Regional Morning Notes Summary - 24 October 2016
Core Content Overview
This document provides a detailed analysis of stock performance and investment highlights across various markets and companies, including China, Indonesia, Malaysia, and Singapore. It includes company-specific updates, financial metrics, and market indices, with a focus on earnings performance, policy impacts, and valuation recommendations.
Main Points and Key Information
China
Shandong Weigao Group Medical Polymer (1066 HK)
- Re-initiate Coverage: SELL recommendation with a target price of HK$4.48.
- Orthopaedic Business: Expected to miss 2016 earnings target due to intensified competition and loss in Zhejiang tender.
- Single-use Medical Consumables: Facing volume and price pressure from provincial tenders and government restrictions on outpatient infusion.
- Blood Purification: Maintained strong growth with 1H16 revenue growth of 25.8% and 33.0% for consumables and equipment respectively.
- Financials:
- 2016F net profit is expected to be 1,012.8 million RMB, down from 2015's 1,112.7 million RMB.
- EBITDA margin is projected to decline from 28.7% in 2015 to 25.2% in 2016, but stabilize at 28.6% in 2017.
- Net margin is expected to decrease to 15.4% in 2016, but increase to 18.8% in 2017.
- Valuation:
- The company's SOTP valuation suggests a target price of HK$4.48.
- Medical devices manufacturers are trading at lower valuations compared to pharmaceutical companies.
BAIC Motor (1958 HK)
- 3Q16 Results: Earnings surged 1,742% yoy to Rmb1.51b, beating consensus.
- Core Net Profit: Increased by 313% yoy to Rmb1.52b, exceeding expectations.
- Performance Drivers:
- Strong performance from Beijing Benz (net profit up 100% yoy to Rmb1.6b).
- Narrowing net loss for the proprietary brand by 30% yoy.
- Earnings Forecast: Raised 2016-18 EPS forecasts by 12-16% and increased target price to HK$12.50.
- Segment Analysis:
- Beijing Benz: Net profit up 100% yoy; margin assumptions raised to 11.1% for 2016-18.
- Proprietary Brand: Net loss narrowed due to higher margin-yielding SUVs and EVs.
- Beijing Hyundai: Earnings missed expectations, with shared profit at Rmb662m.
Indonesia
Adaro Energy (ADRO IJ)
- Key Takeaways: From a site visit to the Batang power plant.
- Not Rated: No specific recommendation given.
Malaysia
Budget 2017
- Market Impact: Predicted to be neutral, with construction and building material companies expected to benefit.
- O&G Sector: 2017 presents opportunities for large FPSOs, but Yinson may face Shariah compliance risks in November 2016.
Singapore
REITs
- 3Q16 Results: CMT and FCT results were in line, while Cache underperformed.
- Triyards Holdings (ETL SP): BUY recommendation with a target price of S$0.41.
- City Developments (CIT SP): BUY recommendation with a target price of S$10.36.
- Securitising Nouvel 18 for a win-win outcome.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18145.7 |
(0.1) |
0.0 |
(0.6) |
4.1 |
| S&P 500 |
2141.2 |
(0.0) |
0.4 |
(1.1) |
4.8 |
| FTSE 100 |
7020.5 |
(0.1) |
0.1 |
1.6 |
12.5 |
| AS30 |
5513.9 |
(0.2) |
(0.1) |
(0.1) |
3.2 |
| CSI 300 |
3327.7 |
0.3 |
0.7 |
1.6 |
(10.8) |
| FSSTI |
2831.1 |
(0.4) |
0.6 |
(0.9) |
(1.8) |
| HSCEI |
9686.4 |
0.5 |
2.0 |
(1.7) |
0.3 |
| HSI |
23374.4 |
0.3 |
1.5 |
(1.2) |
6.7 |
