Regional Morning Notes Summary
Core Content Overview
This document provides an analysis of market updates and investment recommendations for various companies in the Asia-Pacific region, focusing on China, Indonesia, Malaysia, Singapore, and Thailand. It includes company updates, key financials, valuation metrics, and outlooks for stock performance, alongside key economic assumptions and corporate events.
Main Points by Region
China: Geely Auto (175 HK)
- Company Update: Geely launched the new sedan model Emgrand GL, which has strong market demand. Management is optimistic about 2016 sales target of 660,000 units (+29% yoy), with expectations of exceeding it by 33% yoy.
- Product Highlights: Emgrand GL is an A+ class three-box sedan with a large wheelbase and body dimensions, featuring a 1.3T/1.8L engine, 6-speed DCT, and advanced safety systems (ACC, ESP). It is priced lower than JV-branded models, offering better value.
- Performance: The model is expected to sell 13,000 units in 2016, 80,000 in 2017, and 90,000 in 2018, with a gross margin expected to reach 18% in 2016 and >20% in 2017.
- New Products: CMA platform models will be unveiled in October 2016, targeting the mid-range segment. These will be sold under the new "L Brand" and are expected to have 30,000 units of annual sales.
- Financial Outlook: Sales are forecasted to grow at 33%, 24%, and 11% in 2016-18, respectively. ASP is expected to increase by 20%, 20%, and 1% in the same period. Net margin is assumed to remain stable at 9.0%.
- Valuation: The stock is currently trading at 12.5x 2016F PE and 8.8x 2017F PE. The target price is HK$8.00, based on 10x 2017F PE. The recommendation is to Maintain BUY.
- Risks: Potential downside from weaker-than-expected sales of new SUV models. Upside risk from stronger-than-expected CMA model performance.
Indonesia: Bank Danamon (BDMN IJ)
- Company Update: Revenue, loan, and deposit growth are expected to remain weak. The bank is shifting focus from consumer and micro-business lending to SME and corporate loans.
- Deposit Weakness: Deposits fell 19% yoy in 1H16, with a significant drop in CASA ratio. The bank has reduced expensive CASA deposits, leading to a weaker deposit franchise.
- Loan Challenges: Loan growth has stagnated since 2013, with a 6% yoy decline in 1H16. Consolidation of mass-market loans and lower yield curve are expected to pressure NIM.
- Financial Outlook: Net profit is forecasted to grow from Rmb2,261m in 2015 to Rmb4,360m in 2017 and Rmb7,250m in 2018. However, the bank's NPL ratio is high, and provisioning remains moderate.
- Valuation: The stock is currently trading at 11.6x 2016F PE and 10.3x 2017F PE. The recommendation is to Maintain SELL with a revised target price of Rp3,300.
Malaysia: Oil & Gas Sector
- Sector Outlook: Pan Malaysia T&I jobs for 2017-18 could signal a positive trend for offshore activity. Companies like Sapurakencana and Barakah are expected to benefit.
- Alliance Financial Group (AFG MK): Announced a corporate reorganisation to simplify the financial holding company structure. Financial impact is expected to be negligible. Recommendation: HOLD.
Singapore: Frasers Hospitality Trust (FHT SP)
- Company Update: The trust is expanding its footprint in the Asia-Pacific region. Recommendation: BUY with a target price of S$0.81.
Thailand: PTT Global Chemical (PTTGC TB)
- Company Update: Earnings have bottomed out, with a "light at the end of the tunnel" outlook. Recommendation: BUY with a target price of Bt70.00.
