Regional Morning Notes Summary - 26 April 2017
Core Content Overview
This document provides a summary of market updates and stock analysis for various Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand, with a focus on the automotive sector in China and performance updates for United Tractors (UNTR IJ) in Indonesia. It also includes key indices, corporate events, and analyst ratings for selected stocks.
Main Points
China Automotive Sector Update
- Relaxation of Foreign Stake Restrictions: The Chinese government has relaxed the foreign ownership limits in joint ventures (JVs) for the automobile industry, likely in response to pressure from the Trump administration.
- Impact on OEMs: The change is neutral for most Chinese automakers, as local partners (state-owned OEMs) have long-term JV contracts. However, it may negatively affect proprietary brands like GAC's Trumpchi and BAIC's Senova due to potential cessation of foreign technological support.
- Top Picks:
- Brilliance (1114 HK): Buy, with a target price of HK$15.50.
- GAC (2238 HK): Sell, target price HK$11.00.
- Great Wall Motor (2333 HK): Sell, target price HK$6.00.
- BAIC (1958 HK): Sell, target price HK$7.00.
Indonesia Market Update
- United Tractors (UNTR IJ):
- 1Q17 Results: Strong performance with 42% YoY revenue growth and 105.5% YoY earnings growth.
- Dividend: A 40% cash dividend equivalent to Rp536 per share, with ex-dividend on 26 April 2017.
- Performance: Share price fell 8.4% following the rating downgrade, but valuation is now more reasonable at 13.1x 2017F PE.
- Recommendation: Maintain HOLD, with a target price of Rp29,150.
- Key Factors:
- Strong sales of Komatsu machinery and coal.
- Margins expanded due to higher ASP.
- Mining contracting volume affected by weather.
- Earnings expected to improve in 2H17 due to toll road projects.
Key Indices (as of 26 April 2017)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
20996.1 |
1.1 |
2.3 |
1.9 |
6.2 |
| S&P 500 |
2388.6 |
0.6 |
2.0 |
1.9 |
6.7 |
| FTSE 100 |
7275.6 |
0.2 |
1.8 |
(0.8) |
1.9 |
| AS30 |
5900.7 |
0.3 |
(0.4) |
1.8 |
3.2 |
| CSI 300 |
3441.4 |
0.3 |
(0.6) |
(1.4) |
4.0 |
| FSSTI |
3163.9 |
0.6 |
0.8 |
0.7 |
9.8 |
| HSCEI |
10272.1 |
1.6 |
2.3 |
(2.0) |
9.3 |
| HSI |
24455.9 |
1.3 |
2.2 |
0.4 |
11.2 |
| JCI |
5680.8 |
0.3 |
1.1 |
2.0 |
7.3 |
| KLCI |
1765.8 |
0.6 |
1.4 |
1.1 |
7.6 |
| KOSPI |
2196.9 |
1.1 |
2.3 |
1.3 |
8.4 |
| Nikkei 225 |
19079.3 |
1.1 |
3.6 |
(1.0) |
(0.2) |
| SET |
1562.3 |
(0.2) |
(0.8) |
(0.7) |
1.3 |
| TWSE |
9841.7 |
1.3 |
1.0 |
(0.6) |
6.4 |
| BDI |
1154 |
(1.4) |
(10.8) |
(6.9) |
20.1 |
| CPO (RM/mt) |
2671 |
1.2 |
(0.8) |
(10.5) |
(16.5) |
| Brent Crude |
52 |
1.0 |
(5.1) |
2.6 |
(8.3) |
Key Assumptions
| Region |
GDP (yoy) |
2016 |
2017F |
2018F |
| US |
1.6 |
1.6 |
2.7 |
2.5 |
| Euro Zone |
1.7 |
1.7 |
1.6 |
1.5 |
| Japan |
1.0 |
1.0 |
0.9 |
1.2 |
| Singapore |
2.0 |
2.0 |
2.4 |
2.8 |
| Malaysia |
4.2 |
4.2 |
4.5 |
4.7 |
| Thailand |
3.2 |
3.2 |
3.3 |
3.1 |
| Indonesia |
5.0 |
5.0 |
5.2 |
5.5 |
| Hong Kong |
1.9 |
1.9 |
2.0 |
2.0 |
| China |
6.7 |
6.7 |
6.3 |
6.3 |
| Brent (Average) |
45 |
45 |
55 |
60 |
| CPO |
2,653 |
2,653 |
2,600 |
2,500 |
Corporate Events
| Event |
Venue |
Dates |
| Analyst Presentation on Indonesia Strategy |
Singapore Kuala Lumpur |
26 Apr - 28 Apr |
| Group Luncheon with Hopefluent |
Hong Kong |
27 Apr |
| Group Luncheon with CAT Telecom |
Thailand |
28 Apr |
| Roadshow with Meidong Auto Holdings |
UK |
4 May - 5 May |
| Analyst Presentation on Malaysia Outlook |
Hong Kong |
17 May |
| Roadshow with Singtel |
Canada |
26 May |
| Roadshow with PT Siloam Int'l Hospital |
Canada |
5 Jun - 16 Jun |
| Luncheon with United Overseas Bank |
Singapore |
3 Jul |
| Roadshow with Top Glove Corporation |
US/Canada |
5 Sep - 12 Sep |
Company Results Summary
United Tractors (UNTR IJ)
- 1Q17 Performance:
- Revenue grew 42% YoY to Rp13,679 billion.
