20170125-大华继显-Regional_Morning_Notes_29页_1mb

Regional Morning Notes Summary - 25 January 2017

Core Content

This document provides a summary of market updates and stock recommendations for several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand, along with key indices and corporate events. It also includes detailed analysis of specific companies, particularly focusing on the aviation sector in China and Shandong Weigao.

Main Points

China

• Aviation Sector Update:
  • All three Chinese carriers (Air China, China Eastern Airlines, China Southern Airlines) have outperformed the HSI year-to-date (YTD), despite concerns over RMB depreciation.
  • The sector is upgraded to OVERWEIGHT due to improving yields and reduced USD debt.
  • The trio is trading at 0.87x 2017F P/B, close to 1SD below the mean.
  • The 2017F net profit estimates have been adjusted for all three carriers due to RMB depreciation.
  • The expected improvement in yields is due to rising fuel prices, and the reduction in USD debt should lead to lower forex losses.
  • The PE for the three carriers is lower than the market average, indicating potential undervaluation.

Shandong Weigao (1066 HK)

• Equity Disposal:
  • The company is reducing its stake in its blood purification business from 70% to 49.3% through capital enlargement.
  • The disposal is valued at 13.2x 2017F PE, lower than the current PE of the company.
  • The company expects a 21.1% sales growth for its blood purification segment in 2017-2018.
  • The disposal will result in a one-off gain of RMB669.5 million in 2017.
  • The company is maintaining a SELL recommendation with a target price of HK$4.13, reflecting concerns over the impact on future growth and investor sentiment.
  • The orthopaedic segment may miss management earnings guidance due to delays in the A-share listing.

Other Markets

• Indonesia:

  • Ciputra Development (CTRA IJ) is recommended as BUY with a target of Rp1,590.
  • Supportive regulations and macroeconomic conditions suggest stable marketing sales.

• Malaysia:

  • CapitaLand Malaysia Mall Trust (CMMT MK) is HOLD with a target of RM1.53.
  • 2016 earnings were in line with forecasts, with rental reversion growth at 4% and tenant sales growth in mid-range.
  • Syarikat Takaful (STMB MK) is HOLD with a target of RM4.40.
  • 4Q16 earnings were in line with expectations, with strong Family Takaful premium growth.
  • Tenaga Nasional (TNB MK) is BUY with a target of RM16.00.
  • Management reiterated the effectiveness of the ICPT mechanism, and 2017 earnings visibility is high.

• Singapore:

  • M1 (M1 SP) is recommended as BUY with a target of S$2.48.
  • REITs sector performance in 4Q16 was mixed, with KREIT below, MIT above, and ART in line.

• Thailand:

  • Siam Commercial Bank (SCB TB) is BUY with a target of Bt172.00.
  • The macro environment and asset quality have improved, positioning SCB for expansion.

Key Indices

• DJIA: 19912.7, +0.6% (1D), +0.4% (1W), -0.1% (1M), +0.8% (YTD)
• S&P 500: 2280.1, +0.7% (1D), +0.5% (1W), +0.7% (1M), +1.8% (YTD)
• FTSE 100: 7150.3, -0.0% (1D), -1.0% (1W), +1.2% (1M), +0.1% (YTD)
• AS30: 5706.3, +0.7% (1D), -0.8% (1W), +0.5% (1M), -0.2% (YTD)
• CSI 300: 3364.5, +0.0% (1D), +1.1% (1W), +1.7% (1M), +1.6% (YTD)
• FSSTI: 3042.0, +0.5% (1D), +1.0% (1W), +6.0% (1M), +5.6% (YTD)
• HSCEI: 9759.3, +0.3% (1D), +0.6% (1W), +6.3% (1M), +3.9% (YTD)
• HSI: 22949.9, +0.2% (1D), +0.5% (1W), +6.4% (1M), +4.3% (YTD)
• JCI: 5292.1, +0.8% (1D), +0.5% (1W), +5.3% (1M), -0.1% (YTD)
• KLCI: 1680.7, +0.6% (1D), +1.1% (1W), +3.9% (1M), +2.4% (YTD)
• KOSPI: 2065.8, -0.0% (1D), -0.3% (1W), +1.5% (1M), +1.9% (YTD)
• Nikkei 225: 18788.0, -0.5% (1D), -0.1% (1W), -3.3% (1M), -1.7% (YTD)
• SET: 1578.8, +0.5% (1D), +0.8% (1W), +4.6% (1M), +2.3% (YTD)
• TWSE: 9448.0, +0.3% (1D), +1.0% (1W), +4.1% (1M), +2.1% (YTD)
• BDI: 886, -3.1% (1D), -3.9% (1W), -7.8% (1M), -7.8% (YTD)
• CPO (RM/ml): 3295, -0.1% (1D), +0.9% (1W), +3.0% (1M), +3.0% (YTD)
• Brent Crude (US$/bbl): 55, -0.1% (1D), -0.5% (1W), +0.0% (1M), -2.9% (YTD)

Top Picks (BUY)

