20170307-大华继显-Regional_Morning_Notes_24页_1mb

报告摘要

Regional Morning Notes Summary - 07 March 2017

Core Content Overview

This document provides an analysis of various sectors and market outlooks in the Asia-Pacific region, focusing on plantation, battery, city gas distribution, and property sectors, along with key indices and company picks.

Key Sectors and Outlooks

Plantation Sector

CPO Outlook: CPO prices are expected to remain firm in 1H17 due to tight supply and low inventory, but may turn bearish in 2H17 as production recovers and inventory builds up.
2017 CPO Price Forecast: RM2,600/tonne for 2017 and RM2,500/tonne for 2018.
Production Estimates:
- Indonesia: 33.4m-35.0m tonnes
- Malaysia: 18.8m-19.3m tonnes
Key Companies: Bumitama Agri (BAL), First Resources (FR), Astra Agro (AALI), Sampoerna Agri (SGRO), Kim Loong (KIML)
Recommendation: Maintain OVERWEIGHT for the plantation sector.

Battery Sector - China

Policy Headwinds: The government has introduced stringent reforms for the EV battery industry, increasing technical barriers and requiring improvements in energy efficiency and cost reduction.
Impact on Small Players: Smaller battery makers like Tianneng and Chaowei may be edged out due to their inability to meet new standards.
Recommendation: Downgrade the battery sector to UNDERWEIGHT, and maintain SELL on Tianneng and Chaowei.

City Gas Distribution - China

2016 Results: Forecasted core earnings growth of 8-19% for city gas companies, except Kunlun Energy, driven by increased connection growth and rebound in NG sales volume.
Future Outlook: Tightened coal-to-gas conversion and higher NG consumption targets will further boost NG sales.
Recommendation: Maintain OVERWEIGHT for the sector.

Property Sector - China

Home Sales: Growth has decelerated, and the tightening policy has expanded to low-tier cities.
Market Stance: The tightening policy suggests a more cautious market environment.

Key Indices

Index	Previous Close	1D %	1W %	1M %	YTD %
DJIA	20954.3	(0.2)	0.6	4.5	6.0
S&P 500	2375.3	(0.3)	0.2	3.6	6.1
FTSE 100	7350.1	(0.3)	1.3	2.5	2.9
AS30	5788.5	0.2	0.3	2.0	1.2
CSI 300	3446.5	0.5	0.0	2.4	4.1
FSSTI	3121.5	(0.0)	0.4	1.6	8.4
HSCEI	10171.1	0.3	(1.5)	3.3	8.3
HSI	23596.3	0.2	(1.4)	1.1	7.3
JCI	5409.8	0.3	0.5	0.5	2.1
KLCI	1727.4	1.1	2.0	2.3	5.2
KOSPI	2081.4	0.1	(0.6)	0.3	2.7
Nikkei 225	19379.1	(0.5)	1.4	2.5	1.4
SET	1553.6	(0.8)	(0.3)	(1.8)	0.7
BDI	939	3.9	6.9	27.8	(2.3)
CPO (RM/mt)	2975	(0.1)	0.5	(9.9)	(7.0)
Brent Crude (US$/bbl)	56	0.0	(0.0)	0.4	(1.6)

Top Picks

Buy Recommendations

Ping An (2318 HK): Target price S$47.00, potential gain 13.5%
Bank Negara (BBNI IJ): Target price Rp1,725, potential gain 12.7%
Indosat (ISAT IJ): Target price Rp8,015, potential gain 14.1%
Tiga Pilar (AISA IJ): Target price Rp2,550, potential gain 19.7%
Genting Bhd (GENT MK): Target price S$10.45, potential gain 11.1%
Inari Amertron (INRI MK): Target price S$2.15, potential gain 9.1%
OCBC (OCBC SP): Target price S$10.75, potential gain 13.4%
Venture Corp (VMS SP): Target price S$12.40, potential gain 15.0%
Bumitama Agri (BAL SP): Target price S$1.25, potential gain 55.2%
First Resources (FR SP): Target price S$2.15, potential gain 12.7%
Astra Agro (AALI IJ): Target price Rp19,045, potential gain 18.6%
Sampoerna Agro (SGRO IJ): Target price Rp2,190, potential gain 14.9%

Sell Recommendation

Hartalega (HART MK): Downgraded to SELL, target price Rp3,670, potential loss 24.3%

Key Assumptions

Country	GDP (% yoy) 2015	GDP (% yoy) 2016F	GDP (% yoy) 2017F
US	2.6	1.7	2.7
Euro Zone	2.0	1.6	1.1
Japan	1.2	0.8	0.9
Singapore	2.0	1.4	1.8
Malaysia	5.0	4.2	4.5
Thailand	2.8	3.2	3.3
Indonesia	4.8	5.0	5.2
China	6.9	6.5	6.2

Commodity	2016 Avg (US$/bbl)	2017 Avg (US$/bbl)	2018 Avg (US$/bbl)
Brent	45	56	61
CPO (RM/mt)	2,653	2,600	2,500

Corporate Events

Greater China Strategy Analyst Marketing: 1 Mar - 8 Mar (UK/Europe)
Roadshow with Guotai Junan: 7 Mar - 8 Mar (Singapore)
Luncheon with China Gas Holdings: 15 Mar (Hong Kong)
Roadshow with Globetronics Technology: 23 Mar (Singapore)
Roadshow with China Display Optoelectronics Technology: 23 Mar (Hong Kong)
Roadshow with China TCM: 24 Mar (Hong Kong)
Group Luncheon with Yitai Coal: 28 Mar (Hong Kong)
Roadshow with TCM: 5 Apr (Shanghai)
Roadshow with Singtel: 26 May (Canada)

Risks and Assumptions

Battery Sector: Potential over-capacity in 2017, with over 68.5GWh of lithium-ion EV battery capacity expected.
CPO Prices: Expected to rebound in 1H17 but weaken in 2H17 due to increased production.
Lead Prices: Spiked in 2H16, squeezing margins for LAB producers like Tianneng and Chaowei.
Policy Changes: New standards for low-speed EVs may exclude LAB usage, impacting Tianneng and Chaowei.

Analysts

Ken Lee: +852 2236 6760, ken.lee@uobkayhian.com.hk
Sophie Yu: +852 2236 6392, sophie.yu@uobkayhian.com.hk

Peer Comparison

Company	Ticker	Market Cap (US$m)	Recommendation	Price (RM/HK$)	Target Price (RM/HK$)	PE 2015	PE 2016F	PE 2017F	P/B 2016F	ROA 2016F	ROE 2016F	Net Gearing 2015
Kim Loong Resources	KIML MK	15,300	BUY	3.70	4.20	15.5	14.0	12.2	1.8	7.9	22.7	11.7
Genting Bhd	GENT MK	968	SELL	9.41	10.45	13.5	15.7	13.6	1.8	1.2	1.2	87.0
Astra Agro	AALI IJ	2,206	BUY	15,300	19,045	13.5	15.7	13.6	1.4	1.7	0.5	19.3
Sampoerna Agro	SGRO IJ	290	BUY	2,050	2,190	15.6	14.5	12.2	0.8	1.2	1.2	0.8

Conclusion

The document outlines the current market sentiment and investment recommendations for the plantation, battery, and city gas distribution sectors across various countries. It emphasizes the potential for CPO prices to remain firm in the first half of 2017 before weakening, while the battery sector in China faces headwinds due to policy reforms and rising lead costs. The top picks include a mix of buy and sell recommendations, with a focus on companies with strong fundamentals and growth potential.

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