20160705-大华银行-Regional_Morning_Notes_14页_765kb

Regional Morning Notes Summary

Core Content Overview

This document provides a summary of economic and market updates for several Asian regions, including China, Malaysia, Singapore, and Thailand, along with key financial insights on specific companies and market indices. It includes forecasts, performance analyses, and investment recommendations for the period around 5 July 2016.

Main Points by Region

China

• Economic Growth: Expected to remain in an L-shaped recovery, with GDP growth potentially declining to 6.6% yoy in 2Q16 from 6.7% yoy in 1Q16. This is attributed to the slowdown in industrial production and private fixed asset investment (FAI), which are affected by supply-side reforms and deleveraging.
• Industrial Production: Expected to grow at 5.9% yoy in June, down from 6.0% yoy in May, due to the elimination of overcapacity.
• Fixed Asset Investment (FAI): Projected to grow at 9.4% yoy for 1H16, as the private sector remains under pressure.
• Trade: Exports are expected to decline by 3.5% yoy in June, with the risk of Brexit and volatile exchange rates impacting foreign demand. Imports are forecasted to drop by 7.5% yoy due to the devaluation of the renminbi and higher global commodity prices.
• Inflation: CPI inflation is expected to remain stable at 2.0% yoy, while PPI deflation is projected to decrease to -2.2% yoy from -2.8% yoy in May.
• Money Supply: M2 growth is forecasted to slow to 11.5% yoy in June, compared to a high base in the previous month.
• New Loans: Expected to reach Rmb1.1t in June, driven by government infrastructure spending and a strong property market.
• Currency Outlook: The renminbi is projected to gradually depreciate to 7.10/US$ by the end of 2017 due to long-term capital outflows and financial sector adjustments.
• Valuation: The analyst maintains a HOLD recommendation with a target price of RM8.70, based on 23x 2016F PE, aligning with regional peers.

Malaysia

• Bursa Malaysia: The exchange is expected to show a slight softness in 2Q16 earnings due to a decline in average daily value (ADV) driven by Brexit-related market volatility. ADV has since recovered to RM1.71b post-Brexit.
• Earnings Forecast: The net profit for 2Q16 is forecasted at RM51m, indicating a 3% yoy growth, but potential weakness is noted.
• Valuation: The analyst maintains a HOLD with a target price of RM8.70, and an upside of +1.2%.
• Financials: The 12-month rolling ADV is slightly below the full-year forecast, but is expected to recover as market sentiment improves.

Singapore

• Sembcorp Industries (SCI SP): The company's performance in India's power sector is described as "spotty", with ongoing issues in Unit #2 of its TPCIL plant. Despite maintenance, the unit has experienced outages and lower plant load factors (PLF).
• Earnings: The analyst has slashed India's earnings by 42-46% and lowered the target price to S$3.35, maintaining a BUY recommendation.
• Performance: TPCIL reported an average PLF of 69% in 2Q16, but had a low of 6% due to technical issues. The unit was still offline at 0% PLF as of 29 June.
• Valuation Metrics: The company is valued at S$2.91, with a target price of S$3.35 and an upside of +15.1%. The PE ratio is 9.8x, and the P/B ratio is 0.9x.
• Financials: Net profit is expected to be S$529m for 2016F, with EBITDA growth of 6.4% yoy. The EV/EBITDA ratio is 9.0x.

Thailand

• PTT Exploration & Production (PTTEP TB): The analyst upgrades to BUY, suggesting a focus on M&A deals as a strategic move.
• Performance: The company is expected to benefit from increased market activity and M&A opportunities, which are seen as growth drivers.

Key Indices

Top Picks (BUY)

• Air China (HK:753) – CP: 5.39, TP: 10.20, Pot. +/-: +89.2%
• Ping An Insurance (HK:2318) – CP: 34.75, TP: 45.00, Pot. +/-: +29.5%
• Bank BJB (J:BJBR) – CP: 1,080.00, TP: 1,170.00, Pot. +/-: +8.3%
• Genting Bhd (MK:GENT) – CP: 8.05, TP: 10.40, Pot. +/-: +29.2%
• City Developments (SP:CIT) – CP: 8.12, TP: 10.86, Pot. +/-: +33.7%
• DBS (SP:DBS) – CP: 15.78, TP: 19.30, Pot. +/-: +22.3%
• Bangkok Dusit (TB:BDMS) – CP: 23.90, TP: 27.70, Pot. +/-: +15.9%
• Siam Cement (TB:SCC) – CP: 476.00, TP: 630.00, Pot. +/-: +32.4%

Top Picks (SELL)

• Hartalega (MK:HART) – CP: 4.45, TP: 3.10, Pot. +/-: -30.3%
• Sembcorp Marine (SP:SMM) – CP: 1.58, TP: 0.90, Pot. +/-: -43.0%

Key Assumptions

Corporate Events

Summary of Key Financials

Bursa Malaysia

• Net Profit (2016F): RM204m
• EBITDA (2016F): RM313m
• PE (2016F): 22.4x
• Dividend Yield (2016F): 4.2%
• Net Margin (2016F): 37.5%
• Net Debt/Cash to Equity (2016F): -41.3%

Sembcorp Industries

• Net Profit (2016F): S$529m
• EBITDA (2016F): S$1,331m
• PE (2016F): 9.8x
• Dividend Yield (2016F): 3.6%
• Net Margin (2016F): 6.4%
• Net Debt/Cash to Equity (2016F): -74.7%

Conclusion

The report highlights a cautious outlook for China's economy, with an L-shaped recovery expected to persist into 2017. Malaysia's Bursa shows signs of recovery post-Brexit, while Sembcorp Industries faces challenges in its Indian operations. The analyst recommends BUY for several stocks, including PTT Exploration & Production and Sembcorp Industries, while SELL is advised for Hartalega and Sembcorp Marine. Key indices show mixed performance, with some experiencing growth and others facing declines.