Regional Morning Notes Summary - 28 November 2014
Core Content Overview
This document provides an analysis of the regional financial markets, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand. It outlines market updates, investment recommendations, key indices, and sector-specific insights. The summary includes the current outlook, corporate updates, and financial data for various companies across the regions.
Main Points by Region
China
- Market Sentiment: Investors are cautiously optimistic about the China market due to fading concerns over anti-corruption and a hard landing scenario.
- Energy & Utilities Sector:
- Oil & Gas (O&G): O&G and oilfield service stocks are under pressure due to bearish views on oil prices. Most investors expect Brent to drop to $70/bbl, leading to potential earnings pressure. Both CNOOC and PetroChina are recommended for SELL.
- City Gas Distributors: Uncertainty over natural gas pricing due to conflicting signals from PetroChina and local media. The sector is rated OVERWEIGHT, with potential for margin improvement if gas prices are revised upward.
- IPPs (Independent Power Producers): Still a favored sector due to the stable earnings in a low oil price environment. SOE reform is a strong catalyst for margin improvement.
- Top Picks:
- CPI (2380 HK): Highest capacity growth potential, with a BUY rating and target price of HK$5.10.
- CR Gas (1193 HK): BUY rating with a target price of HK$29.60.
- SPT Energy (1251 HK): BUY rating with a target price of HK$4.50, given its better earnings stability and geographic advantage in Xinjiang.
- Key Catalysts: SOE reform, potential gas price revisions, and OPEC's 2015 production target.
- Earnings Outlook: Lower-than-expected gross margins due to pricing wars in imported luxury cars, leading to revised net profit forecasts for 2014–2016.
Indonesia
- XL Axiata (EXCL IJ/HOLD/Rp5,075/Target: Rp5,380):
- Accelerating 3G rollout post-acquisition of Axis.
- Market remains cautious, but potential for rebound is noted.
Malaysia
- Magnum (MAG MK/HOLD/RM2.91/Target: RM2.80):
- 3Q14 results hit by higher tax rates; 2015 DPS forecast cut and rating downgraded to HOLD.
Singapore
- Telecommunications Sector:
- Provides attractive yields and quality earnings, making it a compelling investment area.
Thailand
- Small-Cap Plays:
- Strong interest in renewable energy stocks, indicating a shift in investment focus toward sustainable energy.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17827.8 |
0.1 |
0.8 |
6.0 |
7.5 |
| S&P 500 |
2072.8 |
0.3 |
1.2 |
5.7 |
12.1 |
| FTSE 100 |
6723.4 |
-0.1 |
0.7 |
5.7 |
-0.4 |
| AS30 |
5315.9 |
-1.2 |
0.5 |
-2.2 |
-0.7 |
| CSI 300 |
2754.5 |
1.2 |
8.6 |
14.0 |
18.2 |
| FSSTI |
3341.0 |
-0.3 |
0.8 |
4.0 |
5.5 |
| HSCEI |
11013.9 |
-0.3 |
6.1 |
4.4 |
1.8 |
| HSI |
24004.3 |
-0.4 |
2.8 |
2.1 |
3.0 |
| JCI |
5145.3 |
0.2 |
1.0 |
2.9 |
20.4 |
| KLCI |
1829.9 |
-0.7 |
0.4 |
0.2 |
-2.0 |
| KOSPI |
1982.1 |
0.1 |
0.9 |
2.9 |
-1.5 |
| Nikkei 225 |
17248.5 |
-0.8 |
-0.2 |
12.5 |
5.9 |
| SET |
1599.8 |
0.6 |
2.0 |
2.8 |
23.2 |
| TWSE |
9165.3 |
0.5 |
1.0 |
4.5 |
6.4 |
| BDI |
1187 |
-4.2 |
-10.9 |
-7.6 |
-47.9 |
| CPO (RM/mt) |
2202 |
0.7 |
-1.4 |
0.7 |
-14.4 |
| Nymex Crude (US$/bbl) |
69 |
-6.7 |
-9.1 |
-15.6 |
-30.2 |
Top Picks
| Company |
Ticker |
Current Price (Icy) |
Target Price (Icy) |
Pot. +/- |
| Sunac China |
1918 HK |
7.04 |
9.29 |
32.0 |
| ICBC |
1398 HK |
5.18 |
6.15 |
18.7 |
| Bank Mandiri |
BMRI LJ |
10,475.00 |
12,500.00 |
19.3 |
| Gamuda |
GAM MK |
5.28 |
5.50 |
4.2 |
| DBS |
DBS SP |
19.70 |
22.68 |
15.1 |
| Pacific Radiance |
PACRA SP |
