20141118-大华继显-Regional_Morning_Notes_28页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive market analysis for the telecommunications and e-commerce sectors in several Asian countries, including China, Indonesia, Malaysia, and Thailand. It outlines key company results, investment recommendations, and market outlooks, with a focus on the performance of major players and the impact of regulatory and strategic changes.

Key Sectors and Countries Covered

• Indonesia: Poultry sector is covered with an OVERWEIGHT rating. Top picks include CPIN (Target: Rp4,700, 23.5% upside) and MAIN (Target: Rp2,900, 29.5% upside).
• China: Telecommunications sector outlook highlights the impact of 4G development on near-term earnings. Key companies include JD.com (BUY, Target: US$35.00) and China Mobile.
• Malaysia: Telecommunications results show Deleum (BUY, Target: RM2.40) performed well, with growth in oilfield services and power & machinery divisions.
• Singapore: Property sector is highlighted, with Marina One Residences supporting home sales.
• Thailand: Land And Houses (BUY, Target: Bt12.10) is a top pick due to potential upside from asset divestment. IRPC is under review due to entering a challenging period.

Main Points and Key Information

China: Telecommunications Sector

• 4G Development: Expected to intensify competition and exert pressure on earnings in 2015.
• China Mobile (CM):
  • Aggressively acquired over 40 million 4G users in 9M14.
  • Maintained as the top pick due to first-mover advantage, strong cash cycle, and premium client base.
• China Telecom (CT) and China Unicom (CU):
  • Both lagged in 4G service rollout and user acquisition.
  • CT and CU's 3G/4G user growth declined significantly in 3Q14.
  • Adjusted sales and marketing strategies to mitigate VAT reform and handset subsidy cuts.
• Tencent-JD Alliance:
  • Showing positive effects with 30% of orders from mobile devices in 3Q14.
  • Mobile orders increased 20x on November 11 compared to October average.
  • GMV growth remains strong, with a 111% yoy increase in 3Q14.
• JD.com:
  • 3Q14 Results: Strong top-line growth (61% yoy, 1% qoq), but non-GAAP net income beat estimates.
  • 4Q14 Guidance: Expected strong top-line growth (59%–64% yoy), but weaker margins due to promotions.
  • Target Price: US$35.00 (28.1% upside).
  • Valuation: Based on DCF method with an assumed 8.9% WACC and 2.0% terminal growth.
  • Market Share Strategy: Focus on logistics network expansion and franchise model for delivery stations.

Key Financial Metrics (JD.com)

• Net Revenues: Rmb29b in 3Q14, up 61% yoy.
• GMV: Rmb67.3b, up 111% yoy.
• Non-GAAP Net Income: Rmb371m, beat estimates.
• Operating Costs: Reduced in 3Q14, with a shift to free usage credit over handset subsidies.
• Non-GAAP EPADS: Rmb0.27, up 62% yoy.
• Net Profit (adj.): Rmb1,702.4m in 2015F.
• Cash Flow: Strong operating cash flow in 2015F and 2016F.
• Balance Sheet: Strong cash reserves, with Rmb49,902.6m in 2015F.

Market Indices Overview

• DJIA: 17,647.8 (up 0.1% in 1D).
• S&P 500: 2,041.3 (up 0.1% in 1D, 10.4% YTD).
• FTSE 100: 6,672.0 (down 0.3% in 1D, -1.1% YTD).
• AS30: 5,396.6 (down 0.7% in 1D, 2.6% 1M).
• CSI 300: 2,567.1 (down 0.5% in 1D, 5.1% 1M, 10.2% YTD).
• JCI: 5,053.9 (up 0.1% in 1D, 18.2% YTD).
• KLCI: 1,806.5 (down 0.4% in 1D, -3.2% YTD).
• KOSPI: 1,943.6 (down 0.1% in 1D, -3.4% YTD).
• Nikkei 225: 16,973.8 (down 3.0% in 1D, 4.2% YTD).
• SET: 1,569.1 (down 0.4% in 1D, 2.6% 1M, 20.8% YTD).
• TWSE: 8,884.4 (down 1.1% in 1D, -1.8% 1W, 3.2% YTD).
• BDI: 1,264 (up 0.6% in 1D, 33.9% 1M, 44.5% YTD).
• CPO: 2,198 (down 0.6% in 1D, -1.4% 1W, 0.5% 1M, -14.6% YTD).
• Nymex Crude: 75 (down 0.4% in 1D, -2.5% 1W, -8.8% 1M, -23.3% YTD).

Top Picks and Investment Highlights

Key Assumptions and Risks

• GDP Growth:
  • China: 7.7% in 2014, expected to decline to 7.0% in 2015.
  • Indonesia: 5.8% in 2014, expected to remain stable in 2015.
• Commodity Prices:
  • Brent Crude: Expected to decline from 100 to 85 in 2015.
  • CPO: Expected to rise from 725 to 765 in 2015.
  • BDI: Expected to rise from 1,200 to 1,300 in 2015.
• Risk Factors:
  • 4G Launch Impact: Expected to pressure earnings in 2015.
  • VAT Reform: May lead to lower handset sales and service revenue.
  • Market Competition: Could affect user growth and margins.
  • Earnings Revisions: Full-year forecast for JD.com remains unchanged.

Conclusion

The report highlights the importance of 4G development and strategic alliances in shaping the future of the telecommunications sector in China and other Asian markets. JD.com is a strong performer with a BUY rating and a target price of US$35.00, driven by high GMV growth and Tencent partnership. In Indonesia, the poultry sector is highlighted with OVERWEIGHT ratings for CPIN and MAIN. The telecom sector in China is advised to be UNDERWEIGHT due to medium-term earnings pressure. Overall, the telecom and e-commerce sectors are seen as growth drivers, with logistics and market expansion playing a key role in JD.com's strategy.