Regional Morning Notes Summary - 30 August 2017
Core Content
This document provides a summary of regional market updates, company results, and stock recommendations for the week of 30 August 2017. It includes analysis of the aviation sector, key indices, corporate events, and specific company performance across China, Hong Kong, Indonesia, Malaysia, and Thailand. The report also includes analyst recommendations, financial data, and key assumptions for various companies.
Main Points
Aviation Sector
- SIA (Singapore Airlines): Maintained a HOLD recommendation due to concerns over yield risks from Norwegian Air's entry into the Singapore market and the impact of recent terror attacks in Europe.
- CX (Cathay Pacific): Maintained a SELL recommendation as the company faces competitive pressure and yield challenges. The company's YTD tax throughput declined by 0.2% compared to HKIA's 1.8% growth.
- Norwegian Air: Entering the Singapore market in September, which may affect SIA's 3QFY18 yields. Norwegian Air has a pricing advantage, with RASK 12–43% lower than SIA's.
- Thai Airways International: SELL recommendation due to weak performance and lower-than-expected results.
China
- BAIC Motor (1958 HK): Upgraded from SELL to BUY, with a target price raised to HK$11.50. 1H17 net profit fell 59% yoy, but the worst is over, with recovery expected from 2H17 onwards.
- BYD Company (1211 HK): Maintained a HOLD recommendation. 2Q17 net profit declined 21% yoy but increased 84% qoq, in line with expectations.
- China Singyes Solar (750 HK): Downgraded to HOLD. Solar EPC outlook remains intact, but core earnings were affected by one-offs.
Hong Kong
- BOC Aviation (2588 HK): Upgraded to BUY due to higher dividends and prudent risk management.
Indonesia
- Matahari Putra Prima (MPPA IJ): Maintained a HOLD recommendation. Awaiting better net income performance.
Malaysia
- AirAsia (AIRAMK): Maintained a HOLD recommendation. It maintains pricing power and announced a backdoor listing of Indonesia AirAsia.
- My E.G. Service (MYEG MK): Results within expectations, driven by the immigration segment.
- RHBank (RHBBANK MK): SELL recommendation. Lower-than-expected net credit cost offset by lumpy O&G bond impairment and weaker non-interest income.
- Telekom Malaysia (TMK): SELL recommendation. Internet growth helped offset a slide in voice revenue.
Thailand
- Bangkok Chain Hospital (BCH TB): Downgraded to HOLD. High SC revenue growth and good recovery at WMC were priced in, but the stock price declined to pre-results levels.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
21865.4 |
0.3 |
-0.2 |
0.2 |
10.6 |
| S&P 500 |
2446.3 |
0.1 |
-0.3 |
-1.0 |
9.3 |
| FTSE 100 |
7337.4 |
-0.9 |
0.3 |
-0.4 |
2.7 |
| AS30 |
5733.6 |
-0.7 |
-1.2 |
-0.4 |
0.3 |
| CSI 300 |
3834.5 |
-0.2 |
2.2 |
3.0 |
15.8 |
| FSSTI |
3249.3 |
-0.6 |
-0.4 |
-2.4 |
12.8 |
| HSCEI |
11296.1 |
-0.4 |
5.1 |
5.0 |
20.2 |
| HSI |
27765.0 |
-0.4 |
2.2 |
2.9 |
26.2 |
| JCI |
5888.2 |
-0.3 |
0.1 |
1.0 |
11.2 |
| KLCI |
1761.1 |
-0.5 |
-0.7 |
-0.3 |
7.3 |
| KOSPI |
2364.7 |
-0.2 |
-0.0 |
-1.5 |
16.7 |
| Nikkei 225 |
19362.6 |
-0.4 |
-0.1 |
-3.0 |
1.3 |
| SET |
1614.1 |
1.8 |
2.6 |
2.1 |
4.6 |
| TWSE |
10496.6 |
-0.3 |
1.0 |
0.7 |
13.4 |
| BDI |
1209 |
0.8 |
-4.5 |
29.6 |
25.8 |
| CPO (RM/ml) |
2708 |
-0.1 |
1.9 |
2.5 |
-15.4 |
| Brent Crude (US$/bbl) |
52 |
0.2 |
0.3 |
-1.0 |
-8.5 |
Top Picks
| Ticker |
Recommendation |
Target Price (LC$) |
Potential Upside (%) |
| CSPC |
BUY |
15.24 |
24.1 |
| Hengan Intl |
BUY |
76.00 |
14.2 |
| Ace Hardware |
BUY |
1,300.00 |
26.2 |
| Waskita Karya |
BUY |
3,350.00 |
46.9 |
| Ekovest |
