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Regional Morning Notes Summary - 21 September 2017

Core Content Overview

This document provides an analysis of stock market updates and recommendations for various regions including China, Malaysia, Singapore, and Thailand, with a focus on specific companies and market indices. It also includes corporate events and key financial metrics.

Key Regions and Companies

China

• Wasion Group Holdings (3393 HK):
  • Update: Earnings are expected to recover in 2018 due to the launch of second-generation smart meters.
  • Upgrade: From SELL to BUY, with a target price of HK$4.30.
  • Key Financials:
    • Revenue estimates for 2017–19 raised by 1%, 5%, and 8% respectively.
    • Core EPS estimates raised by 20%, 53%, and 69%.
    • Net profit forecasts for 2017–19 raised by 20%, 53%, and 69%.
  • Segment Performance:
    • Power AMI segment is expected to recover in 2018–19.
    • Communication and Fluid AMI segment has significant growth potential.
    • ADO segment is projected to grow at a 30% CAGR due to power-saving initiatives.
  • Valuation:
    • Target price increased to HK$4.30, reflecting higher EPS and PE assumptions.
    • Valuation premium is justified by expected faster earnings growth.

Malaysia

• Automobile Sector:
  • TIV (Total Industry Volume): August 2017 TIV was flat yoy but up 6.5% mom.
  • Sector Outlook: Maintained UNDERWEIGHT due to soft consumer sentiment and weak ringgit.
  • Company Updates:
    • Berjaya Sports Toto (BST MK): Results in line with expectations. No near-term share price catalyst, but yield is attractive (>7%).
    • UMW Holdings (UMWH MK): SELL recommendation, as its other divisions face operational challenges and the aerospace segment is not profitable until 2019.
    • Bermaz Auto (BAUTO MK): HOLD recommendation, with a target price of RM1.92. Expected recovery in 2HFY18 due to new model launches and increased export volume.

Singapore

• Raffles Medical Group (RFMD SP):
  • Update: Upgrade to BUY on long-term growth potential.

Thailand

• Khon Kaen Sugar Industry (KSL TB):
  • Results: 3QFY17 earnings were disappointing.
• Airports of Thailand (AOT TB):
  • Update: Downgrade to SELL due to stretched valuations and minor impact from rental revisions.

Key Indices Performance

Key Assumptions

Corporate Events

Top Picks

Stock Impact

• Wasion Group Holdings:
  • Revenue estimates for 2017–19 raised by 1%, 5%, and 8% respectively.
  • EBIT margin assumptions lifted to 11.0%, 13.9%, and 14.3%.
  • Net profit forecasts for 2017–19 raised by 20%, 53%, and 69%.

Analysts and Recommendations

• Ken Lee (China):

  • Upgrade to BUY based on expected earnings recovery in 2018.
  • Positive outlook on smart water meter segment due to supportive policies and low penetration.
  • Management confidence in earnings and dividend sustainability.

• Fong Kah Yan (Malaysia):

  • Maintained UNDERWEIGHT on the automobile sector.
  • Continued SELL on UMW Holdings due to ongoing operational challenges.
  • HOLD on Bermaz Auto with a target price of RM1.92.

Peer Comparison (Malaysia)

^ FY17–18F refers to FY18–19F data

Summary of Key Points

• Wasion Group Holdings is upgraded to BUY due to expected earnings recovery in 2018.
• The automobile sector in Malaysia is maintained as UNDERWEIGHT due to weak consumer sentiment and a weak ringgit.
• UMW Holdings remains a SELL due to ongoing challenges in its non-auto segments.
• Bermaz Auto is maintained as HOLD with a target price of RM1.92.
• Raffles Medical Group is upgraded to BUY based on long-term growth potential.
• Airports of Thailand is downgraded to SELL due to stretched valuations.
• Khon Kaen Sugar Industry had disappointing 3QFY17 results.
• Corporate events are listed, including roadshows and conference calls.
• Key financial metrics for Wasion Group include a target price increase and improved EBIT margins.