20140925-大华继显-Regional_Morning_Notes_19页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive update on regional market dynamics and specific company analyses for the week of 25 September 2014. It includes insights on the solar sector in China, updates on Esprit Holdings in Hong Kong, and key indices and corporate events across various markets.

Main Points

China - Solar Sector Update

• New Policies: The National Energy Administration (NEA) has fine-tuned distributed solar power policies to boost installations by removing bottlenecks.
• Key Improvements: The new policies offer higher subsidies, more flexible financing, and better cash flow management. Two DG models (Self-Use and Remaining-Connected-to-Grid, Fully-Connected-to-Grid) are now available.
• Impact on IRR: The new policies could provide up to 15% IRR premium for DG projects, depending on self-use levels, and about 5% average IRR improvement.
• Supply Chain Benefits: The entire solar supply chain, including EPC providers, polysilicon producers, and solar module manufacturers, is expected to benefit.
• Short-term Catalysts: Solar EPC providers like Singyes Solar (750 HK) and GCL Poly (3800 HK) are highlighted as potential beneficiaries.
• Long-term Catalysts: More detailed guidelines from local governments and improved installation momentum are expected.

Hong Kong - Esprit Holdings (330 HK)

• Recommendation: Maintain SELL.
• Target Price: HK$10.30.
• Strategic Shift: The company is refocusing on the mid-range segment, lowering prices and improving product offerings.
• Supply Chain Integration: Implementing a lean supply chain and new vertical strategies, but with short-term disruptions expected.
• Financial Performance:
  • 2014: Net profit of HK$210 million.
  • 2015F: Net profit of HK$306.4 million.
  • 2016F: Net profit of HK$457 million.
  • 2017F: Net profit of HK$542.1 million.
• Valuation: Trading at 1.2x P/B, significantly lower than peers like Inditex and H&M (25% of their valuation).
• Earnings Forecast: Sales expected to decline by 3.8% in FY15, but resume growth in FY16 and FY17.

Key Indices

• DJIA: Previous close 17,210.1; 1D +0.9%, 1W +0.3%, 1M +1.2%, YTD +3.8%.
• S&P 500: Previous close 1,998.3; 1D +0.8%, 1W -0.2%, 1M +0.5%, YTD +8.1%.
• FTSE 100: Previous close 6,706.3; 1D +0.5%, 1W -1.1%, 1M -1.0%, YTD -0.6%.
• AS30: Previous close 5,375.9; 1D -0.7%, 1W -0.7%, 1M -4.6%, YTD +0.4%.
• CSI 300: Previous close 2,441.9; 1D +1.8%, 1W +1.7%, 1M +4.2%, YTD +4.8%.
• FSSTI: Previous close 3,292.8; 1D -0.2%, 1W -0.1%, 1M -1.1%, YTD +4.0%.
• HSCEI: Previous close 10,716.8; 1D +1.4%, 1W -1.6%, 1M -3.6%, YTD -0.9%.
• HSI: Previous close 23,921.6; 1D +0.4%, 1W -1.9%, 1M -4.9%, YTD +2.6%.
• JCI: Previous close 5,174.0; 1D -0.3%, 1W -0.3%, 1M -0.2%, YTD +21.1%.
• KLCI: Previous close 1,840.1; 1D -0.0%, 1W -0.2%, 1M -1.2%, YTD -1.4%.
• KOSPI: Previous close 2,035.6; 1D +0.3%, 1W -1.3%, 1M -1.2%, YTD +1.2%.
• Nikkei 225: Previous close 16,167.5; 1D -0.2%, 1W +1.6%, 1M +3.5%, YTD -0.8%.
• SET: Previous close 1,591.9; 1D +0.1%, 1W +1.4%, 1M +1.8%, YTD +22.6%.
• TWSE: Previous close 9,098.5; 1D +0.1%, 1W -1.1%, 1M -3.1%, YTD +5.7%.
• BDI: Previous close 1,056; 1D -1.6%, 1W -6.0%, 1M -2.9%, YTD -53.6%.
• CPO (RM/mt): Previous close 2,132; 1D +1.6%, 1W +0.8%, 1M +4.7%, YTD -17.1%.
• Nymex Crude (US$/bbl): Previous close 93; 1D +0.1%, 1W -0.2%, 1M -0.5%, YTD -5.6%.

Top Picks

• BUY Recommendations:

  • Sunac China (1918 HK): Target price HK$8.45 (up 39.2%).
  • ICBC (1398 HK): Target price HK$6.15 (up 20.8%).
  • Bank Mandiri (BMRI LJ): Target price RM12,500 (up 18.5%).
  • Gamuda (GAM MK): Target price RM5.60 (up 15.9%).
  • DBS (DBS SP): Target price SGD22.68 (up 22.9%).
  • Pacific Radiance (PACRA SP): Target price SGD1.76 (up 21.4%).

• SELL Recommendation:

  • UMWH Holdings (UMWH MK): Target price HK$10.00 (down 18.6%).

Key Assumptions

• GDP Growth (yoy):

  • US: 1.9% (2013), 3.0% (2014F), 3.0% (2015F).
  • Euro Zone: -0.4% (2013), 1.0% (2014F), 1.4% (2015F).
  • Japan: 1.5% (2013), 2.1% (2014F), 2.0% (2015F).
  • Singapore: 3.9% (2013), 4.2% (2014F), 4.2% (2015F).
  • Malaysia: 4.7% (2013), 5.6% (2014F), 5.2% (2015F).
  • Thailand: 2.9% (2013), 1.5% (2014F), 5.1% (2015F).
  • Indonesia: 5.8% (2013), 5.5% (2014F), 6.0% (2015F).
  • Hong Kong: 2.9% (2013), 3.5% (2014F), 3.7% (2015F).
  • China: 7.7% (2013), 7.2% (2014F), 7.0% (2015F).

• Commodity Prices:

  • Brent (US$/bbl): 110 (2013), 110 (2014F), 110 (2015F).
  • Aluminium (US$/mt): 1,886 (2013), 1,713 (2014F), 1,650 (2015F).
  • Copper (US$/mt): 7,349 (2013), 6,866 (2014F), 6,850 (2015F).
  • Gold (US$/ounce): 1,411 (2013), 1,321 (2014F), 1,400 (2015F).
  • Iron Ore (US$/mt): 135 (2013), 103 (2014F), 95 (2015F).
  • CPO (US$/mt): 736 (2013), 788 (2014F), 848 (2015F).
  • BDI: 1,219 (2014F), 1,500 (2015F), 1,800 (2015F).

Corporate Events

• China Property Sector Analyst Presentation: London, 22-26 Sep.
• CIFI Holdings Corporate Roadshow: London (25 Sep), Milan (26 Sep).
• Comba Corporate Roadshow: Taipei, 29-30 Sep.
• China Railway and Shipping Sector Analyst Presentation: Hong Kong, 30 Sep.
• Asian Gems Conference: Singapore, 8-9 Oct.

Risks

• Policy Implementation Delays: Local governments, banks, and power grids may not align with the new DG policies, leading to delays.
• Market Competition: Esprit's weakened brand and poor store performance may hinder its ability to recover market share.

Conclusion

The document highlights the potential for growth in the solar sector in China due to new policies that aim to improve the DG market. However, it also cautions against the risks of delayed implementation and ongoing market challenges. For Esprit Holdings, the strategic shift to the mid-range segment and supply chain improvements are seen as necessary but may cause short-term disruptions. The overall market indices show mixed performance, with some markets showing positive momentum and others experiencing declines.