AP Weekly Insight

Transcription

AP Weekly Insight

Weekly Update
AP Weekly Insight
Asia Pacific ex Japan / Investment Strategy
Feb 15, 2008
Agenda
21 Did the Snowstorm Freeze Chinese Consumers?
27 Tech: (TSMC) (2330.TT, Not Rated) / (UMC) (2303.TT, Not Rated)
23
Banking: M&A Rumor & Asset Quality Worries
Anita Hwang
H C Kwan.CFA
Patrick Pong
Key Calls
16 Metal & Mining: Shougang Concord Int’l (697 HK,BUY,TP HK$ 3.50)
14 Pharmaceutical: CSL LTD (CSL AU,BUY,TP A$42.04)
2
3
4
5
AP Economics
19
EY Lee
Sean Hwang
Shipping
Temporary Negative Effect from Snowstorm
NOL: Stronger than Expected US Routes
Hee Chan Park
Jay Ryu
Fixed Income
20
Auto Parts
Another liquidity cycle?
Strong Potential in Key Emerging Markets
Byungsoo Lee, CFA
Jaewoo Kim
Fund Flows
21
Consumer
Funds Flow Bottomming….
China’s Consumer Sector
Sunyoung Ahn, CFA
Anita Hwang
Quant Strategy
22
Banking
Valuations vs. Earnings
M&A Rumor & Asset Quality Worries
Young Jean Hwang
Patrick Pong
7
Earnings & Valuation / Performance Table
11
Asia Pacific Country & Sector Rating for February
14
Pharmaceutical
24
Internet / Software
China’s B2B e-Commerce Giant
16
Woo-Cheol Jeong
25
Tech
CSL LTD (CSL AU,BUY,TP A$42.04)
Semiconductor Update
Sean Hwang
Hak Moo Lee
Metal & Mining
26
Shougang Concord Int’l (697 HK,BUY,TP HK$ 3.50)
Tech
Taiwan Semiconductor Manufacturing (TSMC)(2330.TT, Not Rated)
United Microelectronics (UMC)(2303.TT, Not Rated)
EY Lee
H C Kwan,CFA
18
Construction & Property
27
Telecom
Chongqing - Glittering in Western China
IPTV Begins to Bloom in Asia
Kaiser Choi
Young Choi
Equity Research
MIRAE ASSET RESEARCH
AP Insight
AP Economics
Figure 2. Primary Production in 2007
(100Bn Yuan)
20
Comment
(%)
Whole Country (LHS)
25
6 Province (LHS)
Weight of 6 Province (RHS)
23
22.0
21
20.9
23.6
China Economy
15
10
Hee Chan Park
82-2-3774-1850 / [email protected]
19
5
17
0
Temporary Negative Effect from Snowstorm
15
1Q07
2Q07
3Q07
Source: National Bureau of Statistics of China, Mirae Asset Research
estimates
Estimates of immediate damage
The snowstorm has cast a shadow over China’s short-term
growth prospects. GDP growth under 10% YoY cannot be
ruled out.
Long-term effect from snowstorm
Annual GDP growth should not be significantly affected for
Six key provinces suffering from the snowstorm are Anhui,
the following positive factors:
Jiangxi, Hunan, Hubei, Guangxi and Guizhou, but among
(1) 1Q GDP makes up just one-fifth of the entire year’s GDP
them Anhui, Hunan and Hubei were most affected. The
(relatively lower than other quarters) as production
affected regions produce 10-15% of total GDP. Considering
activity nearly stops during the Lunar New Year holiday.
that entire economic activities stopped for a month in these
regions, we estimate 1Q08 GDP to fall by 3.4-4.7%.
(2) Coal shortage is to be eased once transportation is
restored; Shanxi, Inner Mongolia and Henan (46.7% of
total domestic coal production) have not been seriously
affected by the storm.
Figure 1. Weight of Damaged Districts by Activity
(3) Post-storm reconstruction should enhance investments
(%)
25
3 Province
22.2
6 Province
20
14.3
15.4
16.4
into infrastructure; special agricultural loans from the
PBC for affected areas and subsidies from central states
and other countries should boost the growth rate.
14.7
15
10.1
10.6
10.4
10.4
10
7.0
5
However, inflation still remains a risk factor. Price has risen
1.9
2.9
sharply since the storm. High inflation should sustain until
restoration is complete. But we cannot rule out the
0
State GDP Retail Sales
Fixed
Agricultural Industrial Exports
investmet Production Production
possibility that this might prolong the inflation period, and
exacerbate sluggishness in domestic demand.
Source: FactSet, Mirae Asset Research estimates
Investment implications
Damage is likely to be different by industry. Primary industry
and domestic demand seems to be more affected than
secondary industry or exports. In terms of total national
output, agricultural production of the damaged regions
makes up 14.7-22.2%. However, industrial production
makes up 7.0-10.4%, retail sales 10.6-15.4%, fixed
investment 10.4-16.4%, and exports just 1.9-2.9%.
Feb 15, 2008
Inflationary pressure heightened by variables like natural
disasters are not significant factors for a rate hike. Although
the snowstorm is likely to have increased inflationary
pressure, the rate hike does not seem to be a card the PBC
can use. Moreover, concerns of a US recession, and the
Fed’s aggressive rate cuts are additional obstacles to a rate
hike.
2
AP Insight
already priced in a future rate cut with government bond
Fixed Income
yields now below the ECB policy rate of 4%,
Comment
BoK may stay ahead of the curve.
The February BOK has decided to leave its benchmark
Another liquidity cycle?
rate at 5% (unchanged since August 2007). What is most
different from previous statements is that the BOK is very
Byungsoo Lee, CFA
concerned with the uncertainty of Korean economic
prospects due to spillover from the US slowdown. With
private consumption slowly moderating, the Korean
High possibility of Europe following US lead
Monetary policy in advanced countries took note of the
economy is likely to grow at a slower pace if exports
quick and sharp cuts in the US Fed Funds rate. Last week,
weaken (even though solid now) due to decrease in
the bank of England (BOE) also lowered its benchmark
demand by major trading partners. Given the BOK
rate 25bp to 5.25%, following a December 2007 rate cut,
chairman’s remarks on the possibility of preemptive easing
reflecting concerns that a sharp slowdown of activity pulls
of monetary policy ahead of adverse economic data, we
inflation below its target in the mid term. The European
expect the BOK to cut its benchmark rate by 50bp in the
Central Bank (ECB) newly expressed that uncertainty
first half of this year.
about prospects for economic growth are unusually high,
even though it kept its rate on hold due to inflation risk.
Other countries continue tightening stance
With the uncertain over global financial markets, several
Figure 1. Monetary Easing in Advanced Countries
resource-rich countries have been tightening their rates.
Australia raised its benchmark rate to 7% and Russia
(% )
Policy Rates in the Major Advanced Countries
raised its benchmark rate to 10.25%. These countries are
7
exports-oriented and benefiting from the fast growth of
6
emerging economies. This may imply that emerging
5
countries are growing steadily relative to advanced
4
countries and thus indicates that negative spillover effects
3
from US are limited. However, we believe that these
US
Canada
ECB
UK
2
1
countries will need to lower rates going forward due to
rapidly widening interest rates worldwide.
0
03
04
05
06
07
08
Figure 2. Monetary Tightening Abroad
Source: Bloomberg, Mirae Asset Research Center
(% )
In its monetary statement of January 10, the ECB expects
Europe to grow at pace close to its projected growth rate
despite uncertainty in the overseas financial markets.
However, recently the ECB took a more conservative
stance on economic prospects due to the heightened
possibility of the European economy being affected by a
major slowdown in the US. We believe this is due mainly
to the German and French economies slowing quicker
than other European economies, adding to fears that this
Policy Rates in the High-Resource Countries
20
Australia
Russia
Norway
Sweden
18
16
14
12
10
8
6
4
2
0
03
04
05
06
07
08
will affect the European economy as a whole
Source: Bloomberg, Mirae Asset Research Center
Advanced countries affected by the US economic
slowdown are highly likely to follow the US lead and lower
benchmark rates as well. We need to focus on the fact
that the BOE has continued to lower rates, even though
the UK has strong domestic demand relative to other
European countries. The European bond market has
Feb 15, 2008
3
AP Insight
Fund Flows
Weekly Update
Funds Flow Bottomming….
Sunyoung Ahn, CFA
z
Regional funds such as international funds and emerging market funds recorded slight net inflow or moderate net outflow. For
the US funds, which had posted a large-scale outflow over three weeks consecutively, outflow declined to 70% of the level
recorded two weeks ago (or US$6.7bn) last week.
z
In Korea and India, foreign investors are selling some stocks for profit-taking. Meantime, in other Asian countries, moderate net
purchase has been going on for the past three weeks.
z
Due to the fund flow attributes lagging the market, it is premature to expect a dramatic turn into inflow. However, the fact that
the global fund flow and foreign investors’ trading in Asia is stabilizing raises the expectations for the market’s bottoming out.
Figure 1. Global & US Fund Flow
Figure 2. Global Sector Fund Flow
Weekly Net Inflow
02/07~
01/31~
02/13
02/06
(US$ mn)
Total Equity Type
Asia ex.
Japan
South
America
Emerging
markets EMEA
Emerging
markets
Emerging
markets,
total
Pacific
International
4-Wk Net
Inflow
YTD
Total
Asset
-7,606
-7,912
-36,600
-37,696
-
-461
-435
-7,059
-8,641
169,423
-162
-131
-1,595
-2,248
45,030
-288
-72
-2,240
-1,177
51,718
-116
571
-3,855
-4,931
216,554
-1,026
-68
-14,750
-16,996
482,724
-5
35
-764
-1,113
21,420
-5,534
764,654
128
1,332
-5,937
-6,725
-9,579
-32,031
Advanced Europe
markets
Japan
-1,105
-145
-7,031
-14,755
301,122
-279
-503
-3,207
-4,214
40,285
Taxable Bond Fund
1,200
2,200
5,323
9,523
-
US
-35,588 1,803,353
Weekly Net Inflow
4-Wk
Last 2 Weeks 3 Weeks Total
Week
ago
ago
(US$ mn)
All Sector
Funds
Commodities/
Materials
2008
YTD
Total
Asset
-1,741 -3,855 -1,296
231,643
-695
-2,147
155
-51
301
382
1,500
58,950
307
109
-99
607
696
6,465
-641
-448
-711 -1,674 -2,560
26,892
Financials
274
-1,445
222
-50
1,644
15,361
Health Care/Biotech
-68
-24
-135
-74
231
24,410
Real Estate
-425
-139
-579 -1,129
-895
45,749
Technology
-307
-132
-338 -1,044 -1,466
23,421
Telecom
-16
-100
-41
-283
-381
5,870
Utilities
25
76
-343
-577
-50
24,273
Consumer Goods
Energy
Note: Each period from Thursday to Wednesday
Source: AMG Data Service, EPFR (as of February 13, 2008)
Note: Each period from Thursday to Wednesday
Source: EPFR (as of February 13, 2008)
Figure 3. Foreign Investors Trading Trend in Asia
Figure 4. Foreign Investors in 6 Asian Countries
Foreign Investors' Net Purchases
(US$ mn)
Korea
Taiwan
India
2
3
4
Last
Weeks Weeks Weeks
Week
ago
ago
ago
-1,254
105 -745 -2,437
542
-400
0
412
-586
915 -1,182 -1,949
(pt)
4-Wk
Total
YTD
Weekly Market
Performance
440
400
-4,332 -10,101
-4.72
360
-487
-1.81
320
-2,616 -3,301
-3.31
280
368
269
304
380
-349
604
-333
3.31
240
Indonesia
52
20
139
-76
134
207
-0.88
200
Philippines
7
-35
3
-91
-115
-303
-1.16
-784
N/A
1,308
-993 -5,488
-5,958 -14,318
N/A -3,497 -1,495
-4,991 -6,799
Note: Each period from Monday to Friday; Last week is from Monday to
Thursday , Japanese as of January 25, 2008
Source: Bloomberg(as of February 14, 2008)
Feb 15, 2008
Foreign Investors' Accumulated Net Purchases
(RHS)
(USD mn)
220,000
190,000
160,000
130,000
100,000
Thailand
6 Asian
Countries Total
Japan
MSCI EM Asia Index (LHS)
70,000
160
40,000
120
10,000
80
(20,000)
Jan-03 Nov-03 Sep-04 Jul-05 May-06 Mar-07 Jan-08
0.12
Note: 6 Asia Markets include Korea, Taiwan, India, Indonesia, Thailand,
Philippines.
Source: Bloomberg(as of February 14, 2008)
4
AP Insight
Quantitative Strategy
Figure 2. 12-MT P/B in Asia-Pacific ex. Japan
(x)
Weekly Update
(%)
3.5
18
Valuations vs. Earnings
12M Trailing P/B
3.0
Young Jean Hwang
Valuations reasonable
The global stock market has been weakening since Nov
2007 amid concerns over a potential recession of the US
economy. While the MSCI AC World index declined 14%
16
12M Trailing ROE
2.5
14
2.0
12
1.5
10
1.0
2001
Source :
8
2002
2003
2004
2005
2006
2007
2008
MSCI, FactSet, Mirae Asset Research
from its 2007 high, the MSCI AC Asia Pacific ex. Japan
index plunged 21% from its 2007 peak.
Earnings deteriorating
Meanwhile, estimated earnings prospects of the Asia
This makes the valuations of the Asia Pacific ex. Japan
Pacific ex. Japan market continue to deteriorate.
market undemanding. 12-month forward P/E has declined
Upgrades have outpaced downgrades since mid-January
28% from the previous high of 17.4x (Oct 29, 2007) to
2008. The earnings revision ratio in the Asia Pacific ex.
12.5x (Jan 22, 2008), and recently rebounded to 13.1x
Japan market has recently plunged to -20%, the lowest
(Feb 13, 2008). The recent decline in 12-month forward
since 2003.
P/E (from 17.4x to 12.5x) is the steepest since 2003, even
in view of the decline of the 12-month forward P/E from its
The earnings revision ratio fell to 0% in August 2007 when
record high to its record low.
the seriousness of the subprime issue first began to be felt.
In December 2007, it began declining further into negative
territory over concerns of a potential recession in the US
Figure 1. 12-MF P/E in Asia-Pacific ex. Japan
consumption that began to take shape.
