Regional Daily Ideas Troika Top Stories

Transcription

Regional Daily, 8 October 2014
5
Regional Daily
Ideas Troika
Top Stories
Skyworth Digital (751 HK)
Technology - Hardware & Equipment
BUY HKD4.16 TP: HKD4.70
Mkt Cap : USD1,519m
Pg2
Skyworth’s September TV revenue was up 2% y-o-y, snapping the decline
trend in the past year driven by strong overseas sales and 4K TV shipment in
China. We expect shipments in the following months to grow at a faster pace
from last year’s low base.
Analyst: Christopher Tse ([email protected])
Strategy – Thailand
OVERWEIGHT
Pg3
We remain positive on the SET Index – any correction is an opportunity to
buy. PTT and Unique remain our Top Picks. Positive catalysts from the
energy reform may support PTT’s share price, while Unique is undervalued.
We see the SET range-bound at 1,500-1,600 pts.
Analyst: Veena Naidu ([email protected])
Krung Thai Bank (KTB TB)
Financial Services – Banks
BUY THB23.0 TP: THB26.0
Mkt Cap : USD9,861m
Pg4
We expect modest improvements in KTB’s coming 3Q14 results, supported
mainly by stable NIM and lower credit cost. For FY15F, the roll-out of mega
infrastructure could underpin a 17% rebound in earnings and sustain share
price outperformance. BUY with a higher TP of THB26.00.
Analyst: Fiona Leong ([email protected])
Petra Foods (PETRA SP)
Food & Beverage Products
BUY SGD3.95 TP: SGD4.50
Mkt Cap: USD:1,887m
Pg5
In our recent visits to Jakarta and Manila, we observed that Petra is strongly
positioned for the structural growth of modern trade channels in its two core
markets. We maintain our BUY call and SGD4.50 TP.
Analyst: James Koh ([email protected])
Other Key Stories
Regional
Regional Real Estate
Pg6
Monthly Highlights
Analyst: Loong Kok Wen CFA ([email protected])
Weekly Spices
Pg7
Focus on China’s Railway, Leave Aside Occupy Central
Analyst: Leng Seng Choon CFA ([email protected])
Malaysia
Axis REIT (AXRB MK)
Property – REITS
NEUTRAL MYR3.65 TP:MYR3.60
Timber
Sector recommendation: NEUTRAL
Pg8
Smooth As SiLC
Analyst: Alia Arwina ([email protected])
Pg9
Not All Engines Are Firing
Analyst: Hoe Lee Leng ([email protected])
Thailand
Exploration & Production
Pg10
Analyst: Kannika Siamwalla, CFA ([email protected])
See important disclosures at the end of this report
Powered by EFATM Platform
1
Corporate News Flash, 8 October 2014
Skyworth Digital (751 HK)
Buy (Maintained)
Technology - Hardware & Equipment
Market Cap: USD1,519m
Target Price:
Price:
HKD4.70
HKD4.16
Macro
Risks
Shipments Improve Slightly
Growth
Value
Skyworth Digital Holdings (751 HK)
Price Close
Relative to Hang Seng Index (RHS)
4.90
128
4.70
123
4.50
118
4.30
113
4.10
108
3.90
103
3.70
98
3.50
93
3.30
140
88




0
0
.
3
0
0
What’s new?
.
0
0
 Skyworth announced its Sept 2014 TV shipments after market close. 0
Total TV shipments rose 14% y-o-y or 20% m-o-m (Aug 2014: +18% y-oy, 18% m-o-m). China TV shipments rose 8% y-o-y or 20% m-o-m (Aug
2014: +8% y-o-y, +26% m-o-m) while overseas TV shipments expanded
36% y-o-y or 20% m-o-m (Aug 2014: +62% y-o-y, -1% m-o-m)


120
100
4K cloud TV shipments surged by a whopping 97% y-o-y this month,
bringing its shipment mix to 15% of total China TV shipments. (Aug
2014: 13%). Cloud TV shipments also rose 20% y-o-y, and the mix in
Cloud TV shipment has reached 34% (Aug 2014: 33%)
In September, total TV revenue edged up by 2% y-o-y. TV revenue from
China, however, decreased 4% y-o-y while overseas TV revenue rose
52% y-o-y on strong shipment growth.
80
Our view
40

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
20
Oct-13
Vol m
60
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Wong Wai Sen, Stephen
FIL Limited
LSV Asset Management
29.7m/3.83m
6.0
13.0
3.49 - 4.79
53
2,831
35.9
6.0
5.0
Share Performance (%)



