20170605-大华继显-Regional_Morning_Notes_19页_821kb

Regional Morning Notes Summary - 05 June 2017

Core Content Overview

The document provides a summary of financial updates and investment recommendations for several markets and companies in Southeast Asia and beyond, including China, Indonesia, Malaysia, Singapore, and Thailand. It highlights key financial metrics, corporate events, and strategic initiatives for each entity, with a focus on growth expectations, valuation, and risk factors.

China

Jacobson Pharma (2633 HK/BUY/HK$1.77/Target: HK$2.26)

• Key Update: Jacobson Pharma is experiencing a huge demand for Po Chai pills in mainland China, which has led to higher-than-expected sales growth in FY18.
• Delays: The delivery of Po Chai pills to mainland China was delayed to April 2017, later than the initial expectation of January 2017.
• Sales Forecast: FY18 sales for Po Chai pills in mainland China are expected to reach HK$30m (FY16: HK$15m).
• Price Mark-Up: The company implemented an 8% price mark-up for its Non-Hospital Authority (non-HA) segment in FY17 to boost generic drug sales.
• M&A: Medipharma and Ho Chai Kung were consolidated in Dec 2016 and Jan 2017 respectively, expected to contribute HK$14.9m and HK$48.3m to FY18 net profit.
• Financial Impact: Higher finance and M&A costs in FY17 will impact earnings, but the company is maintaining a BUY rating with a revised target price of HK$2.26.
• Valuation: Based on SOTP methodology, the target price reflects 19.0x 2017F PE for proprietary medicine and 15.0x 2017F PE for generic drugs.
• Stock Performance: The company is currently trading at 12.7x/10.3x 2017/18F PE, representing a 0.38x 2017F PEG.
• Index Inclusion: Jacobson Pharma has been added to the MSCI Hong Kong Micro Cap Index effective 1 Jun 17.

Indonesia

Fast Food Indonesia (FAST IJ/BUY/Rp1,500/Target: Rp1,750)

• Performance: Despite weak consumer purchasing power in 1Q17, FAST recorded 3.6% SSS growth and opened five of the 35 planned new stores.
• Growth Expectations: Revenue is expected to grow 8.4% yoy in 2017, and EPS is forecasted to increase by 15.4% yoy.
• New Store Openings: The company plans to open 35 new stores in 2017, including 10 KFC box outlets, aiming to reach 610 stores by end-17.
• Cost Management: Improved cost management and lower raw material prices are expected to drive margin expansion.
• Gross Margin: Expected to expand by 50bp yoy to 63% in 2017.
• Operating Margin: Expected to increase by 30bp yoy to 4.6%.
• Net Margin: Expected to expand by 30bp yoy to 3.8%.
• Valuation: The stock trades at 14x 2017-18F PE average, which is -1SD below its historical average. Target price is set at Rp1,750 based on 16.2x average 2017-18F PE.
• Key Risks: Volatility in raw material prices, higher labor and operational costs, competition from independent chains, and weak consumer purchasing power.

Malaysia

Sector & Strategy

• Alpha Picks: Conviction BUYs include Bumi Armada (reinstated), Ekovest, Globetronics, Kerjaya Prospek, VS Industry, and YTL Power. RHB Bank remains a conviction SELL.
• O&G Sector: Petronas' 1Q17 cash flow recovered to a strong level last seen in 4Q14. The report prefers internationally competitive companies such as Bumi Armada, Yinson, and Dialog.

Singapore

Alpha Picks & Strategy

• Alpha Picks: Conviction BUYs include Memtech, replacing Food Empire after its 31% return in May. SIA is added as a short candidate due to recent price bounce despite challenging prospects.
• Sector Focus: The strategy highlights adjustment amid top-heavy valuations.

Thailand

Media Sector

• Sector Update: Media firm earnings have bottomed out for the year in 1Q17. The sector is upgraded to MARKET WEIGHT.

Key Indices

Top Picks

Key Assumptions

Corporate Events

• Analyst Presentation on Singapore Property & REITs Strategy: 1 Jun - 6 Jun, US
• Group meeting with Fortune REIT: 7 Jun, Hong Kong
• Roadshow with Meidong Auto Holdings: 8 Jun, Taipei
• Roadshow with Tony Electronics Holdings: 8 Jun - 9 Jun, Taipei
• Roadshow with GFPT Public Company: 8 Jun - 9 Jun, Hong Kong
• Site visit to Auto Sector Companies: 13 Jun, Shanghai
• Roadshow with PT Siloam Int'l Hospital: 5 Jun - 16 Jun, Canada
• Analyst Presentation on Spore Strategy: 15 Jun - 16 Jun, Kuala Lumpur
• Luncheon with United Overseas Bank: 3 Jul, Singapore
• Sarawak Oil Palms Site Visit: 3 Jul - 5 Jul, Sarawak
• New Economy Conference 2017: 11 Jul, Kuala Lumpur
• Roadshow with Top Glove Corporation: 5 Sep - 12 Sep, US/Canada

