Regional Morning Notes Summary - 25 November 2016
Core Content Overview
This document provides a comprehensive analysis of financial and operational updates for several companies across China, Indonesia, Malaysia, and Singapore, along with key indices and stock performance data. It highlights investment recommendations, earnings forecasts, and valuation metrics for each company, focusing on their performance in the context of broader economic conditions and market trends.
China
Agricultural Bank Of China (1288 HK)
- Role: Acts as an agent of development in county areas, playing a pivotal role in financing agricultural industrialisation, water conservancy, and urbanisation.
- Loan Mix: Maintains a stable 32:68 ratio between county and urban loans.
- NPLs: NPLs/90-day overdue loans are healthy at 110%, with a loan loss coverage of 172.7% (highest among Big 4 SOE banks).
- Valuation: Current share price is HK$3.20, with a target price of HK$3.60 (upside of +12.5%).
- Performance:
- Net interest income is expected to decline slightly in 2016 but grow in 2017.
- Fees & commissions are projected to grow at a slower rate in 2017 due to reduced agency commissions from the Ministry of Finance.
- The bank has a strong deposit franchise with a high CASA ratio of 53.8% and low cost of deposits.
- Risks: Potential asset quality deterioration due to ongoing economic restructuring and supply-side reforms.
- Recommendation: Maintain HOLD.
China Mengniu Dairy (2319 HK)
- Performance: On a sustainable recovery track, with high-end products driving growth.
- Earnings:
- Expected to achieve high-single-digit sales growth in 2016 and 7% in 2017.
- Sales growth accelerated from 6.6% in 1H16 to about 10% in 3Q16 due to strong UHT yogurt sales.
- Product Mix: UHT yogurt (Just Yogurt) delivered 70% sales growth in 1H16, and management expects higher growth in 2H16.
- Valuation: Current share price is HK$15.60, with a target price of HK$18.30 (upside of +17.3%).
- Market Share: Led the liquid milk market with a 27.4% share in 1H16, up from 27.1% in 1H15.
- Recommendation: Maintain BUY.
Indonesia
- Sector: Banking
- Visits: To Bank Indonesia and the finance ministry.
Malaysia
Axiata (AXIATA MK)
- Performance: 3Q16 earnings below expectations.
- Recommendation: Upgrade to BUY, with a lower target price of RM5.00.
Genting (GENT MK)
- Performance: All key earnings drivers improved yoy; expects better 2017 due to multiple catalysts.
- Recommendation: Maintain BUY, with a target price of RM10.15.
Genting Malaysia (GENM MK)
- Performance: No surprises in both domestic and overseas operations; GITP remains the key catalyst.
- Recommendation: Maintain BUY, with a target price of RM5.10.
Malayan Banking (MAY MK)
- Performance: Net profit 7% above estimate, driven by lower provisions. However, risky O&G loans under the watchlist nearly doubled.
- Recommendation: Maintain HOLD, with a target price of RM8.20.
Singapore
IHHealthcare (IHHSPOHOLD/S2.05/Target:S2.03)
- Performance: 9M16 expected to be flat due to continued cost pressure.
- Recommendation: HOLD.
Thailand
Banpu (BANPU TB)
- Performance: Spike in coal prices supports a big upgrade in 2017 earnings.
- Recommendation: BUY, with a target price of Bt26.00.
Key Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
19083.2 |
0.3 |
1.1 |
4.7 |
9.5 |
| S&P 500 |
2204.7 |
0.1 |
1.3 |
2.5 |
7.9 |
| FTSE 100 |
6829.2 |
0.2 |
0.5 |
(2.3) |
9.4 |
| AS30 |
5549.0 |
(0.0) |
2.6 |
0.5 |
3.8 |
| CSI 300 |
3488.7 |
0.4 |
1.5 |
3.6 |
(6.5) |
| FSSTI |
2843.7 |
0.1 |
1.1 |
(0.4) |
(1.4) |
| HSCEI |
9678.8 |
0.1 |
3.8 |
(1.6) |
0.2 |
| HSI |
22608.5 |
(0.3) |
1.6 |
(4.1) |
3.2 |
| JCI |
5107.6 |
(2.0) |
(1.6) |
