Regional Morning Notes Summary - 04 May 2017
Core Content Overview
This document provides a regional market analysis focusing on Malaysia, China, Indonesia, Singapore, and Thailand, highlighting key financial results, strategic updates, and market implications for the listed companies. It also includes key indices and analyst recommendations.
Main Points by Region
Malaysia
- Bandar Malaysia Debacle: TRX City's failed sale of Bandar Malaysia to the IWH-CREC JV after repeated extensions may lead to a knee-jerk selldown on IWC and dampen broader market sentiment.
- F&N Holdings (FNH MK): 2QFY17 results were above expectations, with a 18.2% yoy increase in net profit, driven by strong performance from Dairies Thailand and a lower effective tax rate.
- Sunway REIT (SREIT MK): 3QFY17 results were in line with expectations, with resilient retail and improved office segment performance partially offsetting hotel segment underperformance.
- Genting Plantations (GENP MK): Potential disposal of land and JVs could enhance group value by RM0.65–1.90/share, implying a 6–18% upside to the target price.
China
- Agricultural Bank of China (1288 HK):
- 1Q17 net profit: Rmb55.7b (+1.9% yoy), in line with expectations.
- Loan growth increased by 4% qoq, with a 7.9% qoq rebound in corporate loans.
- NIM expanded by 4bp qoq to 2.15%.
- County area asset quality improved, with NPL ratio declining to 2.86%.
- Dividend yield is 5.5%, leading to a HOLD recommendation.
- Target price: HK$3.50, based on 0.88x 2017F P/B from the Gordon Growth Model.
- Bank of China (3988 HK):
- 1Q17 net profit: Rmb46.6b (+0.1% yoy), in line with expectations.
- Loans grew by 9.4% yoy, with NIM up 5bp qoq.
- Asset quality remains a concern, with NPL ratio improving slightly to 1.45%.
- Other operating income increased by 50.4% yoy due to subsidy disposals.
- Dividend yield is 5.2%, leading to a HOLD recommendation.
- Target price: HK$3.50, with an upside of -6.7%.
Indonesia
- Adhi Karya (ADHI IJ):
- 1Q17 profitability is expected to improve due to faster LRT project progress.
- Buy recommendation with a target price of Rp2,800.
Singapore
- Sembcorp Industries (SCI SP):
- 1Q17 results: Poor marine performance, but utilities track expectations.
- Buy recommendation with a target price of S$3.66.
- StarHub (STH SP):
- 1Q17: Sequential rebound, but confronting multiple challenges.
- Hold recommendation with a target price of S$2.98.
Thailand
- The Erawan Group (ERW TB):
- 1Q17 results preview: Core profit expected to hit an all-time high.
- Buy recommendation with a target price of Bt6.20.
Key Indices (as of 04 May 2017)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
20957.9 |
0.0 |
-0.1 |
1.3 |
6.0 |
| S&P 500 |
2388.1 |
-0.1 |
0.0 |
1.2 |
6.7 |
| FTSE 100 |
7234.5 |
-0.2 |
-0.6 |
-1.2 |
1.3 |
| AS30 |
5919.9 |
-0.9 |
-0.3 |
0.4 |
3.5 |
| CSI 300 |
3413.1 |
-0.4 |
-0.8 |
-1.2 |
3.1 |
| FSSTI |
3237.8 |
0.8 |
2.3 |
1.8 |
12.4 |
| HSI |
24696.1 |
0.3 |
2.3 |
