20140811-大华继显-Regional_Morning_Notes_31页_1mb

Regional Morning Notes Summary - 11 August 2014

Core Content Overview

This document provides a detailed analysis of market performance and investment recommendations for various sectors in China, Hong Kong, Indonesia, Malaysia, and Singapore, with a focus on corporate results, sector updates, and key indices.

Main Sectors and Key Points

China

• Commodity Sector:

  • Slowing commodity imports reduce oversupply but signal potential demand risks.
  • Maintain UNDERWEIGHT for the sector.
  • Top Picks: China Coal (1898 HK) and Zijin Mining (2899 HK).
  • Steel prices have reached a 5-year low; expect price recovery in September due to seasonal demand and low inventory.
  • Copper imports declined for four consecutive months to the lowest level since 2009.
  • Coal production and imports have decreased, leading to a more balanced market with potential price support.

• Consumer Sector:

  • 1H14 results will be mixed, with Consumer Staples showing steady earnings growth, while Consumer Discretionaries face declining earnings.
  • Maintain MARKET WEIGHT for the sector.
  • Top BUYs: China Mengniu (2319 HK) and Luk Fook (590 HK).
  • Top SELLs: Parkson Retail (3368 HK) and Uni-President China (220 HK).
  • Staples companies are focusing on product premiumisation and market share expansion, while price competition has moderated.
  • Footwear and apparel companies are expected to see a significant net profit decline due to continued discounting and inventory issues.
  • Luxury retailers face weaker performance due to reduced demand and a high base from the previous year.

Hong Kong

• Melco Crown (6883 HK):
  • 2Q14: Hit by poor VIP performance and higher staff costs.
  • US$500m share buyback is expected to support the share price.
  • Maintain BUY.

Indonesia

• United Tractors (UNTR IJ):
  • Strong recommendation to invest, with potential appreciation of at least 56% in 12 months.
  • Maintain BUY.

Malaysia

• Genting Malaysia (GENM MK):
  • GITP construction is progressing well.
  • Maintain HOLD; expected to start outperforming in 2H15.

Singapore

• Ascendas REIT (AREIT SP):
  • Acquisition of Aperia is a short-term pain for long-term gain.
  • Maintain BUY.
• Nam Cheong (NCL SP):
  • Downgrade to HOLD due to positives already priced in.
• Venture Corporation (VMS SP):
  • Short-term uncertainties from M&As.
  • Maintain BUY.
• Wilmar International (WIL SP):
  • Management is confident about better 2H14 performance due to volume growth and margin recovery.
  • Maintain HOLD.

Key Indices

Top Picks and Sell Recommendations

BUY Recommendations

• China Coal (1898 HK): Better cost control and earnings sensitivity to coal prices.
• Luk Fook (590 HK): Strong performance and growth potential.
• Melco Crown (6883 HK): Share buyback supports the share price.
• Ascendas REIT (AREIT SP): Acquisition of Aperia for long-term gain.
• United Tractors (UNTR IJ): Strong potential for appreciation.
• DBS (DBS SP): Strong upside potential.
• Genting Malaysia (GENM MK): Expected to outperform in 2H15.
• China Mengniu (2319 HK): Strongest results due to product premiumisation and Yashili contribution.
• Golden Eagle (3308 HK): Strong growth potential.
• Want Want (151 HK): Moderate upside.

SELL Recommendations

• Uni-President China (220 HK): Widening noodle losses and slower beverage sales.
• Parkson Retail (3368 HK): Weakening earnings profile.
• Jiangxi Copper (358 HK): Reduced demand and increased supply.
• Li Ning (2331 HK): Net loss widening.
• Xstep (1368 HK): Significant downside.
• Giordano (709 HK): Negative outlook.

Key Assumptions

Key Commodities

Corporate Events

• Greater China 2H14 Market Strategy Analyst Presentation (Taipei, 11-12 Aug)
• Bumitama Agri Corporate Luncheon (Singapore, 13 Aug)
• Jiangnan Group Corporate Roadshow (Hong Kong, 15 Aug)
• Dah Chong Hong Luncheon (Hong Kong, 19 Aug)
• Singamas Container Holdings Corporate Roadshow (Hong Kong, 22 Aug)
• Top Glove Corporate Roadshow (Montreal, 2 Sep)
• Asian Gems Conference (Singapore, 8-9 Oct)

Analysts

• Helen Lau (China Sector): +852 2236 6749, helen.lau@uobkayhian.com.hk
• Renee Tai (Consumer Sector): +852 2826 1324, renee.tai@uobkayhian.com.hk
• Herbert Chan (Consumer Sector): +852 2826 1330, herbert.chan@uobkayhian.com

Summary of Key Recommendations

• China Coal (1898 HK) and Zijin Mining (2899 HK) are top picks in the commodity sector.
• China Mengniu (2319 HK) and Luk Fook (590 HK) are top picks in the consumer sector.
• Melco Crown (6883 HK) and United Tractors (UNTR IJ) are recommended for their growth potential.
• Uni-President China (220 HK) and Parkson Retail (3368 HK) are recommended for sale due to weak performance.
• Jiangxi Copper (358 HK) is under review for a SELL due to weak demand and increased supply.

Conclusion

The report highlights mixed results across sectors, with a focus on the commodity and consumer segments in China. While some companies are recommended for purchase due to strong fundamentals and growth potential, others are advised to be sold due to weak performance and market challenges. The document also provides key indices and corporate events for further market insight.