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报告摘要

Regional Morning Notes Summary - 25 June 2018

Core Content Overview

The document provides a summary of market insights and stock analysis for various regions, focusing on the Offshore & Marine and Internet sectors in China, as well as updates on Cathay Pacific Airways in Hong Kong, Indonesia, and Malaysia. It also includes key indices, top picks, corporate events, and peer comparisons for the Internet sector in China and Offshore & Marine in the region.

Main Points

OPEC Supply Hike

OPEC raised supply by 0.7–0.8 mbpd, within expectations, and brought production slightly above the 32.5 mbpd quota.
This leaves the market undersupplied by ~0.5 mbpd in 2H18 and sets a price floor for oil.
The recent pullback in oil prices presents attractive entry points for oil-related stocks.
Preferred picks: Keppel Corporation (KEP SP) and Sembcorp Marine (SMM SP).

Offshore & Marine Sector

Shipyards are rated MARKET WEIGHT, while Oil Services are rated UNDERWEIGHT.
Value emerging for KEP, with the property division contributing ~70% to its valuation.
Avoid small/mid-cap offshore service names due to high debt levels and ongoing restructuring.
Wintermar (WINS IJ) is recommended as a BUY with a target price of Rp380.

Internet Sector - China

Survival games continue to dominate the market.
Tencent and NetEase have significantly increased their presence in the top 10 grossing games.
Tencent is the top pick with a target price of HK$520.
Kingsoft is also recommended as a BUY with a target price of HK$27.
Game approvals are expected to resume in late July.

Key Information

Company Updates

Cathay Pacific Airways (293 HK):
- Pax yield is on track for recovery, with a raised 2018 net profit forecast by 46%.
- Fuel surcharges are expected to be imposed, boosting PBT by HK$450m in September.
- Maintain HOLD with a target price of HK$13.00.
- ROE is expected to be 1.7%, with earnings largely derived from Air China.
- Valuation is at 0.85x P/B, with a suggested entry price near HK$12.00.

Key Indices

DJIA: +0.5% (1D), -2.0% (1W), -0.7% (1M), -0.6% (YTD)
S&P 500: +0.2% (1D), -0.9% (1W), +1.2% (1M), +3.0% (YTD)
FTSE 100: +1.7% (1D), +0.6% (1W), -0.6% (1M), -0.1% (YTD)
AS30: -0.2% (1D), +1.9% (1W), +2.9% (1M), +2.5% (YTD)
CSI 300: +0.4% (1D), -4.4% (1W), -5.4% (1M), -10.5% (YTD)
FSSTI: -0.4% (1D), -2.1% (1W), -6.4% (1M), -3.4% (YTD)
HSCEI: -0.2% (1D), -5.1% (1W), -5.9% (1M), -3.2% (YTD)
HSI: +0.1% (1D), -3.6% (1W), -4.1% (1M), +1.9% (YTD)
JCI: -0.0% (1D), -4.1% (1W), -2.6% (1M), -8.4% (YTD)
KLCI: +0.1% (1D), -3.8% (1W), -5.7% (1M), -5.7% (YTD)
KOSPI: +0.8% (1D), -1.9% (1W), -4.2% (1M), -4.5% (YTD)
Nikkei 225: -0.8% (1D), -1.5% (1W), +0.3% (1M), -1.1% (YTD)
SET: -0.0% (1D), -4.1% (1W), -6.1% (1M), -6.8% (YTD)
TWSE: -0.4% (1D), -1.0% (1W), -0.4% (1M), +2.4% (YTD)
BDI: -0.4% (1D), -7.0% (1W), +24.5% (1M), +1.8% (YTD)
CPO (RM/mt): +0.3% (1D), -2.8% (1W), -7.0% (1M), -5.7% (YTD)
Brent Crude (US$/bbl): -1.8% (1D), -1.5% (1W), -2.9% (1M), +11.0% (YTD)

Corporate Events

Analyst Presentation on Indonesia Outlook & Strategy: Bangkok, 25–26 Jun
Analyst Presentation on Singapore and China Banks: Kuala Lumpur, 27–28 Jun
Roadshow with Jacobson Pharma Corp (2633 HK): Hong Kong, 28 Jun
Luncheon Talk with UOB Thailand (UOB SP): Bangkok, 29 Jun
Roadshow with United Overseas Bank (UOB SP): Taipei, 2–3 Jul
Luncheon with Luk Fook Holdings International (590 HK): Hong Kong, 5 Jul
Roadshow with Jacobson Pharma Corp (2633 HK): Shanghai, 10 Jul
Industry 4.0 Conference: Kuala Lumpur, 26 Jul

Sector Catalysts

OPEC supply hike is expected to support oil prices and benefit oil-related stocks.
Pax yield is expected to improve in 2018, driven by fuel surcharges.
Game approvals in China are set to resume in late July, potentially boosting the online gaming sector.
Survival games (e.g., PUBG, Fortnite) continue to gain popularity, with Tencent and NetEase leading the market.

Top Picks

Offshore & Marine

Keppel Corporation (KEP SP): BUY, target price S$9.00
Wintermar Offshore (WINS IJ): BUY, target price Rp380

Internet - China

Tencent (700 HK): BUY, target price HK$520
Kingsoft (3888 HK): BUY, target price HK$27
NetEase (NTES US): HOLD, target price US$270
IGG (799 HK): HOLD, target price HK$10.50

Valuation Highlights

Cathay Pacific Airways: Adjusted fair value HK$13.00, with suggested entry near HK$12.00.
KEP: Property division makes up ~70% of valuation, with S$9.00 as the target.
Wintermar: Valuation at Rp298, with target price of Rp380.

Risk & Outlook

Cathay Pacific Airways is neutral due to high debt/equity and macroeconomic uncertainties (e.g., trade war, interest rates).
OPEC's actions may not be enough to offset global supply and demand shifts.
Oil services remain underweight due to low dayrates and oversupply.
Tencent and NetEase are expected to continue dominating the mobile gaming market with strong IP portfolios and game development.

Key Assumptions

Country	2017 GDP (%)	2018F GDP (%)	2019F GDP (%)
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 (US$/bbl)	55.00	67.00	66.50

Conclusion

The report outlines a mixed outlook across the regions, with opportunities in the offshore and marine sector due to OPEC's supply hike and recovery in pax yields, while the internet sector in China continues to thrive with Tencent and NetEase leading the way. However, Cathay Pacific Airways remains neutral due to debt concerns and external macroeconomic risks. Investors are advised to focus on larger caps and avoid small/mid-cap offshore service names for now.