Key Indices Performance
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
18293.7 |
0.9 |
1.4 |
-1.4 |
5.0 |
| S&P 500 |
2163.1 |
1.1 |
1.8 |
-1.0 |
5.8 |
| FTSE 100 |
6834.8 |
0.1 |
2.4 |
-0.4 |
9.5 |
| AS30 |
5429.4 |
0.6 |
1.9 |
-3.3 |
1.6 |
| CSI 300 |
3266.6 |
0.3 |
0.1 |
-2.1 |
-12.4 |
| FSSTI |
2850.7 |
-0.1 |
1.5 |
0.3 |
-1.1 |
| HSI |
23669.9 |
0.6 |
2.0 |
2.9 |
8.0 |
| KLCI |
1658.7 |
0.2 |
-1.1 |
-1.9 |
-2.0 |
| BDI |
903 |
4.4 |
19.4 |
32.2 |
88.9 |
| CPO (RM/ml) |
2914 |
1.0 |
1.5 |
1.9 |
32.4 |
| Brent Crude |
47 |
2.1 |
2.1 |
-8.0 |
25.6 |
Key Economic Assumptions
| Region |
GDP Growth (yoy) |
2015 |
2016F |
2017F |
| US |
2.4 |
|
2.5 |
2.7 |
| Euro Zone |
1.6 |
|
1.5 |
1.6 |
| Japan |
0.5 |
|
0.6 |
0.8 |
| Singapore |
2.0 |
|
2.2 |
3.2 |
| 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 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Coal, Wind & Water sector Analyst Presentation |
US/Canada |
14 Sep |
22 Sep |
| Ekovest Bhd Luncheon |
Kuala Lumpur |
22 Sep |
22 Sep |
| Tsaker Chemical Roadshow |
Hong Kong |
22 Sep |
22 Sep |
| Sembcorp Industries Corp Roadshow |
Canada |
26 Sep |
27 Sep |
| Regional Financial and Telco Sector Analyst Presentation |
UK/Europe |
26 Sep |
30 Sep |
| Xingda In'l Group Meeting |
Hong Kong |
29 Sep |
29 Sep |
| Cityneon Corporate Roadshow |
Taipei |
29 Sep |
30 Sep |
| Ricoh Site Visit |
Kuala Lumpur |
5 Oct |
5 Oct |
| Xstep International Holdings Roadshow |
Taipei |
7 Oct |
7 Oct |
| Xstep International Holdings Roadshow |
Kuala Lumpur |
15 Nov |
15 Nov |
| Metro Pacific Investments Roadshow |
Canada |
24 Nov |
25 Nov |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Pot. +/- (%) |
| Air China |
753 HK |
5.42 |
8.40 |
55.0 |
| Ping An Insurance |
2318 HK |
42.65 |
47.00 |
10.2 |
| Ciputra Property |
CTRP IJ |
680.00 |
960.00 |
41.2 |
| Indosat |
ISAT IJ |
5,325.00 |
9,500.00 |
78.4 |
| Genting Bhd |
GENT MK |
8.05 |
9.75 |
21.1 |
| Citiv Dev |
CIT SP |
8.94 |
10.36 |
15.9 |
| OCBC |
OCBC SP |
8.61 |
10.30 |
19.6 |
| Bangkok Dusit |
BDMS TB |
22.70 |
30.00 |
32.2 |
| Siam Cement |
SCC TB |
522.00 |
645.00 |
23.6 |
Sell Recommendation
| Company |
Ticker |
Current Price |
Target Price |
Pot. +/- (%) |
| Hartalega |
HART MK |
4.46 |
3.10 |
-30.5 |
Summary of Key Financials (Geely Auto)
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net turnover (Rmbm) |
30,138 |
48,235 |
71,700 |
80,500 |
| EBITDA (Rmbm) |
4,295 |
7,383 |
10,441 |
11,743 |
| Net profit (Rmbm) |
2,261 |
4,474 |
6,480 |
7,250 |
| EPS (fen) |
30.4 |
49.5 |
73.6 |
82.3 |
| PE (x) |
19.1 |
12.5 |
8.8 |
7.9 |
| P/B (x) |
3.6 |
3.2 |
2.7 |
2.1 |
| EV/EBITDA (x) |
15.4 |
8.5 |
5.4 |
4.5 |
| Net margin (%) |
8.9 |
9.0 |
9.0 |
9.0 |
Summary of Key Financials (Bank Danamon Indonesia)
| Metric |
2014 |
2015 |
2016F |
2017F |
2018F |
| Net interest income |
13,680 |
13,648 |
14,187 |
14,533 |
14,597 |
| Non-interest income |
4,838 |
4,379 |
4,262 |
4,476 |
4,778 |
| Net profit (Rpb) |
2,604 |
2,393 |
3,150 |
3,562 |
3,933 |
| EPS (Rp) |
271.7 |
249.7 |
328.7 |
371.6 |
410.4 |
| PE (x) |
14.0 |
15.3 |
11.6 |
10.3 |
9.3 |
| P/B (x) |
1.1 |
1.1 |
1.0 |
0.9 |
0.9 |
| Net int margin (%) |
8.3 |
8.2 |
8.5 |
8.4 |
7.9 |
| Cost/income (%) |
56.5 |
49.9 |
45.2 |
42.4 |
40.8 |
| Loan loss cover (%) |
104.4 |
93.4 |
98.4 |
101.5 |
93.5 |
Summary of Key Metrics (Geely Auto)
| Metric |
2015 |
2016F |
2017F |
2018F |
| EBITDA margin (%) |
14.3 |
15.3 |
14.6 |
14.6 |
| Pre-tax margin (%) |
9.5 |
12.5 |
12.2 |
12.2 |
| Net margin (%) |
8.9 |
9.0 |
9.0 |
9.0 |
| ROA (%) |
6.7 |
8.3 |
8.9 |
8.4 |
| ROE (%) |
14.6 |
20.2 |
24.3 |
22.0 |
| Debt to equity (%) |
0.0 |
8.4 |
13.5 |
16.6 |
| Net debt/equity (%) |
-47.0 |
-55.5 |
-65.7 |
-63.1 |
| Interest cover (x) |
489.4 |
589.2 |
307.3 |
194.9 |
Analysts