• Air China (753 HK): Target Price HK$6.50, Upside 15.2%
• Ping An Insurance (2318 HK): Target Price HK$47.00, Upside 17.1%
• Ciputra Property (CTRP LJ): Target Price 960.00, Upside 39.1%
• Indosat (ISAT IJ): Target Price 8,015.00, Upside 28.2%
• Genting Bhd (GENT MK): Target Price 10.15, Upside 20.5%
• City Dev (CIT SP): Target Price 10.36, Upside 13.7%
• OCBC (OCBC SP): Target Price 10.65, Upside 13.5%
• Bangkok Dusit (BDMS TB): Target Price 31.20, Upside 39.3%
• Siam Cement (SCC TB): Target Price 645.00, Upside 30.0%

Top Picks (SELL)

• Hartalega (HART MK): Target Price 3.33, Downside 29.4%

Key Assumptions

• GDP Growth:
  • US: 2.6% (2015), 1.7% (2016F), 2.7% (2017F)
  • Euro Zone: 2.0% (2015), 1.6% (2016F), 1.1% (2017F)
  • Japan: 1.2% (2015), 0.8% (2016F), 0.9% (2017F)
  • Singapore: 2.0% (2015), 1.4% (2016F), 1.8% (2017F)
  • Malaysia: 5.0% (2015), 4.2% (2016F), 4.5% (2017F)
  • Thailand: 2.8% (2015), 3.2% (2016F), 3.3% (2017F)
  • Indonesia: 4.8% (2015), 5.0% (2016F), 5.2% (2017F)
  • Hong Kong: 2.4% (2015), 2.1% (2016F), 1.8% (2017F)
  • China: 6.9% (2015), 6.5% (2016F), 6.2% (2017F)
• Brent Crude:
  • Average in 2016: 45 US$/bbl
  • 2017F: 56 US$/bbl
  • 2018F: 61 US$/bbl
• CPO:
  • 2016F: 2,600 RM/mt
  • 2017F: 2,500 RM/mt

Corporate Events

• Site Visit to ST Engineering: 25 Jan 2017, Singapore
• Group Meeting with Gas Malaysia: 26 Jan 2017, Malaysia
• PTT Exploration and Production Roadshow: 6–7 Feb 2017, Singapore
• Luncheon with Keppel T&T: 10 Feb 2017, Singapore
• Luncheon with Kim Loong Resources: 13 Feb 2017, Malaysia
• Tea Session with Valuetronics: 13 Feb 2017, Singapore
• SGX-UOB Kay Hian Corporate Day: 21 Feb 2017, Taipei
• UOB Kay Hian ASEAN Conference: 22 Feb 2017, Taipei
• Annual Plantation Outlook Seminar: 6 Mar 2017, Malaysia

Valuation and Recommendations

• Shandong Weigao (1066 HK):
  • Current price: HK$5.16
  • Target price: HK$4.13
  • Upside: -20.0%
• Air China (753 HK):
  • Current price: HK$5.64
  • Target price: HK$6.50
  • Upside: 15.2%
• China Eastern Airlines (670 HK):
  • Current price: HK$4.02
  • Target price: HK$4.50
  • Upside: 12.0%
• China Southern Airlines (1055 HK):
  • Current price: HK$4.58
  • Target price: HK$5.90
  • Upside: 29.0%

Key Financials for Shandong Weigao

• Net Profit (2016F): RMB1,012.8m
• Net Profit (Adj.) (2016F): RMB1,262.7m
• EPS (2016F): 27.9 Fen
• PE (2016F): 16.3x
• P/B (2016F): 1.8x
• EV/EBITDA (2016F): 10.2x
• ROE (2017F): 16.3%
• Net Gearing (2017F): 28.5%

Earnings and Risks

• Earnings Revisions:
  • Air China: Revised net profit to RMB6.9b (down 5%)
  • CEA: Revised net profit to RMB1,012.8m (up 1%)
  • CSA: Revised net profit to RMB6.2b (down 18%)
• Risks:
  • Continued RMB depreciation could increase forex losses.
  • The disposal of Weigao Blood may impact future growth and investor sentiment.
  • The orthopaedic segment may miss earnings targets due to the delay in A-share listing.

Analysts

• K Ajith: +65 6590 6627, ajith@uobkayhian.com
• Sophie Leong: +65 6590 6621, sophie.leong@uobkayhian.com
• Alex Jiang: +852 2236 6749, alex.jiang@uobkayhian.com.hk
• Fu Jun Wei: +8621 54047225 ext 817, jwfu@uobkayhian.com

Summary

• The aviation sector in China is upgraded to OVERWEIGHT due to improving yields and reduced USD debt.
• Shandong Weigao is recommended as SELL due to the stake disposal in its fastest-growing business and potential earnings shortfalls.
• Key companies across the region are analyzed, with some recommended as BUY and others as HOLD or SELL based on their financial performance and market outlook.
• The document highlights the impact of RMB depreciation on forex losses and earnings visibility.
• Corporate events and upcoming meetings are listed, providing insights into market engagement activities.