Regional Morning Notes Summary
Core Content Overview
This document provides a summary of market updates and investment recommendations for various regions including China, Indonesia, Malaysia, and Singapore, as well as key financial data and valuation metrics for Beijing Capital International Airport (694 HK) and AKR Corporindo (AKRA IJ). It also outlines upcoming corporate events and key assumptions for economic growth and financial indicators.
Key Market Updates
China
- Beijing Capital International Airport (694 HK/BUY/HK$7.37/Target: HK$10.20)
- Slower passenger throughput growth has been priced in at below-mean PE valuation.
- December 2016 passenger throughput growth accelerated to 8.5% from 5.9% in previous months.
- 2016 full-year passenger growth was 5.0%, in line with full-year estimates.
- Despite concerns over air pollution and slot constraints, the company is expected to deliver earnings growth due to higher international passenger throughput and high operating leverage.
- The airport is currently trading at a discount compared to peers and is considered a safe-haven play in a weak earnings environment.
Indonesia
- AKR Corporindo (AKRA IJ/BUY/Rp6,000/Target: Rp7,100)
- Re-initiated coverage with a BUY rating.
- Expected to outperform the JCI (Jakarta Composite Index) due to a 25% YoY increase in net profit from improved margins.
- Revenue growth from petroleum retail sales, chemicals distribution, and land sales in East Java.
- The company is expected to benefit from increased Brent oil prices to US$52/bbl in 2017, up from US$45/bbl in 2016.
Malaysia
- Gas Malaysia (GMB MK/BUY/RM2.55/Target: RM2.75)
- Good earnings visibility due to government approval of IBR (Investment and Business Regulation).
- BUY recommendation based on share price weakness.
- Sime Darby (SIME MK/HOLD/RM8.49/Target: RM8.65)
- Potential restructuring options to enhance value, including demerging the plantation division or merging the property division with PNB Group.
Singapore
- Telecommunications Sector
- Upgrade to OVERWEIGHT due to the question of whether companies should share or not share.
Thailand
- TMB Bank (TMB TB/HOLD/Bt2.24/Target: Bt2.40)
- 2016 net profit fell 12% YoY due to surging provisions.
- Sino-Thai Engineering & Construction (STEC TB/BUY/Bt25.50/Target: Bt32.00)
- Despite small contributions from mega projects, 2017 earnings are expected to grow 41% YoY on a low base from 2016.
Key Indices and Market Data
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
19826.8 |
(0.3) |
(0.3) |
(0.1) |
0.3 |
| S&P 500 |
2267.9 |
(0.3) |
(0.0) |
0.4 |
1.3 |
| FTSE 100 |
7220.4 |
(1.5) |
(0.8) |
3.0 |
1.1 |
| AS30 |
5754.7 |
(0.8) |
(1.0) |
3.0 |
0.6 |
| CSI 300 |
3326.4 |
0.2 |
(1.0) |
(0.6) |
0.5 |
| FSSTI |
3012.8 |
(0.0) |
0.2 |
2.5 |
4.6 |
| HSI |
22841.0 |
0.5 |
0.4 |
3.7 |
3.8 |
| JCI |
5266.9 |
(0.1) |
(0.8) |
0.7 |
(0.6) |
| KLCI |
1663.0 |
0.3 |
(0.5) |
1.5 |
1.3 |
| Nikkei 225 |
18813.5 |
(1.5) |
(2.5) |
(3.0) |
(1.6) |
| BDI |
925 |
1.6 |
(0.1) |
(2.2) |
(3.7) |
| CPO (RM/mt) |
3261 |
(0.4) |
0.6 |
0.5 |
2.0 |
| Brent Crude (US$/bbl) |
55 |
(0.7) |
3.4 |
0.5 |
(2.3) |
Top Picks and Recommendations
| Company |
Ticker |
Current Price |
Target Price |
Upside |
Recommendation |
| Air China |
753 HK |
5.25 |
6.50 |
+23.8 |
BUY |
| Ping An Insurance |
2318 HK |
40.10 |
47.00 |
+17.2 |