(x)
18
17.4x
16
(%)
14.6x
14.2x
30
13.9x
14
20
12.7x 13.0x
12
Figure 3. Earnings Revision Ratio in AP ex. Japan
16.0x
13.1x
11.8x
11.4x
10
2003
10.2x
11.7x
12.9x
12.5x
11.5x
10
0
10.6x
2004
2005
2006
2007
2008
-10
Earnings revision ratio (weekly)
Source :
MSCI, I/B/E/S, FactSet, Mirae Asset Research
-20
Earnings revision ratio (4-week MA)
In addition, 12-month trailing P/B of the Asia Pacific ex.
Japan market has decreased to 2.4x from the 3.0x historic
-30
Jan-07
Source :
Apr-07
Jul-07
Oct-07
Jan-08
high recorded in Oct 2007. Though this is above the 2.0x
average since 2001, it seems reasonable that the ROE of
On a country level, countries that are highly linked to the
the Asia Pacific ex. Japan market still maintains its upward
US economy have experienced more deterioration in
trend.
forecast earnings. The earnings revision ratios in Taiwan
and Korea have recently plummeted into deep negative
territory (from positive territory in November 2007). In
Japan, its earnings revision ratio has been declining
further into the negative, as well. On the contrary, the
earnings revision ratios in India and Hong Kong have
remained relatively robust.
Feb 15, 2008
5
AP Insight
Figure 4. Earnings Revision Ratios by Country
(%)
60
Nov 2007
40
Feb 2008
20
0
-20
Source :
Korea
Taiwan
New Zealand
Japan
Thailand
Australia
Singapore
Philippines
China
Pakistan
Hong Kong
India
Malaysia
-60
Indonesia
-40
Continuously deteriorating earnings revision ratios in the
Asia Pacific ex. Japan market are likely to imply that the
downward revision of forecast EPS is becoming a marketwide trend. As such, it is highly likely to deal a blow to
valuation attractiveness in Asia Pacific ex. Japan.
Market direction
All in all, we think that while reasonable valuations will limit
the market’s downside risk, stock markets are likely to
remain range-bound until there is greater clarity about
macroeconomic and earnings growth.
Feb 15, 2008
6
AP Insight
Earnings & Valuation / Performance Table
Young Jean Hwang
Table 1. Earnings & Valuation / Performance : Global Market
Country
Weight
# Co's
(%)
AC Wor ld
100.0
EPS G (%)
08E
09E LT(5Y)
(YoY) (YoY) Forcast
EPS Change (%)
2008E
2009E
1W
1M
1W
1M
ERR - 12MF
02/13
1W
1M
(%)
(%)
(%)
12-month Forward Valuation
DY
PER
PBR EV/EBITDA
(x)
(x)
(x)
(%)
PEG
(x)
1W
(%)
Performance
1M
12M
(%)
(%)
YTD
(%)
2,872
12.2
11.8
12.0
- 0.7
- 0.8
- 0.6
- 0.6
- 29
- 27
- 12
12.4
2.1
7.5
3.1
1.0
1.6
- 4.9
-7
-9
De v e lope d M a r k e t
EAFE
Pacific
North America
Europe
88.8 1,945
42.1 1,205
12.7
586
46.7
740
29.4
619
11.7
8.6
5.0
15.4
9.9
11.6
10.2
10.9
13.2
10.0
11.2
9.6
11.6
12.6
8.8
- 0.8
-1.2
-0.8
-0.3
-1.4
- 0.8
-1.4
0.3
-0.4
-2.0
- 0.6
-1.2
-0.5
0.0
-1.5
- 0.5
-1.4
0.6
0.4
-2.2
- 35
-41
-33
-25
-49
- 32
-37
-30
-22
-44
- 17
-13
-10
-24
-17
12.5
11.4
13.1
13.7
10.8
2.1
1.8
1.4
2.9
1.9
7.6
7.3
8.6
7.9
6.7
3.1
3.6
2.5
2.5
4.1
1.1
1.2
1.1
1.1
1.2
1.7
0.2
-1.0
3.1
0.7
- 4.5
-7.0
-7.7
-2.2
-6.6
-9
-14
-20
-5
-11
-9
-12
-13
-7
-11
E me r ging M a r k e t
Asia
Latin America
Europe
11.2
5.9
2.5
1.6
927
555
148
102
15.8
16.7
15.3
11.9
13.1
14.4
10.1
8.6
19.3
21.7
17.0
13.9
- 0.2
0.0
1.1
-0.1
- 0.9
-0.8
-0.2
0.8
- 0.5
-0.1
0.1
-0.2
- 1.1
-0.7
-1.0
-0.2
- 16
-24
-2
13
- 15
-22
-1
16
2
2
-2
-3
12.1
12.8
12.5
10.1
2.0
2.0
3.6
1.5
6.9
6.8
8.9
6.4
2.9
2.8
3.7
2.6
0.6
0.6
0.7
0.7
0.5
-2.8
6.0
4.1
- 7.9
-11.3
0.9
-10.7
15
17
23
8
- 11
-14
-4
-12
AC Asia P a c if ic
AC AP e x . J a pa n
AC Asia
AC Asia e x . J a pa n
Australia
Hong Kong
Japan
New Zealand
Singapore
China
India
Indonesia
K or e a
Malaysia
Pakistan
Philippines
Taiwan
Thailand
18.6 1,141
10.1
744
15.8 1,043
7.3
646
2.7
88
1.0
54
8.5
397
0.1
10
0.5
37
1.6
112
0.8
63
0.2
23
1.5
113
0.3
56
0.0
13
0.1
18
1.1
123
0.2
34
8.5
8.6
9.5
10.7
13.9
-19.8
8.3
5.2
3.3
21.5
20.7
17.1
15.6
-6.1
18.7
15.0
10.0
100.9
12.0
14.6
11.6
14.5
7.9
16.2
9.1
6.0
13.4
16.6
23.3
17.1
14.3
11.8
10.1
19.3
9.2
6.9
14.9
17.1
16.0
20.4
9.0
16.1
12.0
6.8
13.3
23.8
28.3
39.3
18.2
15.4
12.6
13.1
18.3
12.3
- 0.6
0.1
- 0.8
0.0
0.0
-0.1
-1.4
0.2
-0.6
0.0
0.3
0.7
- 0.8
0.5
-0.2
-0.3
-0.4
0.3
- 0.1
- 0.1
- 0.3
- 0.7
0.8
0.5
-2.6
-0.5
-1.0
1.1
0.7
3.7
- 0.6
-0.1
0.9
-0.6
-6.1
0.9
- 0.4
0.2
- 0.7
- 0.2
0.5
-0.1
-1.2
0.1
-0.7
-0.2
0.4
0.7
- 0.8
0.2
-0.2
-0.3
-0.9
0.3
0.2
0.4
- 0.3
- 0.7
2.0
0.4
-2.6
-1.0
-1.9
0.5
1.0
5.4
- 0.8
-0.1
0.4
-0.8
-5.4
1.3
- 28
- 24
- 28
- 23
-31
-6
-37
-40
-31
-9
21
48
- 54
-6
-10
-28
-57
-39
- 26
- 22
- 25
- 20
-40
9
-34
-30
-28
-18
16
26
- 41
6
-10
-17
-56
-29
-4
1
-4
1
-7
2
-13
20
-6
8
34
65
- 36
15
-10
11
-12
20
13.0
13.1
13.1
13.3
12.7
17.4
13.1
12.7
12.7
15.1
18.0
14.7
10.5
15.3
11.0
13.9
11.1
11.2
1.6
2.1
1.5
2.0
2.3
1.8
1.3
2.0
1.8
2.7
3.3
4.1
1.4
2.3
NA
2.3
1.7
2.0
8.1
9.7
6.9
7.2
15.8
12.4
6.7
6.7
3.4
7.4
11.1
6.5
5.5
7.1
6.9
6.2
6.3
6.5
2.6
3.3
2.3
2.9
4.5
3.0
1.8
5.7
4.1
2.4
1.1
2.8
2.0
3.6
4.7
3.2
5.2
3.8
0.9
0.8
0.8
0.7
1.4
1.1
1.1
1.9
1.0
0.6
0.6
0.4
0.6
1.0
0.9
1.1
0.6
0.9
- 1.6
- 8.9
- 2.2 - 10.5
- 1.6
- 9.1
- 2.4 - 11.5
-1.7
-7.7
-1.5 -13.3
-0.8
-6.9
-4.9
-8.9
0.4
-9.8
-0.6 -16.6
-7.4 -20.7
-0.9
-5.0
- 4.7
- 7.3
0.8
-6.0
1.2
3.9
-0.7
-8.2
-1.8
-5.1
4.5
5.6
- 11
7
- 12
15
-7
12
-26
-19
-6
37
22
65
13
16
15
-5
-5
24
- 14
- 14
- 14
- 14
-13
-16
-13
-13
-15
-18
-19
-2
- 14
-1
3
-11
-11
-3
AC Ame r ic a s
US
Canada
Argentina
Brazil
Chile
Colombia
Mexico
Peru
49.3
42.9
3.8
0.1
1.6
0.1
0.0
0.6
0.1
888
635
105
11
69
27
7
28
6
15.4
15.8
11.0
23
11.7
21.4
45.1
22.7
49.3
13.0
13.5
9.8
7.9
12.1
12.2
30.2
4.1
-12.5
12.8
12.6
11.6
NA
14.8
13.1
NA
23.8
15.0
- 0.2
-0.4
0.7
66.7
-0.8
1.3
-0.7
-0.4
-4.7
- 0.3
-0.5
1.8
77.9
-0.8
0.2
0.9
-2.0
-10.1
0.1
0.0
1.0
-2.5
-0.6
1.4
-0.3
-0.2
-3.8
0.3
0.3
2.6
-2.2
0.9
-0.3
14.3
-6.3
-16.5
- 22
-27
-10
0
-3
13
100
-17
0
- 20
-23
-15
0
0
7
100
-18
0
- 21
-27
-2
0
-2
13
0
-15
100
13.6
13.6
13.7
10.5
12.1
15.0
10.4
13.2
19.2
2.9
2.9
2.4
NA
3.1
1.8
NA
2.7
NA
7.9
7.9
6.5
NA
8.3
7.0
NA
6.9
NA
2.5
2.5
3.0
2.6
4.7
3.0
3.9
3.4
NA
1.1
1.1
1.2
NA
0.8
1.1
NA
0.6
1.3
3.3
3.1
3.3
-0.1
6.6
5.0
1.5
5.2
9.0
- 2.1
-2.2
-2.6
-2.2
0.8
1.6
-10.1
1.9
1.9
-4
-5
2
-13
39
-6
-8
2
57
-6
-7
-4
-9
-4
-6
-14
-1
1
AC E ur ope
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
UK
Czech Rep.
Hungary
Poland
Russia
Turkey
31.0
0.2
0.5
0.4
0.8
4.4
3.9
0.3
0.3
1.7
1.2
0.4
0.2
1.7
1.0
2.9
9.5
0.1
0.1
0.2
1.1
0.2
721
16
22
23
23
74
61
15
14
40
24
22
11
31
48
39
156
7
4
28
32
31
10.0
9.6
2.0
15.6
-6.1
13.6
9.2
13.7
7.1
11.1
2.4
4.8
7.6
13.1
5.3
33.5
5.7
18.6
10.2
6.3
13.5
8.1
9.9
9.8
12.9
14.0
7.5
9.5
12.1
17.7
7.6
9.8
10.2
12.0
11.3
12.8
8.4
11.2
8.3
8.7
6.4
9.2
6.8
18.4
8.9
9.9
7.9
17.5
6.0
6.4
8.3
21.3
7.1
6.2
6.6
9.6
7.7
8.1
6.4
11.9
9.8
18.9
7.3
19.6
13.4
11.3
- 1.3
-0.1
-3.5
0.3
-0.1
-0.7
-0.3
-0.5
-0.6
-0.3
-0.3
-0.1
-0.6
0.1
-1.5
-1.1
-0.2
0.1
0.5
2.1
-0.1
-1.5
- 1.9
-1.3
-8.4
-0.6
1.1
-1.9
-1.3
-0.5
-0.6
-0.4
-1.5
-0.2
-2.0
-0.5
-4.2
-3.0
-1.6
0.6
0.8
-3.8
2.1
1.3
- 1.4
-0.5
-3.1
0.1
-0.8
-0.9
-0.5
-0.9
-0.8
-0.3
-0.3
-0.5
-0.8
-0.1
-1.9
-1.2
-0.1
-0.7
-0.3
-0.2
-0.3
1.3
- 2.1
-1.4
-8.4
-0.5
0.3
-2.3
-1.4
-0.8
-2.0
-0.4
-1.3
-0.5
-2.7
-0.8
-4.4
-3.1
-1.6
-1.6
-0.8
-6.8
1.0
3.6
- 41
-38
-14
-36
-30
-57
-58
-47
-57
-44
-63
-45
-45
-77
-67
-50
-40
-33
50
-19
52
17
- 37
-25
-5
-50
-30
-58
-33
-7
-71
-28
-63
-27
-45
-71
-62
-55
-42
17
25
-38
67
27
- 15
13
-27
-14
-26
-28
-16
-20
-21
-28
-25
-9
-36
0
-24
-13
-10
17
0
-4
-10
-3
10.8
9.1
10.0
13.4
13.5
10.5
11.0
11.0
8.4
10.0
10.4
10.4
13.4
10.5
10.7
12.0
10.9
14.4
9.9
10.9
10.0
8.2
1.9
1.4
1.8
2.5
2.9
1.6
1.7
2.2
1.4
1.6
1.8
1.9
2.4
2.0
2.0
2.4
2.0
3.6
2.1
1.1
1.4
1.7
6.7
5.6
7.2
8.8
8.0
5.9
5.8
7.3
7.8
5.3
6.6
4.8
8.9
7.3
7.1
8.8
7.3
9.0
6.0
5.8
6.5
4.9
4.0
3.3
4.5
1.9
3.4
4.1
3.5
4.5
4.9
5.3
4.2
4.1
4.4
4.9
4.8
3.1
4.3
4.1
3.5
4.5
1.7
4.8
1.2
0.9
1.3
0.8
2.2
1.6
1.3
0.5
1.2
1.6
1.6
1.1
1.7
1.3
1.7
1.0
1.1
0.8
1.4
0.6
0.7
0.7
0.9
1.0
0.3
3.3
3.7
0.9
2.0
-1.1
0.1
0.5
-0.2
0.6
0.9
1.5
0.8
-0.3
0.1
2.6
7.2
4.3
4.1
3.1
- 6.8
-4.5
-9.5
0.5
4.6
-8.6
-8.8
-11.3
-0.6
-8.9
-7.1
-8.0
-8.9
-9.3
-2.3
-7.3
-4.8
-2.3
-1.2
-3.9
-12.4
-13.9
- 11
-23
-29
-5
16
-15
-1
-8
-34
-20
-11
-14
-9
-10
-20
-19
-9
15
1
-13
14
1
- 11
-13
-13
-8
-6
-13
-13
-16
-4
-11
-13
-18
-12
-14
-12
-11
-9
-9
-7
-11
-11
-20
Israel
Egypt
South Africa
0.3
0.1
0.7
32
17
50
13.1
10.3
21.6
29.1
15.0
17.7
14.6
15.0
11.4
-0.8
0.7
0.3
-1.9
4.9
0.1
1.2
-3.9
0.8
-1.8
-0.7
1.9
-5
-17
-32
-14
-8
-22
19
27
2
12.2
15.2
10.4
2.0
NA
2.4
9.8
8.5
6.7
4.4
2.7
4.0
0.8
1.0
0.9
2.0
-1.6
2.1
-5.0
-8.2
-0.4
6
40
3
-7
-5
-3
Note : Above table is as of Feb. 13, 2008.
