20140918-大华继显-Regional_Morning+Notes_19页_931kb

Regional Morning Notes Summary

Core Content

This document is a regional market update from 18 September 2014, focusing on the performance and outlook of various sectors across different countries, including China, Indonesia, Malaysia, Singapore, and Thailand. It includes key market indices, sector updates, top picks, corporate events, and analyst insights.

Key Sectors and Countries

Automobile - China

• Policies: Reforms in the automobile sector are being reviewed, with a focus on improving after-sales service, spare part sourcing, and car loan business for dealers.
• Top Picks: Zhengtong, Brilliance, and Dongfeng Motor are highlighted as top picks among dealers and OEMs.
• Challenges: Opening up of parallel imports and price cuts on spare parts may challenge dealers, but the impact is expected to be limited.
• Market Weight: Maintained.

Port - China

• Performance: Container throughput in August 2014 increased by 7.2% yoy, with Shenzhen showing strong growth of 8.8% due to recovery in US and EU consumption.
• Key Growth Drivers: Yantian International Container Terminal (16.6% yoy growth), PRD (7.8% yoy growth, partially due to typhoon in July).
• Top Picks: Cosco Pacific (BUY) and Hutchison Port Holdings Trust (BUY) are highlighted due to their attractive valuations and growth momentum.
• Market Weight: Maintained.

Main Views and Key Information

China

• Economic Outlook: GDP growth is expected to remain stable with 7.2% for 2014F and 7.0% for 2015F.
• Key Indices:
  • DJIA: 3.5% YTD
  • S&P 500: 8.3% YTD
  • CSI 300: 3.1% YTD
  • HSI: 4.6% YTD
• Corporate Events:
  • Xingda Corporate Roadshow in Taipei on 22 Sep
  • China Property Sector Analyst Presentation in London from 22 to 26 Sep

Indonesia

• Sawit Sumbermas Sarana (SSMS IJ):
  • Site Visit: Higher production growth (19% yoy) due to better supervision and higher yield.
  • Yield: FFB yield increased to 26 tonnes/ha in 2014 from 21.8 tonnes/ha in 2013.
  • Asset Injection: SSMS plans to acquire Tanjung Sawit Abadi (TSA) and Sawit Multi Utama (SMU), which could boost production and landbank.
  • Valuation: Currently trading at 14.5x 2015F PE, higher than peers' average of 11.5x, attributed to higher growth potential.

Malaysia

• SP Setia (SPSB MK/HOLD/RM3.31/Target: RM3.50):
  • 3QFY14: Earnings hit by GST provisions.
  • Market Weight: Maintained.

Singapore

• First Resources (FR SP/BUY/S$2.00/Target: S$2.65):
  • Production Growth: 54.2% mom and 35.8% yoy in August due to yield recovery and spillover from July.

Thailand

• Sino-Thai Engineering & Construction (STEC TB/BUY/Bt26.00/Target: Bt31.00):
  • Target Price Increase: Raised target price to Bt31.00 due to better earnings outlook.
  • Upcoming Bids: Mega projects are expected to support the share price.

Top Picks and Sell Recommendations

BUY Recommendations

• Sunac China (1918 HK): Target price HK$8.45, potential upside of 37.6%.
• ICBC (1398 HK): Target price HK$6.15, potential upside of 18.5%.
• Brilliance (1114 HK): Target price HK$19.40, potential upside of 16.9%.
• Dongfeng Motor (489 HK): Target price HK$17.50, potential upside of 16.9%.
• Baoxin (1293 HK): Target price HK$7.00, potential upside of 24.3%.
• China Zhengtong (1728 HK): Target price HK$6.50, potential upside of 21.7%.
• Zhongsheng (881 HK): Target price HK$10.50, potential upside of 24.3%.
• Cosco Pacific (1199 HK): Target price HK$13.00, potential upside of 24.3%.
• Hutchison Port Holdings Trust (HPHT SP): Target price US$0.80, potential upside of 2.9%.

SELL Recommendations

• Guangzhou Auto (2238 HK): Target price HK$6.50, potential downside of 16.9%.
• Great Wall Motor (2333 HK): Target price HK$21.50, potential downside of 21.7%.
• Geely (175 HK): Target price HK$2.10, potential downside of 23.9%.
• SP Setia (SPSB MK): Target price RM3.50, potential downside of 16.9%.
• Tianjin Port Dev (3382 HK): Target price HK$1.37, potential downside of 4.0%.
• Xiamen Intl. Port (3378 HK): Target price HK$1.14, potential downside of 6.0%.
• Great Wall Motor (2333 HK): Target price HK$21.50, potential downside of 21.7%.
• COSCO Pacific (1199 HK): Target price HK$13.00, potential upside of 24.3%.
• China Merchant Holdings Intl. (144 HK): Target price HK$27.72, potential downside of 2.9%.

Key Assumptions

• GDP Growth:

  • US: 1.9% (2013), 3.0% (2014F), 3.0% (2015F)
  • Euro Zone: -0.4% (2013), 1.0% (2014F), 1.4% (2015F)
  • Japan: 1.5% (2013), 2.1% (2014F), 2.0% (2015F)
  • Singapore: 3.9% (2013), 4.2% (2014F), 4.2% (2015F)
  • Malaysia: 4.7% (2013), 5.6% (2014F), 5.2% (2015F)
  • Thailand: 2.9% (2013), 1.5% (2014F), 5.1% (2015F)
  • Indonesia: 5.8% (2013), 5.5% (2014F), 6.0% (2015F)
  • Hong Kong: 2.9% (2013), 3.5% (2014F), 3.7% (2015F)
  • China: 7.7% (2013), 7.2% (2014F), 7.0% (2015F)

• Commodity Prices:

  • Brent: $110 (2013), $110 (2014F), $110 (2015F)
  • Aluminium: $1,886 (2013), $1,713 (2014F), $1,650 (2015F)
  • Copper: $7,349 (2013), $6,866 (2014F), $6,850 (2015F)
  • Gold: $1,411 (2013), $1,321 (2014F), $1,400 (2015F)
  • Iron Ore: $135 (2013), $103 (2014F), $95 (2015F)
  • CPO: $2,116 (2013), $788 (2014F), $848 (2015F)
  • BDI: 1,124 (2013), 1,219 (2014F), 1,500 (2015F)

Key Sector Catalysts

• Automobile Sector:

  • Policy reforms favoring auto dealers and after-sales service.
  • Opening up of spare parts and parallel imports may reduce dealer margins but are manageable.
  • Multibrand dealership policies are expected to be relaxed, benefiting dealers.

• Port Sector:

  • Continued growth in container throughput, especially in Shenzhen and Yantian.
  • Potential for higher dividend yields and capacity consolidation.

Risks

• Macro Risks:
  • Worsening economic indicators in the US and Europe.
  • Slowdown in China exports and credit tightening affecting auto sales.

Analysts

• Ken Lee: +852 2236 6760, ken.lee@uobkayhian.com.hk
• Lawrence Li: +8621 5404 7225 ext.813, lawrenceli@uobkayhian.com
• Angela Zhou: +8621 5404 7225 ext.858, angelazhou@uobkayhian.com
• Yogeshar Hassanand: +6221 2993 3876, yogesharhassanand @uobkayhian.com

Conclusion

The document highlights the key market developments and stock recommendations across multiple sectors and regions. It emphasizes the importance of policy changes in the automobile and port sectors, the impact of economic conditions on exports and credit, and the potential for growth in specific companies due to improved yields, production, and asset injections. Valuation and earnings momentum are key factors in stock selection, with several companies recommended for buying due to their strong fundamentals and growth prospects.