Regional Morning Notes Summary - 03 October 2014
Key Stories
- Singapore: Triyards Holdings (ETL SP/BUY/S$0.745/Target: S$1.10) is performing well with contract wins, potentially leading to a "double bagger" (significant growth).
- China: The PBOC (People's Bank of China) has finalized mortgage easing policies, including lowering down payments for first-home buyers and restarting mortgage discounts. Henan province has also implemented more relaxed mortgage lending.
- Indonesia: Bank Negara Indonesia (BBNI IJ/HOLD/Rp5,200/Target: Rp5,175) is focusing on growing its subsidiaries.
- Malaysia: SKP Resources is highlighted in the small-cap strategy. Post-acquisition of Tecnic Group, SKP is expected to become one of the largest plastic manufacturing companies in Malaysia, with a higher target price of RM0.83.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16801.1 |
0.0 |
-0.9 |
-1.6 |
1.4 |
| S&P 500 |
1946.2 |
0.0 |
-1.0 |
-2.8 |
5.3 |
| FTSE 100 |
6446.4 |
-1.7 |
-2.9 |
-5.6 |
-4.5 |
| AS30 |
5298.5 |
-0.7 |
-1.6 |
-6.3 |
-1.0 |
| CSI 300 |
2451.0 |
0.1 |
2.1 |
4.1 |
5.2 |
| FSSTI |
3228.7 |
-1.1 |
-1.9 |
-3.6 |
1.9 |
| HSCEI |
10310.4 |
-1.2 |
-2.4 |
-5.9 |
-4.7 |
| HSI |
22933.0 |
-1.3 |
-3.8 |
-7.3 |
-1.6 |
| JCI |
5000.8 |
-2.7 |
-3.9 |
-4.3 |
17.0 |
| KLCI |
1837.7 |
-0.4 |
-0.3 |
-1.5 |
-1.6 |
| KOSPI |
1976.2 |
-0.8 |
-2.8 |
-3.7 |
-1.7 |
| Nikkei 225 |
15662.0 |
-2.6 |
-4.3 |
0.4 |
3.9 |
| SET |
1569.7 |
-1.1 |
-1.4 |
-0.9 |
20.9 |
| TWSE |
8975.2 |
-0.2 |
-0.4 |
5.0 |
4.2 |
| BDI |
1041 |
-1.3 |
0.3 |
-9.4 |
-54.3 |
| CPO (RM/mt) |
2218 |
2.1 |
3.5 |
13.1 |
13.8 |
| Nymex Crude (US$/bbl) |
91 |
0.3 |
-2.4 |
-4.5 |
-7.3 |
Top Picks
| Company |
Ticker |
Recommendation |
Share Price (HK$) |
Target Price (HK$) |
| China Overseas Land |
688 HK |
BUY |
19.98 |
26.80 |
| China Resources Land |
1109 HK |
BUY |
16.00 |
21.42 |
| China Vanke |
2202 HK |
BUY |
13.72 |
18.94 |
| SUNAC China |
1918 HK |
BUY |
5.88 |
8.45 |
| Shimao Property |
813 HK |
BUY |
15.72 |
18.96 |
Key Assumptions
| Region |
GDP Growth (yoy) |
| US |
3.0 |
| Euro Zone |
1.4 |
| Japan |
2.0 |
| Singapore |
4.2 |
| Malaysia |
5.2 |
| Thailand |
5.1 |
| Indonesia |
6.0 |
| Hong Kong |
3.7 |
| China |
7.0 |
| Commodity |
2013 (US$/mt) |
2014F (US$/mt) |
2015F (US$/mt) |
| Brent |
110 |
110 |
110 |
| Aluminium |
1,886 |
1,713 |
1,650 |
| Copper |
7,349 |
6,866 |
6,850 |
| Gold |
1,411 |
1,321 |
1,400 |
| Iron Ore |
135 |
103 |
95 |
| CPO |
736 |
788 |
848 |
| BDI |
1,219 |
1,500 |
1,800 |
Corporate Events
- Barakah Offshore Petroleum luncheon: Kuala Lumpur, 7 Oct
- Asian Gems Conference: Singapore, 8–9 Oct
- "Tea Tasting" Session with Chatime: Petaling Jaya, 17 Oct
- TICON Industrial Connection Corporate Roadshow: Kuala Lumpur, 17 Oct
Property Sector Update - China
- The PBOC has officially released mortgage easing measures to stimulate first-home demand, which could trigger significant upgrader housing demand.
