Regional Morning Notes Summary
Core Content Overview
This document provides a summary of market outlook and updates for various regions, including Malaysia, China, Hong Kong, Indonesia, and Thailand, along with key financial data and analysis for specific companies.
Key Stories and Outlooks
Malaysia
- 2H15 Outlook: Tepid corporate earnings growth, shrinking ROEs, and economic headwinds are expected to persist.
- Market Outlook: The market may retreat further before experiencing a liquidity-driven recovery in 4Q15. A defensive approach is advised.
China
- Property Sector: Volatile stock markets may negatively impact home sales in key cities, especially in the medium term.
- Sales Trends: There is a concern that the recent stock market corrections may reduce consumer wealth, which could drag down property sales. However, end-user demand and asset reallocation may provide some short-term support.
- Same-Store Sales (SSS): In 1QFY16, SSS in China declined by 7% yoy, and in Hong Kong/Macau by 24% yoy, though these were improvements from the previous quarter.
- Market Weight: Maintained at Market Weight.
- Sector Picks:
- COLI (BUY): Target price HK$37.73
- Vanke (BUY): Target price HK$26.03
- China Resources Land (BUY): Target price HK$30.78
Hong Kong
- Chow Tai Fook (1929 HK):
- 1QFY16 SSS declined by 15% yoy, within expectations.
- Maintain HOLD with a target price of HK$8.61.
- Sales performance shows a sequential improvement, with retail sales declining by 6% yoy and SSS narrowing the decline.
- Key Financials:
- Net profit for 1QFY16 is estimated at HK$5,454.2m.
- Net profit is expected to grow to HK$6,151.9m in 2016F.
- The company is on track to reduce rental costs from 2.9% of sales to 2.5-2.7% over the next two years.
- Valuation: Target price set at 14x FY16F PE, which is at a 15% discount to its historical average.
Indonesia
- Cement Sector: Sales volume grew 2.8% mom in June, following a 7.2% mom increase in May.
- Recommendation: Maintain OVERWEIGHT with Indocement as the top pick.
Singapore
- Singapore Press Holdings (SPH):
- 3QFY15: Newspaper advertising revenue fell 9% yoy.
- Lower media revenue was offset by higher property earnings and lower media costs.
- Venture Corporation (VMS SP):
- Gradual sequential improvement noted.
- Recommendation: BUY with a target price of S$9.00.
Thailand
- Thai Union Frozen Products (TUF):
- 2Q15 earnings likely to have dropped both yoy and qoq.
- Recommendation: HOLD with a target price of Bt21.50.
Key Indices (as of 10 July 2015)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17548.6 |
0.2 |
-1.2 |
-1.2 |
-1.5 |
| S&P 500 |
2051.3 |
0.2 |
-1.3 |
-1.4 |
-0.4 |
| FTSE 100 |
6581.6 |
1.4 |
-0.7 |
-2.5 |
0.2 |
| AS30 |
5456.3 |
0.0 |
-2.4 |
-0.5 |
1.3 |
| CSI 300 |
3897.6 |
6.4 |
-5.1 |
-26.6 |
10.3 |
| FSSTI |
3267.4 |
-0.5 |
-1.8 |
-1.8 |
-2.9 |
| HSI |
24392.8 |
3.7 |
-7.2 |
-8.6 |
3.3 |
| KLCI |
1701.5 |
0.3 |
-1.9 |
-2.0 |
-3.4 |
| KOSPI |
2027.8 |
0.6 |
-3.8 |
-1.1 |
5.9 |
| Nikkei 225 |
19855.5 |
0.6 |
-3.3 |
-1.0 |
13.8 |
| SET |
1472.6 |
0.2 |
-1.3 |
-2.1 |
-1.7 |
| TWSE |
8914.1 |
-0.7 |
-5.0 |
-4.1 |
-4.2 |
| BDI |
853 |
1.5 |
7.4 |
39.4 |
9.1 |
| CPO (RM/mt) |
2154 |
-2.9 |
-4.1 |
-6.1 |
