20170123-大华继显-Regional_Morning_Notes_27页_1mb

Regional Morning Notes Summary

Core Content

This document provides a comprehensive overview of economic activity and market updates for several Asian countries including China, Indonesia, Malaysia, Singapore, and Thailand, with a focus on key sectors and companies. It includes GDP growth analysis, corporate performance, and investment recommendations for various firms.

Main Points

China

• GDP Growth: China's GDP growth edged up to 6.8% yoy in 4Q16, slightly above market expectations of 6.7% yoy, but is expected to face pressure in 2017.
• Economic Activity:
  • Fixed Asset Investment (FAI): FAI growth dropped to 6.5% yoy in Dec 16, down from 8.8% yoy in Nov 16, due to slowing infrastructure investment.
  • Industrial Production (IP): IP growth slowed to 6.0% yoy in Dec 16, partially due to environmental controls and production suspensions in North China.
  • Retail Sales: Retail sales improved to 10.9% yoy in Dec 16, driven by resilient automobile sales.
• Market Outlook: Cautious about 2017 prospects, with a forecasted GDP growth of 6.3% yoy.
• NG Pricing Reform: The reform aims to form a market-driven pricing system, but it is unlikely to significantly impact margins due to the cost pass-through mechanism.
• Valuation: The sector is trading at 10x FY17F PE and 1.9x FY17F P/B, close to historical lows. Top picks include ENN Energy and CR Gas, both rated BUY.

Indonesia

• Total Bangun Persada (TOTL IJ):
  • Rated BUY with a target price of Rp800.
  • It is the cheapest among Indonesian construction companies despite offering the highest dividend yield and ROE.
  • Expected to benefit from the recovery in the property cycle in 2017.
  • Targets Rp4t in new contracts for 2017, up 33% yoy.
  • Maintains a high net cash position (15.4% of market cap in 9M16), which supports its dividend yield of 4.8%.
  • Offers higher ROE (26.8%) and dividend yield (4.8%) compared to peers.
  • Unique direct contract arrangements enhance profitability and reduce exposure to cost pressure and working capital requirements.

Malaysia

• KLCC Property Holdings (KLCCSS MK):

  • Rated HOLD with a target of RM7.50.
  • 2016 results were largely in line with expectations.
  • ExxonMobil will renew only 60% of its NLA at Menara ExxonMobil, and tenant relocation at Suria KLCC is expected to be completed in 3Q17.
  • Mandarin Oriental continues to operate in a challenging environment.

• Inari Amertron (INRI MK):

  • Rated BUY with a target of RM2.00.
  • On track for 22% / 26% yoy growth in FY17 / FY18.
  • Potential earnings upside in FY18 due to a contract for an iris scanning component.

Singapore

• Bumitama Agri (BAL SP):

  • Rated BUY with a target of S$1.25.
  • 4Q16 FFB production increased qoq and yoy.
  • 2016 FFB production dropped by 4.1% yoy, in line with expectations.
  • Expect a strong production recovery in 2017.

• Food Empire Holdings (FEH SP):

  • Rated BUY with a target of S$0.78.
  • Initiate coverage with a BUY rating.
  • The company is expected to benefit from the recovery in the food and beverage sector.

Thailand

• Thai Union Group (TU TB):
  • Rated BUY with a target of Bt24.50.
  • Expected to report small 4Q16 earnings.
  • The company is a key player in the seafood industry.

Key Indices

• The DJIA, S&P 500, FTSE 100, AS30, CSI 300, FSSTI, HSI, JCI, KLCI, KOSPI, Nikkei 225, SET, and TWSE are listed with their previous close, daily, weekly, monthly, and year-to-date performance.
• Brent Crude and CPO (Crude Palm Oil) are also highlighted with their price movements and forecasts.

Corporate Events

• A list of upcoming corporate events is provided, including:
  • PTT Exploration and Production Roadshow in Singapore (6–7 Feb)
  • Luncheon with Kim Loong Resources in Malaysia (13 Feb)
  • SGX-UOB Kay Hian Corporate Day in Taipei (21 Feb)
  • UOB Kay Hian ASEAN Conference in Taipei (22 Feb)
  • Annual Plantation Outlook Seminar in Malaysia (6 Mar)

Key Information

China's Economic Outlook

• GDP growth is expected to moderate in 2Q17.
• Property market cooling down is a concern.
• Automobile sales are a key driver but not sustainable due to the purchase tax rate increase in 2017.
• Environmental protection is a top priority, which is expected to benefit renewable energy and environmental sectors.

NG Pricing Reform Impact

• Upstream and midstream sectors are the focus of the reform.
• Downstream margins are expected to remain stable due to cost pass-through mechanisms.
• Connection fees are unlikely to be canceled nationwide, but may be replaced with higher tariffs or service fees in some regions.

Indonesian Construction Sector

• TOTL is a top pick due to its high ROE and dividend yield.
• It is undervalued with a PE of 10.8x.
• Its direct contract arrangements and net cash position support its high profitability.

Malaysia and Singapore Market Highlights

• KLCC Property Holdings is expected to have revenue and earnings upside.
• Inari Amertron is a BUY due to growth potential.
• Bumitama Agri and Food Empire Holdings are both BUY due to strong production recovery expectations.

Analysts

• China: Chaoping Zhu and Ying Lei Li
• Indonesia: Adrianus Bias Prasuryo
• Other Markets: Not specified in the summary

Valuation Comparison

• TOTL is the cheapest among its peers in the Indonesian construction sector.
• The PE and P/B ratios for TOTL are significantly lower than the sector average.

Conclusion

The document highlights positive growth expectations in the construction and agriculture sectors in Indonesia and Malaysia, as well as renewable energy and environmental sectors in China. It also emphasizes the stability of margins in the city gas distribution sector and the recovery potential in the property market. Investment recommendations are made for several companies, with BUY ratings for ENN Energy, CR Gas, TOTL, Inari Amertron, Bumitama Agri, and Food Empire Holdings. The market outlook remains cautious for 2017, with a forecasted GDP growth of 6.3% yoy for China.