Regional Morning Notes Summary - 21 March 2017
Core Content Overview
This document provides a summary of stock performance, company results, and market insights for several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand, along with key financial metrics and analyst recommendations.
Key Markets and Stocks
China
- CSPC Pharmaceutical Group (1093 HK/BUY/HK$10.12/Target: HK$12.49)
- 2016 Highlights: Strong 1Q17 driven by a surge in Vitamin C prices and growth in the oncology segment.
- 2016 Financials: Net profit grew 26.2% yoy, reaching HK$2,101 million. Revenue rose 8.6% to HK$12,369 million.
- Segment Performance:
- Vitamin C segment: EBIT margin of 7.7% in 4Q16, with EBIT expected to reach HK$55 million in 1Q17.
- Oncology segment: Achieved 29% yoy sales growth in 2016, expected to grow 34.5%, 47.1%, and 37% in 2017–19.
- NBP injection, Jinyouli, and Nuolining included in 2017 NRDL, which will boost sales from 4Q17.
- Valuation: Maintained BUY with a target price of HK$12.49, reflecting 27.0x 2017F PE and a 0.95x 17F PEG.
- Risks: Potential decline in Vitamin C prices.
Indonesia
- Indocement TP (INTP IJ/SELL/Rp15,900/Target: Rp14,000)
- 2016 Highlights: Weak earnings momentum and ASP reductions led to a downgrade to SELL.
- 2016 Financials: Revenue fell 13.7% yoy to Rp15,362 million, with net profit down 11.2% to Rp3,870 million.
- Segment Performance: Lower ASP hurt profitability despite a 25.2% yoy sales volume increase in 4Q16.
- Valuation: Target price reduced to Rp14,000 (15.7x 2017F PE), downgrade due to high valuation despite weak earnings.
Malaysia
- Westports Holdings (WPRTS MK/HOLD/RM3.89/Target: RM3.83)
- Update: Impact from new shipping alliances priced in, with potential for higher port calls and more boxes per call.
- Long-term Outlook: Westports' track record will matter as the impact of alliances becomes clearer.
Singapore
- FSSTI Strategy: Market has outperformed; stocks are fairly valued after a 9.9% ytd rise. Analysts highlight potential for further outperformance in 2017.
Thailand
- Somboon Advance Technology (SAT TB/HOLD/Bt16.30/Target: Bt18.00)
- 2017 Preview: Positives partially priced in; downgrade to HOLD.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
20905.9 |
0.0 |
0.1 |
0.8 |
5.8 |
| S&P 500 |
2373.5 |
0.2 |
0.0 |
0.3 |
6.0 |
| FTSE 100 |
7429.8 |
0.1 |
0.9 |
2.1 |
4.0 |
| AS30 |
5820.5 |
0.3 |
0.4 |
-0.3 |
1.8 |
| CSI 300 |
3449.6 |
0.1 |
-0.2 |
-1.0 |
4.2 |
| FSSTI |
3165.7 |
-0.1 |
0.6 |
2.3 |
9.9 |
| HSCEI |
10584.0 |
0.7 |
3.2 |
1.7 |
12.7 |
| HSI |
24502.0 |
0.8 |
2.8 |
2.2 |
11.4 |
| JCI |
5534.0 |
-0.1 |
2.3 |
3.6 |
4.5 |
| KLCI |
1749.4 |
0.2 |
1.6 |
2.5 |
6.6 |
| KOSPI |
2157.0 |
-0.3 |
1.9 |
2.6 |
6.4 |
| Nikkei 225 |
19521.6 |
-0.3 |
-0.4 |
1.4 |
2.1 |
| SET |
1563.5 |
0.2 |
1.8 |
-0.1 |
1.3 |
| TWSE |
9913.0 |
0.0 |
2.2 |
1.5 |
7.1 |
| BDI |
1196 |
2.0 |
8.8 |
58.0 |
24.5 |
| CPO (RM/ml) |
3001 |
0.2 |
1.8 |
-7.1 |
-6.2 |
| Brent Crude |
52 |
-0.3 |
0.5 |
-8.1 |
-9.2 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Ping An Insurance |
2318 HK |
HK$43.40 |
HK$47.00 |
8.3 |
| Bank Negara Indonesia |
BBNI LJ |
Rp6,600.00 |
Rp7,100.00 |
7.6 |
| Indosat |
ISAT LJ |
Rp6,900.00 |
Rp8,015.00 |
16.2 |
| Tiga Pilar |
AISAJ LJ |
Rp2,220.00 |
Rp2,550.00 |
14.9 |
| Inari Amertron |
INRI MK |
RM1.93 |
RM2.15 |
11.4 |
| V.S. Industries |
VSI MK |
RM1.76 |
RM2.20 |
25.0 |
| OCBC |
OCBC SP |
HK$9.63 |