Source : MSCI, I/B/E/S, FactSet, Mirae Asset Research
Feb 15, 2008
7
AP Insight
Table 2. Earnings & Valuation / Performance : MSCI AC Asia Pacific ex. Japan
Country
Weight
# Co's
(%)
EPS G (%)
08E
09E LT(5Y)
(YoY) (YoY) Forcast
EPS Change (%)
2008E
2009E
1W
1M
1W
1M
ERR - 12MF
02/13
1W
1M
(%)
(%)
(%)
12-month Forward Valuation
PER
PBR EV/EBITDA
DY
(x)
(x)
(x)
(%)
PEG
(x)
1W
(%)
Performance
1M 12M
(%)
(%)
YTD
(%)
Market
100.0
744
8.6
14.6
17.1
0.1
- 0.1
0.2
0.4
- 24
- 22
1
13.1
2.1
9.7
3.3
0.8
- 2.2 - 10.5
7
- 14
E ne r gy
8.2
40
19.3
12.1
17.7
0.7
3.7
0.5
4.0
31
13
18
13.4
2.7
7.8
2.6
0.8
- 1.7 - 15.5
48
- 16
13.1
2.0
9.7
0.1
77
21
33
4
6.6
8.1
6.1
29.2
12.8
-4.7
16.7
37.6
9.4
9.2
7.9
30.2
- 0.1
0.7
-0.5
0.4
1.4
0.1
1.8
-3.1
1.3
0.7
1.4
0.3
4.7
-0.2
6.6
-4.5
- 19
-20
-6
-100
- 33
-40
-25
-100
5
5
-9
0
11.3
10.8
11.2
11.8
2.3
1.9
2.3
1.8
6.5
10.6
5.8
9.4
2.9
5.2
2.3
2.6
1.2
1.2
1.4
0.4
- 7.8
-11.4
-6.4
-26.5
28
29
37
-35
- 10
-12
-9
-36
Indust r ia ls
12.0
Building Products
0.1
Construction & Engineering
2.4
Electrical Equipment
0.7
Machinery
1.5
0.4
Trading Companies & Distrib
Commercial Services & Supp
0.5
Airlines
0.8
Marine
1.0
Road & Rail
0.4
137
2
18
11
14
6
4
13
18
5
1.9
20.8
21.2
23.8
37.3
4.4
9.1
35.8
-10.2
-3.8
21.1
19.8
27.0
25.9
29.6
20.3
12.4
12.5
13.6
17.7
24.6
6.3
34.7
37.7
50.3
33.4
12.0
0.9
22.8
6.0
- 0.3
-1.2
1.1
-0.6
-0.8
-0.4
1.1
-1.2
0.3
-0.1
0.0
-1.0
2.5
-3.5
-1.4
-0.1
1.1
-0.9
-2.8
2.6
- 0.4
-0.8
0.1
-0.9
-1.2
0.1
1.4
-2.0
-0.8
-0.1
- 1.5
-1.0
-1.5
-2.1
-2.0
0.2
0.8
-3.8
-7.4
-1.3
- 28
-50
22
-27
-71
20
-25
-15
-76
-20
- 24
50
-11
-55
-14
-20
-75
15
-65
-20
-6
-50
-6
-18
-36
-40
50
-46
35
-20
14.6
16.8
17.6
16.9
9.8
19.2
15.8
11.7
9.2
19.8
2.1
1.5
3.4
2.6
2.6
1.8
5.4
1.4
1.6
1.7
8.6
10.5
10.7
11.4
6.7
13.7
8.6
6.5
6.2
11.5
2.5
1.3
1.6
1.5
1.7
1.2
3.8
3.8
3.9
4.4
0.6
2.7
0.5
0.4
0.2
0.6
1.3
12.4
0.4
3.3
- 2.0 - 13.4
8.8 -11.5
-6.1 -18.4
-1.7 -16.1
-1.5 -16.8
-4.6 -13.8
-5.8
-4.9
0.2
-9.9
2.9
-9.0
-2.6 -10.1
17
57
63
34
43
44
-29
8
44
-6
- 16
-12
-18
-19
-22
-23
-15
-15
-11
-11
M a t e r ia ls
Chemicals
Metals & Mining
Paper & Forest Products
0.2
2.0
0.1
-3.4
Consume r Discr e t iona r y
Auto Components
Automobiles
Household Durables
Textiles, Apparel & Luxury G
Hotels, Restaurants & Leisur
Media
Retailing
5.6
0.3
1.1
0.4
0.3
1.3
0.5
1.5
83
5
15
7
9
16
12
15
16.7
11.5
24.5
52.6
17.4
1.7
7.5
12.5
15.7
8.5
16.8
9.2
31.9
12.0
17.7
18.5
21.6
17.2
14.2
67.4
15.3
13.6
14.4
23.9
0.8
-0.7
1.7
1.9
-2.4
0.7
0.6
0.4
0.1
-3.0
0.6
4.8
-4.2
-0.6
0.8
0.5
0.5
-0.5
0.8
1.2
-1.4
0.2
0.6
0.4
- 0.3
-2.5
-0.2
2.1
-3.2
-1.1
0.6
0.6
- 16
-60
14
0
-57
-25
-9
0
- 16
-60
14
0
-43
-25
-9
-7
6
-40
71
20
0
-31
18
-7
13.1
8.6
10.1
8.5
10.8
17.0
16.0
17.6
1.9
1.4
1.2
1.6
1.5
2.3
2.1
3.4
8.5
6.3
6.3
7.0
7.5
9.4
9.7
11.5
3.2
2.3
2.0
1.8
3.2
4.2
5.3
2.9
0.6
0.5
0.7
0.1
0.7
1.2
1.1
0.7
- 2.3
-3.1
-3.9
-4.6
-3.4
-1.4
0.3
-1.8
- 8.0
-10.8
-6.6
-6.3
-10.8
-7.1
-7.0
-9.1
-4
1
-1
17
-19
-13
-12
11
- 13
-15
-9
-11
-19
-10
-10
-18
Consume r S t a ple s
Food & Staples Retailing
Food, Beverage & Tobacco
Household & Personal Produ
5.1
2.2
2.5
0.4
47
8
33
6
1.9
5.2
-2.5
19.7
16.3
19.6
13.7
17.3
14.4
10.1
17.6
19.5
0.8
0.8
1.0
-0.8
1.0
-1.2
3.5
-1.4
1.1
1.7
0.9
-0.9
2.3
1.9
3.5
-1.6
-5
-71
13
-20
-5
-57
6
0
- 16
-14
-15
-20
17.6
18.5
16.5
20.7
3.1
2.9
3.0
6.6
11.3
10.9
11.4
14.8
3.3
3.6
3.1
2.6
1.2
1.8
0.9
1.1
- 0.8
-1.7
0.3
-2.7
- 9.1
-10.7
-6.8
-13.2
13
7
19
12
- 10
-14
-5
-11
He a lt h Ca r e
Biotechnology
Pharmaceuticals
1.2
0.5
0.3
15
1
8
21.2
26
18.3
20.0
29.3
14.4
19.4
23.1
17.4
1.0
1.5
1.0
0.9
1.6
-0.8
0.8
1.6
0.3
0.6
1.4
-1.5
27
100
13
27
-100
13
27
-100
38
19.4
22.3
16.1
4.4
7.6
3.0
13.5
15.4
12.2
2.0
1.5
1.2
1.0
1.0
0.9
- 4.6
-4.8
-4.0
- 9.0
-7.3
-11.7
12
40
-1
- 12
-9
-16
F ina nc ia ls
Banks
Capital Markets
Insurance
33.1
17.1
1.2
4.1
186
70
14
15
9.3
15.9
1.2
-3.4
13.8
11.9
10.2
12.9
17.2
13.2
15.4
19.5
0.2
0.4
-0.8
-1.0
0.2
0.3
-3.5
-0.1
0.2
0.5
-0.5
-0.4
0.4
0.2
-2.2
1.4
- 34
-21
-83
-87
- 24
-17
-67
-47
3
-3
0
-27
12.7
11.2
9.5
14.2
1.8
1.7
1.4
2.4
16.0
18.4
11.3
8.5
4.0
4.8
4.6
3.8
0.7
0.9
0.6
0.7
- 3.2 - 12.3
-4.3 -10.8
-6.8 -17.0
-3.0 -14.8
-4
-8
-4
-7
- 16
-14
-24
-20
Inf or ma t ion T e chnology 11.2
Internet Software & Service
0.6
IT Services
1.1
Software
0.0
Communications Equipment
0.2
Computers & Peripherals
1.5
Electronic Equip. & Instr.
2.4
Office Electronics
0.0
Semiconductors
5.4
93
4
7
1
5
21
26
1
28
17.1 16.2 18.3
45.7
32.7
42.5
NA
NA
NA
36.1
33.9
2.0
17.0
20.9
14.7
13.7
17.3
22.1
41.7
3.1
24.9
NA
NA
NA
4.8
25.1
12.9
0.1
0.6
NA
-0.3
0.1
0.9
1.3
NA
-0.9
- 4.6
2.2
NA
-3.2
-3.1
-3.7
1.2
NA
-9.3
- 0.2
0.2
NA
-0.3
0.0
0.8
-0.4
NA
-0.3
- 3.7
0.9
NA
-1.5
-2.2
-5.3
-3.2
NA
-3.9
- 51
- 52
100
100
NA
NA
-100 -100
-100 -100
-68
-79
-43
-43
NA
NA
-63
-58
-6
50
NA
100
-60
-47
14
NA
-21
11.4
28.8
NA
13.3
10.3
9.4
8.4
NA
12.6
1.8
9.7
4.5
1.7
2.1
1.8
1.5
NA
1.5
5.6
20.6
11.5
7.5
7.1
6.5
4.3
NA
5.3
3.2
0.5
1.5
NA
4.5
5.0
3.0
NA
3.3
0.6
0.7
NA
6.6
0.7
0.4
0.3
NA
1.0
- 3.6
-4.0
2.0
-5.6
-5.6
-3.0
-3.6
-1.8
-4.8
- 3.9
-15.4
-4.4
-7.2
-17.5
-10.3
-10.0
-3.2
3.4
- 11
60
-28
-19
-34
-13
-5
-19
-11
- 14
-16
-14
-11
-27
-22
-21
-9
-7
T e le com. S e r vic e s
Diversified Telecom. Service
Wireless Telecom. Services
7.6
3.3
4.4
30
17
13
- 4.5
6.2
-12.1
13.4
8.1
18.0
17.6
8.6
23.5
- 0.1
0.4
-0.4
- 1.1
-0.8
-1.3
- 0.2
0.3
-0.6
- 1.2
-1.0
-1.3
- 24
0
-54
- 21
6
-54
3
25
-23
15.7
14.2
17.0
2.9
2.4
3.4
6.9
6.4
7.3
3.4
4.4
2.8
0.9
1.7
0.7
- 0.3
2.5
-2.4
- 9.1
-3.5
-12.8
29
13
45
- 10
-3
-15
Ut ilit ie s
Electric Utilities
Gas Utilities
3.0
1.4
0.7
36
10
7
1.2
-0.1
-5.0
4.5
-0.8
10.6
7.3
2.2
13.9
- 1.2
-2.5
1.4
- 2.5
-3.1
1.6
- 1.8
-3.2
0.6
- 3.3
-3.8
1.2
- 33
-30
33
- 18
-20
33
-6
20
0
14.6
13.8
19.2
1.4
1.1
3.4
9.8
9.9
13.7
3.2
3.4
2.2
2.0
6.4
1.4
- 3.9 - 10.5
-5.5
-7.2
-0.8
-9.4
7
5
37
- 11
-5
-12
Feb 15, 2008
8
AP Insight
Table 3. FY08 Forecast Earnings Change (1M)
AP e x J P Aust r a lia
China
Hong
K ong
India I ndonesia
J a pa n
K or e a M a la ysia
Ne w Philippine s Singapore
Z e a la nd
T a iw a n T ha ila nd
Market
-0.1
0.8
1.1
0.5
0.7
3.7
-2.6
-0.6
-0.1
-0.5
-0.6
-1.0
-6.1
E ne r gy
3.7
2.6
3.8
NA
2.3
29.5
-6.9
-7.5
0.7
NA
0.8
0.8
0.0
0.9
3.2
M a t e r ia ls
1.4
4.7
-0.6
-1.6
2.9
0.2
-2.0
-1.9
-0.3
-0.9
NA
NA
-0.3
-5.9
Indust r ia ls
0.0
-1.0
0.9
-0.7
0.7
-12.8
-0.6
0.2
-0.9
-1.3
0.0
-2.6
-7.7
-8.8
Consum e r Dis cre tiona ry
0.1
-3.2
0.9
0.4
-0.2
5.8
-3.3
-0.2
1.2
1.5
-3.9
1.7
-9.4
2.2
1.0
0.6
3.1
0.9
0.1
4.7
-2.2
-1.3
2.4
NA
-5.9
3.8
26.1
-2.1
He a lt h Ca r e
0.9
-0.2
NA
NA
0.8
0.6
-2.3
-3.7
NA
0.3
NA
-0.3
NA
NA
Fina ncia ls
0.2
-0.6
0.9
1.2
1.9
-0.4
-3.3
-2.0
-1.0
0.0
-0.7
-1.1
-4.6
1.0
I T
-4.6
-1.1
-8.7
-1.9
-1.1
NA
-4.4
0.9
0.0
NA
NA
-1.4
-8.7
-1.3
T e le c om. S e r v ic e s
-1.1
-2.3
0.1
0.9
-1.3
-1.0
1.1
-5.9
-1.1
-1.2
-0.4
0.2
-7.2
0.6
Ut ilit ie s
-2.5
0.7
-3.1
-0.1
-6.1
-2.3
-3.8
-7.6
0.5
-0.5
0.5
NA
NA
0.4
India I ndone sia
J a pa n
Table 4. 12-month Forward P/E
China
Hong
K ong
K or e a M a la y sia
Z e a la nd
Market
13.1
12.7
15.1
17.4
18.0
14.7
13.1
10.5
15.3
12.7
13.9
12.7
11.1
11.2
E ne r gy
13.4
16.6
12.8
NA
17.3
20.2
11.0
7.7
14.1
NA
7.0
6.3
10.0
10.1
M a t e r ia ls
11.3
12.0
13.8
9.1
9.5
12.6
10.2
10.0
16.2
8.9
NA
NA
10.3
10.1
Indust r ia ls
14.6
17.1
