Regional Morning Notes Summary
Core Content Overview
This document provides a comprehensive summary of financial and economic updates from various Asian markets as of Friday, 29 June 2018. It includes insights on macroeconomic trends, company updates, and market performance, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand.
Main Points and Key Information
China
Economic Outlook
- The People's Bank of China (PBOC) is expected to pursue gradual monetary easing to manage economic slowdown and trade tensions.
- Renminbi depreciation is anticipated to be limited, with a year-end forecast of US$/RMB at 6.70 and 6.90 by end-2019.
- Macroeconomic data for May 2018 showed below-consensus performance in retail sales, fixed asset investment, and industrial production, with industrial profits slowing to 21.1% yoy.
- Trade data remained robust, with export growth at 12.6% yoy and import growth at 26.0% yoy, but the trade balance narrowed to US$24.9b.
- Monetary policy included Rmb463b of MLF loans and a 50bp RRR cut, injecting liquidity into the economy.
- Corporate finance indicators showed a significant contraction in new total social financing (TSF), which dropped to Rmb0.8t from Rmb1.6t in May 2018.
Company Update: Tian Lun Gas Holdings (1600 HK)
- Strategic partnership with the Henan Provincial Government to establish a 15-year joint investment fund for coal-to-gas conversion.
- Target price revised to HK$8.78, reflecting 9.9x 2018F PE, with an upside of +26.7%.
- Profit forecasts for 2018–2020 were lifted by 54%, 73%, and 93%, respectively.
- Key growth driver is the expansion of township gas connections, with 10 million households targeted over five years.
- First phase of the project is expected to connect 0.3m households in 2018, 1m in 2019, and 1.5m in 2020.
- Revenue growth is projected to be 24.0%, 30.5%, and 35.6% for 2018–2020.
- Margin expansion is anticipated, with GPM rising to 28.9%, OPM to 23.8%, and NPM to 14.5%.
- Liquidity and debt management are supported by Rmb10b in total investment and Rmb5b in initial capital.
- Financial metrics show improvement in profitability and reduced leverage over time.
Indonesia
Small/Mid Cap Highlight: Malindo Feedmill (MAIN IJ)
- 1Q18 net profit grew by 73.9% yoy, driven by lower corn prices and increased demand for day old chick (DOC) and broiler (BR).
- Revenue growth was 16.5% yoy, and the company is expected to benefit from the Lebaran festivities in 2Q18.
- The stock trades at 13.9x 2018–19F average PE, which is below its historical average.
Malaysia
Results: V.S. Industry (VSI MK)
- 3QFY18 results missed expectations due to cost spikes, with margins expected to recover to 2017 levels over two or more quarters.
Update: Yinson (YNS MK)
- Despite higher costs in the short term, Yinson reaffirms its ability to execute current projects and absorb another mega contract with award timelines likely in end-2018 or early-2019.
- The stock is rated BUY, with a target price of RM5.30.
Singapore
Update: Sembcorp Industries (SCI SP)
- India outlook improved, with downside risks priced in.
- The stock is upgraded to BUY, with a target price of S$3.60.
Thailand
Update: Total Access Communication (DTAC TB)
- Share price overreacted to negative concerns, but the company is expected to recover.
