Regional Morning Notes Summary
Core Content Overview
This document provides a summary of investment insights for various regions on Friday, 03 July 2015, focusing on key stocks and market indices. It outlines investment strategies, updates on corporate developments, financial performance, and valuation metrics for companies in China, Indonesia, Malaysia, Singapore, and Thailand.
Main Points by Region
China
- Gemdale Properties and Investment (535 HK)
- Strategy: The company is highlighted as a leading real estate developer with a strong SOE background, healthy balance sheet, and strong landbanking capabilities in top-tier cities.
- Performance: Expected to report strong earnings revisions for 1H15 due to robust sales growth and a low base of losses in 1H14.
- Valuation: Currently trading at a 69.5% discount to RNAV (HK$1.77/share), with a target price of HK$0.89 (upside +64.8%).
- Earnings Growth: Projected core net profit CAGR of 26.5% for 2015-2017.
- Key Catalysts: Strong earnings revision, solid contracted sales, and new business lines.
- Risks: Uncertainty in commercial property management, liquidity issues from aggressive landbanking, and potential delays in project launches.
Indonesia
- Wijaya Karya (WIKA IJ)
- Strategy: Aiming to benefit from capital injection and strong bookings growth.
- Government Injection: Expected to be included in the 2016 State Budget for capital injection, with a target of 79.5% YoY growth in new contracts.
- Performance: New contracts booked as of 20 Jun 15 reached Rp6.4t, which is 20.2% of its full-year target.
- Valuation: Trading at 19.2x 2016F PE, above peers but with potential to close the performance gap if targets are met.
- Risks: Uncertainty in achieving the booking target and potential delays in government capital injection.
Malaysia
- Gas Malaysia (GMB MK)
- Update: The stock is upgraded to HOLD with a target price of RM2.75, based on strong earnings visibility.
- Valuation: Expected to revert to mean valuations.
Singapore
- REITs Sector
- Update: The REIT regime is strengthening.
- Oversea-Chinese Banking Corp (OCBC SP)
- Update: Upgraded to BUY with a target price of S$12.58, based on lower SHIBOR offsetting the impact of higher SIBOR.
Thailand
- Bangkok Dusit Medical Services (BDMS TB)
- Update: Acquiring MRH to strengthen presence in the western region. Maintained BUY with a target price of Bt25.75.
- Performance: Strong sales growth and strong positioning in the market.
Key Indices Overview
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17730.1 |
(0.2) |
(0.9) |
(1.6) |
(0.5) |
| S&P 500 |
2076.8 |
(0.0) |
(1.2) |
(1.6) |
0.9 |
| FTSE 100 |
6630.5 |
0.3 |
(2.6) |
(4.3) |
1.0 |
| AS30 |
5587.9 |
1.5 |
(0.6) |
(0.0) |
3.7 |
| CSI 300 |
4108.0 |
(3.4) |
(12.7) |
(20.1) |
16.3 |
| FSSTI |
3327.8 |
(0.1) |
(0.7) |
(0.7) |
(1.1) |
| HSI |
26282.3 |
0.1 |
(4.1) |
(5.0) |
11.3 |
| KLCI |
1733.9 |
0.3 |
1.0 |
(0.9) |
(1.6) |
| KOSPI |
2107.3 |
0.4 |
1.1 |
2.1 |
10.0 |
| Nikkei 225 |
20522.5 |
1.0 |
(1.2) |
0.2 |
17.6 |
| SET |
1491.6 |
(0.9) |
(1.8) |
0.6 |
(0.4) |
| TWSE |
9379.2 |
0.0 |
(1.0) |
(1.9) |
0.8 |
| BDI |
794 |
0.0 |
(4.2) |
34.3 |
1.5 |
| CPO (RM/mt) |
2247 |
0.1 |
0.2 |
0.3 |
(2.2) |
| Nymex Crude (US$/bbl) |
57 |
(0.7) |
(5.2) |
(5.2) |
6.1 |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Upside (%) |
| Beijing Capital |
694 HK |
8.88 |
12.30 |
38.5 |
| ICBC |
1398 HK |
6.15 |
7.80 |
26.8 |
| Bank BJB |
BJR J |
845.00 |
1,300.00 |
53.8 |
| Maybank |
MAY MK |
9.29 |
10.30 |
10.9 |
| DBS |
DBS SP |
20.50 |
25.08 |
22.3 |
| SATS Ltd |
SATSP |
3.61 |
4.00 |
10.8 |
| Kasikornbank |
KBANK TB |
179.00 |
232.00 |
29.6 |
| PTT |
PTT TB |
356.00 |
410.00 |
15.2 |
- Sell: UMWH Holdings (UMWH MK) with a target price of S$9.00 and a downside of 12.6%.
