive full-year dividend | As announced |
22-Mar-19 | Last day for revocation of shares | 20th day of Tender Offer1 |
29-Mar-19 | Close of Offer | Assuming 25 business days tender period |
2-Apr-19 | AGM | As announced |
3-Apr-19 | Consideration paid under the Offer | Assume 3 business days after close of Offer |
11-Apr-19 | Payment of FY18 dividend | As announced2 |
1 assuming the shareholder has not forfeited the right to revoke
2 the dividend is subject to a 10% WHT for non-residents.
This above indicative timetable assumes a conditional offer based on a minimum acceptance level of at least 50%. Payment under the offer may indeed be earlier, as explained below, which also ties in with a shareholders’ right to revoke shares tendered.
In addition, investors should not tender once the offer opens – assuming the tender period commences on the 25 February – but wait until their shares are on the registry as at 4 March to receive the FY18 dividend.
Currently trading at a 2.2%/22% gross/annualised spread. Bear in mind the dividend is subject to 10% tax.
3. Repsol, Petronas & Mitsui Make Massive Gas Find in Indonesia
Repsol SA (REP SM)‘s discovery is very significant for the companies involved and others around the area, which we discuss in detail below. It is also important for Indonesia, which requires more gas to supply domestic and export demand. It is also positive for exploration sentiment globally, to see a material discovery (Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps) and this may encourage further M&A in Indonesia such as this deal: (Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies).
4. Free Money Has Flown
The world will soon discover that debt matters.
The announcement of each round of QE increased asset prices, but the effect on Treasury bond prices began to fade when central bank purchases began. This unexpected behaviour revealed a little-known fact: asset prices react more to the expectation of changes in liquidity than to the experience of greater liquidity in financial markets. By contrast, economic growth is subject to the fluctuating standards of commercial bank lending, which follow variations in the demand for credit. Consequently, financial markets lead the economy. Meanwhile, central banks focus on lagging indicators, so they’re followers, not leaders. Bond markets usually predict more accurately than stock markets. To work, central bank easing policies require real risk-adjusted interest rates. However, with those rates below zero in many countries, further reductions would penalise lenders without helping borrowers. Thus, only rising inflation can save stressed debtors.
5. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
Last week, Uzbekistan placed a debut Eurobond, which attracted high interest from investors. Following a change of leadership in 2016, the country embarked on a path or rapid development. So far, its reform record has been quite impressive. However, new challenges often arise during periods of rapid transition. We expect both demand and supply-related pressures to lead to a rise in headline inflation towards the 20% mark in the next 12 months. We think that given the evidence of a rapid deterioration in the trade and current accounts in 2018, further depreciation of the local currency should be expected in the short term. Investors who have bought the Eurobond, or consider participation in further placements by Uzbek corporate issuers in the coming months, should watch out for signs of the build-up of persistent imbalances in Uzbekistan’s economy.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
