Regional Morning Notes Summary - 12 May 2016
Core Content Overview
This document provides a summary of stock market insights for various regions, including Singapore, China, Indonesia, and Malaysia, with a focus on key companies, sector updates, and investment recommendations. It also includes information on market indices, potential beneficiaries of the Shenzhen-Hong Kong Stock Connect (SZ-HK Connect), and key financial data and analyses for Charoen Phokphand (CPIN IJ).
Key Stories
Singapore
- Sector: Telecommunications
- Liberty Wireless/Circles.Life: A new MVNO (Mobile Virtual Network Operator) is introduced, leading to a downgrade to UNDERWEIGHT.
- City Developments (CIT SP): Diversification strategy is more prominent, with a BUY recommendation and a target price of S$10.86.
- SIA Engineering (SIE SP): Downgrade to SELL due to recent JVs not being accretive in the near term and rich valuations.
- Wilmar International (WIL SP): More cautious on soybean crushing due to high import volumes, but focus on growing the consumer pack business.
China
- Strategy: Potential Beneficiaries of SZ-HK Connect
- The SZ-HK Connect is expected to be launched soon, with southbound trade likely to dominate.
- The Hang Seng Small Cap index is highlighted for its potential to benefit from increased foreign investment.
- Key sectors include Healthcare, IT and E-commerce, and Consumer Staples.
- Companies like China Pioneer Pharma Holding (1345 HK), Guanzhou Baiyunshan Pharm - H (874 HK), and China Huiyuan Juice Group (1886 HK) are identified as potential beneficiaries.
Indonesia
- Charoen Phokphand (CPIN IJ):
- 1Q16 Results: Revenue grew by 23% yoy, driven by strong performance in the live bird and DOC segments.
- Downgrade: From BUY to HOLD, with a revised target price of Rp3,650.
- Entry Price: Rp3,200.
- Key Factors: Continued ASP recovery in DOC and live bird markets, stable exchange rate, and lower raw material prices.
Malaysia
- Astro Malaysia (ASTRO MK): Subdued prospects, with a HOLD recommendation and a target price of RM2.85.
- RHB Capital (RHBC MK): Makes impressive progress in expanding consumer banking market share, with a BUY recommendation and a target price of RM6.25.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17711.1 |
-1.2 |
0.3 |
0.9 |
1.6 |
| S&P 500 |
2064.5 |
-1.0 |
0.7 |
1.1 |
1.0 |
| FTSE 100 |
6162.5 |
0.1 |
0.8 |
-0.6 |
-1.3 |
| AS30 |
5434.8 |
0.6 |
1.9 |
7.5 |
1.7 |
| CSI 300 |
3082.8 |
0.4 |
-3.9 |
-4.2 |
-17.4 |
| FSSTI |
2732.9 |
-0.3 |
-1.4 |
-2.9 |
-5.2 |
| HSCEI |
8443.7 |
-0.5 |
-2.9 |
-4.5 |
-12.6 |
| HSI |
20055.3 |
-0.9 |
-2.3 |
-2.2 |
-8.5 |
| JCI |
4800.0 |
0.8 |
-0.2 |
-0.6 |
4.5 |
| KLCI |
1644.6 |
0.5 |
-0.8 |
4.1 |
2.8 |
| KOSPI |
1980.1 |
-0.1 |
0.1 |
-0.1 |
1.0 |
| Nikkei 225 |
16579.0 |
0.1 |
-0.5 |
4.1 |
-12.9 |
| SET |
1382.4 |
-0.6 |
-1.6 |
-0.2 |
7.3 |
| TWSE |
8135.6 |
-0.3 |
-0.6 |
-4.6 |
-2.4 |
| BDI |
579 |
-2.5 |
-11.2 |
4.3 |
21.1 |
| CPO (RM/ml) |
2681 |
0.9 |
5.5 |
0.4 |
21.9 |
| Brent Crude |
48 |
4.6 |
6.7 |
11.1 |
27.7 |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Air China |
753 HK |
5.82 |
10.20 |
75.3 |
| Ping An |
2318 HK |
34.30 |
45.00 |
31.2 |
| Bank BJB |
BJBR J |
930.00 |
1,170.00 |
25.8 |
| Gamuda |
GAM MK |
4.75 |
5.55 |
16.8 |
| WCT Holdings |
WCTHG MK |
1.71 |
2.05 |
19.9 |
| City Developments |
CIT SP |
8.04 |
10.86 |
35.1 |
| DBS |
DBS SP |
14.67 |
19.22 |
31.0 |
| Charoen Phokphand |
CPF TB |
26.00 |
30.00 |
15.4 |
| Siam Cement |
