Regional Morning Notes Summary - 15 June 2016
Core Content Overview
This document provides a detailed analysis of regional market updates and investment insights, focusing on Indonesia, China, Malaysia, Singapore, and Thailand. It includes sector updates, company-specific news, key indices, top picks, and corporate events for the period.
Key Stories and Updates
Indonesia
- Ace Hardware Indonesia (ACES IJ/HOLD/Rp900/Target: Rp1,000): The company's SSS growth is not strong enough, and it has not seen significant new openings. The report suggests a cautious outlook.
China
- Property Management Services (PMS): The PMS sector is growing, with the market size expected to reach 22b sqm by the end of 2016 from 17.6b sqm in 2015. PMS companies are focusing on value-added services such as community O2O platforms to increase revenue and reduce reliance on traditional low-margin services.
- Market Share Growth: The top 100 PMS companies saw their market share rise from 14% in 2012 to 20% in 2014, but net margins remained flat at 4.8% in 2014 due to rising labor costs.
- Value-Added Services: Revenue contribution from value-added services increased from 24.2% in 2010 to 36.6% in 2014. Companies are investing in O2O platforms to drive growth.
- Hong Kong-Listed PMS Companies:
- Colour Life Services (1778 HK/HOLD): Expanded GFA under management to 360m sqm by end-May 2016, up from 332m sqm in 2015. The company is targeting 420m sqm by 2016. Its O2O platform, "Caizhiyun," is integrated with property management fees and wealth management products.
- Zhong Ao Home (ZAH/1538 HK/NOT RATED): Its O2O platform "Aidaojia" has expanded to five new cities. The company is seeking external capital through convertible notes and M&A loans to support its expansion.
- COPH (2669 HK/NOT RATED): Likely to expand its portfolio through the M&A of COLI and CITIC, adding 24m sqm of GFA. The company has a strong track record and operates in 50 cities with 427 properties.
Malaysia
- Telecommunications Sector: The introduction of a fifth telco player led to a 4% and 7% cut in sector earnings forecasts for 2017-2018. The sector is maintained in UNDERWEIGHT.
Singapore
- Brexit Implications: The report analyses the impact of Brexit on the FSSTI and highlights stocks that may be affected by the upcoming referendum on 23 June 2016.
Thailand
- Somboon Advance Technology (SAT TB/HOLD/Bt13.20/Target: Bt14.20): The company's management has confirmed a cautious outlook, and the report suggests maintaining a HOLD rating.
Key Indices (as of 14 June 2016)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17674.8 |
-0.3 |
-1.5 |
0.8 |
1.4 |
| S&P 500 |
2075.3 |
-0.2 |
-1.7 |
1.4 |
1.5 |
| FTSE 100 |
5923.5 |
-2.0 |
-5.7 |
-3.5 |
-5.1 |
| AS30 |
5282.5 |
-2.0 |
-2.7 |
-2.1 |
-1.2 |
| CSI 300 |
3076.0 |
0.3 |
-3.6 |
0.0 |
-17.6 |
| FSSTI |
2768.3 |
-0.6 |
-2.8 |
1.2 |
-4.0 |
| HSCEI |
8583.1 |
-0.4 |
-3.2 |
3.4 |
-11.2 |
| HSI |
20387.5 |
-0.6 |
-3.1 |
3.4 |
-7.0 |
| JCI |
4821.6 |
0.3 |
-2.3 |
1.3 |
5.0 |
| KLCI |
1626.1 |
