Regional Morning Notes Summary - 15 August 2016
Core Content
This document provides a detailed overview of economic and market updates across China, Malaysia, and Singapore, along with key indices, top picks, and sector analysis. It highlights the performance of various companies and the economic indicators that affect their operations and valuations.
Main Points
China
Economic Activity
- Economic data in July 2016 receded more than expected, with declines in Industrial Production (IP), Fixed Asset Investment (FAI), and Retail Sales.
- Private FAI fell to 2.1% yoy in July, the lowest in the period, while government spending slowed.
- M2 money supply growth decelerated to 10.2% yoy, below market expectations, while M1 continued to rise at 25.4% yoy.
- TSF (Total Social Financing) dropped sharply to Rmb487.9b in July, indicating weaker investment demand.
- The PBOC is expected to maintain a conservative monetary policy, with potential RRR cuts in 3Q16 to offset liquidity contraction.
Sector Update - Banking
- 1H16 earnings are expected to decelerate from 1.4% in 1Q16 to -0.04% in 1H16, driven by better asset quality.
- NPL (Non-Performing Loan) ratio improved in 2Q16, but ICBC may face a downside earnings surprise due to higher credit charges.
- CCB remains the top pick in the sector due to better asset quality and stronger capital.
Company Update - China Gas Holdings (384 HK)
- Asset restructuring with ST Nan Dian is expected to be positive, as it involves the injection of Zhejiang Zhongran and Zhongranqi into ST Nan Dian.
- Synergies and value enhancement are expected from the restructuring, especially from the gas-fired IPPs business.
- Target price is HK$15.40, and the recommendation remains BUY.
Malaysia
- Berjaya Auto (BAUTO MK): Earnings for FY17-19F are cut by 11%/8%/2%, and the stock is downgraded to HOLD due to prolonged market softness and weak ringgit.
- The stock is viewed as a yield play, with RM2.43 as the current share price and RM2.30 as the target price.
Singapore
- ComfortDelGro Corporation (CD SP): 1H16 results were within expectations, and the company is holding up well despite a challenging landscape.
- First Resources (FR SP): 2Q16 core net profit surpassed expectations by US$24.9m, driven by larger inventory drawdown and better ASP.
- Golden Agri-Resources (GGR SP): 2Q16 net profit increased due to deferred tax income, but core net loss worsened to US$54.4m.
- ST Engineering (STE SP): 2Q16 revised guidance to lower PBT, indicating weaker performance.
- Wilmar International (WIL SP): 2Q16 trading losses were one-off, and the company is expected to recover in 3Q16 with normal operations and better sugar refining contributions.
Thailand
- AP Thailand (AP TB): 2Q16 net profit was within expectations, and 2H16 is expected to show strong improvement.
- Airports of Thailand (AOT TB): Upgraded to BUY due to continued operating leverage from passenger growth, with margin improvement.
- Robinson Department Store (ROBINS TB): Earnings rose by 38% in 2Q16 due to wider gross margins and stronger other income, upgraded to BUY.
- True Corporation (TRUE TB): 2Q16 results beat consensus due to strong mobile business performance, but downgraded to SELL.
- IRPC (IRPC TB): A brighter outlook is expected due to improved economic conditions.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18576.5 |
(0.2) |
0.2 |
0.3 |
6.6 |
| S&P 500 |
2184.1 |
(0.1) |
0.1 |
1.0 |
6.9 |
| FTSE 100 |
6916.0 |
0.0 |
1.8 |
3.7 |
10.8 |
| AS30 |
5626.3 |
0.5 |
0.7 |
2.1 |
5.3 |
| CSI 300 |
3294.2 |
1.9 |
2.8 |
0.5 |
(11.7) |
| FSSTI |
2867.4 |
(0.1) |
1.3 |
(2.0) |
(0.5) |
| HSCEI |
9554.9 |
1.4 |
4.6 |
5.6 |
(1.1) |
| HSI |
22766.9 |
0.8 |
2.8 |
5.1 |
3.9 |
| JCI |
5377.2 |
(0.8) |
(0.8) |
5.2 |
17.1 |
| KLCI |
1684.2 |
0.3 |
1.2 |
0.9 |
(0.5) |
| KOSPI |
2050.5 |
0.1 |
1.6 |
