Regional Morning Notes Summary - 15 July 2015
Core Content Overview
This document provides a summary of market updates and company analyses for several Asian countries, focusing on financial performance, strategic moves, and valuation metrics.
China
Dalian Wanda Commercial Properties (3699 HK)
- Operational Highlights: Achieved satisfactory growth in rental income (33.3% yoy) and consolidated revenue (12.0% yoy) in 1H15.
- Performance: Consolidated revenue for 1H15 reached Rmb73.4b, which is 101% of the target. Contracted sales revenue amounted to Rmb61.2b, representing 36.4% of the full-year target.
- Market Position: The proposed A-share listing is expected to bring higher valuations and better liquidity. This is a key catalyst for the stock.
- Recommendation: Upgrade to BUY with a target price of HK$77.86, implying a 34.5% upside.
- Strategic Shift: The company is transitioning from a property developer to a property service provider, with rental income expected to contribute half of net profit in the coming 1-2 years.
- Financial Metrics:
- Net profit (adj.) is projected to increase significantly over the years.
- EBITDA and operating profit are on an upward trajectory.
- ROE is expected to remain stable at around 17.1% in 2017.
- Net debt to equity is rising, indicating increased leverage.
- Share Price Catalysts:
- Better-than-expected contracted sales.
- More local government policies to support home sales.
- Stronger foot traffic in newly-commenced malls.
- Approval of the A-share listing.
Indonesia
Construction Sector
- New Bookings: Four listed SOE construction companies booked new contracts of Rp40.0t in 1H15, a 53% yoy increase.
- Target Achievement: This represents 42.3% of the full-year target of Rp95t.
- Government Projects: Around 60% of new contracts are government-related, mostly infrastructure projects.
- Private Projects: The remaining 40% are private, with the government projects split evenly between commercial and non-profit.
- Valuation:
- WIKA has the highest forward PE (36.0x 2015, 25.4x 2016).
- WSKT is currently at a premium due to a rights issue causing 37% EPS dilution.
- WSKT's forward PE is 21.5x and is trading at a 7.3% discount to WIKA.
- Challenges:
- Corruption-related legal issues affecting project implementation.
- The Ministry of Transportation is waiting for a new presidential regulation to speed up infrastructure development.
- Budget realisation rate for the Ministry of Public Affairs and Public Housing is 18% in 1H15.
- Market Outlook:
- The government has allocated Rp290.3t for infrastructure in 2015, a 63% yoy increase.
- The Ministry of Finance expects infrastructure development to continue in 2016 with a similar budget.
Malaysia
AMMB Holdings (AMM MK)
- Recommendation: Upgrade to HOLD with a target price of RM5.80.
- Share Price: The share price has retraced more than 10.0% since the downgrade, suggesting much of the earnings risk has been factored into current valuations.
- Earnings Forecast: Revised 2016/17 earnings forecasts are expected to improve, with the target price now at RM2.60.
Sunsuria (SSR MK)
- Growth Prospects: Poised for multi-fold growth in net profit, with a 3-year CAGR of 170% driven by its flagship development, Sunsuria City.
- Recommendation: BUY with a target price of RM1.45.
Uzma (UZMA MK)
- Earnings Forecast: Upgraded 2016/17 earnings forecasts due to the contribution from a long-term high-margin WIF contract.
- Recommendation: Maintain HOLD with a higher ex-diluted target price of RM2.60.
Singapore
Strategy
- Positioning for 2H15: Ahead of a potential general election, the market faces rising rates and external uncertainties.
- Sector Focus: Highlighting key stock picks to navigate the heightened volatility in the property and REITs sector.
Thailand
Bangkok Chain Hospital (BCH TB)
- Downgrade: From HOLD to SELL due to fewer cash-based patients and high cost of opening new hospitals.
