20180704-大华继显-Regional_Morning_Notes_22页_864kb

Regional Morning Notes Summary - 04 July 2018

Core Content Overview

This document provides a summary of market insights and recommendations for various regions, focusing on the gaming sector in Macau and the banking sector in Indonesia. It includes analysis of sector performance, key indicators, corporate events, and investment strategies.

Main Points

Macau Gaming Sector

• Share Price Volatility: The gaming sector in Macau is seen as a good opportunity to accumulate after recent share price volatility.
• EBITDA Forecast: The sector's 2018-19 EBITDA is upgraded by 18% and 23%, respectively, due to stronger GGR growth (17% yoy) and better margin expansion.
• Market Weight: The sector is maintained at MARKET WEIGHT as GGR growth is expected to moderate in 2019.
• Top Picks:
  • Galaxy Entertainment Group (0027 HK): BUY recommendation with a target price of HK$75.00 (32.0% upside).
  • Sands China (1928 HK): BUY recommendation with a target price of HK$52.00 (32.1% upside).
  • SJM Holdings (880 HK): BUY recommendation with a target price of HK$13.50 (48.5% upside).
• Performance Highlights:
  • GGR Growth: Macau's GGR in June fell 11.8% mom but grew 12.5% yoy to MOP22.5b.
  • VIP and Mass Market: VIP growth is expected to slightly underperform mass market growth in 2H18 due to macroeconomic slowdown.
  • Non-Gaming Revenue: Expected to grow by 9% in 2018F, contributing to sector diversification.
• Catalysts:
  • Positive outlook due to property price growth and PPI inflation.
  • Potential impact from Hainan's development as a resort and casino hub.
  • Concession licensing changes may lead to more competitive offerings and higher capital commitments for non-gaming facilities.

Indonesia Banking Sector

• New LTV Regulation: A step in the right direction, allowing 0% down payment under certain conditions.
• Market Impact: The regulation is expected to benefit all income classes, particularly first-time homebuyers.
• Market Weight: The sector is maintained at MARKET WEIGHT.
• Top Picks:
  • Bank Negara (BBNI IJ): BUY recommendation with a target price of Rp10,800 (3.8% dividend yield).
  • Bank Mandiri (BMRI IJ): BUY recommendation with a target price of Rp8,850.
• Key Observations:
  • Loan Growth: The impact on mortgage loan growth may not be significant, but the regulation could sustain it.
  • Risk Appetite: The success of the regulation depends on banks' willingness to take on associated risks.
  • Collateral and Risk Management: Banks may still require collateral, and the new regulation may not significantly impact asset quality.
  • Corporate Clients: BBNI is highlighted for its exposure to corporate clients and salary-linked loans.

Key Information

GDP Growth Forecasts

• China: 6.9% (2017), 6.4% (2018F), 6.2% (2019F)
• Indonesia: 5.1% (2017), 5.3% (2018F), 5.4% (2019F)
• Malaysia: 5.9% (2017), 5.0% (2018F), 5.3% (2019F)

Market Indices Performance (as of 03 Jul 18)

Key Assumptions

• GGR Growth: Expected to be around 17% for 2018, with potential moderation in 2019.
• PPI Inflation: Strong correlation with VIP GGR, with a recent increase to 4.1% yoy in May 2018.
• Property Prices: A leading indicator for GGR growth, with recent increases in China.
• Loan Growth: Property loans account for 9% of total loans in 1Q18, with growth of 11.4% yoy in 2017/1Q18.

Corporate Events

• Roadshow with UOB SP: Taipei, 2-3 Jul
• Analyst Presentation: Taipei, 4-5 Jul
• Luncheon with Luk Fook Holdings International: Hong Kong, 5 Jul
• Roadshow with Jacobson Pharma Corp: Shanghai, 10 Jul
• Group Luncheon with CIMC-TianDa Holdings Company Limited: Hong Kong, 11 Jul
• Group Luncheon with China Yongda Automobiles Services Holdings: Hong Kong, 12 Jul
• Group Meeting with China Resources Gas Group: Hong Kong, 12 Jul
• Industry 4.0 Conference: Kuala Lumpur, 26 Jul

Risks

• Hainan Development: Could act as a threat to Macau's non-gaming diversification.
• Concession Licensing: May require more capital for non-gaming facilities.
• UnionPay POS Crackdown: May tighten capital control, but not significantly impact GGR.
• Banks' Risk Appetite: Will determine the success of the new LTV regulation.
• Asset Quality: While not a major risk now, could be affected if banks increase lending to lower income segments.

Valuation/Recommendation

• Macau Gaming Sector: Maintain MARKET WEIGHT. Recent pull-back offers a buying opportunity, with stocks trading at mean to -0.5SD below five-year EV/EBITDA multiples.
• Indonesia Banking Sector: Maintain MARKET WEIGHT. The sector is under pressure from external factors, but the new LTV regulation could provide long-term benefits.