Regional Morning Notes Summary - 15 March 2016
Core Content Overview
This document provides a detailed market analysis and investment recommendations for various regions and sectors, focusing on financials and property development companies in China, Indonesia, Malaysia, and Singapore. It includes key results, market indices, top picks, corporate events, and valuation metrics.
Key Takeaways by Region
China
- Financials: The sector is at near-trough valuations, with investors generally neutral to positive. Insurers are preferred over banks due to better balance sheet strength and less NPL risk.
- China Vanke (2202 HK):
- Upgraded to BUY with a target price of HK$25.31.
- 2015 results were stable with a 20.3% increase in core net profit.
- Dividend payout was higher than expected at Rmb0.72/share with a 47.5% payout ratio.
- Active landbanking in 2015, with a total GFA of 15.8 million sqm and Rmb77.7b in land premium.
- The company's market share increased to 3.00% in 2015.
- Shareholding structure issues are being resolved with a potential asset injection from Shenzhen Metro Group.
Indonesia
- Pembangunan Perumahan (PTPP IJ):
- Upgraded to BUY with a target price of Rp4,600.
- Net income increased by 39% in 2015 and is expected to grow by 34% in 2016.
Malaysia
- DiGi.Com (DIGI MK):
- Maintained as HOLD with a target price of RM5.35.
- Postpaid segment competition is intensifying, making customer acquisition expensive amid weak consumer sentiment.
Singapore
- Del Monte Pacific (DELM SP):
- Upgraded to BUY with a target price of S$0.46.
- 3QFY16 was a challenging quarter due to one-off charges, but a turnaround was achieved.
- Market Outlook: The market has bounced back to early 2016 levels, and preferred stocks with better earnings visibility are highlighted.
Key Indices (as of 14 March 2016)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17229.1 |
0.1 |
0.9 |
7.9 |
-1.1 |
| S&P 500 |
2019.6 |
-0.1 |
0.9 |
8.3 |
-1.2 |
| FTSE 100 |
6174.6 |
0.6 |
-0.1 |
8.2 |
-1.1 |
| AS30 |
5242.4 |
0.3 |
0.7 |
7.1 |
-1.9 |
| CSI 300 |
3065.7 |
1.6 |
-1.3 |
4.0 |
-17.8 |
| FSSTI |
2847.1 |
0.6 |
0.8 |
9.2 |
-1.2 |
| HSCEI |
8686.3 |
1.5 |
0.7 |
10.5 |
-10.1 |
| HSI |
20435.3 |
1.2 |
1.4 |
8.0 |
-6.7 |
| JCI |
4877.5 |
1.3 |
0.5 |
2.9 |
6.2 |
| KLCI |
1700.3 |
0.2 |
0.1 |
3.1 |
0.5 |
| KOSPI |
1972.3 |
0.0 |
0.7 |
5.9 |
0.6 |
| Nikkei 225 |
17233.8 |
1.7 |
1.9 |
7.6 |
-9.5 |
| SET |
1394.3 |
0.1 |
-0.1 |
8.2 |
8.2 |
| TWSE |
8747.9 |
0.5 |
1.0 |
8.4 |
4.9 |
| BDI |
393 |
1.3 |
11.0 |
35.1 |
-17.8 |
| CPO (RM/mt) |
2502 |
0.9 |
1.7 |
3.3 |
13.7 |
| Brent Crude (US$/bbl) |
40 |
-2.1 |
-3.2 |
18.5 |
6.0 |
Top Picks (BUY)
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Potential Upside (%) |
| Beijing Capital |
694 HK |
7.81 |
11.40 |
46.0 |
| ICBC |
1398 HK |
4.23 |
5.05 |
19.4 |
| Bank BJB |
BJB IJ |
935.00 |
1,140.00 |
21.9 |
| WCT Holdings |
WCTHG MK |
1.63 |
2.05 |
25.8 |
| City Developments |
CIT SP |
