20150316-大华继显-Regional_Morning_Notes_21页_1mb

Regional Morning Notes Summary - 16 March 2015

Core Content Overview

This document provides a detailed analysis of stock market updates and investment recommendations across several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand. It outlines key financial metrics, sector performance, and corporate events for the period, with a focus on railway and property sectors in China, cement in Indonesia, and education and microelectronics in Singapore and Thailand.

Main Points and Key Information

China: Railway Sector

• 2014 Results Preview: Railway companies are expected to report strong results, with equipment makers seeing 36–50% yoy earnings growth and construction contractors expecting 9–19% growth.
• Zhuzhou CSR and CCC: These companies are expected to slightly exceed market expectations, while CSR, CNR, CRG, and CRCC are likely to match consensus.
• Key Catalysts: Strong railway spending in 2015, the "One Belt One Road" strategy, and railway sector reform.
• Top Picks: Zhuzhou CSR and CCC.
• Earnings Estimates:
  • Zhuzhou CSR: Net income of Rmb2,200m, EPS of Rmb1.84, 50.1% yoy growth.
  • CCC: Net income of Rmb14,894m, EPS of Rmb0.92, 18.5% yoy growth.
  • CRG: Net income of Rmb10,400m, EPS of Rmb0.49, 11.1% yoy growth.
  • CRCC: Net income of Rmb11,311m, EPS of Rmb0.92, 9.3% yoy growth.
• Market Outlook: The railway sector is expected to remain a major driver of growth in 2015, with domestic spending projected at Rmb900b (+12% yoy).
• Risks: Potential delays in URT projects due to high local government gearing, and a possible slowdown in railway spending in 2016.

China: Brilliance Auto (1114 HK)

• 2014 Results: Net profit is expected to grow 52% yoy to Rmb5.12b.
• 2015–2016 Outlook: Earnings growth of 11% and 22%, driven by sales growth and reduced input costs from euro depreciation.
• Sales Performance:
  • 2M15 sales: 48,701 units (+14% yoy), with strong growth in 5-series and X1.
  • 3-series sales remained flat yoy.
• Key Drivers: Euro depreciation, which reduces parts costs, and strong sales performance.
• Valuation: Current price of HK$15.14, target price of HK$17.50 (+15.4% upside), trading at 10.7x 2015F PE.
• Recommendation: Maintain BUY, with potential upside from euro depreciation and increased contribution from BMW Auto Finance (China).
• Risks: Economic slowdown in China or credit tightening could impact sales.

Indonesia: Cement Sector

• 2M15 Sales: Declined 4% yoy and 10% mom due to seasonality and heavy rainfall.
• Sales Improvement: Expected in 2Q15 with increased property and infrastructure activities.
• Top Pick: Indocement (INTP).
• Reasons for Top Pick:
  • Limited impact from competition.
  • Least earnings impact from lower selling prices.
  • Superior margins.
  • Strong balance sheet.
• Newcomer: PT Cemindo Gemilang (PTCG) controls 2.5% of the domestic market and is building a 4mt cement plant in Bayah-Banten.
• Cement Imports: 310,602 tonnes in 2M15, with PTCG accounting for 70% of imports.
• Regional Performance:
  • Kalimantan: Best yoy volume growth at 4%.
  • Sumatra: Worst performance with over 10% yoy decline.
  • Java: Cement consumption growth is expected to be positive.

Malaysia: Property Sector

• Sime Darby: May acquire PNB's stake in SP Setia, according to media reports.

Singapore: Overseas Education (OEL SP)

• Valuation: Share price has declined by 17%, leading to an upgrade to BUY.
• Target Price: S$0.94.
• Reason for Upgrade: Value emerges as a key factor.

Thailand: Hana Microelectronics (HANA TB)

• Reason for Upgrade: High dividend yield and baht depreciation.
• Target Price: Bt45.00.
• Ratchaburi Electricity Generating Holding (RATCH TB):
  • On track for three years of growth.
  • Target price: Bt68.00.

Key Indices and Assumptions

• GDP Growth Projections:
  • China: 7.7% (2014), 7.0% (2015F), 7.0% (2016F).
  • Indonesia: 5.8% (2015F), 5.8% (2016F).
  • Malaysia: 5.2% (2015F), 5.2% (2016F).
  • Thailand: 3.9% (2015F), 3.9% (2016F).
• Commodity Prices:
  • CPO: 722 (2014), 765 (2015F), 788 (2016F).
  • BDI: 1,101 (2014), 1,300 (2015F), 1,400 (2016F).
• Stock Market Indices:
  • DJIA: Prev Close 17749.3, 1M % -1.5, YTD % -0.4.
  • S&P 500: Prev Close 2053.4, 1M % +2.1, YTD % +0.3.
  • CSI 300: Prev Close 3617.7, 1M % +3.4, YTD % +2.4.
  • HSI: Prev Close 23823.2, 1M % -3.7, YTD % +0.9.

Corporate Events

• CIFI Holdings Roadshow: Singapore, 16 Mar.
• ASEAN Conference: Taipei, 17–18 Mar.
• China Property Analyst Presentation: Singapore & Kuala Lumpur, 17–19 Mar.
• Indofood Sukses Maksur Roadshow: Singapore, 27 Mar.
• Sunway Berhad Luncheon: Kuala Lumpur, 31 Mar.
• Singamas Container Holdings Roadshow: Singapore, 31 Mar.
• Roadshow: Kuala Lumpur, 1 Apr.
• Sihuan Pharmaceutical Holdings Corporate Roadshow: Taipei, 30 Mar.
• Corporate Roadshow: Singapore, 2 Apr; Kuala Lumpur, 3 Apr.

Top Picks

Analysts

• Lawrence Li: +8621 5404 7225 ext 813, lawrenceli@uobkayhian.com
• Angela Zhou: +8621 5404 7225 ext 858, angelazhou@uobkayhian.com
• Ken Lee: +852 2236 6760, ken.lee@uobkayhian.com.hk

Summary of Key Sector Catalysts

• China: Strong railway spending, "One Belt One Road" strategy, railway sector reform.
• Indonesia: Expected improvement in cement sales in 2Q15 due to increased property and infrastructure activity.
• Thailand: High dividend yield, baht depreciation.
• Singapore: Value re-emerges after a 17% price decline.
• Malaysia: Potential acquisition of PNB's stake in SP Setia by Sime Darby.

Conclusion

The document highlights the potential for growth in the railway and property sectors in China, the cement sector in Indonesia, and the overseas education and microelectronics sectors in Singapore and Thailand. It emphasizes the importance of factors such as currency depreciation, government spending, and corporate events in driving stock performance. The recommendations include maintaining BUY on Brilliance Auto and upgrading several stocks due to favorable valuations and growth prospects.