20170127-大华继显-Regional_Morning_Notes_31页_1mb

报告摘要

Regional Morning Notes Summary - Friday, 27 January 2017

Core Content Overview

This document provides a detailed analysis of financial markets and specific companies in China, Indonesia, Malaysia, and Singapore, with a focus on banking and water treatment sectors in China. It also includes updates on corporate events and key indices, as well as analyst recommendations and investment outlooks.

Main Points by Region

China

Banking Sector:
- SHIBOR rates have increased due to reduced liquidity injections from the PBOC and tighter monetary policy.
- BoCom and China Minsheng are most exposed to interbank borrowing, with net interbank assets accounting for 16.8% and 16.4% of total assets respectively.
- Earnings forecasts for BoCom and China Minsheng were trimmed, with target prices reduced to HK$5.25 and HK$8.25, and BoCom downgraded to SELL.
- CCB, ICBC, and CMB are recommended as BUY picks due to their stable deposit base and resilience in the face of financial risk monitoring.
- NIM (Net Interest Margin) is expected to compress slightly, but the overall market remains OVERWEIGHT.
Water Treatment Sector:
- The 13th Five-Year Plan for wastewater treatment (WWT) includes more investment and improved enforcement.
- Total investment in WWT is expected to increase by 31% compared to the previous five-year plan, reaching Rmb564b.
- WWT treatment ratio in cities is expected to rise to 95%, and in counties to 85% by 2020.
- Sludge treatment is a growing area, with the government pushing for conversion of sludge into useful materials.
- The River Chief policy is being implemented to improve river clean-up and environmental restoration, with a target of less than 10% of rivers being highly polluted.

Indonesia

Bank Negara Indonesia (BBNI):
- Posted 2016 net profit of Rp11.3t, 25% yoy, and 11% above consensus.
- Loan growth was 21% yoy, with strong performance in corporate and SME lending.
- Maintained BUY recommendation with a target price of Rp6,800.

Malaysia

Bumi Armada (BAB MK):
- Expected to see improvement in floating projects, with first oil likely by 1Q17 and 2Q17.
- Recommended as BUY with a target price of RM0.92.
Sime Darby (SIME MK):
- The plan to split into three key stand-alone businesses is uncertain.
- The plantation business has a premium PE, which may affect other segments.
- Recommended as HOLD with a target price of RM8.65.

Singapore

Keppel Corp (KEP SP):
- Reported 4Q16 O&M kitchen sinking, indicating challenges in operations.
- Recommended as HOLD with a target price of S$6.45.

Key Indices

Index	Previous Close	1D %	1W %	1M %	YTD %
DJIA	20100.9	0.2	1.9	0.8	1.7
S&P 500	2296.7	-0.1	1.5	1.5	2.6
FTSE 100	7161.5	-0.0	-0.7	1.3	0.3
AS30	5726.0	0.3	-0.1	0.9	0.1
CSI 300	3388.0	0.4	1.8	2.2	2.4
FSSTI	3051.8	0.4	1.4	5.8	5.9
HSCEI	9854.4	1.2	0.6	7.3	4.9
HSI	23374.2	1.4	1.4	8.3	6.2
JCI	5317.6	0.5	0.4	4.2	0.4
KLCI	1692.2	0.5	1.5	4.5	3.1
KOSPI	2083.6	0.8	0.5	2.0	2.8
Nikkei 225	19402.4	1.8	1.7	-0.0	1.5
SET	1591.0	0.4	2.3	4.9	3.1
TWSE	9448.0	0.3	1.0	4.1	2.1
BDI	840	-2.6	-10.8	-12.6	-12.6
CPO (RM/mt)	3305	-0.2	0.2	3.3	3.3
Brent Crude	56	2.0	3.7	1.8	-1.1

Top Buys and Sells

BUY Recommendations

Air China (753 HK): Target price HK$6.50, upside 14.4%
Ping An Insurance (2318 HK): Target price HK$47.00, upside 16.9%
Ciputra Property (CTRP IJ): Target price HK$960.00, upside 39.1%
Indosat (ISAT IJ): Target price HK$8,015.00, upside 28.2%
Genting Bhd (GENT MK): Target price HK$10.15, upside 19.0%
City Dev (CIT SP): Target price HK$10.36, upside 13.0%
OCBC (OCBC SP): Target price HK$10.65, upside 12.9%
Bangkok Dusit (BDMS TB): Target price HK$31.20, upside 38.7%
Siam Cement (SCC TB): Target price HK$600.00, upside 16.7%

SELL Recommendation

Hartalega (HART MK): Target price HK$3.33, downside 30.6%

Key Assumptions

Country/Region	GDP % yoy	2015	2016F	2017F
US	2.7	2.6	1.7	2.7
Euro Zone	1.1	2.0	1.6	1.1
Japan	0.9	1.2	0.8	0.9
Singapore	1.8	2.0	1.4	1.8
Malaysia	4.5	5.0	4.2	4.5
Thailand	3.3	2.8	3.2	3.3
Indonesia	5.2	4.8	5.0	5.2
China	6.2	6.9	6.5	6.2

Corporate Events

PTT Exploration and Production Roadshow: Singapore, 6–7 Feb
Luncheon with Keppel T&T: Singapore, 10 Feb
Luncheon with Kim Loong Resources: Malaysia, 13 Feb
Tea Session with Valuetronics: Singapore, 13 Feb
SGX-UOB Kay Hian Corporate Day: Taipei, 21 Feb
UOB Kay Hian ASEAN Conference: Taipei, 22 Feb
Annual Plantation Outlook Seminar: Malaysia, 6 Mar

Sector Catalysts

Stabilisation in NIM and asset quality
Continued focus on financial risk monitoring and reduction of WMPs
PPP model driving investment in environmental projects

Key Risks

Trade war between China and the US
Slower growth due to tighter control over WMPs and interbank activities

Analysts

Jonathan Koh, CFA: +65 6590 6620 | jonathankoh@uobkayhian.com
Jasmine Duan: +852 2826 1351 | jasmine.duan@uobkayhian.com.hk
Yan Shi: 008621 54047225 (804) | yan.shi@uobkayhian.com
Yinglei Li: 008621 54047225 (819) | yinglei@uobkayhian.com

Peer Comparison (Selected)

Company	Ticker	Recommendation	Price (HK$)	Target Price (HK$)	2016F PE	2017F PE
CCB	939 HK	BUY	5.84	7.08	5.8	5.6
ICBC	1398 HK	BUY	4.80	6.05	5.4	5.3
CMB	3968 HK	BUY	19.66	20.75	7.2	6.7

Investment Highlights

BBNI remains a top pick in the Indonesian banking sector with a target price of Rp6,800 and an upside of +21.4%.
BEWG and CTEG are key beneficiaries of the expanding water clean-up and sludge treatment market, with BUY recommendations and target prices of HK$7.60 and HK$2.90 respectively.
Kangda International is a turnaround story with earnings expected to double in 2017-18, and a target price of HK$3.30.

Conclusion

The report highlights increased regulatory focus in China on financial risk control and environmental protection, leading to higher investment in water treatment and tightened liquidity conditions in the banking sector. BBNI is highlighted as a strong performer in Indonesia, while CCB, ICBC, and CMB are top buys in the Chinese banking sector. BEWG, CTEG, and Kangda International are also recommended as BUY due to their roles in the water treatment and environmental restoration market.