20160728-大华继显-Regional_Morning_Notes_33页_1mb

Regional Morning Notes Summary

Core Content

This document provides a summary of financial updates and market analysis for various regions and sectors as of Thursday, 28 July 2016. It includes insights on regulatory changes, company results, stock recommendations, and key financial indicators.

Main Points by Region

China

• Banking Sector:

  • The CBRC (China Banking Regulatory Commission) is expected to further tighten regulations on wealth management business (WMP).
  • Key changes include:
    • Banning two-tier products.
    • Restricting novice investors from investing in equities and NSCA.
    • Requiring higher provisions for WMPs that offer "expected returns".
  • Impact:
    • Short-term negative effect on bank earnings (around 2-3% annually).
    • Long-term positive as it reduces reputation risks and encourages funds to flow back to the real economy.
  • Recommendation: Maintain MARKET WEIGHT due to caution on NPL formation.
  • Top Picks: ICBC and CCB with BUY ratings.

• Securities Sector:

  • 1H16 net profit is expected to decline 60% yoy, but this is likely already priced in.
  • Sequential improvement is expected in 2H16 due to increased A-share ADT and resumed short-selling activities.
  • Regulatory tightening on brokers and investment banking may lead to a decline in TAM business, but earnings impact is expected to be manageable.
  • Recommendation: Maintain OVERWEIGHT on the sector.
  • Top Picks: CITICS and CGS with BUY ratings.

Indonesia

• Unilever Indonesia (UNVR IJ/SELL/Rp46,600/Target: Rp41,000):
  • 1H16 Net Income: Rp3,298b, 12.5% yoy growth, above our expectation.
  • 2Q16 Net Income: Rp1,728b, 29.1% yoy and 10.1% qoq growth.
  • Segmental Performance:
    • Home & Personal Care (HPC): Sales up 14.4% yoy, gross margin expanded to 57.5%.
    • Food: Sales up 14.9% yoy, but gross margin declined to 37.6%.
  • Recommendation: Maintain SELL due to valuations and expectations of slower growth in 4Q16.

Malaysia

• Syarikat Takaful (STMB MK/HOLD/RM4.00/Target: RM4.20):

  • 2Q16 Net Profit: 12% above our estimate.
  • Target Price Raised: From RM3.90 to RM4.20 due to higher premium growth assumptions.
  • Recommendation: Maintain HOLD.

• Hartalega Holdings (HART MK/SELL/RM4.29/Target: RM3.10):

  • 1QFY17 Results Preview: Projected modest sequential improvement in top-line due to selling price adjustments and higher utilisation rates.
  • Recommendation: Maintain SELL.

Singapore

• First Resources (FR SP/BUY/S$1.57/Target: S$2.00):
  • Earnings Forecast Cut: Due to lower FFB production growth assumptions.
  • Dry weather impact is more severe than expected, affecting performance.
  • Recommendation: Maintain BUY.

Thailand

• Siam Cement (SCC TB/BUY/Bt504.00/Target: Bt630.00):

  • 2Q16 Net Profit: Record high, 14% above consensus.
  • Recommendation: Maintain BUY.

• Bangchak Petroleum (BCP TB/BUY/Bt34.50/Target: Bt40.50):

  • 2Q16 Results Preview: Operations are back on track.

• Central Plaza Hotel (CENTEL TB/BUY/Bt42.75/Target: Bt47.00):

  • 2Q16 Core Profit: Expected to grow 20% yoy.

• GFPT (GFPT TB/HOLD/Bt12.20/Target: Bt12.00):

  • 2Q16 Earnings: May increase yoy and qoq.

Key Indices

Key Assumptions

Corporate Events

Stock Impact & Earnings Forecasts

Unilever Indonesia (UNVR IJ)

• 1H16 Net Income: Rp3,298b, 12.5% yoy growth.
• 2Q16 Net Income: Rp1,728b, 29.1% yoy and 10.1% qoq growth.
• Earnings Growth:
  • HPC: 14.4% yoy, gross margin expanded to 57.5%.
  • Food: 14.9% yoy, gross margin declined to 37.6%.
• Target Price: Raised from Rp34,000 to Rp41,000.
• Recommendation: Maintain SELL.

Analysts

• Edmond Law: +852 2826 4837, edmond.law@uobkayhian.com.hk
• Jasmine Duan: +852 2826 1351, jasmine.duan@uobkayhian.com.hk
• Stevanus Juanda: +6221 2993 3845, stevanusjuanda@uobkayhian.com

Conclusion

The document highlights regulatory tightening in China's banking and securities sectors, with a focus on the impact on wealth management products and brokerage earnings. It also reviews company results from Indonesia and Malaysia, and provides insights into key financial indices and market expectations. Overall, the analysis suggests a cautious outlook for the banking sector due to potential NPL formation, while the securities sector is expected to show sequential improvement in 2H16. Unilever Indonesia's performance was strong, but its valuation remains a concern.