20180621-大华继显-Regional_Morning_Notes_16页_884kb

Regional Morning Notes Summary - 21 June 2018

Core Content Overview

This document provides a summary of stock updates, financial performance, and market outlook for several companies and indices across different regions. It includes insights into the performance of individual stocks, corporate developments, and macroeconomic assumptions. The report also highlights key financial metrics and investment recommendations.

Company Updates

Sunny Optical (2382 HK)

• Key Points:
  • Sunny Optical is expected to achieve its 2018 shipment volume target despite challenges in the smartphone market.
  • The company faces mild margin pressure in 1H18 due to tight supply of components, strong bargaining power of sensor suppliers, and product homogeneity.
  • Management anticipates a recovery in margins for 2H18 and 2019 due to product innovation and technological improvements.
  • The trend of larger apertures in smartphone cameras is expected to continue, with Sunny developing products ranging from f/1.6 to f/1.35.
  • 2019-2020 Profit Forecasts Revised: Up by 8% and 16% respectively, reflecting growth in handset lens sets and 3D sensing modules.
  • Target Price Updated: Raised to HK$157.25 based on 33x 2018F PE, with an upside of +0.1% from the current share price of HK$157.10.
  • Valuation Metrics:
    • EBITDA margins expected to increase from 17.5% to 18.2%.
    • Net margin expected to rise from 13.0% to 14.2%.
    • EPS projected to increase from 116.7 to 142.2 (Fen).
    • Net debt/(cash) to equity is expected to decrease from 6.8% to -46.8%.
    • Financial Forecast:
      • Revenue: Rmbm 30,767 (2018F), Rmbm 39,680 (2019F), Rmbm 49,294 (2020F).
      • Net profit: Rmbm 4,205 (2018F), Rmbm 5,600 (2019F), Rmbm 7,008 (2020F).
      • Recommendation: Maintain HOLD.

Summarecon Agung (SMRA IJ)

• Key Points:
  • 1H18 pre-sales were weak, reaching only Rp1.04t, which is 26.1% of the full-year target of Rp4t.
  • Expected to miss the full-year pre-sales target, with 1H18 pre-sales in the range of Rp1.2-1.3t.
  • Management expects flattish net profit growth for 2018.
  • Dividend Announcement: Rp5 per share, distributed on 20 Jul 18.
  • Market Cap: Rpb 13,272.6, with a target price of Rp950 (upside +3.3%).
  • Valuation Metrics:
    • PE: 38.0 (2018F), 32.6 (2019F), 27.6 (2020F).
    • P/B: 2.0 (2018F), 1.9 (2019F), 1.8 (2020F).
    • Net margin expected to increase from 6.2% to 8.9%.
    • Recommendation: Maintain HOLD.

Regional Outlook

Indonesia

• Summarecon Agung (SMRA IJ): Pre-sales performance in 1H18 was slow, and the company is expected to miss its full-year target due to the upcoming elections.
• Market Cap: Rpb 13,272.6, with a target price of Rp950.
• Stock Impact: Weak pre-sales and net profit growth expected, with a focus on ongoing apartment projects.

Malaysia

• Syarikat Takaful (STMB MK): Share price has appreciated by 20% in two months, driven by the perception of zero-rated GST boosting demand, though this is not the case.
• Recommendation: Downgraded to HOLD.
• Stock Impact: Strong earnings growth expected in 2H18, which could lead to a re-rating of share prices.

Singapore

• Sector Focus: Plantation.
• Market Outlook: The US-China trade war could create short-term selling pressure on CPO prices, but it is expected to be positive in the mid-term as palm oil may gain market share in China.
• CPO Price: RM2,231 (1H18), with a 1H18 decline of 3.3%.

Thailand

• Sector Focus: Construction Services.
• Market Outlook: Expect share prices to re-rate in response to strong earnings growth from 2H18.
• Top Pick: STEC is highlighted as the top recommendation.
• Recommendation: Maintain OVERWEIGHT.

Key Indices

Top Picks and Sell Recommendations

BUY Recommendations:

• Baoshan Iron & Steel (600019 CH): Target price HK$11.25, potential upside +29.9%.
• Gudang Garam (GGRM LJ): Target price LJ RM83,000, potential upside +20.3%.
• PP Persero (PTPP LJ): Target price LJ RM3,700, potential upside +51.0%.
• V.S. Industry (VSI MK): Target price MK RM2.90, potential upside +83.5%.
• OCBC (OCBC SP): Target price SP RM16.02, potential upside +34.4%.
• SingTel (ST SP): Target price SP RM4.22, potential upside +33.1%.
• Siam Cement (SCC TB): Target price TB RM610, potential upside +45.2%.

SELL Recommendations:

• Great Wall Motor (2333 HK): Target price HK$6.50, potential downside -4.7%.
• Hartalega (HART MK): Target price MK RM4.02, potential downside -32.2%.

Key Assumptions

Corporate Events

Conclusion

The report highlights that while the smartphone market is facing challenges, Sunny Optical is well-positioned for growth in 2019 with the introduction of triple cameras and 3D sensing modules. The company is expected to see improved margins and increased demand for larger aperture lenses. In contrast, Summarecon Agung is facing weak pre-sales in 1H18 due to market conditions and upcoming elections. The report also discusses the potential impact of the US-China trade war on CPO prices and the positive outlook for palm oil in the mid-term. Overall, the analysis provides insights into financial performance, market trends, and investment recommendations across different regions.