20140804-大华继显-Regional_Morning_Notes_50页_2mb

Regional Morning Notes Summary - 04 August 2014

Core Content Overview

This document provides a comprehensive summary of market updates and investment recommendations across the China, Hong Kong, Indonesia, and Malaysia markets, focusing on key sectors such as Automobile, Healthcare, and Banking. It includes earnings previews, stock recommendations, and analysis of sector-specific developments.

Main Points by Region

China

Automobile Sector

• NDRC Anti-trust Probe: The probe into global carmakers for anti-competitive behavior has led to price cuts on spare parts and imported cars, but the impact is expected to be limited.
• Impact on OEMs: The probe may cause a one-off profit impact of 2-3% on Brilliance, DFM, and GAC, while domestic carmakers are not expected to be affected.
• Auto Dealers: Price cuts on imported cars may reduce sales margins, but dealers still benefit from tight supply-demand dynamics and lower spare part prices.
• Market Preference: The report continues to prefer OEMs over dealers due to their stronger bargaining power. Recommended stocks: Brilliance (1114 HK), DFM (489 HK), GAC (2238 HK).
• Sector Catalysts: Potential price cuts on spare parts and products could ease market concerns.
• Risks: Possible price cuts on domestically-made models and intensifying competition may affect earnings growth.

Healthcare Sector

• 1H14 Results: The sector experienced a 13.4% yoy growth in expansion, but slower earnings growth due to drug tender delays, anti-corruption campaigns, and intensified competition.
• Selective Positioning: Companies with strong product mix and expansion strategies, such as Sihuan Pharmaceutical, Lijun Intl, and China TCM, are expected to outperform.
• Stock Picks:
  • Sihuan Pharmaceutical (460 HK): Upgraded to BUY, with a target price of HK$6.20.
  • Sinopharm (1099 HK): Maintained BUY, with a target price of HK$27.70.
  • Lijun Intl (2005 HK): Maintained BUY, with a target price of HK$4.30.
  • China TCM (570 HK): Maintained BUY, with a target price of HK$5.20.
• Downgrades:
  • TUL (3933 HK): Downgraded to HOLD, with a revised target price of HK$5.70.
  • Sino Biopharmaceutical (1177 HK): Downgraded to SELL, with a target price of HK$5.50.
  • Shineway (2877 HK) and Shandong Weigao (1066 HK): Maintained SELL with respective target prices of HK$10.20 and HK$7.50.
• Sector Catalysts: Strong demand for healthcare products, drug tender programs, and government support are key drivers.
• Risks: TCM pricing control, lower tendering prices, and possible delays in drug tenders.

Hong Kong

• Bank of East Asia (23 HK): 1H14 earnings exceeded estimates, and the recommendation is maintained as BUY with a target price of HK$36.50.

Indonesia

• Alam Sutera Realty (ASRI IJ): 1H14 net profit was Rp515b (-31% yoy) due to changes in sales mix and higher financial costs. Reiterated BUY with a target price of Rp650.
• Ciputra Development (CTRA IJ): Downgraded to HOLD due to limited share price upside, with a target price of Rp1,160.
• Ciputra Property (CTRP IJ): 1H14 net profit was Rp127b (-50% yoy) due to poor sales of apartments and offices. Upgraded to BUY due to positive earnings outlook post-election.
• Ciputra Surya (CTRS IJ): 1H14 net profit of Rp248b (43% of full-year target). Earnings outlook remains positive due to Jayapura expansion in 2015. Maintained BUY with a target price of Rp2,910.
• London Sumatra Indonesia (LSIP IJ): Delivered stupendous results despite a low base impact, with BUY recommendation.
• PT Wintermar Offshore Marine (WINS IJ): Downgraded to HOLD due to contract slowdown in 2Q14.

Key Financial Highlights (China Overseas Land - 688 HK)

• 1H14 Results: Core net profit surged 33.7% yoy, while gross margins remained stable and net gearing ratio increased 8.8ppt to 37.2%.
• Performance: Attributable net profit increased 18% yoy to HK$13,022m, with core net profit at HK$10,790m, 8% above market consensus.
• Landbanking: Acquired 10 land plots worth HK$31b, adding 6.85m sqm GFA to land reserve. Total landbank reached 41.55m sqm as of end-June.
• Recommendation: Maintained BUY with a target price of HK$26.80.
• Financial Metrics:
  • Net Profit (Adj.): Expected to grow to HK$22,511.4m in 2014F.
  • PE Ratio: 8.6x (2014F).
  • P/B Ratio: 1.5x (2014F).
  • EV/EBITDA: 6.2x (2014F).
  • ROE: 17.5% (2014F).

Summary of Key Information

Analyst Contact

• China Automobile: Ken Lee
  Email: ken.lee@uobkayhian.com.hk
  Phone: +852 2236 6760

• China Healthcare: Carol Dou
  Email: caroldou@uobkayhian.com
  Phone: +8621 5404 7225 ext.811

Conclusion

The report highlights the China and Hong Kong markets as key areas of focus, with automobile and healthcare sectors showing mixed performance. In Indonesia, real estate and banking remain strong, but some companies face headwinds due to contract slowdowns and competition. Overall, the document recommends BUY for Brilliance, DFM, GAC, Sihuan, Sinopharm, Lijun, and China TCM, while SELL is advised for Sino Biopharmaceutical, Shineway, and Shandong Weigao.