20160901-大华继显-Regional_Morning_Notes_33页_1mb

Regional Morning Notes Summary - 01 September 2016

Core Content Overview

This document provides a comprehensive update on financial performance and market outlook for various sectors in China, Indonesia, Malaysia, and Singapore, along with key indices and sector picks. It focuses on banking, infrastructure, and other sectors, highlighting results, valuations, and future growth expectations.

Main Points

China: Banking Sector

• 2Q16 Results Review: Operating metrics were broadly in line with expectations, but NPL (Non-Performing Loans) pressures remained high.
• Performance Highlights:
  • CMB reported the best results with higher-than-peer PPOP (Pre-Provision Operating Profit) growth and better asset quality.
  • CCB maintained strong earnings with a solid capital position and lower NPL ratio.
• NPL Trends:
  • Net NPL formation ratio declined sequentially for most banks, but ABC, BoCom, and Minsheng showed deterioration.
  • NPL ratio for CCB remained stable, while CMB had the highest coverage ratio.
• NIM (Net Interest Margin):
  • NIM narrowed in 2Q16 but is expected to stabilize in 2H16.
• Valuation:
  • CCB and CMB are top picks with BUY recommendations.
  • CCB is preferred among large banks, while CMB is preferred among mid-sized banks.
• Key Data:
  • ICBC: NIM 2.16%, NPL ratio 1.55%, Profit after tax 75,752 Rmbm.
  • CCB: NIM 2.25%, NPL ratio 1.63%, Profit after tax 65,458 Rmbm.
  • CMB: NIM 2.54%, NPL ratio 1.83%, Profit after tax 16,881 Rmbm.
• Market Weight:
  • Maintained for the sector.

China: Infrastructure Sector

• 1H16 Performance:
  • Major infrastructure contractors' results slightly below expectations.
  • CRCC and CRG were well protected by lower interest costs.
  • CCCC was impacted by higher net gearing and operating costs.
• Growth Drivers:
  • Urban rail transit (URT) and municipal projects are key for new order growth.
  • CCCC gained momentum from overseas markets.
• VAT Impact:
  • The VAT reform in May 2016 had a limited impact on construction contractors, with CRCC reporting a 2-3% revenue drop.
  • CRCC's gross margin contracted by 1ppt, but net margin was not significantly affected.
• Sector Picks:
  • CRCC is the top pick with a BUY recommendation.
• Key Data:
  • CRCC: Revenue up 1.5%, net profit up 9%, gross margin 10.3%, net finance cost down 22%.
  • CCCC: Revenue up 3.7%, net profit up 7%, overseas revenue up 12%.
  • CRG: Revenue up 1.5%, net profit up 12%, with focus on URT and PPP projects.

Indonesia

• Astra Agro Lestari (AALI IJ/HOLD):
  • Limited growth ahead, share price fully valued.
  • Target price: Rp16,230.
  • Current price: Rp16,400.

Malaysia

• Banking Sector:
  • Overall banking statistics in July 2016 indicated a moderating growth environment.
  • Lower LLC (Loan Loss Coverage), slight NPL increase, and persistent deposit growth weakness.
• PPB Group (PEP MK/SELL):
  • Expect better performance in 2H16 supported by stable contributions from grains, agribusiness, cinema, and consumer products.
  • Target price: RM14.30.
  • Current price: RM16.08.

Singapore

• Singapore Press Holdings (SPH SP/HOLD):
  • 4QFY16 page count fell.
  • Expect continued advertising revenue challenges.
  • Target price: S$3.80.
  • Current price: S$3.77.

Key Indices (as of 1 Sep 2016)

Key Assumptions

Top Sector Picks

Corporate Events

Analyst Contact

• Edmond Law: +852 2826 4837, edmond.law@uobkayhian.com.hk
• Jasmine Duan: +852 2826 1351, jasmine.duan@uobkayhian.com.hk