20180802-大华继显-Regional_Morning_Notes_40页_1mb

Regional Morning Notes Summary - August 2, 2018

Core Content Overview

This document provides a comprehensive analysis of stock market performance and investment strategies across China, Indonesia, Malaysia, and Singapore, with a focus on specific companies and sectors. It includes key recommendations, market updates, and valuation insights based on analyst reports and market data.

Main Points and Key Information

China

• Alpha Picks: Anta Sports, China Oriental Group, CNBM, HEC Pharma, and The United Labs are highlighted as high conviction picks for August.
• Strategy Updates:
  • Tian Lun Gas: Taken profit after a 30.8% monthly surge.
  • Alibaba: Closed position due to margin pressure from Ele.me consolidation and regulatory restrictions on Ant Financial.
  • CPMC: Downgraded to HOLD due to potential loss of dividend income and reduced supply to JDB.
  • BYD: Maintained SELL due to disappointing 1H18 results and ongoing margin pressure from subsidy cuts.
• Sector Updates:
  • IT Hardware: Expected to see margin pressure despite year-over-year (YoY) bottom-line growth. Sunny is preferred due to its likely shipment target achievement and oversold status.
  • Steel: Steel prices hit a five-year high due to environmental regulations in Tangshan. The sector is re-iterated as OVERWEIGHT due to expected fiscal stimulus in 2H18 and undemanding valuations.
• Key Indices:
  • The CSI 300, HSI, and KLCI showed mixed performance, with the HSI and KLCI showing positive returns, while the CSI 300 declined.
  • CPO and Brent Crude prices also showed varying movements, with CPO decreasing and Brent Crude increasing slightly.

Indonesia

• Consumer Sector: Retailers showed signs of improved purchasing power in 1H18 results.
• TLKM: Downgraded to HOLD due to inability to mitigate the decline in voice revenue in 2Q18.

Malaysia

• Bermaz Auto: Added to BUY list due to strong growth momentum from new models.
• KPJ Healthcare: Maintained HOLD due to cautious approach to digitalisation and soft 2Q18 results.
• Malakoff Corporation: Downgraded to HOLD due to limited price upside despite a fair acquisition price.
• Top Glove: Maintained SELL due to rising cost pressures and tensions with Adventa Capital.

Singapore

• China Aviation Oil: Added to BUY list due to strong 2Q18 results from increased oil trading volumes.
• First Resources: Maintained HOLD due to weak CPO ASP despite improved production.

Key Recommendations

Market Performance (1H18)

Corporate Events

• Group luncheon with Plover Bay (1523 HK) on 2 Aug 2018.
• Roadshow with Plover Bay Technologies (1523 HK) on 2 Aug 2018.
• UOB Kay Hian Asian Gems Conference on 9-10 Oct 2018.
• UOB Kay Hian Annual Regional 1H2019 Strategy Conference on 13 Nov 2018.

Summary of Key Analyst Insights

• Anta Sports: Strong 1Q18 sales growth, expected to normalize in 2Q18. Maintained BUY due to potential shipment target achievement.
• China Oriental Group: Expected to benefit from fiscal spending acceleration in 2H18. Maintained BUY due to undervaluation and strong steel prices.
• CNBM: Strong 1H18 results and expected cement price hikes. Maintained BUY with a target of HK$10.98.
• HEC Pharma: Strong R&D pipeline and potential inclusion in SZ-HK Connect. Maintained BUY with a target of HK$68.99.
• The United Labs: Strong 1H18 performance due to improved raw material prices and production resumption. Maintained BUY with a target of HK$11.10.
• BYD: Continued margin pressure from subsidy cuts and competition. Maintained SELL with a target of HK$30.00.

Valuation Metrics

Analyst Contact

• Greater China Research: Robin Yuen, Sandra Huang, Neo Chen
• Contact: +852 25218787, research@uobkayhian.com
• Other Analyst: Yukkei Lee, +852 2826 4867, Yukkei.lee@uobkayhian.com.hk

Summary of Investment Actions

• Add to BUY list: China Oriental Group, CNBM, Anta Sports, HEC Pharma, The United Labs.
• Maintain SELL: BYD, Top Glove.
• Maintain HOLD: TLKM, KPJ Healthcare, Malakoff Corporation, CPMC, First Resources.
• Close Position: Alibaba, Ctrip, Tian Lun Gas.

Conclusion

The report outlines a mix of bullish and bearish outlooks across different markets and sectors. While some companies like Anta Sports, China Oriental Group, and CNBM are recommended as buys due to strong fundamentals and potential for growth, others such as BYD and CPMC face challenges and are downgraded. The steel sector in China is highlighted as an OVERWEIGHT due to environmental regulations and fiscal stimulus expectations. Overall, the document serves as a strategic guide for investors, emphasizing the importance of monitoring key indicators and market dynamics.