- Recommendation: SELL with a target price of Bt6.20.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18053.6 |
0.4 |
1.6 |
0.9 |
1.3 |
| S&P 500 |
2109.0 |
0.4 |
1.3 |
0.7 |
2.4 |
| FTSE 100 |
6753.8 |
0.2 |
5.0 |
(0.5) |
2.9 |
| AS30 |
5561.9 |
1.9 |
(0.0) |
0.4 |
3.2 |
| CSI 300 |
4112.1 |
(2.4) |
4.7 |
(21.2) |
16.4 |
| FSSTI |
3316.5 |
0.2 |
(0.7) |
(0.2) |
(1.4) |
| HSCEI |
11836.2 |
(1.4) |
0.1 |
(13.1) |
(1.2) |
| HSI |
25120.9 |
(0.4) |
0.6 |
(6.5) |
6.4 |
| JCI |
4901.8 |
0.2 |
(0.1) |
1.3 |
(6.2) |
| KLCI |
1721.1 |
0.3 |
0.5 |
(0.1) |
(2.3) |
| KOSPI |
2059.2 |
(0.1) |
0.9 |
0.8 |
7.5 |
| Nikkei 225 |
20385.3 |
1.5 |
0.0 |
(0.0) |
16.8 |
| SET |
1488.4 |
(0.2) |
0.3 |
(0.9) |
(0.6) |
| TWSE |
9041.8 |
0.1 |
(2.3) |
(2.4) |
(2.9) |
| BDI |
915 |
1.7 |
10.2 |
42.5 |
17.0 |
| CPO (RM/mt) |
2185 |
0.0 |
(2.1) |
(2.9) |
(4.9) |
| Nymex Crude |
53 |
0.5 |
3.2 |
(10.4) |
0.1 |
Top Picks
BUY
- Beijing Capital (694 HK): Target price HK$12.30, potential upside 44.5%
- ICBC (1398 HK): Target price HK$7.80, potential upside 36.4%
- Bank BJB (BJR IJ): Target price HK$1,300.00, potential upside 54.8%
- Maybank (MAY MK): Target price HK$10.30, potential upside 12.0%
- DBS (DBS SP): Target price HK$25.08, potential upside 19.1%
- SATS Ltd (SATS SP): Target price HK$4.00, potential upside 9.3%
- Kasikornbank (KBANK TB): Target price HK$232.00, potential upside 22.4%
- PTT (PTT TB): Target price HK$410.00, potential upside 21.3%
SELL
- UMWH Holdings (UMWH MK): Target price HK$9.00, potential downside 11.8%
Key Assumptions
| Country |
GDP (%, yoy) |
2013 |
2014 |
2015F |
| US |
2.2 |
2.2 |
2.4 |
2.9 |
| Euro Zone |
-0.5 |
-0.5 |
0.9 |
1.3 |
| Japan |
1.6 |
1.6 |
-0.1 |
1.0 |
| Singapore |
4.4 |
4.4 |
2.9 |
2.9 |
| Malaysia |
4.7 |
4.7 |
6.0 |
5.0 |
| Thailand |
2.8 |
2.8 |
0.9 |
2.7 |
| Indonesia |
5.6 |
5.6 |
5.0 |
5.0 |
| Hong Kong |
2.9 |
2.9 |
3.5 |
3.7 |
| China |
7.7 |
7.7 |
7.2 |
7.0 |
| Metric |
2014 |
2015F |
2016F |
2017F |
| Brent (US$/bbl) |
99.45 |
61 |
72 |
72 |
| CPO (US$/mt) |
722 |
765 |
788 |
788 |
Corporate Events
- China Autos and Economics Analyst Presentation: London, 13 Jul - 15 Jul
- Concord New Energy Teleconference: 16 Jul
Company Description
Dalian Wanda Commercial Properties is a commercial property developer, owner, and operator in China. It also develops mixed-use property projects that include retail, office, hotel, residential, restaurant, entertainment, and leisure.
