Regional Morning Notes Summary
Core Content Overview
This document provides a comprehensive summary of financial and economic developments across several Asian regions, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand. It includes updates on monetary policy, company results, key financial metrics, and analyst recommendations.
China
Monetary Policy
- The People's Bank of China (PBOC) announced a 50 basis point (bp) cut in the required reserve ratio (RRR) effective 1 March 2016, aiming to boost liquidity and support loan growth.
- The move is expected to inject approximately Rmb700 billion into the credit market.
- The RRR cut may exert downward pressure on the renminbi (RMB), but the PBOC is likely to continue interventions and regulatory measures to stabilize the currency.
- Further RRR cuts are anticipated in April or May to continue monetary easing.
Banking Sector
- 2015 Results Preview: Limited surprises, with stable operating metrics (NIM, NPL ratio, capital ratio) expected in 4Q15.
- Dividend Payout Ratio: A further cut in dividend payout ratio is still possible due to the weakening earnings outlook.
- Earnings Outlook: Weaker net interest income growth and higher credit costs due to asset quality deterioration are expected to reduce earnings by 15–20% annually.
- Valuation and Recommendations:
- ICBC and CCB are maintained as BUY recommendations with target prices at HK$5.05 and HK$5.85, respectively.
- ABC, CMB, and Minsheng are downgraded from BUY to HOLD due to weaker fundamentals.
- Sector Valuation: Target P/B ratio of 0.6–0.9x based on lower ROE assumptions.
- Key Financial Metrics:
- NPL Ratio: Rose to 1.67% in 4Q15, with a significant increase in special mention loans (SML) to 3.79%.
- Net Gearing Ratio: Reached 77.6% in 2015, above the healthy level of 75%.
- Core Net Margin: Declined to 5.6% in 2015 from 10.0% in 2014.
- Dividend Yield: Dropped to 4.4% in 2015 from 7.0% in 2014.
Company Results
- Yuexiu Property (123 HK):
- 2015 Performance: Weak margins and lower dividend yield.
- Core Net Profit: Plunged 59.0% yoy to Rmb1,013 million, primarily due to weak gross margin and forex losses.
- Dividend: Final dividend of 1.9 HK cents, down 29.6% yoy.
- Landbanking: Acquired 1.03 million sqm of land in 2015, with a land premium of Rmb7.0 billion.
- Recommendation: Maintain HOLD with a target price of HK$1.18.
Indonesia
- Bank Jabar (BJBR IJ):
- 4Q15 Performance: Earnings significantly beat consensus.
- Recommendation: BUY with a target price of Rp1,140.
Malaysia
Banking Sector
- Loan Growth: Moderated further, with a 14% yoy decline in loan approvals.
- Deposit Growth: Continued to trail loan growth at 0.8% vs. 7.7%.
- Funding Cost: Likely to remain elevated.
- Recommendation: Maintain MARKET WEIGHT.
Company Results
- KPJ Healthcare (KPJ MK):
- 2015 Performance: Revenue up 6.7% yoy due to higher service offerings and overseas operations.
- Recommendation: HOLD with a target price of RM4.53.
Singapore
- Golden Agri-Resources (GGR SP):
- 2015 Performance: Core net profit of US$221 million, flat yoy.
- Downstream and China Operations: Report better margins, offsetting upstream weakness.
- Recommendation: BUY with a target price of S$0.44.
Thailand
Company Results
- Bangkok Dusit Medical Services (BDMS TB):
- 4Q15 Performance: Good results due to cost control.
- Recommendation: Upgraded to BUY with a target price of Bt26.00.
- Diamond Building Products (DRT TB):
- 4Q15 Performance: Satisfactory results due to good cost control.
- Recommendation: BUY with a target price of Bt5.20.
- Thai Vegetable Oil (TVO TB):
- 4Q15 Performance: Earnings below expectations but above consensus.
- Recommendation: HOLD with a target price of Bt22.80.
- True Corporation (TRUE TB):
- 4Q15 Performance: Results below estimates.
- Recommendation: SELL with a target price of Bt5.80.
