20150526-大华继显-Regional_Morning_Notes_19页_1022kb

Regional Morning Notes Summary - 26 May 2015

Core Content Overview

This document provides a detailed analysis of market conditions and investment recommendations for various regions, including Indonesia, China, Malaysia, Singapore, and Thailand, as well as key financial data and corporate events.

Key Stories by Region

Indonesia

• Indofood CBP (ICBP IJ): Initiated coverage with a BUY recommendation. Target price: Rp16,200 (16% upside from current level).
  • The company has pricing power and resilience to rupiah depreciation.
  • It has a diverse portfolio in consumer branded products, including noodles, dairy, snack food, and diapers.
  • The dairy division is expected to recover, and the beverage business is projected to break even by 2016.
  • Despite the depreciation of the rupiah, ICBP has historically managed to maintain or grow profits due to its pricing power and cost management.
  • Key Financials (2015F):
    • Net turnover: Rp32,373b
    • EBITDA: Rp4,449b
    • Operating profit: Rp3,837b
    • Net profit: Rp2,974b
    • EPS: Rp510
    • P/E: 27.4x
    • P/B: 5.2x
    • EV/EBITDA: 17.8x
    • Dividend yield: 1.5%

China

• Property Sector: Property sales remained strong in May, with a 33.3% yoy increase and 16.7% ytd yoy increase.
  • Residential sales were flat on a week-over-week basis but showed resilience due to stimulus policies and improved market sentiment.
  • Land market remains weak with 45.3% yoy decline in land premium in 4 major cities.
  • Preferred stocks: COLI, Vanke, CR Land, Longfor for the next 6-12 months.
  • SOE reform is a key factor for investors, with attention on Greenland HK (337 HK) and Joy City (207 HK).

Malaysia

• Tenaga Nasional (TNB MK): Update with a BUY recommendation. Target price: RM17.00.
  • The potential purchase of 1MDB's power assets is under consideration, but depends on valuations.
  • Share price retracement is seen as an opportunity to accumulate.

Singapore

• Sabana Shari'ah Compliant REIT (SSREIT SP): Upgrade to BUY with a target price of S$0.95.
  • Negatives are priced in, indicating potential for recovery.

Thailand

• Food Sector: 1Q15 earnings surged yoy and qoq due to extraordinary gains from CPF and TUF.

Key Indices Performance (as of 26 May 2015)

Top Picks (BUY)

Top Picks (SELL)

Key Assumptions

Corporate Events

Summary of Key Financials and Recommendations

• Indofood CBP (ICBP IJ): Strong pricing power and resilience to rupiah depreciation.

  • Target price: Rp16,200 (16% upside from current level).
  • Expected to grow core net income by 15.7% yoy in 2016.
  • Strong fundamentals with high ROE and positive net margin.
  • DCF valuation used to determine target price, assuming:
    • Risk-free rate: 7.5%
    • Equity risk premium: 5.3%
    • Terminal growth rate: 5%
    • WACC: 9.2 - 10.8%
    • Beta: 0.97 (declining to 0.875 as leverage decreases)

• China Property Market: Strong sales due to stimulus policies and market sentiment, with tier-1 cities still experiencing high land prices and weak land sales.

• Preferred stocks in the property sector include COLI, Vanke, CR Land, and Longfor.

• SOE reform is a key theme for investors, with Greenland HK and Joy City highlighted.

Conclusion

The report emphasizes the resilience of consumer brands in Indonesia, particularly Indofood CBP, and highlights positive trends in property sales in China. It also outlines investment opportunities in the Malaysia and Singapore markets, with a focus on BUY recommendations and valuable insights into market dynamics and valuation models. The document serves as a comprehensive guide for investors, covering key financials, sector updates, and corporate events.