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Regional Morning Notes Summary - 13 February 2017

Core Content

This document provides an overview of the economic and sectoral developments in several Asian countries, with a focus on China and Indonesia, along with Malaysia, Singapore, and other markets. It includes trade data, sector performance, company results, and investment recommendations, as well as key indices and corporate events.

Main Points

China: Trade and Cement Sector

• Trade Data:

  • Chinese exports and imports increased by 7.9% and 16.7% YoY in January 2017, beating market expectations.
  • Strong internal and external demand, supported by a weaker renminbi and recovery in major export markets (Japan, US, EU).
  • The trade surplus increased to USD51.35 billion in January 2017 from USD40.82 billion in December 2016.

• Cement Sector:

  • Supply-side reforms and off-peak production policies are key drivers in curbing supply and supporting price strength.
  • The government is phasing out outdated capacity and implementing stricter environmental standards.
  • Cement prices have remained high due to low inventories and production curbs, especially in the northern regions.
  • A 32.5 grade cement cancellation policy is expected in 2017, which could increase clinker demand by up to 10%.
  • Despite potential property sales slowdown, infrastructure investment is expected to support cement demand.
  • Anhui Conch and CR Cement are recommended as top picks, with target prices raised.

• Economic Assumptions:

  • China's GDP growth is projected at 6.2% for 2017.
  • Brent crude and CPO prices are expected to remain stable or increase slightly.

• Key Indices:

  • The CSI 300 and HSI showed positive performance in 2017, while the Nikkei 225 faced a decline.
  • The BDI (Baltic Dry Index) dropped significantly in January 2017.

Indonesia: Company Results

• Jasa Marga (JSMR IJ):
  • 4Q16 results showed strong performance with revenue and EBITDA growth of 8.5% and 14.8% qoq.
  • Profitability improved for the second consecutive quarter, driven by successful cost control and a 12% tariff increase.
  • Net income rose 28.8% YoY to Rp1.89t, outperforming consensus estimates.
  • The company's current valuation (2.2x 2017F P/B) is considered attractive.
  • Recommendation: BUY with a target price of Rp5,900.

Malaysia: Sector and Company Performance

• Plantation Sector:

  • January 2017 inventory reached 1.54m tonnes, higher than market expectations.
  • Lower month-on-month inventory due to reduced production and stable exports.

• MISC (MISC MK):

  • 2016 core profit met expectations but missed consensus.
  • Did not benefit much from higher 4Q16 spot rates.
  • Recommendation: SELL with a target price of RM6.30.

• Westports Holdings (WPRTS MK):

  • 2016 profits were strong.
  • Plans to accelerate CT9 expansion.
  • Recommendation: HOLD with a target price of RM3.90.

Singapore: Company Results and Indices

• ComfortDelGro Corporation (CD SP):

  • 2016 results were in line with expectations but showed signs of tougher times ahead.
  • Recommendation: HOLD with a target price of S$2.47.

• Singapore Post (SPOST SP):

  • 9MFY17 earnings slumped due to cost pressure.
  • Recommendation: HOLD with a target price of S$1.46.

• Key Indices:

  • The FSSTI and HSCEI showed strong growth, while the KLCI and Nikkei 225 faced declines.

Corporate Events

• Several events are scheduled in February and March 2017, including:
  • Luncheon with Kim Loong Resources (Malaysia)
  • Tea Session with Valuetronics and Duty Free International (Singapore)
  • SGX-UOB Kay Hian Corporate Day (Taipei)
  • UOB Kay Hian ASEAN Conference (Taipei)
  • Group Meeting with Bumilama Agri (Singapore)
  • Annual Plantation Outlook Seminar (Malaysia)
  • Roadshow with Guotai Junan (Singapore)

Investment Recommendations

BUY Recommendations

• Anhui Conch (914 HK): Target price HK$31.50, upside +23.7%.
• CR Cement (1313 HK): Target price HK$4.50.
• Jasa Marga (JSMR IJ): Target price Rp5,900.

SELL Recommendations

• MISC (MISC MK): Target price RM6.30.

HOLD Recommendations

• Westports Holdings (WPRTS MK): Target price RM3.90.
• ComfortDelGro Corporation (CD SP): Target price S$2.47.
• Singapore Post (SPOST SP): Target price S$1.46.

Key Financial Metrics

• Jasa Marga (JSMR IJ):

  • Revenue: Rp8,832 billion (2016), EBITDA: Rp5,044 billion (2016).
  • Net profit: Rp1,889 billion (2016), with a 28.8% YoY increase.
  • Net margin: 21.4% (2016), PE: 17.2x (2016), P/B: 2.4x (2016).

• Anhui Conch (914 HK):

  • Current P/B: 1.7x, Target P/B: 1.9x.
  • Current price: HK$26.75, Target price: HK$31.50.

• CR Cement (1313 HK):

  • Current price: HK$3.80, Target price: HK$4.50.

Analysts

• China:

  • Zhu Chaoping: +8621 5404 7225 ext. 822, chaoping@uobkayhian.com
  • Xu Ye: +8621 5404 7225 ext. 820, xuye@uobkayhian.com

• Indonesia:

  • Adrianus Bias Prasuryo: +6221 2993 3990, adrianusbias@uobkayhian.com

• Malaysia:

  • Johnson Hu, CFA: +8621 5404 7225 ext 809, johnsonhu@uobkayhian.com

Summary of Key Themes

• China:

  • Strong trade performance in January 2017 due to increased demand and weaker RMB.
  • Cement sector benefits from supply curbs, off-peak production, and policy reforms.
  • Infrastructure investment is expected to be a major growth driver.

• Indonesia:

  • Jasa Marga showed strong quarterly performance and is recommended as a buy.
  • Successful cost control and tariff increases contributed to improved margins.

• Malaysia:

  • Plantation sector had higher-than-expected inventory levels in January 2017.
  • MISC is recommended as a sell due to weak performance.

• Singapore:

  • ComfortDelGro and Singapore Post are held due to margin pressures and cost challenges.

• Investment Outlook:

  • Focus on sectors with strong policy support and supply-side improvements.
  • Opportunities in low-valuation stocks, particularly in China.