Regional Morning Notes Summary - 24 June 2015
Core Content Overview
This document provides an analysis of the financial and strategic developments in the healthcare and retail sectors across several Asian countries, including China, Indonesia, Malaysia, Singapore, and Thailand. It also includes key indices, stock picks, corporate events, and valuation data for selected companies.
Main Points
China Healthcare Sector
- Drug Price Pressure: The government continues to push for hospital reform and standardization of drug procurement, leading to ongoing price pressures. Secondary price negotiations and the slow progress of drug tender programs are still key challenges.
- Tender Progress: As of 22 May 2015, some provinces (e.g., Hunan, Hubei, Sichuan) have started executing drug tenders, while others are still in the registration or negotiation stages.
- Policy Impact: The new policy encourages the use of essential drugs and aims to reduce hospital drug sales (excluding TCM decoctions) to below 30%. It also opens opportunities for private sector involvement in hospital pharmacy management.
- Stock Picks:
- Phoenix Healthcare (1515 HK): Recommended as a "BUY" with a target price of HK$21.80 (current price: HK$15.64).
- China TCM (570 HK): Recommended as a "BUY" with a target price of HK$8.80 (current price: HK$6.60).
- Risks: Lower tender prices, anti-corruption measures, competition, and possible delays in policy implementation.
Indonesia Retail Sector - Supra Boga Lestari (RANC IJ)
- Strategic Move: RANC plans to spin off its majority stake in Ministop and develop a fresh food mobile application called HappyFresh.
- Ministop Performance: Ministop has been incurring net losses due to limited brand recognition and scale. RANC aims to sell the brand to strategic investors to open 100-150 new stores.
- HappyFresh: A mobile platform that allows customers to choose delivery times and enjoy free delivery. It has a strong presence in Malaysia with 40,000 product varieties.
- Financials:
- RANC is trading at a 12-month trailing PE of 42.0x, which is a 6.6% premium to the sector average.
- In 2014, RANC reported a net profit of Rp15 billion, with a net margin of 0.9%.
- Valuation Metrics:
- 12-month trailing PE: 42.0x.
- EV/EBITDA: 3.8x.
- Risks:
- Unfavorable government regulations on modern retailers.
- Intense competition from global retail brands.
- Weak purchasing power due to high inflation.
Malaysia - Gamuda (GAM MK)
- Earnings Outlook: Earnings momentum is expected to slow down over the next 12-15 months.
- Stock Recommendation: "HOLD" with a target price of RM5.40 (current price: RM4.94).
- Corporate Events: Analyst presentations on the 2H15 Outlook and Strategy are scheduled for 1 Jul and 6 Jul 2015 in Singapore Kuala Lumpur.
Singapore - DBS Group Holdings (DBS SP)
- Performance: DBS is recommended as a "BUY" with a target price of S$25.08 (current price: S$20.92).
- Resilience: The company benefits from its operations in developed markets, contributing to its stability.
- Stock Recommendation: "BUY" with a potential upside of 19.9%.
Thailand - Advanced Info Service (ADVANC TB)
- Earnings Outlook: Weaker earnings are expected in 2Q15 due to seasonality.
- Stock Recommendation: "BUY" with a target price of Bt270.00 (current price: Bt231.00).