-0.2 |
-2.1 |
-0.1 |
-3.9 |
| KOSPI |
1972.0 |
-0.4 |
-2.0 |
0.3 |
0.5 |
| Nikkei 225 |
15859.0 |
-1.0 |
-4.9 |
-3.4 |
-16.7 |
| SET |
1428.1 |
0.4 |
-1.0 |
2.4 |
10.9 |
| TWSE |
8576.1 |
0.5 |
-0.2 |
6.5 |
2.9 |
| BDI |
608 |
-0.2 |
0.3 |
1.3 |
27.2 |
| CPO (RM/mt) |
2606 |
-1.0 |
-2.0 |
-0.7 |
18.4 |
| Brent Crude (US$/bbl) |
50 |
-1.0 |
-3.1 |
4.2 |
33.7 |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Air China |
753 HK |
HK$5.37 |
HK$10.20 |
96.9 |
| Ping An Insurance |
2318 HK |
HK$33.85 |
HK$45.00 |
32.9 |
| Bank BJB |
BJR J |
Rp1,020.00 |
Rp1,170.00 |
14.7 |
| Genting Bhd |
GENT MK |
Bt8.04 |
Bt10.40 |
29.4 |
| City Developments |
CIT SP |
S$8.65 |
S$10.86 |
25.5 |
| DBS |
DBS SP |
S$15.64 |
S$19.30 |
23.4 |
| Bangkok Dusit |
BDMS TB |
Bt24.00 |
Bt27.70 |
15.4 |
| Siam Cement |
SCC TB |
Bt474.00 |
Bt630.00 |
32.9 |
Key Assumptions
| Country |
GDP (yoy) 2015 |
GDP (yoy) 2016F |
GDP (yoy) 2017F |
| US |
2.4 |
2.5 |
2.7 |
| Euro Zone |
1.6 |
1.5 |
1.6 |
| Japan |
0.5 |
0.6 |
0.8 |
| Singapore |
2.0 |
2.7 |
3.0 |
| Malaysia |
5.0 |
4.2 |
5.0 |
| Thailand |
2.8 |
3.2 |
3.6 |
| Indonesia |
4.8 |
5.0 |
5.5 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
| Brent Crude |
53.60 |
42 |
54 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Start Date |
End Date |
| Naga Corp Ltd Roadshow |
Kuala Lumpur |
15 Jun |
16 Jun |
| Concord New Energy Roadshow |
Shanghai |
16 Jun |
16 Jun |
| BIMB Holdings Bhd Roadshow |
Singapore |
16 Jun |
17 Jun |
| Singapore Strategy Analyst Presentation |
Kuala Lumpur |
16 Jun |
17 Jun |
| China Resources Cement Roadshow |
Taiwan |
21 Jun |
21 Jun |
| UOB Roadshow |
US/Canada |
20 Jun |
24 Jun |
Market Weight
- Property Sector: Maintained as MARKET WEIGHT.
Analyst Contact
Peer Comparison
| Company |
Ticker |
Currency |
Share Price (14 Jun 16) |
Market Cap (HK$m) |
2016F PE (x) |
2017F PE (x) |
2016F Dividend Yield (%) |
2017F Dividend Yield (%) |
2016F P/B (x) |
2017F P/B (x) |
3M Avg. Volume (000 shares) |
| Colour Life Services |
1778 HK |
HK$ |
5.37 |
5,371 |
11.4 |
8.8 |
3.5 |
4.8 |
2.7 |
2.2 |
266 |
| COPH* |
2669 HK |
HK$ |
1.10 |
3,616 |
24.2 |
19.4 |
- |
- |
- |
- |
31,900 |
| ZAH |
1538 HK |
HK$ |
1.31 |
1,048 |
10.8 |
7.0 |
2.2 |
3.5 |
1.8 |
1.5 |
590 |
| Jones Lang LaSalle |
JLL US |
US$ |
119.57 |
41,858 |
11.9 |
11.0 |
0.7 |
0.8 |
1.7 |
1.5 |
419 |
| CBRE Group. |
CBG US |
US$ |
29.40 |
76,521 |
12.8 |
12.1 |
- |
- |
2.9 |
2.8 |
2,541 |
| Savills PLC |
SVS LN |
GBP |
711.50 |
10,928 |
11.2 |
10.5 |
3.9 |
4.2 |
2.4 |
2.2 |
224 |
| Soufun Holdings |
SFUN US |
US$ |
4.94 |
18,220 |
- |
41.5 |
1.0 |
1.5 |
3.5 |
2.5 |
3,992 |
| Leju Holdings |
LEJU US |
US$ |
4.32 |
4,533 |
11.3 |
9.3 |
1.1 |
1.3 |
1.3 |
1.2 |
97 |
| E-House |
EJ US |
US$ |
6.39 |
7,139 |
- |
- |
- |
- |
- |
- |
985 |
| Shenzhen World Union |
002285 CH |
Rmb |
7.51 |
18,078 |
21.9 |
17.7 |
0.9 |
1.1 |
3.3 |
2.9 |
33,587 |
| Average |
- |
- |
- |
- |
14.4 |
15.2 |
1.9 |
2.5 |
2.4 |
2.1 |
7,460 |
*PE of COPH is based on 25% simple average growth on net profit.