Key Assumptions
| Country |
2014 GDP % |
2015F GDP % |
2016F GDP % |
| US |
2.2 |
2.9 |
2.9 |
| Euro Zone |
-0.5 |
1.3 |
1.3 |
| Japan |
1.6 |
1.0 |
1.0 |
| Singapore |
4.4 |
2.9 |
2.9 |
| Malaysia |
4.7 |
5.0 |
5.0 |
| Thailand |
2.8 |
2.7 |
2.7 |
| Indonesia |
5.6 |
5.0 |
5.0 |
| Hong Kong |
2.9 |
3.7 |
3.7 |
| China |
7.7 |
7.2 |
7.0 |
| Metric |
2014 |
2015F |
2016F |
| Brent (US$/bbl) |
99.45 |
61 |
72 |
| CPO (US$/ml) |
722 |
765 |
788 |
| BDI |
1,101 |
1,300 |
1,400 |
Corporate Events
| Event |
Venue |
Start |
End |
| Malaysia 2H15 Outlook & Strategy Analyst Presentation |
Kuala Lumpur |
6 Jul |
7 Jul |
| Indo Oil and Gas Sector Analyst Presentation |
Singapore |
6 Jul |
6 Jul |
| Indo Oil and Gas Sector Analyst Presentation |
Kuala Lumpur |
7 Jul |
8 Jul |
| China Autos and Economics Analyst Presentation |
Lugano & Milan |
8 Jul |
8 Jul |
| China Autos and Economics Analyst Presentation |
Europe |
9 Jul |
9 Jul |
| China Autos and Economics Analyst Presentation |
Frankfurt |
10 Jul |
10 Jul |
| China Autos and Economics Analyst Presentation |
London |
13 Jul |
15 Jul |
Summary of Financials and Metrics
Gemdale Properties and Investment (535 HK)
- Net Turnover: Rmb2,169m (2014), Rmb6,189m (2015F), Rmb8,655m (2016F), Rmb10,877m (2017F)
- EBITDA: Rmb1,066m (2014), Rmb1,915m (2015F), Rmb2,680m (2016F), Rmb3,286m (2017F)
- Net Profit (rep./act.): Rmb361m (2014), Rmb659m (2015F), Rmb933m (2016F), Rmb1,148m (2017F)
- EPS (fen): 1.9 (2014), 5.2 (2015F), 7.0 (2016F), 8.4 (2017F)
- PE (x): 23.1 (2014), 8.3 (2015F), 6.2 (2016F), 5.2 (2017F)
- P/B (x): 0.8 (2014), 1.0 (2015F), 0.9 (2016F), 0.8 (2017F)
- EV/EBITDA (x): 4.5 (2014), 2.5 (2015F), 1.8 (2016F), 1.5 (2017F)
- Net Debt/Equity (%): 7.7 (2014), 45.8 (2015F), 62.4 (2016F), 69.0 (2017F)
- Interest Cover (x): 4.7 (2014), 3.9 (2015F), 4.2 (2016F), 4.7 (2017F)
- ROE (%): 7.6 (2014), 11.5 (2015F), 13.5 (2016F), 14.5 (2017F)
Wijaya Karya (WIKA IJ)
- Net Turnover: Rpb12,463m (2014), Rpb16,539m (2015F)
- EBITDA: Rpb1,222m (2014), Rpb1,725m (2015F)
- Net Profit (rep./act.): Rpb615m (2014), Rpb765m (2015F)
- EPS (Rp): 100.2 (2014), 165 (2015F)
- PE (x): 28.9 (2014), 25.2 (2015F), 19.2 (2016F)
- P/B (x): 4.5 (2014)
- EV/EBITDA (x): 16.7 (2014)
- Net Debt/Equity (%): 14.7 (2014)
- Interest Cover (x): 5.2 (2014)
- ROE (%): 17.7 (2014)
Key Metrics for 4 Listed SOE Construction Companies
| Company |
New Contracts (2015F) |
% YoY |
Net Income (2015F) |
% YoY |
| ADHI |
Rp15,200m |
65 |
Rp505m |
56 |
| PTPP |
Rp27,000m |
33 |
Rp730m |
37 |
| WSKT |
Rp20,837m |
-8 |
Rp650m |
30 |
| WIKA |
Rp31,646m |
79 |
Rp765m |
24 |
Conclusion
The report highlights the potential for growth in several key markets, with a focus on Gemdale Properties and Investment in China and Wijaya Karya in Indonesia. Both are expected to benefit from strong earnings growth, capital injections, and expansion strategies. The overall market outlook is cautiously optimistic, with valuation corrections and strong performance in specific sectors like REITs and construction. Investors are advised to monitor earnings revisions, capital injections, and project launches for potential value creation.
