Regional Morning Notes Summary
Core Content
This document provides a comprehensive overview of market updates and investment recommendations for various regions, focusing primarily on China, Indonesia, Malaysia, Singapore, and Thailand. It includes insights on property and automotive sectors, key financial metrics, corporate events, and valuation analysis.
Main Points
China - Property Sector
- Home Sales:
- Home sales rebounded in the last week, but transaction volumes remain weak year-on-year (yoy).
- Nov 16 sales dropped 21% month-on-month (mom) and 28.6% yoy, indicating a cooling market.
- Regional policy tightening continues to curb price growth.
- Market Trends:
- HPR (Home Purchase Restriction) extended to tier-3 cities, such as Jiaxing, to control ASP (Average Selling Price).
- Developers' M&As are ongoing, with larger developers acquiring smaller projects.
- Company Updates:
- Longfor (960 HK): Upgraded to BUY due to visible earnings growth and healthy financials.
- CRL (1109 HK): Upgraded to BUY for similar reasons.
- Sunac (1918 HK) and Poly Property (119 HK): Downgraded to SELL due to weak margins and high gearing.
- China Vanke (2202 HK): Downgraded due to unjustified valuation and lack of share price cushion.
- Valuation:
- The sector trades at 7.3x 2017F PE, a 42.6% discount to RNAV (RNAV/Share).
- Stronger earnings momentum and new SUV models support the upgrade for GAC.
Indonesia
- Adhi Karya (ADHI IJ):
- Trading at 8% below -2SD historical PE mean, indicating value emergence.
- Upgraded to BUY.
Malaysia - Plantation Sector
- 3Q16 Results:
- Results within expectations.
- GENP outperformed peers.
- Pure upstream players like GENP and SOP benefited from the strong rally in CPO (Crude Palm Oil) prices.
Singapore - Shipyard Sector
- Market Outlook:
- Shipyard sector is riding the recovery wave for now, as land remains out of reach.
- Upgraded to MARKET WEIGHT.
Thailand
- Mega Lifesciences (MEGA TB):
- Earnings growth is expected to resume and continue for the next few years.
- Upgraded to BUY.
Key Indices Performance (as of 07 Dec 2016)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
19251.8 |
0.2 |
0.7 |
7.6 |
10.5 |
| S&P 500 |
2212.2 |
0.3 |
0.3 |
6.1 |
8.2 |
| FTSE 100 |
6779.8 |
0.5 |
0.1 |
1.3 |
8.6 |
| AS30 |
5486.6 |
0.5 |
-0.6 |
2.9 |
2.7 |
| CSI 300 |
3459.2 |
-0.3 |
-2.9 |
3.1 |
-7.3 |
| FSSTI |
2949.1 |
0.2 |
2.4 |
5.3 |
2.3 |
| HSCEI |
9768.9 |
0.6 |
-0.8 |
1.7 |
1.1 |
| HSI |
22675.2 |
0.8 |
-0.3 |
-0.6 |
3.5 |
| JCI |
5273.0 |
0.1 |
2.7 |
-2.1 |
14.8 |
| KLCI |
1629.7 |
0.3 |
0.2 |
-1.3 |
-3.7 |
| KOSPI |
1989.9 |
1.3 |
0.6 |
-0.4 |
1.5 |
| Nikkei 225 |
18360.5 |
0.5 |
0.3 |
6.9 |
-3.5 |
| SET |
1516.5 |
1.0 |
1.0 |
0.9 |
17.7 |
| TWSE |
9250.8 |
1.0 |
0.6 |
0.7 |
10.9 |
| BDI |
1196 |
-0.2 |
-0.5 |
39.9 |
150.2 |
| CPO (RM/ml) |
3197 |
1.4 |
3.4 |
14.5 |
45.3 |
| Brent Crude |
54 |
-1.8 |
16.3 |
18.3 |
44.7 |
Top Picks (BUY)
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Upside (%) |
| Longfor |
960 HK |
9.86 |
14.69 |
49.0 |
| CRL |
1109 HK |
18.70 |
29.03 |
55.2 |
| China Resources Land |
1109 HK |
18.70 |
29.03 |
