Regional Morning Notes Summary
Core Content Overview
This document provides a regional update on economic activity and company results for key markets including China, Indonesia, Malaysia, and Singapore, as well as insights into market indices, key assumptions, and stock performance. It also includes analyst views and financial metrics for specific companies such as Nexteer Automotive and Holcim Indonesia.
Main Market Insights
China
- Economic Activity:
- Industrial production growth declined to 6.8% yoy in Jan and Feb 2015, below market expectations of 7.7% yoy.
- Retail sales growth slowed to 10.7% yoy, 0.9ppt below consensus, with online sales increasing 44.6% yoy.
- Urban fixed asset investment (FAI) growth fell to 13.9% yoy, down from 15.7% yoy in the previous month.
- Analyst View:
- Economic growth momentum remains weak, with more supportive measures expected through infrastructure investment and monetary easing.
- The People's Bank of China cut RRR and interest rates in Feb 2015, but these had limited impact on reducing financing costs for the real economy.
- The government is expected to adopt more proactive fiscal policies in 2015 to boost demand, especially via infrastructure investment.
- Key Metrics:
- Industrial production growth: 6.8% (vs. 7.7% consensus)
- Retail sales growth: 10.7% (vs. 11.6% consensus)
- Urban FAI growth: 13.9% (vs. 15.0% consensus)
Company Results
Nexteer Automotive (1316 HK)
- 2014 Results:
- Net profit rose 48% yoy to US$161m, beating expectations.
- Revenue increased to US$3,019m, with US and China as primary growth drivers.
- Performance:
- Net profit: US$161m (2014) vs. US$152m (estimate) and US$156m (consensus).
- EBITDA: US$356m (2014), up 44% yoy.
- Key Financials:
- Net turnover: US$3,019m (2014), expected to grow to US$4,300m by 2017.
- EBITDA: US$356m (2014), projected to reach US$509m in 2017.
- Net profit (adj.): US$161m (2014), expected to rise to US$256m in 2017.
- Analyst View:
- Maintain BUY rating.
- Target price: HK$9.00 (upside of +16.0%).
- EBITDA margin: 11.8% (2014), expected to remain 11–12% in 2015–2017.
- Revenue growth is expected to slow in 2017 due to flat backlog.
- Risks:
- Potential recalls by OEMs could impact sales.
- Sub-prime car loans in the US may affect demand for Nexteer's products.
Holcim Indonesia (SMCB IJ)
- 2014 Results:
- Net profit fell 30% yoy to Rp668b, below expectations due to higher COGS (+19%) and SG&A expenses (+20%).
- Performance:
- Revenue increased 9% yoy to Rp10.5t, with sales volume up 4% yoy to 8.8mt and ASP up 5% yoy to Rp1.2m/tonne.
- Gross margin dropped to 29% (vs. 35% in 2013), and operating margin fell to 12% (vs. 19% in 2013).
- Analyst View:
- Downgrade to HOLD with a target price of Rp1,905 (upside of +12.7%).
- Earnings revised downward for 2015 and 2016 to Rp922b and Rp1t, respectively.
- Key Financials:
- Net turnover: Rp10.5t (2014), expected to grow to Rp15.2t by 2017.
- Net profit (adj.): Rp677m (2014), expected to reach Rp1,253m in 2017.
- Net debt to equity: 58.9% (2014), projected to decrease to 21.5% by 2017.