16.2
16.3
24.3
17.2
11.9
12.0
16.3
28.4
15.2
12.4
13.1
11.6
Cons um e r Dis cre tionary
13.1
14.8
16.7
18.9
12.5
13.7
11.8
8.8
17.2
13.8
16.1
14.6
13.7
18.8
17.6
17.3
15.9
31.1
19.9
16.6
20.6
16.8
20.1
NA
14.5
22.4
17.7
14.6
He a lt h Ca r e
19.4
20.8
NA
NA
16.6
11.7
15.0
16.9
NA
24.6
NA
24.3
NA
NA
Fina nc ia ls
12.7
11.1
14.2
17.8
23.5
12.8
12.6
8.3
13.4
15.8
15.3
11.9
13.5
12.3
I T
11.4
14.5
17.9
14.6
15.5
NA
15.2
11.5
11.2
NA
NA
7.7
10.5
7.0
T e le com. S e r v ic e s
15.7
15.3
18.7
20.2
18.6
13.2
14.4
10.2
16.1
10.8
13.7
15.3
12.7
17.2
Ut ilit ie s
14.6
14.1
14.2
16.7
20.9
14.3
25.1
11.1
12.8
16.8
10.6
NA
NA
8.5
India I ndone sia
J a pa n
Table 5. Performance (1M)
China
Hong
K ong
K or e a M a la y sia
Z e a la nd
Market
-10.5
-7.7
-16.6
-13.3
-20.7
-5.0
-6.9
-7.3
-6.0
-8.9
-8.2
-9.8
-5.1
E ne r gy
-15.5
-8.3
-18.7
NA
-23.7
11.0
-14.3
-26.2
-7.5
NA
0.0
-17.3
-18.1
5.6
1.8
M a t e r ia ls
-7.8
-2.1
-24.2
-37.7
-21.5
-11.0
-16.8
-7.6
-8.3
-17.3
NA
NA
-10.0
-2.8
Indust r ia ls
-13.4
-3.8
-14.8
-13.0
-23.4
-0.6
-3.8
-16.3
-7.8
-2.2
-14.7
-14.2
-3.2
4.3
Cons um e r Dis cre tionary
-8.0
-7.0
-18.8
-5.1
-15.3
-12.4
-5.5
-5.7
-3.9
-7.2
0.0
-6.7
-7.9
10.4
-9.1
-10.0
-12.5
-13.5
-12.7
-10.9
-5.1
-7.0
-3.5
NA
-13.2
-17.4
1.8
9.2
He a lt h Ca r e
-9.0
-7.8
NA
NA
-13.2
-7.1
-7.7
-5.4
NA
-15.8
NA
-8.0
NA
NA
-12.3
-11.3
-17.5
-16.3
-21.6
-10.0
-6.8
-8.8
-7.1
-5.9
-10.6
-10.4
8.2
12.9
I T
-3.9
-7.7
-8.3
-18.3
-3.9
NA
-9.7
6.7
-2.7
NA
NA
-12.3
-7.6
2.2
T e le com. S e r v ic e s
-9.1
1.6
-13.2
-4.9
-30.0
-3.8
-5.0
-5.4
-5.7
-5.5
-3.1
-0.5
1.5
10.4
-10.5
-9.3
-13.9
0.1
-31.8
-18.6
3.8
-5.5
-4.2
-8.5
-5.8
NA
NA
-0.6
Fina nc ia ls
Ut ilit ie s
Feb 15, 2008
9
AP Insight
Table 6. Asia Pacific Company Map : Top and Bottom of 1M EPS Change & 1M Performance
E ne r gy
Aust r a lia
WorleyParsons
1.3 /
China
M a t e r ia ls
Indust r ia ls
Newcrest Mining
-6.5
9.9 /
Paladin Energy
Alumina
-11.2 / 10.4
-27.0 /
6.8
Consume r
Consume r
Disc r e t iona r y S t a ple s
Leighton Holdings Pacific Brands
0.7 /
3.3
Asciano Group
-1.6
-3.4 /
0.1 /
Crown
-4.7
Goodman Fielder
-2.2
0.0 /
1.9
-2.0 /
F ina nc ia ls
Ansell
2.6
Futuris
-4.4 /
He a lt h
Ca r e
6.5
Cochlear
-1.1 / -13.3
-2.9
1.1 /
-2.0
154.2 /
7.0
2.7 /
2.4
7.6 /
-1.0 /
-1.4
Hong
-10.1 /
-1.0
-16.2 /
4.7
-8.7 /
-5.8
-1.4 /
9.1
0.0 /
-6.6
12.2 /
3.3
3.1 /
-4.5 /
Bumi Resources
-2.3 /
-5.5
-2.3 /
-1.9
Indocement Tungga United Tractors
-0.7
5.3 /
-0.7
8.7 /
-2.7
-4.1 /
-2.4
-4.7 /
2.1
-21.7 /
-4.5
4.1 /
-3.6
-5.9 /
-0.4
33.9 /
-0.2 /
4.1
-21.7 /
-3.2
0.8 /
4.3 /
1.4
Jindal Steel & Powe Jaiprakash Associat Indian Hotels
Cairn India
-5.4
-1.7
15.9 / -13.6
4.1 / -26.9
-1.6 /
J a pa n
2.6 / -13.1
-7.9 /
-12.1 / -16.5
3.0
2.6 /
2.1
10.8 /
TonenGeneral SekiyMitsubishi Rayon
Ebara
-25.8 /
-11.0 /
0.6
GS Holdings
-0.9 /
-30.4 /
-4.1
-1.6
-9.4
1.1 /
0.6
6.7 /
-9.8
-2.1
0.1 /
-6.7 /
-5.6
0.0
0.0 /
-16.0 /
0.0
1.2
0.3 /
0.9
13.1 /
-20.8 /
-1.2 /
7.3 /
1.8
0.2 /
2.3
-5.7 /
1.0
-6.9
-9.6 /
-0.5 /
-9.7
-1.4
4.1 /
-2.6
-3.2 /
-0.7
-2.2
-0.9 /
-10.3 /
11.6 /
-0.2
-32.8 /
2.6
Yuhan
-3.4 /
-5.3
-4.0 /
5.5
PTT Chemical
6.3
1.8 /
5.9
PTT Aromatics & ReSiam Cement
2.6
-8.4 /
0.9
Eternal Chemical
2.9 /
-0.3
Taiwan Cement
-3.1 /
4.3
0.4
-0.3 /
-0.6 /
-1.8
0.6 /
-1.8
6.0
-2.3
-4.4 /
15.0 /
-16.4 /
1.0 /
-9.5 /
26.4 /
-6.9 /
0.8 /
-5.9 /
2.5
0.0 /
2.9
0.7 /
-4.7
-0.9
-1.5
-1.2 /
-3.2
-3.8 /
-1.8
0.0
1.3 /
0.1
1.4
1.5
-5.4
-3.2 /
-3.5
Konami
4.5
-0.6 /
-2.0
3.2 /
-44.7 /
-7.9
-6.7
-6.5
-4.3 /
2.2
-7.1
2.5 /
-8.7
-6.1 / -14.8
-0.4
Softbank
-4.5
8.4 /
-42.3 /
2.9 /
Nippon Telegraph &The Chugoku Elect
Advantest
-9.7
1.4 /
2.1
-1.0
-8.0 /
4.7
KT
2.7
-14.3 /
4.0
Korea Gas
-1.5 /
0.4
-6.8 /
0.1 /
6.5 /
-5.8
Korea Electric Pow
0.4
DiGi.com Bhd
-2.3
0.1 /
Hokuriku Electric P
-5.3 /
-4.5
Petronas Gas Bhd
2.1
1.9 /
0.0
Telekom Malaysia BYTL Corp. Bhd
-2.3
-0.5 /
1.8
-1.9 /
0.0 /
1.9
-3.3
-1.7
2.6 /
1.9
0.2 /
-0.1 /
0.9
3.1 /
-13.9 /
-0.5 /
3.2
10.9 /
-0.1 /
4.1
5.9 /
1.0
PNOC Energy Deve
-1.9
-0.4 /
1.7
0.4 /
5.7
Venture
1.6
9.9
-0.8 /
-2.7
0.4 /
Ratchaburi Electric
0.5
2.0 /
0.6
Advanced Info Servi Glow Energy
3.2
Polaris Securities
President Chain Sto
0.0
Singapore Telecomm
TMB Bank
-0.5
-1.6 /
0.3
Globe Telecom
-1.2
UOL Group
-28.0 /
-3.2
Philippine Long Dist First Philippine Hold
Thanachart Capital Hana Microelectron
2.1
1.3
0.0 /
Contact Energy
-5.6 /
1.7
-0.3 /
4.1 /
2.6
Videsh Sanchar Nig Tata Power
Metropolitan Bank
CP ALL
Yulon Motor
0.6 /
-5.0
San Miguel
-3.8 / 13.2
-12.2 /
-1.5 /
-3.8 /
Evergreen Marine CFar Eastern Departm
0.6
-1.6
Telecom Corp. of N Vector
Siam Makro
61.6 /
-0.4
-0.4 /
Bursa Malaysia Bhd
0.0
Precious Shipping
Walsin Lihwa
-2.8 /
Hong Kong & Chin
Fisher & Paykel Hea
4.2
Airports of Thailand BEC World
18.9 /
2.5
-0.2 /
-5.5
2.4 /
-4.9
Telekomunikasi Ind Perusahaan Gas N
SembCorp Marine Genting Internation Olam International Parkway Holdings CapitaLand
1.5 /
1.4 /
0.9 /
Guangdong Electri
Indosat
-0.7
7.9 / -13.9
0.5 /
-6.5 /
Banpu
-2.2 /
-7.6
Multi-Purpose Holdi
Singapore Airlines Jardine Cycle & Car Wilmar Internationa
7.3 /
-2.1 /
Mirae Asset Securit LG Philips LCD
3.9
-1.0
-1.7 /
T a iw a n
-4.2
0.0
-4.9
0.3
-0.7 /
-0.8
Ayala Land
Singapore Petroleum
0.3 /
0.7 /
-1.6
Taisho Pharmaceuti Acom
0.7
2.8 /
3.6
Jollibee Foods
T ha ila nd
-0.2
Petron
1.2 /
-0.2
Auckland Internatio Fisher & Paykel App
-0.7 /
2.5 /
Amorepacific Corp. Hanmi Pharmaceuti Korean ReinsuranceHynix SemiconductoLG TeleCom
-16.5 /
0.2 /
Fletcher Building
-0.2 /
1.1
Chugai Pharmaceut Orix
CJ CheilJedang
-5.1
14.7 /
-4.9
Sky Network Televi
Z e a la nd
-2.8
4.5
China Telecom
Dr. Reddy's LaboratIndiabulls Financial SWipro
Malaysian Bulk Car Astro All Asia Netw Guinness Anchor Bh
Ne w
S inga por e
13.5 /
0.7 /
-1.0 /
Petronas Dagangan Lafarge Malayan CeMalaysian Airline SyUMW Holdings Bhd Kuala Lumpur Kepo
Scomi Group Bhd
P hilippine s
-5.6 /
-97.3 / -25.9
LG Electronics
5.9
ZTE CORP H
Bank Mandiri (Perse
-1.9
Sapporo Holdings
6.6
Kia Motors
Samsung Fine ChemDoosan
-15.8 / -11.8
0.7 /
-2.4 / -13.6
184.4 /
6.9 /
-0.2 /
China Communicati China Resources P
Sun Pharmaceutical Infrastructure Devel HCL Technologies Mahanagar TelephoGAIL (India)
Sega Sammy HoldinHouse Foods
Honam PetrochemicKumho Industrial
SK Energy
M a la y sia
-7.2
3.3
Bank Danamon Ind
-0.6
United Spirits
Japan Petroleum Ex Sumitomo Osaka C Odakyu Electric Rai Sanyo Electric
0.0 /
K or e a
-2.4
0.0 /
ITC
Bharat Petroleum Sterlite Industries (InGMR Infrastructure Bajaj Auto
5.7
Chinese Estates (HoFoxconn Internation Hutchison TelecommHongKong Electric
Energi Mega PersadInternational Nickel Truba Alam Manun Ramayana Lestari S Gudang Garam
India
-0.9 /
3.1
Telstra
Hang Lung PropertieKingboard Chemica PCCW
Astra International Astra Agro Lestari Kalbe Farma
5.7 /
-4.1 / -10.1
8.6 /
Lee & Man Paper MHutchison Whampo Yue Yuen Industrial
Indone sia
0.4 /
Computershare
Bank of China
Fosun International Melco International Lifestyle Internation
K ong
AGL Energy
China Insurance InteLenovo Group
China Petroleum & Shougang Concord Citic Resources HoldFU JI Food & CaterinChina Mengniu Dair
Ut ilit ie s
0.7 / -11.6
Perpetual
Inner Mongolia Yita China Molybdenum China Eastern Airlin Dongfeng Motor Gr Global Bio-Chem Te
50.1 /
T e le comm.
