20170616-大华继显-Regional_Morning_Notes_26页_1mb

Regional Morning Notes Summary - 16 June 2017

Core Content Overview

This document provides a detailed market analysis of the financial and economic landscape in several Asian countries, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand. It includes insights on key sectors such as Automobile, Banking, and Healthcare, along with market performance data, top picks, and sector-specific catalysts and risks.

Key Sectors and Insights

China - Automobile Sector

• Takeaways from Visit to Auto Dealers in Shanghai:

  • New-car sales margins for BMW dealerships have improved year-to-date due to narrower discounts.
  • Strong orders for the new 5-series, expected to launch on 28 June 2017, with both Zhengtong and Yongda reporting satisfactory market response.
  • Auto financing is growing rapidly, contributing to premium car sales.
  • Inventory turnover for BMW dealers is low (one month), indicating strong demand and disciplined supply.

• Sector Rating:

  • OEM: UNDERWEIGHT (Maintained)
  • Dealers: MARKET WEIGHT (Maintained)
  • Electric Vehicles: UNDERWEIGHT (Maintained)

• Top Picks:

  • BUY: Brilliance, Meidong, Yongda, Zhengtong
  • Target Prices (HK$):
    • Brilliance: 15.50
    • Meidong: 2.70
    • Yongda: 11.80
    • Zhengtong: 6.20

• Key Assumptions:

  • Sales growth for Brilliance: 48%
  • Yongda: 57%
  • Zhengtong: 76%
  • Meidong: 41%

• Earnings Forecast:

  • No changes to the core net profit forecasts for the listed companies.

• New 5-Series vs. New E-Class:

  • The new 5-series is slightly smaller than the new E-class but offers comparable specifications and performance.
  • New 5-series models are expected to drive sales growth in the next 2-3 years.

China - Banking Sector

• Potential Damage from Anbang's Liquidity Crunch:

  • Anbang Insurance's chairman, Wu Xiaohui, was detained for investigation, leading to a sharp decline in insurance premiums.
  • Anbang's reliance on universal life products, which account for over 40% of its total premiums, makes it vulnerable to liquidity issues.
  • Anbang may have to divest its stakes in China Minsheng Bank (17.8%) and China Merchants Bank (10.7%).

• Market Weight:

  • Maintained OVERWEIGHT on the banking sector.

• Top Buys:

  • BUY: China Merchants Bank (CMB), Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB)
  • Target Prices (HK$):
    • CMB: 24.20
    • ICBC: 5.95
    • CCB: 7.28

• Catalysts:

  • Stabilisation in asset quality and NIM.
  • Regulators focusing on financial risk control, which benefits larger SOE banks.

• Risks:

  • Moderation in earnings growth due to increased regulatory control over credit expansion, WMPs, and interbank activities.

China - Healthcare Sector

• Fast Track System:

  • The new fast track system has reduced the average drug approval time from 24-36 months to 6-12 months.
  • This creates a good opportunity to invest in pharmaceutical manufacturers' pipeline.
  • The policy accelerates approvals for innovative or urgent drugs, especially in areas like AIDS, hepatitis, and oncology.

• Key Beneficiaries:

  • CSPC, Sino Biopharm, and HEC Pharm are expected to benefit from this policy.

• Sector Rating:

  • OVERWEIGHT (Maintained)

Key Indices Performance

Corporate Events

• Roadshow with PT Siloam Int'l Hospital: 5 Jun – 16 Jun
• Analyst Presentation on Spore Strategy: 15 Jun – 16 Jun
• Luncheon with Loob Holdings: 20 Jun
• Luncheon with Wisdom Education International Holdings Co. Ltd.: 27 Jun
• Group meeting with IGG Inc: 29 Jun
• Luncheon with United Overseas Bank: 3 Jul
• Site Visit to Sarawak Oil Palms Bhd: 3 Jul – 5 Jul
• Analyst Marketing on Thai Strategy & Thai Telco: 3 Jul – 7 Jul
• New Economy Conference 2017: 11 Jul
• Roadshow with Citic Envirotech Ltd: 18 Jul – 19 Jul
• Analyst Marketing on Singapore Strategy & Small & Mid Caps: 20 Jul – 21 Jul
• Visit to Sarawak Corridor of Renewable Energy: 1 Aug – 3 Aug

Top Picks

Key Assumptions

Risks and Catalysts

• Risks:

  • Potential liquidity issues for Anbang Insurance.
  • Moderation in banking sector earnings due to regulatory actions.
  • Value destruction in Genting Hong Kong due to cruise segment losses and RWM suspension.

• Catalysts:

  • Upbeat 1H17 results by August 2017.
  • Stabilisation in asset quality and NIM.
  • Strong product cycle for BMW in the next 2-3 years.
  • Improved bargaining power for auto dealers due to new regulations.

Conclusion

The report highlights positive developments in the Chinese automobile sector, particularly for BMW dealers, due to improved sales margins, strong demand for new models, and the growth of auto financing. The banking sector remains under scrutiny due to the potential liquidity issues of Anbang Insurance, but China Merchants Bank is upgraded to BUY due to its strong fundamentals. The healthcare sector benefits from the new fast track system, which accelerates drug approvals. Overall, the document suggests a cautious but optimistic outlook across the region, with specific recommendations for investment in key companies and sectors.