20150226-大华继显-Regional_Morning_Notes_42页_2mb

Regional Morning Notes Summary

Core Content Overview

This document provides a summary of market updates and analysis for various regions, including China, Hong Kong, Indonesia, Malaysia, and Singapore, as of Thursday, 26 February 2015. It includes company updates, stock performance, key indices, budget plans, corporate events, and strategic outlooks.

Main Points by Region

China

• Shandong Weigao (1066 HK):
  • Plans to spin off Weigao Ortho for a separate listing on the Hong Kong Stock Exchange.
  • The spin-off will reduce Weigao's stake in Weigao Ortho from 90% to less than 66.15%.
  • The orthopaedic industry has slowed, with growth declining from ~22% in 2010 to ~18% in recent years.
  • Despite being a market leader, Weigao Ortho may not benefit from a valuation premium due to the industry slowdown.
  • The company's earnings visibility is limited for 2015-2016 due to fierce competition, rising SG&A expenses, and pricing pressures.
  • Recommendation: Maintain SELL with a Target Price of HK$5.20.

Hong Kong

• FY15/16 Budget Plan:
  • Aims to boost domestic demand and sustain economic growth through infrastructure and social spending.
  • The 2014/15 budget surplus was HK$63.8b, significantly higher than the projected HK$10.3b.
  • The government plans to reduce salaries tax and profits tax by 75% for certain taxpayers, which will reduce government revenue by HK$17.7b.
  • Relief measures include rent subsidies, additional tax allowances, and fee waivers for tourism-related sectors.
  • Fiscal Impact: The budget is market neutral, with a projected fiscal reserve of HK$856.3b by the end of the next fiscal year.
  • Key Sectors: Construction, transportation, and logistics will benefit from the increased capital expenditure.

Indonesia

• Elnusa (ELSA IJ):
  • Operating profit grew strongly by 45% yoy in 2014.
  • Expected to benefit from resilient drilling and oilfield services (DOS) and a higher oil lifting target in 2015.
  • DOS margins are expected to be maintained due to the weak rupiah, while Petrofin margins remain stable.
  • Seismic activities contribute a smaller portion of revenue (20-25%) compared to DOS (75-80%).

Malaysia

• Xiata (AXIATA MK):
  • 2014 was a washout year with core net profit contracting 15% yoy due to weak Celcom earnings and Axis' integration.
  • Recommendation: Maintain HOLD with a Target Price of RM7.15.
• Hong Leong Bank (HLBK MK):
  • 2QFY15 saw a 4.3% qoq and 5.9% yoy decline in pre-provision operating profit.
  • Recommendation: Maintain HOLD with a Target Price of RM14.95.
• Kossan Rubber (KRI MK):
  • 4Q14 revenue rose 4% qoq due to a newly-commissioned plant and a firmer exchange rate.
  • Recommendation: Maintain HOLD with a Target Price of RM5.52.
• Sunway (SWB MK):
  • Earnings beat estimates due to accelerated property development billings.
  • Recommendation: BUY with a Target Price of RM3.63.

Singapore

• QT Vascular (QTVC SP):
  • Achieved milestones and is expected to continue strong sales growth.
  • Recommendation: BUY with a Target Price of S$0.60.
• StarHub (STH SP):
  • Elevated capital expenditure in 2015 and 2016.
  • Recommendation: SELL with a Target Price of S$3.98.

Thailand

• Land And Houses (LH TB):
  • Results in line with expectations, but downgraded to HOLD due to limited upside and possible share price weakness from warrant exercise.
• Ratchaburi Electricity Generating Hldg (RATCH TB):
  • Full-year 2014 results in line, and the company is a BUY recommendation.
• Samart Corp (SAMART TB):
  • Results in line with expectations.
• TVO (TVO TB):
  • Earnings increased qoq but declined yoy.
  • Recommendation: HOLD with a Target Price of Bt25.00.

Key Indices Overview

Top Picks and Valuation

Key Assumptions

Corporate Events

Stock Data - Shandong Weigao (1066 HK)

Risks

• Intensifying competition in the orthopaedic industry.
• Lower product prices affecting profitability.
• Limited earnings visibility for 2015-2016.
• Potential slowdown in earnings due to spin-off of Weigao Blood.

Analysts

• Carol Dou Xiao Qin: +8621 5404 7225 ext 811 | caroldou@uobkayhian.com
• Serena Shao: +8621 5404 7225 ext 817 | serenashao@uobkayhian.com
• Teenie Fung: +852 2236 6798 | teenie.fung@uobkayhian.com.hk

Summary

The document highlights a mix of BUY, HOLD, and SELL recommendations across various markets. It emphasizes the slowdown in the orthopaedic industry in China and its impact on valuations, the market-neutral Hong Kong budget with a focus on domestic demand and infrastructure, and positive performance in some Indonesian and Malaysian companies. Key financial metrics and capital projects are also provided to support the analysis.