SCC TB |
486.00 |
630.00 |
29.6 |
Key Assumptions
| Region |
GDP (yoy) 2015 |
GDP (yoy) 2016F |
GDP (yoy) 2017F |
| US |
2.4 |
2.5 |
3.0 |
| Euro Zone |
1.6 |
1.7 |
1.7 |
| Japan |
0.5 |
1.0 |
1.0 |
| Singapore |
2.0 |
2.7 |
3.0 |
| Malaysia |
5.0 |
4.2 |
5.0 |
| Thailand |
2.8 |
3.2 |
3.6 |
| Indonesia |
4.8 |
5.0 |
5.5 |
| Hong Kong |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.5 |
6.2 |
| Indicator |
2015 Avg |
2016F Avg |
2017F Avg |
| Brent Crude (US$/bbl) |
53.60 |
42 |
54 |
| CPO (RM/mt) |
2,168 |
2,500 |
2,600 |
Corporate Events
| Event |
Venue |
Start Date |
End Date |
| FDG Electric Vehicles Roadshow |
Shanghai |
16 May |
16 May |
| FDG Electric Vehicles Roadshow |
Hong Kong |
23 May |
23 May |
| Construction and Transport Sector Analyst Presentation |
UK/Europe |
18 May |
25 May |
| Regional Gaming & Malaysia Outlook Analyst Presentation |
Hong Kong |
20 May |
20 May |
| Valuetronics Tea Session |
Singapore |
26 May |
26 May |
Sector Update - Renewable Energy
- April Operating Data: Huaneng Renewables outperformed peers due to better geographical exposure.
- 2H16 Outlook: Improved power sector utilisation is expected due to low base and policy support to reduce curtailment.
- Maintain OVERWEIGHT for the sector.
Utilisation Hours and Curtailment Ratio (2015)
| Region |
Utilisation (hours) |
Curtailment (%) |
| Gansu |
1184 |
39% |
| Jilin |
1430 |
32% |
| Heilongjiang |
1520 |
21% |
| Xinjiang |
1571 |
32% |
| Ningxia |
1614 |
13% |
| Liaoning |
1780 |
10% |
| Hebei |
1808 |
10% |
| Inner Mongolia |
1865 |
18% |
| Average |
1728 |
15% |
Curtailment Ratio and % of Capacity in Curtailed Regions (2015)
| Company |
Curtailment (%) |
% of Capacity in Curtailed Regions |
| 958 HK (Huaneng Renewables) |
9.9 |
38% |
| 916 HK (Longyuan Power) |
14.4 |
62% |
| 1798 HK (Datang Renewables) |
19.7 |
77% |
Company Results - Charoen Phokphand (CPIN IJ)
- 1Q16 Revenue: Rp33,901 billion, up 23% yoy and 17.4% qoq.
- Segmental Performance:
- Feed: Revenue of Rp22,491 billion, contributing 62.7% of consolidated revenue, with an operating margin of 12.5%.
- Live Bird: Revenue of Rp1.5t, contributing 13.4% of consolidated revenue, with an operating margin of 1.6%.
- DOC: Revenue of Rp1.5t, contributing 12.7% of consolidated revenue, with an operating margin of 2.7%.
- Commercial: Revenue of Rp1.3t, contributing 7.1% of consolidated revenue, with an operating profit of Rp118.8b.
- Forex Gain: Rp152b in 1Q16, compared to a forex loss of Rp266b in 1Q15.
Valuation and Recommendation
- CPIN IJ: Maintain HOLD with a target price of Rp3,650.
- Valuation: Trading at 19.3-16.4x 2016-17F PE, which is about +1SD above historical average.
- Entry Price: Rp3,200.
Analysts
-
Yan Shi:
-
Villya Christin:
Summary of Key Points
- The SZ-HK Connect is expected to be launched soon, with southbound trade likely to dominate.
- Huaneng Renewables outperformed peers in April, and is recommended as a BUY with a target price of HK$3.30.
- CPIN IJ experienced strong revenue growth in 1Q16 but was downgraded to HOLD due to operating margin concerns.
- Datang Renewables and Longyuan Power are expected to benefit from the implementation of minimum utilisation hours regulation.
- The wind power industry is expected to see improved utilisation from 2H16 due to policy support and low base effects.
- The stock market is influenced by various factors including exchange rates, raw material prices, and industry-specific performance.