55.2 |
| KWG |
1813 HK |
19.30 |
20.20 |
4.6 |
| Shimao Property |
813 HK |
10.42 |
10.03 |
3.7 |
| Sino-Ocean Land |
3377 HK |
3.41 |
3.70 |
8.5 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| UOB Roadshow |
Taipei |
7 Dec |
8 Dec |
| Hua Hong Semiconductor Plant Visit |
Hong Kong |
8 Dec |
8 Dec |
| IMAX China Luncheon |
Shanghai |
9 Dec |
9 Dec |
| SGX-UOB Kay Hian Corporate Day |
Taipei |
21 Feb |
21 Feb |
| UOB Kay Hian ASEAN Conference |
Taipei |
22 Feb |
22 Feb |
Key Financials for Guangzhou Automobile Group (2238 HK)
| Metric |
2014 |
2015 |
2016F |
2017F |
2018F |
| Net turnover (Rmbm) |
22,383 |
29,418 |
47,107 |
55,303 |
61,303 |
| EBITDA (Rmbm) |
559 |
1,995 |
4,905 |
5,962 |
6,230 |
| Operating profit (Rmbm) |
-657 |
334 |
3,236 |
4,001 |
3,953 |
| Net profit (Rmbm) |
3,185 |
4,211 |
7,012 |
8,950 |
9,953 |
| EPS (fen) |
43.1 |
64.3 |
105.3 |
120.6 |
134.2 |
| PE (x) |
18.6 |
12.6 |
8.3 |
7.5 |
6.8 |
| P/B (x) |
1.6 |
1.5 |
1.4 |
1.4 |
1.2 |
| Dividend yield (%) |
2.0 |
2.4 |
3.8 |
4.1 |
4.6 |
| Net debt/(cash) to equity (%) |
-11.5 |
-11.8 |
-25.5 |
-29.5 |
-33.6 |
| ROE (%) |
9.3 |
11.4 |
17.0 |
18.9 |
18.3 |
| FY16 NAV/Share (HK$) |
7.62 |
|
|
|
|
| FY16 Net Debt/Share (HK$) |
1.29 |
|
|
|
|
Key Assumptions
| Company |
2015 |
2016F |
2017F |
| GQ Honda |
580 |
650 |
700 |
| GAC Toyota |
403 |
410 |
420 |
| Trumpchi |
197 |
380 |
450 |
| Honda (China) |
12 |
9 |
9 |
| GAC Gonow |
10 |
2 |
- |
| GAC Fiat-Chrysler |
37 |
140 |
200 |
| GAC Mitsubishi |
53 |
50 |
100 |
| Commercial vehicles |
3 |
3 |
3 |
Risks
- Downside risk from a more severe-than-expected drop in sales and ASP of GAC's sedan models.
- Potential headwinds for developers due to continued policy tightening and market cooling.
Summary of Investment Recommendations
- BUY: Longfor (960 HK), CRL (1109 HK), Adhi Karya (ADHI IJ), KWG (1813 HK), Mega Lifesciences (MEGA TB), and Guangzhou Automobile Group (2238 HK).
- SELL: Sunac (1918 HK), Poly Property (119 HK), and China Vanke (2202 HK).
- HOLD: Agile (3383 HK), China Ovs Grand Oceans (81 HK), Sino-Ocean Land (3377 HK), Shimao Property (813 HK), and Yuexiu Property (123 HK).
Summary of Key Financial Highlights
- GAC's Sales Growth: Trumpchi GS4 sales momentum remains strong, with sales increasing to 34,000 units/month in Sep-Nov 16.
- New SUV Models: GAC is launching multiple new SUV models in 2017 and 2018, which are expected to boost sales.
- Capacity Expansion: GAC is expanding production capacity for SUV models, including adding a new shift to reach 450,000 units in 2017.
- Valuation Upgrade: Based on stronger earnings momentum and new SUV pipeline, GAC's valuation is upgraded from HOLD to BUY.
Summary of Sector and Company Insights
- Property Sector: Continued policy tightening and M&A activity, with some companies showing strong earnings visibility.
- Automotive Sector: GAC is leading the way with its SUV product pipeline, and the sector is expected to recover in 2017.
- Investment Outlook: The document emphasizes the importance of sector-specific analysis and highlights key companies for investment and divestment.
