20151008-大华继显-Regional_Morning_Notes_18页_918kb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive analysis of the stock market outlook for several Asian countries, including China, Indonesia, and Malaysia, as of 08 October 2015. It includes investment strategies, key financial metrics, and market events relevant to these regions.

Main Points by Region

China

• Market Strategy: The current stock rally driven by reflation hopes is deemed unsustainable. Investors are advised to look for value creators rather than speculative plays.
• Key Recommendations: Companies like Anhui Conch, China Longyuan, China Shenhua, China Vanke, and Huaneng Power are highlighted as value creators with relatively less demanding valuations.
• Earnings Outlook: Consensus earnings forecast for 2016 is considered too optimistic. MSCI China's 12-month forward PE is expected to be higher than the current 8.9x.
• Valuation Metrics: The index is trading at a P/B of 1.18x, but excluding financials, it is at 1.38x, which is still higher than the 2008 low of 1.16x.
• Key Financials: Only 9 out of 21 non-financial stocks in the HSCEI have ROIC > WACC, indicating limited value creation.
• Challenges: Industrial production growth is declining, inventory to sales ratio is still rising, and operating deleverage is expected to continue.
• Key Assumptions:
  • China's GDP growth is forecasted at 6.5% for 2015 and 6.7% for 2016.
  • Brent crude oil prices are expected to average at 56 USD/bbl for 2015 and 63 USD/bbl for 2016.
• Corporate Events: Analyst presentations are scheduled in Singapore, Malaysia, and Indonesia, covering the property and retail sectors.

Indonesia

• Market Strategy: Sumber Alfaria Trijaya (AMRT IJ) is a key beneficiary of government relaxation on modern retail regulations.
• Key Recommendations: AMRT is rated as a BUY, trading at 29.2x 2016F PE, which is below the 3-year average of 38.3x.
• Regulatory Impact: The government is expected to revise 89 regulations to boost retail growth, including removing the alcohol sales ban, easing retail expansion, and reducing licensing bureaucracy.
• Earnings and Revenue: AMRT’s revenue growth for 2015 is expected to be 15% yoy, with a focus on expanding its franchise network and improving fee income through added services.
• Online Expansion: AMRT aims to double the number of Alfamart outlets integrated with AlfaOnline by end-2015.
• Financials:
  • Net turnover increased from 2010 to 2014.
  • EBITDA margin remained stable at 6.0% in 2014.
  • Net margin declined from 2.0% to 1.3% over the period.
• Valuation Metrics: AMRT is currently trading at 29.2x 2016F PE, with a 3-year average PE of 38.3x.
• Risks: New regulations, global retail competition, and weak purchasing power due to inflation.

Malaysia

• Budget Preview: Budget 2016 is expected to be market-neutral and flattish, with a focus on infrastructure spending and fiscal consolidation.
• Market Sentiment: Improved sentiment due to foreign fund inflows, better-than-expected exports, and early activation of Value Cap funds.
• Key Recommendations: Focus on deep value companies like Genting Bhd and WCT, and recovery laggards such as AMMB. Large-cap picks include Genting Berhad, Maybank, and IJM Corporation Berhad.
• Stock Picks:
  • Genting Berhad: BUY, Target Price RM10.50, 2015F PE 15.6x, 2016F PE 13.6x, P/B 1.0x.
  • IJM Corporation Berhad: BUY, Target Price RM3.95, 2015F PE 15.9x, 2016F PE 14.2x, P/B 1.4x.
  • Malayan Banking: BUY, Target Price RM10.00, 2015F PE 12.1x, 2016F PE 11.7x, P/B 1.4x.
• Fiscal Policy: The government may introduce short-term measures to boost domestic demand, such as investment incentives.
• Economic Outlook: GDP growth is expected at 4.8% for 2015 and 4.8% for 2016.
• Market Outlook: The FBMKLCI is expected to reach 1,730 by end-2015.

Key Indices Overview

Key Assumptions

Top Picks

BUY Recommendations

• Beijing Capital (694 HK): 7.81 to 11.40, Potential +46.0%
• ICBC (1398 HK): 4.86 to 7.60, Potential +56.4%
• Bank BJB (BJBR IJ): 655.00 to 980.00, Potential +49.6%
• DiGi.Com (DIGI MK): 5.70 to 6.30, Potential +10.5%
• Maybank (MAY MK): 8.71 to 10.00, Potential +14.8%
• CapitaLand (CAPL SP): 3.03 to 4.08, Potential +34.7%
• DBS (DBS SP): 17.48 to 23.75, Potential +35.9%
• Kasikornbank (KBANK TB): 177.50 to 232.00, Potential +30.7%
• PTT (PTT TB): 268.00 to 410.00, Potential +53.0%

SELL Recommendations

• SIA Engineering (SIE SP): 3.83 to 3.00, Potential -21.7%
• UMWH Holdings (UMWH MK): 7.73 to 7.00, Potential -9.4%

Corporate Events

• Indonesia Market Strategy & Consumer Sector Analyst Presentation:
  • Kuala Lumpur: 8-9 Oct
  • Singapore: 14 Oct
  • Bangkok: 15-16 Oct
• Singapore Telecommunications Sector Analyst Presentation:
  • Singapore: 7-9 Oct
• Asian Gems Conference:
  • Singapore: 12-13 Oct
• China Property Sector Analyst Presentation:
  • Singapore: 14 Oct
• AKR Corporindo Roadshow:
  • Taipei: 19-20 Oct
• Indo Oil and Gas Sector Analyst Presentation:
  • Taipei: 21-22 Oct
• Singapore Telecommunications Sector Analyst Presentation:
  • Kuala Lumpur: 22-23 Oct

Key Metrics

Profitability

Growth

Leverage

Analysts

• China: Tham Mun Hon (+852 2236 6799, munhon.tham@uobkayhian.com.hk)
• Indonesia: Villya Purba (+6221 2993 3979, villyapurba@uobkayhian.com), Stevanus Juanda (+6221 2993 3845, stevanusjuanda@uobkayhian.com)