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Regional Morning Notes Summary

Core Content

This document provides a regional market overview for March 6, 2015, with a focus on China, Hong Kong, Indonesia, Malaysia, and Thailand. It includes insights on the property sector in China, company results in Hong Kong, and key economic indicators and stock recommendations across the region.

Main Points

China Property Outlook

• Affordability: Housing affordability in selected tier-2 cities has reached its healthiest level since 1999.
• Soft Landing: The property market is expected to experience a soft landing in 2015, with steady property sales and flat prices in major cities.
• Policy and Credit: More market-oriented policies and credit easing measures are anticipated, including property tax and relaxed second home lending.
• Market Consolidation: SOEs and large developers are expected to outperform due to better financing terms and resilience to market shocks.
• Stock Picks: Preferred stocks include Vanke, COLI, CR Land, Longfor, Wanda, and CIFI, with a focus on developers with significant landbank exposure and lower funding costs.

Hong Kong Exchanges & Clearing (388 HK)

• Performance: 2014 earnings slightly beat the market consensus, with a strong outlook for 2015.
• Earnings: 2014 profit attributable to shareholders was HK$1,503m, up 16.8% qoq and 47.6% yoy.
• Target Price: Maintained BUY with a new target price of HK$210.00, reflecting a 19.5% upside from the current price of HK$175.80.
• Catalysts: Expected approval and launch of the SZ-HK Stock Connect, and the continued operation of LME Clear.
• Valuation: Fwd PE ratio for FY15F is 29.2, below the historical peak of 41.8.
• Revenue Mix: Trading fees and tariffs account for 37.7% of total revenue in 4Q14, while clearing and settlement fees make up 24.6%.

Indonesia

• Pembangunan Perumahan (PTPP IJ): FY14 results slightly above market expectations.
• Strategy: Focus on the property sector with potential for growth and policy support.

Malaysia - Plantation Sector

• 4Q14 Results: Lower CPO prices and production growth impacted results.
• 1Q15 Outlook: Production is expected to remain weak due to the lagged impact of dry weather in 2014.

Singapore - First Resources (FR SP)

• Key Highlights: Management comments on CPO price outlook, biodiesel in Indonesia, slower new planting programme, and cost and yield improvements.

Thailand

• CH Karnchang PCL (CK TB): Restructuring is expected to benefit the company, with a strong construction business.
• SVI (SVI TB): Too young to be blindly optimistic, indicating caution in its outlook.

Key Indices (as of 5 Mar 15)

Stock Picks

BUY Recommendations

• Sunac China (1918 HK): Target price HK$9.29, potential upside 30.5%
• ICBC (1398 HK): Target price HK$6.80, potential upside 25.2%
• Bank Mandiri (BJBR IJ): Target price IDR 880.00, potential downside 9.3%
• Bank Negara (BBNI IJ): Target price IDR 7,500.00, potential upside 12.4%
• Genting Msia (GENM MK): Target price MYR 4.47, potential upside 8.2%
• DBS (DBS SP): Target price S$23.55, potential upside 20.9%
• Pacific Radiance (PACRA): Target price HK$1.00, potential upside 39.9%
• Krung Thai Bank (KTB TB): Target price THB 29.00, potential upside 24.5%
• Sino Thai Engr (STEC TB): Target price THB 30.25, potential upside 23.0%

SELL Recommendation

• SVI (SVI TB): Target price Bt3.60, potential downside 12.1%

Key Assumptions (GDP Growth % yoy)

Corporate Events

Conclusion

The document highlights a cautiously optimistic outlook for the property sector in China, with a focus on affordability and policy support. Hong Kong Exchanges & Clearing is recommended as a BUY with a positive outlook due to potential growth from new initiatives and market expansion. Other markets such as Indonesia, Malaysia, and Thailand are also covered with a mix of BUY and SELL recommendations, emphasizing the importance of sector-specific dynamics and policy impacts.