S e r v ice s
Bendigo Bank
1.2 /
-8.4
IT
-1.5
-2.1 / 13.2
AU Optronics
7.1 /
-0.9
0.1 /
0.8
Far EasTone Teleco
-0.5 /
1.4
Taishin Financial Ho Powerchip Semicon Taiwan Mobile
-28.5 /
-4.7
-147.3 /
-4.2
-4.1 /
0.0
Feb 15, 2008
10
AP Insight
Asia Pacific Country & Sector Rating for February
Young Jean Hwang
Table 1. Asia Pacific Country Rating for February
A sia P a cific C ountry Ra ting by M e dia n Z -score of 6 C rite ria
13-Country Rank's Z-score
40%
30%
30%
-0.5
Negative
India
0
0.5
Neutral
Positive
Positive
Z-score (1.00)
Indonesia
Positive
Z-score (0.97)
China
Positive
Z-score (0.71)
Hong Kong
Positive
Z-score (0.65)
Singapore
Neutral
Z-score (0.29)
Thailand
Neutral
Z-score (0.03)
Philippines
Neutral
Z-score (-0.20)
Korea
Neutral
Z-score (-0.35)
Malaysia
Neutral
Z-score (-0.35)
New Zealand
Neutral
Z-score (-0.45)
Taiwan
Negative
Z-score (-0.51)
Japan
Negative
Z-score (-0.62)
Australia
Negative
Z-score (-0.91)
Source :
Feb 15, 2008
Momentum 1 Momentum 2
Growth
Profitability
Wtd. Avg. of
FY08 & FY09 EPS
Monthly Change
(13 Countries Rank)
Wtd. Avg. of
FY08 & FY09 EPS
Growth (YoY)
(13 Countries Rank)
Wtd. Avg. of
FY08 & FY09
ROE
(13 Countries Rank)
Positive
Positive
Positive
Positive
0.92
1.00
1.33
1.00
Positive
Neutral
-0.13
Neutral
0.02
Positive
1.91
Positive
Positive
Positive
Positive
0.78
1.91
1.39
Positive
Positive
1.02
1.71
Positive
1.24
(Breadth)
(Magnitude)
12m Fw. EPS
Monthly
Revision Ratio
(13 Countries Rank)
Valuation
Liquidity
Median Z-score of Money Supply Growth
12m Fw. P/E, P/B, less Target Policy Rate
EV/EBITDA
(Distance from
(13 Countries Rank) Median since 2000)
Ne ga t iv e
-4.41
Positive
Ne ga t iv e
-1.00
Positive
0.63
Ne ga t iv e
-1.69
Ne ga t iv e
-0.60
Neutral
0.27
Ne ga t iv e
-2.97
Ne ga t iv e
-3.63
Positive
Neutral
0.00
Ne ga t iv e
-1.86
Ne ga t iv e
-1.20
Positive
Positive
0.57
3.62
Neutral
0.00
Neutral
0.06
Neutral
0.00
Positive
Positive
0.52
1.03
Ne ga t iv e
-2.71
Neutral
-0.15
Neutral
0.35
Neutral
0.32
Ne ga t iv e
-0.57
Neutral
-0.26
Ne ga t iv e
-0.88
Ne ga t iv e
-1.00
Ne ga t iv e
-1.06
Neutral
0.30
Ne ga t iv e
-1.28
Positive
Positive
1.84
1.02
Neutral
0.19
Positive
2.82
Ne ga t iv e
-3.58
Ne ga t iv e
-0.99
Neutral
-0.28
Neutral
-0.43
Ne ga t iv e
-1.16
Neutral
-0.02
Ne ga t iv e
-2.39
Neutral
0.00
Neutral
0.00
Ne ga t iv e
-0.87
Ne ga t iv e
-0.90
Ne ga t iv e
-1.59
Neutral
-0.12
Neutral
0.01
Positive
Ne ga t iv e
-3.84
Ne ga t iv e
-1.01
Neutral
-0.23
Ne ga t iv e
-1.03
Ne ga t iv e
-3.45
Neutral
0.23
Positive
Ne ga t iv e
-1.03
Ne ga t iv e
-1.67
Ne ga t iv e
-1.00
Positive
Ne ga t iv e
-0.82
Positive
4.24
1.00
1.00
3.66
2.27
5.56
0.80
4.23
11
AP Insight
Table 2. Asia Pacific ex. Japan Sector Rating for February
Asia P a cif ic e x. J a pa n S e ct or Ra t ing by M e dia n Z - scor e of 5 Cr it e r ia
21-Sector Rank's Z-score
40%
30%
30%
-0.5
Negative
0
Neutral
Internet Software
& Services
0.5
Positive
Positive
Z-score (3.39)
Household Durables
Positive
Z-score (2.14)
Electronic Equipment
& Instruments
Positive
Z-score (1.15)
Marine
Positive
Z-score (0.86)
Automobiles
Positive
Z-score (0.71)
Airlines
Positive
Z-score (0.63)
Energy
Positive
Z-score (0.58)
Machinery
Neutral
Z-score (0.43)
Pharmaceuticals
Neutral
Z-score (0.12)
Construction
& Engineering
Neutral
Z-score (0.08)
Banks
Neutral
Z-score (0.00)
Source :
Feb 15, 2008
Growth
Profitability
Valuation
Wtd. Avg. of
FY08 & FY09 EPS
Monthly Change
(21 Sectors Rank)
Wtd. Avg. of
FY08 & FY09 EPS
Growth (YoY)
(21 Sectors Rank)
Wtd. Avg. of
FY08 & FY09
ROE
(21 Sectors Rank)
Median Z-score of
12m Fw. P/E, P/B,
EV/EBITDA
(21 Sectors Rank)
Positive
Positive
Positive
Positive
4.20
1.73
3.39
8.61
Ne ga t ive
-7.12
Positive
Positive
Positive
Positive
2.38
2.14
5.23
0.63
Neutral
-0.30
Positive
Positive
2.94
Neutral
0.03
Positive
2.18
Positive
Positive
Positive
0.86
0.86
Neutral
0.41
Positive
1.00
Positive
Neutral
0.00
Positive
Ne ga t ive
-3.03
Positive
Ne ga t ive
-2.01
Positive
Positive
1.89
Ne ga t ive
-2.94
Positive
0.86
Positive
Positive
1.44
Neutral
0.49
Positive
1.97
Ne ga t ive
-0.79
Neutral
-0.44
Ne ga t ive
-1.39
Positive
Positive
2.62
4.18
Neutral
0.43
Positive
1.16
Ne ga t ive
-1.14
Neutral
0.15
Neutral
0.12
Ne ga t ive
-1.94
Neutral
0.08
Neutral
-0.07
Positive
1.19
Neutral
0.15
Ne ga t ive
-2.62
Neutral
0.00
Positive
Neutral
0.00
Ne ga t ive
-1.36
Neutral
-0.14
(Breadth)
(Magnitude)
12m Fw. EPS
Monthly
Revision Ratio
(21 Sectors Rank)
2.11
1.00
0.72
0.58
Neutral
0.29
1.15
1.00
0.71
0.63
12
AP Insight
Table 2. Asia Pacific ex. Japan Sector Rating for February (Continued)
Asia P a cif ic e x. J a pa n S e ct or Ra t ing by M e dia n Z - scor e of 5 Cr it e r ia
21-Sector Rank's Z-score
40%
30%
30%
-0.5
Negative
Telecom. Services
0
Neutral
0.5
Positive
Neutral
Z-score (-0.05)
Chemicals
Neutral
Z-score (-0.13)
Capital Markets
Neutral
Z-score (-0.21)
Retailing
Neutral
Z-score (-0.33)
Auto Components
Neutral
Z-score (-0.44)
Metals & Mining
Negative
Z-score (-0.87)
Consumer Staples
Negative
Z-score (-0.87)
Utilities
Negative
Z-score (-0.97)
Insurance
Negative
Z-score (-1.27)
Semiconductors
Negative
Z-score (-1.68)
Source :
Feb 15, 2008
Growth
Profitability
Valuation
Wtd. Avg. of
FY08 & FY09 EPS
Monthly Change
(21 Sectors Rank)
Wtd. Avg. of
FY08 & FY09 EPS
Growth (YoY)
(21 Sectors Rank)
Wtd. Avg. of
FY08 & FY09
ROE
(21 Sectors Rank)
Median Z-score of
12m Fw. P/E, P/B,
EV/EBITDA
(21 Sectors Rank)
Neutral
-0.25
Neutral
0.13
Neutral
-0.05
Neutral
0.00
Ne ga t ive
-1.43
Positive
0.89
Neutral
-0.13
Ne ga t ive
-1.00
Ne ga t ive
-1.44
Neutral
0.01
Neutral
-0.21
Neutral
0.12
Ne ga t ive
-1.44
Ne ga t ive
-1.14
Neutral
0.37
Positive
1.53
Neutral
-0.35
Neutral
-0.33
Neutral
0.33
Ne ga t ive
-2.39
Ne ga t ive
-1.44
Neutral
-0.33
Neutral
-0.44
Ne ga t ive
-0.70
Positive
Ne ga t ive
-2.03
Ne ga t ive
-2.73
Ne ga t ive
-0.87
Positive
2.39
Neutral
0.13
Positive
Positive
0.61
1.77
Ne ga t ive
-1.46
Ne ga t ive
-0.87
Ne ga t ive
-2.08
Neutral
-0.25
Neutral
-0.31
Ne ga t ive
-1.56
Ne ga t ive
-4.19
Ne ga t ive
-0.97
Neutral
-0.37
Ne ga t ive
-2.11
Ne ga t ive
-1.92
Ne ga t ive
-1.00
Ne ga t ive
-1.27
Ne ga t ive
-3.77
Ne ga t ive
-2.04
Neutral
-0.41
Ne ga t ive
-1.68
Positive
(Breadth)
(Magnitude)
12m Fw. EPS
Monthly
Revision Ratio
(21 Sectors Rank)
0.57
0.51
13
AP Weekly Insight
Pharmaceutical
Expansion to biopharmaceutical encouraging
CSL is the only manufacturer of influenza vaccine in the
Key Call
southern hemisphere and the inventor of world’s 1st
CSL LTD
cervical cancer vaccine, Guardasil. Royalty income from
(CSL AU,BUY,TP A$42.04)
Merck will be the strongest contributing factor to earnings
growth over the next couple of years. Expanding to
Sean Hwang
various recombinant biopharmaceuticals is likely to send
CSL to a new leadership position in the global
pharmaceutical market.
New Era for Plasma Industry
Figure 1. Residual Income Model
New leader in newer healthcare marketplace
We initiate coverage on CSL Ltd. with a BUY rating and
fair value of AU$42.04, which is derived from our RIM
model under the assumption of 9% cost of equity.
Although this valuation appears demanding at 30.3x FY08
earnings, P/E is likely to fall as low as 17.0x to FY10.
CSL has established a leading position in the plasma
proteins market on the back of cutting-edge fractionation
technology and collecting power. Now the company is
(A$ mn)
BVo
2007
2008 2009 2010 2011 2012 2013
2016
2017
3,025.93,784.04,737.95,942.67,444.89,288.9 11,560.914,446.6 17,571.3
ROE(%)
25.1
25.1
28.4
28.6
28.8
28.7
28.2
27.9
28.4
COE(%)
9.0
9.0
9.0
9.0
9.0
9.0
9.0
9.0
9.0
16.1
16.1
19.4
19.6
19.8
19.7
19.2
18.9
19.4
ROECOE
RI
488.6 611.0 919.41,162.81,472.91,826.7 2,221.6 2,736.8 3,412.4
PV RI
448.3 514.3 709.9 823.8 957.31,089.2 1,215.3 1,373.5 1,571.1 12,056.6
NAV
23,028.1
547.7
led by its flagship product Guardasil, the cervical cancer
Fair price
42.04
vaccine that was licensed to Merck.
Source: Mirae Asset Research Estimates
Supply of plasma proteins to be tightened
2015
2,268.8
BV
Shr
Outstand
ing
expanding its presence into the biopharmaceutical market
2014
Figure 2. Global IVIG Market
The global plasma product market is a competitive
oligopoly, led by a few players such as CSL, Baxter, and
Tarcelo. Capital-intensive fractionating facilities and
difficulties in blood collection have existed as barriers to
new entrants into this market. The leading companies are
(tonnes of IVIg)
Projection
140
120
100
expected to benefit from a tight supply/demand balance
80
for plasma proteins as a result of recent M&As in the
60
industry.
40
20
In addition, global short supply in blood can prompt further
price hikes of plasma proteins and make the market share
more concentrated in the companies that are vertically
integrated. The company collected 4mn liters of plasma
through its collection centers worldwide and obtained an
additional 700,000 liters that were for sale to Talecris (5%
margin). After expiration of the supply agreement at the
end of 2008, CSL can internally process the plasma,
formally sold to Talecris, and sell it for a greater margin
(roughly 30%). In summary, the current blood shortage
expands the gap between vertically integrated players
such as CSL and Grifols and non-vertically integrated
players such as Talecris. Liquid IVIG’s indication
0
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Source: NBA, Mirae Asset Research
Figure 3. Financial and Operational figures
(A$ mn)
Sales
EBITDA
Pre-tax NP
NP
EPS
YoY(%)
P/E(x)
P/B(x)
EV/EBITDA
ROE(%)
2005
2,749.9
410.5
641.9
546.5
0.93
126.2
12.1
3.1
7.8
26.3
2006
2,848.9
155.3
170.5
117.4
0.21
(76.9)
83.4
4.9
30.7
5.9
2007
3,172.4
678.2
774.1
539.3
0.98
358.2
29.8
7.1
17.5
23.8
2008E
3,688.7
1,002.1
1,071.8
760.9
1.39
41.1
25.2
6.3
15.0
25.1
2009E
4,444.7
1,433.1
1,513.8
1,074.8
1.96
41.2
17.9
5.1
11.0
28.4
Source: Factset, Mirae Asset Research Estimates
extension to Alzheimer (now performed by Baxter) could
be an important catalyst.
