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报告摘要

Regional Morning Notes Summary - 10 October 2018

Core Content

This document provides a summary of market updates and investment recommendations for various regions and sectors as of 10 October 2018. It includes insights on the gaming sector in Macau, updates on key companies in Indonesia, Malaysia, Singapore, and Thailand, along with industry forecasts, valuation metrics, and corporate events.

Main Points

Gaming - Macau

Golden Week Optimism Fades Away: Despite strong initial visitor growth, the sentiment turned negative in the final days of the Golden Week due to a slowdown in growth rates.
Traffic Performance: Total visitor arrivals increased by 7.2% YoY to 895,000, with Chinese visitors rising by 14% YoY to 735,000. However, the growth rate declined after the first few days.
GGR Forecast: The GGR for October 18 is expected to rebound to high single-digit growth, but it will weaken in November-December 18. The total GGR for 2018 is forecasted to grow by 14.3% YoY.
Sector Outlook: The macroeconomic outlook for the second half of 2018 remains uncertain due to the risk of a prolonged trade war, slowing business confidence, and the renminbi devaluation. The market weight is maintained due to the low valuations.
Top Picks: Sands China (1928 HK) is the most defensive due to its mass-market focus and high dividend yield (5%). Galaxy Ent (0027 HK) is also recommended for its premium-mass facilities and strong execution. Wynn Macau (1128 HK) is considered the biggest downside due to its heavy VIP exposure.

Indonesia

Nippon Indosari Corpindo (ROTI IJ): Current +3SD valuation fully priced in an 8% sales return. The company has improved operations with new forecasting and merchandising tools, and increased control over distributors. However, the stock is still considered expensive and the recommendation is to SELL, with a raised target price to Rp860 from Rp700.
Sales Return: Sales return fell to 7% in August 2018 from 25.9% in Q1 2018 and is expected to remain low. The company is re-launching a cheaper fighting brand (BOTI) to compete with other brands.
Profitability: The EBITDA margin has decreased, and the company is expected to report losses in the Philippines expansion in 2018 and 2019.

Malaysia

Tenaga Nasional (TNB MK): The stock is recommended to be BUY due to earnings predictability, undemanding valuations, and a 4.7% dividend yield.

Singapore

Singapore Telecommunications (ST SP): Recommended to BUY with a target price of S$3.94. The company is leveraging the cohesive strength of regional mobile associates.

Thailand

Advanced Info Service (ADVANC TB): Recommended to BUY with a target price of Bt220. The company is expected to have a promising earnings outlook for 3Q18.

Key Information

Indices Performance

Index	Previous Close	1D %	1W %	1M %	YTD %
DJIA	26430.6	-0.2	-1.3	+2.2	+6.9
S&P 500	2880.3	-0.1	-1.5	+0.1	+7.7
FTSE 100	7237.6	+0.1	-3.2	-0.6	-5.9
AS30	6164.0	+0.1	-1.6	-1.4	-0.1
CSI 300	3288.7	-0.1	-2.7	+1.8	-18.4
FSSTI	3166.6	-0.5	-2.3	+1.5	-6.9
HSI	26172.9	-0.1	-3.5	-1.7	-12.5
KLCI	1774.2	-0.1	-1.3	-1.4	-1.3
Nikkei 225	23469.4	-1.3	-3.2	+4.9	+3.1
BDI	1530	-0.4	-2.5	+3.2	+12.0
CPO (RM/ml)	2096	-0.1	+0.2	-5.2	-12.3
Brent Crude	85	+1.3	+0.2	+10.6	+27.1

Corporate Events

UOB Kay Hian Asian Gems Conference: Singapore, 9–10 Oct 2018
Analyst Marketing on Greater China Commodities: Kuala Lumpur, 11–12 Oct 2018
Group Luncheon with China Shineway Pharmaceutical: Hong Kong, 29 Oct 2018
Roadshow with Digi.com (DIGI MK): Canada, 30 Oct–2 Nov 2018
Group Luncheon with Sembcorp Industries (SCI SP): Singapore, 5 Nov 2018
UOB Kay Hian Annual Regional 1H2019 Strategy Conference: Kuala Lumpur, 13 Nov 2018

Key Assumptions

Region	GDP (YoY) 2017	GDP (YoY) 2018F	GDP (YoY) 2019F
US	2.2	2.7	2.3
Euro Zone	2.4	2.1	1.8
Japan	1.7	1.2	1.1
Singapore	3.6	3.2	2.8
Malaysia	5.9	4.8	4.8
Thailand	3.9	4.5	4.2
Indonesia	5.1	5.3	5.4
Hong Kong	3.8	3.8	2.8
China	6.9	6.4	6.2
CPO (RM/mt)	2,783	2,400	2,500
Brent (US$/bbl)	55.00	71.60	71.00

Valuation & Recommendations

Top Picks

Sands China (1928 HK): BUY, with a target price of HK$38.00 (upside of 9.7%)
Galaxy Ent (0027 HK): BUY, with a target price of HK$54.00 (upside of 20.5%)

Sell Recommendation

Nippon Indosari Corpindo (ROTI IJ): Maintain SELL, target price raised to Rp860 from Rp700

Financial Highlights

ROTI IJ Key Financials

Metric	2017 (Rpb)	2018F (Rpb)	2019F (Rpb)	2020F (Rpb)
Net turnover	2,491	2,774	3,261	3,951
EBITDA	372	348	514	615
Operating profit	257	180	302	331
Net profit (adj.)	146	149	182	200
EPS (Rp)	27.3	24.0	29.2	33.4
PE (x)	37.2	42.3	34.7	31.5
Net margin (%)	5.9	5.4	5.6	5.1
Dividend yield (%)	1.3	0.2	0.3	0.3

Risk & Assumptions

Risks: Prolonged trade war, slowing business outlook, and renminbi devaluation could negatively impact the VIP segment.
Assumptions Changes: GGR forecasts for 2018 were reduced to 14.3% YoY due to the one-off impact of Typhoon Mangkhut. The 2019–20 growth forecasts remain at 5% each.

Conclusion

The document outlines the current market sentiment and investment outlook for the gaming sector in Macau, highlighting the decline in Golden Week optimism and the rebound in October. It also provides updates on Nippon Indosari Corpindo (ROTI IJ), noting the current valuation and improved operations, but maintaining a SELL recommendation. The key recommendations include BUY for Sands China and Galaxy Ent, while the SELL recommendation for ROTI IJ is maintained. The overall market outlook remains cautious, with macroeconomic uncertainties affecting the sector.

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