20161209-大华继显-Regional_Morning_Notes_27页_1mb

Regional Morning Notes Summary

Date: Friday, 09 December 2016

Core Content Overview

This document provides a detailed analysis of the regional financial and economic landscape, focusing on China, Indonesia, Malaysia, and Thailand. It outlines the expected impact of the renminbi (Rmb) depreciation, key economic indicators, corporate performance highlights, and market outlooks.

Key Market Forecasts

• Rmb Depreciation: The Rmb is expected to depreciate to 7.2 against the US dollar by end-2017, following a 5.6% decline in 2016 and a 5% depreciation in 2017.
• Capital Outflow: The depreciation is expected to continue due to the narrowing interest rate spread with the US and less attractive asset returns in China.
• Sector Impact: Airlines, developers, and utilities are expected to be the most negatively impacted, while selected banks and healthcare companies may benefit from the weaker Rmb.

Economic Indicators

Trade

• Export and Import Growth: Strong growth was recorded in both export and import values.
  • Exports (US$): Increased 0.1% yoy in November 2016, surpassing the market forecast of a 5.0% yoy decline.
  • Imports (US$): Rose 6.7% yoy, beating the market forecast of a 1.9% yoy decrease.
• Key Markets:
  • US: Export growth was 8.1% yoy.
  • EU: Export growth was 5.6% yoy.
  • Japan: Export growth was 3.3% yoy.
  • Hong Kong: Export growth was -16.1% yoy, suggesting a decline in fabricated trade.
• Commodity Imports:
  • Iron Ore: Increased 17.4% mom.
  • Crude Oil: Increased 16.0% mom.
  • Copper Ore: Increased 16.8% mom.
  • Coal: Increased 102.5% mom.

Corporate Highlights

Indonesia

• Aneka Tambang (ANTM IJ): Supported by gold trading. The company has several promising projects, including a ferronickel plant, a SGA plant, and an anode slime plant. However, earnings before smelter completion are limited to gold trading. It is currently trading at 1.28x P/B, higher than its 5-year mean P/B of 0.92x.

Malaysia

• Bermaz Auto (BAUTO MK): 2QFY17 results were below expectations due to weak sales volume and a prolonged weakness of the ringgit against the yen. It is a yield play in the meantime.
• EcoWorld Development (ECW MK): 4QFY16 results showed solid sales of RM1.7b, with no surprises.
• SapuraKencana Petroleum (SAKP MK): 3QFY17 core profit exceeded expectations. The company is expected to see improving sentiment with the narrowing of FY18 orderbook gap and strengthening cash flow. Target price was raised to RM1.62.

Thailand

• Diamond Building Products (DRT TB): A new strategy is expected to support earnings growth. The company offers an attractive yield of 7%.

Singapore

• Property Sector: REITs are noted to have a sense of déjà vu, indicating similar trends as in previous years.

Top Picks

• BUY Recommendations:

  • Air China (753 HK): Target price 7.00, potential upside 33.6%.
  • Ping An Insurance (2318 HK): Target price 47.00, potential upside 11.8%.
  • Ciputra Property (CTRP IJ): Target price 960.00, potential upside 38.1%.
  • Indosat (ISAT IJ): Target price 8,015.00, potential upside 27.7%.
  • Genting Bhd (GENT MK): Target price 10.15, potential upside 26.1%.
  • Citiv Dev (CIT SP): Target price 10.36, potential upside 22.0%.
  • OCBC (OCBC SP): Target price 10.45, potential upside 12.4%.
  • Bangkok Dusit (BDMS TB): Target price 31.20, potential upside 36.2%.
  • Siam Cement (SCC TB): Target price 645.00, potential upside 34.9%.

• SELL Recommendation:

  • Hartalega (HART MK): Target price 3.33, potential downside 29.9%.

Key Assumptions

• GDP Forecasts:

  • US: 2.6% (2015), 2.0% (2016F), 2.7% (2017F).
  • Euro Zone: 2.0% (2015), 1.4% (2016F), 1.0% (2017F).
  • Japan: 0.5% (2015), 0.6% (2016F), 0.8% (2017F).
  • Singapore: 2.0% (2015), 1.4% (2016F), 1.7% (2017F).
  • Malaysia: 5.0% (2015), 4.2% (2016F), 4.5% (2017F).
  • Thailand: 2.8% (2015), 3.2% (2016F), 3.5% (2017F).
  • Indonesia: 4.8% (2015), 5.0% (2016F), 5.2% (2017F).
  • Hong Kong: 2.4% (2015), 2.1% (2016F), 1.8% (2017F).
  • China: 6.9% (2015), 6.5% (2016F), 6.2% (2017F).

• Commodity Prices:

  • Brent Crude: Average 54 US$/bbl, with a 17.2% yoy increase.
  • CPO (Crude Palm Oil): Average 3217 RM/ml, with a 14.6% yoy increase.

