Regional Morning Notes Summary
Core Content Overview
This document provides a summary of market outlook and investment recommendations for various Asian markets and sectors as of Friday, 09 January 2015. It includes key stories, strategy updates, sector analyses, company-specific updates, top picks, and key assumptions.
Key Stories
Indonesia
- JCI has declined by an average of 9% following the last six fuel hikes.
- The strategy for 1H15 is to stay slightly more defensive.
- Recommended buys include: TLKM, BJBR, INTP, SMGR.
China
- Oilfield Services sector is struggling due to falling oil prices.
- Brent oil price forecast for 2015 is cut to $65/bbl and long-term to $70/bbl.
- Underweight recommendation for the sector due to weak demand and potential capex cuts.
Hong Kong
- Chow Tai Fook (1929 HK) is recommended as a BUY with a target price of HK$12.09.
- 3QFY15 performance was hit by protests and weak luxury demand.
- Same-store sales declined by 15% in China and 21% in Hong Kong.
Malaysia
- Foreign outflows are expected to continue, but domestic liquidity may lift market valuation by year-end.
- Top Glove (TOPG MK) is recommended as a BUY with a target price of RM5.08.
- Gaining better acceptance among nitrile glove customers.
Singapore
- Triyards Holdings (ETL SP) is recommended as a BUY with a target price of S$1.04.
- Secured $75m contracts from US-based operators in 1QFY15.
Thailand
- Oil & Gas sector is suggested for bottom fishing.
- PTTGC is highlighted as the best pick.
- Recommendation to upgrade to Market Weight.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17907.9 |
1.8 |
0.5 |
0.3 |
0.5 |
| S&P 500 |
2062.1 |
1.8 |
0.2 |
0.1 |
0.2 |
| FTSE 100 |
6570.0 |
2.3 |
0.1 |
-1.5 |
0.1 |
| AS30 |
5359.4 |
0.5 |
-0.5 |
1.9 |
-0.5 |
| CSI 300 |
3559.3 |
-2.3 |
2.9 |
14.6 |
0.7 |
| FSSTI |
3345.1 |
1.4 |
-0.6 |
0.8 |
-0.6 |
| HSI |
23835.5 |
0.7 |
1.0 |
1.5 |
1.0 |
| JCI |
5211.8 |
0.1 |
-0.3 |
1.7 |
-0.3 |
| KLCI |
1728.1 |
1.1 |
-1.9 |
-0.6 |
-1.9 |
| KOSPI |
1904.7 |
1.1 |
-0.6 |
-3.4 |
-0.6 |
| Nikkei 225 |
17167.1 |
1.7 |
-3.2 |
-3.6 |
-1.6 |
| SET |
1521.6 |
1.4 |
1.6 |
-2.4 |
1.6 |
| TWSE |
9238.0 |
1.7 |
-0.3 |
1.2 |
-0.7 |
| BDI |
724 |
-2.7 |
-7.4 |
-23.9 |
-7.4 |
| CPO (RM/mt) |
2317 |
0.4 |
0.9 |
7.6 |
0.9 |
| Nymex Crude |
49 |
0.3 |
-8.4 |
-22.6 |
-8.4 |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside |
| Sunac China |
1918 HK |
HK$7.49 |
HK$9.29 |
24.0% |
| ICBC |
1398 HK |
HK$5.72 |
HK$6.15 |
7.5% |
| Bank Mandiri |
BMRI J |
Rp10,950.00 |
Rp12,500.00 |
14.2% |
| Gamuda |
GAM MK |
RM5.01 |
RM5.50 |
9.8% |
| DBS |
DBS SP |
S$20.08 |
S$22.68 |
12.9% |
| Pacific Radiance |
PACRA SP |
S$0.78 |
S$1.57 |
101.3% |
| Bangkok Bank |
BBL TB |
HK$192.00 |
HK$276.00 |
43.8% |
| Advanced Info |
ADVANC |
- |
- |
8.0% |
Key Assumptions
| Metric |
2013 (%) |
2014 (%) |
2015F (%) |
| US GDP |
1.9 |
2.7 |
3.2 |
| Euro Zone GDP |
-0.4 |
0.9 |
1.4 |
| Japan GDP |
1.5 |
1.5 |
2.0 |
| Singapore GDP |
3.9 |
3.2 |
3.3 |
| Malaysia GDP |
4.7 |
5.9 |
5.2 |
| Thailand GDP |
2.9 |
1.5 |
3.9 |
| Indonesia GDP |
5.8 |
5.2 |
5.8 |
| Hong Kong GDP |
2.9 |
3.5 |
3.7 |
| China GDP |
7.7 |
7.2 |
7.0 |
| Brent (US$/bbl) |
110 |
100 |
85 |
| CPO (US$/mt) |
736 |
725 |
765 |
| BDI |
1,219 |
1,200 |
1,300 |
Sector Catalysts
- Oil majors to announce 2015 capex plans.
- Global oil price rebound.
Company Update - Chow Tai Fook (1929 HK)
- Recommendation: BUY with target price of HK$12.09.
- 3QFY15 Performance: Sales fell 10% yoy due to protests and weak luxury demand.
- Same-store sales: Declined by 15% in China and 21% in Hong Kong/Macau.
- Mass-market sales: Showed positive trends.
- Gem-set ASPs: Improved in China.
- Key Risks:
- Slower pick-up in gem-set sales.
- Another round of gold price depreciation.
- Intensifying competition.
- Increased promotional activities.
Investment Strategy
- Indonesia: Stay defensive in 1H15 due to JCI decline.
- Recommended buys: TLKM, BJBR, INTP, SMGR.
- Malaysia: Expect domestic liquidity to support market valuation by year-end.
- Top Glove (TOPG MK): Gaining better acceptance among nitrile glove customers.
Analysts
Peer Comparison (Selected)
| Company |
Ticker |
Recommendation |
Price (HK$) |
Market Cap (US$m) |
Net Profit (HK$m) |
EPS (HK$) |
PE (x) |
| SPT Energy |
1251 HK |
BUY |
1.57 |
310.6 |
300.4 |
0.19 |
6.8 |
| Petro-king |
2178 HK |
SELL |
1.14 |
181.5 |
196.6 |
0.20 |
5.8 |
| Anton |
3337 HK |
SELL |
1.80 |
513.5 |
382.6 |
0.17 |
8.3 |
| COSL |
2883 HK |
HOLD |
13.48 |
13,125.0 |
6,716.0 |
1.49 |
7.2 |
Valuation Highlights
- Chow Tai Fook: Valued at 15x FY5F PE, which is a 10% discount to its historical average.
- COSL: Target price cut to HK$15.50, or 8x 2015F PE, in line with its historical average.
- Petro-king: Valued at 0.5x 2015F P/B due to loss-making status and high liquidity risk.
- Anton: Valued at 1x 2015F P/B, with a target price of HK$1.30.
Outlook and Risks
- Chow Tai Fook: Expect 4QFY15 performance to be similar to 3QFY15 in Hong Kong, but improve in China.
- Key Risks:
- Slower pick-up in gem-set sales.
- Gold price depreciation.
- Intensifying competition.
- Increased promotional activities.
Summary
- The report emphasizes defensive strategies in Indonesia and weakness in China's oilfield services.
- Chow Tai Fook is highlighted as a BUY due to improving gem-set ASPs and positive mass-market trends.
- Top Glove and Triyards Holdings are recommended for growth potential.
- Oil price declines are expected to pressure OFS and delay unconventional resource development.
- JCI is expected to decline in 1H15 but recover by end-2015.
- Corporate events include the Regional Oil & Gas Conference and Indosat Roadshow.