Key Indices and Market Data
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16516.5 |
(0.7) |
(0.6) |
0.3 |
(5.2) |
| S&P 500 |
1932.2 |
(0.8) |
(0.7) |
(0.4) |
(5.5) |
| FTSE 100 |
6097.1 |
0.0 |
1.0 |
0.2 |
(2.3) |
| AS30 |
4947.9 |
0.0 |
(1.8) |
(2.9) |
(7.4) |
| CSI 300 |
2877.5 |
(2.4) |
(7.7) |
(0.8) |
(22.9) |
| FSSTI |
2666.5 |
0.6 |
0.2 |
2.5 |
(7.5) |
| HSCEI |
7916.3 |
(1.5) |
(3.7) |
(2.8) |
(18.1) |
| HSI |
19111.9 |
(1.3) |
(1.8) |
(2.5) |
(12.8) |
| JCI |
4771.0 |
0.8 |
1.3 |
3.2 |
3.9 |
| KLCI |
1654.8 |
(0.5) |
(1.2) |
(0.8) |
(2.2) |
| KOSPI |
1916.7 |
(0.2) |
0.0 |
(0.4) |
(2.3) |
| Nikkei 225 |
16026.8 |
(1.0) |
(0.5) |
(10.3) |
(15.8) |
| SET |
1332.4 |
(0.8) |
0.9 |
2.7 |
3.4 |
| TWSE |
8411.2 |
0.5 |
1.0 |
3.3 |
0.9 |
| BDI |
329 |
0.6 |
4.1 |
3.8 |
(31.2) |
| CPO (RM/mt) |
2437 |
(0.6) |
(1.1) |
5.8 |
10.8 |
| Brent Crude |
36 |
2.5 |
3.7 |
3.5 |
(3.5) |
Top Picks
| Company |
Ticker |
Current Price (Icy) |
Target Price (Icy) |
Potential Upside (%) |
| Beijing Capital |
694 HK |
6.77 |
11.40 |
68.4 |
| ICBC |
1398 HK |
3.84 |
7.60 |
97.9 |
| Bank BJB |
BJBR IJ |
920.00 |
1,140.00 |
23.9 |
| DiGi.Com |
DIGI MK |
4.93 |
5.35 |
8.5 |
| Maybank |
MAY MK |
8.51 |
9.55 |
12.2 |
| City Developments |
CIT SP |
7.11 |
10.86 |
52.7 |
| DBS |
DBS SP |
13.58 |
17.48 |
28.7 |
| Kasikornbank |
KBANK TB |
170.50 |
192.00 |
12.6 |
| PTT |
PTT TB |
260.00 |
320.00 |
23.1 |
| Company |
Ticker |
Current Price (Icy) |
Target Price (Icy) |
Potential Upside (%) |
| UMWH Holdings |
UMWH MK |
7.08 |
6.00 |
(15.3) |
| Sembcorp |
SMM SP |
1.53 |
0.88 |
(42.5) |
Key Assumptions
| Country |
GDP (yoy) 2014 |
GDP (yoy) 2015F |
GDP (yoy) 2016F |
| US |
2.4 |
2.5 |
2.5 |
| Euro Zone |
0.9 |
1.5 |
1.7 |
| Japan |
-0.1 |
0.5 |
1.0 |
| Singapore |
2.9 |
2.0 |
2.7 |
| Malaysia |
6.0 |
4.9 |
4.8 |
| Thailand |
0.9 |
2.7 |
3.2 |
| Indonesia |
5.0 |
4.8 |
5.4 |
| Hong Kong |
2.5 |
1.8 |
1.5 |
| China |
7.3 |
6.5 |
6.7 |
Corporate Events
| Event |
Venue |
Dates |
| Thai Energy & Petrochemical Sectors Analyst Presentation |
Kuala Lumpur |
01 Mar |
| Thai Energy & Petrochemical Sectors Analyst Presentation |
Singapore |
02 Mar |
| PTT Global Chemical Corporate Roadshow |
Singapore |
03 Mar – 04 Mar |
| Plantation Outlook Seminar 2016 |
Kuala Lumpur |
07 Mar |
| TRX City Sdn Bhd Luncheon |
Malaysia |
08 Mar |
| China Economy and Financial Sector Analyst Presentation |
Singapore |
09 Mar |
| China Economy and Financial Sector Analyst Presentation |
Kuala Lumpur |
10 Mar – 11 Mar |
| ASEAN Conference |
Taiwan |
22 Mar – 23 Mar |
Analysts and Contact Information
Summary of Key Financial Data and Trends
- Monetary Policy: PBOC's RRR cut supports liquidity and loan growth, but risks RMB depreciation.
- Banking Sector: NPL ratios and SML ratios are rising, with potential medium-term NPL ratio reaching 5%.
- Company Performance: Mixed results with some companies outperforming expectations and others underperforming.
- Valuation Adjustments: Target prices and recommendations were revised based on weaker earnings outlook and lower ROE assumptions.
- Economic Outlook: China's GDP growth is expected to slow, while other regions show varied growth rates.
