20160906-大华继显-Regional_Morning_Notes_22页_1mb

Regional Morning Notes Summary

Core Content

This document provides a comprehensive overview of the real estate and related sectors across several Asian countries, including China, Indonesia, Malaysia, Singapore, and Thailand, as well as key market indices and investment recommendations. It includes insights on sector performance, company updates, financial metrics, and market trends.

Main Points

China: Property Sector

• 1H16 Results Review:
  • Revenue growth for developers was strong at 29% yoy, driven by higher GFA deliveries.
  • Gross margins contracted due to lingering effects of price cuts from 2014 and 1H15.
  • Mild margin recovery is expected in 2H16 and 2017, supported by resilient sales and ASP growth since 2H15.
  • Core net profit margins fell due to higher finance costs and SG&A expenses, with an average decline of 1.6ppt to 9.0%.
  • Net gearing ratio increased to 88.4% due to aggressive land acquisitions.
• Performance Divergence:
  • Companies like CIFI, R&F, and CRL maintained better margins, while Sunac, Poly Property, and COGO struggled.
• Key Picks:
  • CRL (1109 HK), COLI (688 HK), Longfor (960 HK), and KWG (1813 HK) are recommended as BUYs.
  • Poly Property (119 HK) and SUNAC (1918 HK) are recommended as SELLs.
• Market Outlook:
  • Developers are optimistic about meeting full-year targets due to strong YTD lock-in rates and saleable resources.
  • The sector is trading at a 38.2% discount to RNAV and at 7.2x 2017F PE.
• Funding Costs and Debt Exposure:
  • Funding costs for developers fell to 5.72% in 1H16 from 6.30% in 2015.
  • Foreign debt exposure decreased to 32.6% at end-Jun 16 due to redemption of USD bonds via RMB Panda bonds.
• Geely Auto (175 HK):
  • August sales growth accelerated to 69% yoy, exceeding expectations.
  • New SUV models (Boyu, Emgrand GS, Vision SUV) drove the sales surge.
  • 8M16 sales reached 382,500 units, representing 58% of the sales target.
  • Production capacity for new models is expected to expand by end-2016 to meet demand.

Indonesia: Mitra Adiperkasa (MAPI IJ)

• Update:
  • The company is recommended as a BUY with a target price of Rp5,200.
  • The shutdown of unprofitable department stores could lead to a step-up in profits.

Malaysia: Plantation Sector

• 2Q16 Results Review:
  • FFB production saw a slow pick-up.
  • Expect 60% of FFB production to be harvested in 2H16.

Singapore: O&G Sector

• Small/Mid Cap Highlights:
  • Singapore O&G (SOG SP) is recommended as a BUY with a target price of S$1.43.
  • The company is in excellent health, and recent share pull-back presents an entry opportunity.

Thailand: Strategy

• Alpha Picks: Domestic Cyclical Play:
  • Five high conviction calls for September include AP, CPF, CK, ERW, and MAJOR.
• Mega Lifesciences (MEGA TB):
  • Recommended as a BUY with a target price of Bt23.50.
  • Performance is expected to recover and strengthen with improved economic conditions in Thailand and strong GDP growth in Myanmar and Vietnam.

Key Indices

• Performance:
  • DJIA: +0.4% (1D), +0.5% (1W), -0.3% (1M), +6.1% (YTD)
  • S&P 500: +0.4% (1D), +0.5% (1W), -0.1% (1M), +6.7% (YTD)
  • FTSE 100: -0.2% (1D), +0.6% (1W), +1.3% (1M), +10.2% (YTD)
  • AS30: +1.0% (1D), -0.7% (1W), -1.1% (1M), +3.4% (YTD)
  • CSI 300: +0.2% (1D), +0.4% (1W), +3.6% (1M), -11.0% (YTD)
  • FSSTI: +1.7% (1D), +0.8% (1W), +0.8% (1M), -1.1% (YTD)
  • HSCEI: +1.5% (1D), +3.5% (1W), +7.7% (1M), +1.8% (YTD)
  • HSI: +1.6% (1D), +3.6% (1W), +6.8% (1M), +7.9% (YTD)
  • JCI: +0.1% (1D), -0.3% (1W), -1.2% (1M), +16.6% (YTD)
  • KLCI: +0.4% (1D), -0.3% (1W), +0.8% (1M), -0.9% (YTD)
  • KOSPI: +1.1% (1D), +1.4% (1W), +2.1% (1M), +5.0% (YTD)
  • Nikkei 225: +0.7% (1D), +1.8% (1W), +4.8% (1M), -10.5% (YTD)
  • SET: -1.9% (1D), -3.3% (1W), -1.7% (1M), +15.9% (YTD)
  • TWSE: +1.1% (1D), -0.2% (1W), -0.0% (1M), +9.0% (YTD)
  • BDI: +0.6% (1D), +0.6% (1W), +13.8% (1M), +51.5% (YTD)
  • CPO (RM/ml): +1.4% (1D), -0.6% (1W), +17.4% (1M), +27.9% (YTD)
  • Brent Crude (US$/bbl): +1.7% (1D), -3.3% (1W), +7.6% (1M), +27.8% (YTD)

Key Information

• Market Trends:
  • The property sector in China is expected to see margin improvement in 2H16 and 2017.
  • Market consolidation is a trend in the property sector, with certain companies expected to benefit.
• Investment Themes:
  • Defensive names with high earnings visibility: CRL and Longfor are highlighted.
  • Market consolidation: COLI is preferred due to its ability to convert sales growth into earnings.
  • Dividend play: KWG is recommended for its yield and valuation.
• Corporate Events:
  • Several companies are conducting roadshows and analyst presentations in the coming months, including Inari Amerton, China Power International, and others.

Analyst and Contact Information

• Analyst: David Yang
• Phone: +8621 5404 7225 ext 801
• Email: davidyang@uobkayhian.com

Conclusion

The document outlines a positive outlook for the property sector in China, with some companies showing strong performance and potential for margin recovery. It also highlights key investment opportunities in various Asian markets, including Indonesia, Malaysia, and Singapore, and provides detailed financial data and analysis for a range of companies. The emphasis is on defensive strategies, market consolidation, and dividend plays in the face of economic uncertainties.