Regional Morning Notes Summary
Core Content Overview
This document provides a summary of market updates and investment insights for various regions including China, Indonesia, Malaysia, Singapore, and Thailand, focusing on sectors such as Renewable Energy, Securities, and Company Updates.
Key Regions and Sectors
China
-
Renewable Energy:
- The National Energy Administration (NEA) released an annual solar installation quota of 18.1GW for 2016, which is higher than market expectations of 15GW.
- Upstream solar product producers are expected to benefit, with actual installation likely to reach 20GW in 2016, up 33% YoY.
- Downstream solar farm operators face intensified competition and declining tariffs due to new competitive mechanisms in quota allocation.
- Recommendation: Maintain OVERWEIGHT; prefer upstream manufacturers.
-
Securities:
- Two new IPOs (China Merchants Securities and Dong Fang Securities) show less differentiation.
- Recommendation: Maintain BUY on CITICS and CGS; prefer CITICS for its leading-industry position and CGS for its low valuation.
Indonesia
- Charoen Phokphand (CPIN LJ/BUY/Rp3,740/Target: Rp4,750):
- Upgraded to BUY due to consolidation of live birds segment, early signs of ASP recovery, new regulations stabilizing poultry prices, and lower interest costs.
- Target price is Rp4,750, with an upside of +26.7%.
- Key financials show a 14.4% increase in 2016 revenue and 13.9% in 2017.
- Recommendation: Upgrade to BUY.
Malaysia
- Property:
- Outlook remains bleak in 2H16, but there are pockets of opportunity for companies that can monetize assets.
- Recommendation: Maintain OVERWEIGHT.
Singapore
- REITs:
- Hospitality REITs had a good April for hoteliers.
- Recommendation: Maintain OVERWEIGHT.
Thailand
- Total Access Communication (DTAC TB/HOLD/Bt34.75/Target: Bt32.50):
- 2Q16 results are expected to continue depressing earnings.
- Recommendation: HOLD.
Key Indices Performance
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17733.1 |
0.5 |
-1.4 |
0.1 |
1.8 |
| S&P 500 |
2078.0 |
0.3 |
-1.8 |
0.5 |
1.7 |
| FTSE 100 |
5950.5 |
-0.3 |
-4.5 |
-3.3 |
-4.7 |
| AS30 |
5231.7 |
0.0 |
-3.8 |
-4.2 |
-2.1 |
| CSI 300 |
3094.7 |
-0.7 |
-2.6 |
0.3 |
-17.1 |
| FSSTI |
2751.6 |
-0.8 |
-3.2 |
-1.1 |
-4.6 |
| HSCEI |
8409.8 |
-2.3 |
-6.8 |
-0.2 |
-13.0 |
| HSI |
20038.4 |
-2.1 |
-5.9 |
-0.4 |
-8.6 |
| JCI |
4814.4 |
-0.0 |
-1.3 |
1.8 |
4.8 |
| KLCI |
1614.9 |
-0.8 |
-2.2 |
-1.1 |
-4.6 |
| KOSPI |
1952.0 |
-0.9 |
-3.6 |
-0.8 |
-0.5 |
| Nikkei 225 |
15434.1 |
-3.0 |
-7.4 |
-7.3 |
-18.9 |
| SET |
1411.2 |
-1.7 |
-1.7 |
0.3 |
9.6 |
| TWSE |
8494.1 |
-1.3 |
-2.1 |
4.3 |
1.9 |
| BDI |
598 |
-1.0 |
-2.1 |
-2.4 |
25.1 |
| CPO (RM/ml) |
2516 |
-0.7 |
-4.0 |
-4.1 |
14.4 |
| Brent Crude |
47 |
-3.6 |
-9.2 |
-3.6 |
26.6 |
Top Picks
| Company |
Ticker |
Recommendation |
Target Price (HK$) |
Price (HK$) |
| Air China |
753 HK |
BUY |
10.20 |
5.07 |
| Ping An Insurance |
2318 HK |
BUY |
45.00 |
33.35 |
| Bank BJB |
BJB RJ |
BUY |
1,170.00 |
1,015.00 |
| Genting Bhd |
GENT MK |
BUY |
10.40 |
8.00 |
| City |
CIT SP |
BUY |
10.86 |
8.80 |
| DBS |
DBS SP |
BUY |
19.30 |
15.61 |
| Bangkok Dusit |
BDMS TB |
BUY |
27.70 |
23.80 |
| Siam Cement |
SCC TB |
BUY |
630.00 |
466.00 |
Key Assumptions
| Country/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 |
2.7 |
3.0 |
| 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 |
| Commodity |
2016 Average |
2016 Forecast |
2017 Forecast |
| Brent (US$/bbl) |
42 |
54 |
54 |
| CPO (RM/mt) |
2,500 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| BIMB Holdings Bhd Roadshow |
Singapore |
16 Jun |
17 Jun |
| Singapore Strategy for 2H16 & Small-Mid Caps Analyst Presentation |
Kuala Lumpur |
16 Jun |
17 Jun |
| China Resources Cement Roadshow |
Taiwan |
21 Jun |
21 Jun |
| UOB Roadshow |
US/Canada |
20 Jun |
24 Jun |
| Modern Dental Group Luncheon |
Hong Kong |
6 Jul |
6 Jul |
Company Update: Charoen Phokphand (CPIN IJ)
- Live Birds Segment: Consolidated in 1Q16, contributing Rp1.5t or 13.4% of total revenue.