Summary of Key Financials and Metrics

Jacobson Pharma (HK)

• Net Turnover (HK$m): FY15: 948, FY16: 1,084, FY17F: 1,221, FY18F: 1,408, FY19F: 1,601
• EBITDA (HK$m): FY15: 192, FY16: 255, FY17F: 268, FY18F: 363, FY19F: 428
• Operating Profit (HK$m): FY15: 139, FY16: 186, FY17F: 188, FY18F: 277, FY19F: 336
• Net Profit (HK$m): FY15: 102, FY16: 146, FY17F: 161, FY18F: 275, FY19F: 324
• EPS (Fen): FY15: 5.6, FY16: 8.0, FY17F: 10.1, FY18F: 15.1, FY19F: 17.8
• PE (x): FY15: 31.5, FY16: 22.1, FY17F: 17.5, FY18F: 11.7, FY19F: 9.9
• P/B (x): FY15: 3.4, FY16: 3.5, FY17F: 2.0, FY18F: 1.8, FY19F: 1.5
• EV/EBITDA (x): FY15: 16.8, FY16: 12.6, FY17F: 12.0, FY18F: 8.9, FY19F: 7.5
• Dividend Yield (%): FY15: 1.0, FY16: 8.6, FY17F: 1.7, FY18F: 2.1, FY19F: 2.5
• Net Margin (%): FY15: 10.8, FY16: 13.4, FY17F: 13.1, FY18F: 19.5, FY19F: 20.2
• Debt to Equity (%): FY15: 48.4, FY16: 30.2, FY17F: 30.0, FY18F: 29.7
• Net Debt/(Cash) to Equity (%): FY15: 39.3, FY16: (3.2), FY17F: 0.7, FY18F: (5.8)
• Interest Cover (x): FY15: 101.2, FY16: 38.3, FY17F: 46.4, FY18F: 48.9
• ROE (%): FY15: 15.6, FY16: 12.7, FY17F: 15.9, FY18F: 16.6

Fast Food Indonesia (Rp)

• Net Turnover (Rpb): 2015: 4,475, 2016: 4,883, 2017F: 5,291, 2018F: 5,846, 2019F: 6,435
• EBITDA (Rpb): 2015: 270, 2016: 366, 2017F: 385, 2018F: 429, 2019F: 478
• Operating Profit (Rpb): 2015: 81, 2016: 183, 2017F: 206, 2018F: 234, 2019F: 265
• Net Profit (Rpb): 2015: 105, 2016: 173, 2017F: 199, 2018F: 231, 2019F: 266
• EPS (Rp): 2015: 52.6, 2016: 86.5, 2017F: 99.9, 2018F: 116.0, 2019F: 133.3
• PE (x): 2015: 28.5, 2016: 17.3, 2017F: 15.0, 2018F: 12.9, 2019F: 11.3
• P/B (x): 2015: 2.7, 2016: 2.4, 2017F: 2.3, 2018F: 2.1, 2019F: 1.9
• EV/EBITDA (x): 2015: 9.0, 2016: 6.6, 2017F: 6.3, 2018F: 5.7, 2019F: 5.1
• Dividend Yield (%): 2015: 4.0, 2016: 2.7, 2017F: 4.4, 2018F: 5.0, 2019F: 5.9
• Net Margin (%): 2015: 2.3, 2016: 3.5, 2017F: 3.8, 2018F: 4.0, 2019F: 4.1
• Net Debt/(Cash) to Equity (%): 2015: (39.3), 2016: (48.2), 2017F: (42.8), 2018F: (44.6), 2019F: (46.7)
• ROE (%): 2015: 9.1, 2016: 14.8, 2017F: 15.7, 2018F: 16.8, 2019F: 17.7

Conclusion

The report outlines positive outlooks for several companies across the region, with Jacobson Pharma and Fast Food Indonesia being highlighted as key BUY recommendations. Jacobson Pharma benefits from strong demand for Po Chai pills in China and its strategic M&A, while Fast Food Indonesia is expected to see improved SSS growth and margin expansion due to new store openings and cost control measures. Both companies face certain risks, including raw material price fluctuations and competitive pressures, but their fundamentals and growth prospects are viewed positively.