Regional Morning Notes Summary - 25 August 2016
Core Content Overview
This document provides a summary of company results and market updates for various regions including China, Indonesia, Malaysia, Singapore, and Thailand, along with key indices and investment recommendations. It includes detailed financial performance, strategic moves, and future outlook for selected companies.
Main Points and Key Information
China
China Lesso (2128 HK)
- 1H16 Results:
- Results beat expectations with record-high margins.
- Pipe sales volume increased by 11.8% yoy, contributing to a 13.3% yoy rise in net profit.
- Lesso Mall recorded a 27% yoy decline due to a shift in business strategy.
- Target Price: HK$5.90 (Upside: +23.4%).
- Strategic Moves:
- Expansion into the environmental sector through the acquisition of GZEP.
- Increased capex budget to Rmb2b for 2016, with Rmb700m used for overseas land acquisition.
- New Shandong plant increased production capacity to 2.16m tonnes by end-Jun 16.
- Financial Highlights:
- Gross margin rose to 29.8% (up 2.7ppt yoy), driven by lower raw material costs.
- Net margin increased to 12.5% (up 1ppt yoy).
- Maintains a BUY rating with a target price based on 8x 2016F PE.
China TCM (570 HK)
- 1H16 Results:
- Solid growth in TCM granule business with 21.9% yoy increase in revenue.
- Net profit to shareholders rose 109.2% yoy.
- Target Price: HK$4.80 (Upside: +34.5%).
- Strategic Moves:
- Synergy from the acquisition of Tianjiang Pharma.
- New dividend policy to pay 30%+ of net profit from 2016.
- Financial Highlights:
- TCM formula granule's gross margin improved from 52.8% to 58.5%.
- Selling expense as a % of revenue dropped from 31.3% to 27.4%.
- Maintains a BUY rating with a revised target price.
Indonesia
Indofood Sukeses Makmur (INDF IJ)
- 3Q16 Results:
- CPO prices rose 20% yoy.
- The stock is still considered cheap with a target price of Rp9,000.
- Recommendation: BUY.
Malaysia
RHBank (RHBBANK MK)
- 2Q16 Results:
- Results beat expectations by 5% due to a lumpy write-back of collective allowance.
- PPOP growth was fairly solid, but asset quality remains a concern.
- Recommendation: HOLD.
WCT Holdings (WCTHG MK)
- Update:
- Expected significant improvement in 2H16 due to construction billings entering more advanced stages.
- Recommendation: BUY.
Singapore
Genting Hong Kong (GENHK SP)
- Update:
- Share price expected to remain soft until better earnings visibility from its new fleet.
- Maintain HOLD with a lower target price of US$0.28.
ISOTeam (ISO SP)
- FY16 Update:
- More SolarNova contract wins are expected.
- Recommendation: BUY.
Thailand
Food Sector
- 2Q16 Earnings:
- Decent earnings and positive outlook for the sector.
- Bangkok Dusit Medical Services (BDMS TB)
- Earnings growth is expected to resume in 2H16.
- Strong future growth momentum with plans to be a leading hospital in the Asia Pacific.
- Recommendation: BUY.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18481.5 |
-0.4 |
-0.5 |
-0.5 |
6.1 |
| S&P 500 |
2175.4 |
-0.5 |
-0.3 |
0.0 |
6.4 |
| FTSE 100 |
6835.8 |
-0.5 |
-0.3 |
1.6 |
9.5 |
| AS30 |
5653.6 |
0.1 |
0.5 |
0.8 |
5.8 |
| CSI 300 |
3329.9 |
-0.4 |
-1.3 |
3.1 |
-10.8 |
| FSSTI |
2869.6 |
0.7 |
0.9 |
-2.1 |
-0.5 |
| HSI |
22820.8 |
-0.8 |
0.1 |
3.8 |
4.1 |
| KLCI |
1682.1 |
-0.1 |
-0.7 |
0.8 |
-0.6 |
| KOSPI |
2043.8 |
-0.3 |
0.0 |
1.6 |
4.2 |
| Nikkei 225 |
16597.3 |
0.6 |
-0.9 |
-0.1 |
-12.8 |
| SET |
1547.6 |
0.5 |
1.0 |
2.3 |
20.1 |
| BDI |
706 |
2.0 |
3.1 |
-1.7 |
47.7 |
| CPO (RM/mt) |
2809 |
-0.3 |
3.3 |
18.6 |
27.7 |
| Brent Crude |
49 |
-1.8 |