| JCI |
5409.2 |
0.1 |
0.2 |
0.4 |
17.8 |
| KLCI |
1670.0 |
0.2 |
0.7 |
(0.1) |
(1.3) |
| KOSPI |
2033.0 |
(0.4) |
0.5 |
(1.0) |
3.7 |
| Nikkei 225 |
17184.6 |
(0.3) |
1.9 |
2.6 |
(9.7) |
| SET |
1500.4 |
0.5 |
1.5 |
0.5 |
16.5 |
| TWSE |
9306.6 |
(0.1) |
1.5 |
0.2 |
11.6 |
| BDI |
842 |
(0.8) |
(5.6) |
(10.5) |
76.2 |
| CPO (RM/mt) |
2761 |
0.3 |
3.5 |
(5.3) |
25.5 |
| Brent Crude (US$/bbl) |
52 |
(0.3) |
0.2 |
12.4 |
38.4 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Air China |
753 HK |
5.21 |
8.40 |
61.2 |
| Ping An Insurance |
2318 HK |
40.30 |
47.00 |
16.6 |
| Ciputra Property |
CTRP LJ |
700.00 |
960.00 |
37.1 |
| Indosat |
ISAT LJ |
6,400.00 |
9,500.00 |
48.4 |
| Genting Bhd |
GENT MK |
7.87 |
9.90 |
25.8 |
| Citiv Dev |
CIT SP |
8.77 |
10.36 |
18.1 |
| OCBC |
OCBC SP |
8.49 |
10.30 |
21.3 |
| Bangkok Dusit |
BDMS TB |
21.70 |
31.00 |
42.9 |
| Siam Cement |
SCC TB |
508.00 |
645.00 |
27.0 |
Key Assumptions
| Metric |
2015 |
2016F |
2017F |
| GDP Growth (% yoy) |
2.6 |
2.0 |
2.7 |
| Brent Crude (US$/bbl) |
53.60 |
42 |
54 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Date |
| Tanjung Malim Estate Site Visit |
Malaysia |
25 Oct |
| Ourgame Int'l Group Meeting |
Hong Kong |
25 Oct |
| Greentown Service Group Group Luncheon |
Hong Kong |
28 Oct |
| Ekovest Bhd Corporate Roadshow |
Singapore |
3 Nov |
| Xstep International Holdings Roadshow |
Kuala Lumpur |
15 Nov |
| Metro Pacific Investments Roadshow |
Canada |
24 Nov - 25 Nov |
Summary of Key Financial Metrics for Shandong Weigao Group Medical Polymer
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net Profit (Rmbm) |
1,112.7 |
1,012.8 |
1,354.1 |
1,505.5 |
| EBITDA (Rmbm) |
1,697.2 |
1,656.5 |
2,052.6 |
2,261.1 |
| Operating Profit (Rmbm) |
1,380.8 |
1,320.3 |
1,706.7 |
1,906.0 |
| EPS (fen) |
25.7 |
27.9 |
29.9 |
33.3 |
| PE (x) |
17.6 |
16.1 |
15.1 |
13.5 |
| P/B (x) |
1.9 |
1.8 |
1.6 |
1.5 |
| EV/EBITDA (x) |
10.2 |
10.5 |
8.5 |
7.7 |
| Net Margin (%) |
18.8 |
15.4 |
18.8 |
19.2 |
| Net Debt/(Cash) to Equity (%) |
(25.3) |
(25.9) |
(30.0) |
(32.7) |
| Interest Cover (x) |
38.1 |
27.6 |
68.4 |
75.4 |
| ROE (%) |
10.9 |
9.2 |
11.4 |
11.6 |
Summary of Key Financial Metrics for BAIC Motor (1958 HK)
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net Profit (Rmbm) |
3,319 |
5,792 |
8,095 |
9,556 |
| EBITDA (Rmbm) |
8,266 |
14,104 |
19,409 |
22,179 |
| Operating Profit (Rmbm) |
4,479 |
9,934 |
14,881 |
17,290 |
| EPS (fen) |
43.7 |
76.3 |
106.6 |
125.9 |
| PE (x) |
14.8 |
9.1 |
6.8 |
5.5 |
| P/B (x) |
2.1 |
2.0 |
1.8 |
1.5 |
| EV/EBITDA (x) |
6.2 |
3.6 |
2.6 |
2.3 |
| Net Margin (%) |
3.9 |
5.1 |
5.3 |
5.4 |
| Interest Cover (x) |
10.8 |
22.5 |
33.6 |
45.3 |
| ROE (%) |
9.7 |
15.5 |
18.9 |
19.4 |
Summary of Key Investment Highlights
- Medical Consumables: Face policy headwinds including restrictions on outpatient infusion and reduced vaccine production.
- Orthopaedic Segment: Expected to struggle with growth due to competition and delayed backdoor listing.
- Blood Purification: Strong growth prospects due to rising demand for dialysis in China.
- Earnings Estimates: Weigao's recurring EPS growth is expected to be 8.7% in 2016 and 7.2% in 2017.
- Valuation: The company is undervalued compared to peers, with a SELL recommendation based on SOTP methodology.
