20151007-大华继显-Regional_Morning_Notes_15页_875kb

Regional Morning Notes Summary - 07 October 2015

Core Content Overview

This document provides an analysis of regional market updates and investment recommendations for various companies in China, Malaysia, and Singapore. It includes detailed financial data, company performance highlights, and potential catalysts for stock price movements.

Key Companies and Recommendations

Joy City Property (207 HK)

• Recommendation: BUY
• Target Price: HK$1.85
• Upside: +58.1%
• Core Content:
  • Earnings Rebound: Despite weak 2015 earnings, the company is expected to see a strong rebound in 2016-17 due to new mall launches, fast sales recognition, and recurring income growth.
  • Expansion Plan: Plans to expand to 20 malls over the next five years through asset-light strategies, including strategic partnerships and brand management services.
  • Market Focus: Concentrates on tier-1 cities (Beijing and Shanghai) with 65.5% of its GAV located there. Targets young consumers aged 18-35.
  • O2O Platform: Uses online platforms like WeChat and its own app to drive foot traffic and enhance customer value through data collection and membership management.
  • Valuation: Currently trading at a 74.7% discount to its end-16 RNAV, suggesting an attractive valuation.
  • Financial Highlights:
    • Net profit (adj.) is expected to rise from 2015F (RM201m) to 2017F (RM924m).
    • EBITDA margin is projected to decrease from 35.7% in 2015F to 31.3% in 2017F.
    • ROE is expected to improve from 1.1% in 2015F to 4.3% in 2017F.

WCT Holdings (WCTHG MK)

• Recommendation: BUY (Maintained)
• Target Price: RM1.80
• Upside: +22.4%
• Core Content:
  • OUG Development: The first phase of the OUG project is set to launch by the end of 2015, offering 400 condominium units with a total GDV of RM420m.
  • Arbitration Progress: Positive developments in the RM1.36b Dubai arbitration case, which could lead to RM1b in cash proceeds.
  • Construction Division: Expected to win more contracts, including infrastructure projects like the Outer Ring Road and KL118 tower.
  • Valuation: Based on SOTP, the target price is RM1.80, which is a 10% discount to the SOTP valuation of RM2.00/share, implying a 16.5x 2016F PE.
  • Financial Highlights:
    • Net profit (adj.) is projected to increase from RM134m in 2015F to RM165m in 2017F.
    • ROE is expected to rise from 5.4% in 2015F to 6.5% in 2017F.
    • Dividend yield remains stable at 1.5%.

Key Indices Performance

Key Assumptions

Corporate Events

• 2015 Malaysia O&G Assembly: Kuala Lumpur, 7 Oct
• Indonesia Market Strategy & Consumer Sector Analyst Presentation: Kuala Lumpur, 8-9 Oct
• Singapore Telecommunications Sector Analyst Presentation: Singapore, 7-9 Oct; Bangkok, 14-16 Oct
• Asian Gems Conference: Singapore, 12-13 Oct
• China Property Sector Analyst Presentation: Singapore, 14 Oct
• AKR Corporindo Roadshow: Taipei, 19-20 Oct
• Indo Oil and Gas Sector Analyst Presentation: Taipei, 21-22 Oct

Risk Factors

• Joy City Property: Weaker-than-expected macroeconomic growth, competition from e-commerce, and competition from other commercial property developers.
• WCT Holdings: Execution risk, weaker property sales due to regulatory changes, and rising raw material prices.

Valuation and Recommendation

• Joy City Property: Attractive valuation with a 58.1% upside to the target price. Currently at a 74.7% discount to end-16 RNAV.
• WCT Holdings: Maintained BUY rating. Target price of RM1.80 is based on a 10% discount to SOTP valuation, implying a 16.5x 2016F PE.

Catalysts

• Joy City Property: Strong leasing results from new malls, spin-off of non-core assets, and benefits from SOE reform.
• WCT Holdings: Good take-up rate for property developments and winning new construction jobs.

Financial Highlights

Joy City Property

• Net Profit (adj.): RM201m (2015F), RM504m (2016F), RM924m (2017F)
• EPS (Fen): 1.6 (2015F), 4.1 (2016F), 7.6 (2017F)
• PE (x): 58.3 (2015F), 23.3 (2016F), 12.7 (2017F)
• Net Debt/(Cash) to Equity (%): 66.3 (2015F), 71.1 (2016F), 70.8 (2017F)

WCT Holdings

• Net Profit (adj.): RM134m (2015F), RM154m (2016F), RM165m (2017F)
• EPS (sen): 9.5 (2016F), 10.7 (2017F)
• PE (x): 15.5 (2016F), 12.9 (2017F)
• Net Debt/(Cash) to Equity (%): 70.4 (2016F), 68.1 (2017F)

Summary

The document highlights key investment opportunities in the property and construction sectors across China, Malaysia, and Singapore. Joy City Property is recommended as a BUY due to its strong earnings rebound potential, expansion plans, and SOE reform benefits. WCT Holdings is also recommended as a BUY, with potential upside from its OUG development and arbitration proceeds. Both companies face risks related to macroeconomic conditions and competition, but their valuations and growth prospects make them attractive investment options.