7.58 |
10.86 |
43.3 |
| Del Monte Pacific |
DELM SP |
0.325 |
0.46 |
42.0 |
| Ping An |
2318 HK |
35.30 |
45.00 |
27.3 |
| CPIC |
2601 HK |
26.75 |
30.40 |
13.7 |
Key Assumptions
| Region |
GDP (yoy) |
2015F |
2016F |
| US |
2.5 |
2.5 |
2.5 |
| Euro Zone |
1.5 |
1.5 |
1.7 |
| Japan |
0.5 |
0.5 |
1.0 |
| Singapore |
2.0 |
2.0 |
2.7 |
| Malaysia |
4.9 |
4.9 |
4.8 |
| Thailand |
2.7 |
3.2 |
3.2 |
| Indonesia |
4.8 |
5.4 |
5.4 |
| Hong Kong |
1.8 |
1.5 |
1.5 |
| China |
6.5 |
6.7 |
6.7 |
| Metric |
2015 |
2016F |
2017F |
2018F |
| Brent (Average) |
53.60 |
42 |
54 |
- |
| CPO (RM/mt) |
2168 |
2500 |
2600 |
- |
Corporate Events
| Event |
Venue |
Start Date |
End Date |
| TCL Display Technology Holdings Roadshow |
Taipei |
21 Mar |
22 Mar |
| ASEAN Conference |
Taiwan |
22 Mar |
23 Mar |
| Country Garden Roadshow |
Kuala Lumpur |
24 Mar |
24 Mar |
| Wenzhou Kangning Hospital Roadshow |
Shanghai |
31 Mar |
31 Mar |
| Concord New Energy Roadshow |
Hong Kong |
31 Mar |
31 Mar |
| Shenzhen Investment Corporate Roadshow |
Taipei |
19 Apr |
20 Apr |
Key Investment Views
- Insurers are preferred over banks:
- CPIC and Ping An are recommended as they are undervalued and have stronger balance sheets.
- Banks face rising NPLs, potential dividend cuts, and the negative impact of debt-to-equity swaps.
- Debt-to-equity swaps:
- Seen as a long-term negative for banks due to higher capital requirements and potential moral hazard.
- Dividend Stability:
- Banks are expected to maintain stable dividends, with potential yield reductions if earnings fall short.
- Vanke's Performance:
- Stable core net profit growth, higher-than-expected dividends, and active landbanking.
- Positive outlook due to its strong financial position and potential asset injection from Shenzhen Metro Group.
Valuation Highlights
| Company |
Price (HK$) |
Target (HK$) |
Upside (%) |
EPS (Fen) |
PE (2016F) |
P/B (2016F) |
ROE (2016F) |
| Ping An |
35.30 |
45.00 |
27.3 |
191.2 |
8.8 |
11.3 |
1.1 |
| CPIC |
26.75 |
30.40 |
13.7 |
222.7 |
11.1 |
8.9 |
1.0 |
| ICBC |
4.23 |
5.05 |
19.4 |
151.7 |
4.4 |
0.7 |
1.3 |
| CCB |
4.88 |
5.85 |
21.9 |
151.7 |
4.6 |
0.7 |
1.2 |
| Del Monte Pacific |
0.325 |
0.46 |
42.0 |
126.4 |
11.1 |
14.2 |
2.9 |
Analysts
Summary
The report outlines a cautious stance on the banking sector in China due to rising NPLs and potential dividend cuts, while expressing a positive outlook on the insurance sector, particularly on CPIC and Ping An. It highlights China Vanke as a top pick with strong financials, active landbanking, and a higher-than-expected dividend payout. In Indonesia, Pembangunan Perumahan is recommended due to strong net income growth. In Malaysia, DiGi.Com is maintained at HOLD due to competitive pressures. In Singapore, Del Monte Pacific is recommended as a BUY due to its turnaround and better earnings visibility. The document also includes key market indices, corporate events, and valuation metrics for further analysis.
