Regional Morning Notes Summary
Core Content
This document provides a comprehensive analysis of market trends and investment opportunities across several Asian markets, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand. It includes sector updates, company-specific insights, key indices, top picks, corporate events, and valuation details for key stocks, particularly in the automotive and solar energy sectors.
Main Points by Country
China
- Automotive Sector:
- The Chinese government is not cracking down on foreign carmakers (JVs) and is instead implementing broad anti-monopoly measures.
- Domestic carmakers are losing market share to JVs due to inferior technology and brand equity. The government is focusing subsidies on electric vehicles (EVs), not conventional cars.
- JVs are expected to continue gaining market share due to better technology, brand reputation, and cost efficiency.
- Top Picks: Brilliance (1114 HK), DFM (489 HK), and China Zhengtong (1728 HK).
- Sell Recommendations: GAC (2238 HK), Geely (175 HK), GWM (2333 HK), and BYD (1211 HK) due to stretched valuations, earnings risks, and high exposure to competitive segments.
- Solar Energy (China Singyes Solar Technologies 750 HK):
- The company is maintaining a BUY recommendation with a target price of HK$16.80.
- There is a strong potential for a DG (distributed generation) installation boom in 4Q14, supported by new government policies.
- Management has been in close communication with clients and expects to announce an updated orderbook by late September or early October.
- The company has a solid EPC (Engineering, Procurement, Construction) pipeline and is increasing its focus on solar farm and BOT (Build, Operate, Transfer) projects.
- Key Financials:
- Expected to grow net turnover from HK$4,150.5m in 2013 to HK$10,961.4m in 2016.
- Net profit is projected to increase from HK$490.6m in 2013 to HK$1,116.5m in 2016.
- ROE is expected to rise from 22.1% in 2013 to 27.0% in 2016.
- Valuation: The stock is undervalued based on the P/B (price-to-book) ratio, which is expected to drop from 3.2x in 2014F to 1.5x in 2016F.
- Catalysts: Favorable local government guidelines, improved policy environment, and strong financing support.
Indonesia
- Technical Analysis:
- The stock UNTR is recommended to be bought based on technical indicators suggesting a potential rebound.
- The candlestick pattern indicates a bullish trend, and the stock has reached a Fibonacci retracement level.
- MACD remains above its centerline, indicating continued upward momentum.
- Company Update:
- No specific company results or updates are mentioned for Indonesia.
Malaysia
- Astro Malaysia (ASTRO MK):
- Recommended to buy with a target price of RM3.65.
- Results for 2QFY15 are within expectations, and margin improvement is expected in the coming quarters due to the end of the World Cup.
- Berjaya Sports Toto (BST MK):
- Recommended to hold with a target price of RM3.88.
- 1QFY15 results were disappointing due to lower ticket sales and higher prize payouts.
- The stock is seen as a dividend-yield play with limited re-rating catalysts.
- Sunway (SWB MK):
- Recommended to buy with a target price of RM3.51.
- The company is rewarding shareholders through the floatation of its construction division.
Singapore
- QT Vascular (QTVC SP):
- Recommended to buy with a target price of S$0.60.
- The stock is noted for its potential and is highlighted as a "who doesn't like chocolate" play, suggesting it may be an attractive investment.
Thailand
- Khon Kaen Sugar Industry (KSL TB):
- Downgraded to HOLD with a target price of Bt14.40.
- 3QFY14 results showed a decline in earnings.
- Advanced Info Service (ADVANC TB):
- Recommended to buy with a target price of Bt270.00.