Stock Data
| Metric |
Value |
| GICS Sector |
Financials |
| Bloomberg Ticker |
3699 HK |
| Shares Issued (m) |
652.5 |
| Market Cap (HK$m) |
262,133.4 |
| Market Cap (US$m) |
33,816.3 |
| 3-mth Avg Daily Turnover (US$m) |
84.2 |
Price Performance
| Period |
Return (%) |
| 1mth |
(22.1) |
| 3mth |
3.6 |
| 6mth |
20.4 |
| 1yr |
n.a. |
| YTD |
17.0 |
| Metric |
Value |
| Major Shareholder |
Wang Jianlin |
| % of Total Shares |
50.50% |
| FY15 RNAV/Share |
HK$86.51 |
| FY15 Net Debt/Share |
HK$30.09 |
Analysts
Risks
- Construction Delays: Slower-than-expected construction of Wanda Plaza and delay in GFA delivery.
- Economic Slowdown: Could lead to weak consumption power, negatively affecting rental income.
- O2O Platform Development: May be delayed.
- Selling Pressure: After the six-month lock-up period, the selling pressure is still not fully released.
Major Shareholders
| Shareholder |
Number of Offer Shares after IPO |
% of Total Shares |
Current Holdings |
Change |
| Wang Jianlin |
2,286,287 |
50.50% |
2,286,287 |
0 |
| Kuwait Investment Authority |
48,445 |
1.07% |
48,445 |
0 |
| China Life Insurance Company |
48,445 |
1.07% |
48,445 |
0 |
| Ping An Asset Management |
48,333 |
1.07% |
0 |
(48,333) |
| Och-Ziff Capital Management |
40,371 |
0.89% |
43,171 |
2,800 |
| APG Strategic Real Estate Pool |
32,292 |
0.71% |
32,292 |
0 |
| Gree Electric Appliances Sales |
32,297 |
0.71% |
32,297 |
0 |
| Fubon Life Insurance |
16,148 |
0.36% |
16,148 |
0 |
| Timing Investment Fund |
16,148 |
0.36% |
16,148 |
0 |
| Management |
- |
- |
- |
- |
| Heywin Investment Limited |
16,148 |
0.36% |
16,148 |
0 |
| MACRO-LINK International |
16,148 |
0.36% |
16,148 |
0 |
| Shanghai Jupai Hehui |
12,919 |
0.29% |
21,061 |
8,142 |
| Woodman Funds SICAV |
10,496 |
0.23% |
10,496 |
0 |
| Total |
2,624,477 |
57.98% |
2,587,086 |
(37,391) |
Valuation/Recommendation
- Upgrade to BUY based on the company's asset-light transformation and expected rental income growth.
- Target price is HK$77.86, which is a 10.0% discount to 2015 RNAV of HK$86.51/share.
Summary of Key Metrics
| Metric |
2014 |
2015F |
2016F |
2017F |
| Net Turnover |
86,774 |
138,136 |
171,727 |
197,486 |
| EBITDA |
48,452 |
60,171 |
70,228 |
77,969 |
| Operating Profit |
47,347 |
60,171 |
70,228 |
77,969 |
| Net Profit (rep./act.) |
24,581 |
29,519 |
33,982 |
37,913 |
| Net Profit (adj.) |
12,999 |
19,427 |
23,890 |
27,821 |
| EPS (Fen) |
347.9 |
429.1 |
527.7 |
614.6 |
| PE (x) |
13.3 |
10.8 |
8.8 |
7.5 |
| P/B (x) |
1.6 |
1.4 |
1.2 |
1.0 |
| EV/EBITDA (x) |
7.3 |
5.9 |
5.0 |
4.5 |
| Dividend Yield (%) |
1.2 |
2.3 |
3.4 |
4.0 |
| Net Margin (%) |
15.0 |
14.1 |
13.9 |
14.1 |
| Net Debt/(cash) to Equity (%) |
55.7 |
59.4 |
69.1 |
71.5 |
| Interest Cover (x) |
3.4 |
4.8 |
4.4 |
4.5 |
| ROE (%) |
24.4 |
17.6 |
17.5 |
17.1 |
Conclusion
The document outlines the financial performance, strategic shifts, and valuation insights for various companies in China, Indonesia, and Malaysia, with a particular emphasis on Dalian Wanda Commercial Properties and the construction sector in Indonesia. The overall sentiment is cautiously optimistic, with upgrades to certain stocks and a focus on the potential impact of A-share listings and government policies on market dynamics.