- Henan province has implemented more relaxed mortgage lending.
- Despite weak property sales, the easing is expected to lead to stronger sales and valuation recovery in the China property sector.
- Maintain MARKET WEIGHT on the sector.
What's New
- PBOC's move to encourage mortgage lending for first-home buyers is expected to boost sales, especially for upgraders.
- Banks are likely to increase mortgage lending, but not at the expense of profitability.
- CIFI (884 HK) and SUNAC (1918 HK) are highlighted as high-growth picks with potential for accumulation.
- The housing market still faces concerns over oversupply and weak pricing power, but the credit cycle is expected to swing back to recovery.
Sector Catalysts
- More evident mortgage easing.
- Stronger sales recovery in 4Q14.
Risks
- Weaker-than-expected sales in 4Q14.
- Developers like R&F and Agile may miss full-year sales targets.
Peer Comparison
| Company |
Ticker |
Recommendation |
Price (HK$) |
Target (HK$) |
Upside (%) |
Market Cap (US$m) |
PE (2013) |
PE (2014F) |
Yield (2013) |
Yield (2014F) |
P/B (2014) |
NAV/Share (HK$) |
Discount to NAV (%) |
Net Gearing (%) |
| Agile |
3383 HK |
HOLD |
4.77 |
6.42 |
34.6 |
2,567 |
2.6 |
2.9 |
8.3 |
9.1 |
0.4 |
14.27 |
-66.6 |
79.2 |
| COGO |
81 HK |
HOLD |
4.40 |
6.90 |
56.8 |
1,293 |
3.9 |
3.4 |
2.8 |
3.5 |
0.6 |
13.80 |
-68.1 |
47.8 |
| China Overseas Land |
688 HK |
BUY |
19.98 |
26.80 |
34.1 |
21,036 |
8.4 |
7.3 |
2.4 |
2.8 |
1.3 |
26.80 |
-25.4 |
28.5 |
| China Resources Land |
1109 HK |
BUY |
16.00 |
21.42 |
33.9 |
12,017 |
9.3 |
7.7 |
2.7 |
3.3 |
0.9 |
23.80 |
-32.8 |
43.2 |
| CIFI |
884 HK |
BUY |
1.45 |
1.93 |
32.8 |
1,126 |
3.5 |
2.8 |
4.8 |
5.4 |
0.6 |
3.85 |
-62.3 |
71.9 |
| China Vanke |
2202 HK |
BUY |
13.72 |
18.94 |
38.0 |
16,823 |
8.1 |
6.5 |
3.8 |
4.9 |
1.4 |
23.67 |
-42.0 |
42.1 |
| Shimao Property |
813 HK |
BUY |
15.72 |
18.96 |
20.6 |
7,031 |
6.5 |
5.1 |
5.2 |
5.9 |
0.9 |
31.60 |
-50.3 |
77.4 |
Share Price Performance (as of 30 September)
| Company |
1 Week (%) |
1 Month (%) |
3 Months (%) |
6 Months (%) |
| Agile |
-7.9 |
-18.4 |
-9.1 |
-22.0 |
| COLI |
-3.5 |
-8.3 |
6.3 |
-0.6 |
| COGO |
-5.4 |
-9.8 |
-8.3 |
-13.7 |
| CR Land |
-4.2 |
-9.8 |
12.8 |
-6.0 |
| CIFI |
-5.2 |
-5.2 |
1.4 |
-4.6 |
| China Vanke |
-3.5 |
-5.5 |
-0.3 |
n.a. |
| Glorious |
0.8 |
8.2 |
10.2 |
12.3 |
| Guangzhou R&F |
-6.3 |
-16.0 |
-18.0 |
-29.8 |
| Kaisa |
-2.3 |
3.5 |
28.3 |
5.7 |
| KWG |
-2.7 |
-3.2 |
23.0 |
27.9 |
| Longfor |
-3.5 |
-10.3 |
-7.0 |
-17.0 |
| Minmetals Land |
-3.3 |
-7.4 |
4.8 |
0.0 |
| Poly Property |
-5.4 |
-11.6 |
-7.7 |
