20170525-大华继显-Regional_Morning_Notes_21页_1mb

Regional Morning Notes Summary - 25 May 2017

Core Content Overview

This summary provides an analysis of key developments in the financial markets of China, Malaysia, and Singapore, along with stock updates and valuations for specific companies.

China

Geely Auto (175 HK)

• Company Update: Geely's parent company, Zhejiang Geely Holding Group, has agreed to acquire a 49.9% stake in Proton and a 51% stake in Lotus Cars from DRB-Hicom.
• Strategic Implications: The acquisition is expected to help Geely penetrate the ASEAN market and gain access to Lotus' lightweight chassis technology to meet China's tightening fuel-economy rules.
• Stock Impact: The acquisition is done at the parent company level, which is expected to have limited impact on Geely (175 HK). The company's target price remains at HK$10.50, with an upside of -9.9% from the current share price of HK$11.66.
• Valuation: Based on 10x 2017F PE, the target price is set at HK$10.50. The company's net profit is forecasted to grow from Rmb5,112m in 2016 to Rmb8,130m in 2017, with a 6% margin below consensus.
• Financials:
  • Net Profit: Rmb5,112m (2016), Rmb8,130m (2017F), Rmb8,900m (2018F), Rmb10,100m (2019F)
  • PE: 19.9 (2016), 11.5 (2017F), 10.5 (2018F), 9.3 (2019F)
  • P/B: 5.0 (2016), 3.9 (2017F), 3.1 (2018F), 2.5 (2019F)
  • EV/EBITDA: 14.9 (2016), 8.4 (2017F), 7.2 (2018F), 5.7 (2019F)

Malaysia

MY EG Services (MYEG MK)

• Initiate Coverage: The company is entering new growth areas with accommodation services and the GST monitoring system.
• Key Catalysts:
  • Foreign worker amnesty programme, expected to increase the number of foreign workers from 1.5m in FY16 to 2.5m in FY19.
  • Roll-out of accommodation services with a target of 500 sites over 4-5 years.
  • Launch of the GST Electronic Monitoring System (EMS), with 500,000 sites expected to be covered by FY19.
• Stock Impact: Initiate coverage with HOLD and a target price of RM2.29. The entry price is RM2.06.
• Valuation:
  • PE: 36.9 (FY16), 39.3 (FY17F), 30.6 (FY18F), 24.3 (FY19F)
  • PEG: 0.9x
• Financials:
  • Net Profit: RM142.8m (FY16), RM200.7m (FY17F), RM258.2m (FY18F), RM324.7m (FY19F)
  • Net Margin: 50.7% (FY16), 52.3% (FY17F), 44.2% (FY18F), 39.2% (FY19F)
  • ROE: 35.7% (FY16), 37.1% (FY17F), 35.8% (FY18F), 34.2% (FY19F)

Singapore

Property Sector

• REITs Focus: Rosier economic outlook and S-REITs are in the spotlight. The sector is expected to be influenced by economic trends and regulatory changes.

Key Indices (as of 25 May 2017)

Top Picks

BUY

• Alibaba (BABA US): Target price $139.00, potential upside 13.2%
• Beijing Ent. Water (371 HK): Target price HK$7.60, potential upside 24.4%
• Telekomunikasi (TLKM IJ): Target price IJ$5,000.00, potential upside 14.7%
• Tiga Pilar (AISA IJ): Target price IJ$2,500.00, potential upside 15.2%
• V.S. Industry (VSI MK): Target price MK$2.20, potential upside 11.1%
• OCBC (OCBC SP): Target price SP$11.70, potential upside 12.2%
• Siam Cement (SCC TB): Target price TB$600.00, potential upside 14.9%

SELL

• Great Wall Motor (2333 HK): Target price HK$6.00, potential downside 25.1%
• MGM China (2282 HK): Target price HK$15.00, potential downside 12.2%
• Hartalega (HART MK): Target price MK$4.07, potential downside 36.3%

Corporate Events (May 2017 - June 2017)

• Analyst Marketing on China Internet Sector - Kuala Lumpur (25 May - 26 May)
• Roadshow with Singtel - Canada (26 May)
• Analyst Presentation on Singapore Property & REITs Strategy - Canada/US/UK (29 May - 6 Jun)
• Roadshow with Tongda Group Holdings - Hong Kong (1 Jun)
• Roadshow with United Overseas Bank - Canada (2 Jun)
• Group meeting with Fortune REIT - Hong Kong (7 Jun)
• Roadshow with Meidong Auto Holdings - Taipei (8 Jun)
• Roadshow with Tonly Electronics Holdings - Taipei (8 Jun - 9 Jun)
• Roadshow with GFPT Public Company - Hong Kong (8 Jun - 9 Jun)
• Roadshow with PT Siloam Int'l Hospital - Canada (5 Jun - 16 Jun)
• Analyst Presentation on Spore Strategy - Kuala Lumpur (15 Jun)
• Luncheon with United Overseas Bank - Singapore (3 Jul)
• Sarawak Oil Palms Site Visit - Sarawak (3 Jul - 5 Jul)
• Roadshow with Top Glove Corporation - US/Canada (5 Sep - 12 Sep)

Summary of Key Financial Metrics

Geely Auto (175 HK)

• Net Profit: Rmb5,112m (2016), Rmb8,130m (2017F), Rmb8,900m (2018F), Rmb10,100m (2019F)
• PE: 19.9 (2016), 11.5 (2017F), 10.5 (2018F), 9.3 (2019F)
• P/B: 5.0 (2016), 3.9 (2017F), 3.1 (2018F), 2.5 (2019F)
• EV/EBITDA: 14.9 (2016), 8.4 (2017F), 7.2 (2018F), 5.7 (2019F)
• Dividend Yield: 1.1% (2016), 1.7% (2017F), 1.9% (2018F), 2.2% (2019F)
• Net Margin: 8.4% (2016), 9.1% (2017F), 8.5% (2018F), 8.3% (2019F)
• Net Debt/(Cash) to Equity: (60.9)% (2017F), (74.0)% (2018F), (83.4)% (2019F)
• ROE: 20.4% (2016), 29.0% (2017F), 25.3% (2018F), 23.5% (2019F)

MY EG Services (MYEG MK)

• Net Profit: RM142.8m (FY16), RM200.7m (FY17F), RM258.2m (FY18F), RM324.7m (FY19F)
• PE: 36.9 (FY16), 39.3 (FY17F), 30.6 (FY18F), 24.3 (FY19F)
• P/B: 13.8 (FY16), 15.1 (FY17F), 11.2 (FY18F), 8.5 (FY19F)
• EV/EBITDA: 47.4 (FY16), 33.6 (FY17F), 25.2 (FY18F), 19.8 (FY19F)
• Net Margin: 50.7% (FY16), 52.3% (FY17F), 44.2% (FY18F), 39.2% (FY19F)
• ROE: 35.7% (FY16), 37.1% (FY17F), 35.8% (FY18F), 34.2% (FY19F)

Key Assumptions

Summary

This report highlights strategic acquisitions, new business ventures, and financial performance across key markets in China, Malaysia, and Singapore. Geely Auto is expanding into the ASEAN market through Proton and Lotus, while MY EG Services is leveraging government initiatives and new services to boost earnings. The report also includes key financial metrics and valuations for these companies, along with a list of top picks and corporate events.