Regional Morning Notes Summary - 07 November 2016
Core Content Overview
This document provides a regional financial update covering China, Indonesia, Malaysia, Singapore, and Thailand, with a focus on economic data, company updates, stock performance, and investment recommendations. It includes key indices, top picks, corporate events, and key assumptions for the upcoming quarters.
Main Points by Region
China
- Economic Outlook:
- Stronger momentum in economic activities is expected for October 2016.
- FAI growth is forecasted to rise to 8.4% yoy in October, driven by government-led investment and improved private sector performance.
- IP growth is expected to rebound to 6.3% yoy, with increased power generation and a shift from hydro to thermal energy.
- Retail sales are projected to grow 10.7% yoy, supported by car and property sales.
- Export growth may weaken further, while import growth is expected to rebound to 5% yoy.
- Inflation: CPI is forecasted at 2.1% yoy, while PPI is expected to rise to 1.0% yoy due to commodity price increases.
- Money Supply: M2 growth is expected to moderate to 11.1% yoy, due to reduced loan issuance and tightening measures.
- Company Update - Brilliance Auto (1114 HK):
- 3Q16 results beat expectations with 28% yoy net profit growth, attributed to cost savings and improved operating leverage.
- However, 5-series discounting remains a concern for 4Q16-3Q17.
- New X1 sales exceeded expectations, contributing to the profit surprise.
- The stock is trading at HK$9.49, with a target price of HK$9.00 and a -9.0% upside.
- EPS is revised upwards for 2016-18 by 10% / 3% / 8%, reflecting lower production costs.
- The stock is maintained at HOLD due to ongoing margin pressures from the 5-series and the proprietary brand.
Indonesia
- Banking Sector:
- 9M16 results show BBCA as the top performer with +13% yoy core net income.
- BBNI also outperformed its SOE peers, but its share price growth was the lowest among the Big 4 banks.
- BMRI had the worst performance with -18% yoy earnings.
- Lending rate cuts are expected, which may pressure NIM and ROE.
- Japfa Comfeed Indonesia (JPFA IJ):
- 3Q16 saw better-than-expected ASP recovery.
- Lower sales volume post-Lebaran (Hindu holiday) is noted.
Malaysia
- Investment Strategy:
- Focus on event catalysts for November, with BUY recommendations on several stocks.
- Ekovest (EKO MK):
- Trading suspension indicates $40% stake sale to EPF.
- BUY recommendation with a target price of RM3.00.
- Potential for value creation including a special dividend.
Singapore
- Strategy:
- Staying the course with a focus on long-term fundamentals.
- Singapore Post (SPOST SP):
- Downgraded to HOLD due to elevated transformation costs.
- Target price of S$1.76.
- Venture Corporation (VMS SP):
- BUY recommendation with a target price of S$11.00.
- 3Q16 results suggest sustainable performance.
- Singapore Airlines (SIA SP):
- HOLD recommendation with a target price of S$10.10.
- Analyst briefing indicates challenging conditions ahead.
Thailand
- Company Updates:
- Bangchak Petroleum (BCP TB):
- BUY recommendation with a target price of Bt40.00.
- 3Q16 results are expected to show softer earnings growth.
- Electricity Generating (EGCO TB):
- HOLD recommendation with a target price of Bt220.00.
- Solid results are expected for 3Q16.
