20171004-大华继显-Regional_Morning_Notes_20页_1mb

Regional Morning Notes Summary - 04 October 2017

Core Content Overview

This document provides a comprehensive update and analysis on various regional markets and specific companies in China, Indonesia, Malaysia, and Singapore. It includes company updates, key picks, corporate events, financial metrics, and valuation analysis.

Main Points

China

• Shandong Weigao (1066 HK):
  • Upgraded to BUY due to its acquisition of Argon Medical, which enhances its leadership in the high-end medical consumables sector.
  • The acquisition may result in a negative bottom-line impact in 2018/19 due to Argon's losses and debt financing costs, but the company's strong in-house sales team is expected to offset these through market share gains.
  • The company's target price is HK$6.76, representing a 19.9% upside from the current price of HK$5.64.
  • Key Financials:
    • Revenue is projected to grow steadily from 2017 to 2019.
    • EBITDA and net profit are expected to increase, with EBITDA margin improving from 25.6% to 29.0%.
    • Dividend yield is anticipated to rise from 1.1% to 1.8%.
    • Valuation includes a SOTP method with a 15x 2018F PE for existing business and 5x FY16 P/B for Argon.
  • Orthopaedics Business:
    • Divided into three sub-segments.
    • Expected to grow at mid- to low-teen rates in 2017 due to price negotiation and two-invoice policy.
    • The management's shareholding increased to 20% after the 2016 share incentive plan, boosting loyalty and performance.
  • Blood Purification:
    • A key growth area with strong demand.
    • Expected to maintain ~18% CAGR through 2018F.
    • ZTE is expected to gain market share in the IoT segment with its NB-IoT solutions.
    • ZTE Corp (763 HK):
      • Maintained as BUY with a target price of HK$32.70.
      • Strong 5G product lineup including Massive MIMO, SDN/NFV, and FlexHaul.
      • Expected to benefit from the 5G capex cycle starting in 2019.
      • 5G investment is projected to be larger than the 4G cycle, with a target price increase based on 28x 2018F PE.
      • Market Share in the global telecom equipment market is expected to rise due to Chinese leadership in 5G.

Indonesia

• Tunas Baru Lampung (TBLA IJ):
  • Initiated coverage with a BUY recommendation.
  • Target price is Rp2,000, with a potential upside of 43.7% from the current price of Rp1,390.
  • The company has clear catalysts from its sugar business.

Malaysia

• VS Industry (VSI MK):
  • Upgraded to BUY with a target price of RM3.10.
  • The key catalyst is the fill-up of capacity at its new plant, which is expected to be completed by mid-2018.
  • Potential contact wins from a new customer are anticipated to drive growth.

Singapore

• Alpha Picks for October:
  • Added SingTel to the list of recommendations.
  • Removed Cityneon due to its strong outperformance.

Thailand

• Oil & Gas Sector:
  • Preference is given to laggards and petrochemical plays.
  • The sector is expected to benefit from increased demand and investment.

Key Indices Performance

Top Picks

Key Assumptions

Corporate Events

Analysts

• Shandong Weigao: Alex Jiang Lei

  • Contact: +852 2236 6749
  • Email: alexjiang@uobkayhian.com

• ZTE Corp: Yukkei Lee, CFA

  • Contact: +852 2826 4867
  • Email: Yukkei.lee@uobkayhian.com.hk