Regional Morning Notes Summary - 28 May 2014
Core Content Overview
This document provides a summary of market insights and performance analysis for key regions (China, Indonesia, Malaysia, and Singapore) on 28 May 2014, focusing on the property and automobile sectors, company results, and key indices.
China Property Sector
Main Points
- The China property sector rose 7.3% in the past two weeks due to policy easing.
- Banks are adopting more relaxed mortgage policies for first-time home buyers, which is helping to stimulate housing demand.
- Prudent pricing is crucial for satisfactory sales performance.
- Top Spring (3688 HK)'s projects in Nanjing and Hangzhou show good sales due to end-user focus, reasonable pricing, and prime locations.
- Policy adjustments by local governments, though initially refuted, may still lead to more relaxed housing policies.
- A deal between Greentown China (3900 HK) and Sunac China (1918 HK) indicates a potential increase in M&A activity and project sales due to the challenging environment for smaller developers.
Key Catalysts
- Upcoming sales.
- Further policy loosening.
- Changes in banks' mortgage policies.
Top Sector Picks
| Company |
Ticker |
Recommendation |
Target Price (HK$) |
Current Price (HK$) |
Upside (%) |
| Shimao |
813 HK |
BUY |
23.24 |
15.82 |
46.9 |
| COLI |
688 HK |
BUY |
27.15 |
19.88 |
36.6 |
| KWG |
1813 HK |
BUY |
5.72 |
4.74 |
20.7 |
Market Weight
Indonesia Automobile Sector (2W)
Main Points
- Pricing is not the main determinant in the 2W market.
- Honda continues to dominate due to superior engines, higher resale value, and a larger dealer network and financing arm.
- Adira Finance found that monthly payment affordability is more important than interest rates.
- Suzuki offers the lowest list price with the largest discount, but its market share remains below 6%.
- Yamaha is slightly cheaper than Honda, but offers lower discounts on financing.
Key Catalysts
- Continued dominance of ASII in the 2W segment.
- Improved affordability through monthly payments.
- Potential M&A activities and project sales.
Market Weight
Malaysia Company Results
AXIATA (AXIATA MK)
- 1Q14 core net profit was below estimates.
- Celcom reported a 22% decline in core net profit to RM515m due to lower handset sales and absence of tax benefits.
- XL and Dialog showed improvements.
- Entry price is RM6.50, with target price at RM6.90.
- Hold recommendation is maintained.
Key Financials
| Metric |
2012 (RMm) |
2013 (RMm) |
2014F (RMm) |
2015F (RMm) |
2016F (RMm) |
| Net turnover |
17,652 |
18,371 |
19,830 |
21,349 |
22,805 |
| EBITDA |
7,424 |
7,271 |
7,486 |
8,099 |
8,695 |
| Net profit (adj.) |
2,785 |
2,659 |
2,819 |
3,171 |
3,654 |
| EPS (sen) |
32.8 |
31.2 |
33.0 |
37.1 |
42.8 |
| PE (x) |
21.0 |
22.1 |
20.9 |
18.6 |
16.1 |
| Dividend Yield (%) |
5.1 |
3.2 |
3.4 |
3.8 |
4.4 |
Recommendation
- Hold recommendation is maintained.
- Target price: RM6.90.
- Upside: +0.1%.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16675.5 |
0.4 |
1.0 |
1.9 |
0.6 |
| S&P 500 |
1911.9 |
0.6 |
1.4 |
2.6 |
3.4 |
| FTSE 100 |
6844.9 |
0.4 |
0.0 |
2.4 |
1.4 |
| AS30 |
5490.8 |
0.0 |
1.6 |
(0.5) |
2.6 |
| CSI 300 |
2147.4 |
(0.4) |
1.5 |
0.6 |
(7.8) |
| FSSTI |
3274.1 |
(0.3) |
0.3 |
1.0 |
3.4 |
| HSCEI |
10082.9 |
(0.4) |
2.0 |
3.2 |
(6.8) |
| HSI |
22944.3 |
(0.1) |
0.5 |
3.7 |
(1.6) |
| JCI |
4963.9 |
(0.2) |
(1.0) |
1.4 |
16.1 |
| KLCI |
1867.6 |
0.3 |
(0.7) |
0.6 |
0.0 |
| KOSPI |
1997.6 |
(0.6) |
(0.7) |
1.4 |
(0.7) |
| Nikkei 225 |
14636.5 |
0.2 |
4.0 |
2.4 |
(10.2) |
| SET |
1392.7 |
0.3 |
(0.1) |
(1.3) |
7.2 |
| TWSE |
9055.3 |
0.2 |
1.9 |
2.8 |
5.2 |
| BDI |
973 |
0.9 |
(4.8) |
0.6 |
(57.3) |
Key Assumptions
| Country |
GDP (% yoy) 2012 |
GDP (% yoy) 2013 |
GDP (% yoy) 2014F |
| US |
2.8 |
1.9 |
3.0 |
| Euro Zone |
-0.7 |
-0.4 |
1.0 |
| Japan |
2.0 |
1.5 |
2.5 |
| Singapore |
1.9 |
4.1 |
4.3 |
| Malaysia |
5.6 |
4.7 |
5.2 |
| Thailand |
6.4 |
2.9 |
3.0 |
| Indonesia |
6.2 |
5.8 |
5.5 |
| Hong Kong |
1.5 |
3.0 |
3.5 |
| China |
7.8 |
7.7 |
6.9 |
Key Financials (Continued)
| Commodity |
2013 (US$/unit) |
2014F (US$/unit) |
2015F (US$/unit) |
| Brent |
110 |
110 |
110 |
| Aluminium |
1,886 |
1,713 |
1,650 |
| Copper |
7,354 |
6,850 |
6,750 |
| Gold |
1,407 |
1,200 |
1,300 |
| Iron Ore |
135 |
120 |
110 |
| CPO |
736 |
858 |
858 |
| BDI |
1,219 |
1,500 |
1,800 |
Corporate Events
| Event |
Venue |
Start Date |
End Date |
| QT Vascular Group Lunch |
Singapore |
29 May |
29 May |
| Hong Kong & China Consumer Outlook Analyst Presentation |
Canada |
26 May |
26 May |
| Hong Kong & China Consumer Outlook Analyst Presentation |
US |
29 May |
6 Jun |
| United Overseas Bank Corporate Roadshow |
Frankfurt |
2 Jun |
2 Jun |
| United Overseas Bank Corporate Roadshow |
Dublin |
3 Jun |
3 Jun |
| United Overseas Bank Corporate Roadshow |
London |
4 Jun |
4 Jun |
| Pacific Radiance Corporate Roadshow |
London |
4 Jun |
5 Jun |
| Zijin Mining Corporate Roadshow |
Toronto |
9 Jun |
11 Jun |
| Zijin Mining Corporate Roadshow |
US |
12 Jun |
20 Jun |
Conclusion
- China property is expected to continue recovery due to prudent pricing and policy easing.
- Indonesia 2W market is dominated by Honda, with Suzuki offering the lowest price but limited market share.
- AXIATA reported below expectations results, with Celcom being the main drag.
- Market weight is maintained for both China property and Indonesia 2W.
