Regional Morning Notes Summary
Core Content Overview
This document provides a summary of regional market insights and stock performance for the week of 11 February 2016, focusing on China, Indonesia, Malaysia, and Singapore. It includes updates on key sectors, company results, valuation changes, and market indices, along with analyst recommendations and corporate events.
Key Sectors and Companies
China: Insurance Sector
- Potential Growth Driver: A proposed pilot scheme for personal tax deferral pension insurance is expected to be introduced in 2016, which could add Rmb100b in new premiums annually (7% of industry premiums).
- Market Impact: The under-penetrated commercial pension market in China, with the first pillar (national pension) dominating, is expected to see increased reliance on the second and third pillars (occupational and private pensions) due to the aging population and insufficient first pillar contributions.
- Recommendations:
- CPIC is upgraded from HOLD to BUY due to undemanding valuation and potential benefits from the pilot scheme.
- Ping An is maintained at BUY.
- Sector Rating: Maintained at MARKET WEIGHT due to cautious outlook on fixed income and equity investments.
Indonesia: Waskita Karya (WSKT)
- 2015 Performance: Net income increased by 104.7% yoy to Rp1.0t, exceeding consensus and target forecasts.
- Key Drivers: Strong revenue growth (37.6% yoy), higher gross margin, and lower non-operating expenses.
- 2016-2017 Forecasts: Net profit is expected to rise by 44.7% and 29.3% respectively.
- Analyst Recommendation: Maintain BUY with a revised target price of Rp2,500 (+34.8% upside).
Malaysia: Plantation Sector
- CPO Production and Inventory:
- CPO production in January 2016 dropped 19.3% mom to 1.13m tonnes.
- Inventory levels fell 12.4% mom to 2.31m tonnes, up 30.4% yoy.
- CPO Prices: Strengthened to RM2,450-2,500/tonne due to tight supply.
- Future Outlook: CPO production is expected to decline further in February 2016 due to fewer harvesting days and the Chinese New Year holiday.
- Sector Rating: Maintained at MARKET WEIGHT.
Singapore: ComfortDelGro Corporation (CD)
- 2015 Results Preview: Expected to deliver solid performance due to strong results from SBS.
- Analyst Recommendation: Maintain BUY with a target price of S$3.30.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
15914.7 |
(0.6) |
(2.6) |
(2.6) |
(8.7) |
| S&P 500 |
1851.9 |
(0.0) |
(3.2) |
(3.7) |
(9.4) |
| FTSE 100 |
5672.3 |
0.7 |
(2.8) |
(4.1) |
(9.1) |
| AS30 |
4826.5 |
(1.1) |
(2.1) |
(3.3) |
(9.7) |
| CSI 300 |
2963.8 |
(0.7) |
0.6 |
(11.8) |
(20.6) |
| FSSTI |
2582.1 |
(1.6) |
(0.8) |
(4.7) |
(10.4) |
| HSCEI |
8054.9 |
1.0 |
(2.3) |
(8.9) |
(16.6) |
| HSI |
19288.2 |
0.5 |
(2.0) |
(5.7) |
(12.0) |
| JCI |
4732.5 |
(0.8) |
3.2 |
6.0 |
3.0 |
| KLCI |
1644.4 |
(1.1) |
(1.4) |
0.4 |
(2.8) |
| KOSPI |
1917.8 |
0.1 |
0.3 |
0.0 |
(2.2) |
| Nikkei 225 |
15713.4 |
(2.3) |
(8.6) |
(11.2) |
(17.4) |
| SET |
1304.7 |
0.1 |
1.0 |
5.7 |
1.3 |
| TWSE |
8063.0 |
(0.8) |
2.0 |
(0.6) |
(3.3) |
| BDI |
290 |
(0.3) |
(4.3) |
(32.4) |
(39.3) |
| CPO (RM/mt) |
2424 |
1.3 |
4.7 |
9.2 |
10.2 |
| Brent Crude (US$/bbl) |
31 |
2.0 |
(11.7) |
(7.8) |
(17.0) |
Top Picks
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Potential Upside (%) |
| Beijing Capital |
694 HK |
6.49 |
