20181011-大华继显-Regional_Morning_Notes_27页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a summary of regional market insights and corporate highlights for various Asian markets, including China, Hong Kong, Indonesia, Malaysia, and Singapore, as well as key indices and recommendations.

Main Points

China

• Wisdom Education International Holdings (6068 HK):
  • The company is expected to maintain growth due to existing capacity expansion and new school openings.
  • The new Foshan School, despite high development costs, is anticipated to contribute significantly to earnings due to higher tuition fees and faster utilization.
  • The share price is currently undervalued, with a target price of HK$4.50.
  • Earnings visibility is strong for the next three years.
  • The company has sufficient capital to sustain growth and is expected to maintain a net debt-to-equity ratio near its comfortable level.
  • The new school in Foshan is expected to start operations in September 2019, and the company has raised its 3-year EPS CAGR to 25.0%.

Hong Kong

• Property Sector:
  • CE Carrie Lam emphasized increasing public housing supply to 70% of new land developments.
  • Land reclamation is the government's top focus for long-term land supply, with 1,700ha planned.
  • No new cooling measures were discussed, but the government's focus on public housing may reduce developers' share of land supply.
  • The "Land Sharing Pilot Scheme" is introduced to facilitate land conversions and lease modifications.
  • Developers with large farmland holdings are expected to benefit from land conversions, with potential NAV accretions.
  • Top picks include NWD and SHKP, both rated as BUY with target prices of HK$13.30 and HK$146.00 respectively.

Indonesia

• Sarana Menara Nusantara (TOWR IJ):
  • The stock is considered one of the most undervalued in the market.
  • The company is expected to benefit from the development of new infrastructure and has a target price of Rp875.

Malaysia

• Economic and Institutional Reforms:
  • Reforms are ongoing, but there are concerns about potential "sacrifice" budgets and additional taxes.
  • ATA IMS (AIB MK): Expected to see stronger performance in the second half of FY19 due to the commencement of new product assembly in 3QFY19.
  • Serba Dinamik Holdings (SDH MK): Has near-term upside as it may surpass its orderbook target and secure more EPCC projects to meet power capacity targets.

Singapore

• ComfortDelGro Corporation (CD SP):
  • The company is expected to have a stable performance in the taxi sector.
  • The stock is rated as BUY with a target price of S$2.59.

Indices Overview

• Key indices include DJIA, S&P 500, FTSE 100, AS30, CSI 300, FSSTI, HSCEI, HSI, JCI, KLCI, Nikkei 225, SET, and TWSE.
• The performance of these indices is summarized with percentage changes over different time frames (1D, 1W, 1M, YTD).

Key Information

Top Picks

• BUY Recommendations:
  • Baoshan Iron & Steel (600019 CH): Target price of HK$9.53, with potential upside of 27.4%.
  • Gudang Garam (GGRM LJ): Target price of Rp85,000, with potential upside of 12.8%.
  • PP Persero (PTPP LJ): Target price of RM3,700, with potential upside of 122.9%.
  • CIMB (CIMB MK): Target price of RM7.00, with potential upside of 19.9%.
  • OCBC (OCBC SP): Target price of RM13.68, with potential upside of 24.9%.
  • SingTel (ST SP): Target price of RM3.94, with potential upside of 25.5%.
  • Siam Cement (SCC TB): Target price of RM530, with potential upside of 24.4%.

Key Assumptions

• GDP Growth (yoy):
  • US: 2.2 (2017), 2.7 (2018F), 2.3 (2019F)
  • Euro Zone: 2.4 (2017), 2.1 (2018F), 1.8 (2019F)
  • Japan: 1.7 (2017), 1.2 (2018F), 1.1 (2019F)
  • Singapore: 3.6 (2017), 3.2 (2018F), 2.8 (2019F)
  • Malaysia: 5.9 (2017), 4.8 (2018F), 4.8 (2019F)
  • Thailand: 3.9 (2017), 4.5 (2018F), 4.2 (2019F)
  • Indonesia: 5.1 (2017), 5.3 (2018F), 5.4 (2019F)
  • Hong Kong: 3.8 (2017), 3.8 (2018F), 2.8 (2019F)
  • China: 6.9 (2017), 6.4 (2018F), 6.2 (2019F)
• CPO (RM/mt): 2,783 (2017), 2,400 (2018F), 2,500 (2019F)
• Brent Crude (US$/bbl): 55.00 (2017), 71.60 (2018F), 71.00 (2019F)

Corporate Events

• Analyst Marketing on Greater China Commodities: 11–12 October 2018, Kuala Lumpur
• Group Luncheon with China Shineway Pharmaceutical: 29 October 2018, Hong Kong
• Roadshow with Digi.com (DIGI MK): 30 October–2 November 2018, Canada
• Group Luncheon with Sembcorp Industries (SCI SP): 5 November 2018, Singapore
• UOB Kay Hian Annual Regional 1H2019 Strategy Conference: 13 November 2018, Kuala Lumpur

Risk and Uncertainty

• Regulatory Risk: The Chinese government is still reviewing laws to promote private schools, which could impact earnings.
• Market Sentiment: In Hong Kong, the lack of new cooling measures and the focus on public housing may affect property developers' share prices in the short term.
• Earnings Growth: Some companies may experience slower growth due to regulatory constraints and limited M&A activities.

Financial Highlights

• Key Financial Metrics for Wisdom Education International Holdings:

  • Net turnover: Rmb701 (2016), Rmb979 (2017), Rmb1,231 (2018F), Rmb1,656 (2019F), Rmb2,028 (2020F)
  • EBITDA: Rmb275 (2016), Rmb375 (2017), Rmb476 (2018F), Rmb653 (2019F), Rmb817 (2020F)
  • Net profit: Rmb154 (2016), Rmb200 (2017), Rmb305 (2018F), Rmb427 (2019F), Rmb528 (2020F)
  • EPS: 12.4 (2016), 13.6 (2017), 15.0 (2018F), 20.9 (2019F), 25.9 (2020F)
  • Net debt-to-equity: 3.8 (2018F), 30.2 (2019F), 25.8 (2020F)

• Key Metrics for Hong Kong Property Developers:

  • NWD: Potential NAV accretion of 15.3%
  • SHKP: Potential NAV accretion of 10.3%
  • CKA: Potential NAV accretion of 4.5%
  • HLD: Potential NAV accretion of 27.0%

Conclusion

The summary highlights the investment opportunities and challenges in various Asian markets, emphasizing the importance of regulatory environment, economic growth, and corporate performance. It also outlines key recommendations, financial metrics, and potential risks for the listed companies.