20140410-大和证券-Asia_Pacific_Daily_42页_2mb

Summary of Document Content

Core Content

The document is a financial analysis report dated April 10, 2014, focusing on the performance and outlook of two brewing companies, Carlsberg (CAB) and Guinness (GAB), as well as an analysis of China Precious Metal Resources (1194 HK). It includes insights on market trends, valuations, and investment recommendations.

Main Points

Brewery Sector (Malaysia)

• Market Performance:
  • Both CAB and GAB experienced a sharp decline in share prices, down by 20-37% from their June 2013 highs.
  • The sector is rated NEUTRAL, reflecting a balanced view of the market.
• Fundamentals:
  • Both brewers have strong fundamentals, good branding, and corporate governance.
  • Guinness (GAB) is preferred over Carlsberg (CAB) due to its stronger presence in both off-trade and on-trade channels.
• Consumer Behavior:
  • The rising cost of living may lead to "down-trading" by social drinkers to more affordable neighborhood pubs.
• Performance Analysis:
  • GAB saw a 22% decline in share price in 2013, while CAB had a 10% decline.
  • The 2013 performance was weaker compared to 2012, where both had strong earnings and share price growth.
  • GAB had a 23% share price increase in 2012, reaching an all-time high of RM21.72/share in June 2013.
  • CAB had a 47% share price increase in 2012, peaking at RM16.08/share in June 2013.
• Future Outlook:
  • The 2014-15 beer sales volume growth is expected to be flat at 1%, due to the lack of a major sporting event like the FIFA World Cup and the impact of government subsidy rationalization and GST.
  • The DCF-derived target price for GAB has been reduced from RM16.48 to RM15.85.
  • CAB's target price remains at RM13.95 with no changes to its forecasts.
• Key Risks:
  • A potential 15% excise duty hike could lead to a 5% decline in GAB's earnings and an 8% decline in CAB's earnings.
  • A 2014-2015 period saw a 5% decline in MLM volume sales due to increased costs and reduced consumer spending.

China Precious Metal Resources (1194 HK)

• Rating Change: Downgraded from Outperform to Hold.
• Target Price: Reduced from HKD1.25 to HKD0.87, with a 4.4% downside.
• Performance:
  • 2013 net profit declined by 59% YoY to HKD181m, due to a 20% fall in gold ASP and 53% rise in financial costs.
  • Gold sales volume increased by 18% YoY, but production growth is expected to slow.
• Financial Forecasts:
  • 2014E production volume is forecasted at 167,400 oz, down 10% from prior estimates.
  • 2015E production volume is forecasted at 185,000 oz, down 8%.
  • EPS is projected to decrease significantly, by 64% in 2014E and 51% in 2015E.
• Key Assumptions:
  • Gold price is expected to remain around USD1,250/oz for 2014E, with a slight decrease in 2015E to USD1,230/oz.
  • Cash cost is stable at USD380/oz.
  • Gross margin is forecasted to be 48% for 2014E, down from previous levels.
• Valuation Metrics:
  • EV/EBITDA for 2014E is 8.4x, lower than its peers.
  • PBR for 2014E is 0.7x, also lower than peers.
  • ROE is expected to be 2% for 2014E and 3% for 2015E.
• Key Risks:
  • Higher financial costs and increased environmental expenses could negatively impact earnings.
  • Rising debt levels may strain the company's financial position.
• Upside Potential:
  • Early repayment of short-term loans could provide a 13% upside.
• Comparison with Peers:
  • Zijin Mining (2899 HK) and Zhaojin Mining (1818 HK) are highlighted as having better performance and valuations than CPM.
  • China Gold International (2099 HK) and Lingbao Gold (3330 HK) have higher valuations and better financial metrics.

Key Information

• Investment Recommendations:

  • GAB: Maintained ADD rating with a DCF-derived target price of RM15.85.
  • CAB: Maintained ADD rating with a DCF-derived target price of RM13.95.
  • CPM: Downgraded to Hold with a new target price of HKD0.87.

• Market Indices:

  • TPX: Down 11.7% YTD, with 8.2% EPS growth.
  • HSCEI: Up 6.9% 1M, down 4.0% YTD, with 8.4% EPS growth.
  • HSI: Up 0.8% 1M, down 2.0% YTD, with 8.1% EPS growth.
  • KOSPI: Up 1.2% 1M, down 0.6% YTD, with 16.7% EPS growth.
  • TWSE: Up 2.5% 1M, up 3.7% YTD, with 10.0% EPS growth.
  • SENSEX: Up 3.6% 1M, up 7.2% YTD, with 14.4% EPS growth.
  • FBMKLCI: Up 1.3% 1M, down 0.6% YTD, with 10.1% EPS growth.
  • SET: Up 2.0% 1M, up 6.4% YTD, with 11.4% EPS growth.
  • PCOMP: Up 1.6% 1M, up 11.8% YTD, with 15.0% EPS growth.
  • JCI: Up 5.0% 1M, up 15.1% YTD, with 13.1% EPS growth.
  • AS51: Up 0.0% 1M, up 2.1% YTD, with 8.2% EPS growth.

• Company Roadshows:

  • A list of upcoming roadshows for various companies in April and May 2014, including Lai Sun, Mega Financial Holdings, Beijing Jingneng, Econtext Asia, China Railway Group, Beijing Jingcheng Machinery, Cathay Financial, Eotechnics, Yuexiu Transport, Paradise Entertainment, and Afrecca TV.

• Daiwa Asian Events:

  • A list of upcoming events in 2014, including the Daiwa Consumer and Gaming Conference, Daiwa Small/Mid Cap Corporate Day, and Daiwa ASEAN Conference in different locations.

Conclusion

The report provides a detailed analysis of the brewing sector in Malaysia, highlighting the NEUTRAL sector rating and the attractive valuations for both CAB and GAB. GAB is preferred due to its stronger market position and potential for down-trading. The report also includes a comprehensive analysis of China Precious Metal Resources, showing a downgrade due to weaker-than-expected performance and rising financial costs. The market indices show mixed performance, with some up and others down. The upcoming events and roadshows are listed to provide insights into investor sentiment and company updates.