BUY |
1.55 |
38.4 |
| OCBC |
BUY |
13.38 |
21.7 |
| Siam Cement |
BUY |
600.00 |
18.6 |
| Ticker |
Recommendation |
Target Price (LC$) |
Potential Upside (%) |
| Great Wall Motor |
SELL |
5.50 |
-44.3 |
| UMW Holdings |
SELL |
4.80 |
-14.9 |
Key Assumptions
| Region |
GDP Growth (% yoy) |
2016 |
2017F |
2018F |
| US |
1.6 |
1.6 |
2.5 |
2.5 |
| Euro Zone |
1.7 |
1.7 |
1.8 |
1.6 |
| Japan |
1.0 |
1.0 |
0.9 |
1.2 |
| Singapore |
2.0 |
2.0 |
2.4 |
2.5 |
| Malaysia |
4.2 |
4.2 |
5.0 |
4.9 |
| Thailand |
3.2 |
3.2 |
3.3 |
3.3 |
| Indonesia |
5.0 |
5.0 |
5.2 |
5.5 |
| Hong Kong |
1.9 |
1.9 |
2.0 |
2.0 |
| China |
6.7 |
6.7 |
6.6 |
6.3 |
| Brent (US$/bbl) |
45 |
45 |
55 |
58 |
| CPO (RM/mt) |
2,653 |
2,653 |
2,600 |
2,400 |
Corporate Events
- Roadshow with HC International: Hong Kong, 31 Aug
- Roadshow with Sihuan Pharmaceutical: Taipei, 1 Sep
- Roadshow with Anta Sports Products: Shanghai, 5 Sep
- Roadshow with Meidong Auto Holdings: Shanghai, 5 Sep
- Luncheon with Ten Pao Group Holdings: Hong Kong, 5 Sep
- Analyst Marketing on 2H17: Singapore, 5–6 Sep
- Malaysia Outlook: Kuala Lumpur, 11–12 Sep
- Indonesia Construction Sector: Singapore, 13 Sep
- Asian Gems Conference 2017: Singapore, 10–11 Oct
- UOB Kay Hian Annual Regional Strategy Conference: Kuala Lumpur, 13 Nov
Company Results - BAIC Motor (1958 HK)
- 1H17 Net Profit: Plunged 59% yoy to Rmb986m, but the worst is over.
- 2Q17 Net Profit: Turned from a net profit of Rmb1.4b to a net loss of Rmb372m, below expectations.
- Proprietary Brand: 2Q17 net loss widened 124% yoy to Rmb1.9b due to a 41% yoy sales slump.
- Beijing Hyundai: Net loss in 2Q17, but sales rebounded from a trough of <30,000 units in Mar 17 to ~60,000 units in Jun 17.
- Beijing Benz: Net profit surged 99% yoy to Rmb2.0b in 2Q17, driven by 38% sales growth and margin expansion.
Analyst Recommendations
- Ken Lee and Sophie Leong are the analysts for BAIC Motor.
- Upgrade to BUY for BAIC Motor, with a target price of HK$11.50, based on improved 2018F PE multiple.
- Maintain HOLD for SIA and SELL for CX due to yield risks and competitive pressures.
Financial Highlights
Key Financials (Rmbm)
| Metric |
2016 |
2017F |
2018F |
2019F |
| Net Turnover |
116,199 |
154,300 |
173,797 |
186,568 |
| EBITDA |
15,690 |
27,621 |
30,098 |
33,364 |
| Net Profit (reported) |
6,367 |
5,418 |
7,369 |
9,269 |
Cash Flow (Rmbm)
| Metric |
2016 |
2017F |
2018F |
2019F |
| Operating |
15,212 |
19,454 |
28,517 |
22,994 |
| Pre-tax Profit |
15,269 |
23,671 |
26,559 |
29,958 |
| Net Interest Income/Expense |
-468 |
-443 |
-381 |
-445 |
| Net Profit (recurring) |
6,367 |
5,418 |
7,369 |
9,269 |
Balance Sheet (Rmbm)
| Metric |
2016 |
2017F |
2018F |
2019F |
| Fixed Assets |
40,071 |
43,340 |
47,341 |
50,099 |
| Other LT Assets |
- |
- |
- |
- |
| Net Debt/Cash to Equity |
18.1 |
-24.6 |
-55.7 |
-70.0 |
Summary
- BAIC Motor is upgraded to BUY due to improved performance and recovery expectations.
- SIA is recommended to HOLD due to yield risks and market uncertainties.
- CX is recommended to SELL due to yield pressures and weak performance.
- Norwegian Air entering the Singapore market is a key risk factor for SIA.
- Terror attacks in Europe are expected to affect demand and yields for both SIA and CX.
- Beijing Benz is performing well, driving growth and margin improvements.
- Proprietary brand is expected to recover in 2018–2019, driven by EV sales and reduced subsidy cuts.
- Corporate events are scheduled across various regions, including roadshows and analyst meetings.
- Key indices show mixed performance, with some experiencing declines and others showing modest gains.
