20150612-大华继显-Regiona_Morning_Notes_21页_1mb

Regional Morning Notes Summary - 12 June 2015

Core Content Overview

This document provides a regional financial update covering China, Indonesia, Malaysia, Singapore, and Thailand, focusing on economic activity, sector performance, key indices, corporate events, and investment recommendations.

China

Economic Activity

• Economic activity in China stabilized in May 2015, supported by fiscal and monetary expansion.
• Industrial production, retail sales, and fixed asset investment (FAI) rebounded slightly, with FAI growth reaching 9.9% yoy.
• Infrastructure investment, particularly in highways, railways, and electricity, drove the growth.
• Industrial value-added rose to 6.1% yoy, surpassing market expectations.
• Retail sales increased by 10.1% yoy, with a shift toward technology-driven products and sales channels.
• Money supply (M2) reached Rmb130.74t, up 10.8% yoy, indicating improved liquidity.
• New loan issuance hit Rmb900.8b, higher than the consensus, showing a positive flow into the real economy.
• Total social financing (TSF) reached Rmb1.22t, with bank loans to non-financial enterprises as the main driver.

Key Indices

• DJIA: 18039.4 (0.2% 1D, 0.4% 1M, 1.2% YTD)
• S&P 500: 2108.9 (0.2% 1D, 0.2% 1M, 2.4% YTD)
• FTSE 100: 6846.7 (0.2% 1D, -2.6% 1M, 4.3% YTD)
• AS30: 5562.6 (1.4% 1D, -1.9% 1M, 3.2% YTD)
• CSI 300: 5306.6 (2.4% 1M, 11.8% 1Y, 50.2% YTD)
• FSSTI: 3347.7 (0.7% 1D, -2.7% 1M, -0.5% YTD)
• HSCEI: 13743.3 (0.9% 1D, -1.6% 1M, 14.7% YTD)
• HSI: 26907.9 (0.8% 1D, -1.8% 1M, 14.0% YTD)
• JCI: 4928.8 (-0.1% 1D, -3.3% 1W, -5.3% 1M, -5.7% 1Y)
• KLCI: 1734.8 (-0.1% 1D, -0.4% 1W, -3.5% 1M, -1.5% 1Y)
• KOSPI: 2056.6 (0.3% 1D, -0.8% 1W, -1.9% 1M, 7.4% YTD)
• Nikkei 225: 20383.0 (1.7% 1D, 0.5% 1W, 3.9% 1M, 16.8% YTD)
• SET: 1514.8 (0.7% 1D, 1.6% 1W, 2.0% 1M, 1.1% YTD)
• TWSE: 9302.5 (0.0% 1D, -0.5% 1W, -3.9% 1M, -0.1% YTD)
• BDI: 629 (1.8% 1D, 4.3% 1W, 8.8% 1M, -19.6% YTD)
• CPO: 2285 (-0.2% 1D, 0.7% 1W, 6.4% 1M, -0.5% YTD)
• Nymex Crude: 61 (-0.3% 1D, 2.5% 1W, -0.2% 1M, 13.8% YTD)

Key Assumptions

• GDP growth for 2015F is 7.0%.
• Brent crude prices are expected to fall to 65 US$/bbl in 2015F, up from 99.45 US$/bbl in 2014.
• CPO prices are forecasted to rise to 765 US$/mt in 2015F.
• BDI is expected to reach 1,300 in 2015F.

Corporate Events

• Pacific Radiance Luncheon: 19 Jun, Singapore
• M3 Marine Group Luncheon: 25 Jun, Singapore
• QL Resources Berhad Roadshow: 30 Jun, Singapore

Top Picks

Key Risks

• Economic slowdown in the Euro Zone and Japan.
• Potential tightening measures due to surging home prices.
• Interest rate hikes in the US affecting credit easing in China.
• Delays in SOE reform plans.
• Large corrections in A-share markets.

Indonesia

Fast Food Indonesia (FAST IJ)

• Promising outlook is dampened by a weak rupiah and high operating costs.
• Same-store sales (SSS) fell 1.2% yoy in 1Q15, due to declining purchasing power and cost pressures.
• Operating margin declined to 0.8% in 1Q15 from 1.6% in 1Q14.
• KFC Box format was launched in 4Q14, but only five new stores were approved in 2015.
• Targeting 49 new standard stores in 2015, bringing total KFC stores to 497 (excluding KFC Box).
• Plans to increase prices by 5% in 2H15 to maintain operating margin at 1.5%.

Key Financials

• Net turnover: Rp3,559 (2014)
• EBITDA: Rp337 (2014)
• Operating profit: Rp220 (2014)
• Net profit (rep./act.): Rp206 (2014)
• EPS (Rp): 103.4 (2014)
• PE (x): 15.0 (2014)
• P/B (x): 3.1 (2014)
• EV/EBITDA (x): 8.0 (2014)
• Dividend yield (%): 1.5 (2014)
• Net margin (%): 5.8 (2014)
• Net debt/(cash) to equity (%): -36.7 (2014)
• Interest cover (x): 10.7 (2014)
• ROE (%): 22.6 (2014)

Risks

• Higher chicken prices due to rupiah depreciation.
• Weak purchasing power affecting sales.
• Cost pressures from imported materials and labor.

Malaysia

• Oil & Gas (O&G) sector is still unexciting, and will remain an oil price play.
• Malaysian O&G stocks have a positive correlation (+0.60) with oil price movements.
• GDP growth for 2015F is 5.0%.

Singapore

• Silverlake Axis (SILV SP) is recommended as BUY with a target price of S$1.66.
• Current price: S$1.09.
• Potential upside: 83.3%.
• Growth remains intact despite market noise.

Thailand

• Diamond Building Products (DRT TB) is recommended as HOLD with a target price of Bt5.10.

• Current price: Bt4.96.

• Potential upside: 2.6%.

• Limited downside but no near-term catalyst.

• MCOT (MCOT TB) is recommended as SELL with a target price of Bt12.20.

• Current price: Bt12.60.

• Potential downside: 3.2%.

• Earnings pressured by stiff competition in digital TV.

Key Takeaways

• China: Economic activity stabilized due to fiscal and monetary expansion. Key sectors like property and real economy are showing signs of recovery, but high operating costs and overcapacity remain challenges.
• Indonesia: FAST IJ faces challenges due to a weak rupiah and rising costs, but the company is exploring cost-efficient store formats and plans to increase prices.
• Malaysia: O&G sector is tied to oil prices and remains unexciting.
• Singapore: SILV SP is a growth story with strong potential.
• Thailand: DRT TB is stable with limited downside, while MCOT is under pressure from competition in digital TV.

Analysts

• China: Edison Bian, David Yang
• Indonesia: Villya Purba, Stevanus Juanda