Regional Morning Notes Summary - 30 August 2018
Core Content Overview
This document provides a detailed summary of stock performance, company results, key financial metrics, and market outlook for several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand. It also includes information on key indices, corporate events, and analyst recommendations for selected stocks.
China
China Construction Bank (939 HK)
- Key Performance: 2Q18 net profit rose 7.5% year-over-year to Rmb73.2b, with NIM stable at 2.34%. Loan growth was 4.3% year-to-date.
- Stability Drivers: Infrastructure loans and residential mortgages contributed to stability. NPL ratio improved to 1.48%, and loan loss coverage increased to 189.5%.
- Fintech Strategy: Launched a 5-year fintech plan, focusing on AI, blockchain, and cloud computing. Fees from electronic banking increased by 59.8% year-over-year.
- Valuation: Maintained BUY rating with a target price of HK$9.02. Upside is +27.2% from current price.
- Outlook: Expected to maintain ROE and CET-1 CAR above industry peers. Continued focus on cost efficiency and asset quality.
Indonesia
Sido Muncul (SIDO IJ)
- Performance: Beat expectations with higher extraction rates and new market entries. Upgraded to BUY.
- Target Price: Raised to Rp895 from Rp805.
Malaysia
Bumi Armada (BAB MK)
- Performance: 1H18 results were impacted by Kraken costs and impairments. Maintained BUY rating with a target price of RM0.75.
- Rationale: Risk-reward is considered palatable with improved confidence in Kraken's final acceptance.
CIMB Group (CIMB MK)
- Performance: 2Q18 results were in line with expectations. Core earnings were affected by weaker non-interest income.
- Outlook: Maintained BUY with potential for earnings recovery in 3Q18.
Telekom Malaysia (TMK)
- Performance: 1Q18 results below expectations. Downgraded to HOLD.
- Rationale: Potential for lower dividend payout due to challenging operating parameters.
Singapore
Venture Corporation (VMS SP)
- Performance: Earnings growth slowed when excluding T&M/Med clients. Downgraded to HOLD.
- Target Price: Set at S$18.20, down from S$18.84.
Thailand
Bangkok Chain Hospital (BCH TB)
- Performance: Strong earnings growth led to a target price increase to Bt21.50.
- Valuation: Raised target price due to attractive valuation and growth potential.
Key Indices (as of 30 August 2018)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
26124.6 |
0.2 |
1.5 |
3.2 |
5.7 |
| S&P 500 |
2914.0 |
0.6 |
1.8 |
4.0 |
9.0 |
| FTSE 100 |
7563.2 |
-0.7 |
-0.0 |
-1.8 |
-1.6 |
| AS30 |
6457.0 |
0.7 |
1.3 |
1.4 |
4.7 |
| CSI 300 |
3386.6 |
-0.4 |
2.4 |
-3.7 |
-16.0 |
| FSSTI |
3243.9 |
-0.1 |
1.4 |
-1.9 |
-4.7 |
| HSI |
28416.4 |
0.2 |
1.8 |
-1.1 |
-5.0 |
| KLCI |
1820.6 |
-0.3 |
1.3 |
2.8 |
1.3 |
| KOSPI |
2309.0 |
0.3 |
1.6 |
0.7 |
-6.4 |
| Nikkei 225 |
22848.2 |
0.2 |
2.2 |
1.3 |
0.4 |
| BDI |
1684 |
-0.8 |
-3.0 |
-1.1 |
23.3 |
| CPO (RM/mt) |
2186 |
0.6 |
-0.3 |
1.6 |
-8.6 |
| Brent Crude |
77 |
1.6 |
3.2 |
3.8 |
15.4 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Baoshan Iron & Steel |
600019 CH |
8.06 |
9.53 |
18.2 |
| Gudang Garam |