Feb 15, 2008
14
AP Insight
Figure 4. Global Comparison
Price History
Current Price
52 Week High
52 Week Low
Beta
Size
Market Value(US$ mn)
Enterprise Value
Sales
Assets
Valuation
LTM Price to Earnings
LTM EPS
FY1 Price to Earnings
FY1 EPS
FY2 Price to Earnings
FY2 EPS
NTM Price to Earnings
NTM EPS
Price to Book
Enterprise to Sales
Dividend Yield
Gross Margin
EBITDA Margin
Operating Profit Margin
Net Margin
Net Return on Assets
Net Return on Equity
Growth (Yr/Yr)
Sales Growth
Gross Profit Growth
Assets Growth
CSL
Grifols
Avg
Median
06/2007
12/2006
Novo
Nordisk
NOVO.BDK
12/2006
CSL-AU
GRF-ES
Baxter
GSK
SanofiAventis
Green
Cross
BAX-US
GSK-GB
SAN-FR
006280-KR
12/2006
12/2006
12/2006
12/2006
46.40
54.08
35.85
0.76
45.68
50.07
30.43
0.74
29.50
34.93
18.17
0.92
23.41
26.97
13.95
0.99
63.99
68.75
40.82
0.71
61.86
65.20
48.10
0.57
21.67
30.37
20.05
0.62
77.99
98.29
74.00
0.76
79.30
110.71
52.31
0.72
54,355.6
57,634.4
17,277.3
28,290.5
39,484.2
39,170.7
8,615.8
10,659.0
16,232.5
16,680.2
2,695.3
3,440.1
4,986.8
5,402.4
855.4
1,150.7
39,744.6
38,567.7
6,853.6
7,568.0
39,223.7
39,773.7
10,378.0
13,750.0
119,413.9
131,062.8
45,450.2
45,851.3
106,531.8
114,319.4
37,431.4
97,982.8
714.6
796.0
437.5
391.7
24.7
3.69
21.3
2.96
17.3
3.30
18.2
3.09
6.3
4.3
1.9
56.2
28.8
21.0
15.2
12.0
24.3
24.0
1.80
21.0
2.39
18.7
2.61
20.6
2.42
6.5
4.1
1.1
52.7
29.7
20.0
15.4
11.7
21.8
33.5
0.98
26.7
1.10
20.7
1.43
22.3
1.32
8.0
5.9
1.1
45.2
30.0
21.4
17.0
13.3
23.8
40.6
0.40
38.2
0.61
26.3
0.89
25.0
0.94
8.9
5.8
0.4
33.6
15.6
15.2
7.0
5.2
12.3
24.4
13.45
22.5
2.85
20.2
3.17
22.1
2.90
6.6
4.7
1.1
74.5
29.5
23.3
16.7
15.1
21.4
23.7
2.61
19.5
3.18
17.2
3.60
19.0
3.25
6.2
3.5
1.2
46.6
23.6
18.6
13.5
10.2
22.3
11.7
0.94
11.2
1.93
10.6
2.05
11.1
1.95
6.3
2.9
4.6
78.4
39.0
32.3
23.2
23.0
57.4
14.2
3.76
9.7
8.06
9.0
8.66
9.6
8.16
1.6
2.8
3.3
58.9
35.3
15.2
14.1
5.4
8.8
18.7
4,008.00
3.6
1.9
1.0
40.0
15.3
13.5
8.6
9.6
19.0
+ 22.9
+ 26.8
+ 12.7
+ 24.7
+ 26.1
+ 15.4
+ 27.3
+ 43.2
+ 15.8
+ 38.2
+ 29.4
+ 23.0
+ 28.2
+ 32.4
+ 16.3
+ 5.4
+ 13.2
+ 15.1
+ 22.1
+ 22.8
+ 6.8
+ 15.9
+ 19.6
- 0.8
+ 19.2
+ 34.5
+ 33.9
Source: Factset, Mirae Asset Research
Feb 15, 2008
15
AP Insight
Metal & Mining
Undemanding valuation to provide a bargain hunting
opportunity
The company’s share price recently plummeted due to
Initiation
concerns over a rights issue in 2H07 and overall stock
Shougang Concord Int’l
market weakness despite its strong FY07 ROE forecast at a
(697 HK,BUY,TP HK$ 3.50)
hefty 37.8%. As such, P/E and EV/EBITDA have plunged to
6.2x and 6.0x, respectively. Accordingly, our TP presents a
83.3% upside from the current price.
EY Lee
852-2295-2529 / [email protected]
Full-scale heavy plate facility on-line in April 2007
Major Beneficiary of Demand Growth
In 2004, SQ set up a two-phased investment plan to build a
slab facility with two blast furnaces and an integrated steel
Initiate coverage with BUY rating and TP of HK$3.50
mill with a heavy plate rolling line. It launched operations of
Our investment points for Shougang Concord Int’l are: 1)
a slab facility according to the first phase plan and began
significant top-line and bottom-line growth expected
the trial operations of 4,300mm-wide heavy plate facility in
following full-scale operation of new shipbuilding plate
September 2006 for the second phase. Both facilities began
works in 2007; 2) bright outlook for its steel manufacturing,
operations in April 2007 and production capacity for slab is
shipping, and electricity generation business; and 3) its
now 2.6mn p.a. and for plate is 1.2mn p.a.
share price being undervalued after a recent sharp decline.
Our TP is equivalent to P/E of 12x to FY08 forecast EPS,
Figure 1. Shougang Concord International: TP HK$3.50
Construction
Production
capacity
(1,000 tons)
QZP
1993
800 plate
SQ
2004
2600 slab
which is a 35% discount to the Hang Seng Index average
P/E. The discount was due to concerns over the possibility
of an additional rights issue.
Product
spec
3000mm
Timely facility expansion to fuel earnings growth
In 2007, the company began operation of a newly
constructed slab plant (annual capacity of 2.6mn tons)
1200 Plate
4300mm
Note
Procure slab from SQ
Integrated steel mill with
two blast furnaces
Completed two-phased
investment, began
operations in April 2007
Source: Company Data, Mirae Asset Research estimates
including two blast furnaces and a heavy plate plant
(annual capacity of 1.2mn tons) at Qinghuangdao Shouqin
Only listed player in the China’s Shougang Group
(SQ). As such, we project FY07 sales to be up 97% YoY
As the largest shareholder, Shougang Holdings owns a
and OP to be up 468.7% YoY. We also forecast sales and
40.2% stake in Shougang Concord Int’l. Shougang
EPS to expand at CAGR of 9% and 20.3%, respectively,
Holdings’ largest shareholder is Shougang Corp., whose
during 2007-10 on the back of Shouqin’s expected
largest shareholder is the City of Beijing. Shougang
increase in slab production capacity to 3mn tons p.a. and
Concord Int’l is the only listed company among Shougang
heavy plate to 2mn tons p.a. through 2011.
group companies. Listed on Hong Kong stock market in
1991, the company specializes in making heavy plate
Impressive strategy to secure iron ore mine
products.
The company secured a 6.4% stake in Australian mine
explorer Australasian Resources Ltd. (ARH AU) for
AU$28mn in 2007. In February, the company also
acquired a 19.7% stake in Australian iron ore miner Mount
Gibson Iron Ltd. including a 10% option share. Such
investment in upstream process is expected to sustain the
company’s lofty profitability over the long haul.
Feb 15, 2008
16
AP Insight
Figure 2. Shareholding Structure (as of Feb 2008)
Figure 5. OP Contribution by Segment
Steel
Trade, Others,
Electricity,
1.1
0.6
6.1
Public &
Institution,
Shougang
37.57%
Holding,
Shipping, 11.5
40.20%
JP
Morgan Chase,
2.79%
Baring
Asset,
Cheung
Carlo
Kong
Tassara,
HLDGS,
8.04%
Steel
Manufacture,
80.7
6.43%
4.97%
Figure 3. Operation Margin by Business Segment
Figure 6. Shougang’s Sales and OP Forecast
(%)
60
50
(mn HK$)
2006년
(mn HK$)
18,000
1H07
3,500
Operating income
Revenue
16,000
3,000
14,000
40
2,500
12,000
30
10,000
2,000
8,000
1,500
20
6,000
10
1,000
4,000
500
2,000
0
Steel
Shipping
Electricity
Steel Trade
0
0
2003
2004
2005
2006
2007E 2008E 2009E 2010E
Figure 4. Sales Contribution by Segment
Figure 7. Shougang Concord International: TP HK$3.50
Fiscal year
Others, 0.9
Steel Trade,
14.4
Electricity, 4.2
Shipping, 2.6
Steel
Manufacture,
77.9
Ended Dec.
Sales
(HK$ mn)
OP
(HK$ mn)
2005
2006
2007E
2008E
2009E
4,570.
0
208.6
6,467.
5
420.9
12,745.
8
1,664.4
15,879.
6
2,161.7
15,970.
0
2,386.0
EBITDA
(HK$ mn)
287.7
679.7
2,139.0
2,745.5
2,993.4
Net Profit
(HK$ mn)
305.0
221.6
1,515.9
2,045.9
2,283.9
EPS
(HK$)
0.07
0.04
0.23
0.29
0.33
P/E
(x)
7.6
11.4
7.8
6.2
5.5
P/B
(x)
1.3
1.1
3.0
2.1
1.6
EV/EBITDA
(x)
18.0
10.1
8.0
6.0
5.0
Feb 15, 2008
17
AP Insight
Construction & Property
Figure 2. No Bubble in Home Prices
Income vs Home Price in Chongqing
RMB
Industry Update
Chongqing - Glittering in Western China
RMB/m2
13,500
2,900
12,500
2,700
11,500
2,500
2,300
10,500
2,100
9,500
1,900
8,500
Kaiser Choi
1,700
7,500
1,500
6,500
1,300
5,500
1,100
900
4,500
1998
Highlighted Company
Company
C C Land (1224.HK)
1999
2000
2001
2002
2003
2004
2005
Urban Annual Disposable Income Per Capita (LHS)
Rating
Current Price (Feb 13) Target Price
Not Rated
HK$9.88
–
Chongqing is a pilot reform city in western China
It is on China’s top agenda to accelerate the economic
development in western China following the country’s
success in wealth creation along its coastal regions. As
one of the most important cities in the west, Chongqing
has been selected as a “Trial Zone for Comprehensive
2006
2007
Residential Selling Price (RHS)
Source: CEIC, Statistical Information of Chongqing, Mirae Asset Research
Favorable supply-demand situation
Home supply had been in line with demand in Chongqing
until 2005 when the purchasing power of local residents
began to flow into the market and demand started to
outstrip supply, as illustrated in Figure 3. We estimate that
Reform” by the State Council with the aim to achieve
cumulative demand-supply gap should have widened to
“coordinated rural and urban development.” Under China’s
about 11mn m2. With a total population of 28mn,
planned economy, Chongqing will become the regional
Chongqing’s urbanization rate was 48.3% in 2007. The
economic center in western China. We expect that the city
government plans to boost the rate to 52% by 2010 and to
will receive greater budget from the central government to
80% by 2020, which should result in higher demand for
speed up the development of infrastructure and urban-
urban residential properties. Besides, local residents and
rural integration. More autonomy would also be given to
end-users still dominate the market (accounts for 91% of
the local governments to carry out policies on land, credit
total buyers). As Chongqing has been designated to
and preferential tax treatment.
become the economic growth engine in western China, we
anticipate both real demand and investment demand will
Figure 1. GDP Growth Outpaced National Average
%
continue to increase in the next few years, lending support
to further price growth.
GDP YoY Growth
13.0
Figure 3. Demand Outstrips Supply from 2005
12.0
11.0
10.0
Residential Supply vs Demand in Chongqing
'000m2
35,000
9.0
30,000
8.0
25,000
20,000
7.0
1996
1997
1998
1999
2000
2001
China
2002
2003
2004
2005
2006
15,000
Chongqing
10,000
5,000
Source: CEIC, Mirae Asset Research
0
1998
Home price catching up with income growth
1999
2000
2001
2002
Residential Supply
2003
2004
2005
2006
2007
Residential demand
We believe property markets in Chongqing remain healthy.
Although home price growth in the city has accelerated in
recent years, the increase has actually been supported by
solid income growth. Over the past decade, home prices
in Chongqing increased by 133%, in line with the 130%
Source: CEIC, Statistical Information of Chongqing, Mirae Asset Research
C C Land has heavy exposure in western China
Amongst major mainland developers, C C Land (1224.HK)
growth in urban annual disposable income per capita. The
has the heaviest exposure in western China. Virtually all of
accelerating home prices have only caught up with income
its land reserves are located in the west, of which 65% lie
growth, as illustrated in Figure 2.
in Chongqing. Future prospects for the company are bright
in our view.
Feb 15, 2008
18
AP Insight
Shipping
Figure 1. FY07 Earnings Review
(US$mn, %)
Industry Update
Revenue
NOL
(NOL.SP,BUY,TP SG$4.47)
Je Hyun Ryu
Stronger than Expected US Routes
2007E
2007P
8,161.9 8,160.0
Diff
(%,%p)
2006
(YoY) Consensus
Diff
(%,%p)
(0.0) 7,263.5
12.3
7,982.1
2.2
OP
551.4
613
11.2
401.0
52.9
495.1
23.8
Pre-tax profit
563.1
585.9
4.0
272.8
114.7
508.7
15.2
NP
496.0
523.0
5.4
363.7
43.8
451.7
15.8
OP margin
6.8
7.5
0.8
5.5
2.0
6.2
1.3
Pre-tax
margin
6.9
7.2
0.3
3.8
3.4
6.4
0.8
Net margin
6.1
6.4
0.3
5.0
1.4
5.7
0.8
Source: NOL, Mirae Asset Research estimates
NOL: FY07 earnings beat consensus estimates
Figure 2. Operating Data for Container Lines
NOL recorded FY07 revenue of US$8.2bn, in line with our
estimates, but OP of US$613mn exceeded our estimates
Freight volume (1,000 FEU)
2005
2006
2007P
2008E
2009E
1,946.0
2,097.0
2,358.0
2,452.2
2,625.0
by 11.2%. The company’s revenue and OP also beat
Asia-Europe Trade
383.0
414.0
428.0
459.2
505.6
consensus estimates by 2.2% and 23.8%, respectively.
Transatlantic Trade
122.0
120.0
132.0
141.8
148.8
We maintain our BUY rating and TP of SG$4.47.
Transpacific Trade
710.0
730.0
832.0
818.4
890.3
Latin America Trade
139.0
165.0
182.0
202.2
208.2
592.0
668.0
784.0
830.6
872.1
Higher volume and freight rate
Freight rate (US$/FEU)
Asia/Australia/Middle East
2,841
2,632
2,740
2,873
2,951
NOL’s FY07 freight volume and rate rose by 12.5% YoY
Total Europe
2,664
2,497
2,848
2,820
2,872
and 4.1% YoY, respectively. In particular, freight rate in US
Total US
3,539
3,416
3,347
3,729
3,790
routes only declined 1.5% YoY in 4Q07, while freight rate
1,991
1,689
1,877
1,860
1,953
for Europe and Asia routes increased by 25.2% YoY and
23.2% YoY, respectively, for the same period. Meanwhile,
4Q07 freight volume in US routes increased 23.4% YoY
Figure 3. Container Volume Results
and 19.7% QoQ.