Impact of 5% Rmb Depreciation

• Airlines:

  • Air China (753 HK): Operating income impact -123.41m, interest impact -2,534.46m, total impact -17.1%.
  • CEA (670 HK): Operating income impact -43.97m, interest impact -1,969.13m, total impact -16.0%.
  • CSA (1055 HK): Operating income impact -207.48m, interest impact -2,093.14m, total impact -17.0%.

• Banks:

  • ABC (1288 HK): Operating income impact 1,415.51m, interest impact -7.38m, total impact 0.6%.
  • BOC (3988 HK): Operating income impact 7,027.89m, interest impact -11.01m, total impact 2.9%.
  • BOCom (3328 HK): Operating income impact 741.71m, interest impact -2.70m, total impact 0.9%.
  • ICBC (1398 HK): Operating income impact 2,422.28m, interest impact -16.23m, total impact 0.6%.
  • Minsheng (1988 HK): Operating income impact 0.00, interest impact -0.68m, total impact -0.8%.

• Healthcare:

  • CSPC (1093 HK): Operating income impact 57.60m, interest impact -0.75m, total impact 1.5%.
  • The United Labs (3933 HK): Operating income impact 42.40m, interest impact -4.40m, total impact 8.1%.

• Property:

  • Agile (3383 HK): Operating income impact 0.00, interest impact -589.00m, total impact -6.3%.
  • COGO (81 HK): Operating income impact -141.85m, interest impact -29.39m, total impact -6.0%.
  • COLI (688 HK): Operating income impact -2,878.45m, interest impact -402.71m, total impact -5.7%.
  • CR Land (1109 HK): Operating income impact -1,821.30m, interest impact -166.98m, total impact -5.5%.
  • China Vanke (2202 HK): Operating income impact 0.00, interest impact -453.75m, total impact -0.9%.
  • Evergrande (3333 HK): Operating income impact 0.00, interest impact -903.51m, total impact -3.2%.
  • Gemdale PI (535 HK): Operating income impact 0.00, interest impact -42.98m, total impact -1.4%.
  • Guangzhou R&F (2777 HK): Operating income impact 0.00, interest impact -206.91m, total impact -1.4%.
  • Joy City (207 HK): Operating income impact 0.00, interest impact -217.00m, total impact -6.3%.
  • KWG (1813 HK): Operating income impact 0.00, interest impact -209.13m, total impact -3.8%.
  • Longfor (960 HK): Operating income impact -122.98m, interest impact 0.00, total impact -0.8%.
  • SUNAC China (1918 HK): Operating income impact 0.00, interest impact -340.00m, total impact -6.7%.
  • Shimao Property (813 HK): Operating income impact 0.00, interest impact -209.13m, total impact -1.5%.
  • Sino-Ocean Land (3377 HK): Operating income impact -404.87m, interest impact 0.00, total impact -6.0%.
  • Yuexiu Property (123 HK): Operating income impact 0.00, interest impact -119.85m, total impact -2.7%.

• Utilities:

  • BEHL (392HK): Operating income impact -211.00m, interest impact 0.00, total impact -5.0%.
  • China Gas (384HK): Operating income impact -356.00m, interest impact -77.00m, total impact -6.0%.
  • CR Gas (1193HK): Operating income impact -313.00m, interest impact 0.00, total impact -5.0%.
  • ENN Energy (2688HK): Operating income impact 0.00, interest impact -173.00m, total impact -3.5%.
  • Kunlun (135HK): Operating income impact -619.00m, interest impact 0.00, total impact -5.0%.
  • Towngas China (1083HK): Operating income impact -61.30m, interest impact 0.00, total impact -5.0%.

Analysts

• Tham Mun Hon: Greater China Research Team Lead, Contact: +852 2236 6799, Email: munhon.tham@uobkayhian.com.hk
• Chaoping Zhu: Contact: +8621 5404 7225 ext. 822, Email: chaoping@uobkayhian.com
• Ye Xu: Contact: +8621 5404 7225 ext. 820, Email: xuye@uobkayhian.com

Corporate Events

• IMAX China Luncheon: Shanghai, 9 Dec
• SGX-UOB Kay Hian Corporate Day: Taipei, 21 Feb
• UOB Kay Hian ASEAN Conference: Taipei, 22 Feb

Conclusion

The document highlights the ongoing impact of Rmb depreciation on various sectors, particularly airlines, developers, and utilities, while suggesting potential benefits for banks and healthcare. It also notes the strong trade performance in November 2016, driven by improved external demand and the Rmb's weakening against the US dollar. The outlook for 2017 remains cautiously optimistic, with continued export growth and import expansion supported by infrastructure investment, though uncertainties such as US trade policies may affect certain industries.