Operational Data and Financials
| Company |
GFA under Management (m sqm) |
No. of Projects |
Net Margin (%) |
Net Profit (Rmbm) |
| Colour Life |
322.1 |
2,001 |
19.9 |
1,833 |
| ZAH |
33.8 |
167 |
19.2 |
1,642 |
| COPH |
82.6 |
427 |
4.6 |
1,391 |
Notes:
- ZAH uses adjusted net profit for margin calculations.
- PMS Sector Trends: Companies are increasingly relying on capital markets for expansion due to the high costs of developing value-added services and O2O platforms.
- Market Consolidation: PMS companies are seeking external funding and capital market listings to support growth and expansion, especially in the O2O space.
Profitability and Margins (2015)
- Colour Life: Gross margin of 54.9%, net margin of 19.9%, ROE of 8.3%, and ROA of 7.8%.
- ZAH: Gross margin of 33.3%, net margin of 19.2%, ROE of 27.0%, and ROA of 19.6%.
- COPH: Gross margin of 20.6%, net margin of 4.6%, ROE of 20.2%, and ROA of 5.7%.
Debt Structure and Dividend Outlook for Beijing Capital International Airport (694 HK)
| Item |
2015 (Rmbm) |
2016F (Rmbm) |
2017F (Rmbm) |
2018F (Rmbm) |
| Bonds |
2,997.3 |
2,997.3 |
0.0 |
0.0 |
| Parent Company Loan |
2,815.8 |
2,278.0 |
2,118.3 |
1,958.6 |
| Long Term Borrowings |
5,870.0 |
4,585.0 |
5,275.0 |
4,100.0 |
| Total Debt |
11,683.1 |
9,850.3 |
7,493.3 |
6,058.6 |
- Debt Reduction: Redemption of Rmb3.0b bonds and repayment of long-term borrowings will reduce net debt by 62% by 2018.
- Dividend Payout: The dividend payout could increase from 40% (Rmb660m) as net debt declines.
Stock Data for Beijing Capital International Airport (694 HK)
| Metric |
Value |
| GICS Sector |
Industrials |
| Bloomberg Ticker |
694 HK |
| Shares Issued (m) |
4,330.9 |
| Market Cap (HK$m) |
34,517.2 |
| Market Cap (US$m) |
4,448.4 |
| 3-Month Avg. Daily Turnover (US$m) |
4.1 |
Analyst Contact for Beijing Capital International Airport (694 HK)
Conclusion
- The Property Management Services (PMS) sector in China is growing, with a focus on value-added services and O2O platforms.
- PMS companies are increasingly leveraging capital markets for expansion and growth.
- Beijing Capital International Airport (694 HK) is a BUY recommendation, with a target price of HK$11.60, indicating a 45.5% upside.
- Market consolidation is expected to accelerate in the PMS sector as companies seek to raise capital and expand.
- Corporate events and roadshows are being held across various regions, highlighting the importance of investor relations and capital raising opportunities.
