20151207-大华继显-Regional_Morning_Notes_13页_694kb

报告摘要

Regional Morning Notes Summary - 07 December 2015

Core Content Overview

This document provides an analysis of regional aviation and related sectors, with a focus on China, Indonesia, and Malaysia, as well as broader market indices and stock recommendations. It also includes updates on China Railway Group (CRG), its asset swap with Erju, and its overseas railway projects.

Key Sectors and Updates

Aviation Sector

Regional Airlines & Airports:
- Marketing trip feedback indicated that Chinese carriers are attractive due to strong traffic growth, but concerns over international yield weakness and high USD debt persist.
- Chinese airlines are expected to see a decline in gearing from 2.6x to 1.2x by 2016 due to strong earnings and A-share cash infusion.
- Regional airports are seen as a defensive and cash-generative sector.
- Stock Picks: Air China (753 HK), China Eastern (670 HK), China Southern (1055 HK), Beijing Capital International Airport (694 HK), Malaysia Airports Holdings (MAHB MK) are recommended as BUY.
- SIAEC is recommended as SELL due to operational challenges and weak performance.

Oil & Gas (O&G) Sector (Malaysia)

3Q15 results showed divergence from the oil price downtrend.
Low oil prices and earnings risks increase downside potential.
No specific stock picks mentioned.

Market Indices Performance

Index	Prev Close	1D %	1W %	1M %	YTD %
DJIA	17847.6	2.1	0.3	(0.4)	0.1
S&P 500	2091.7	2.1	0.1	(0.4)	1.6
FTSE 100	6238.3	(0.6)	(2.1)	(1.8)	(5.0)
AS30	5242.2	0.8	0.5	(0.5)	(2.7)
CSI 300	3677.6	(1.9)	3.4	(3.1)	4.1
FSSTI	2879.1	(0.2)	0.7	(4.4)	(14.4)
HSCEI	9834.3	(1.5)	(0.2)	(6.8)	(17.9)
HSI	22235.9	(0.8)	0.8	(2.8)	(5.8)
JCI	4508.5	(0.6)	(1.1)	(1.3)	(13.7)
KLCI	1667.9	(0.4)	(0.9)	(1.1)	(5.3)
KOSPI	1974.4	(1.0)	(2.7)	(3.3)	3.1
Nikkei 225	19504.5	(2.2)	(1.9)	1.2	11.8
SET	1333.6	(0.5)	(2.2)	(5.7)	(11.0)
BDI	563	(1.9)	(3.1)	(10.8)	(28.0)
CPO	2124	0.0	1.4	(1.7)	(7.6)
Brent Crude	43	(1.9)	(4.1)	(11.5)	(25.0)

Top Picks

Company	Ticker	Recommendation	Share Price	Target Price	Pot. +/- (%)
BUY	Air China	753 HK	6.11	10.60	34.8
BUY	China Eastern	670 HK	4.13	8.20	63.4
BUY	CEA	670 HK	4.13	8.20	63.4
BUY	CSA	1055 HK	5.81	7.70	32.6
BUY	Beijing Capital	694 HK	8.46	11.40	34.8
BUY	MAHB	MAHB MK	5.62	7.20	35.2
BUY	SATS	SATS SP	3.83	4.50	17.4
SELL	SIAEC	SIE SP	3.59	3.30	(8.1)

Key Assumptions

Country	GDP (yoy) 2014	GDP (yoy) 2015F	GDP (yoy) 2016F
US	2.4	2.5	2.5
Euro Zone	0.9	1.5	1.7
Japan	-0.1	0.5	1.5
Singapore	2.9	2.5	2.9
Malaysia	6.0	4.8	4.8
Thailand	0.9	2.7	4.0
Indonesia	5.0	4.8	5.4
Hong Kong	2.5	1.8	1.5
China	7.3	6.5	6.7

Brent (Average)	CPO (US$/mt)	2015F PE	2016F PE
99.45	722	14.8	13.7
56	550	10.2	9.4

Corporate Events

Event	Venue	Begin	Close
Red Star Macalline Roadshow	Shanghai	7 Dec	7 Dec
Singapore O&G Corporate Roadshow	Taipei	8 Dec	9 Dec
Singapore Strategy 2H15 Analyst Presentation	Taipei	10 Dec	11 Dec

China Railway Group (CRG) Update

Asset Swap with Erju:
- CRG's manufacturing business (valued at Rmb11.5b) is being swapped with Erju.
- This transaction is expected to slightly dilute CRG's earnings but is a catalyst for its growth.
- CRG's earnings for 2015F are estimated at Rmb11,068.2m, with a target price of HK$7.20.
- Entry Price: HK$6.42, Upside: +12.1%.
Overseas Railway Projects:
- Expected to drive new orders and growth in 2016.
- OBOR (One Belt One Road) is a major catalyst for overseas orders.
- Key Projects:
  - China-Laos Railway (US$6.8b, 5 years, CRG, CRRC)
  - China-Thailand Railway (US$12.2b, 3 years, CRG, CRCC, CRRC)
  - Jakarta-Bandung Railway (US$5.5b, 3 years, CRG, CRRC)
  - US Xpress West HSR (US$12.7b, completed by 2022, CRG, CRRC, China State Con.)
  - Moscow-Kazan HSR (US$19.0b, completed by 2018, CRG, CRRC)
  - Hungary-Serbia Railway (US$1.6b, 2 years, CRG, CRC Inter., CRRC)

Earnings and Valuation

CRG's 2015F Net Profit: Rmb11,068.2m, with a revised forecast of Rmb12,960m (+1.6%).
2016F Net Profit: Rmb11,962.5m.
2015F EBITDA: Rmb27,056.9m.
2016F EBITDA: Rmb29,309.6m.
Valuation:
- CRG's 2016F PE is at 9.4x, which is fair.
- Compared to peers like China Communications Construction (CCC) and China Railway Construction (CRCC), CRG is valued higher.
- Target Price: HK$7.20, based on 10.5x 2016F PE.

Risks

Steep depreciation in the renminbi.
Sharp rise in fuel prices.
Potential competition and market saturation in the aviation sector.

Financial Highlights

CRG's 2015F Net Profit: Rmb11,068.2m.
2016F Net Profit: Rmb11,962.5m.
2015F EBITDA Margin: 4.4x.
2016F EBITDA Margin: 4.6x.
Net Margin: 1.8% in 2015F, expected to rise to 1.9% in 2016F.
ROE: 11.1% in 2015F, expected to remain stable in 2016F.
Net Debt/Equity: 113.4% in 2015F, expected to decline to 106.7% in 2016F.

Summary of Key Points

Aviation Sector:
- Chinese airlines are preferred due to strong earnings and low competition.
- Regional airports are seen as defensive and cash-generative.
- SATS is recommended as a top buy, while SIAEC is a top sell.
China Railway Group:
- Asset swap with Erju is a catalyst for growth.
- Overseas projects, especially OBOR, are expected to drive new orders and earnings.
- Valuation is fair at 9.4x 2016F PE.
- Gearing is expected to decline significantly due to strong earnings and cash inflow.
Market Indices:
- Mixed performance across regions, with some indices showing positive growth and others declining.
Stock Picks:
- BUY recommendations include Air China, China Eastern, Beijing Capital, and MAHB.
- SELL recommendations include SIAEC.