- ASP Recovery: Early signs of ASP recovery in June 2016, with live bird ASP reaching Rp20,500/chick.
- New Regulations: Stabilizing poultry prices and reducing unhealthy competition.
- Debt Reduction: Plans to repay Rp1.5t-2.0t of debt in 2016, reducing net gearing ratio from 52.5% to 36.2%.
- Dividend Increase: Dividend payout ratio increased to 25%, with a dividend of Rp29/share and a yield of 0.8%.
- Recommendation: Upgrade to BUY with a target price of Rp4,750.
Risks
- Weaker-than-expected solar installation.
- Delay in subsidy payments.
- Volatility in the rupiah.
- Higher production costs due to the parent stock culling programme.
- Volatility in broiler ASP.
- Potential threat from new entrants.
Valuation and Recommendation
- CITICS: Target price HK$21.90, current price HK$16.32.
- CGS: Target price HK$9.30, current price HK$6.25.
- CPIN: Target price Rp4,750, current price Rp3,740.
Analysts
Stock Impact and Financials
- CPIN:
- Revenue and net profit expected to increase due to live birds segment consolidation.
- Net margin forecast to improve from 8.0% to 8.4% in 2016.
- Trading at 19.7x 2016F PE and 16.8x 2017F PE, -0.5SD below historical average.
- Target price based on 23x PE of 2016-17F EPS.
Peer Comparison
| Company |
Ticker |
Rec |
Price (HK$) |
Target (HK$) |
Market Cap (US$m) |
2016F PE |
2017F PE |
2016F P/B |
2017F P/B |
2016F ROE |
2017F ROE |
2016F ROA |
2017F ROA |
2016F Yield |
2017F Yield |
| CITICS |
6030 HK |
BUY |
16.32 |
21.90 |
28,163 |
10.7 |
9.9 |
1.1 |
1.0 |
10.3 |
10.3 |
2.3 |
2.3 |
2.8 |
3.0 |
| HTS |
6837 HK |
HOLD |
12.14 |
14.30 |
23,721 |
9.8 |
8.6 |
1.0 |
0.9 |
10.3 |
10.8 |
1.9 |
1.9 |
3.1 |
3.5 |
| CGS |
6881 HK |
BUY |
6.25 |
9.30 |
7,682 |
7.9 |
6.8 |
0.8 |
0.7 |
10.3 |
11.3 |
1.8 |
1.8 |
3.8 |
4.4 |
Key Financials
| Metric |
2015 (Rpb) |
2016F (Rpb) |
2017F (Rpb) |
2018F (Rpb) |
% Change 2016F |
% Change 2017F |
| Net turnover |
30,108 |
38,797 |
43,367 |
48,887 |
14.4 |
13.9 |
| EBITDA |
4,150 |
5,337 |
6,168 |
6,976 |
14.5 |
6.3 |
| Operating profit |
4,560 |
5,277 |
5,978 |
6,254 |
6.8 |
6.2 |
| Net profit |
3,116 |
3,659 |
4,254 |
- |
8.1 |
7.7 |
| Net margin |
8.0 |
8.4 |
8.7 |
- |
- |
- |
Cash Flow and Balance Sheet
| Metric |
2015 (Rpb) |
2016F (Rpb) |
2017F (Rpb) |
2018F (Rpb) |
| Operating |
1,706 |
3,206 |
3,583 |
4,067 |
| Total assets |
24,685 |
27,362 |
30,553 |
34,249 |
| Shareholders' equity |
12,547 |
15,204 |
18,084 |
21,240 |
Conclusion
The report highlights positive developments in upstream solar power production in China, while cautioning about the challenges in the downstream segment. In Indonesia, the upgrade of CPIN to BUY is based on the consolidation of the live birds segment and signs of ASP recovery. In Malaysia, the property sector shows a bleak outlook but with potential opportunities. In Singapore, the REITs sector, particularly hospitality REITs, had a good April. Overall, the report recommends focusing on upstream manufacturers and companies with strong fundamentals and stable valuations.