HK$10.75 |
11.6 |
| Venture Corp |
VMS SP |
HK$11.21 |
HK$12.40 |
10.6 |
| Bangkok Dusit |
BDMS TB |
THB20.60 |
THB27.00 |
31.1 |
| Siam Cement |
SCC TB |
THB536.00 |
THB600.00 |
11.9 |
Key Assumptions
| Region |
GDP (% yoy) 2015 |
GDP (% yoy) 2016F |
GDP (% yoy) 2017F |
| US |
2.6 |
1.7 |
2.7 |
| Euro Zone |
2.0 |
1.6 |
1.1 |
| Japan |
1.2 |
0.8 |
0.9 |
| Singapore |
2.0 |
1.4 |
1.8 |
| Malaysia |
5.0 |
4.2 |
4.5 |
| Thailand |
2.8 |
3.2 |
3.3 |
| Indonesia |
4.8 |
5.0 |
5.2 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.7* |
6.3 |
| *Actual |
2016 |
2017F |
2018F |
| Brent (Average) |
45 |
56 |
61 |
| CPO |
2,653 |
2,600 |
2,500 |
Corporate Events
| Event |
Venue |
Dates |
| Luncheon with Ten Pao Group |
Hong Kong |
21 Mar |
| Group Meeting with China Shengmu |
Hong Kong |
21 Mar |
| Roadshow with Globetronics |
Singapore |
23 Mar |
| Roadshow with China Display |
Hong Kong |
23 Mar |
| Roadshow with China TCM |
Singapore |
24 Mar |
| Roadshow with Meidong Auto |
Hong Kong |
24 Mar |
| Luncheon with Yilai Coal Co |
Shanghai |
5 Apr |
| Luncheon with China Resources Gas Group |
Hong Kong |
27 Mar |
| Luncheon with IGG Inc |
Shanghai |
28 Mar |
| Group Meeting with Yihai Int'l |
Hong Kong |
29 Mar |
| Roadshow with Ann Joo Resources |
Singapore |
30 Mar |
| Roadshow with Sihuan Pharmaceutical |
Shanghai |
5 Apr |
| Roadshow with Sihuan Pharmaceutical |
Taiwan |
5 Apr |
| Roadshow with BBI Life Science |
Hong Kong |
7 Apr |
| Luncheon with Dynagreen |
Hong Kong |
12 Apr |
| Roadshow with Singtel |
Canada |
10 Apr |
| Roadshow with Singtel |
Hong Kong |
11 Apr |
Key Financial Metrics (CSPC)
| Metric |
2016 (HK$m) |
2017F (HK$m) |
2018F (HK$m) |
2019F (HK$m) |
| Net turnover |
12,369.0 |
14,122.8 |
16,480.5 |
18,963.5 |
| EBITDA |
3,237.2 |
3,828.5 |
4,671.3 |
5,524.7 |
| Operating profit |
2,649.5 |
3,535.7 |
4,378.8 |
5,232.2 |
| Net profit (rep./act.) |
2,100.8 |
2,785.8 |
3,458.9 |
4,140.2 |
| Net profit (adj.) |
2,100.8 |
2,785.8 |
3,458.9 |
4,140.2 |
| EPS (diluted, HKD) |
28.18 |
35.25 |
46.3 |
57.0 |
| PE (x) |
28.9 |
21.9 |
17.8 |
15.0 |
| P/B (x) |
6.0 |
5.0 |
4.2 |
3.5 |
| EV/EBITDA (x) |
17.8 |
15.0 |
12.3 |
10.4 |
| Net margin (%) |
17.0 |
19.7 |
21.0 |
21.8 |
| Net debt/(cash) to equity (%) |
-20.7 |
-32.0 |
-43.6 |
-48.9 |
| Interest cover (x) |
77.6 |
105.1 |
128.3 |
151.7 |
Summary of Main Points
- CSPC Pharmaceutical Group showed strong performance in 2016 with net profit growth of 26.2% yoy, driven by Vitamin C price increases and oncology segment growth. The company is expected to see continued growth in 2017–19, with NBP injection, Jinyouli, and Nuolining included in the NRDL.
- Indocement TP faced challenges in 2016 with weak earnings momentum and ASP reductions, leading to a downgrade to SELL.
- Westports Holdings is expected to benefit from new shipping alliances, with potential for improved performance in the long term.
- FSSTI is fairly valued after a 9.9% ytd rise and is expected to see further outperformance in 2017.
- Somboon Advance Technology has seen its positives partially priced in, resulting in a HOLD recommendation.
- Valuation and Earnings: CSPC's valuation is based on a 27.0x 2017F PE, while INTP's target price is reduced to Rp14,000 due to weak earnings and high valuation.
- Corporate Events: Multiple meetings and roadshows are scheduled for March and April 2017, focusing on key companies and sectors.
