20160526-大华继显-Regional_Morning_Notes_29页_1mb

Regional Morning Notes Summary

Key Story Overview

This document provides a summary of market insights and stock analyses for various Asian markets as of Thursday, 26 May 2016. It includes updates on specific companies, sector performances, and investment recommendations.

Key Companies and Their Analysis

Singapore

• China Aviation Oil Singapore Corp (CAO SP/BUY/S$0.995/Target: S$1.56)
  • Core Message: The company is performing well due to recurring profit streams and the growth of the China aviation sector.
  • Recommendation: Maintain BUY.
  • Target Price: S$1.56.
  • Upside: +56.8%.
  • Performance: Expected to benefit from long-term contracts and increased demand in the aviation sector.

China

• Beijing Enterprises Water Group (371 HK/BUY/HK$4.59/Target: HK$7.60)

  • Core Message: A good start for its new environmental investment fund model, enabling it to capture more PPP opportunities in environmental projects.
  • Recommendation: Maintain BUY.
  • Target Price: HK$7.60.
  • Upside: +65.6%.
  • Key Points:
    • The company is forming an investment fund with the Tongzhou government and Fosun Group.
    • The model allows BEWG to capture high capex projects without deteriorating financial position.
    • It is responsible for the construction and operation of projects, generating construction and operational revenue.
    • The company is trading at 14x 2016F PE, close to 1.5SD below historical average.
    • Risks: Project returns may fall short of expectations, affecting the fixed coupon rates.

• China Resources Land (1109 HK/BUY/HK$18.06/Target: HK$27.77)

  • Core Message: Strong core-tier city exposure and steady recurring income offer higher earnings visibility.
  • Recommendation: Maintain BUY.
  • Target Price: HK$27.77.
  • Upside: +53.8%.
  • Key Points:
    • Contracted sales are on track, with sales expected to peak in June to October.
    • The company has a strong landbank in core tier-1 and tier-2 cities.
    • Commercial property and investment properties are showing strong growth.
    • The company is targeting to operate 38 shopping malls with a total GFA of 8.8m sqm by 2018.
    • It is trading at a 51.2% discount to RNAV compared to historical averages.
    • Key Catalysts: Higher margins from new projects, injection of Shenzhen projects, and stronger-than-expected sales.
    • Valuation: RNAV is HK$37.02/share, with a target discount of 25%.

Market Indices Performance

Corporate Events

Key Assumptions

Top Picks

BUY

• Air China (753 HK): Target price HK$10.20, Upside +91.4%
• Ping An (2318 HK): Target price HK$45.00, Upside +33.9%
• Bank BJB (BJBR JI): Target price HK$1,170.00, Upside +27.9%
• Gamuda (GAM MK): Target price HK$5.55, Upside +16.6%
• WCT Holdings (WCTHG MK): Target price HK$2.05, Upside +21.3%
• City (CIT SP): Target price HK$10.86, Upside +32.3%
• DBS (DBS SP): Target price HK$19.30, Upside +26.1%
• Bangkok Dusit (BDMS TB): Target price HK$27.70, Upside +14.5%
• Siam Cement (SCC TB): Target price HK$630.00, Upside +33.5%

SELL

• Spurakencana (SAKP MK): Target price HK$1.43, Downside -11.2%
• Sembcorp (SMM SP): Target price HK$0.88, Downside -42.9%

Summary of Key Points

Beijing Enterprises Water Group

• New Investment Fund Model: Aims to capture more PPP opportunities in environmental projects without affecting financial health.
• Performance: Strong progress in forming investment funds with local governments and Fosun Group.
• Growth Drivers: Environmental renovation projects, especially river clean-up, are expected to drive significant growth in construction revenue.
• Valuation: Trading at 14x 2016F PE, close to 1.5SD below historical average.
• Risks: Project returns may not meet expectations, affecting fixed coupon income.

China Resources Land

• Strong Landbank Exposure: Focus on core-tier cities, leading to strong contracted sales and recurring income.
• Commercial Property Growth: Investment property revenue increased 30.6% yoy to Rmb593m in April.
• Earnings Growth: Expected to maintain strong performance with a 22.7% 3-year core net profit CAGR.
• Valuation: Trading at 7.2x 2016F PE, with a 51.2% discount to RNAV compared to historical averages.
• Catalysts: Higher margins from new projects, Shenzhen Bay project injection, and stronger-than-expected contracted sales.

Conclusion

The document highlights the potential of companies in the environmental and real estate sectors in China and Singapore. It suggests that Beijing Enterprises Water Group is well-positioned to benefit from the government's push for environmental PPP projects, while China Resources Land is expected to maintain strong growth due to its core-tier city exposure and diversified income streams. Investment recommendations include BUY for both companies, with target prices reflecting expected upside. The analysis also includes key market indices, corporate events, and valuation metrics to support the recommendations.