- Earnings are expected to improve in the second half of 2014.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17279.7 |
0.1 |
1.7 |
1.6 |
4.2 |
| S&P 500 |
2010.4 |
0.0 |
1.3 |
1.1 |
8.8 |
| FTSE 100 |
6837.9 |
0.3 |
0.5 |
0.9 |
1.3 |
| AS30 |
5437.3 |
0.3 |
-1.7 |
-3.6 |
1.6 |
| CSI 300 |
2425.2 |
0.7 |
-0.5 |
2.5 |
4.1 |
| FSSTI |
3305.1 |
0.2 |
-1.2 |
-0.6 |
4.3 |
| HSCEI |
10783.3 |
-0.1 |
-2.1 |
-2.5 |
-0.3 |
| HSI |
24306.2 |
0.6 |
-1.2 |
-3.2 |
4.3 |
| JCI |
5227.6 |
0.4 |
1.6 |
0.6 |
22.3 |
| KLCI |
1849.5 |
0.2 |
-0.9 |
-1.1 |
-0.9 |
| KOSPI |
2053.8 |
0.3 |
0.6 |
-0.1 |
2.1 |
| Nikkei 225 |
16321.2 |
1.6 |
2.6 |
5.0 |
0.2 |
| SET |
1584.9 |
0.0 |
0.2 |
1.8 |
22.0 |
| TWSE |
9240.5 |
0.0 |
0.2 |
-1.5 |
7.3 |
| BDI |
1075 |
-1.3 |
-9.0 |
-1.2 |
-52.8 |
| CPO (RM/mt) |
2156 |
1.3 |
4.7 |
2.8 |
-16.2 |
| Nymex Crude (US$/bbl) |
92 |
0.0 |
-0.5 |
-1.3 |
-6.1 |
Top Picks and Recommendations
| Company |
Ticker |
Recommendation |
Price (HK$) |
Target Price (HK$) |
Upside % |
| Brilliance |
1114 HK |
BUY |
13.88 |
19.40 |
44.9 |
| DFM |
489 HK |
BUY |
13.22 |
17.50 |
16.4 |
| Sunac China |
1918 HK |
BUY |
- |
- |
- |
| Bank Mandiri |
BMRI J |
BUY |
- |
- |
- |
| Gamuda |
GAM MK |
BUY |
- |
- |
- |
| DBS |
DBS SP |
BUY |
- |
- |
- |
| Pacific Radiance |
PACRA SP |
BUY |
- |
- |
- |
| Bangkok Bank |
BBL TB |
BUY |
- |
- |
- |
Key Assumptions
| Country/Region |
GDP (yoy) 2013 |
GDP (yoy) 2014F |
GDP (yoy) 2015F |
| US |
1.9 |
3.0 |
3.0 |
| Euro Zone |
-0.4 |
1.0 |
1.4 |
| Japan |
1.5 |
2.1 |
2.0 |
| Singapore |
3.9 |
4.2 |
4.2 |
| Malaysia |
4.7 |
5.6 |
5.2 |
| Thailand |
2.9 |
1.5 |
5.1 |
| Indonesia |
5.8 |
5.5 |
6.0 |
| Hong Kong |
2.9 |
3.5 |
3.7 |
| China |
7.7 |
7.2 |
7.0 |
Key Financial Metrics for China Singyes Solar Technologies
| Metric |
2013 |
2014F |
2015F |
2016F |
| Net turnover (HK$m) |
3,097.5 |
6,820.8 |
8,853.6 |
10,961.4 |
| EBITDA (HK$m) |
559.7 |
1,182.3 |
1,475.2 |
1,836.6 |
| Net profit (HK$m) |
328.6 |
703.5 |
880.0 |
1,116.5 |
| Net profit (adj.) (HK$m) |
328.6 |
703.5 |
880.0 |
1,116.5 |
| EPS (HK$) |
48.7 |
98.8 |
114.8 |
145.7 |
| PE (x) |
22.5 |
11.1 |
9.5 |
7.5 |
| P/B (x) |
3.8 |
2.3 |
1.9 |
1.5 |
| ROE (%) |
19.5 |
24.1 |
24.3 |
27.0 |
Corporate Events
| Event |
Venue |
Begin Date |
End Date |
| Xingda Corporate Roadshow |
Taipei |
22 Sep |
22 Sep |
| China Property Sector Analyst Presentation |
London |
22 Sep |
26 Sep |
| Kong Sun Corporate Roadshow |
Hong Kong |
24 Sep |
24 Sep |
| CIFI Holdings Corporate Roadshow |
London |
25 Sep |
25 Sep |
| CIFI Holdings Corporate Roadshow |
Milan |
26 Sep |
26 Sep |
| Comba Corporate Roadshow |
Taipei |
29 Sep |
30 Sep |
| Asian Gems Conference |
Singapore |
8 Oct |
9 Oct |
Conclusion
The report highlights the ongoing shift in the Chinese automotive sector towards JVs and the potential for a DG installation boom in the solar energy segment. It also provides insights into market performance, key indices, and corporate events. Investment recommendations are made based on company-specific performance, policy changes, and financial metrics. The overall sentiment is cautiously optimistic, with a focus on long-term growth and improved policy environments.
