Regional Morning Notes Summary - 09 July 2018
Core Content Overview
This document provides a summary of stock updates and market insights for several Asian markets, including China, Indonesia, Malaysia, Singapore, and Thailand. It includes company-specific updates, financial forecasts, valuation metrics, and investment recommendations for key stocks.
Main Points by Region
China
- Alibaba Group (BABA US):
- 1QFY19: Revenue is estimated at Rmb81.5b, up 62% yoy. EPS is trimmed by 4% and 1% for FY19 and FY20 due to margin contraction from the consolidation of Ele.me and content investments.
- Target Price: US$230.00, unchanged from previous.
- Earnings Forecast: Revenue growth is guided at over 60% yoy for FY19, excluding new retail and Lazada.
- Segment Insights:
- Customer management revenue is expected at Rmb34b, up 30% yoy, representing 58% of Alibaba's China retail revenue.
- Ant Financial is facing regulatory tightening and forex losses, which could reduce its net profit contribution to Alibaba.
- Ele.me will be consolidated starting from May, and its loss margin is expected to narrow in FY19.
- Valuation: Trading at 26x non-GAAP FY19F PE, near historical average.
- Catalysts: Faster B2C expansion, advertising revenue growth, and potential listing of Ant Financial.
- Financial Metrics:
- Net turnover is expected to grow to Rmb402,514m in FY19.
- EBITDA is projected to increase to Rmb106,826m.
- Net profit (adj.) is forecasted at Rmb118,265m.
- ROE is expected to reach 23.3% in FY21.
Indonesia
- Japfa Comfeed Indonesia (JPFA IJ):
- Earnings Growth: Expected to grow by 84.5% yoy in 2018, driven by improved local corn supply, government support, and better demand for DOCs and broilers.
- Target Price: Rp2,190, with a potential upside of +33.1%.
- Lebaran Effect: Strong net profit growth in 2Q18 and 1H18 is anticipated due to the festive season.
- Sales Volume Growth: Animal feed, DOC, and broiler sales volumes are expected to grow by 6%, 25%, and 15% yoy in 2018 respectively.
- Margin Expansion: Gross, operating, and net margins are projected to expand by 200bp, 100bp, and 180bp yoy in 2018.
- Stock Data:
- Market cap: Rp19,290.2b.
- 3-mth avg daily turnover: US$0.3m.
- Current PE: 9.8x 2018-19F average.
Key Market Indices and Metrics
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
24456.5 |
0.4 |
1.0 |
-3.4 |
-1.1 |
| S&P 500 |
2759.8 |
0.8 |
1.6 |
-0.7 |
3.2 |
| FTSE 100 |
7617.7 |
0.2 |
-0.3 |
-0.8 |
-0.9 |
| AS30 |
6355.7 |
0.8 |
1.0 |
3.2 |
3.1 |
| CSI 300 |
3365.1 |
0.7 |
-4.2 |
-11.0 |
-16.5 |
| FSSTI |
3191.8 |
-2.0 |
-2.4 |
-7.1 |
-6.2 |
| HSCEI |
10622.6 |
0.1 |
-2.3 |
-12.7 |
-9.3 |
| HSI |
28315.6 |
0.5 |
-0.6 |
-8.5 |
-5.4 |
| JCI |
5694.9 |
-0.8 |
-1.8 |
-5.0 |
-10.4 |
| KLCI |
1663.9 |
-1.6 |
-1.6 |
-6.4 |
-7.4 |
| KOSPI |
2272.9 |
0.7 |
-2.3 |
-7.3 |
-7.9 |
| Nikkei 225 |
21788.1 |
1.1 |
-2.3 |
-4.0 |
-4.3 |
| SET |
1614.8 |
0.8 |
1.2 |
-6.2 |
-7.9 |
| TWSE |
10608.6 |
-0.0 |
-2.1 |
-4.9 |
-0.3 |
| BDI |
1622 |
0.6 |
14.1 |
16.6 |
18.7 |
| CPO (RM/ml) |
2279 |
-0.6 |
-1.3 |
-3.8 |
-4.7 |
| Brent Crude |
77 |
0.2 |
-0.1 |
1.0 |
15.5 |
Key Picks and Recommendations
BUY Recommendations
- Alibaba Group (BABA US):
- Target Price: US$230.00.
