Regional Morning Notes Summary
Core Content Overview
This document provides a comprehensive analysis of market conditions and company performance in the Asia-Pacific region, focusing on key sectors in China, Indonesia, Malaysia, and Singapore, as well as selected stocks and indices. It includes results, market outlook, valuation analysis, and strategic recommendations.
China - Coal Sector
Key Highlights
- 3Q14 Results: The worst in 10 years due to coal prices hitting the bottom.
- Earnings Outlook: Expect an earnings rebound starting from 4Q14 due to government support and peak consumption season.
- Company Performance:
- China Shenhua: Maintained relatively stable earnings with a 10.5% yoy decline in 9M14 and 11.8% in 3Q14. Its low production cost and integrated model helped.
- China Coal: Suffered a 79.3% yoy decline in 9M14 and a financial loss of Rmb121m in 3Q14, due to high sensitivity to coal prices.
- Yanzhou Coal: Experienced a 38.1% yoy earnings decrease due to ASP decline and reduced sales volume.
- Cost Control: China Coal and Yanzhou Coal demonstrated strong cost control, with unit production cost decreasing by 11.7–30.8% yoy.
- Valuation: China Coal is the top pick with the cheapest valuation in terms of P/B.
- Action: Maintain MARKET WEIGHT; top pick remains China Coal.
China - Zhuzhou CSR Times Electric
Key Highlights
- 9M14 Results: Strong earnings beat expectations, with net profit of Rmb1,747m (+105.7% yoy) and revenue of Rmb8,821m (+82.5% yoy).
- Performance Drivers:
- High-speed MU deliveries in 3Q14.
- Increased capacity utilisation and product mix changes.
- Financials:
- 9M14 EPS: Rmb1.49 (+91.0% yoy).
- EBITDA margin improved to 40% in 3Q14 from 37.5% in 3Q13.
- Valuation & Recommendation:
- Maintain BUY; raise target price to HK$39.10.
- Earnings estimates revised up by 20–24%.
- Share Price Catalysts:
- Overseas rolling stock orders.
- Strong railway investment in 4Q14.
Indonesia - Strategy & Sector Feedback
Key Highlights
- Cement Sector:
- Competition unlikely to intensify in the next two years.
- It is uneconomical for Anhui to ship cement from Kalimantan to Java.
- New cement plants would take 2–3 years to build.
- Poultry Sector:
- Stable feed selling prices and declining input costs should drive recovery.
- Feed prices are more sensitive than DOC prices for poultry companies.
- Stock Picks:
- BUY: Cement (INTP, SMGR), Poultry (CPIN, MAIN), and SIDO.
- Trim: BBCA due to widened valuation premium.
Malaysia - Automobile & MAHB
Key Highlights
- Automobile Sector:
- Modest 2014 TIV growth.
- Rigorous marketing campaigns expected to drive growth in 4Q14.
- Malaysia Airports Holdings (MAHB):
- Full ownership of ISG transforms MAHB into an international player.
- Maintain HOLD; target price RM8.10.
Singapore - Results & Stock Picks
Key Highlights
- CapitaCommercial Trust (CCT):
- 3Q14: CapitaGreen pre-commitments hit 40%.
- Maintain BUY; target price S$1.88.
- Ezra Holdings (EZRA):
- 4QFY14: Within expectations.
- Share price turnaround contingent on Emas AMC and EOL.
- Maintain HOLD; target price S$0.94.
- Frasers Centrepoint Trust (FCT):
- 4QFY14: Hitting new highs.
- Maintain BUY; target price S$2.23.
Thailand - Property Sector
Key Highlights
- 3Q14 Results Preview:
- Total normalised profit estimated to rise by 20.3% qoq and 47.6% yoy.
- Market Outlook:
- Property sector is expected to benefit from improved profitability.
