Regional Morning Notes Summary
Core Content Overview
This document provides an analysis of financial markets and companies in China, Indonesia, Malaysia, Singapore, and Thailand, focusing on investment recommendations, market performance, key financial metrics, and growth opportunities.
China
China Vanke (2202 HK)
- Initiate Coverage: BUY with a target price of HK$18.94.
- Key Drivers: Stronger mortgage easing in 4Q14, policy relaxation, upward revisions in project completion, and potential macro-level stimulus.
- Company Profile: Leading property developer in China by contract sales in 2013, with over 25 years of experience. Operates in 65 cities with 406 projects and a total planned landbank of $85.4m sqm.
- Valuation: Based on a 20% discount to end-14 RNAV of HK$23.67/share, implying a 31.7% upside.
- RNAV Calculation: Derived from DCF model, including book asset values and revaluation surpluses.
- Share Price Catalysts: Expected project completions, policy changes, and macroeconomic stimulus.
- Risks: Margins may be pressured due to flexible pricing strategy and weaker demand in 2H14.
- Financial Highlights:
- Net Profit (adj.): Expected to rise from Rmb14,625 in 2014F to Rmb25,631 in 2016F.
- ROE: Expected to increase from 21.5% in 2013 to 23.3% in 2016F.
- Net Debt to Equity: Increased from 34.2% in 2014F to 55.6% in 2016F.
- EV/EBITDA: Drops from 6.4x in 2014F to 3.7x in 2016F.
Indonesia
Sarana Menara Nusantara (TOWR IJ)
- Initiate Coverage: BUY with a target price of Rp360.00.
- Key Drivers: Strong cash flow generation, long-term contracts with telco operators, and growth opportunities due to increasing data traffic and 3G rollout.
- Company Profile: Largest independent tower company in Indonesia, with 10,799 towers and 19,991 tenants as of Jun 14. Revenue is heavily dependent on Hutch, XL Axiata, Telkom, and Smartfren.
- Valuation: Currently trades at 15.0x 2014F EV/EBITDA, based on Bloomberg consensus.
- Growth Potential: Management targets 2014 revenue of Rp3.75t-3.87t (+17-21% yoy) and EBITDA of Rp3.1t-3.2t (+17-21% yoy).
- Business Model: Long-term, non-cancellable contracts with telcos, high EBITDA margins (>80%), and low maintenance costs.
- Market Position: Lower gearing ratio (2.2x) compared to Tower Bersama (5.4x), allowing for increased debt and M&A opportunities.
- Peer Comparison: TOWR IJ is compared with TBIG IJ and other international tower companies, showing better EV/EBITDA multiples.
- Tenancy Ratios: Higher tenancy ratios improve profitability and returns. For example, at 2.00x, EBITDA reaches Rp288/Rpb and IRR reaches 26%.
Malaysia
Gaming Sector
- Casino: 2Q14 performance below expectations, except for RGB International.
- Sector Outlook: Maintain Market Weight due to lack of immediate catalysts.
Singapore
Property & REITs Sector
- Keppel Land, K-REIT: Rationalising MBFC T3.
Thailand
Hana Microelectronics (HANA TB)
- Update: It's hunting season.
- Initiate Coverage: HOLD with a target price of Bt46.50.
- Performance: Current price is Bt42.50, with a potential upside of 2.9%.
- Sector Outlook: No immediate catalysts, so Maintain Market Weight.