- Upside: +24.5%.
- Reason: Strong B2C growth, advertising revenue potential, and potential listing of Ant Financial.
- Japfa Comfeed Indonesia (JPFA IJ):
- Target Price: Rp2,190.
- Upside: +33.1%.
- Reason: Expected strong earnings growth and margin expansion due to improved supply and demand dynamics.
SELL Recommendation
- Top Glove (TOPG MK):
- Target Price: RM8.40.
- Reason: Legal proceedings against Adventa Capital may lead to impairment charges and loss of profit guarantees.
HOLD Recommendation
- Westports Holdings (WPRTS MK):
- Target Price: RM3.35.
- Reason: Port calls from key customers are increasing, but global trade war uncertainties remain.
Key Financial Metrics for Alibaba Group
| Metric |
2017 |
2018 |
2019F |
2020F |
2021F |
| Net turnover (Rmbm) |
158,273 |
250,266 |
402,514 |
544,436 |
704,521 |
| EBITDA (Rmbm) |
58,461 |
85,223 |
106,826 |
144,601 |
206,456 |
| Net profit (Rmbm) |
43,675 |
63,985 |
72,578 |
107,983 |
156,749 |
| Net profit (adj.) |
60,309 |
85,766 |
118,265 |
150,320 |
195,085 |
| EPS (Fen) |
2,424.7 |
3,359.4 |
4,586.5 |
5,772.0 |
7,416.7 |
| PE (x) |
50.6 |
36.5 |
26.7 |
21.3 |
16.5 |
| P/B (x) |
11.3 |
8.8 |
7.1 |
5.6 |
4.4 |
| EV/EBITDA (x) |
52.2 |
35.8 |
28.6 |
21.1 |
14.8 |
Key Financial Metrics for Japfa Comfeed Indonesia
| Metric |
2016 |
2017 |
2018F |
2019F |
| Net turnover (Rpb) |
27,063 |
29,603 |
35,695 |
39,325 |
| EBITDA (Rpb) |
1,316 |
2,813 |
3,700 |
4,165 |
| Operating profit (Rpb) |
3,092 |
2,170 |
2,975 |
3,356 |
| Net profit (Rpb) |
2,065 |
997 |
1,840 |
2,106 |
| EPS (Rp) |
37.7 |
87.6 |
156.9 |
179.7 |
| PE (x) |
43.6 |
18.8 |
10.5 |
9.2 |
| P/B (x) |
10.2 |
2.0 |
2.0 |
1.8 |
| EV/EBITDA (x) |
18.1 |
8.5 |
6.4 |
5.7 |
Key Assumptions
| Metric |
2017 |
2018F |
2019F |
| GDP (% yoy) |
2.3 |
2.5 |
2.3 |
| Earnings growth (%) |
84.5 |
- |
- |
| CPO (RM/mt) |
2,783 |
2,400 |
2,500 |
| Brent (US$/bbl) |
55.00 |
67.00 |
66.50 |
Corporate Events
- Roadshow with Jacobson Pharma Corp (2633 HK): Shanghai, 10 Jul.
- Group Luncheon with CIMC-TianDa Holdings (445 HK): Hong Kong, 11 Jul.
- Group Luncheon with China Yongda Automobiles (3669 HK): Hong Kong, 12 Jul.
- Group Meeting with China Resources Gas (1193 HK): Hong Kong, 12 Jul.
- Analyst Presentation on 2H18 Malaysia Strategy: Singapore, 19-20 Jul.
- Industry 4.0 Conference: Kuala Lumpur, 26 Jul.
- Group Luncheon with Singapore Airlines (SIA SP): Singapore, 30 Jul.
Analyst Contact