Key Indices Performance (as of 27 October 2014)
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16805.4 |
0.8 |
2.6 |
-1.8 |
1.4 |
| S&P 500 |
1964.6 |
0.7 |
4.1 |
-0.9 |
6.3 |
| FTSE 100 |
6388.7 |
-0.5 |
1.2 |
-3.9 |
-5.3 |
| AS30 |
5399.3 |
0.5 |
2.6 |
1.6 |
0.9 |
| CSI 300 |
2390.7 |
-0.2 |
-2.1 |
-1.9 |
2.6 |
| FSSTI |
3222.6 |
-0.4 |
2.2 |
-2.1 |
1.7 |
| HSCEI |
10391.6 |
-0.5 |
1.5 |
-1.8 |
-3.9 |
| HSI |
23302.2 |
-0.1 |
1.2 |
-1.6 |
-0.0 |
| JCI |
5073.1 |
-0.6 |
0.9 |
-1.2 |
18.7 |
| KLCI |
1818.9 |
0.5 |
2.9 |
-1.2 |
-2.6 |
| KOSPI |
1925.7 |
-0.3 |
1.3 |
-5.2 |
-4.3 |
| Nikkei 225 |
15291.6 |
1.0 |
5.2 |
-5.8 |
-6.1 |
| SET |
1539.9 |
0.5 |
0.9 |
-3.8 |
18.6 |
| TWSE |
8646.0 |
-1.0 |
1.6 |
-3.8 |
0.4 |
| BDI |
1192 |
3.2 |
26.3 |
13.6 |
-47.7 |
| CPO (RM/mt) |
2170 |
1.0 |
1.8 |
1.8 |
-15.7 |
| Nymex Crude |
81 |
0.2 |
-1.8 |
-13.2 |
-17.5 |
Key Assumptions
| Indicator |
2013 |
2014 |
2015F |
| GDP (yoy) |
- |
- |
- |
| US |
1.9 |
2.7 |
3.2 |
| Euro Zone |
-0.4 |
0.9 |
1.4 |
| Japan |
1.5 |
1.5 |
2.0 |
| Singapore |
3.9 |
3.5 |
3.9 |
| Malaysia |
4.7 |
5.9 |
5.2 |
| Thailand |
2.9 |
1.5 |
3.9 |
| Indonesia |
5.8 |
5.2 |
5.8 |
| Hong Kong |
2.9 |
3.5 |
3.7 |
| China |
7.7 |
7.2 |
7.0 |
| Brent (US$/bbl) |
110 |
100 |
85 |
| CPO (US$/mt) |
736 |
788 |
848 |
| BDI |
1,219 |
1,200 |
1,300 |
Top Picks
| Ticker |
Recommendation |
Price (HK$) |
Target Price (HK$) |
Upside % |
| Sunac China |
BUY |
1918 HK |
8.45 |
34.6 |
| ICBC |
BUY |
1398 HK |
6.15 |
23.2 |
| Bank Mandiri |
BUY |
BMRI J |
12,500.00 |
23.8 |
| Gamuda |
BUY |
GAM MK |
5.50 |
10.9 |
| DBS |
BUY |
DBS SP |
22.68 |
24.1 |
| Pacific Radiance |
BUY |
PACRA SP |
1.76 |
58.6 |
| Bangkok Bank |
BUY |
BBL TB |
276.00 |
40.8 |
| Advanced Info |
BUY |
ADVANC |
270.00 |
18.4 |
Corporate Events
| Event |
Venue |
Start Date |
End Date |
| ENN Energy Holdings Luncheon |
Hong Kong |
29 Oct |
29 Oct |
| Raffles Medical Group Luncheon |
Singapore |
30 Oct |
30 Oct |
| China Aviation Sector Analyst Presentation |
Singapore |
31 Oct |
31 Oct |
| China Aviation Sector Analyst Presentation |
Kuala Lumpur |
3 Nov |
4 Nov |
| China Aviation Sector Analyst Presentation |
Hong Kong |
5 Nov |
5 Nov |
| China Aviation Sector Analyst Presentation |
Taipei |
6 Nov |
7 Nov |
| Alam Sutera Realty Corporate Roadshow |
Taipei |
10 Nov |
11 Nov |
Analysts Contact
Risks
- Lower-than-expected power demand continuing into 4Q14 and beyond.
- Failure to control supply, including production reduction and import control.
