Regional Morning Notes Summary - 20 October 2014
Core Content Overview
This document provides a comprehensive update on the performance and outlook of various sectors and companies in the Asia-Pacific region, with a focus on China, Malaysia, Indonesia, Singapore, and Thailand. It includes sector analyses, company updates, key financial metrics, and investment recommendations.
Key Sectors and Updates
Oil & Gas
-
China:
- Downgrade: The sector is downgraded to UNDERWEIGHT due to tumbling demand and supply surplus, which are expected to continue dampening oil prices.
- Oil Price Assumption: Reduced to US$85/bbl for 4Q14 and 2015.
- Downstream Impact: Downstream industries may benefit from lower input costs, while upstream E&P companies like PetroChina and CNOOC are expected to be most affected.
- PetroChina: Downgraded to SELL with a target price of HK$7.00, reflecting 11x FY15F PE and 0.8x P/B.
- CNOOC: Downgraded to SELL with a target price of HK$10.90, 9x FY15F PE.
- Sinopec: Maintained as HOLD with a target price of HK$6.60, showing minimal earnings impact.
-
Malaysia:
- Oil & Gas Sector: Maintained as OVERWEIGHT despite recent sell-downs, as it presents a buying opportunity.
-
Singapore:
- Offshore & Marine Sector: Discusses the impact of lower oil prices on the sector, emphasizing the need to separate the wheat from the chaff.
Company Updates
Daphne (210 HK)
- Performance: Encouraging 3Q14 sales pick-up of 6.3% yoy, up from -2.4% in 2Q14 and -9.5% in 1Q14.
- Target Price: Maintained at HK$4.60, with an upside of +22.3%.
- Store Network: Closed 26 franchised stores but opened 103 self-managed stores in 3Q14.
- E-commerce: Online sales improved in 3Q14, with the launch of the online brand Ondul in June 2014.
- Financials:
- Net Profit (Adj.): 410.4 HK$m in 2014F.
- EPS: 24.2 cents in 2014F.
- PE: 15.5x in 2014F.
- P/B: 1.2x in 2014F.
- Recommendation: BUY.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16380.4 |
1.6 |
-1.0 |
-5.2 |
-1.2 |
| S&P 500 |
1886.8 |
1.3 |
-1.0 |
-6.2 |
2.1 |
| FTSE 100 |
6310.3 |
1.8 |
-0.5 |
-7.7 |
-6.5 |
| AS30 |
5260.1 |
0.3 |
1.4 |
-3.3 |
-1.7 |
| CSI 300 |
2441.7 |
-0.1 |
-1.0 |
0.7 |
4.8 |
| FSSTI |
3167.7 |
0.4 |
-1.7 |
-4.2 |
0.0 |
| HSCEI |
10234.0 |
0.5 |
-0.7 |
-5.1 |
-5.4 |
| HSI |
23023.2 |
0.5 |
-0.3 |
-5.3 |
-1.2 |
| JCI |
5028.9 |
1.6 |
1.3 |
-3.8 |
17.7 |
| KLCI |
1788.3 |
1.2 |
-1.1 |
-3.3 |
-4.2 |
| KOSPI |
1900.7 |
-0.9 |
-2.1 |
-7.5 |
-5.5 |
| Nikkei 225 |
14532.5 |
-1.4 |
-6.1 |
-11.0 |
-10.8 |
| BDI |
944 |
1.5 |
-2.0 |
-12.2 |
-58.5 |
| CPO (RM/mt) |
2131 |
-1.3 |
-3.3 |
0.7 |
-17.2 |
| Nymex Crude |
83 |
0.6 |
-2.9 |
-9.9 |
-15.4 |
Top Picks
| Company |
Ticker |
Price (HK$) |
Target (HK$) |
Upside (%) |
| Sunac China |
1918 HK |
6.38 |
8.45 |
32.4 |
| ICBC |
1398 HK |
4.92 |
6.15 |
25.0 |
| Bank Mandiri |
BMRI J |
9,925.00 |
12,500.00 |
25.9 |
| Gamuda |
GAM MK |
4.81 |
5.50 |
14.3 |
| DBS |
DBS SP |
17.90 |
22.68 |
26.7 |
| Pacific Radiance |
PACRA SP |
1.09 |
1.76 |
62.2 |
| Bangkok Bank |
BBL TB |
192.00 |
276.00 |
43.8 |
| Advanced Info |
ADVANC |
224.00 |
270.00 |
20.5 |
Key Assumptions
| Country |
2013 GDP (yoy) |
2014 GDP (yoy) |
2015F GDP (yoy) |
| US |
1.9 |
3.0 |
3.0 |
| Euro Zone |
-0.4 |
1.0 |
1.4 |
| Japan |
1.5 |
2.1 |
2.0 |
| Singapore |
3.9 |
3.2 |
4.2 |
| Malaysia |
4.7 |
5.6 |
5.2 |
| Thailand |
2.9 |
1.5 |
5.1 |
| Indonesia |
5.8 |
5.5 |
6.0 |
| Hong Kong |
2.9 |
3.5 |
3.7 |
| China |
7.7 |
7.2 |
7.0 |
| Index |
2013 |
2014 |
2015F |
| Brent (US$/bbl) |
110 |
100 |
85 |
| CPO (US$/mt) |
736 |
788 |
848 |
| BDI |
1,219 |
1,200 |
1,300 |
Sector Catalysts
- Oil price rebound.