Freight volume (1,000 FEU)
Increasing backhaul volume from US exports
Asia-Europe Trade
4Q07P
3Q07
QoQ
(%,%p)
4Q06
YoY
(%,%p)
670
564
18.8
580
15.5
117
98
19.4
113
3.5
We believe strength in US routes is being fueled by
Transatlantic Trade
38
32
18.8
32
18.8
increasing backhaul volume from US exports. According to
Transpacific Trade
243
203
19.7
197
23.4
the company, for every 10 FEUs in US routes that are full
Latin America Trade
headhaul, 6 FEUs are estimated to have been full
backhaul in FY07. This is a huge improvement from FY06
when the backhaul volume in US routes was only 5 FEUs
for every 10 FEUs headhaul. This improvement in the
backhaul volume was due to increasing demand for US
exports as a result of weak dollar.
55
44
25.0
45
22.2
217
187
16.0
193
12.4
Freight rate (US$/FEU)
2,865
2,885
(0.7)
2,583
10.9
Total Europe
3,161
2,978
6.1
2,524
25.2
Total US
3,312
3,462
(4.3)
3,362
(1.5)
2,041
2,060
(0.9)
1,657
23.2
Focus on better-than-expected US routes
NOL’s strong earnings improvement is due to growth in
container volume in Europe and Asia, and better-thanexpected performance in US routes. NOL announced that
it will reduce supply to 50,000 TEU/week in 1Q08.
Effective supply control should tighten supply/demand
balance relative to sluggishness in the demand for US
routes.
Feb 15, 2008
19
AP Insight
Therefore, we recommend investors to keep close eyes on
Auto Parts
S&T Daewoo and Dongyang Mechatronics which have
already secured strong potential to expand supplies to
Industry Update
global auto manufacturers and are expected to see
Strong Potential in Key Emerging Markets
Jaewoo Kim
positive earnings performance in the mid- to long-term
perspective.
Figure 1. Global Automakers Interested
Outstanding Domestic Auto Parts Makers
Fast growing group
Our View on Highlighted Companies
• Active expanding
capacity
Japan
Japan
Company
S&T Daewoo (064960.KS)
Dongyang Mech. (013570.KS)
Rating
BUY
BUY
in
Current Price
Target Price
(Feb 13)
W27,400
W5,610
• Auto parts makers
with quality and
price
competitiveness
capture increasing
attention
• Nurturing new auto
parts makers
Increasingly
necessary
South
KoreaKorea
South
W65,000
W16,000
China
China
• Competitiveness of
domestic auto parts
makers underlined
Slow growing group
Germany
Germany
Global automakers responding to demand for low-end
• Continued efforts for
restructuring
USA
USA
cars are likely to see qualified Korean auto parts makers
• Competitive
domestic auto parts
makers forecast to
generate overseas
sales
• Further cost saving
increasingly
necessary
Other
Europe
Other
Europe
benefit from this industry trend.
Source: WardsAuto, Mirae Asset Research estimates
At the moment, global automakers are categorized into
two groups: 1) fast growing automakers based in Asia;
and 2) slow-growing automakers in North America and
Europe. Facing different circumstances, each group has
different strategies and goals. However, both groups share
Figure 2. Japanese Auto Parts Stocks Sharply Rise
on Expansion of Overseas Sales
P/E gap between automakers and auto parts makers (RHS)
Japanese major automakers’ avg P/E (LHS)
Japanese major auto parts makers’ avg. P/E (LHS)
120
100
40.0
a common need for auto parts makers that are competitive
Toyota - GM joint venture in
the U.S., New United Motor
Manufacturing, Inc.
(NUMMI), started
production, 1984
80
in price and high in quality.
60.0
20.0
60
Securing auto parts makers to meet continued production
0.0
Toyota Motor
Manufacturing, Kentucky,
Inc. started production,
1988
40
capacity expansion is vital for fast-growing automakers. To
do so, they are likely to seek new auto parts makers with
quality and price competitiveness, while encouraging
existing auto parts makers to expand investment.
(20.0)
20
(40.0)
0
(60.0)
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
Source: Factset, Mirae Asset Research estimates
For slow-growing automakers, cost structure improvement
is key. These companies are also likely to want auto parts
makers with strong price competitiveness and good quality
Figure 3. Korea Auto Parts Manufacturers
Competitive than China Peers (Japan=100)
products.
Materials
If automakers are focused more on competitive pricing
than on quality, they are likely to contract with China auto
qualified auto parts makers in Korea.
Inventory
management
Transportation
Facility
expansion
Korea
88.3
77
86.2
83.1
80.7
China
81.8
45.9
75
76.4
68.4
R&D labor
R&D facility
Other R&D
Others
Total
parts makers. However, if automakers want both quality
and price competitiveness, they are likely to turn to
Labor
More
Korea
74.6
73.7
75.1
80
84.2
China
52.9
58.5
57.3
64.8
72
Source: KIET, KAP Korea, Mirae Asset Research estimates
Recently, GM steadily increased orders to domestic auto
parts makers including S&T Daewoo and Dongyang
Mechatronics. As such, global automakers are very likely
to pay more attention to Korean auto parts makers as they
seek new growth engines in key emerging markets with
improved price competitiveness.
Feb 15, 2008
20
AP Insight
Consumer
According to samples drawn by the Shanghai Economic
Committee during the seven day Spring Festival holiday
from 361 large- to-mid retailers in Shanghai, total retail
Industry Update
sales were RMB4.2bn or an increase of 20.5% YoY. Part
China’s Consumer Sector
of the increase was attributed to the increased spending
from staying in town during the adverse weather. Overall,
Anita Hwang
the retail sales of consumer goods in China during the
Spring Festival holiday rose 16.0% YoY to RMB255bn
(15% YoY growth in 2007, 14.5% YoY growth in 2006).
Did the snowstorm freeze Chinese consumers?
The unexpectedly cold weather and snowstorm in China
over the past month has triggered many concerns on
escalating consumer prices and reduced consumption
demand. While we believed the temporary shock from
reduced supply would drive up prices, we were not in the
view that consumption demand would be significantly
affected. The most heavily-hit snowstorm areas were in
A reality check of hypermarkets in Shanghai
Research on “Large-scale Retailers in Shanghai in 2007”
conducted by Shanghai Business School revealed a
slowdown in expansion of hypermarkets in Shanghai. New
store opening reduced as a result of intense competition
and escalating rental costs.
the rural and second- to third-tier cities in Central and
Southern provinces. These regions are neither key
revenue-generating areas for retailers nor manufacturing
Figure 2. Slowed Expansion of
Shanghai during 2007
2007
2006
New Store Opening
14
20
Closure
1
2
145
132
9.8%
15.2%
hubs for apparel and footwear. Unless the snowstorm and
cold weather persist for much longer, we expect material
negative impact to be contained to the agricultural players.
Hypermarkets
Total
YoY growth in store number
in
The retail statistics from first-tier cities like Shanghai and
Beijing during the Spring Festival holiday confirmed that
The level of competition is reflected in the fact that 69 of
consumption has not dwindled during the cold weather.
the 145 hypermarkets in Shanghai have at least one
Beijing Municipal Bureau of Commerce reported that sales
competitor within a 1 km radius. Some stores have as
of 36 department stores in Beijing on the past Sunday
many as 4 competitors within a 1 km radius. 133 of the
increased 29.6% YoY. According to statistics from the
145 hypermarkets have at least one competitor within a 3
Beijing Commercial Information and Consultation Center,
km radius. Some stores have as many as 16 competitors
sales revenue generated from a sample of 2,901 stores in
within a 3 km radius.
Beijing recorded double-digit growth in line with
expectations.
We reiterate our previous view that China’s hypermarket
competitive environment is highly intense as a result of
Figure 1. Beijing’s Retail Sales during New Year’s
Category
Y-o-Y Growth (%)
rapid expansion. Growth rate is expected to slow
particularly in first-tier cities while profit margin is expected
Department stores / shopping malls
23.4
Supermarkets
21.0
Catering Services
13.2
small players struggle to survive. We believe the
Specialty Stores
12.4
hypermarket is likely to become an oligopolistic market
Source: Beijing Commercial Information and Consultation Center
to narrow. Market consolidation is expected to continue as
dominated by national foreign players and a few regional
leaders.
Feb 15, 2008
21
AP Insight
Banking
Could be CCB given its Asia expansion strategy
CCB’s exposure in HK and overseas markets is relatively
Industry Update
small compared to other Chinese banks. A major
breakthrough was in December 2006 when CCB acquired
M&A Rumor & Asset Quality Worries
Bank of America(Asia) in HK for HK$9.7bn or 1.3x book
value. It has now adopted the name CCB(Asia). This has
Patrick Pong
only raised overseas earnings contribution to 1.9% in
1H07, in contrast to 0.8% in FY06. CCB’s chairman
indicated that the priority of overseas development
Highlighted Companies
strategy is to strengthen Asian business, particularly in HK.
Company
Rating
Current Price (Feb 14)
Target Price
HK$5.83
-
Not Rated
CCB (939.HK)
Recently, the bank spent HK$1.8bn to acquire a 50%
interest in a HK office building which is to be constructed
HK’s Wing Lung Bank is speculated to be for sale
by 2011. Moreover, the bank’s branch network expanded
According to Ming Pao Daily, a large-scale Chinese bank
from 14 in 2006 to 20 in 2007. These moves suggest
has interests to acquire Wing Lung Bank (WLB), which is
CCB’s expansion plan in HK has continued.
62.56%-owned by the Wu family. WLB, a medium-sized,
locally incorporated commercial bank, with market cap of
Inappropriate time to acquire because…
HK$22bn, denied there are negotiations or agreements.
While US subprime meltdown does not pose a systemic
threat to the HK banking sector, HKMA deputy chief
Asking price is equivalent to 3x book value
executive Choi Yiu-kwan warns that “local lenders should
Asking price is reportedly to be as high as 3x book value
not lose sight of the second wave” and closely monitor the
(or 21x FY06 earnings), valuing WLB at HK$34bn. This
contagion effect on HK’s economic growth and asset
valuation looks expensive as transactions of medium-
quality. An increase in bad debt charges would erode
sized banks in HK usually fall within a range of 1.2x-2.5x
profitability of HK banks.
book value. The most expensive M&A was back in 2001
when DBS bought Dao Heng Bank for 3.4x book value.
Profitability to be trimmed by economic slowdown
The most recent M&A was in 2006 when JCG Holdings
Bank asset qualities remain sound so far, as the overdue
acquired Asia Commercial Bank for 2.4x book value.
loan ratio hovers at a record low of 0.6% and bad debt
charge to asset ratio stands at 0.04% as of 3Q07.
However, when economic activities start moderating over
Figure 1. Chinese Banks’ Exposure in HK
Branches
BOC(HK)
CCB(Asia)
ICBC(Asia)
WLB
280
20
41
33
Macau
0
4
0
0
Others
12
0
0
3
HK
Profit(2006)
HK$mn
14,007
616
1,246
1,606
Asset(2006)
HK$mn
928,953
36,894
146,392
84,981
Equity(2006)
HK$mn
86,640
8,024
11,085
BOC
65.7%
CCB
100%
ICBC
71.21%
11,382
Wu
family
62.56%
Shareholder
Source: Company
the course of the year, overdue loans and bad debt
charges should start to rise as they usually lag behind the
business cycle. For instance, when HK’s real GDP slowed
from 6% in 1994 to 2.3% in 1995, banks’ bad debt charge
ratio edged up from 0.05% in 1994 to 0.18% 1996. After
the Asian financial crisis, this ratio peaked at 0.76% in
1999. Despite these concerns, we believe the HK
economy should be more resilient than before, as
discussed in the previous AP weekly. We expect the ratio
to be more in line with 1996 levels. Hence, the impact on
Who’s the buyer?
the HK banking sector is likely to be limited as ROE
BOC looks unlikely as BOC(HK) is already one of the
declines 1.9%p to 14.6% and ROA narrows 0.15%p to
largest players in HK and an acquisition of WLB is unlikely
1.2%.
to bring in much synergetic benefit. Although ICBC is
expanding overseas, emerging markets are at the top of
its agenda. It recently acquired 79.9% of Macau’s Seng
Heng Bank for HK$4.5bn and 20% enlarged capital of
South African Standard Bank for HK$42.31bn. An
acquisition in a mature market like HK looks inconsistent
with the bank’s M&A objective.
Feb 15, 2008
22
AP Insight
Figure 2. Impact of HK Economic Slowdown
Banking
Sector
2006
Scenario 1
Scenario 2
A slowdown
A recession
Pre-provision
ROA
%
1.54
1.54
1.54
Bad debt charge
% of asset
0.01
0.18
0.76
Pre-tax ROA
%
1.53
1.36
0.78
Tax
% of asset
0.18
0.16
0.09
Post-tax ROA
%
1.35
1.20
0.69
Equity/Asset
%
8.2
8.2
8.2
ROE
%
16.5
14.6
8.4
Source: HKMA, Mirae Asset Research estimates
We prefer CCB on undemanding valuation
We believe CCB’s expansion in Asia through organic
growth and acquisition should continue and be positive to
the bank’s long-term outlook. As a global economic
slowdown would erode profitability, it is in the bank’s favor
to fight for the best valuation, which is more than what the
Wu family is asking, or to look for other opportunities in the
Asian region. CCB is trading at 16.6x FY08 earnings, well
below the peer group average. Coupled with 28% EPS
CAGR, we prefer CCB compared to its China peers.
Figure 3. Peer Group Comparison
(X,%)
P/E
2007
P/E
2008
P/B
2007
P/B
2008
3-yr
EPS
CAGR
China Merchant Bank
42.3
29.3
6.4
5.4
42.7
Bank of Comm.
China Construction Bank
Bank of China
ICBC
China CITIC Bank
Average
27.5
20.2
14.3
22.0
21.8
24.7
21.4
16.6
11.0
17.0
15.1
18.4
4.3
3.7
1.9
3.4
2.6
3.7
3.9
3.4
1.7
3.2
2.3
3.3
34.1
28.3
25.4
31.7
45.2
34.6
Sources: Bloomberg, Mirae Asset Research estimates
Feb 15, 2008
23
AP Insight
Internet / Software
Of note, the utilization rate of e-commerce by China
SME’s is rising fast. Moreover, the proportion of paid
Company Update
members among the company’s member base is still very
China’s B2B e-Commerce Giant
Woo-Cheol Jeong
Taeyoung Kim
small, thus leaving ample room for growth.
