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Regional Morning Notes Summary - 26 August 2016

Core Content Overview

This document provides a summary of financial results and market analysis for several companies across China, Hong Kong, Indonesia, and Malaysia, along with key indices, analyst recommendations, and corporate events. It highlights performance trends, earnings expectations, and valuation metrics for the listed firms, with a focus on their financial health and potential for future growth.

Main Points by Region

China

• China Construction Bank (939 HK)

  • 1H16 Results: Earnings ahead of expectations, with net profit rising 1.1% yoy to Rmb133.4b.
  • Key Highlights:
    • Net interest margin (NIM) narrowed by 15bp in 2Q16 due to rate cuts and VAT reform.
    • Asset quality improved, with a decline in net NPL formation ratio.
    • Loan growth was driven mainly by mortgages and discounted bills, while corporate loans grew modestly.
    • Operating expenses declined due to cost control and VAT reform.
  • Valuation: Maintained BUY recommendation with a target price of HK$6.30. P/BV and P/NTA ratios are declining, indicating potential undervaluation.
  • Dividend Yield: Expected to remain stable at around 5.5% for 2016.

• China General Nuclear Corp (1816 HK)

  • 1H16 Results: Core earnings rose 35.6% yoy, excluding forex impact.
  • Key Highlights:
    • Revenue increased 36.3% yoy, driven by strong power generation volume from subsidiaries.
    • Gross profit surged 42.8% due to cost savings and higher margins.
    • Utilisation hours for subsidiaries increased by 7% yoy, while average utilisation dipped slightly due to temporary shutdowns in some units.
  • Valuation: Maintained BUY recommendation with a target price of HK$3.10. EPS is expected to rise from 7.0 to 24.5 by 2018.
  • Market Share: CGN has 17 generation units with 18GW capacity, accounting for 61% of China's nuclear power market.

Hong Kong

• Galaxy Entertainment (27 HK)
  • 2Q16 Results: Earnings and special dividend of 30% were in line with expectations.
  • Valuation: HOLD recommendation with a target price of HK$26.00.

Indonesia

• Wijaya Karya Beton (WTON IJ)
  • 1H16 Results: Results aligned with expectations.
  • Valuation: BUY recommendation with a target price of Rp1,300.

Malaysia

• Genting Bhd (GENT MK)

  • 2Q16 Results: Results below original expectations, mainly due to GENS drag.
  • Valuation: BUY recommendation with a target price of RM9.75.
  • Key Catalysts: Expected gaming-related catalysts in 4Q16 may re-rate the stock.

• Genting Malaysia (GENM MK)

  • 2Q16 Results: No major surprises.
  • Valuation: HOLD recommendation with a target price of RM4.60.

• Malayan Banking (MAY MK)

  • 2Q16 Results: Net profit 6% below estimate and 20% below consensus.
  • Valuation: HOLD recommendation with a target price of RM7.90.
  • Risk: Provisions are a drag on earnings, and further earnings downgrade is possible.

Key Indices Overview

Top Picks (BUY)

Sell Recommendation

Key Assumptions

Corporate Events

Summary of Key Insights

• China Construction Bank showed strong asset quality improvement and remains the top pick in the banking sector.
• China General Nuclear Corp demonstrated robust earnings growth due to nuclear power generation volume and policy support.
• Genting Bhd had underperformance in 2Q16 but is expected to benefit from gaming-related catalysts in 4Q16.
• Malayan Banking faced earnings pressure from provisions and credit costs.
• The market indices show mixed performance with some positive trends and others experiencing declines.
• The BUY recommendations are based on strong fundamentals, growth potential, and improving financial metrics.
• Corporate events are scheduled in various regions, indicating active investor engagement.