-6.3 |
| Nymex Crude |
53 |
-0.2 |
-7.5 |
-14.3 |
-1.2 |
Top Picks (BUY)
| Company |
Ticker |
Current Price (Icy) |
Target Price (Icy) |
Potential Upside (%) |
| Beijing Capital |
694 HK |
8.19 |
12.30 |
50.2 |
| ICBC |
1398 HK |
5.52 |
7.80 |
41.3 |
| Bank BJB |
BJR J |
825.00 |
1,300.00 |
57.6 |
| DBS |
DBS SP |
20.51 |
25.08 |
22.3 |
| SATS Ltd |
SATSP |
3.64 |
4.00 |
9.9 |
| Kasikornbank |
KBANK TB |
183.00 |
232.00 |
26.8 |
| PTT |
PTT TB |
338.00 |
410.00 |
21.3 |
Top Picks (SELL)
| Company |
Ticker |
Current Price (Icy) |
Target Price (Icy) |
Potential Downside (%) |
| UMWH Holdings |
UMWH MK |
10.06 |
9.00 |
-10.5 |
Key Assumptions
| Region |
GDP (yoy) |
2013 |
2014 |
2015F |
| US |
2.9 |
2.2 |
2.4 |
2.9 |
| Euro Zone |
1.3 |
-0.5 |
0.9 |
1.3 |
| Japan |
1.0 |
1.6 |
-0.1 |
1.0 |
| Singapore |
2.9 |
4.4 |
2.9 |
2.9 |
| Malaysia |
5.0 |
4.7 |
6.0 |
5.0 |
| Thailand |
2.7 |
2.8 |
0.9 |
2.7 |
| Indonesia |
5.0 |
5.6 |
5.0 |
5.0 |
| Hong Kong |
3.7 |
2.9 |
3.5 |
3.7 |
| China |
7.0 |
7.7 |
7.2 |
7.0 |
| Item |
2014 |
2015F |
2016F |
| Brent (Average) |
99.45 |
61 |
72 |
| CPO (US$/mt) |
722 |
765 |
788 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| China Autos and Economics |
Frankfurt |
10 Jul |
10 Jul |
| Analyst Presentation |
London |
13 Jul |
15 Jul |
Recent HK-Listed Developers' Debt Financing Activities
| Date |
Company |
Stock Code |
Bond Type |
Size (HK$m) |
Cost (%) |
Maturity |
| 2015/7/8 |
Evergrande |
3333 HK |
Corporate bond |
6,800m |
5.30 |
2019 |
| 2015/7/8 |
Evergrande |
3333 HK |
Corporate bond |
8,200m |
6.98 |
2022 |
| 2015/7/7 |
R&F |
2777 HK |
Corporate bond |
6,500m |
n.a. |
2020 |
| 2015/7/7 |
Longfor |
960 HK |
Corporate bond |
2,000m |
4.60 |
2020 |
| 2015/6/26 |
Times Property |
1233 HK |
Corporate bond |
n.a. |
n.a. |
2020 |
| 2015/6/26 |
Wuzhou Int |
1369 HK |
Senior note |
US$100m |
13.75 |
2018 |
| 2015/6/25 |
China SCE |
1966 HK |
Senior note |
US$350m |
10.00 |
2020 |
| 2015/6/19 |
BJ Capital Land |
2868 HK |
Corporate bond |
3,000m |
4.58 |
2020 |
Key Financial Insights
- Home Prices: In June, the average primary market price in 100 cities rose by 0.56% mom, led by tier-1 cities.
- Sales Momentum: Expected to slow in July/August due to seasonal factors and market corrections, but likely to rebound in end-3Q15.
- Valuation: The company's target price is based on a 14x FY16F PE, which is at a 15% discount to its historical average.
- Entry Price: HK$7.00 is set as the entry price.
- Catalysts: Quarterly sales performance and gold price movements are key factors affecting the share price.
Conclusion
The document outlines the outlook for various regions, emphasizing the potential for a market retreat in Malaysia, the impact of volatile stock markets on China's property sector, and the financial performance and valuation of specific Hong Kong-listed companies. It highlights the importance of liquidity, asset reallocation, and policy support for the property sector, while noting the challenges posed by the stock market's performance and consumer sentiment. Overall, the report suggests a cautious approach with some opportunities for accumulation in the property sector and a HOLD recommendation for Chow Tai Fook.