- Stronger-than-expected 3Q14 results.
- Announcement of more SOE reform strategies for PetroChina.
- Announcement of output volume rebound for CNOOC in early-2015.
- Strong pick-up in railway investment in 4Q14 and more overseas orders.
Risks
- Continued oil price weakness.
- Delays in SOE reforms.
Railway Sector - China
- Overview: Heavy newsflow on overseas expansion drives share prices.
- Top Picks: Maintain OVERWEIGHT on the sector. CNR and CCC are highlighted as top picks.
- Overseas Projects:
- Russia's HSR: China signed a MoU with Russia to develop a Eurasian HSR corridor, including the Moscow-Kazan line.
- Mexico's HSR: A consortium of CRCC and CSR won the bid for a 210km HSR project.
- Domestic Investment: Expected to see a strong pick-up in 4Q14.
- Equipment Makers: More leveraged to domestic railway investment, while contractors are exposed to property development.
- CRG's Shield Machines: China's manufacturers are gaining market share globally, with China Railway Engineering Equipment leading the market.
Company Comparison (Rolling Stock and Railway Equipment)
| Company |
Ticker |
Price (HK$) |
Target (HK$) |
Rec. |
Market Cap (US$m) |
2014F PE |
2015F PE |
P/B (2014F) |
EV/EBITDA (2014F) |
ROE (2014F) |
Dividend Yield (2014F) |
| CSR-H |
1766 HK |
7.63 |
8.19 |
BUY |
13,576 |
15.2 |
13.1 |
2.1 |
10.9 |
13.9 |
1.9 |
| CNR-H |
6199 HK |
7.53 |
8.90 |
BUY |
10,017 |
12.1 |
11.1 |
1.5 |
7.8 |
12.8 |
2.3 |
| CCC-H |
1800 HK |
5.57 |
8.28 |
BUY |
11,613 |
5.1 |
4.7 |
0.8 |
6.1 |
16.0 |
4.9 |
| CRCC-H |
1186 HK |
7.35 |
8.90 |
BUY |
11,689 |
6.3 |
5.8 |
0.8 |
3.7 |
13.2 |
3.2 |
Daphne (210 HK) - Key Financials
| Metric |
2012 (HK$m) |
2013 (HK$m) |
2014F (HK$m) |
2015F (HK$m) |
2016F (HK$m) |
| Net Turnover |
10,529.1 |
10,446.5 |
11,080.8 |
12,454.2 |
13,915.8 |
| EBITDA |
1,659.1 |
1,102.5 |
863.2 |
1,108.1 |
1,261.3 |
| Operating Profit |
1,398.4 |
789.5 |
511.3 |
670.4 |
774.7 |
| Net Profit (Adj.) |
1,032.3 |
631.9 |
410.4 |
503.5 |
584.1 |
| EPS (cent) |
54.4 |
37.3 |
24.2 |
29.7 |
34.5 |
| PE (x) |
6.9 |
10.1 |
15.5 |
12.6 |
10.9 |
| P/B (x) |
1.3 |
1.2 |
1.2 |
1.1 |
1.0 |
| Net Margin (%) |
9.1 |
3.2 |
4.0 |
4.0 |
4.2 |
| ROE (%) |
21.6 |
6.7 |
8.4 |
9.0 |
9.8 |
Production Costs of Different Oils
| Oil Type |
Low (US$/bbl) |
High (US$/bbl) |
Avg (US$/bbl) |
| Onshore Mid-East |
10 |
35 |
25 |
| Russia |
25 |
70 |
50 |
| Deep Water |
25 |
70 |
50 |
| US Shale Oil |
60 |
80 |
70 |
| Oilsand |
70 |
90 |
80 |
Summary of Key Points
- Oil & Gas Sector: Downgraded to UNDERWEIGHT due to weak demand and surplus supply.
- Railway Sector: Maintained as OVERWEIGHT, with strong overseas expansion and investment.
- Company Performance: Daphne shows a sales pick-up in 3Q14, with continued promotional activity.
- Investment Recommendations: Several companies are recommended as BUY, while others are SELL or HOLD.
- Oil Price Assumptions: Revised to US$85/bbl for 4Q14 and 2015.
- Market Conditions: Overall market indices show mixed performance, with some regions like Singapore and Thailand showing positive trends.
Analysts