Figure 1. Paid subscribers
(1,000)
25
20
Highlighted Companies
(1,000)
250
Gold Supplier (Lhs)
International TrustPass (Lhs)
China TrustPass (Rhs)
200
15
150
10
100
Initiate with HOLD rating and TP of HK$ 19.00
5
50
We initiated coverage of Alibaba.com with a HOLD rating
0
Company
Alibaba.com (1688.HK)
Rating
Current Price (Jan 9)
Target Price
HOLD
HK$
HK$ 19.00
and TP of HK$19.00. We have a neutral stance on the
stock as even though the price has fallen more than 50%
0
05/12
06/06
06/12
07/06
Source: Mirae Asset Research estimates
from the previous high due to weak global stock
performance, we still view the current valuation as
Figure 2. Revenue and OP
demanding.
(RMB mn)
6,000
Alibaba.com was listed on the HKSE on November 6,
2007. The company raised US$1.5bn in its IPO, which
was the largest IT offering since Google. As China’s
largest and leading e-commerce company, Alibaba.com
has first mover advantage in the Chinese B2B ecommerce market.
Revenue (Lhs)
OP (Rhs)
(RMB mn)
1,400
1,200
5,000
1,000
4,000
800
3,000
600
2,000
400
1,000
200
0
0
2004
The company is currently trading at FY08 forecast P/E of
2005
2006
2007E 2008E 2009E
Source: Mirae Asset Research estimates
97.9x. Chinese Internet firms on the NASDAQ are trading
at an average FY08 forecast P/E of 26.7x, while the
benchmark Hang Seng Index average FY08 forecast P/E
is 17.6x. TP was derived by applying Hang Seng Index
average PEG of 0.9x to 3-year EPS growth in anticipation
of the company’s growth potential. As there is limited
upside potential (current stock price is HK$19.58), we
maintain a HOLD on the company.
We forecast the company to post FY08 revenue of
RMB3.4bn (up 54.3% YoY) and OP of RMB760mn (up
75.6% YoY). The company should enjoy such robust
growth thanks to its first mover advantage in the China
B2B e-commerce market. Considering China’s high
economic growth and rapidly improving Internet
infrastructure, high growth of the B2B e-commerce market
should sustain.
Feb 15, 2008
24
AP Insight
1Gb DDR2 on 75nm.
Tech
Micron Technology also seems to focus on being a
dedicated memory manufacturer by spinning off it CMOS
Industry Update
image sensor (CIS) units. We see that this could bring
about more competition among the top memory players.
Semiconductor Update
Micron has been well positioned to benefit from 8” fab
leverage on CIS like the system LSI business of Samsung
Hak Moo Lee
Electronics. Unlike other dedicated DRAM players, Micron
and Samsung Electronics have been less vulnerable to
the price drops due to their 8” fab utilization on various
We believe that the DRAM cycle has bottomed out.
However, there are still several uncertainties, given 1) that
Qimonda has issued convertible bonds; 2) that Micron
Technology should shortly spin-off its CMOS image
sensor business and focus on its memory business; 3)
that Powerchip Semiconductor Corp (PSC) should expand
sub-32-nm CMOS research.
products other than DRAMs.
Even though Micron has a plan to expand the NAND flash
market by sub-40 nm products in 2H08, it would suffer
from its supply of DRAM units due to the relatively
stagnant progress in technology migration to sub-70 nm.
More than 80% of DRAM in Micron’s 12” fab in Virginia
and Singapore is being produced in 78nm technology,
Qimonda is projecting revenue to drop -56% YoY to
€513mn and NP to turn in the red to €598mn in 4QFY07.
The operating cash outflow was around US$400mn in the
same quarter, and it had been performing the worst
among DRAM companies (Figure 1).
which has less size efficiency than Samsung’s 68nm and
Hynix’s 66nm technology.
We believe that the restructuring of the DRAM industry is
imminent, but the speed would be slower than anticipated.
Powerchip Semiconductor, a Taiwan DRAM company, is
poised to join the sub-32 mn memory technology group
Figure 1. Operating Cash Flow in 4QFY07
from next month. Powerchip Semiconductor is also
struggling with operating cash outflow. However, it should
(US$ mn)
400
progress one step forward to strive to survive in DRAM
industry.
300
200
100
(300)
Qimonda
Nanya
Powerchip
ProMOS
Elpida
Hynix
(200)
Micron
0
(100)
(400)
(500)
Source: Micron Technology
Even though DRAM prices have rebounded recently by
around 15-20% from the previous bottom, major
commodity DRAMs such as DDR2 512Mb are still far
below cash cost. Therefore, Qimonda could continue to
suffer from operating cash outflow.
Recently, Qimonda issued convertible bonds (total amount
US$217.6mn, 17.5mn ADSs with an initial conversion
price of US$7.25 per share at a coupon of 6.75%). We
believe that it would take more time to reach the
meaningful reflection point of the DRAM industry, due to
Qimonda’s efforts to survive. In spite of the operating cash
outflow, the company still focuses on the DRAM
technology progress to 58nm and the cost optimization of
Feb 15, 2008
25
AP Insight
Tech
As shipment slows, top foundries are cutting capex in
equipment investment and turning to R&D to boost
productivity. Unlike their peers, these companies have
Industry Update
been cutting capex more aggressively. According to
Taiwan Semiconductor Manufactu
ring (TSMC)
Gartner’s newly release estimates, global semiconductor
(2330.TT, Not Rated)
US$51.3bn. In the meantime, the two foundries plan to cut
capital expenditures is forecasted to shrink 13.2% to
even more than that: each by over 30% in 2008.
United Microelectronics (UMC)
(2303.TT, Not Rated)
H C Kwan.CFA
A bump cleared, but more ahead
Both TSMC and UMC during the week reported net sales
figures for the month of January as sales were flat on a
MoM basis. TSMC reported small growth of 3.6% MoM to
NT$31.0bn while UMC reported a small MoM decline of
2.9% to NT$8.2bn.
The performances of both foundries in January are in line
with earlier guidance. But we see more turbulence ahead
for them, especially in 1H08.
UMC is expected to face sharp slowdown in sales over the
next two months. We estimate a 20% drop in sales in the
last two months of 1Q08 due to shrinking shipment volume
and ASP. Given over 30% depreciation costs in COGS,
profit, in there is any, is likely to drop significantly.
TSMC may do better for its higher share of sales from
advanced under-90nm process nodes, which may edge up
2%p to 35%. But a fall in utilization rate to 70% from 85%
in 4Q07 should hurt bottom line.
We believe 1H08 should be a tough period for
semiconductor players and look forward to a turnaround in
3Q08, driven by ever increasing popularity of flat panel
TVs. The US is scheduled to terminate analog
broadcasting in February 2009. Barring a severe downturn
in economic activities, demand for new replacement TV
should be solid in the US and around the world.
Figure1.Total Semiconductor Capital Spending (US$bn)
2007
2008
2009
2010
2011
2012
59.09
51.30
55.72
63.25
58.25
62.65
Source: Gartner
Feb 15, 2008
26
AP Insight
of services from the network deterred aggressive
infrastructure investments by telcos. However, we remain
focused on the following positive drivers for IPTV services:
1) CT, CNC and SMG willingness to support IPTV
business; and 2) government plans to reduce the gap in
information accessibility between urban and rural regions.
In short, IPTV business has great potential to grow in the
China market.
Telecom
Earnings Review
Industry Update
IPTV Begins to Bloom in Asia
Young Choi
Our View on Highlighted Companies
KT(030200.KS)
BUY
Current
Price(Feb13)
W50,000
SKT(017670.KS)
BUY
W189,000
W 330,000
W13,100
Company
Rating
Hanaro Telecom(033630.KS)
Target Price
W 71,000
BUY
W11,600
China Telecom(728.HK)
Not Rated
HK$5.74
N/A
China Netcom(906.HK)
Not Rated
HK$23.10
N/A
PCCW(8.HK)
Not Rated
HK$4.43
N/A
IPTV business is on a rising trend in the Asian
telecommunications industry. As most fixed-line telecom
operators face declining revenue from fixed-line
operations, IPTV is emerging as a positive new growth
driver. Also, recent trends toward telecom-media
convergence should be another factor driving IPTV
business growth. China started IPTV services in 2005 and
Korea is expected to launch full-IPTV services with realtime broadcasting in early 2H08. Meanwhile, Hong Kong
has already seen meaningful penetration in IPTV services.
Figure 1. IPTV Subscriber Numbers in Asian Market
2006
('000)
1,200
846
1,000
2007
1,131
900
Hong Kong now looks to be the world leader in IPTV
penetration with the success of PCCW’s ‘nowTV’ service.
Launched in 2003, nowTV is expected to have had around
900,000 subscribers at end-2007. Aside from the fact that
IPTV subscriptions and ARPU showed steady growth, we
are focused on PCCW’s QPS plan to utilize content
distribution across various platforms (mobile, fixed-line,
broadband, IPTV). We believe PCCW should benefit from
the QPS plan as it should lower churn rate of other
products and increase overall ARPU. We also believe
PCCW’s nowTV is a stronger service than i-Cable’s
(dominant cable TV operator), considering superiority of
content and availability of bundled service.
Figure 2. PCCW’s nowTV Subsciptions and ARPU
Trend
('000)
1,000
Subs (LHS)
monthly ARPU (RHS)
(HK$)
200
800
160
600
120
400
80
200
40
0
0
2H03 1H04 2H04 1H05 2H05 1H06 2H06 1H07
758
800
600
500
Source: PCCW, Mirae Asset Research estimates
400
150
200
0
China
Hong Kong
(PCCW)
Korea
Source: Korea Electriocs Information Center, PCCW, Mirae Asset
Research estimates
Note: Hong Kong’s 2007 number is estimation
Note: KT’s subscriber number is not considered in Korea’s 2006 number
China’s IPTV subscriptions were 846,000 persons at end2007, significantly below market expectation of 1.3mn. We
believe regulations on IPTV led to the sluggish growth.
The Chinese government issued IPTV business licenses
to only four broadcasting companies (Shanghai Media
Group(SMG), CCTV, Southern Media Corp(SMC), and
Zhejiang Radio Television Group(ZRTG)), and has not
allowed telcos to operate the business directly. Separation
Feb 15, 2008
In Korea, we believe IPTV is about to bloom. Total number
of subscribers of pre-IPTV (based on VOD service)
reached 1.1mn as of December 2007. With the National
Assembly granting full-IPTV services at the end of last
year, launch of full-IPTV services should begin early 2H08
by major fixed-line telcos, like KT and Hanaro Telecom.
Also, as dominate mobile operator SKT’s acquisition of
Hanaro Telecom is expected to be approved by the
government, the IPTV market should be driven by two
dominate players: KT and SKT. This should lead to largescale penetration of IPTV business, in our view.
27
AP Insight
Figure 3. Trend in Korea IPTV Subscriptions
('000)
1,200
Hanaro (HanaTV)
KT (MegaTV)
1,000
280
800
600
55
65
73
548
501
540
400
200
325
230
147
591
664
754
807
0
Jun07
Aug07
Oct07
Dec07
Source: Company data, Mirae Asset Research estimates
Feb 15, 2008
28
AP Insight
Recommendation
By industry
Attractive: over +10% of the current industry index
Neutral: -10% to +10% of the current industry index
Cautious: -10% or less than the current industry index
Terminology of Investment recommendation by industry has changed
since August 3, 2005 as follows: Overweight Æ Attractive /
Underweight Æ Cautious.
By item (six months)
Buy: A target price of over + 20% of the current price,
Hold: A target price of - 10% to +10% of the current price
Reduce: A target price of –20% or less than the current price
* Note: Correction of –10% to +10% is possible based on the
investment recommendations by industry.
Earnings Quality Score
Earnings Quality Score = 0.70*(Historical Earnings Stability) + 0.15*(Consensus Forecast Certainty) + 0.15*(Consensus Forecast
Accuracy)
1.
Historical Earnings Stability
-
The variability of the net profit growth rate (YOY) over the last 20 quarters was translated into percentage terms.
Earnings growth variability was calculated based on MAD (Median Absolute Deviation), rather than SD (Standard Deviation) in order to
minimize distortion from outliers.
- The lower the earnings growth variability, the higher this indicator.
2.
Consensus Forecast Certainty
-
3.
Consensus Forecast Accuracy
-
*
The gap between analysts' views on 12-month forward EPS was translated into percentage terms.
The gap is calculated by dividing the SD of 12-month forward EPS with the average value.
The narrower the gap is, the higher this indicator.
The median value of absolute EPS surprise over the last 3-year was translated into percentage terms.
EPS surprise was calculated based on 'the actual figure at the end of the year / the consensus estimate at the beginning of the year - 1'.
The lower the absolute EPS surprise, the higher this indicator.
Reference
1)
Consensus Forecast Certainty and Consensus Forecast Accuracy were applied only to companies with more than 5 years of EPS
estimates.
2) We gave the average score of 50 to cases in which the aforementioned indicators could not be produced.
Compliance Notice
This report is distributed to our clients only, and none of the report material may be copied or distributed to any other party. While we have taken
all reasonable care to ensure its reliability, we do not guarantee that it is accurate or complete. Therefore, Mirae Asset shall not be liable for any
result from the use of this report. As of Jan 18, Mirae Asset is entrusted to deal with the disposition and acquisition of treasury stock for SK
Telecom.
As of Feb 15, Mirae Asset Securities is SKT, KT's ELW issuer and LP.
For China Merchants Bank (3968.HK), Bank of Communications (3328.HK), China Construction Bank (0939.HK), Bank of China (3988.HK),
ICBC (1398.HK), China CITIC Bank (0998.HK), Guangzhou R&F Properties (2777.HK), and Li Ning (2331.HK):
Mirae Asset HK (MAHK) has financial interest in China Merchant Bank as at January 31, 2008, but no financial interests in other companies as at
January 31, 2008. MAHK does not act as a market maker of the companies on January 31, 2008. No employees of MAHK serve as an officer of
the companies as at January 31, 2008. MAHK acts no investment banking roles for the companies within past 12 months.
This report has never been provided to any institutional investor or third party. This report has been prepared without any undue external
influence or interference, and accurately reflects the personal views of the analyst on the company herein.
[Mirae Asset Securities Research]
Item
Analyst
Type
Securities Held by the Analyst
Number of
Purchasing
Shares
Price
Purchasing
Date
Holdings of
Shares over1%
Participation in
the Issuance of
Securities
Involvement
with the
Affiliates
Treasury Stock
Acquired
NA
Feb 15, 2008
29

AP Weekly Insight

Transcription

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