-1.6 |
7.4 |
31.6 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Upside % |
| Air China |
753 HK |
5.87 |
9.00 |
53.3 |
| Ping An Insurance |
2318 HK |
39.90 |
47.00 |
17.8 |
| Ciputra Property |
CTRP IJ |
630.00 |
960.00 |
52.4 |
| Indosat |
ISAT IJ |
6,025.00 |
9,500.00 |
57.7 |
| Genting Bhd |
GENT MK |
8.20 |
10.40 |
26.8 |
| Citiv Dev |
CIT SP |
8.75 |
10.36 |
18.4 |
| OCBC |
OCBC SP |
8.63 |
10.48 |
21.4 |
| Bangkok Dusit |
BDMS TB |
23.20 |
25.75 |
11.0 |
| Siam Cement |
SCC TB |
518.00 |
630.00 |
21.6 |
Sell
| Company |
Ticker |
Current Price |
Target Price |
Downside % |
| Hartalega |
HART MK |
4.41 |
3.10 |
-29.7 |
Key Assumptions
| Region |
GDP (% yoy) 2015 |
GDP (% yoy) 2016F |
GDP (% yoy) 2017F |
| US |
2.4 |
2.5 |
2.7 |
| Euro Zone |
1.6 |
1.5 |
1.6 |
| Japan |
0.5 |
0.6 |
0.8 |
| Singapore |
2.0 |
2.2 |
3.2 |
| Malaysia |
5.0 |
4.2 |
5.0 |
| Thailand |
2.8 |
3.2 |
3.6 |
| Indonesia |
4.8 |
5.0 |
5.5 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
| Metric |
2016F (US$/bbl) |
2017F (US$/bbl) |
2018F (US$/bbl) |
| Brent (Average) |
42 |
54 |
54 |
| CPO |
2,500 |
2,600 |
2,600 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| GCL New Energy Group Meeting |
Hong Kong |
25 Aug |
25 Aug |
| Kingdee Int'l Group Meeting |
Hong Kong |
25 Aug |
25 Aug |
| Q Technology Group Luncheon |
Hong Kong |
26 Aug |
26 Aug |
| China Titans Luncheon |
Hong Kong |
31 Aug |
31 Aug |
| China TCM Roadshow |
Shanghai |
1 Sep |
1 Sep |
| Dawnrays Pharma Roadshow |
Shanghai |
1 Sep |
1 Sep |
| Q Technology Group Roadshow |
Shanghai |
2 Sep |
2 Sep |
| Inari Amerton Corporate Roadshow |
Taipei |
6 Sep |
6 Sep |
| China Power International Roadshow |
Shanghai |
7 Sep |
7 Sep |
| Frasers Logistics & Ind' Trust Luncheon |
Singapore |
7 Sep |
7 Sep |
| O-Net Technologies Luncheon |
Hong Kong |
8 Sep |
8 Sep |
| Sihuan Pharmaceutical Holdings Group Roadshow |
Taipei |
8 Sep |
9 Sep |
| China Resources Gas Roadshow |
Canada |
12 Sep |
13 Sep |
| China Aviation Oil Roadshow |
UK/Europe |
13 Sep |
16 Sep |
| Skyworth Digital Hldg Group Meeting |
Hong Kong |
21 Sep |
21 Sep |
| Sembcorp Industries Corp Roadshow |
Canada |
26 Sep |
27 Sep |
| Regional Financial and Telco Sector Analyst Presentation |
UK/Europe |
26 Sep |
30 Sep |
| Xstep International Holdings Roadshow |
Taipei |
7 Oct |
7 Oct |
| Metro Pacific Investments Roadshow |
Canada |
26 Oct |
28 Oct |
| Xstep Roadshow |
Kuala Lumpur |
15 Nov |
15 Nov |
Summary of Company Highlights
- China Lesso: Strong performance in the pipe business, strategic shift to environmental sector, and expansion into overseas markets.
- China TCM: Strong growth in TCM granule business, improved margins, and new dividend policy.
- Indofood Sukeses Makmur: CPO prices rose 20% yoy, with the stock still considered undervalued.
- Bangkok Dusit Medical Services: Earnings growth expected in 2H16, supported by expansion plans.
- WCT Holdings: Construction billings expected to drive significant improvement in 2H16.
Valuation and Risk
- China Lesso: Valuation is still relatively cheap at -1SD below historical mean.
- China TCM: Valuation has bottomed, with a target price based on a lower PE ratio.
Conclusion
The report highlights strong performance in several Chinese companies, particularly in the pipe and TCM granule sectors, along with positive outlooks for other markets such as Indonesia and Thailand. It also provides key financial metrics, corporate events, and investment recommendations, emphasizing the potential for growth and diversification in the coming quarters and years.
