20161017-大华继显-Regional_Morning_Notes_40页_2mb

Regional Morning Notes Summary - 17 October 2016

Core Content Overview

This document provides a comprehensive update on economic and market developments across several Asian countries, including China, Indonesia, Malaysia, Singapore, and Thailand, as well as specific corporate updates and sector analysis, particularly in the healthcare industry.

China: Economic and Market Highlights

Inflation

• CPI and PPI Inflation Rose in September 2016:
  • CPI increased to 1.9% yoy, higher than the market consensus of 1.6% yoy.
  • Food, fuel, and services were the main contributors to the rise in consumer prices.
  • Vegetable and pork prices rose by 7.5% and 5.8% respectively, contributing to the CPI.
  • Core CPI, excluding food and fuel, also rebounded to 1.7% yoy.
• PPI:
  • Positive yoy change recorded for the first time since March 2012.
  • Upstream sectors (coal, steel) saw significant price increases, with outdoor prices rising 4.1% and 10.1% respectively.
  • Consumer goods prices remained weak, especially durable goods, which fell 1.5% yoy.
• Real Interest Rates:
  • Consumer real interest rates remain below zero, while manufacturer real interest rates hit a 58-month low.
  • The PBOC is unlikely to cut interest rates in 2016 due to inflationary pressures and the need to stabilize the RMB against the USD.

Sector Update - Healthcare

• Integration of URBMI and NRCMI:
  • The Ministry of Human Resources and Social Security (MHRSS) has urged provincial governments to finalize integration schemes by the end of 2016 and implement them in 2017.
  • Integration will expand the number of reimbursable drugs for rural residents to ~2,400 (previously ~1,000).
  • This is expected to significantly boost sales for companies whose drugs are included in the new list.
• Key Beneficiaries:
  • Sino Biopharm (1177 HK): Major beneficiaries due to its inclusion in the National Reimbursement Drug List (NRDL) and provincial NRCMI lists.
    • Two key drugs: RunZhong and Tianqingganmei contribute 21.4% and 15.5% of finished drug sales, respectively.
  • CMS (867 HK): Benefiting from the rural expansion of Deanxit, which accounts for 25.5% of FY15 sales.
  • Luye (2186 HK): Two key drugs, Lipusu and Maitongna, contribute 45.2% and 13.9% of sales, respectively.
  • Dawnrays (2348 HK): Anneizhen and Leiyide account for 40% and 35.8% of finished drug sales.
• Market Impact:
  • The healthcare sector has rebounded since 15 August, with a 42% increase in 12-month forward PE premium over MSCI.
  • Analysts maintain an OVERWEIGHT rating on the sector, citing ongoing integration, faster drug approvals, and valuation gaps between A-shares and H-shares.

Corporate Highlights

• China Overseas Land (688 HK):
  • Disposing of low-margin assets to COGO is viewed as a positive move, expected to improve asset quality and profitability.
  • Target price: HK$32.11, with a BUY rating.

Indonesia: Corporate Highlights

• Bumi Serpong Damai (BSDE IJ):
  • Revised target price upward due to an understated RNAV guidance.
  • BUY rating, with target: Rp2,790.
• Japfa Comfeed Indonesia (JPFA IJ):
  • A small penalty cost is unlikely to impact profits significantly.
  • BUY rating, target: Rp2,075.
• Malindo Feedmill (MAIN IJ):
  • Fundamentally improving, BUY rating, target: Rp2,555.
• Nippon Indosari Corpindo (ROTI IJ):
  • Strong sales growth, but rising expenses may offset profit growth.
  • HOLD rating, target: Rp1,725.
• Tiphone Mobile Indonesia (TELE IJ):
  • Fundamentals remain strong, but share price has dropped 15% from its peak.
  • NOT RATED.

Malaysia: Strategy and Corporate Update

• Post Marketing Opportunities:
  • Rising interest in infrastructure, E&E (OSAT/EMS), and situational plays (e.g., General Election).
• Malaysian Resources Corp (MRC MK):
  • Two potential suitors show interest in acquiring its share in the Eastern Dispersal Link.
  • HOLD rating, target: RM1.43.

Singapore: Results and Outlook

• Singapore Press Holdings (SPH SP):
  • Earnings to weaken further in 4QFY16 due to economic conditions.
  • Dividends to decline.
  • SELL rating, target: S$3.29.

Thailand: Results and Outlook

• Kasikorn Bank (KBANK TB):
  • Earnings rose 7% yoy in 3Q16 due to moderate revenue growth and lower provisions.
  • BUY rating, target: Bt217.00.

Key Indices (as of 17 October 2016)

Top Picks (BUY)

Key Assumptions (GDP % yoy)

Corporate Events

Analysts

• Chaoping Zhu: +8621 5404 7225 ext. 822, chaoping@uobkayhian.com
• Ye Xu: +8621 5404 7225 ext. 820, xuy@uobKayhian.com
• Alex Jiang: +852 2236 6749, alex.jiang@uobkayhian.com.hk
• Ye Xu: +8621 5404 7225 ext. 820, xuy@uobKayhian.com
• Fu Jun Wei: +8621 54047225 ext 817, jwfu@uobKayhian.com