11.40 |
75.7 |
| ICBC |
1398 HK |
3.99 |
7.60 |
90.5 |
| Bank BJB |
BJR IJ |
920.00 |
1,140.00 |
23.9 |
| DiGi.Com |
DIGI MK |
4.88 |
5.35 |
9.6 |
| Maybank |
MAY MK |
8.59 |
10.00 |
16.4 |
| City Developments |
CIT SP |
6.93 |
10.86 |
56.7 |
| DBS |
DBS SP |
13.38 |
17.80 |
33.0 |
| Kasikornbank |
KBANK TB |
166.50 |
192.00 |
15.3 |
| PTT |
PTT TB |
236.00 |
320.00 |
35.6 |
Sell Picks:
- UMWH Holdings: UMH MK, current price 6.59, target price 6.00, potential downside -9.0%
- Sembcorp: SMM SP, current price 1.47, target price 0.88, potential downside -39.9%
Key Assumptions
| Region |
2014 GDP (yoy) |
2015F GDP (yoy) |
2016F GDP (yoy) |
| US |
2.4 |
2.5 |
2.5 |
| Euro Zone |
0.9 |
1.5 |
1.7 |
| Japan |
-0.1 |
0.5 |
1.0 |
| Singapore |
2.9 |
2.0 |
2.7 |
| Malaysia |
6.0 |
4.9 |
4.8 |
| Thailand |
0.9 |
2.7 |
3.2 |
| Indonesia |
5.0 |
4.8 |
5.4 |
| Hong Kong |
2.5 |
1.8 |
1.5 |
| China |
7.3 |
6.5 |
6.7 |
| Metric |
2015 |
2016F |
2017F |
| Brent (US$/bbl) |
53.60 |
54 |
62 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Indo Telcos Analyst Presentation |
Singapore |
18 Feb |
18 Feb |
| Asean Property and REITs Analyst Presentation |
Kuala Lumpur |
18 Feb |
19 Feb |
| Greater China Strategy & Auto Parts Sector Analyst Presentation |
Taipei |
22 Feb |
23 Feb |
| Raffles Medical Group Luncheon |
Singapore |
23 Feb |
23 Feb |
| Beijing Urban Construction Design & Development Roadshow |
Shanghai |
23 Feb |
24 Feb |
Valuation and Rating Changes
| Company |
Recommendation |
Old Target Price (HK$) |
New Target Price (HK$) |
% Change |
| China Life |
HOLD |
27.60 |
20.80 |
-24.6 |
| Ping An |
BUY |
63.00 |
45.00 |
-28.6 |
| CPIC |
BUY (Upgraded) |
32.20 |
30.40 |
-5.6 |
Net Profit Estimates
| Company |
2015F (Rmbm) |
2016F (Rmbm) |
2017F (Rmbm) |
% Change |
| China Life |
45,090 |
34,937 |
23,255 |
-22.5 |
| Ping An |
47,537 |
46,281 |
39,181 |
-2.6 |
| CPIC |
18,195 |
17,416 |
11,168 |
-4.3 |
Waskita Karya (WSKT) Financial Highlights
- 2015 Net Income: Rp1.0t (up 104.7% yoy).
- 2015 Revenue: Rp14.2t (up 37.6% yoy).
- Gross Margin: Increased to 13.6% from 10.8%.
- Orderbook: Reached Rp52.1t at end-15 (up 57.2% yoy).
- Analyst Recommendation: Maintain BUY with a target price of Rp2,500.
Malaysia Palm Oil Market
- CPO Production (Jan 16): 1.13m tonnes (down 19.3% mom).
- Inventory Levels (Jan 16): 2.31m tonnes (down 12.4% mom).
- CPO Price: RM2,251/tonne (up 4.7% mom).
- Supply Concerns: Tight supply and lower production contributed to price recovery.
- Sector Rating: Maintained at MARKET WEIGHT.
Summary of Key Points
- China Insurance Sector: The proposed personal tax deferral pension insurance pilot scheme is a significant growth driver, expected to benefit Ping An and CPIC.
- Indonesia's Waskita Karya: Strong performance in 2015 with net income doubling and robust orderbook leading to strong future earnings growth.
- Malaysia's Plantation Sector: CPO prices have strengthened due to reduced supply and inventory levels, with production expected to decline further in February.
- Market Indices: Most indices showed mixed performance with some experiencing significant declines, while others showed modest gains.
- Analyst Recommendations: Several companies are recommended as BUY, while others are downgraded to HOLD or SELL based on market performance and future outlook.
