20180803-大华继显-Regional_Morning_Notes_35页_1mb

Regional Morning Notes Summary - 03 August 2018

Core Content Overview

This document provides an analysis of stock market performance and company results across various regions, including China, Hong Kong, Indonesia, Malaysia, and Singapore, with a focus on the automobile sector and other key financial indicators. It includes earnings previews, target prices, market performance data, and investment recommendations.

Main Points by Region

China

• Automobile Sector:
  • 1H18 results are expected to be affected by tariff cuts.
  • Geely: Guiding for >50% yoy net profit growth in 1H18, driven by 44% sales volume growth and margin expansion. It remains the top pick with a target price of HK$30.00.
  • GWM: 1H18 earnings increased 52% yoy due to R&D accounting changes, but 3Q-4Q18 earnings will be dragged down by price cuts and competition.
  • BYD: Net profit is expected to plunge 71–83% yoy to Rmb300m–500m due to EV subsidy cuts. Full-year net profit is expected to drop 15% yoy to Rmb3.45b.
  • BAIC: 1H18 net profit is expected to grow 235% yoy to Rmb3.3b, driven by the turnaround of Beijing Hyundai and growth in Beijing Benz.
  • Meidong and Zhongsheng: Target prices were cut due to lower 2018F PE assumptions. Meidong's target price reduced to HK$3.50, Zhongsheng's to HK$17.50.
  • Dealers: Earnings growth in 1H18 is expected to be lower than consensus due to delayed consumption and inventory shortages.

Hong Kong

• CK Asset Holdings (1113 HK):
  • 1H18 core net profit rose 20.1% yoy to HK$12,068m, in line with expectations.
  • Annualised recurrent income is HK$4.00/share, representing 6.8% of the share price. The company is transitioning into a solid yield vehicle.
  • MGM China (2282 HK): 2Q18 results are expected to be in line with expectations, but "wild cards" remain to be seen.
  • Cathay Pacific Airways (293 HK): Expected to report HK$720m in losses for 1H18, but fuel surcharges may act as a positive catalyst.

Indonesia

• XL Axiata (EXCL IJ):
  • 2Q18 results are expected to be in line with expectations.
  • The company is now the top pick in the sector and is ready to take on Indosat.

Malaysia

• Fraser & Neave Holdings (FNH MK):
  • 3QFY18 results are in line with expectations.
  • EBIT rose 45.2% yoy in Malaysia and 11.4% yoy in Thailand, driven by cost savings and lower input costs.

Key Indices Performance

Top Picks

Key Assumptions

Corporate Events

Investment Recommendations

• OEMs (Original Equipment Manufacturers):

  • Geely (175 HK): Top pick, maintain BUY with target price HK$30.00.
  • BAIC (1958 HK): Maintain BUY with target price HK$8.00.
  • Brilliance (1114 HK): Maintain BUY with target price HK$15.00.
  • GAC (2238 HK): Maintain BUY with target price HK$10.00.
  • DFM (489 HK): Maintain BUY with target price HK$10.00.
  • GWM (2333 HK): Maintain SELL with target price HK$4.80.
  • BYD (1211 HK): Maintain SELL with target price HK$30.00.

• Dealers:

  • Meidong (1268 HK): Cut target price to HK$3.50.
  • Zhengtong (1728 HK): Maintain BUY with target price HK$6.50.
  • Yongda (3669 HK): Maintain BUY with target price HK$10.50.
  • Zhongsheng (881 HK): Maintain HOLD with target price HK$17.50.

Risks

• Macro Risks: Severe credit tightening and a full-scale trade war between China and the US could negatively impact auto sales.
• Market Risks: Over-optimistic earnings expectations for dealers may lead to disappointment in 1H18 results.

Results Announcement Schedule

Analysts

• Ken Lee: +852 2236 6760 | ken.lee@uobkayhian.com.hk
• Johnny Yum: +852 2236 6706 | johnny.yum@uobkayhian.com.hk
• Shaun Tan: +852 2236 6798 | shaun.tan@uobkayhian.com.hk

Summary of Key Highlights

• Geely is highlighted as the top pick in the automobile sector, with strong growth and a favorable target price.
• BYD and GWM are underperforming, with earnings expected to decline due to subsidy cuts and market share loss.
• CK Asset Holdings is transitioning into a solid yield vehicle, with a strong recurrent income and improved gearing.
• Meidong and Zhongsheng had their target prices cut due to lower earnings expectations.
• The document includes detailed financial data, PE band charts, and consensus EPS vs. share price comparisons for various companies.

Conclusion

The summary reflects a comprehensive analysis of the regional stock market and automobile sector performance in early August 2018. It outlines key financial metrics, earnings expectations, and investment recommendations, emphasizing the importance of valuation, earnings momentum, and macroeconomic factors in shaping investment decisions.