20141219-大华继显-Regional_Morning_Notes_20页_1mb

Regional Morning Notes Summary - 19 December 2014

Core Content

This document provides an overview of the financial markets in several Asian regions, including China, Indonesia, Malaysia, and Singapore, with a focus on the securities and telecommunications sectors. It also includes updates on key companies, market indices, and analyst recommendations.

Key Regions and Sectors

China

• Sector: Securities
• Key Points:
  • Brokers are trading at stretched valuations (2.1x 2015F book value and above 4SD vs historical average).
  • The recent share price rally is attributed to rising index and increased trading turnover.
  • CITICS and CGS have been downgraded to HOLD due to overvaluation.
  • BYD (1211 HK) has seen a 29% plunge in its stock price, with the target price reduced to HK$19.00 from HK$25.50.
  • The company faces significant financial and earnings risks, including reliance on government subsidies and high net debt.
  • The A-share market remains undervalued, which may prevent short-term corrections.
  • Profit forecasts for 2015 and 2016 have been revised downward due to lower assumptions on EV sales.
  • Margin trading has increased, with 16% of trades conducted through margin, up from 7% in 2013.

Indonesia

• Sector: Telecommunications
• Key Points:
  • The sector is focused on monetising data traffic generated by social media.
  • Telkom and Indosat are highlighted as strong performers with premium pricing strategies.
  • Telkom and Indosat have reiterated BUY recommendations.
  • XL Axiata has high data usage per user but charges lower prices, limiting its ability to monetise data traffic.
  • 3G BTS has increased significantly for Indosat, contributing to improved data services.

Malaysia

• Company: Berjaya Sports Toto (BST MK)
• Key Points:
  • 2QFY15 results showed softer ticket sales, aided by a favourable payout ratio.
  • The company is held at HOLD, with a target price of RM3.60.

Singapore

• Strategy: Focus on small/mid-cap companies with net cash positions.
• Key Picks: OSIM, CSE Global, Silverlake, Lantrovision, and Isoteam.
• Update: Singapore Press Holdings (SPH SP) is held at HOLD with a target price of S$4.30.
• Key Insight: Advertising revenue contraction is tapering off, indicating some improvement in the sector.

Key Indices

Key Picks

Key Assumptions

Key Metrics (BYD)

Analysts

• Edmond Law: +852 2826 4837, edmond.law@uobkayhian.com.hk
• Terrance Liu: +852 2826 1351, Terrance.liu@uobkayhian.com.hk
• Ken Lee: +852 2236 6760, ken.lee@uobkayhian.com.hk

Corporate Events

• Regional Oil & Gas Conference: Kuala Lumpur, 13 Jan

Conclusion

• The Regional Morning Notes is the final release for the year, with production resuming on 5 January 2015.
• The document highlights the overvaluation of brokers in China, suggesting a take profit strategy.
• BYD is downgraded to SELL due to its reliance on government subsidies and financial risks.
• The Indonesian telecommunications sector is expected to benefit from data traffic growth and monetisation potential.
• The Singapore market is advised to focus on net cash companies for potential outperformance when interest rates rise.
• Malaysia sees softer ticket sales but maintains HOLD for Berjaya Sports Toto.
• The A-share market remains undervalued, potentially attracting foreign investors through Stock Connect.
• Margin trading has surged, contributing to increased trading volumes and outstanding margin balance.
• The key risk for BYD is the potential withdrawal of government subsidies, which could significantly impact its profitability.