1.6 |
4.5 |
| Nikkei 225 |
16919.9 |
1.1 |
4.1 |
2.6 |
(11.1) |
| SET |
1552.6 |
0.3 |
3.0 |
5.3 |
20.5 |
| TWSE |
9150.4 |
0.2 |
0.6 |
2.2 |
9.7 |
| BDI |
671 |
2.8 |
5.5 |
(9.9) |
40.4 |
| CPO (RM/mt) |
2583 |
(0.1) |
4.1 |
11.2 |
17.4 |
| Brent Crude (US$/bbl) |
47 |
0.4 |
3.9 |
(0.9) |
26.5 |
Top Picks
| Company |
Ticker |
CP (Icy) |
TP (Icy) |
Pot. +/- (%) |
| Air China |
753 HK |
6.16 |
9.00 |
46.1 |
| Ping An Insurance |
2318 HK |
39.05 |
45.00 |
15.2 |
| Ciputra Property |
CTRP IJ |
640.00 |
960.00 |
50.0 |
| Indosat |
ISAT IJ |
6,625.00 |
9,500.00 |
43.4 |
| Genting Bhd |
GENT MK |
8.30 |
10.40 |
25.3 |
| City |
CIT SP |
8.80 |
10.36 |
17.7 |
| DBS |
DBS SP |
15.04 |
19.15 |
27.3 |
| Bangkok Dusit |
BDMS TB |
22.30 |
25.75 |
15.5 |
| Siam Cement |
SCC TB |
- |
630.00 |
18.9 |
Sell
| Company |
Ticker |
CP (Icy) |
TP (Icy) |
| True Corporation |
TRUE TB |
8.95 |
5.80 |
Key Assumptions
| Country |
2015 GDP % yoy |
2016F GDP % yoy |
2017F GDP % yoy |
| US |
2.4 |
2.5 |
2.7 |
| Euro Zone |
1.6 |
1.5 |
1.6 |
| Japan |
0.5 |
0.6 |
0.8 |
| Singapore |
2.0 |
2.7 |
3.0 |
| Malaysia |
5.0 |
4.2 |
5.0 |
| Thailand |
2.8 |
3.2 |
3.6 |
| Indonesia |
4.8 |
5.0 |
5.5 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
| Indicator |
2015 Value (US$/bbl) |
2016F Value (US$/bbl) |
2017F Value (US$/bbl) |
| Brent (Average) |
53.60 |
42 |
54 |
| CPO |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| ST Engineering Luncheon |
Singapore |
16 Aug |
16 Aug |
| China Resources Gas Luncheon |
Hong Kong |
17 Aug |
17 Aug |
| Cowell E Holdings Luncheon |
Hong Kong |
18 Aug |
18 Aug |
| Q Technology Group Luncheon |
Hong Kong |
26 Aug |
26 Aug |
| Q Technology Group Roadshow |
Shanghai |
2 Sep |
2 Sep |
| Inari Amerton Corporate Roadshow |
Taipei |
6 Sep |
6 Sep |
| China Resources Gas Roadshow |
Canada |
12 Sep |
16 Sep |
| China Aviation Oil Roadshow |
UK/Europe |
13 Sep |
16 Sep |
| Sembcorp Industries Corp Roadshow |
Canada |
26 Sep |
27 Sep |
| Regional Financial and Telco Sector Analyst Presentation |
UK/Europe |
26 Sep |
30 Sep |
| Metro Pacific Investments Corporate Roadshow |
Canada |
26 Oct |
28 Oct |
Analysts
Valuation
| Company |
Ticker |
Rec. |
Price 12 Aug 16 (HK$) |
Target Price (HK$) |
Market Cap (US$m) |
PE (x) |
P/B (x) |
ROE (%) |
ROA (%) |
Yield (%) |
| ICBC |
1398 HK |
BUY |
4.79 |
5.50 |
236,149 |
5.2 |
0.7 |
14.4 |
13.4 |
5.8 |
| CCB |
939 HK |
BUY |
5.69 |
6.30 |
184,085 |
5.2 |
0.7 |
14.8 |
13.7 |
5.9 |
| ABC |
1288 HK |
HOLD |
3.03 |
3.00 |
154,032 |
4.6 |
0.6 |
13.8 |
12.6 |
6.5 |
| BOC |
3988 HK |
HOLD |
3.40 |
3.40 |
147,648 |
5.0 |
0.6 |
12.1 |
11.5 |
6.0 |
| BoCom |
3328 HK |
HOLD |
5.70 |
5.35 |
60,219 |
5.6 |
0.6 |
11.3 |
10.5 |
4.5 |
| CMB |
3968 HK |
HOLD |
18.46 |
17.85 |
66,765 |
6.5 |
0.9 |
15.3 |
14.1 |
4.6 |
| Minsheng |
1988 HK |
HOLD |
8.44 |
7.70 |
49,741 |
5.6 |
0.7 |
14.1 |
13.2 |
2.5 |
Summary
- China: Economic activity declined in July, with private FAI and retail sales showing the most weakness. The banking sector is expected to see better asset quality leading to positive earnings surprises. CCB is the top pick, while ICBC may be affected by higher credit charges.
- Malaysia: Berjaya Auto is downgraded to HOLD due to weak performance and market conditions.
- Singapore: Several companies reported better-than-expected results, including First Resources and Robinson Department Store.
- Thailand: AP Thailand, AOT, and ROBINS are upgraded to BUY, while TRUE Corporation is downgraded to SELL.
- Market indices showed mixed performance, with China and Singapore showing positive growth and Hong Kong experiencing declines.
- Corporate events and roadshows are scheduled for various locations, indicating ongoing market activity.
- Valuation and recommendations for key companies are provided, with CCB and ICBC being BUY and HOLD respectively.
