Asia Pacific Daily Summary - Daiwa Capital Markets
Core Content and Key Information
Investment Conference Dates
Daiwa Investment Conference is scheduled in the following locations:
- New York: May 27th & 28th (Tue & Wed)
- San Francisco: May 30th (Fri)
- London: June 2nd & 3rd (Mon & Tue)
Major Changes in Analyst Ratings
| Company |
Analyst |
Rating Change |
Page |
| econtext Asia (1390 HK) |
John Choi |
Hold → Buy |
P.3 |
| Guinness (GUIN MK) |
Mandy Teh |
Add → Reduce |
P.7 |
| Paradise (034230 KS) |
Thomas Y. Kwon |
Outperform |
P.8 |
| Tropicana (TRCB MK) |
Isaac Chow |
Buy |
P.23 |
| Mitsubishi (8058 JP) |
Jiro Iokibe |
Buy |
P.24 |
| Suzuki Motor (7269 JP) |
Eiji Hakomori |
Neutral |
P.25 |
Key Investment Highlights
- econtext Asia:
- Share price fell by 69% since January 2014.
- The company is a proxy for rising e-commerce spending in Japan.
- Management is keen to expand its presence in Asia ex-Japan (AxJ) to make it a significant revenue source by 2020.
- Analysts upgraded the rating to Buy due to its attractive valuation, with a new target price of HKD3.50.
- Other Companies:
- Hyundai Via Corp (011210 KS): Major beneficiary of HMG's capacity expansion, rated Buy.
- MISC (MISC MK): Improving freight rates, rated Add.
- KLCCPSG (KLCCSS MK): Hotel and retail revenues drove 1QFY14 higher, rated Add.
- KEPCO (015760 KS): Rated Outperform, with KRW appreciation expected to boost 2014 EPS growth.
- 21Vianet (VNET US): Video Con. and NDR events in May 2014.
- Giordano (709 HK): NDR events in May 15th in HK and SG.
- DEXUS Property Group (DXS AU): NDR events in May 15-16th in Tokyo.
- Mitrabahtera Segara Sejati (MBSS IJ): NDR events in May 20-22nd in US.
- Cromwell Property Group (CMW AU) and SP Ausnet (SPN AU): NDR events in May 22-23rd in Tokyo.
- Bank Negara Indonesia (BBNI IJ): NDR events in May 22-29th in US.
- Worley Parsons (WOR AU): NDR events in May 27th in Tokyo.
- China Suntine (956 HK): NDR events in May 5-6th in Taipei.
- Philippine Long Distance Tel (TEL PM): NDR events in June 3rd in EU.
Regional Indices Performance
| Market |
1D (%) |
1M (%) |
YTD (%) |
EPS Growth 13E (%) |
EPS Growth 14E (%) |
PER 13E |
PER 14E |
| TPX |
-0.7 |
2.1 |
-11.1 |
8.6 |
10.9 |
12.9 |
11.6 |
| HSCEI |
1.5 |
-3.9 |
-9.1 |
7.6 |
8.9 |
6.0 |
5.5 |
| HSI |
1.8 |
-3.2 |
-4.5 |
6.1 |
8.6 |
10.2 |
9.4 |
| KOSPI |
0.4 |
-1.6 |
-2.3 |
42.4 |
18.0 |
10.5 |
8.9 |
| TWSE |
-0.9 |
-1.1 |
2.3 |
12.2 |
10.3 |
14.7 |
13.3 |
| SENSEX* |
2.4 |
4.1 |
11.2 |
15.3 |
14.7 |
14.9** |
13.0** |
| FSSTI |
-0.9 |
0.8 |
1.7 |
7.4 |
9.7 |
14.2 |
13.0 |
| FBMKLCI* |
-0.0 |
0.7 |
-0.0 |
4.8 |
9.9 |
16.2** |
14.7** |
| SET* |
-0.2 |
-1.0 |
5.9 |
11.3 |
11.5 |
12.6** |
11.3** |
| PCOMP* |
-0.5 |
3.2 |
15.6 |
7.8 |
14.8 |
19.3** |
16.8** |
| JCI* |
0.3 |
2.0 |
14.9 |
10.6 |
13.0 |
14.6** |
12.9** |
| AS51 |
-0.2 |
0.4 |
1.8 |
8.1 |
7.9 |
15.8 |
14.6 |
*Valuation based on MSCI Universe
**MSCI index priced as of 10 May
Financial Summary and Forecasts (HKD)
Revenue and Profit Forecasts
| Metric |
FY14E (m) |
FY15E (m) |
FY16E (m) |
| Revenue |
1,113 |
1,217 |
1,340 |
| Operating Profit |
110 |
146 |
170 |
| Net Profit |
68 |
87 |
100 |
| Core EPS (Fully Diluted) |
0.130 |
0.168 |
0.193 |
| EPS Change (%) |
n.a. |
28.7 |
15.0 |
Cash Flow and Balance Sheet (HKDm)
| Metric |
FY14E |
FY15E |
FY16E |
| Cash Flow from Operations |
137 |
189 |
220 |
| Free Cash Flow |
89 |
115 |
134 |
| Cash & Short-term Investment |
1,646 |
1,787 |
1,958 |
| Total Assets |
3,449 |
3,624 |
3,829 |