GGRM IJ |
73,375.00 |
85,000.00 |
15.8 |
| PP Persero |
PTPP IJ |
1,895.00 |
3,700.00 |
95.3 |
| Bumi Armada |
BAB MK |
0.53 |
1.06 |
101.9 |
| OCBC |
OCBC SP |
11.41 |
13.68 |
19.9 |
| SingTel |
ST SP |
3.20 |
3.98 |
24.4 |
| Siam Cement |
SCC TB |
452.00 |
530.00 |
17.3 |
Key Assumptions (GDP Growth, yoy)
| Country/Region |
2017 |
2018F |
2019F |
| US |
2.3 |
2.5 |
2.3 |
| Euro Zone |
2.4 |
2.3 |
1.9 |
| Japan |
1.7 |
1.8 |
1.9 |
| Singapore |
3.6 |
2.8 |
3.0 |
| Malaysia |
5.9 |
5.0 |
5.3 |
| Thailand |
3.9 |
4.2 |
4.2 |
| Indonesia |
5.1 |
5.3 |
5.4 |
| Hong Kong |
3.8 |
3.8 |
2.8 |
| China |
6.9 |
6.4 |
6.2 |
| CPO (RM/mt) |
2,783 |
2,400 |
2,500 |
| Brent Crude |
55.00 |
67.00 |
66.50 |
Corporate Events (August 2018)
- Roadshow with China Traditional Chinese Medicine Holdings (570 HK): Shanghai (30 Aug), Taipei (20 Sep)
- Roadshow with China MeiDong Auto Holdings (1268 HK): Singapore (30 Aug)
- Roadshow with Bright Scholar Education Holdings Limited (BEDU US): Singapore (3 Sep), Kuala Lumpur (4 Sep)
- Group Luncheon with Nexteer Automotive Group (1316 HK): Hong Kong (11 Sep)
- Roadshow with VS Industry (VSI MK): Singapore (17 Sep)
- UOB Kay Hian Asian Gems Conference: Singapore (9 Oct)
- Roadshow with Digi.com (DIGI MK): Canada (30 Oct - 2 Nov)
- UOB Kay Hian Annual Regional 1H2019 Strategy Conference: Kuala Lumpur (13 Nov)
Key Financial Metrics (China Construction Bank)
| Metric |
2017 |
2018F |
2019F |
2020F |
| Net Interest Income (Rmbm) |
452,456 |
498,827 |
532,734 |
568,984 |
| Non-Interest Income (Rmbm) |
141,575 |
134,501 |
139,247 |
144,196 |
| Net Profit (Rmbm) |
242,264 |
265,324 |
287,647 |
311,488 |
| EPS (fen) |
96.5 |
104.6 |
113.5 |
123.1 |
| PE (x) |
6.8 |
6.2 |
5.7 |
5.3 |
| P/B (x) |
1.0 |
0.9 |
0.8 |
0.7 |
| Dividend Yield (%) |
4.5 |
5.2 |
5.7 |
5.7 |
| Net Interest Margin (%) |
2.2 |
2.3 |
2.3 |
2.3 |
| Cost/Income Ratio (%) |
28.1 |
28.0 |
27.9 |
27.9 |
| Loan Loss Coverage (%) |
171.1 |
193.8 |
214.3 |
233.0 |
| CET-1 CAR (%) |
13.7 |
14.3 |
14.7 |
15.1 |
China Southern Airlines (1055 HK)
- Performance: 1H18 earnings beat expectations. Net profit declined 24.4% yoy to Rmb2.1b, but this was offset by higher government grants and cost control.
- Yield Outlook: Optimistic about pax yields in 2H18, with 5% rise in August. Expected 7% yield increase on peak periods.
- Fuel Cost: Fuel cost rose 29% yoy, but ex-fuel cost per unit improved by 2.1%.
- Target Price: Maintained at HK$6.60 with upside of +24.5%.
- Dividend: No interim dividend declared. Operating cash flow rose 3.4% yoy.
Summary of Key Points
- Positive Performance: CCB and CSA showed positive results with stable or improved earnings.
- Growth Drivers: Infrastructure loans, residential mortgages, and cost control were key growth factors.
- Fintech Initiatives: CCB is investing in fintech to improve efficiency and customer engagement.
- Valuation & Targets: Multiple stocks had target prices raised due to strong earnings growth and improved fundamentals.
- Market Outlook: Some stocks were downgraded due to near-term challenges, while others were maintained or upgraded.