Key Indices (as of 07 November 2016)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17888.3 |
-0.2 |
-1.5 |
-1.9 |
2.7 |
| S&P 500 |
2085.2 |
-0.2 |
-1.9 |
-3.2 |
2.0 |
| FTSE 100 |
6693.3 |
-1.4 |
-4.3 |
-5.0 |
7.2 |
| AS30 |
5263.1 |
-0.8 |
-2.0 |
-5.1 |
-1.5 |
| CSI 300 |
3354.2 |
-0.3 |
0.4 |
3.1 |
-10.1 |
| FSSTI |
2788.8 |
-0.5 |
-1.0 |
-3.0 |
-3.3 |
| HSCEI |
9491.5 |
0.1 |
-0.3 |
-4.4 |
-1.8 |
| HSI |
22642.6 |
-0.2 |
-1.4 |
-5.1 |
3.3 |
| JCI |
5362.7 |
0.6 |
-0.9 |
-0.3 |
16.8 |
| KLCI |
1648.2 |
0.0 |
-1.3 |
-1.0 |
-2.6 |
| KOSPI |
1982.0 |
-0.1 |
-1.9 |
-3.5 |
1.1 |
| Nikkei 225 |
16905.4 |
-1.3 |
-2.5 |
0.3 |
-11.2 |
| SET |
1485.7 |
-0.5 |
-0.6 |
-1.2 |
-15.3 |
| TWSE |
9068.2 |
0.0 |
-2.6 |
-2.1 |
-8.8 |
| BDI |
855 |
0.7 |
2.5 |
-7.2 |
78.9 |
| CPO (RM/mt) |
2765 |
-0.6 |
-1.8 |
1.1 |
25.7 |
| Brent Crude |
46 |
-1.7 |
-8.3 |
-10.4 |
22.3 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Air China |
753 HK |
5.18 |
7.00 |
35.1 |
| Ping An Insurance |
2318 HK |
40.65 |
47.00 |
15.6 |
| Ciputra Property |
CTRP LJ |
730.00 |
960.00 |
31.5 |
| Indosat |
ISAT LJ |
6,350.00 |
9,500.00 |
49.6 |
| Genting Bhd |
GENT MK |
7.80 |
9.90 |
26.9 |
| Citiv Dev |
CIT SP |
8.42 |
10.36 |
23.0 |
| OCBC |
OCBC SP |
8.43 |
10.45 |
24.0 |
| Bangkok Dusit |
BDMS TB |
22.80 |
31.20 |
36.8 |
| Siam Cement |
SCC TB |
498.00 |
645.00 |
29.5 |
Top Picks (SELL)
| Company |
Ticker |
Current Price |
Target Price |
Potential Downside (%) |
| Hartalega |
HART MK |
4.65 |
3.10 |
-33.3 |
Key Assumptions
GDP Growth Forecast (yoy)
| Region |
2015 |
2016F |
2017F |
| US |
2.6 |
2.0 |
2.7 |
| Euro Zone |
2.0 |
1.4 |
1.0 |
| Japan |
0.5 |
0.6 |
0.8 |
| Singapore |
2.0 |
1.4 |
1.7 |
| Malaysia |
5.0 |
4.2 |
4.5 |
| Thailand |
2.8 |
3.2 |
3.5 |
| Indonesia |
4.8 |
5.0 |
5.2 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
Commodity and Energy Prices
| Commodity |
2015 |
2016F |
2017F |
| Brent Crude |
53.60 |
42 |
54 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events (November 2016)
| Event |
Venue |
Start Date |
End Date |
| Valuetronics Tea Session |
Singapore |
7 Nov |
7 Nov |
| Cityneon Roadshow |
Hong Kong |
9 Nov |
9 Nov |
| SMI Holdings Roadshow |
Singapore |
10 Nov |
10 Nov |
| Shanghai Industrial Urban Devt Group Roadshow |
Shanghai |
10 Nov |
10 Nov |
| Xstep International Holdings Roadshow |
Kuala Lumpur |
15 Nov |
15 Nov |
| Ministry of Finance Indonesia Corporate Roadshow |
Taipei |
21 Nov |
22 Nov |
| Indo Strategy Analyst Marketing |
Taipei |
23 Nov |
23 Nov |
| Metro Pacific Investments Roadshow |
Canada |
24 Nov |
25 Nov |
Key Financial Metrics for Brilliance Auto (1114 HK)
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net Profit (Rmbm) |
3,495 |
3,545 |
3,809 |
4,675 |
| EPS (fen) |
69.5 |
70.5 |
75.8 |
93.0 |
| PE (x) |
11.1 |
11.7 |
10.9 |
8.9 |
| P/B (x) |
2.1 |
1.9 |
1.7 |
1.4 |
| Net Margin (%) |
n.a. |
n.a. |
n.a. |
n.a. |
| Net Debt/(Cash) to Equity (%) |
0.8 |
-3.9 |
-7.0 |
-8.9 |
| Interest Cover (x) |
9.8 |
6.6 |
4.2 |
2.4 |
| ROE (%) |
19.0 |
16.5 |
15.5 |
16.5 |
Conclusion
The report outlines positive economic momentum in China, particularly in FAI and IP growth, but warns of ongoing margin pressures from the aging 5-series and increased competition. In Indonesia, BBCA is highlighted as the top-performing bank, while BBNI is seen as undervalued. In Malaysia, Ekovest is a key BUY due to its stake sale and value creation potential. In Singapore, Venture Corporation is recommended with a target price of S$11.00, and Singapore Post is downgraded to HOLD due to transformation costs. In Thailand, Bangchak Petroleum and Electricity Generating are seen as BUY and HOLD respectively. The target price for Brilliance Auto is raised to HK$9.00, and the stock is maintained at HOLD due to competition and margin pressures.