BUY |
| Ciputra Property |
CTRP IJ |
690.00 |
960.00 |
+39.1 |
BUY |
| Indosat |
ISAT IJ |
6,050.00 |
8,015.00 |
+32.5 |
BUY |
| Genting Bhd |
GENT MK |
8.29 |
10.15 |
+22.4 |
BUY |
| Citiv Dev |
CIT SP |
8.79 |
10.36 |
+17.9 |
BUY |
| OCBC |
OCBC SP |
9.35 |
10.65 |
+13.9 |
BUY |
| Bangkok Dusit |
BDMS TB |
22.50 |
31.20 |
+38.7 |
BUY |
| Siam Cement |
SCC TB |
492.00 |
645.00 |
+31.1 |
BUY |
Key Assumptions
| Region |
GDP Growth (% YoY) |
| US |
2.6 |
| Euro Zone |
1.6 |
| Japan |
0.9 |
| Singapore |
1.8 |
| Malaysia |
4.5 |
| Thailand |
3.3 |
| Indonesia |
5.2 |
| Hong Kong |
1.8 |
| China |
6.2 |
| Item |
2016 (US$/bbl) |
2017F (US$/bbl) |
2018F (US$/bbl) |
| Brent (Average) |
45 |
56 |
61 |
| CPO (RM/mt) |
2,653 |
2,600 |
2,500 |
Corporate Events
| Event |
Venue |
Date |
| China Healthcare Sector Analyst Marketing |
Malaysia |
17 Jan 2017 |
| Annual Heineken-UOB Kay Hian Corporate Networking |
Malaysia |
19 Jan 2017 |
| Spore REITS Sector Analyst Marketing |
Malaysia |
19 Jan 2017 |
| PTT Exploration and Production Roadshow |
Singapore |
6 Feb 2017 |
| Luncheon with Kim Loong Resources |
Malaysia |
13 Feb 2017 |
| SGX-UOB Kay Hian Corporate Day |
Taipei |
21 Feb 2017 |
| UOB Kay Hian ASEAN Conference |
Taipei |
22 Feb 2017 |
| Annual Plantation Outlook Seminar |
Malaysia |
6 Mar 2017 |
Valuation and Financials
Beijing Capital International Airport (694 HK)
- Share Price: HK$7.37
- Target Price: HK$10.20
- Upside: +38.4%
- PE (2017F): 14.1x (5% below 4-year mean)
- EV/EBITDA (2017F): 8.2x
- Net Debt/Equity (2017F): 24.4%
- Interest Cover (2017F): 11.6x
- ROE (2017F): 10.0%
AKR Corporindo (AKRA IJ)
- Share Price: Rp6,000
- Target Price: Rp7,100
- Upside: +18.3%
- PE (2017F): 18.9x
- EV/EBITDA (2017F): 16.4x
- Net Debt/Equity (2017F): 37.0%
- Interest Cover (2017F): 166.6x
- ROE (2017F): 17.7%
Peer Comparison
| Company |
Ticker |
Price (Icy) |
Rec |
Target Price (Icy) |
Market Cap (US$m) |
PE (2016) |
PE (2017F) |
P/B (2016) |
P/B (2017F) |
Yield (2016) |
Yield (2017F) |
ROE (2017F) |
| Airports Of Thailand |
AOT TB |
394 |
BUY |
450 |
15,979 |
29.5 |
24.7 |
4.7 |
4.2 |
1.7 |
2.1 |
18.1 |
| Beijing Capital Intl Airport |
694 HK |
7.37 |
BUY |
10.20 |
4,116 |
15.6 |
14.1 |
1.5 |
1.4 |
2.6 |
2.8 |
10.0 |
| Guangzhou Baiyun Intl Airport |
600004 CH |
13.93 |
NR |
n.a. |
2,334 |
11.9 |
11.4 |
1.5 |
1.4 |
2.6 |
2.6 |
12.8 |
| Malaysia Airports Hldgs |
MAHB MK |
6.22 |
HOLD |
6.40 |
2,311 |
39.5 |
24.9 |
1.7 |
1.7 |
1.4 |
1.1 |
1.8 |
| Shanghai Intl Airport |
600009 CH |
26.76 |
NR |
n.a. |
7,512 |
18.3 |
16.2 |
2.3 |
2.1 |
1.7 |
1.9 |
13.3 |
| Shenzhen Airport |
000089 CH |
7.97 |
NR |
n.a. |
2,381 |
26.8 |
22.0 |
1.5 |
1.4 |
0.8 |
1.1 |
6.5 |
| Sydney Airport |
SYD AU |
5.94 |
NR |
n.a. |
10,066 |
39.9 |
35.6 |
12.6 |
17.3 |
5.2 |
5.7 |
37.9 |
Conclusion
The report highlights the performance and future outlook of key companies in the region, emphasizing that Beijing Capital International Airport and AKR Corporindo are top picks due to their strong earnings visibility, potential for growth, and undervalued positions. It also outlines the impact of macroeconomic factors such as GDP growth, oil prices, and corporate restructuring on the market. Investors are advised to consider the upside potential from improved performance and strategic moves, particularly in the airport and energy sectors.
