20170427-大华继显-Regional_Morning_Notes_26页_1mb

Regional Morning Notes Summary - 27 April 2017

Core Content

This document is a regional financial update report covering key stocks and indices from China, Malaysia, Singapore, and Thailand. It includes sector updates, company results, financial metrics, valuation analysis, and analyst recommendations.

Main Points

China

• Sector Update: The Handset Components sector is poised for growth, driven by innovations such as dual cameras, fingerprint modules, and miniaturized sensing systems. Key beneficiaries include Q Tech and Globetronics.
• Top Picks:
  • Q Tech (1478 HK): Expected to grow >90% yoy, driven by increased fingerprint module orders and faster adoption of dual cameras. Target price: HK$7.50.
  • Globetronics (GTB MK): Expected to grow 145% yoy due to new sensor products. Target price: RM6.08.
  • Tongda (698 HK): Buy recommendation, target price: HK$3.30.
• Key Companies:
  • China General Nuclear Corporation (1816 HK):
    • 1Q17: Flattish core earnings; generation volume up 12.4% yoy.
    • Maintained BUY recommendation with a target price of HK$3.20.
    • Financial highlights include EBITDA growth, improved utilisation, and a guaranteed purchase policy for nuclear power.
  • China Minsheng Bank (1988 HK):
    • 1Q17: Contraction in net interest income and fee income, but supported by cost savings.
    • Maintained HOLD recommendation with a target price of HK$7.80.
    • Net profit growth of 3.6% yoy, but NIM compression and fee income decline were observed.

Malaysia

• Hume Industries (HUME MK): Buy recommendation, target price RM4.15. Current environment is challenging, but long-term recovery from infrastructure projects is expected.

Singapore

• CapitaLand (CAPL SP): Buy recommendation, target price S$4.30. The company is undergoing a leadership change.

Thailand

• Siam Cement (SCC TB): Buy recommendation, target price Bt600.00. Results exceeded expectations.

Key Indices

• The report includes performance data for major global and regional indices such as DJIA, S&P 500, FTSE 100, AS30, CSI 300, FSSTI, HSI, and others, along with changes in price and performance over different time frames.

Sell Recommendations

• Sinopharm (1099 HK): Sell recommendation with a target price of HK$31.58.
• Great Wall Motor (2333 HK): Sell recommendation with a target price of HK$6.00.
• MGM China (2282 HK): Sell recommendation with a target price of HK$13.20.
• Hartalega (HART MK): Sell recommendation with a target price of RM4.07.

Valuation and Earnings Growth

• Q Tech: Trading at 14.1x 2017F PE, which is undemanding. Expected earnings CAGR of 48% from 2016 to 2019.
• Globetronics: Expected 13.2x ex-cash 2018F PE, with strong net profit CAGR of 64% and potential upside from new sensor commercialisation.
• Tongda: Expected to benefit from increasing RF and sensor content in smartphones, with a target price of HK$3.30.

Corporate Events

• Several corporate events are scheduled in the coming months, including roadshows and analyst briefings with companies such as Meidong Auto Holdings, Singtel, and Top Glove Corporation.

Analysts

• Cindy Lam and Yan Shi are the analysts providing insights.
• Yeoh Bit Kun is also listed with contact details.

Key Information

• Growth Drivers: Innovations in smartphone technology, such as dual cameras and fingerprint modules, are expected to drive growth in the Handset Components sector.
• Valuation Plays: Q Tech and Globetronics are highlighted for their attractive valuations and potential for earnings growth.
• Challenges: Companies like Minsheng Bank and Hume Industries face challenges due to NIM compression, weak demand, and a difficult operating environment.
• Positive Outlook: The report maintains a positive outlook for the Handset Components sector and specific companies, with the expectation of improved returns and better utilisation in the future.

Sector Recommendations

• Handset Components: Upgraded to OVERWEIGHT due to the expected growth in demand for advanced smartphone components.
• Top Picks: Q Tech, Globetronics, and Tongda are highlighted as key BUY recommendations.
• Sell Recommendations: Sinopharm, Great Wall Motor, MGM China, and Hartalega are recommended to be sold.

Financial Highlights

• China General Nuclear Corporation:
  • 1Q17 net profit up 73% yoy.
  • EBITDA margin improved from 50.6% in 2016 to 54.2% in 2017F.
  • ROE is expected to increase from 12.4% in 2017F to 15.7% in 2019F.
• China Minsheng Bank:
  • Net profit up 3.6% yoy to Rmb14.2b.
  • NIM compression and fee income decline observed, but supported by cost-cutting measures.

Summary

The report highlights growth opportunities in the Handset Components sector, particularly in China, with a focus on Q Tech and Globetronics. It also includes analysis of company results, financial metrics, and key indices, along with specific buy and sell recommendations. The overall sentiment is cautiously optimistic, with a focus on improving returns and utilisation in the coming quarters.