20150414-大和证券-Asia_Pacific_Daily_45页_3mb_3mb

Asia Pacific Daily Summary - 14 April 2015

Core Content

This report provides an overview of key market insights and investment recommendations from Daiwa for the Asia Pacific region, focusing on the commercial property sector in Greater China, the Korean healthcare industry, and other market participants. It also includes regional index performance, company roadshows, and financial summaries for selected firms.

Main Sections

1. Hang Lung Properties (101 HK)

• Rating: Buy
• Target Price: HKD34.90
• Overview: Hang Lung Properties (HLP) has been engaged in a 10-year wealth-building venture, primarily through investments in China to transform into a leading player in the Greater China commercial property sector.
• Share Price Performance:
  • HLP's share price dropped 40% from its peak of HKD40.30 in 2010 to HKD24.15.
  • Despite strong gross rentals and BVPS growth (CAGR of 12% and 6%, respectively), the valuation has been notably derated since 2011.
• Investor Focus:
  • HLP's strategy is seen as simple and focused, with potential for value creation through systematic retail property management.
  • The report highlights four key questions investors should consider when evaluating HLP's shares.
• Key Risks:
  • Structural derating of HLP shares
  • Potential impact from global investor interest in Hong Kong family business groups

2. Korea Healthcare Sector

• Rating: Positive (unchanged)
• Key Players:
  • SK Chemicals (006120 KS):
    • Rating: Buy
    • Target Price: KRW29,174/share
    • Two new vaccines (herpes zoster and 13-valent pneumococcal) are expected to be launched in the next 6-12 months.
    • Recent Phase III clinical trial success could reduce development risk and increase valuation.
    • Key risk: Unexpected provisioning by SK E&C, a 28% owned subsidiary.
  • Green Cross (006280 KS):
    • Rating: Outperform
    • Target Price: KRW200,000
    • Strong earnings visibility and sustainable growth outlook.
    • Share price has risen 49% year-to-date, but investors are seeking a correction before increasing positions.

3. United Microelectronics (2303 TT)

• Rating: Underperform (4)
• Target Price: TWD14.20
• Performance:
  • 1Q15 results are expected to slightly miss consensus.
  • 2Q15 revenue guidance is below seasonal average due to pent-up demand from currency volatility.
• Margin Trends:
  • Muted margin trend expected for 2015 due to the ramp-up of 28nm production.
  • 28nm is expected to contribute about 8% of revenue in 1Q15, increasing to 9% in 2Q15.
• Capex and Overheads:
  • UMC budgeted TWD1.8bn in capex for 2015, with 90% allocated to 28nm expansion.
  • This will increase depreciation by 17% YoY, significantly adding to fixed overheads.
• Recommendation:
  • Despite raising forecasts, the Underperform rating is maintained due to the muted margin trend.
  • Key upside risk: 28nm margin ramping ahead of expectations.

4. Regional Indices (April 2015)

*Valuation based on MSCI Universe
**MSCI index priced as of 10 Apr

Key Events and Roadshows

• Daiwa Consumer and Gaming Conference 2015:
  • Dates: 21st - 23rd April 2015
  • Venue: Hong Kong
• Company Roadshows:
  • 13-16 Apr: China Water Affairs (855 HK), Hang Lung Properties (101 HK), Swire Properties (1972 HK), Sansung L&L (016100 KS)
  • 14 Apr: First Tractor (38 HK), Tianneng Power (819 HK)
  • 14-15 Apr: China Singyes (750 HK), CT Environment (1363 HK)
  • 16-17 Apr: Doosan Corp (000150 KS), Techntronic Industries (669 HK)
  • 17 Apr: NagaCorp (3918 HK), EGL Holdings (6882 HK)
  • 20 Apr: Truly Int'l (732 HK)

Additional Highlights

• Hyundai Development (012630 KS):
  • Partnered with Hotel Shilla for duty-free shop business.
• M1 (M1 SP):
  • 1Q15 results largely in line with expectations.
• Economic Calendar:
  • April 2015 includes key events and data releases.
• Rating and Target-Price Information:
  • Detailed in the report for various companies.
• Recently Published Reports:
  • Includes insights on market trends and investment opportunities.

Conclusion

The report outlines a mix of investment opportunities and risks across the Asia Pacific region, with a focus on Hang Lung Properties and the Korean healthcare sector. It suggests that HLP's shares may represent a rare buying opportunity due to its undervaluation and potential for long-term growth in prime commercial property assets. In the Korean market, SK Chemicals and Green Cross are highlighted for their strong fundamentals and growth potential, while United Microelectronics faces margin challenges and is recommended as an Underperform due to the muted outlook. Overall, the report emphasizes the importance of evaluating both structural and market-specific factors in making investment decisions.