Regional Morning Notes Summary - 19 January 2016
Core Content
This document provides a comprehensive analysis of the Asian markets, with a focus on Indonesia, Hong Kong, Malaysia, Singapore, and Thailand. It outlines investment strategies, market updates, key financial metrics, and valuation insights for various sectors and companies. The main emphasis is on identifying opportunities and risks in the current market environment, particularly in light of macroeconomic trends and company-specific developments.
Main Points
Indonesia
- GDP Growth Expectations: Projected to increase from 4.8% in 2015 to 5.4% in 2016 and 5.6% in 2017, indicating a potential recovery.
- Market Recovery: The Jakarta Composite Index (JCI) is expected to recover starting from the second half of 2016 and appreciate over the next 2–3 years.
- Sector Outlook:
- Overweight sectors include Construction (WIKA, WSKT, PTPP), Banking (BBNI, BJBR), and Consumer (INDF), with expected earnings growth of more than 20% in 2016 and 2017.
- Top Buys: BBNI (Rp6,150), EXCL (Rp4,540), INDF (Rp6,900), ISAT (Rp6,550), PTPP (Rp4,400), WIKA (Rp3,900), WSKT (Rp2,100).
- Recovery Sectors: Plantation (AALI, DSNG), poultry (CPIN, JFPA), and telco (EXCL, ISAT) are expected to see strong recovery in 2016.
Hong Kong
- Key Company: BOCHK (2388 HK):
- Update: Concerns over the RRR requirement for offshore renminbi (CNH) were overdone. The bank's fundamentals remain strong.
- Valuation: Currently trading at 1.0x 2016F P/B with a dividend yield of 5.7%.
- Target Price: HK$28.50, with an upside of +37.3%.
- Reasons for Buy: Positive earnings impact from the US rate hike, benign credit costs, minimal fund-raising risk, and potential disposal of NCB for HK$68b.
- Market Outlook: The JCI is expected to appreciate due to a recovery in the Indonesian economy.
Malaysia
- SapuraKencana (SAKP MK):
- Update: Downgraded to SELL due to current valuation pricing in an undiscounted >US$40/bbl oil price, with more earnings risk and impairments expected.
- Target Price: RM1.43.
- Reasons for Sell: High exposure to oil prices, substantial intangibles, and potential earnings risks.
Singapore
- Keppel REIT (KREIT SP):
- Update: 4Q15 saw rising tech demand stemming from finance outflow.
- Valuation: Currently at S$0.88, with a target of S$1.22.
- Recommendation: BUY.
- M1 (M1 SP):
- Update: 4Q15 saw more contributions from corporate customers.
- Valuation: Currently at S$2.61, with a target of S$3.34.
- Recommendation: BUY.
Thailand
- Selected BUYs: IRPC, PS, KTB, CK, and SCC.
- SVI (SVI TB):
- Update: The "missing piece of the puzzle" in the market.
- Valuation: Currently at Bt5.70, with a target of Bt6.20.
- Recommendation: BUY.
Key Indices Performance
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
15988.1 |
(2.4) |
(2.2) |
(6.7) |
(8.2) |
| S&P 500 |
1880.3 |
(2.2) |
(2.2) |
(6.2) |
(8.0) |
| FTSE 100 |
5779.9 |
(0.4) |
(1.6) |
(4.5) |
(7.4) |
| AS30 |
4910.7 |
(0.0) |
(1.4) |
(4.8) |
(8.1) |
| CSI 300 |
3130.7 |
0.4 |
(1.9) |
(16.9) |
(16.1) |
| FSSTI |
2593.0 |
(1.4) |
(4.3) |
(9.1) |
(10.1) |
| HSCEI |
8134.8 |
(1.2) |
(4.4) |
(15.6) |
(15.8) |
| HSI |
19237.5 |
(1.5) |
(3.3) |
(11.6) |
(12.2) |
| JCI |
4481.3 |
(0.9) |
0.4 |
0.3 |
(2.4) |
| KLCI |
1622.6 |
(0.4) |
(0.9) |
(1.3) |
(4.1) |
| Nikkei 225 |
16955.6 |
(1.1) |
(4.2) |
(10.7) |
(10.9) |
| BDI |
369 |
(1.1) |
(11.1) |
(22.6) |
(22.8) |
| CPO (RM/mt) |
266 |
(88.1) |
(88.0) |
(87.6) |
(87.9) |
| Brent Crude |
29 |
(0.6) |
(8.8) |
(22.0) |
(22.8) |
Key Assumptions
| Region |
2014 GDP (yoy) |
2015F GDP (yoy) |
2016F GDP (yoy) |
| US |
2.4 |
2.5 |
2.5 |
| Euro Zone |
0.9 |
1.5 |
1.7 |
| Japan |
-0.1 |
0.5 |
1.0 |
| Singapore |
2.9 |
2.0 |
2.7 |
| Malaysia |
6.0 |
4.9 |
4.8 |
| Thailand |
0.9 |
2.7 |
3.2 |
| Indonesia |
5.0 |
4.8 |
5.4 |
| Hong Kong |
2.5 |
1.8 |
1.5 |
| China |
7.3 |
6.5 |
6.7 |
| Indicator |
2015 (Average) |
2016F (Average) |
2017F (Average) |
| Brent (US$/bbl) |
53.60 |
54 |
62 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
- Greater China Strategy and Energy Sector Analyst Presentation:
- Dates & Locations: 19–29 January in London, Milan, Frankfurt, Helsinki, Vienna, and Dublin.
- Keppel REIT Luncheon: 19 January, Singapore.
- UOB Luncheon: 20 January, Singapore.
- Futotech Bhd Luncheon: 22 January, Kuala Lumpur.
- WCT Holdings Roadshow: 26 January, Singapore.
- Indonesian Strategy Analyst Presentation: 11–13 March in Singapore and Kuala Lumpur.
Analysts
Valuation Summary - BOCHK
| Metric |
2015F |
2016F |
2017F |
| Share Price (HK$) |
20.75 |
- |
- |
| Target Price (HK$) |
28.50 |
- |
- |
| Potential Upside |
+37.3% |
- |
- |
| Dividend Yield (%) |
5.7 |
- |
- |
| P/BV (x) |
1.0 |
- |
- |
| P/NTA (x) |
1.0 |
- |
- |
| PE (x) |
7.6 |
- |
- |
| ROE (%) |
14.5 |
- |
- |
Valuation Summary - Indonesia (JCI)
| Sector |
UOBKH Rating |
Target Price (Rp) |
Potential Upside (%) |
| Construction |
OVERWEIGHT |
3,900 |
38.5 |
| Banking |
OVERWEIGHT |
4,400 |
13.5 |
| Consumer |
OVERWEIGHT |
6,900 |
21.6 |
| Poultry |
MARKET WEIGHT |
2,100 |
23.2 |
| Oil & Gas |
MARKET WEIGHT |
- |
- |
| Agriculture |
OVERWEIGHT |
- |
- |
Conclusion
The report suggests a bullish outlook for Indonesia in 2016, driven by GDP recovery and early infrastructure spending. Hong Kong remains a defensive market with BOCHK being a strong BUY due to its strong fundamentals and valuation. In Malaysia, SapuraKencana is downgraded to SELL due to earnings risks. Singapore has positive signals from Keppel REIT and M1, both BUY recommendations. The overall market environment is seen as favorable for long-term growth, with a focus on sectors like construction, banking, and consumer.
