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Regional Morning Notes Summary

Core Content Overview

This document provides a detailed analysis of stock performance and investment opportunities in the Asia-Pacific region, focusing on Colour Life Services Group (1778 HK) and Adhi Karya (ADHI IJ). It includes key financial metrics, valuation insights, and strategic developments for these companies, as well as market indices and upcoming corporate events.

Key Stories

Singapore: Telecommunications Sector

• The telecommunications sector in Singapore is "Almost out of the woods", suggesting it is nearing recovery or stable conditions.
• Page 14 is referenced for this analysis.

China: Initiate Coverage on Colour Life Services Group

• Initiate Coverage with a BUY recommendation at HK$6.13 and a target price of HK$7.82.
• The company is the largest residential community service provider in China, with a 1% market share and a total GFA of 25 billion sqm.
• The company is growing through organic expansion and M&As, with a 31.6% increase in contracted GFA to 270.2m sqm as of end-Jun 15.
• It is developing an online platform (Caizhiyun APP) that offers value-added services and has 1.56m registered users and 0.6m active users.
• The company's cost control practices and low-cost consultancy business contribute to strong profitability.
• Key financial metrics show consistent EBITDA and net profit growth.

Indonesia: Adhi Karya

• Rights issue at a 23% discount to current share price (Rp2,030) at Rp1,560.
• The rights issue involves issuing 1.76 billion shares, resulting in a 49.4% dilution.
• The company is the main contractor for LRT Stage 1 projects, with total construction value of Rp6.6t-7.0t.
• YTD 2015 new contracts reached Rp9.6t, which is 51.3% of its full-year target of Rp18.7t.
• The rights issue could lead to re-rating if the proceeds are used effectively, with a 2016F PE of 14.1x, lower than the sector's 18.7x.

Key Financials

Colour Life Services Group

Adhi Karya

Key Assumptions

Stock Impact & Valuation

Colour Life Services Group

• Upside of 27.6% to the target price of HK$7.82.
• The company is expected to benefit from its "Property+Service" strategy, which enhances customer loyalty and supports developers.
• The online platform and third-party applications are expected to drive value-added service growth.
• Strong cost savings and high net margins are key to its profitability.
• Valuation based on 15.5x 2016F PE.

Adhi Karya

• Potential 45% growth in net profit in 2016, based on 10% growth in new contracts and 48.2% realization rate.
• The rights issue may lead to re-rating if the proceeds are used effectively.
• The company is currently undervalued compared to the sector's average PE of 18.7x.

Corporate Events

Risks

• More market competition from large developers like COLI and Vanke.
• Rising labour costs could impact margins.
• Reliance on third-party sub-contractors for certain services.

Summary of Main Points

• Colour Life Services Group is a leading property management company in China with a BUY recommendation.
• The company has high growth potential and is transforming its business with an online platform.
• Adhi Karya is conducting a rights issue at a 23% discount to attract investors.
• The LRT project is a key driver for Adhi Karya's revenue and profit growth.
• Both companies are expected to benefit from improved performance and valuation.
• Key financial metrics indicate positive growth trends and strong profitability.
• The corporate events provide insights into market activities and investment opportunities.