1.8 |
12.3 |
| KLCI |
1772.5 |
-0.3 |
0.4 |
1.4 |
8.0 |
| BDI |
1034 |
-3.6 |
-10.4 |
-19.3 |
7.6 |
| Brent Crude |
51 |
0.7 |
-2.0 |
-4.4 |
-10.6 |
| CPO (RM/ml) |
2703 |
2.7 |
3.6 |
-4.4 |
-15.5 |
Top Picks (BUY)
| Company |
Ticker |
Current Price |
Target Price |
Potential Upside (%) |
| Alibaba |
BABA US |
116.57 |
130.00 |
11.5 |
| Beijing Ent. Water |
371 HK |
5.90 |
7.60 |
28.8 |
| Indosat |
ISAT IJ |
7,150.00 |
7,900.00 |
10.5 |
| Tiga Pilar |
AISA IJ |
2,240.00 |
2,550.00 |
13.8 |
| V.S. Industry |
VSI MK |
2.02 |
2.20 |
8.9 |
| OCBC |
OCBC SP |
10.18 |
10.75 |
5.6 |
| SingTel |
ST SP |
3.74 |
4.48 |
19.8 |
| Bangkok Dusit |
BDMS TB |
20.20 |
27.00 |
33.7 |
| Siam Cement |
SCC TB |
530.00 |
600.00 |
13.2 |
Sell Recommendations
| Company |
Ticker |
Current Price |
Target Price |
Potential Downside (%) |
| Great Wall Motor |
2333 HK |
8.23 |
6.00 |
-27.1 |
| MGM China |
2282 HK |
17.70 |
15.00 |
-15.3 |
| Hartalega |
HART MK |
4.91 |
4.07 |
-17.1 |
Key Assumptions
| Metric |
2016 |
2017F |
2018F |
2019F |
| Loan Growth (%) |
9.1 |
9.3 |
8.8 |
8.8 |
| NPL Ratio (%) |
2.4 |
2.4 |
2.5 |
2.5 |
| Credit Costs (bp) |
102.1 |
114.7 |
119.3 |
112.7 |
| Net Profit (Rmbb) |
183.9 |
188.4 |
193.3 |
212.7 |
| Cost/Income Ratio (%) |
38.6 |
36.9 |
36.9 |
36.6 |
| Loan Loss Coverage (%) |
173.4 |
168.0 |
169.5 |
172.0 |
Valuation Metrics
| Metric |
2016 |
2017F |
2018F |
2019F |
| P/BV (x) |
0.8 |
0.7 |
0.6 |
0.6 |
| P/NTA (x) |
0.8 |
0.7 |
0.6 |
0.6 |
| Adjusted P/E (x) |
5.6 |
5.4 |
5.3 |
4.8 |
| Dividend Yield (%) |
5.4 |
5.5 |
5.7 |
6.2 |
Key Financials for Agricultural Bank of China (1288 HK)
| Metric |
1Q17 (Rmbm) |
1Q16 (Rmbm) |
yoy %chg |
qoq %chg |
| Net Interest Income |
103,206 |
101,704 |
1.5 |
3.2 |
| Other Operating Income |
20,798 |
8,406 |
147.4 |
560.1 |
| Net Profit (rep./act.) |
55,708 |
54,688 |
1.9 |
87.1 |
| Operating Expenses |
(56,904) |
(51,784) |
9.9 |
-5.7 |
| Pre-Provision Profit |
92,571 |
87,244 |
6.1 |
52.8 |
| Loan Loss Provision |
(23,629) |
(18,168) |
30.1 |
-8.8 |
| NPL Ratio |
2.33 |
2.39 |
-0.06 |
-0.04 |
| CET-1 CAR (%) |
9.81 |
10.5 |
- |
- |
Key Financials for Bank of China (3988 HK)
| Metric |
1Q17 (Rmbm) |
1Q16 (Rmbm) |
yoy %chg |
qoq %chg |
| Net Interest Income |
324,899 |
306,048 |
6.1 |
3.9 |
| Other Operating Income |
167,036 |
180,505 |
-50.4 |
- |
| Net Profit (rep./act.) |
168,983 |
164,578 |
2.7 |
23.6 |
| Operating Expenses |
(51,784) |
(56,904) |
- |
- |
| Pre-Provision Profit |
92,571 |
87,244 |
6.1 |
52.8 |
| Loan Loss Provision |
(23,629) |
(18,168) |
30.1 |
-8.8 |
| NPL Ratio |
1.45 |
1.45 |
- |
- |
| CET-1 CAR (%) |
11.27 |
10.5 |
- |
- |
Stock Impact Highlights
- Asset quality stabilisation in county areas, with NPL ratio improvement.
- Debt-to-equity swaps (DES) are being used by ABC to promote deleveraging.
- Trade recovery benefits BOC, with China's total trade up 12.2% yoy.
- BOCHK benefits from higher US interest rates, with NIM up 6bp in 2H16.
Analysts