| Total Liabilities |
1,636 |
1,742 |
1,867 |
| Shareholders' Equity |
1,810 |
1,879 |
1,959 |
Key Ratios
| Ratio |
FY14E |
FY15E |
FY16E |
| Net Profit Margin (%) |
6.1 |
7.1 |
7.5 |
| Operating Profit Margin (%) |
9.9 |
12.0 |
12.7 |
| Gross Profit Margin (%) |
26.0 |
26.5 |
27.0 |
| PER (x) |
19.9 |
15.4 |
13.4 |
| PBR (x) |
0.7 |
0.7 |
0.7 |
| ROE (%) |
4.4 |
4.7 |
5.2 |
Valuation Comparison
| Company |
Share Price (LC) |
Market Cap (USDm) |
PER 13E |
PER 14E |
PBR 13E |
PBR 14E |
EV/EBITDA 13E |
EV/EBITDA 14E |
Dividend Yield (%) |
ROE (%) |
| econtext Asia |
2.59 |
172 |
19.9 |
15.4 |
0.7 |
0.7 |
n.a. |
n.a. |
0.0 |
4.4 |
| Digital Garage |
1,318 |
611 |
22.0 |
17.2 |
1.6 |
1.5 |
13.5 |
10.9 |
0.4 |
8.7 |
| GMO Internet |
977 |
1,130 |
18.0 |
14.7 |
3.5 |
2.9 |
4.8 |
3.6 |
1.6 |
20.5 |
| GMO Payment |
3,310 |
561 |
36.3 |
30.1 |
8.0 |
6.7 |
11.8 |
9.0 |
0.9 |
23.2 |
| Softbank Corp |
7,276 |
85,799 |
18.9 |
14.6 |
3.2 |
2.6 |
7.4 |
6.5 |
0.6 |
18.0 |
| Rakuten |
1,228 |
15,997 |
26.1 |
21.2 |
4.4 |
3.7 |
12.0 |
9.8 |
0.3 |
19.3 |
| Yahoo Japan |
436 |
24,386 |
18.4 |
16.2 |
3.2 |
2.8 |
8.8 |
7.1 |
1.1 |
19.2 |
| Dena |
1,635 |
2,422 |
6.6 |
6.4 |
1.0 |
0.9 |
2.4 |
2.4 |
2.7 |
17.0 |
| GREE |
905 |
2,126 |
10.0 |
8.8 |
1.7 |
1.5 |
3.6 |
3.2 |
1.7 |
17.9 |
| Average |
- |
- |
19.6 |
16.1 |
3.3 |
2.8 |
8.0 |
6.6 |
1.2 |
18.0 |
| Tencent |
478.80 |
115,237 |
46.8 |
32.5 |
6.6 |
5.0 |
30.4 |
20.8 |
0.3 |
33.2 |
| Kingsoft |
22.00 |
3,358 |
25.7 |
18.2 |
5.0 |
3.9 |
18.2 |
12.2 |
0.7 |
21.4 |
| Netdragon |
11.76 |
773 |
13.9 |
12.3 |
1.2 |
1.1 |
n.a. |
n.a. |
3.3 |
7.1 |
| Average |
- |
- |
28.8 |
21.0 |
6.6 |
5.0 |
24.3 |
16.5 |
1.4 |
20.6 |
Earnings Revisions
| Metric |
FY14E |
FY15E |
FY16E |
| Agency Payment Fees (HKDm) |
909 |
992 |
1,087 |
| Agency Payment Amount (HKDm) |
47,362 |
53,046 |
59,411 |
| Average Fee Margin (%) |
1.92% |
1.87% |
1.83% |
| Settlement Transaction Fees (HKDm) |
61 |
65 |
69 |
| Number of Data Transactions (m) |
114 |
126 |
138 |
| Revenue (m) |
1,113 |
1,217 |
1,340 |
| Operating Profit (m) |
110 |
146 |
170 |
| Net Profit (m) |
68 |
87 |
100 |
| Core EPS (HKD) |
0.130 |
0.168 |
0.193 |
| DPS (HKD) |
0.000 |
0.034 |
0.039 |
| EBITDA (m) |
166 |
208 |
237 |
Key Recommendations and Risks
- Rating: Upgraded to Buy from Hold.
- Target Price: Reduced to HKD3.50 from HKD6.20.
- Main Risks:
- Larger-than-expected expenses for overseas expansion.
- Further margin falls due to increased competition in Japan.
Market Outlook and Strategic Moves
- econtext Asia's Presence Outside Japan:
- Indonesia (2011): PT. Midtrans (23% ownership).
- China (Nov-13): VeriTrans Shanghai (50% ownership).
- India (Nov-13): Citrus India (10.9% ownership).
- Strategic Focus:
- Continued expansion in AxJ.
- Potential M&A opportunities in Japan.
- Organic growth expected in FY14-16.
Summary of Key Points
- econtext Asia is a key player in the e-commerce and payment sector in Japan, with a strong presence in AxJ.
- The company's valuation is considered attractive, leading to a Buy recommendation.
- Despite a significant drop in share price, the company's fundamentals and growth prospects remain positive.
- The main risks include competition in Japan and costs associated with overseas expansion.
- Financial forecasts show growth in revenue and operating profit, with a focus on improving fee margins and increasing transaction volumes.
- The company's financial position is stable, with increasing cash reserves and a strong balance sheet.