Key Indices (as of 12 March 2015)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17635.4 |
(0.2) |
(2.6) |
(1.3) |
(1.1) |
| S&P 500 |
2040.2 |
(0.2) |
(2.8) |
(1.4) |
(0.9) |
| FTSE 100 |
6721.5 |
0.3 |
(2.9) |
(1.4) |
2.4 |
| AS30 |
5763.3 |
(0.5) |
(1.8) |
1.0 |
7.0 |
| CSI 300 |
3524.7 |
0.1 |
(0.2) |
2.4 |
(0.3) |
| FSSTI |
3378.6 |
(0.6) |
(1.1) |
(1.2) |
0.4 |
| HSCEI |
11417.3 |
(0.8) |
(2.7) |
(3.1) |
(4.7) |
| HSI |
23718.0 |
(0.7) |
(3.1) |
(2.9) |
0.5 |
| JCI |
5419.6 |
(0.8) |
(0.5) |
1.4 |
3.7 |
| KLCI |
1778.2 |
(0.6) |
(2.6) |
(0.6) |
1.0 |
| KOSPI |
1980.8 |
(0.2) |
(0.9) |
2.0 |
3.4 |
| Nikkei 225 |
18723.5 |
0.3 |
0.1 |
4.1 |
7.3 |
| SET |
1543.8 |
0.8 |
(1.2) |
(4.3) |
3.1 |
| TWSE |
9523.2 |
(0.1) |
(1.0) |
0.3 |
2.3 |
| BDI |
565 |
(0.5) |
1.1 |
2.2 |
(27.7) |
| CPO (RM/mt) |
2240 |
(2.0) |
(5.1) |
(2.9) |
(2.5) |
| Nymex Crude |
48 |
0.4 |
(4.7) |
(5.6) |
(9.2) |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Upside |
| Sunac China |
1918 HK |
6.67 |
9.29 |
39.3% |
| ICBC |
1398 HK |
5.38 |
6.80 |
26.4% |
| Bank Negara |
BBNI LJ |
6,700.00 |
7,500.00 |
11.9% |
| Gentling Msia |
GENM MK |
4.07 |
4.47 |
9.8% |
| DBS |
DBS SP |
19.59 |
23.55 |
20.2% |
| Pacific |
PACRA SP |
0.67 |
1.00 |
49.3% |
| Krong Thai |
KTB TB |
23.10 |
29.00 |
25.5% |
| Sino Thai Engr |
STEC TB |
23.30 |
30.25 |
29.8% |
| Sell |
UMWH |
- |
10.00 |
(6.2%) |
Key Assumptions
| Region |
2014 GDP % |
2015F GDP % |
2016F GDP % |
| US |
2.4 |
3.2 |
3.3 |
| Euro Zone |
0.9 |
1.4 |
1.4 |
| Japan |
1.5 |
2.0 |
2.0 |
| Singapore |
3.2 |
3.3 |
3.3 |
| Malaysia |
5.9 |
5.2 |
5.2 |
| Thailand |
1.5 |
3.9 |
3.9 |
| Indonesia |
5.2 |
5.8 |
5.8 |
| Hong Kong |
3.5 |
3.7 |
3.7 |
| China |
7.2 |
7.0 |
7.0 |
| Indicator |
2014 |
2015F |
2016F |
| Brent (US$/bbl) |
99.45 |
65 |
70 |
| CPO (US$/mt) |
722 |
765 |
788 |
| BDI |
1,101 |
1,300 |
1,400 |
Corporate Events
| Event |
Location |
Start Date |
End Date |
| Indonesian Strategy Analyst Presentation |
Kuala Lumpur |
12 Mar |
13 Mar |
| CIFI Holdings Roadshow |
Singapore |
16 Mar |
16 Mar |
| ASEAN Conference |
Taipei |
17 Mar |
18 Mar |
| China Property Analyst Presentation |
Singapore & Kuala Lumpur |
17 Mar |
19 Mar |
| Indofood Sukses Maksur Roadshow |
Singapore |
27 Mar |
27 Mar |
| Sunway Berhad Luncheon |
Kuala Lumpur |
31 Mar |
31 Mar |
| Singamas Container Holdings Roadshow |
Singapore |
31 Mar |
31 Mar |
| Roadshow |
Kuala Lumpur |
1 Apr |
1 Apr |
| Sihuan Pharmaceutical Holdings |
Taipei |
30 Mar |
31 Mar |
| Corporate Roadshow |
Singapore |
2 Apr |
2 Apr |
| Corporate Roadshow |
Kuala Lumpur |
3 Apr |
3 Apr |
Conclusion
The document highlights the slowdown in China's economic activity and the mixed results from companies such as Nexteer Automotive and Holcim Indonesia. While Nexteer is maintained as a BUY due to strong growth expectations, Holcim Indonesia is downgraded to HOLD due to underperformance and rising costs. The economic outlook for the region remains cautious, with infrastructure investment and monetary easing seen as key drivers for recovery. The market indices show a mixed performance, with China and Singapore leading in growth expectations, while US and Euro Zone remain below the consensus.
