20180711-大华继显-Regional_Morning_Notes_22页_1mb

Regional Morning Notes Summary - 11 July 2018

Core Content Overview

This document provides an investment outlook for various regional markets, focusing on the cement and pharmaceutical sectors in China, as well as updates for Indonesia, Malaysia, and Singapore. It includes earnings forecasts, valuation analysis, corporate events, and key financial data for selected companies. The document also highlights the potential for growth and the current market sentiment towards specific stocks.

Main Points by Region

China

• Cement Sector:
  • Expected to deliver record-high earnings in 1H18 due to strong market conditions and infrastructure demand.
  • The sector is upgraded to OVERWEIGHT as the recent sell-off presents a good buying opportunity.
  • Key companies: Anhui Conch, CNBM, and CR Cement are maintained at BUY with updated target prices.
  • Cement prices remained high in 1H18, with an average of Rmb432/tonne, up 22.5% yoy.
  • Supply remains tight due to production curbs and environmental checks.
  • Infrastructure demand is expected to outperform property demand in 2H18 due to potential fiscal stimulus.

Indonesia

• Ciputra Development (CTRA IJ):
  • Upgraded to BUY after a recent sell-off appears overdone.
  • Target price: Rp1,330.
  • Current price: Rp990.

Malaysia

• Gaming Sector:
  • Multiple catalysts expected in the near term.
  • Gaming taxes may rise following the abolishment of GST, but the impact on earnings is expected to be moderate.
  • Sector recommendation: OVERWEIGHT.
• Plantation Sector:
  • Inventory rose to 2.19m tonnes in June 2018.
  • Weak exports due to export duty resumption and loss of market share to other edible oils.

Singapore

• Asian Healthcare Specialists (AHSP SP):
  • Upgraded to BUY due to the aging population and growth in orthopaedic demand.
  • Target price: S$0.33.
  • Current price: S$0.24.

Thailand

• Central Plaza Hotel (CENTEL TB):
  • Maintained at HOLD.
  • 2Q18 core profit expected to grow by 2% yoy.
  • Target price: Bt50.00.
  • Current price: Bt44.50.

Key Financial Indices

Key Sector Picks and Recommendations

Cement Sector (China)

• Anhui Conch (600585 CH / 914 HK):

  • Upgraded to BUY.
  • Target price: Rmb46.70 (A-shares) and HK$58.45 (H-shares).
  • 1H18 net profit expected to grow by 80-100% yoy.
  • Revised earnings forecasts up by 11% for 2018 and 5% for 2019.
  • Strong cost control and core businesses in fast-growing regions.

• CNBM (3323 HK):

  • Maintained at BUY.
  • Target price: HK$10.98.
  • Revised earnings forecasts down by 3% due to higher finance costs.
  • Trading at 5.6x 2018F PE and 0.7x 2018F P/B.

• CR Cement (1313 HK):

  • Maintained at BUY.
  • Target price: HK$10.00.
  • Revised earnings forecasts up by 15% for 2018 and 9% for 2019.
  • EPS dilution due to private placement, but market overreacted.

Company Updates

YiChang HEC ChangJiang Pharmaceutical (1558 HK)

• Key Highlights:
  • Deepening hospital penetration at Kewei drives fast growth.
  • Positive 1H18 profit alert with net profit growth of over 110% yoy.
  • Expected to receive more drug asset injections in 2019-20, including 20-30 US/EU-qualified generics and 3-5 self-developed innovative drugs.
  • Target price: HK$68.99.
  • Valuation based on SOTP: 15x 2019F PE for existing drugs and HK$22.4 per share for near-term drug pipeline.
  • Strong pipeline across generics and innovative drugs for hepatitis, diabetes, and oncology.

Key Financials (YiChang HEC ChangJiang Pharmaceutical)

Corporate Events

Analysts

• Sandra Huang & Jie Qiong: +8621 5404 7225 ext. 804, sandrahuang@uobkayhian.com
• Neo Chen: +8621 5404 7225 ext. 810, neochen@uobkayhian.com

Conclusion

The document highlights the strong performance of the cement sector in China, driven by high earnings, tight supply, and potential fiscal stimulus. It also emphasizes the growth potential of YiChang HEC ChangJiang Pharmaceutical due to its deepening market penetration and pipeline of generics and innovative drugs. The upgrade to OVERWEIGHT for the cement sector and BUY for specific companies reflects confidence in the sector's fundamentals and valuation. The report also provides updates for other regions and key financial indices, supporting an overall positive outlook for the selected stocks.