(5.4) |
11.2 |
| KLCI |
1624.2 |
(0.4) |
(0.2) |
(3.2) |
(4.0) |
| KOSPI |
1971.3 |
(0.8) |
(0.5) |
(3.2) |
0.5 |
| Nikkei 225 |
18333.4 |
0.9 |
2.6 |
5.6 |
(3.7) |
| SET |
1490.1 |
(0.4) |
1.1 |
(1.1) |
15.7 |
| TWSE |
9152.1 |
(0.3) |
1.7 |
(2.5) |
9.8 |
| BDI |
1201 |
(1.9) |
(2.4) |
44.5 |
151.3 |
| CPO (RM/ml) |
2995 |
0.9 |
3.1 |
9.4 |
36.1 |
| Brent Crude (US$/bbl) |
49 |
0.1 |
5.4 |
(4.8) |
31.4 |
Top Picks (BUY)
- Air China: Target price HK$7.00, potential upside 37.5%
- Ping An Insurance: Target price HK$47.00, potential upside 11.0%
- Ciputra Property: Target price IJD 960.00, potential upside 39.1%
- Indosat: Target price IJD 8,015.00, potential upside 31.4%
- Genting Bhd: Target price MK 10.10, potential upside 25.3%
- Citiv Dev: Target price SP 10.36, potential upside 24.1%
- OCBC: Target price SP 10.45, potential upside 19.0%
- Bangkok Dusit: Target price TB 31.20, potential upside 37.4%
- Siam Cement: Target price TB 645.00, potential upside 36.1%
Key Assumptions
| Region |
GDP (yoy) |
2015 |
2016F |
2017F |
| US |
2.6 |
2.6 |
2.0 |
2.7 |
| Euro Zone |
2.0 |
2.0 |
1.4 |
1.0 |
| Japan |
0.5 |
0.5 |
0.6 |
0.8 |
| Singapore |
2.0 |
2.0 |
1.4 |
1.7 |
| Malaysia |
5.0 |
5.0 |
4.2 |
4.5 |
| Thailand |
2.8 |
2.8 |
3.2 |
3.5 |
| Indonesia |
4.8 |
4.8 |
5.0 |
5.2 |
| Hong Kong |
2.4 |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.9 |
6.5 |
6.2 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Metro Pacific Investments Roadshow |
Canada |
24 Nov |
25 Nov |
| Oriental Watch Holdings |
Hong Kong |
28 Nov |
28 Nov |
| Group Meeting |
- |
- |
- |
| Sa Sa International Group Meeting |
Singapore |
29 Nov |
29 Nov |
| Thai Oil Corporate Roadshow |
Singapore |
29 Nov |
30 Nov |
Key Metrics (Agricultural Bank Of China)
| Metric |
2015 |
2016F |
2017F |
2018F |
| Net interest income (Rmbm) |
429,891 |
431,103 |
451,240 |
464,721 |
| Non-interest income (Rmbm) |
94,235 |
111,849 |
114,964 |
117,844 |
| Net profit (rep./act.) (Rmbm) |
179,461 |
188,469 |
193,686 |
192,652 |
| EPS (Fen) |
55.3 |
58.0 |
59.6 |
59.3 |
| PE (x) |
5.2 |
4.9 |
4.8 |
4.8 |
| P/B (x) |
0.9 |
0.7 |
0.6 |
0.6 |
| Dividend Yield (%) |
6.4 |
6.1 |
6.3 |
6.2 |
| Net interest margin (%) |
2.9 |
2.4 |
2.3 |
2.2 |
| Cost/income (%) |
42.7 |
38.4 |
38.1 |
38.3 |
| Loan loss cover (%) |
286.5 |
170.0 |
160.0 |
155.0 |
| Net debt/(cash) to equity (%) |
24.6 |
14.3 |
5.5 |
0.8 |
| ROE (%) |
16.1 |
14.8 |
13.7 |
12.4 |
| Target Price (HK$) |
3.60 |
- |
- |
- |
Key Metrics (China Mengniu Dairy)
| Metric |
2014 |
2015 |
2016F |
2017F |
2018F |
| Net turnover (Rmbm) |
50,049 |
49,027 |
52,887 |
56,335 |
59,470 |
| EBITDA (Rmbm) |
3,510 |
3,571 |
4,474 |
4,851 |
5,207 |
| Operating profit (Rmbm) |
2,215 |
2,127 |
2,782 |
2,921 |
3,022 |
| Net profit (rep./act.) (Rmbm) |
2,351 |
2,367 |
2,612 |
2,912 |
3,085 |
| EPS (fen) |
60.1 |
60.7 |
67.0 |
74.7 |
79.2 |
| PE (x) |
23.0 |
22.7 |
20.6 |
18.5 |
17.4 |
| P/B (x) |
2.5 |
2.4 |
2.2 |
2.0 |
1.9 |
| EV/EBITDA (x) |
17.1 |
16.8 |
13.4 |
12.4 |
11.5 |
| Net margin (%) |
4.7 |
4.8 |
4.9 |
5.2 |
5.2 |
| Dividend Yield (%) |
2.0 |
1.0 |
1.1 |
1.2 |
1.3 |
| ROE (%) |
12.7 |
10.9 |
11.3 |
11.5 |
11.2 |
Conclusion
The report highlights the performance of key financial and consumer companies across the region, with a focus on their earnings, valuations, and growth prospects. While some companies, like Agricultural Bank Of China, show stable fundamentals but face asset quality risks, others such as China Mengniu Dairy are on a recovery path with strong product innovation. The document also includes market indices, corporate events, and analyst recommendations, offering a holistic view of the regional market landscape.