- Earnings doubled to Rp1.5 trillion.
- Net profit increased 21.9% QoQ due to lower forex loss and higher net interest income.
- Gross margin: 20.9% (up 3.3% YoY).
- EBIT margin: 15.2% (up 3.4% YoY).
- Net margin: 11.0% (up 4.1% YoY).
- Performance Drivers:
- Strong sales in Komatsu and coal.
- Margins improved due to higher ASP.
- Dividend: 40% of 2016 earnings, equivalent to Rp536/share.
- Valuation: 13.1x 2017F PE, down from 14.6x.
- Recommendation: Maintain HOLD with a target price of Rp29,150.
Top Picks (BUY)
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Potential Upside (%) |
| Alibaba |
BABA US |
115.48 |
130.00 |
12.6 |
| Beijing Ent. Water |
371 HK |
6.08 |
7.60 |
25.0 |
| Indosat |
ISAT IJ |
7,250.00 |
7,900.00 |
9.0 |
| Tiga Pilar |
AISI IJ |
2,130.00 |
2,550.00 |
19.7 |
| V.S. Industry |
VSI MK |
1.92 |
2.20 |
14.6 |
| OCBC |
OCBC SP |
9.71 |
10.75 |
10.7 |
| SingTel |
ST SP |
3.75 |
4.48 |
19.5 |
| Bangkok Dusit |
BDMS TB |
20.20 |
27.00 |
33.7 |
| Siam Cement |
SCC TB |
542.00 |
600.00 |
10.7 |
Top Picks (SELL)
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Potential Downside (%) |
| Great Wall Motor |
2333 HK |
9.20 |
6.00 |
(34.8) |
| MGM China |
2282 HK |
17.18 |
13.20 |
(23.2) |
| Hartalega |
HART MK |
4.96 |
4.07 |
(17.9) |
Summary of Key Financials for United Tractors (UNTR IJ)
| Metric |
2016 (Rpb) |
2017F (Rpb) |
2018F (Rpb) |
2019F (Rpb) |
| Net turnover |
45,539 |
55,462 |
61,997 |
66,854 |
| EBITDA |
9,995 |
13,575 |
15,342 |
16,346 |
| Net profit (rep./act.) |
5,002 |
7,527 |
8,684 |
9,239 |
| Net profit (adj.) |
5,002 |
7,527 |
8,684 |
9,239 |
| EPS (Rp) |
1,341.0 |
2,018.0 |
2,328.0 |
2,476.9 |
| PE (x) |
19.8 |
13.2 |
11.4 |
10.7 |
| P/B (x) |
2.4 |
2.2 |
2.0 |
1.8 |
| EV/EBITDA (x) |
8.4 |
6.2 |
5.5 |
5.1 |
| Dividend Yield (%) |
2.2 |
2.8 |
4.2 |
4.8 |
Valuation & Performance
- Forward PE: Expected to trade within 13x-14.2x, with no significant catalysts for re-rating.
- Stock Impact: Share price performance may improve post-ex-dividend.
- Earnings Forecast: Maintained for 2017, with potential for improvement in 2H17 due to toll road projects.
- Growth Assumptions:
- Passenger vehicle sales: 3% YoY growth.
- ASP: 2-3% annual drop.
- EV sales: 10% YoY growth to 560,000 units.
Analysts
Conclusion
The report highlights the relaxation of foreign stake restrictions in China's automotive industry and its potential impact on state-owned automakers. In Indonesia, United Tractors reported strong results, with the potential for further growth in the second half of the year. The document also includes key financial metrics, corporate events, and analyst recommendations across various markets.
