Regional Morning Notes Summary - 21 November 2016
Core Content Overview
This document provides a summary of market analysis and investment recommendations for various regions, focusing on key companies and indices. It includes updates on company performance, financial metrics, and strategic outlooks for 2017.
Main Points by Region
China
- Sino Biopharmaceutical (1177 HK):
- Downgraded to HOLD due to expected low single-digit growth in the hepatitis B segment in 2017.
- 3Q16 sales increased by 7.2% yoy, but core net profit only grew by 4.0% yoy due to price erosion and higher R&D costs.
- Runzhong (22.4% of total sales) is expected to face fierce competition from GSK's Tenofovir.
- Anlotinib approval might be delayed, affecting growth expectations.
- Receivable days increased by 20 days to 95 days, raising concerns about destocking in 2017.
- Target price reduced to HK$5.64 with an upside of +6.2% from the entry price of HK$4.80.
Indonesia
- Strategy: Higher US GDP growth is expected to translate to higher Indonesia GDP growth.
- JCI (Jakarta Composite Index): Volatile in the short term, but positive long-term growth is anticipated.
Malaysia
- Automobile Sector: Maintained UNDERWEIGHT rating. Bermaz Auto is the top pick due to its attractive yield of 6% (based on 80% payout) and potential to increase to 7.5% with 100% payout.
- IOI Corporation (IOI MK): Sell recommendation maintained due to high historical valuation. 1QFY17 results were in line, but 2HFY17 is expected to be weaker.
Singapore
- Strategy: Anticipate corporate earnings recovery in 2017 but remain defensive due to macroeconomic uncertainty.
- FSSTI (FTSE Straits Times Index): Year-end target of 3,000. The index is expected to face elevated volatility.
Thailand
- Robinson Department Store (ROBINS TB): Buy recommendation due to impressive margin expansion and higher rental income in 3Q16.
- Advanced Info Service (ADVANC TB): Buy recommendation with positive outlook.
- Market Growth: Expected to see higher growth in 2017, with Thailand's GDP growth at 3.5%.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18867.9 |
-0.2 |
0.1 |
4.0 |
8.3 |
| S&P 500 |
2181.9 |
-0.2 |
0.8 |
1.9 |
6.7 |
| FTSE 100 |
6775.8 |
-0.3 |
0.7 |
-3.5 |
8.5 |
| AS30 |
5427.5 |
0.3 |
-0.4 |
-1.6 |
1.6 |
| CSI 300 |
3417.5 |
-0.6 |
0.0 |
2.7 |
-8.4 |
| FSSTI |
2838.7 |
0.9 |
0.9 |
0.3 |
-1.5 |
| HSI |
22344.2 |
0.4 |
-0.8 |
-4.4 |
2.0 |
| JCI |
5170.1 |
-0.4 |
-1.2 |
-4.4 |
12.6 |
| KLCI |
1623.8 |
-0.2 |
-0.6 |
-2.8 |
-4.1 |
| KOSPI |
1974.6 |
0.3 |
-0.5 |
-2.9 |
0.7 |
| Nikkei 225 |
17967.4 |
0.6 |
3.4 |
4.6 |
-5.6 |
| SET |
1473.9 |
0.0 |
-1.4 |
-1.8 |
14.4 |
| TWSE |
9008.8 |
0.2 |
0.6 |
-3.2 |
8.0 |
| BDI |
1257 |
2.1 |
20.3 |
49.3 |
163.0 |
| CPO (RM/ml) |
2918 |
0.4 |
1.4 |
5.1 |
32.6 |
| Brent Crude |
47 |
0.8 |
4.7 |
-9.3 |
25.7 |
Top Picks
BUY
- Air China (753 HK): Target price HK$7.00, potential upside +38.6%.
- Ping An Insurance (2318 HK): Target price HK$47.00, potential upside +16.2%.
- Ciputra Property (CTRP LJ): Target price HK$960.00, potential upside +34.3%.
- Indosat (ISAT LJ): Target price HK$8,015.00, potential upside +28.2%.
- Genting Bhd (GENT MK): Target price HK$10.10, potential upside +28.8%.
- City Dev (CIT SP): Target price HK$10.36, potential upside +23.3%.
- OCBC (OCBC SP): Target price HK$10.45, potential upside +17.8%.
- Bangkok Dusit (BDMS TB): Target price HK$31.20, potential upside +42.5%.
- Siam Cement (SCC TB): Target price HK$645.00, potential upside +39.0%.
SELL
- Hartalega (HART MK): Target price HK$3.33, potential downside -31.8%.
