20151217-大华继显-Regional_Morning_Notes_17页_1mb

Regional Morning Notes Summary - 17 December 2015

Core Content Overview

This document provides a detailed analysis of stock performance and market outlook for several Asian markets and specific companies, including Jiangxi Copper (358 HK), Wijaya Karya (WIKA IJ), and others. It includes updates on market conditions, earnings forecasts, valuation metrics, and recommendations for investment.

Key Markets and Indices

• Global Indices: The DJIA, S&P 500, FTSE 100, AS30, and others show mixed performance with varying percentage changes over different time frames.
• Asian Indices: The CSI 300, HSI, KLCI, and others show positive returns for the year-to-date (YTD), while some have declined in the last week and month.
• Commodity Indices: The BDI (Baltic Dry Index) and CPO (Crude Palm Oil) have shown declines, while Brent Crude has increased.

Company Updates

Jiangxi Copper (358 HK)

• TC/RC Estimate: Revised down by 9% for 2016 due to a new agreement with Antofagasta.

• Copper ASP Estimate: Reduced by 7% for 2015-17 due to weaker copper prices.

• Earnings Impact: Earnings estimates for 2015-17 are revised down by 3%, 27%, and 20% respectively.

• Valuation: Trading at 0.6x 2015F P/B, slightly above historical trough but much lower than the historical average.

• Recommendation: HOLD, with a target price of HK$9.00.

• Key Financials:

  • Net profit (adj.) for 2015F: HK$1,277 million
  • Net profit (adj.) for 2016F: HK$1,276.7 million
  • Net profit (adj.) for 2017F: HK$1,405.4 million
  • EPS (Fen) for 2015F: 44.5
  • EPS (Fen) for 2016F: 36.9
  • EPS (Fen) for 2017F: 40.6

• Market Cap: HK$52,963.7 million

• Share Price: HK$8.74

• Upside Potential: +3.0% to target price of HK$9.00

Wijaya Karya (WIKA IJ)

• Earnings Growth: Strong potential for 28% yoy growth in 2016 and 23% yoy in 2017, driven by new contracts.
• Mega Projects: Involved in several major projects, including the Jawa-5 power plant and Jakarta-Bandung railway.
• IPO Catalyst: Subsidiary IPOs are expected in 2016 and 2017, with potential to boost share price.
• Recommendation: BUY, with a target price of Rp3,900.
• Valuation: Trading at 19.4x 2016F PE, below historical 3-year average of 23.8x.
• Share Price: Rp2,630
• Upside Potential: +48.3% to target price of Rp3,900

Key Points and Insights

Jiangxi Copper

• TC/RC: Reduced by 9% for 2016 due to lower copper prices.
• Copper ASP: Revised down by 7% for 2015-17.
• Earnings Impact: Reduced by 3-27% for 2015-17.
• Demand Outlook: Weak demand from China will continue to impact copper prices in 2016.
• Valuation: Undervalued but not enough to justify a HOLD recommendation.

Wijaya Karya

• New Contracts: 60% of full-year target achieved in November 2015, with potential for 27.6% yoy growth in 2016.
• Mega Projects: Significant contracts in the pipeline, including the Jawa-5 power plant and Jakarta-Bandung railway.
• IPO Potential: Subsidiary IPOs expected to be approved in 2016 and 2017.
• Valuation: Undervalued based on 2016F PE, with potential for strong earnings growth.

Risk and Earnings Revisions

• Jiangxi Copper: Earnings revised down for 2015-17 due to lower TC/RC and copper ASP estimates.
• Wijaya Karya: No earnings revisions, but growth potential is high.

Valuation and Recommendations

Summary of Key Financial Metrics

Jiangxi Copper

• PE (2015F): 16.4x
• P/B (2015F): 0.6x
• EV/EBITDA (2015F): 27.5x
• Net Margin (2015F): 1.0%
• ROE (2015F): 3.4%

Wijaya Karya

• PE (2016F): 19.4x
• P/B (2016F): 3.1x
• EV/EBITDA (2016F): 9.2x
• Net Margin (2016F): 5.2%
• ROE (2016F): 17.1%

Conclusion

The document outlines the current market outlook and investment recommendations for Jiangxi Copper and Wijaya Karya, emphasizing the impact of weaker copper prices, potential supply cuts, and strong earnings growth prospects. While Jiangxi Copper is recommended to be held due to its undemanding valuation and weak demand outlook, Wijaya Karya is recommended as a BUY due to its strong earnings growth potential and involvement in significant projects.