20150430-大华继显-Regional_Morning_Notes_51页_2mb

Regional Morning Notes Summary - 30 April 2015

Core Content Overview

This document provides a comprehensive analysis of financial results and market outlook for various sectors and companies across China, Indonesia, Malaysia, Singapore, and Thailand. It includes stock recommendations, performance summaries, key assumptions, corporate events, and sector-specific updates, particularly focusing on the property and railway sectors in China.

Main Points

China

• Property Sector:

  • Property sales are recovering in tier-1 and tier-2 cities, with a 12.3% YoY increase in April 2015.
  • The government is expected to remain supportive of the sector until a nationwide recovery is seen.
  • Market consolidation is expected to continue, with a preference for large players and SOEs.
  • The recovery is attributed to policy loosening, especially on second-home down payments and business tax exemptions.
  • A soft landing is anticipated in the second half of 2015, with tier-1 cities showing price uptrends and low-tier cities experiencing price declines.

• Railway Sector:

  • Railway companies (CRG, CRCC, CCC, CSR, CNR) reported 1Q15 results in line with expectations.
  • New construction contracts declined in 1Q15 due to delays in the PPP program, but are expected to increase from 2Q15 onwards.
  • The merger of CSR and CNR into CRRC is expected to resume trading by 1 July 2015.
  • CRRC is anticipated to benefit from the acquisition of Bombardier's railway unit, enhancing its brand and reducing IP disputes.

• Company Results:

  • Bank of China (3988 HK): Earnings in line, but provisions may be inadequate, leading to increased credit costs.
  • China Construction Bank (939 HK): Results in line, supported by lower operating expenses.
  • ICBC (1398 HK): Fundamentals intact, though asset quality was a surprise on the downside.
  • Ping An Insurance (2318 HK): Earnings ahead of expectations due to higher investment income.
  • Sinopharm Group (1099 HK): Net profit up 27.5% YoY, driven by enhanced operating efficiency.

• Stock Picks:

  • Large-cap picks: COLI (688 HK), Vanke (2202 HK), CRL (1109 HK), Wanda (3699 HK).
  • Small-cap picks: CIFI (884 HK).
  • Other notable picks: CCC (1800 HK), Zhuzhou CSR (3898 HK), and China Resources Land (1109 HK).

• Key Indices:

  • The CSI 300 and HSI showed strong growth, with the CSI 300 up 17.8% YoY.
  • The Nikkei 225 increased by 4.0% in 1Q15, while the KLCI and TWSE also showed positive performance.

• Corporate Events:

  • Ascott Residence Trust Luncheon, Sunsuria Roadshow, BWI International Luncheon, and Indosat Roadshow are scheduled for May 2015.

Key Sectors and Companies

Property

• Recovery Gaining Momentum: Sales in tier-1 and tier-2 cities are improving, while tier-3 cities show growth.
• Market Outlook: Expect continued consolidation and a soft landing in the sector.
• Top Picks: Large players and SOEs are favored, with specific mentions of Evergrande (3333 HK), Greenland HK (337 HK), CMP (978 HK), and Joy City (207 HK).

Railway

• 1Q15 Results: No major surprises, but new contracts declined.
• Future Outlook: Expect new contract wins to increase from 2Q15 onwards due to the PPP program.
• Mergers and Acquisitions: The CSR-CNR merger is expected to resume trading by 1 July 2015. CRRC may acquire Bombardier's railway unit, enhancing its international presence.

Key Assumptions

• GDP Growth: Expected to rise across the region, with China at 7.0% for 2015F.
• Commodity Prices: Brent crude oil is expected to decrease from 99.45 to 65 in 2015, with CPO and BDI showing similar trends.
• Sector Catalysts: China's "One Belt One Road" initiatives and increased railway spending in 2015-2017 are key drivers.

Risks

• Delays in urban rapid transit (URT) projects due to high local government gearing.
• Potential slowdown in railway spending from 2018 onwards.

Summary of Key Financials

Regional Highlights

Indonesia

• Semen Indonesia (SMGR IJ): Net profit slightly below expectations, down 9.1% YoY and 19.5% QoQ.

Malaysia

• IJM Corporation (IJM MK): Focus on enhancing concession assets and property developments.

Singapore

• REITs: CDL Hospitality Trusts below expectations, Starhill and Parkway Life REIT in line.
• QT Vascular (QTVC SP): Litigation and competition are ongoing, but not a major concern.

Thailand

• Property Sector: Normalised profit is expected to decline 37.3% QoQ but increase 2.1% YoY.
• Siam Cement (SCC TB): Results exceed market expectations.

Analysts and Contact

• Edison Bian: +852 2236 6761 | edison.bian@uobkayhian.com.hk
• David Yang: +8621 5404 7225 ext 801 | davidyang@uobkayhian.com
• Lawrence Li: +8621 5404 7225 ext 813 | lawrenceli@uobkayhian.com
• Angela Zhou: +862154047225ext858 | angelazhou@uobkayhian.com

Conclusion

The document outlines a cautiously optimistic outlook for the Chinese property and railway sectors, with emphasis on policy support, market consolidation, and long-term growth opportunities. It also highlights key financial results, stock recommendations, and potential risks that investors should be aware of. The regional analysis includes updates from Indonesia, Malaysia, Singapore, and Thailand, with a focus on property and corporate developments.