Key Indices (as of 19 September 2014)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17266.0 |
0.6 |
1.3 |
2.5 |
4.2 |
| S&P 500 |
2011.4 |
0.5 |
0.7 |
2.0 |
8.8 |
| FTSE 100 |
6819.3 |
0.6 |
0.3 |
1.2 |
1.0 |
| AS30 |
5419.0 |
0.1 |
-2.3 |
-3.5 |
1.2 |
| CSI 300 |
2408.7 |
0.3 |
-0.6 |
1.4 |
3.4 |
| FSSTI |
3297.3 |
0.0 |
-1.5 |
-0.6 |
4.1 |
| HSCEI |
10799.4 |
-0.9 |
-2.1 |
-2.7 |
-0.2 |
| HSI |
24168.7 |
-0.9 |
-2.0 |
-3.8 |
3.7 |
| JCI |
5208.1 |
0.4 |
1.5 |
0.8 |
21.9 |
| KLCI |
1845.3 |
0.1 |
-1.4 |
-1.4 |
-1.2 |
| KOSPI |
2047.7 |
-0.7 |
0.7 |
-1.1 |
1.8 |
| Nikkei 225 |
16067.6 |
1.1 |
1.8 |
4.0 |
-1.4 |
| SET |
1584.2 |
0.9 |
0.2 |
2.7 |
22.0 |
| TWSE |
9237.0 |
0.5 |
-0.9 |
-0.1 |
7.3 |
| BDI |
1089 |
-3.1 |
-8.2 |
4.5 |
-52.2 |
| CPO (RM/mt) |
2127 |
0.5 |
4.5 |
-0.2 |
-17.3 |
| Nymex Crude (US$/bbl) |
93 |
-0.1 |
0.8 |
-1.6 |
-5.5 |
Key Assumptions
| Country |
GDP (% yoy) 2013 |
GDP (% yoy) 2014F |
GDP (% yoy) 2015F |
| US |
1.9 |
3.0 |
3.0 |
| Euro Zone |
-0.4 |
1.0 |
1.4 |
| Japan |
1.5 |
2.1 |
2.0 |
| Singapore |
3.9 |
4.2 |
4.2 |
| Malaysia |
4.7 |
5.6 |
5.2 |
| Thailand |
2.9 |
1.5 |
5.1 |
| Indonesia |
5.8 |
5.5 |
6.0 |
| Hong Kong |
2.9 |
3.5 |
3.7 |
| China |
7.7 |
7.2 |
7.0 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Upside Potential |
| Sunac China |
1918 HK |
5.91 |
8.45 |
43.0% |
| ICBC |
1398 HK |
5.14 |
6.15 |
19.6% |
| Bank |
BMRI LJ |
10,425.00 |
12,500.00 |
19.9% |
| Gamuda |
GAM MK |
4.80 |
5.60 |
16.7% |
| DBS |
DBS SP |
18.21 |
22.68 |
24.5% |
| Pacific Radiance |
PACRA SP |
1.45 |
1.76 |
21.8% |
| Bangkok |
BBL TB |
211.00 |
237.00 |
12.3% |
| PTT |
PTT TB |
- |
360.00 |
2.9% |
Sell Recommendation
| Company |
Ticker |
Current Price |
Target Price |
Potential Change |
| UMWH Holdings |
UMWH MK |
12.34 |
10.00 |
-19.0% |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Xingda Corporate Roadshow |
Taipei |
22 Sep |
22 Sep |
| China Property Sector Analyst Presentation |
London |
22 Sep |
26 Sep |
| Kong Sun Corporate Roadshow |
Hong Kong |
24 Sep |
24 Sep |
| CIFI Holdings Corporate Roadshow |
London |
25 Sep |
25 Sep |
| CIFI Holdings Corporate Roadshow |
Milan |
26 Sep |
26 Sep |
| Comba Corporate Roadshow |
Taipei |
29 Sep |
30 Sep |
| Asian Gems Conference |
Singapore |
8 Oct |
9 Oct |
Conclusion
The document highlights investment opportunities in key sectors across Asia, focusing on China Vanke and Sarana Menara Nusantara as top picks. It outlines their financial performance, growth potential, and market dynamics, along with key risks and valuation metrics. Additionally, it provides insights into other markets, such as Malaysia and Thailand, and includes a comprehensive overview of regional stock indices and corporate events.
