20160525-大华继显-Regional_Morning_Notes_31页_2mb

Regional Morning Notes Summary - 25 May 2016

Core Content Overview

This document provides a summary of market insights and investment recommendations for various Asian markets including China, Hong Kong, Indonesia, Malaysia, Singapore, and Thailand, with a focus on financial institutions and infrastructure-related stocks. It also includes key economic indicators, corporate events, and valuation analysis for selected companies.

Main Points by Region

China

• Strategy: "Take Some, Give Some" – Investors should focus on infrastructure and real estate due to the need for macro policy easing to support growth amid reform challenges.
• Market Outlook: Despite concerns about policy tightening, macro easing is still necessary to mitigate economic dislocation. The Li Keqiang index shows a rebound in growth, but the recovery is expected to be gradual (L-shaped).
• Key BUYs: CR Cement, Anhui Conch, CRCC, CCCC, CR Land, COLI, and Sunac.
• Valuation: MSCI China is trading at 9.9x 12-month forward PE, which is not compelling. However, the sector still offers attractive valuations, particularly in infrastructure and real estate.
• Earnings: Consensus EPS for MSCI China fell by 1.1% since March. The IT sector saw an increase, while energy and industrials faced cuts.
• Macro Data: Industrial profit growth rebounded to 7.4% yoy, but this was mainly due to lower input costs rather than top-line growth.

Hong Kong

• BOC Hong Kong (2388 HK): Maintain BUY due to attractive valuation, but special dividend may be minimal. The bank's share price rose on speculation, but the market may be disappointed.
• Dividend Yield: 5.4%, which is below the historical mean.
• Capital Adequacy: Tier-1 CAR is at 13.3% in 2016F, with Total CAR at 18.1%.
• Asset Disposal: Proceeds from asset sales may be used for ASEAN expansion rather than special dividends.
• Special Dividend Sensitivity: Based on different ASEAN asset valuations, the potential special dividend ranges from HK$0.69 to HK$3.07/share.

Indonesia

• Adhi Karya (ADHI IJ): Maintain BUY with a target price of Rp3,400.
• Project Delay: Complications arise in the Jakarta LRT project due to an ownership dispute between the Ministry of Transportation and the provincial government. The matter is pending a decision by the President.

Malaysia

• Genting (GENT MK): Maintain BUY. 1Q16 results met expectations, with non-gaming initiatives as key drivers.
• Genting Malaysia (GENM MK): Maintain HOLD. 1Q16 was a tepid quarter; Genting Highlands remains positive, but overseas operations could drag down performance.
• Hong Leong Bank (HLBK MK): SELL. 3QFY16 earnings were within expectations, but pre-provision profit and net profit fell by 1.4% and 4.1% yoy, respectively.

Singapore

• Cityneon Holdings (CITN SP): Maintain BUY with a target price of S$0.85.
• What's New: The company is expected to benefit from the "What happens in Vegas stays in Vegas" strategy, indicating a focus on entertainment and related sectors.

Thailand

• Amata Corporation (AMATA TB): Maintain HOLD. Weak land sales momentum continues.
• Hana Microelectronics (HANA TB): Downgrade to SELL. Smartphone and PC markets are decelerating.

Key Indices Performance

Top Picks

BUY

• Air China (753 HK)
• Ping An (2318 HK)
• Bank BJB (BJBR J)
• Gamuda (GAM MK)
• WCT Holdings (WCTHG MK)
• City (CIT SP)
• DBS (DBS SP)
• Siam Cement (SCC TB)

SELL

• Sapurakencana (SAKP MK)
• Sembcorp (SMM SP)

Key Assumptions

• GDP Growth:

  • US: 2.4% (2015), 2.5% (2016F), 3.0% (2017F)
  • Euro Zone: 1.6% (2015), 1.7% (2016F), 1.7% (2017F)
  • Japan: 0.5% (2015), 0.6% (2016F), 1.0% (2017F)
  • Singapore: 2.0% (2015), 2.7% (2016F), 3.0% (2017F)
  • Malaysia: 5.0% (2015), 4.2% (2016F), 5.0% (2017F)
  • Thailand: 2.8% (2015), 3.2% (2016F), 3.6% (2017F)
  • Indonesia: 4.8% (2015), 5.0% (2016F), 5.5% (2017F)
  • Hong Kong: 2.4% (2015), 2.1% (2016F), 1.8% (2017F)
  • China: 6.9% (2015), 6.5% (2016F), 6.2% (2017F)

• Brent Crude (Average): 53.60 (2015), 42 (2016F), 54 (2017F)

• CPO (RM/mt): 2,168 (2015), 2,500 (2016F), 2,600 (2017F)

Corporate Events

• Construction and Transport Sector Analyst Presentation (UK/Europe, 18 May – 25 May)
• Valuetronics Tea Session (Singapore, 26 May)
• Meidong Auto Roadshow (United Kingdom, 6 Jun – 7 Jun)
• Singapore Strategy for 2H16 & Small-Mid Caps Analyst Presentation (Taipei, 6 Jun – 7 Jun)
• China Aviation Oil Singapore Corporate Roadshow (Taipei, 7 Jun – 8 Jun)

Analysts

• Tham Mun Hon: +852 2236 6799 | munhon.tham@uobkayhian.com.hk
• Lauren Jiang: +852 2236 6798 | lauren.jiang@uobkayhian.com.hk
• Edmond Law: +852 2826 4837 | edmond.law@uobkayhian.com.hk
• Jasmine Duan: +852 2826 1351 | jasmine.duan@uobkayhian.com.hk

Conclusion

The document highlights the importance of macroeconomic support for China's economic reforms, emphasizing the need for continued policy easing. It also evaluates the performance and prospects of several key companies, including BOC Hong Kong, Adhi Karya, Genting, and others, with a mix of BUY and SELL recommendations. The analysis suggests that while some sectors like infrastructure and real estate are attractive, others face headwinds due to market conditions and policy changes.