- The stock is rated BUY, with a target price of Bt58.00.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
24216.1 |
0.4 |
-1.0 |
-0.6 |
-2.0 |
| S&P 500 |
2716.3 |
0.6 |
-1.2 |
1.0 |
1.6 |
| FTSE 100 |
7615.6 |
-0.1 |
0.8 |
-0.2 |
-0.9 |
| AS30 |
6305.8 |
0.2 |
-0.4 |
3.0 |
2.2 |
| CSI 300 |
3423.5 |
-1.0 |
-4.7 |
-10.0 |
-15.1 |
| FSSTI |
3257.6 |
0.1 |
-1.3 |
-7.4 |
-4.3 |
| HSCEI |
10868.5 |
-0.1 |
-4.4 |
-9.1 |
-7.2 |
| HSI |
28497.3 |
0.5 |
-2.7 |
-6.5 |
-4.8 |
| JCI |
5667.3 |
-2.1 |
-2.7 |
-6.6 |
-10.8 |
| KLCI |
1665.7 |
-0.0 |
-1.6 |
-6.2 |
-7.3 |
| KOSPI |
2314.2 |
-1.2 |
-1.0 |
-5.8 |
-6.2 |
| Nikkei 225 |
22270.4 |
-0.0 |
-1.9 |
-0.4 |
-2.2 |
| SET |
1599.5 |
-1.2 |
-2.1 |
-7.8 |
-8.8 |
| TWSE |
10654.3 |
-0.4 |
-2.6 |
-2.8 |
0.1 |
| BDI |
1309 |
-1.1 |
-2.8 |
21.5 |
-4.2 |
| CPO (RM/ml) |
2279 |
0.1 |
1.4 |
-5.8 |
-4.6 |
| Brent Crude (US$/bbl) |
78 |
0.3 |
6.6 |
3.4 |
16.4 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Pot. +/- (%) |
| Baoshan Iron & Steel |
600019 CH |
7.66 |
9.53 |
24.4 |
| Gudang Garam |
GGRM LJ |
66,950.00 |
85,000.00 |
27.0 |
| PP Persero |
PTPP LJ |
1,840.00 |
3,700.00 |
101.1 |
| V.S. Industry |
VSI MK |
1.42 |
2.30 |
62.0 |
| OCBC |
OCBC SP |
11.61 |
14.28 |
23.0 |
| SingTel |
ST SP |
3.08 |
4.22 |
37.0 |
| Siam Cement |
SCC TB |
410.00 |
610.00 |
48.8 |
Sell
| Company |
Ticker |
Current Price |
Target Price |
Pot. +/- (%) |
| Hartalega |
HART MK |
5.68 |
4.02 |
-29.2 |
Key Assumptions
| Indicator |
2017 |
2018F |
2019F |
| GDP (%) |
6.9 |
6.4 |
6.2 |
| CPO (RM/mt) |
2,783 |
2,400 |
2,500 |
| Brent (Average) (US$/bbl) |
55.00 |
67.00 |
66.50 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Luncheon Talk with UOB Thailand (UOB SP) |
Bangkok |
29 Jun |
29 Jun |
| Roadshow with United Overseas Bank (UOB SP) |
Taipei |
2 Jul |
3 Jul |
| Luncheon with Luk Fook Holdings International (590 HK) |
Hong Kong |
5 Jul |
5 Jul |
| Roadshow with Jacobson Pharma Corp (2633 HK) |
Shanghai |
10 Jul |
10 Jul |
| Group Luncheon with CIMC-TianDa Holdings Company Limited (445 HK) |
Hong Kong |
11 Jul |
11 Jul |
| Group Luncheon with China Yongda Automobiles Services Holdings (3669 HK) |
Hong Kong |
12 Jul |
12 Jul |
| Group Meeting with China Resources Gas Group (1193 HK) |
Hong Kong |
12 Jul |
12 Jul |
| Industry 4.0 Conference |
Kuala Lumpur |
26 Jul |
26 Jul |
Summary of Tian Lun Gas Holdings (1600 HK)
- Company Description: Processes and distributes natural gas through urban pipelines and operates natural-gas refilling stations.
- Stock Data:
- GICS sector: Utilities
- Shares issued (m): 989.6
- Market cap (HK$m): 6,858.0
- Market cap (US$m): 873.9
- Price Performance:
- 52-week high/low: HK$7.34 / HK$4.20
- 1mth: 29.5%
- 3mth: 26.2%
- 6mth: 14.2%
- YTD: 12.7%
- Key Financials:
- Net profit is expected to grow by 54.3% to 744.6m Rmb in 2018.
- EBITDA is projected to rise to 1,471.2m Rmb in 2018.
- Valuation:
- Target price: HK$8.78
- PE ratio: 9.9x 2018F
- P/B ratio: 1.8x
- EV/EBITDA: 6.9x
- Leverage:
- Net debt to equity: 125.6% in 2018F, expected to reduce to 81.8% in 2020F.
- Interest cover: 7.4x in 2018F, rising to 10.5x in 2020F.
Conclusion
The report highlights gradual monetary easing in China, with Tian Lun Gas Holdings as a top pick due to its strategic partnership with the Henan government and the potential for coal-to-gas conversion. Other notable mentions include Malindo Feedmill in Indonesia and Yinson in Malaysia, both showing strong earnings growth and positive outlooks. The document also provides key indices and corporate events across the region, indicating market dynamics and investment opportunities.
