Regional Morning Notes Summary - 27 January 2016
Core Content Overview
This document provides a summary of market updates, company results, and investment recommendations across several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand. It also includes key financial metrics, sector insights, and corporate events.
Main Points by Region
China
- Property Sector:
- Property management companies (PMCs) face thin profits due to conservative local pricing models.
- O2O platforms are being explored to diversify revenue streams, particularly in e-commerce and value-added services.
- Colour Life (1778 HK): Leading in O2O with a user base of 1.56 million, and active users of 600,000. Its platform, Caizhiyun, has over 4,000 daily orders for e-wealth management.
- China Overseas Property Holdings (COPH) (2669 HK): Launched an O2O platform with 44 properties and 21,386 registered users. Plans to expand to other cities in 2016.
- Zhong Ao Home (ZAH) (1538 HK): Released O2O operational data with 1,111 properties covered. Registered users increased to 179,500, with 64% active in Dec 2015. Plans to expand in 2016.
- Market Weight: Maintained for PMCs.
- Key Financial Ratios:
- Gross Profit Margin (GPM): 18.6% (2013), 19.1% (2014), 19.2% (1H15)
- Net Profit Margin (NPM): 4.6% (2013), 4.5% (2014), 4.4% (1H15)
- ROE: 19.9% (2013), 18.4% (2014), 21.2% (1H15)
- Recommendation: Maintain BUY for companies with strong O2O platforms and growth potential.
Indonesia
- Nippon Indosari Corpindo (ROTI IJ):
- Preliminary 2015 net income indicates 41.8% yoy growth.
- 4Q15 net income growth of 31.8% yoy.
- Strong performance with sales growth of 15.6% yoy and improved gross margin.
- Trading at 20.5x 2016F PE (UOBKH) and 21.1x consensus 2016F PE, which is below historical average.
- Target Price: Rp1,600, with upside of +28.0%.
- Recommendation: Maintain BUY, as the company is expected to continue its growth in general trade and improve margins.
- Stock Impact: Audited results will be released in March 2016. The company expects a 16.8% yoy net income growth in 2016.
- Key Financials:
- 2015 Net Income: Rp267b
- 2015 Revenue: Rp2,174b
- 2015 Gross Profit: Rp1,152b
- 2015 Operating Profit: Rp389b
- 2015 Net Profit: Rp267b
- 2015 Net Margin: 12.3%
- 2015 EBITDA: Rp515b
- 2015 Net Debt/Share: Rp130
- Market Cap: Rp6,327.3b (2015)
- Dividend Yield: 0.4% (2015)
- P/B Ratio: 5.3 (2015)
- EV/EBITDA: 13.6 (2015)
- Corporate Event: No specific event listed in this section.
Malaysia
- Bursa Malaysia (BURSA MK/HOLD/RM8.30/Target: RM8.70):
- 4Q15 results preview: Expect relatively resilient earnings with a 7% yoy growth in equity ADV.
- Raised 2016 ADV forecast by 1.4%.
- JCY International (JCYH MK/HOLD/RM0.72/Target: RM0.78):
- Cut earnings forecasts and target price due to soft HDD demand outlook.
- Downgraded to HOLD.
- Update: No further details provided.
Singapore
- REITs Sector:
- 4Q15 results of Suntec REIT, MINT, ART, and SGREIT are in line.
- SMRT Corporation (MRT SP/HOLD/S$1.42/Target: S$1.51):
- 9MFY16 results: Good performance with a boost from grants.
Thailand
- Banking Sector:
- 2015: Weak earnings but within expectations; surging provisions were a key negative.
- PTT Global Chemical (PTTGC TB/BUY/Bt49.75/Target: Bt63.00):
- 4Q15 results preview: Earnings likely to improve qoq due to better performance from refinery and aromatic businesses.
- Thai Union Group (TU TB/BUY/Bt17.70/Target: Bt21.10):
- 4Q15 results preview: Earnings may have dropped qoq but increased yoy.
