20160309-大华继显-Regional_Morning_Notes_16页_1mb

Regional Morning Notes Summary - 09 March 2016

Core Content

This document provides an overview of the regional market updates, focusing on China, Malaysia, Singapore, and Thailand. It includes economic data, sector updates, company-specific analysis, and investment recommendations.

Main Points

China

• Trade Growth: Trade growth in February 2016 deteriorated further due to weak domestic and foreign demand. Export value fell 25.4% yoy, and import value dropped 13.8% yoy, both worse than expected. The trade surplus fell to US$32.6b, significantly lower than the expected US$51b.
• Seasonality: The slowdown in automobile sales was attributed to the seasonal effect of Chinese New Year, which occurred earlier in 2016 than in 2015.
• Key Markets: Exports to the US, EU, Japan, and Hong Kong all declined, with the largest drop being to Hong Kong (-24.7% yoy).
• Commodity Prices: Import prices for crude oil and iron ore fell further in February, but there were signs of a rebound due to hopes for aggressive fiscal and monetary policies.
• Automobile Sector: Passenger vehicle sales growth is expected to slow from 9.4% in January to 3-4% in February. The OVERWEIGHT rating is maintained, with Geely and DFM as top picks.
• Earnings and Valuation: The document outlines key financials for various automobile companies, highlighting their performance and valuations. Geely is expected to benefit from the SUV market and has a target price of HK$4.10, while DFM has a target price of HK$15.00.
• Analysts: The report is authored by Chaoping Zhu and Ken Lee, with additional insights from Sophie Yu.

Malaysia

• VS Industry (VSI MK/BUY/RM1.17/Target: RM1.60): The stock was upgraded to BUY due to the recent sell-off being overdone. VSI is not purely a US dollar play, and its earnings are driven by higher sales volume.
• Key Financials: VSI is expected to have a net profit of RM167m for FY16, with a fully-diluted target price of RM1.60 based on 12x 2017F PE.
• Earnings Sensitivity: VSI's earnings are sensitive to the US$/RM exchange rate, with a 36.8% upside if the exchange rate remains stable.
• Corporate Events: VSI is scheduled to launch a new coffee brewer model in 4QFY16, which is expected to drive growth. The company also has a strong relationship with Customer K, and its sales are expected to grow at a 29% CAGR for FY15-18.
• Analyst: The report is authored by Fong Kah Yan.

Singapore

• Offshore & Marine Sector: The sector is still undervalued, but the analyst recommends selective accumulation after a share price pull-back.

Thailand

• Central Plaza Hotel (CENTEL TB/BUY/Bt39.00/Target: Bt47.00): The company is a BUY recommendation, with a target price of Bt47.00.

Key Indices

• DJIA: -0.6% (1D), +0.6% (1W), +5.8% (1M), -2.6% (YTD)
• S&P 500: -1.1% (1D), 0.0% (1W), +6.8% (1M), -3.2% (YTD)
• FTSE 100: -0.9% (1D), -0.4% (1W), +7.7% (1M), -1.9% (YTD)
• AS30: -0.7% (1D), +3.6% (1W), +5.9% (1M), -3.3% (YTD)
• CSI 300: +0.1% (1D), +6.0% (1W), +4.9% (1M), -16.7% (YTD)
• FSSTI: -1.6% (1D), +3.6% (1W), +5.9% (1M), -3.6% (YTD)
• HSCEI: -1.4% (1D), +5.4% (1W), +5.6% (1M), -12.0% (YTD)
• HSI: -0.7% (1D), +3.1% (1W), +3.8% (1M), -8.7% (YTD)
• JCI: -0.4% (1D), +0.6% (1W), +0.9% (1M), +4.7% (YTD)
• KLCI: -0.6% (1D), +1.0% (1W), +1.5% (1M), -0.3% (YTD)
• KOSPI: -0.6% (1D), +1.5% (1W), +1.5% (1M), -0.8% (YTD)
• Nikkei 225: -0.8% (1D), +4.3% (1W), +4.3% (1M), -11.8% (YTD)
• SET: -1.5% (1D), +2.1% (1W), +5.4% (1M), +6.7% (YTD)
• TWSE: +0.1% (1D), +2.1% (1W), +7.5% (1M), +3.9% (YTD)
• BDI: +3.4% (1D), +10.2% (1W), +24.9% (1M), -23.4% (YTD)
• CPO (RM/mt): -0.0% (1D), +0.3% (1W), +1.6% (1M), +11.8% (YTD)
• Brent Crude (US$/bbl): -3.4% (1D), +7.2% (1W), +20.0% (1M), +5.9% (YTD)

Key Assumptions

• GDP Growth (yoy):

  • US: 2.4% (2014), 2.5% (2015F), 2.5% (2016F)
  • Euro Zone: 0.9% (2014), 1.5% (2015F), 1.7% (2016F)
  • Japan: -0.1% (2014), 0.5% (2015F), 1.0% (2016F)
  • Singapore: 2.9% (2014), 2.0% (2015F), 2.7% (2016F)
  • Malaysia: 6.0% (2014), 4.9% (2015F), 4.8% (2016F)
  • Thailand: 0.9% (2014), 2.7% (2015F), 3.2% (2016F)
  • Indonesia: 5.0% (2014), 4.8% (2015F), 5.4% (2016F)
  • Hong Kong: 2.5% (2014), 1.8% (2015F), 1.5% (2016F)
  • China: 7.3% (2014), 6.5% (2015F), 6.7% (2016F)

• Brent Crude (US$/bbl):

  • 2015: 53.60
  • 2016F: 42
  • 2017F: 54

• CPO (RM/mt):

  • 2015: 2,168
  • 2016F: 2,500
  • 2017F: 2,600

Top Picks

Sell Recommendations:

• Sapurakencana (SAKP MK): -32.5%
• Sembcorp (SMM SP): -47.6%

Risks

• Macro Risk: Further slowdown in the Chinese economy could hurt automobile sales and profitability.
• Currency Risk: VSI's earnings are sensitive to the US$/RM exchange rate. A significant depreciation of the ringgit could impact its performance.

Conclusion

The document outlines a cautious yet positive outlook for the regional markets, emphasizing the potential for fiscal and monetary stimulus to support economic growth. It highlights the importance of automobile sector and VS Industry as key investment opportunities, despite the current weakness in trade and commodity prices. The analyst recommends selective accumulation in undervalued sectors and maintaining a BUY rating on several stocks, including Geely, DFM, and VS Industry.