20170602-大华继显-Regional_Morning_Notes_21页_1mb

Regional Morning Notes Summary - 02 June 2017

Core Content Overview

This document provides a comprehensive update on the stock market performance and key investment insights for several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand. It includes sector updates, company-specific analysis, key financial metrics, and investment recommendations.

Key Market Insights

China

• Automobile Sector:
  • The SUV segment is experiencing a significant price war, with Chang'an Auto recently cutting MSRPs by 5-15%.
  • Great Wall Motor (GWM) and BAIC are under pressure due to aggressive sales targets and declining sales, leading to margin pressure.
  • Brilliance is recommended as a BUY due to its luxury segment focus, improved pricing, and new product launches.
  • GWM and BAIC are advised to be SOLD due to expected earnings declines and market share loss.
  • The automobile sector has outperformed the MSCI China Index by 7% in the last month, but this is attributed to speculation about a "vehicle-to-village" scheme rather than fundamental improvement.
  • The six major Chinese OEMs have set >30% yoy sales targets for 2017, which are unlikely to be met due to slowdown in SUV sales and inventory pile-up.

Indonesia

• Sumber Alfaria Trijaya (AMRT):
  • Re-initiated coverage with a BUY rating and a target price of Rp660.
  • Achieved 10% yoy EPS growth in 1Q17 despite weak purchasing power, due to better merchandise mix.
  • Opened 340 new stores in 1Q17, part of a plan to open 1,500 new stores this year, increasing total store count to 15,245.
  • Expected 25.5% yoy fee income growth in 2017 and 27.5% yoy net profit growth.
  • Key risks: Competition in Jabodetabek, rising costs, expansion challenges, and potential regulatory issues.

Malaysia

• FBMKKLCI Target:
  • Slightly increased to 1763.1, but a more defensive stance is recommended in the short term.
• Banking Sector:
  • RHBBank is expected to trade downwards due to the dilutive impact of the deal.
  • AMMB is recommended to HOLD.
• Westports Holdings (WPRTS):
  • 5M17 volumes contracted, mainly due to transshipment issues.
  • Uncertainties from CMA CGM have been resolved, and gateway volumes are strong.
  • Maintain HOLD stance as risks are mostly priced in.

Singapore

• Venture Corporation (VMS SP):
  • Downgraded to HOLD after an excellent rally that approached fair value.

Thailand

• Bangkok Chain Hospital (BCH):
  • Earnings continue to grow despite short-term challenges.
  • Recommended as a BUY.

Key Indices Performance (as of 02 June 2017)

Top Picks (BUY and SELL)

BUY Recommendations

• Alibaba (BABA US): Target price $139, current price $123.97, upside +12.1%.
• Beijing Ent. Water (371 HK): Target price HK$7.60, current price HK$6.21, upside +22.4%.
• Brilliance (1114 HK): Target price HK$15.50, current price HK$14.36, upside +14.9%.
• Tiga Pilar (AISA J): Target price JPY 2,500, current price JPY 2,200, upside +13.6%.
• V.S. Industry (VSI MK): Target price S$2.20, current price S$1.96, upside +12.2%.
• OCBC (OCBC SP): Target price S$11.70, current price S$10.56, upside +10.8%.
• Siam Cement (SCC TB): Target price Bt600, current price Bt520, upside +15.4%.

SELL Recommendations

• Great Wall Motor (2333 HK): Target price HK$6.00, current price HK$8.30, downside -27.7%.
• MGM China (2282 HK): Target price HK$15.00, current price HK$17.30, downside -13.3%.
• Hartalega (HART MK): Target price RM4.07, current price RM6.30, downside -35.4%.

Key Financial Assumptions

Corporate Events

Stock Performance Highlights

• AMRT (Indonesia):
  • 1Q17 gross profit grew 18% yoy to Rp2.9t.
  • Gross margin expanded to 22%.
  • Fee income increased 21% yoy.
  • Net profit grew 10% yoy to Rp73.
• Brilliance (China):
  • EPS is expected to grow 20% in 2017 and 25.5% in 2018.
  • Target price is HK$15.50 based on 12x 2017F PE.
• GWM (China):
  • Wholesale shipment dropped 8% yoy in Apr 17.
  • Retail discounts for H6 widened to 13-15%.
  • Target price is HK$6.00 based on 7x 2017F PE.

Key Financial Metrics (AMRT)

Conclusion

The document highlights the escalation of price wars in the Chinese SUV market, aggressive sales targets that may not be met, and the pressure on margins for key players like GWM and BAIC. In contrast, Brilliance is viewed as a strong performer due to its luxury segment focus and new product launches. In Indonesia, AMRT is recommended as a BUY due to its expanding store network, improved merchandise mix, and strong earnings growth. The Malaysian and Singaporean markets show mixed signals, with some stocks under pressure and others showing resilience. Overall, the report advocates for a more defensive stance in the near term.