Key Indices Performance
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16167.2 |
1.8 |
0.9 |
-7.9 |
-7.2 |
| S&P 500 |
1903.6 |
1.4 |
1.2 |
-7.6 |
-6.9 |
| FTSE 100 |
5911.5 |
0.6 |
0.6 |
-5.5 |
-5.3 |
| AS30 |
5057.1 |
1.8 |
3.0 |
-3.8 |
-5.4 |
| CSI 300 |
2940.5 |
-6.0 |
-8.8 |
-23.4 |
-21.2 |
| FSSTI |
2545.6 |
-1.4 |
-3.5 |
-11.5 |
-11.7 |
| HSCEI |
7895.2 |
-3.4 |
-5.8 |
-20.7 |
-18.3 |
| HSI |
18860.8 |
-2.5 |
-3.9 |
-14.8 |
-13.9 |
| JCI |
4510.5 |
0.1 |
0.4 |
-0.3 |
-1.8 |
| KLCI |
1626.7 |
0.1 |
0.2 |
-2.2 |
-3.9 |
| KOSPI |
1871.7 |
-1.1 |
-0.9 |
-6.0 |
-4.6 |
| Nikkei 225 |
16708.9 |
-2.3 |
-2.0 |
-11.0 |
-12.2 |
| SET |
1268.1 |
0.0 |
0.2 |
-1.2 |
-1.5 |
| TWSE |
7828.7 |
-0.8 |
-0.3 |
-6.4 |
-6.1 |
| BDI |
345 |
-2.5 |
-5.0 |
-27.8 |
-27.8 |
| CPO (RM/mt) |
2286 |
0.3 |
0.9 |
4.5 |
3.9 |
| Brent Crude (US$/bbl) |
31 |
1.9 |
8.0 |
-18.0 |
-16.7 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Upside (%) |
| Beijing Capital |
694 HK |
7.31 |
11.40 |
56.0 |
| ICBC |
1398 HK |
3.85 |
7.60 |
97.4 |
| Bank BJB |
BJBR IJ |
835.00 |
1,140.00 |
36.5 |
| DiGi.Com |
DIGI MK |
5.10 |
5.95 |
16.7 |
| Maybank |
MAY MK |
8.29 |
10.00 |
20.6 |
| City Developments |
CIT SP |
6.79 |
10.86 |
59.9 |
| DBS |
DBS SP |
13.76 |
22.34 |
62.4 |
| Kasikornbank |
KBANK TB |
158.00 |
192.00 |
21.5 |
| PTT |
PTT TB |
219.00 |
340.00 |
55.3 |
Top Picks (SELL)
| Company |
Ticker |
Current Price |
Target Price |
Upside (%) |
| SIA Engineering |
SIE SP |
3.39 |
3.30 |
-2.7 |
| UMWH Holdings |
UMWH MK |
6.65 |
6.00 |
-9.8 |
| Sembcorp Marine |
SMM SP |
1.48 |
1.05 |
-28.8 |
Key Assumptions
| Country/Region |
GDP (yoy) 2014 |
GDP (yoy) 2015F |
GDP (yoy) 2016F |
| US |
2.4 |
2.5 |
2.5 |
| Euro Zone |
0.9 |
1.5 |
1.7 |
| Japan |
-0.1 |
0.5 |
1.0 |
| Singapore |
2.9 |
2.0 |
2.7 |
| Malaysia |
6.0 |
4.9 |
4.8 |
| Thailand |
0.9 |
2.7 |
3.2 |
| Indonesia |
5.0 |
4.8 |
5.4 |
| Hong Kong |
2.5 |
1.8 |
1.5 |
| China |
7.3 |
6.5 |
6.7 |
| Indicator |
2015 |
2016F |
2017F |
| Brent (Average) |
53.60 |
54 |
62 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Date |
| Greater China Strategy and Energy Sector Analyst Presentation |
Vienna |
27 Jan |
| Greater China Strategy and Energy Sector Analyst Presentation |
London |
28 Jan |
| Greater China Strategy and Energy Sector Analyst Presentation |
Dublin |
29 Jan |
| Futotech Bhd Roadshow |
Singapore |
27 Jan |
| Dawnrays Pharma Roadshow |
Shanghai |
29 Jan |
| MAL Utilities Analyst Presentation |
Kuala Lumpur |
3 Feb |
| Singapore Airlines Luncheon |
Singapore |
5 Feb |
Conclusion
- Property Management Services (PMS) in China are increasingly adopting O2O platforms to enhance profitability.
- Nippon Indosari Corpindo (ROTI IJ) shows strong performance with 41.8% yoy net income growth and is recommended to BUY.
- The market outlook is cautiously optimistic for companies with strong O2O strategies, while some are downgraded due to weak performance or poor outlook.
- Key financial metrics for PMS companies indicate a focus on improving margins and expanding services.
- Valuation: ROTI is undervalued relative to its historical forward PE of 25.2x, making it an attractive investment.
