Regional Morning Notes Summary
Core Content
This document outlines key investment insights and updates for the financial markets in China, Indonesia, Malaysia, and Thailand, focusing on electric vehicles (EVs), corporate events, and investment highlights.
Main Points
China: Electric Vehicles
- Subsidy Cuts:
- Electric passenger vehicles: 20% cut in 2017, well expected.
- Electric buses: Central government subsidies cut by 40-70%, with a cap on local subsidies at 50% of central subsidies.
- Resulting in a 55.0-77.5% overall cut in subsidies for electric buses.
- Impact on Margins:
- Electric bus makers will face a 70-90% drop in gross profit per vehicle due to the subsidy cuts.
- Net profit forecasts for BYD and Yutong are cut by 18% and 20% respectively for 2017-18.
- Downgrade:
- BYD: Downgraded from HOLD to SELL, target price cut from HK$54.00 to HK$38.00.
- Yutong: Downgraded from BUY to HOLD, target price cut from Rmb28.00 to Rmb20.00.
- EV Sales:
- Expected to grow 15% yoy to 550,000 units in 2017, down from 45% yoy growth in 2016.
- BYD's EV sales target for 2017 reduced to 180,000 units (+50% yoy), down from 240,000 units (+100% yoy).
Malaysia
- Alpha Picks:
- Top Glove and Genting Bhd are new conviction BUYs.
- UMW Holdings is a new conviction SELL.
- OCK Group:
- Maintained as a BUY with a target price of RM1.00.
Indonesia
- WIKA:
- Maintained as a BUY with a target price of Rp2,900.
Singapore
- Property Sector:
- 2017 strategy: Silver lining in supply.
Thailand
- Alpha Picks:
- Taking profit on ROBINS and replacing it with PTTGC.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
19881.8 |
0.6 |
-0.3 |
3.7 |
0.6 |
| S&P 500 |
2257.8 |
0.8 |
-0.3 |
3.0 |
0.8 |
| FTSE 100 |
7177.9 |
0.5 |
1.6 |
6.6 |
0.5 |
| AS30 |
5784.6 |
1.1 |
1.6 |
5.1 |
1.1 |
| CSI 300 |
3342.2 |
1.0 |
0.6 |
-5.3 |
1.0 |
| FSSTI |
2899.0 |
0.6 |
1.0 |
-0.7 |
0.6 |
| HSCEI |
9459.6 |
0.7 |
2.8 |
-3.3 |
0.7 |
| HSI |
22150.4 |
0.7 |
2.4 |
-1.8 |
0.7 |
| JCI |
5276.0 |
-0.4 |
4.9 |
0.6 |
-0.4 |
| KLCI |
1635.5 |
-0.4 |
1.1 |
0.4 |
-0.4 |
| KOSPI |
2044.0 |
0.9 |
0.3 |
3.7 |
0.9 |
| Nikkei 225 |
19114.4 |
-0.2 |
-1.6 |
3.7 |
0.0 |
| SET |
1542.9 |
0.3 |
2.2 |
2.7 |
0.0 |
| TWSE |
9272.9 |
0.2 |
1.8 |
0.9 |
0.2 |
| BDI |
961 |
3.6 |
3.7 |
-18.6 |
0.0 |
| CPO (RM/ml) |
3199 |
-0.2 |
0.0 |
3.5 |
45.4 |
| Brent Crude |
56 |
-2.2 |
0.8 |
2.1 |
-2.2 |
Top Picks
| Company |
Ticker |
CP (Icy) |
TP (Icy) |
Pot. +/- (%) |
| Air China |
753 HK |
5.02 |
6.50 |
29.5 |
| Ping An Insurance |
2318 HK |
39.35 |
47.00 |
19.4 |
| Ciputra Property |
CTRP LJ |
685.00 |
960.00 |
40.1 |
| Indosat |
ISAT LJ |
6,300.00 |
8,015.00 |
27.2 |
| Genting Bhd |
GENT MK |
7.90 |
10.15 |
28.5 |
| City Dev |
CIT SP |
8.31 |
10.36 |
24.7 |
| OCBC |
OCBC SP |
8.98 |
10.45 |
16.4 |
| Bangkok Dusit |
BDMS TB |
23.10 |
31.20 |
35.1 |
| Siam Cement |
SCC TB |
496.00 |
645.00 |
30.0 |
Key Assumptions
| Country |
GDP (% yoy) |
2015 |
2016F |
2017F |
| US |
2.6 |
- |
- |
- |
| Euro Zone |
1.1 |
- |
- |
- |
| Japan |
0.9 |
- |
- |
- |
| Singapore |
1.8 |
- |
- |
- |
| Malaysia |
4.5 |
- |
- |
- |
| Thailand |
3.3 |
- |
- |
- |
| Indonesia |
5.2 |
- |
- |
- |
| Hong Kong |
1.8 |
- |
- |
- |
| China |
6.2 |
- |
- |
- |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Luncheon with UOB Bank Senior Economist |
SingaporeThailand |
9 Jan12 Jan |
9 Jan12 Jan |
| China Healthcare Sector Analyst Marketing |
SingaporeMalaysia |
16 Jan17 Jan |
16 Jan18 Jan |
| Spore REITS Sector Analyst Marketing |
Malaysia |
19 Jan |
20 Jan |
| PTT Exploration and Production Roadshow |
Singapore |
6 Feb |
7 Feb |
| SGX-UOB Kay Hian Corporate Day |
Taipei |
21 Feb |
21 Feb |
| UOB Kay Hian ASEAN Conference |
Taipei |
22 Feb |
22 Feb |
Investment Highlights: Li Ning (2331 HK)
- Re-Initiated Coverage: BUY with a target price of HK$6.10.
- Earnings Turnaround: Driven by de-stocking, sales mix upgrade, better product launches, and cost savings.
- Sales Recovery:
- Expected to be sustained by new store expansion, e-commerce growth, and same-store sales (SSS) growth.
- Projected to add about 300 new stores in 2017 and 2018.
- Financials:
- Net margin expected to rise from 3.8% in 2016 to 5.9% in 2017 and 8.4% in 2018.
- Gross margin expected to increase from 45.0% in 2015 to 46.8% in 2016, 47.7% in 2017, and 48.6% in 2018.
- E-commerce Growth:
- Sales doubled in 1H16 and expected to grow 80-90% in 3Q16.
- Projected to grow 75% in 2016, 40% in 2017, and 25% in 2018.
- Stock Performance:
- Price: HK$4.92, Upside: +24.0%.
- Major Shareholder: Mr. Li Ning (27.99%).
Risks
- Slower-than-expected sportswear industry growth.
- Slower-than-expected SSS growth.
- Higher-than-expected SG&A costs from self-run stores.
- Operational losses from Danskin, a US brand acquired by Li Ning in Nov 16.
Analysts