Key Indices
| Index |
Previous Close |
1 Day % |
1 Week % |
1 Month % |
YTD % |
| DJIA |
18144.1 |
0.1 |
1.3 |
-0.5 |
1.8 |
| S&P 500 |
2124.2 |
0.1 |
1.3 |
-0.1 |
3.2 |
| FTSE 100 |
6834.9 |
0.1 |
1.9 |
-2.8 |
4.1 |
| AS30 |
5671.4 |
1.2 |
2.5 |
0.1 |
5.2 |
| CSI 300 |
4786.1 |
3.2 |
-8.3 |
-3.3 |
35.4 |
| FSSTI |
3339.8 |
0.7 |
1.3 |
-3.2 |
-0.8 |
| HSI |
27333.5 |
0.9 |
2.9 |
-2.4 |
15.8 |
| KLCI |
1726.9 |
-0.3 |
0.3 |
-3.4 |
-2.0 |
| KOSPI |
2081.2 |
1.3 |
2.6 |
-3.0 |
8.6 |
| Nikkei 225 |
20809.4 |
1.9 |
2.7 |
2.7 |
19.2 |
| SET |
1503.2 |
-0.1 |
-0.0 |
-1.4 |
0.4 |
| TWSE |
9391.1 |
0.5 |
1.4 |
-2.6 |
0.9 |
| BDI |
790 |
1.4 |
16.0 |
34.8 |
1.0 |
| CPO (RM/mt) |
2219 |
-1.4 |
-1.5 |
4.0 |
-3.4 |
| Nymex Crude |
61 |
0.3 |
2.1 |
2.4 |
14.8 |
Top Picks
| Company |
Ticker |
Current Price |
Target Price |
Pot. Upside (%) |
| Beijing Capital |
694 HK |
8.76 |
12.30 |
40.4 |
| ICBC |
1398 HK |
6.63 |
7.80 |
17.6 |
| Bank BJB |
BJR J |
900.00 |
1,300.00 |
44.4 |
| Maybank |
MAY MK |
9.28 |
10.30 |
11.0 |
| DBS Group Holdings |
DBS SP |
20.91 |
25.08 |
19.9 |
| SATS Ltd |
SATS SP |
3.50 |
4.00 |
14.3 |
| Kasikornbank |
KBANK TB |
199.50 |
252.00 |
26.3 |
| PTT |
PTT TB |
357.00 |
410.00 |
14.8 |
Corporate Events
| Event |
Venue |
Date |
| M3 Marine Group Luncheon |
Singapore |
25 Jun |
| QL Resources Berhad Roadshow |
Singapore |
30 Jun |
| Malaysia 2H15 Outlook & Strategy |
Singapore Kuala Lumpur |
1 Jul - 7 Jul |
| Indonesia Oil and Gas Sector |
Singapore Kuala Lumpur |
6 Jul - 7 Jul |
Key Assumptions
| Country |
GDP (yoy %) |
| US |
2.9 |
| Euro Zone |
1.3 |
| Japan |
1.0 |
| Singapore |
2.9 |
| Malaysia |
5.0 |
| Thailand |
2.7 |
| Indonesia |
5.0 |
| Hong Kong |
3.7 |
| China |
7.0 |
| Metric |
2014 |
2015F |
2016F |
| Brent (US$/bbl) |
99.45 |
65 |
70 |
| CPO (US$/mt) |
722 |
765 |
788 |
| BDI |
1,101 |
1,300 |
1,400 |
Peer Comparison (2015)
| Company |
Ticker |
Rec |
Current Price (HK$) |
Target Price (HK$) |
Market Cap (HK$m) |
2015 EPS (Rmb cent) |
2016 EPS (Rmb cent) |
2017 EPS (Rmb cent) |
2015F PE (x) |
2015F P/B (x) |
2015F EV/EBITDA (x) |
| Shandong Weigao |
1066 HK |
SELL |
6 |
4.8 |
26,858 |
31.9 |
30.1 |
31.0 |
26.8 |
2.0 |
3.8 |
| Sinopharm Group |
1099 HK |
HOLD |
36.7 |
42.5 |
101,552 |
133.0 |
167.8 |
207.6 |
2.7 |
2.7 |
22.1 |
| Sino Biopharma |
1177 HK |
SELL |
8.81 |
7.3 |
43,534 |
37.3 |
44.9 |
52.6 |
5.3 |
5.3 |
23.6 |
| Pioneer Pharma |
1345 HK |
SELL |
4.93 |
5 |
6,573 |
24.0 |
27.5 |
32.8 |
4 |
4 |
16.5 |
| Phoenix Health |
1515 HK |
BUY |
15.64 |
21.8 |
13,040 |
33.8 |
41.4 |
60.3 |
5.7 |
5.7 |
37 |
| China TCM |
570 HK |
BUY |
6.60 |
8.80 |
28,288 |
20.0 |
28.9 |
36.5 |
1.7 |
1.7 |
26.4 |
Summary of Key Information
- China Healthcare: Drug price pressure remains due to ongoing tender programs and secondary negotiations. Phoenix Healthcare and China TCM are recommended as top buys.
- Indonesia Retail: RANC is spinning off Ministop and launching HappyFresh. It is trading at a 42.0x PE, which is higher than the sector average of 39.4x.
- Malaysia: Gamuda's earnings momentum is expected to slow down in the next 12-15 months.
- Singapore: DBS Group is highlighted as a top buy due to its presence in developed markets.
- Thailand: Advanced Info Service is expected to have weaker earnings in 2Q15 due to seasonality.
- Key Indices: Mixed performance across regions with notable gains in BDI and CPO, while some indices show negative trends.
- Top Picks: A mix of BUY and SELL recommendations with significant upside potential for some stocks.
