20161019-大华继显-Regional_Morning_Notes_42页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a detailed analysis of financial markets and specific companies across China, Hong Kong, Indonesia, Malaysia, and Singapore, focusing on economic indicators, sector updates, company results, and investment recommendations. It also includes key indices, assumptions, and analyst insights.

Key Indices Performance

Main Market Updates

China

• Monetary Policy: M2 and new loans grew strongly in September 2016, but tighter property regulations may lead to negative shocks in 4Q16. The PBOC may not cut interest rates or RRR due to RMB depreciation concerns.
• Coal Sector: Coal prices are expected to stabilize at high levels in winter, with earnings surging in 2H16. The NDRC is increasing coal supply to control prices, and listed coal companies are expected to benefit.
• Company Results: Zhuzhou CRRC Times Electric reported weaker-than-expected sales in locomotives and EMU orders, leading to a downgrade to SELL. The company's net profit declined slightly in 9M16.

Hong Kong

• Macau Gaming: Strong Golden Holiday visitations are expected to boost 4Q16 performance, with Sands China and SJM Holdings as top picks. The sector is seen as a BUY.

Indonesia

• Adhi Karya: Downgraded to HOLD due to uncertainties in the LRT project.

Malaysia

• Hume Industries: Upgraded to BUY with a revised target price due to strong order flows and product pipeline.
• Top Glove: Maintained HOLD as industry price competition has softened, indicating the tail-end of oversupply.

Singapore

• Keppel REIT: Upgraded to BUY due to active leasing and portfolio de-risking.
• M1: Downgraded to SELL due to poor performance.
• ST Engineering: Upgraded to BUY with a revised target price due to a charge from a Chinese land system unit.

Top Picks and Sell Recommendations

BUY

• Air China (753 HK)
• Ping An Insurance (2318 HK)
• Ciputra Property (CTRP IJ)
• Indosat (ISAT IJ)
• Genting Bhd (GENT MK)
• Citiv Dev (CIT SP)
• OCBC (OCBC SP)
• Keppel REIT (KREIT SP)
• ST Engineering (STE SP)

SELL

• M1 (M1 SP)
• Zhuzhou CRRC Times Electric (3898 HK)

Key Assumptions

• Brent Crude (Average): Rmb53.60 in 2015, Rmb42 in 2016F, Rmb54 in 2017F.
• CPO (RM/mt): Rmb2,168 in 2015, Rmb2,500 in 2016F, Rmb2,600 in 2017F.

Analysts and Contact Information

• Chaoping Zhu
  +8621 5404 7225 ext. 822
  chaoping@uobkayhian.com

• Yan Shi
  008621 54057225 (804)
  yan.shi@uobkayhian.com

• Johnson Hu
  +8621 54047225 ext 809
  johnsonhu@uobkayhian.com

Sector Updates and Investment Outlook

Coal Sector in China

• Price Trends: Coal prices are expected to stabilize in winter and correct in 1Q17, but unlikely to reach a new low.
• Earnings: Earnings are expected to surge in 3Q16 and 4Q16, acting as a near-term share price catalyst.
• Target Price: China Coal is the top pick with a target price of HK$5.50.
• Earnings Forecast:
  • China Coal: Rmb2,323m (2016F) and Rmb2,463m (2017F)
  • China Shenhua: Rmb27,653m (2016F) and Rmb28,925m (2017F)
  • Yanzhou Coal: Rmb927m (2016F) and Rmb969m (2017F)

Zhuzhou CRRC Times Electric (3898 HK)

• Downgrade: From HOLD to SELL due to weaker locomotive sales and EMU order uncertainty.
• Target Price: HK$35.00.
• Earnings: Net profit of Rmb1.906b in 9M16, down 1.4% yoy.
• Margin Pressure: Gross margin declined to 38.2% in 9M16, down 2.8ppt from 9M15.
• Outlook: Expect a decline of over 30% in locomotive sales in 2016.

Conclusion

The document outlines the current economic and market conditions, with a focus on China's monetary policy and coal sector, as well as updates from key companies in Hong Kong, Indonesia, Malaysia, and Singapore. It highlights the impact of policy changes and market dynamics on company performance and provides investment recommendations based on earnings, valuations, and sector trends. Analysts suggest maintaining an OVERWEIGHT on coal due to government intervention, while some companies like Zhuzhou CRRC Times Electric face downward revisions due to weak performance.