20150812-大华继显-Regional_Morning_Notes_21页_1mb

Regional Morning Notes Summary - 12 August 2015

Core Content

This document provides a summary of market updates and analysis for China, Indonesia, and Malaysia, focusing on key sectors and corporate events. It also includes insights on stock performance, sector-specific trends, and investment recommendations.

Main Points

China

• Monetary Policy: The PBoC lowered the yuan reference rate by 1.9%, which may indicate a new channel of monetary support. This could lead to a weaker yuan, which is expected to be positive for the stock market in the medium term.
• Impact on Sectors:
  • Airlines: Most affected due to foreign currency-denominated liabilities. Air China, China Southern, and China Eastern are expected to see a decline in EPS due to the yuan depreciation.
  • Automobile: July sales declined by 2.5% yoy, but this was less severe than expected. The after-sales market remains robust, with dealers preferred over OEMs. Top picks include Zhengtong and Baoxin.
  • Property Developers: Likely to be negatively impacted by the weaker yuan due to their foreign debt exposure.
• Key Assumptions:
  • China's GDP growth is expected to be 7.0% for 2015.
  • The yuan is expected to stabilize in the near term but may weaken further when the Fed begins rate hikes.
• Corporate Events: No specific events are mentioned for China.

Indonesia

• Astra International (ASII):
  • 1H15 outlook is still challenging.
  • Target price reduced to Rp6,800 from Rp8,200.
  • Maintained HOLD rating.
• Company Description:
  • Operates in automobile, motorcycle, and related spare parts distribution and assembly.
  • Also involved in mining, plantations, finance, and IT.
• Stock Data:
  • Market cap: Rp249,985.9 billion (US$m: 18,371.9)
  • Share price: Rp6,175
  • Target price: Rp6,800
  • Upside: +10.1%

Malaysia

• Gaming Sector:
  • Listed casino operators are attractive due to cheap valuations and promising growth opportunities.
  • Maintain OVERWEIGHT with GENT as the top pick.
• Sunway REIT (SREIT):
  • FY15 rental and occupancy rates increased, but higher expenses dragged down results.
• Kossan Rubber (KRI):
  • Expected to see sequential margin expansion due to ringgit depreciation and increased nitrile glove sales.
• Corporate Events:
  • Agensi Inovasi Malaysia Luncheon in Kuala Lumpur on 12 Aug.
  • Phoenix Healthcare Group Roadshow in Singapore on 17-18 Aug.
  • Yoma Strategic Group Meeting in Singapore on 18 Aug.
  • CIF1 Holdings Roadshow in Singapore and Kuala Lumpur on 24-26 Aug.
  • Overseas Education New Campus Site Visit in Singapore on 28 Aug.

Key Information

Market Impact of 1% RMB Depreciation

• Airlines: Air China (-6.7%), China Southern (-7.6%), China Eastern (-11.5%).
• Automobile: Zhengtong (-2.0%), Baoxin (-1.5%), Zhongsheng (-2.0%).
• Oilfield Services: SPT (+3.0%), COSL (+2.0%).
• Utilities: Towngas (-10.0%).

Top Picks in China

• BUY: Beijing Capital (694 HK), ICBC (1398 HK), Bank BJB (BJBR J), Maybank (MAY MK), CapitaLand (CAPL SP), DBS (DBS SP), Kasikornbank (KBANK TB), PTT (PTT TB).
• SELL: SIA Engineering (SIE SP), UMW H (UMWH).

Key Indices

Assumptions

• GDP Growth:
  • US: 2.9%
  • Euro Zone: 1.3%
  • Japan: 1.0%
  • Singapore: 2.9%
  • Malaysia: 5.0%
  • Thailand: 2.7%
  • Indonesia: 5.0%
  • Hong Kong: 3.7%
  • China: 7.0%
• Brent Oil: Average at US$99.45 in 2014, expected to be US$61 in 2015 and US$72 in 2016.
• CPO (Crude Palm Oil): US$722 in 2014, expected to be US$765 in 2015 and US$788 in 2016.

Risks

• RMB Depreciation: Could lead to forex losses and higher interest payments for companies with foreign debt.
• Macro Risk: Credit tightening could hurt sales.
• Geopolitical Risk: Sino-Japan tensions could affect Japanese car sales in China.

Sector Catalysts

• Release of monthly sales and 2Q15 results.
• New policies, such as car licence quota announcements.

Conclusion

The report highlights the impact of the yuan depreciation on various sectors, particularly airlines and automobile dealers, and suggests that while the short-term effects may be negative, the medium-term outlook is positive due to improved corporate earnings. It also provides a detailed analysis of Astra International and other companies, along with key financial metrics and investment ratings.