Key Assumptions
| Country/Region |
GDP Growth (yoy) |
2015 |
2016F |
2017F |
| US |
2.7 |
2.6 |
2.0 |
2.7 |
| Euro Zone |
1.0 |
2.0 |
1.4 |
1.0 |
| Japan |
0.8 |
0.5 |
0.6 |
0.8 |
| Singapore |
1.7 |
2.0 |
1.4 |
1.7 |
| Malaysia |
4.5 |
5.0 |
4.2 |
4.5 |
| Thailand |
3.5 |
2.8 |
3.2 |
3.5 |
| Indonesia |
5.2 |
4.8 |
5.0 |
5.2 |
| Hong Kong |
1.8 |
2.4 |
2.1 |
1.8 |
| China |
6.2 |
6.9 |
6.5 |
6.2 |
| Metric |
2015 |
2016F |
2017F |
2018F |
| Brent (Average) |
53.60 |
42 |
54 |
- |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
- |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Ministry of Finance Indonesia Roadshow |
Taipei |
21 Nov |
22 Nov |
| Greater China Auto Parts Analyst Presentation |
Singapore |
22 Nov |
22 Nov |
| Concord New Energy Roadshow |
London |
21 Nov |
23 Nov |
| Concord New Energy Roadshow |
Milan |
24 Nov |
24 Nov |
| Concord New Energy Roadshow |
UK/Europe |
21 Nov |
24 Nov |
| Indo Strategy Analyst Marketing |
Taipei |
23 Nov |
23 Nov |
| China TCM Group Luncheon |
Hong Kong |
24 Nov |
24 Nov |
| Metro Pacific Investments Roadshow |
Canada |
24 Nov |
25 Nov |
| Oriental Watch Holdings Group Meeting |
Hong Kong |
28 Nov |
28 Nov |
| Thai Oil Roadshow |
Singapore |
29 Nov |
30 Nov |
Key Financials for Sino Biopharmaceutical (1177 HK)
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net turnover (HK$m) |
14,550.2 |
16,217.8 |
17,564.1 |
19,157.6 |
| EBITDA (HK$m) |
3,136.3 |
3,333.8 |
3,767.8 |
4,229.0 |
| Operating profit (HK$m) |
2,807 |
2,952 |
3,337 |
3,736 |
| Net profit (rep./act.) (HK$m) |
1,779 |
1,950 |
2,143 |
2,346 |
| Net profit (adj.) (HK$m) |
1,773 |
1,948 |
2,141 |
2,344 |
| EPS (fen) |
40.3 |
49.8 |
61.4 |
72.0 |
| PE (x) |
14.9 |
12.0 |
9.8 |
7.7 |
| P/B (x) |
1.6 |
1.6 |
1.4 |
1.3 |
| EV/EBITDA (x) |
15.8 |
10.3 |
8.8 |
7.2 |
| Dividend yield (%) |
2.3 |
2.6 |
3.3 |
3.8 |
| Net margin (%) |
11.2 |
13.1 |
14.6 |
15.8 |
| Net debt/(cash) to equity (%) |
62.0 |
65.6 |
71.9 |
43.3 |
| Interest cover (x) |
11.4 |
18.6 |
22.4 |
30.8 |
| ROE (%) |
11.4 |
13.3 |
15.3 |
15.7 |
Key Financials for Lee & Man Paper (2314 HK)
| Metric |
2014 |
2015 |
2016F |
2017F |
2018F |
| Net turnover (HK$m) |
17,099 |
17,616 |
19,217 |
21,362 |
22,585 |
| EBITDA (HK$m) |
2,443 |
3,753 |
4,385 |
5,011 |
5,367 |
| Operating profit (HK$m) |
2,443 |
2,882 |
3,448 |
4,016 |
4,357 |
| Net profit (rep./act.) (HK$m) |
1,888 |
2,321 |
2,800 |
3,280 |
3,570 |
| Net profit (adj.) (HK$m) |
1,923 |
2,308 |
2,800 |
3,280 |
3,570 |
| EPS (fen) |
40.3 |
49.8 |
61.4 |
72.0 |
78.4 |
| PE (x) |
14.9 |
12.0 |
9.8 |
8.3 |
7.7 |
| P/B (x) |
1.6 |
1.6 |
1.4 |
1.3 |
|
| EV/EBITDA (x) |
15.8 |
10.3 |
8.8 |
7.7 |
|
| Dividend yield (%) |
2.3 |
2.6 |
3.3 |
3.8 |
|
| Net margin (%) |
11.2 |
13.1 |
14.6 |
15.8 |
|
| Net debt/(cash) to equity (%) |
62.0 |
65.6 |
71.9 |
43.3 |
|
| Interest cover (x) |
11.4 |
18.6 |
22.4 |
30.8 |
|
| ROE (%) |
11.4 |
13.3 |
15.3 |
16.1 |
|
Stock Impact
- Sino Biopharmaceutical: Expected sales growth for Runzhong to slow further in 2017 due to price erosion and intensified competition from Tenofovir.
- Lee & Man Paper: 3% price hike in November to offset input costs, with Vietnam plant starting trial run and commercial production expected in 1Q-2Q17.
- Tissue paper is expected to drive profit per tonne growth, with capacity expansion to 575,000 tonnes by end-2017.
Earnings and Valuation
- Sino Biopharmaceutical: Net profit forecasts for 2017-18 reduced by 4.8% and 7.0% respectively.
- Lee & Man Paper: Net profit forecasts for 2016-18 maintained at HK$2.8b, HK$3.28b, and HK$3.57b.
- Valuation: Sino Biopharmaceutical is downgraded to HOLD with target price HK$5.64. Lee & Man Paper maintains BUY with target price HK$7.20.
Summary of Key Recommendations
- BUY: Air China, Ping An Insurance, Ciputra Property, Indosat, Genting Bhd, City Dev, OCBC, Bangkok Dusit, Siam Cement.
- SELL: Hartalega.
- HOLD: Sino Biopharmaceutical.
Analysts
