Regional Morning Notes Summary - 13 May 2016
Core Content
This document provides a comprehensive analysis of the financial performance and market outlook for various companies and sectors in China, Indonesia, Malaysia, Singapore, and Thailand. It includes updates on tax reforms, company results, stock recommendations, and key financial metrics.
Main Points
China
- Resources Tax Reform:
- The reform shifts from quantity-based to value-based taxation, with neutral impact on the commodity sector.
- Zijin Mining is expected to benefit from the new tax scheme, with potential earnings increases due to its lower tax rates on gold and copper and a significant portion of its gold production from overseas.
- Jiangxi Copper may face a slight negative impact due to higher tax rates on copper, but its main mine is subject to lower rates.
- Water Resources Tax:
- A pilot tax scheme is being introduced in Hebei province, expected to have limited impact on water supply companies but increase demand for recycled water.
- Maintain OVERWEIGHT on the sector, with Beijing Enterprises Water as a top pick.
Indonesia
- Astra International (ASII IJ):
- Downgraded to HOLD due to potential 12% YoY decline in core earnings for 2016.
Malaysia
- Kerjaya Prospek Group (KPG MK):
- Positive outlook with job wins likely to surpass full-year expectations.
- Recommended as BUY with a target of RM2.20.
Singapore
- ComfortDelGro Corporation (CD SP):
- No surprises in 1Q16 results, continues to deliver.
- Recommended as BUY with a target of S$3.16.
- Ezion Holdings (EZI SP):
- Downgraded to HOLD due to no improvement expected until 3Q16.
- Singapore Airlines (SIA SP):
- 4QFY16 results below expectations due to higher cargo losses and maintenance costs.
- Recommended as BUY with a target of S$13.90.
- Singapore Telecommunications (ST SP):
- 4QFY16 results showed strong performance from Telkomsel.
- Recommended as BUY with a target of S$4.38.
Thailand
- Bangkok Expressway and Metro (BEM TB):
- Downgraded to HOLD as good results are expected but have been priced in.
- Charoen Pokphand Foods (CPF TB):
- 1Q16 earnings beat expectations.
- Recommended as BUY with a target of Bt31.00.
- PTT (PTT TB):
- 1Q16 results exceeded expectations due to a strong gas business.
- Recommended as BUY with a target of Bt370.00.
Key Financial Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17720.5 |
0.1 |
0.3 |
(0.0) |
1.7 |
| S&P 500 |
2064.1 |
(0.0) |
0.7 |
0.1 |
1.0 |
| FTSE 100 |
6104.2 |
(0.9) |
(0.2) |
(2.2) |
(2.2) |
| AS30 |
5423.4 |
(0.2) |
1.5 |
5.8 |
1.5 |
| CSI 300 |
3090.1 |
0.2 |
(3.9) |
(5.3) |
(17.2) |
| FSSTI |
2745.4 |
0.5 |
(0.8) |
(5.0) |
(4.8) |
| HSCEI |
8413.7 |
(0.4) |
(2.5) |
(8.5) |
(12.9) |
| HSI |
19915.5 |
(0.7) |
(2.6) |
(5.9) |
(9.1) |
| JCI |
4803.3 |
0.1 |
(0.2) |
(1.0) |
4.6 |
| KLCI |
1649.0 |
0.3 |
0.2 |
(4.3) |
(2.6) |
| KOSPI |
1977.5 |
(0.1) |
(0.4) |
(0.2) |
0.8 |
| Nikkei 225 |
16646.3 |
0.4 |
3.1 |
1.6 |
(12.5) |
| SET |
1399.3 |
1.2 |
0.1 |
1.0 |
8.6 |
| TWSE |
8108.1 |
(0.3) |
(0.7) |
(6.3) |
(2.8) |
| BDI |
579 |
0.0 |
(9.8) |
3.4 |
21.1 |
| CPO (RM/ml) |
2713 |
1.2 |
5.1 |
2.8 |
23.3 |
| Brent Crude |
48 |
1.0 |
6.8 |
7.6 |
29.0 |
Top Picks
| Company |
Ticker |
Rating |
Target Price |
Potential Upside (%) |
| Air China |
753 HK |
BUY |
HK$10.20 |
75.0 |
| Ping An |
2318 HK |
BUY |
HK$45.00 |
32.0 |
| Bank BJB |
BJBR J |
BUY |
RM1,170.00 |
27.2 |
| Gamuda |
GAM MK |
BUY |
RM5.55 |
17.1 |
| WCT Holdings |
WCTHG MK |
BUY |
RM2.05 |
20.6 |
| City |
CIT SP |
BUY |
S$10.86 |
36.3 |