0.91 |
1.57 |
72.5 |
| Bangkok Bank |
BBL TB |
202.00 |
276.00 |
36.6 |
| Advanced Info |
ADVANC |
240.00 |
270.00 |
12.5 |
Sell Recommendation
| Company |
Ticker |
Current Price |
Target Price |
Pot. +/- |
| UMWH Holdings |
UMWH MK |
11.34 |
10.00 |
-11.8 |
Key Assumptions
| Country/Commodity |
2013 |
2014F |
2015F |
| US GDP (% yoy) |
1.9 |
2.7 |
3.2 |
| Euro Zone GDP (% yoy) |
-0.4 |
0.9 |
1.4 |
| Japan GDP (% yoy) |
1.5 |
1.5 |
2.0 |
| Singapore GDP (% yoy) |
3.9 |
3.2 |
3.3 |
| Malaysia GDP (% yoy) |
4.7 |
5.9 |
5.2 |
| Thailand GDP (% yoy) |
2.9 |
1.5 |
3.9 |
| Indonesia GDP (% yoy) |
5.8 |
5.2 |
5.8 |
| Hong Kong GDP (% yoy) |
2.9 |
3.5 |
3.7 |
| China GDP (% yoy) |
7.7 |
7.2 |
7.0 |
| Brent (US$/bbl) |
110 |
100 |
85 |
| CPO (US$/mt) |
736 |
725 |
765 |
| BDI |
1,219 |
1,200 |
1,300 |
Corporate Events
| Event |
Venue |
Date |
| Indonesia Health Care Analyst Presentation |
Singapore |
1 Dec |
| Regional 1H15 Strategy Forum |
Kuala Lumpur |
3 Dec |
| Greater China 1H15 Strategy Analyst Presentation |
Singapore |
4 Dec |
China Zhengtong Auto Services (1728 HK)
- Company Overview: Specialises in luxury car retail and maintenance services.
- Stock Performance: Fell 18% over the past couple of months due to concerns over weak margins in 2H14.
- Earnings Outlook:
- 2014–2016 net profit forecasts revised down by 8%, 15%, and 14% respectively.
- Earnings growth expected at 8%, 19%, and 15% for 2014–2016.
- Recommendation: Maintain BUY with a revised target price of HK$5.70.
- Valuation: Trading at 6.5x 2015F PE, which is 2SD below its historical mean of 12x.
- Growth Drivers:
- Strong service business.
- New car loan business with Dongfeng Motor expected to start in early 2015.
Key Financials (China Zhengtong)
| Metric |
2012 |
2013 |
2014F |
2015F |
2016F |
| Net turnover (Rmbm) |
27,649 |
29,840 |
33,071 |
35,706 |
39,629 |
| EBITDA (Rmbm) |
1,622 |
1,847 |
2,123 |
2,425 |
2,720 |
| Operating profit (Rmbm) |
1,259 |
1,548 |
1,748 |
1,964 |
2,180 |
| Net profit (Rmbm) |
604 |
837 |
901 |
1,074 |
1,240 |
| EPS (fen) |
27 |
38 |
41 |
49 |
56 |
| PE (x) |
12.0 |
8.4 |
7.7 |
6.5 |
5.6 |
| P/B (x) |
1.1 |
0.9 |
0.8 |
0.8 |
0.7 |
| Dividend Yield (%) |
- |
2.5 |
2.6 |
3.1 |
3.6 |
| Net margin (%) |
2.2 |
2.8 |
2.7 |
3.0 |
3.1 |
Analyst Contact
Summary of Key Recommendations
- BUY Recommendations:
- SPT Energy (1251 HK)
- CPI (2380 HK)
- CR Gas (1193 HK)
- ENN Energy (2688 HK)
- Huaneng (902 HK)
- Datang (991 HK)
- Huadian (1071 HK)
- China Power (2380 HK)
- HOLD Recommendations:
- Sinopec (386 HK)
- Magnum (MAG MK)
- Advanced Info (ADVANC)
- China Gas (384 HK)
- HKCG (3 HK)
- SELL Recommendations:
- CNOOC (883 HK)
- PetroChina (857 HK)
- UMWH Holdings (UMWH MK)
- Petro-king (2178 HK)
- Antonoil (3337 HK)
Sector Ratings
| Sector |
Rating |
| Oil & Gas |
UNDERWEIGHT |
| Oilfield Services |
UNDERWEIGHT |
| City Gas Distributor |
OVERWEIGHT |
| IPPs |
MARKET WEIGHT |
Conclusion
The document highlights the cautious outlook on oil and gas sectors due to falling oil prices, while noting potential for rebounds in 2H15. It identifies city gas distributors and IPPs as positive investment opportunities, especially in the context of SOE reform. China Zhengtong Auto Services is highlighted as a bottom fishing opportunity, with its service business and new car loan venture expected to drive future growth. The key indices reflect mixed performance, with China showing strong growth and the US and Euro Zone showing more moderate or negative trends. The report also underscores the importance of tracking corporate events and adjusting investment strategies accordingly.