-13.1 |
| SUNAC |
2.8 |
-2.2 |
33.9 |
30.7 |
| Shimao |
-3.9 |
-7.9 |
10.4 |
-7.5 |
| Sino-Ocean Land |
-5.5 |
-6.6 |
4.1 |
-3.5 |
| Yuexiu |
-6.1 |
-11.9 |
-1.1 |
-8.6 |
| HSCEI |
-2.4 |
-6.0 |
-0.2 |
2.3 |
Analysts
PBOC Mortgage Easing Impact on Property Sector
| Measures Encouraged |
Impact |
Remarks |
| Lower down payment to 30% for upgraders |
Significant |
Could trigger strong demand from upgraders |
| 30% discount on first-home mortgages |
Neutral |
Banks are cautious about profitability; SOE banks may offer limited discounts |
| Lower second-home lending rates |
Neutral |
Limited impact due to low second-home loan volumes |
| Permitting third-home lending |
Neutral |
Speculative demand is suppressed by purchase restrictions |
Key Financials for China Zhengtong Auto Services (1728 HK)
| Financial Metric |
2012 (Rmbm) |
2013 (Rmbm) |
2014F (Rmbm) |
2015F (Rmbm) |
2016F (Rmbm) |
| Net turnover |
27,649 |
29,840 |
33,327 |
36,430 |
40,460 |
| EBITDA |
1,600 |
1,915 |
2,232 |
2,693 |
3,018 |
| Operating profit |
1,238 |
1,616 |
1,857 |
2,232 |
2,478 |
| Net profit (rep./act.) |
604 |
837 |
976 |
1,258 |
1,445 |
| Net profit (adj.) |
559 |
796 |
976 |
1,258 |
1,445 |
| EPS (fen) |
27 |
38 |
44 |
57 |
65 |
| PE (x) |
13.7 |
9.6 |
8.1 |
6.3 |
5.5 |
| P/B (x) |
1.2 |
1.1 |
0.9 |
0.8 |
0.7 |
| EV/EBITDA (x) |
6.0 |
5.0 |
4.3 |
3.6 |
3.2 |
| Dividend yield (%) |
- |
2.2 |
2.5 |
3.2 |
3.7 |
Inventory and Saleable Area Data (14 Cities)
- Average Inventory Turnover: Not provided in detail, but images are referenced.
- Residential Saleable Area: Images referenced, indicating data from Soufun.
- Destocking Months in Major Cities:
| City |
Months |
| Qingdao |
27.0 |
| Hangzhou |
26.4 |
| Ningbo |
19.8 |
| Wuhan |
19.4 |
| Changsha |
16.7 |
| Beijing |
15.5 |
| Xiamen |
14.9 |
| Shanghai |
14.4 |
| Shenzhen |
14.4 |
| Guangzhou |
14.4 |
| Suzhou |
13.1 |
| Nanjing |
11.1 |
| Chongqing |
9.8 |
Conclusion
The report highlights key developments in the property sector in China, driven by PBOC mortgage easing policies, which are expected to stimulate housing demand and lead to a recovery in sales and valuations. Companies like SUNAC, Vanke, and China Overseas Land are recommended as top picks. However, some developers, such as R&F and Agile, are at risk of missing sales targets. In Singapore, Triyards Holdings is noted for its strong performance and potential for growth. In Malaysia, SKP Resources is highlighted as a small-cap opportunity. The report also includes corporate events, key financials, and share price performance for various companies.