| DBS |
DBS SP |
BUY |
S$19.22 |
29.3 |
| Charoen |
CPF TB |
BUY |
Bt30.00 |
7.1 |
| Siam Cement |
SCC TB |
BUY |
Bt630.00 |
28.0 |
Key Assumptions
| Country |
GDP (yoy) 2015 |
GDP (yoy) 2016F |
GDP (yoy) 2017F |
| US |
2.4 |
2.5 |
3.0 |
| Euro Zone |
1.6 |
1.7 |
1.7 |
| Japan |
0.5 |
1.0 |
1.0 |
| Singapore |
2.0 |
2.7 |
3.0 |
| Malaysia |
5.0 |
4.2 |
5.0 |
| Thailand |
2.8 |
3.2 |
3.6 |
| Indonesia |
4.8 |
5.0 |
5.5 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
Corporate Events
| Event |
Venue |
Start |
End |
| FDG Electric Vehicles Roadshow |
Shanghai |
16 May |
16 May |
| FDG Electric Vehicles Roadshow |
Hong Kong |
23 May |
23 May |
| Construction and Transport Sector Analyst Presentation |
UK/Europe |
18 May |
25 May |
| Regional Gaming & Malaysia Outlook Analyst Presentation |
Hong Kong |
20 May |
20 May |
| Valuetronics Tea Session |
Singapore |
26 May |
26 May |
Company Results - AAC Technologies (2018 HK)
- 1Q16 Performance:
- Revenue increased 10.4% YoY to Rmb2.5b, beating expectations.
- Dynamic components sales surged due to upgraded acoustic solutions and increased sales to Chinese customers.
- Net profit dropped 38.6% QoQ to Rmb619m due to seasonal adjustments and increased R&D costs.
- Growth Drivers:
- RF Mechanics: Expected to be a key growth driver, with increased adoption of higher specification products and new projects ramping up.
- Speaker Box Adoption: Increased adoption by Chinese smartphone customers, contributing 38% of sales.
- Valuation & Target:
- Raised target price to HK$63.20 based on 17x 2016F PE.
- Maintained HOLD as the market has already priced in the positive outlook.
Key Financials (AAC Technologies)
| Metric |
2014 |
2015 |
2016F |
2017F |
2018F |
| Net Turnover (Rmbm) |
8,879.3 |
11,738.9 |
14,081.0 |
16,465.0 |
18,973.8 |
| EBITDA (Rmbm) |
2,088.8 |
2,688.4 |
3,125.9 |
3,602.5 |
4,096.3 |
| Net Profit (Rmbm) |
2,317.7 |
3,106.9 |
3,646.1 |
4,214.8 |
4,798.8 |
| EPS (Fen) |
188.7 |
253.0 |
296.9 |
343.2 |
390.8 |
| PE (x) |
25.7 |
19.2 |
16.3 |
14.1 |
12.4 |
| P/B (x) |
6.5 |
5.3 |
4.4 |
3.7 |
3.1 |
| EV/EBITDA (x) |
28.5 |
22.1 |
19.0 |
16.5 |
14.5 |
| Net Margin (%) |
26.1 |
26.5 |
25.9 |
25.6 |
25.3 |
| UOBKH/Consensus (x) |
- |
- |
0.98 |
0.97 |
0.96 |
Analysts
Sector Picks (China - Basic Materials)
| Company |
Ticker |
Recommendation |
Share Price (HK$) |
Target Price (HK$) |
| Anhui Conch |
914 HK |
BUY |
18.80 |
25.00 |
| CR Cement |
1313 HK |
BUY |
2.37 |
3.50 |
Analysts (Water Sector)
Sector Picks (China - Water)
| Company |
Ticker |
Recommendation |
Share Price (HK$) |
Target Price (HK$) |
| Beijing Enterprises Water |
371 HK |
BUY |
4.66 |
7.60 |
Earnings Revision
- AAC Technologies:
- Net profit forecast increased by 19.3% YoY for 2016 and 12.6% YoY for 2017 due to expected growth in the RF mechanicals segment and faster adoption of speaker boxes.
Action & Recommendation
- Maintain HOLD on AAC Technologies due to the market already pricing in the positive outlook.
- Maintain MARKET WEIGHT on the non-ferrous metals sector, with a preference for the cement sector.
- Maintain OVERWEIGHT on the water sector, with Beijing Enterprises Water as the top pick.
Conclusion
The document outlines the financial performance and outlook for key companies across several Asian markets, highlighting the impact of tax reforms, growth drivers, and valuation changes. It recommends maintaining certain ratings and highlights specific stocks with potential for growth based on market conditions and company-specific factors.