1HFY15 TV shipments have reached 5.9m units (+6% y-o-y), which is
slightly ahead of our FY15 forecast of 12m units (+5% y-o-y). We also
expect Oct-Feb 2015 TV shipments to grow at a faster pace from a low
base effect – as TV shipments in the same months last year fell at a
range of 8-22% y-o-y.
The implied 11% drop in Skyworth’s average selling price (ASP) last
month was also less severe than the 15-21% implied decline in the
previous four months. However, due to the lower ASPs, 1H15 TV sales
were down 9% y-o-y vs our +7% y-o-y estimate for FY15F (end March).
We expect TV gross margins to remain stable due to: i) the lower panel
cost, and ii) stronger sales of 4K Cloud TVs. Its blended FY15 GPM
should also see a mild upside from increased white goods contributions
(to 13% in FY15 with a 22% GPM vs 6% of FY14 sales) while the sales
mix of TVs may dip to c.70% in FY15 (FY14: 75%) with a 19% GPM.
Maintain BUY and a TP of HKD4.70, based on a 8x FY15F P/E.
Skyworth’s valuation is still undemanding, as it trades at a 7x FY15F P/E
and offers a dividend yield of 5%.
YTD
1m
3m
6m
12m
Absolute
(2.6)
(5.2)
7.5
(1.2)
8.9
Forecasts and Valuations
Mar-12
Mar-13
Mar-14
Mar-15F
Mar-16F
Relative
(2.6)
2.4
8.5
(5.4)
7.4
Total turnover (HKDm)
28,232
37,824
39,480
45,183
49,497
Reported net profit (HKDm)
1,347
1,501
1,254
3,041
1,911
Recurring net profit (HKDm)
1,380
1,539
1,336
1,654
1,901
Recurring net profit growth (%)
26.9
11.5
(13.2)
23.8
14.9
Recurring EPS (HKD)
0.52
0.56
0.48
0.59
0.68
DPS (HKD)
0.16
0.18
0.15
0.19
0.22
Recurring P/E (x)
7.94
7.39
8.75
7.07
6.15
P/B (x)
1.29
1.14
1.08
0.79
0.73
P/CF (x)
81.8
2.3
10.4
5.5
Shariah compliant
Christopher Tse +852 2103 9415
[email protected]
Kong Yong Ng 852 2103 5844
[email protected]
Dividend Yield (%)
na
3.7
4.4
3.6
4.7
5.4
EV/EBITDA (x)
7.30
7.62
8.29
4.59
3.92
Return on average equity (%)
17.3
16.3
12.1
23.8
12.4
Net debt to equity (%)
16.9
27.9
9.5
Our vs consensus EPS (adjusted) (%)


2

.
2
0
.
2
Source: Company data, RHB
net cash net cash
2.0
12.4
2
Strategy, 7 October 2014
Strategy - Thailand
Overweight (Maintained)
Macro
Risks
Tread With Caution In October
Growth
Value


1

1

1




1
RHB’s Top Picks
Monthly portfolio in Sep 2014
Top picks for Oct 2014
29/08/14
30/09/14
Return
UNIQ
9.85
11.3
14.7%
PTT
360
PTT
321
360
12.1%
DTAC
105
140
KBANK
225
235
4.4%
UNIQ
11.3
13.5
KTB
23.5
23.7
0.9%
PS
34.5
34.25
-0.7%
CPN
48.25
46.5
-3.6%
QH
4.44
4.22
-5.0%
Average
3.3%
SET
1.5%
30/09/14 Target Price
396
The market may see short-term profit-taking, but we remain positive on
the SET Index – any correction is an opportunity to buy. PTT and
Unique remain our Top Picks. Positive catalysts from the energy reform
may continue supporting PTT’s share price, while Unique remains
undervalued. We include Total Access Communication, given its
reasonable valuation and attractive dividend yield. We see the SET
range-bound at 1,500-1,600 pts.

Source: Companies data, RHB



RHB’s portfolio registered a 3.3% return m-o-m vs the SET Index’s 1.5%.
Our BUY calls – Unique Engineering & Construction (Unique) (UNIQ TB,
BUY, TP: THB13.50) (+14.7%) and PTT (PTT TB, BUY, TP: THB396.00)
(+12.1%) recorded strong returns. The two stocks that underperformed
and dragged down our October portfolio were Central Pattana (CPN TB,
BUY, TP: THB55.00) (-3.6%) and Quality Houses (QH TB, BUY, TP:
THB5.00) (-5.0%). Due to the weak recovery in domestic consumption,
all retailers underperformed – including Central Pattana, although it is
more exposed to more resilient mid-range to high-end consumers. We
saw profit-taking in the property sector across the board.
Our September portfolio outperformed the SET Index by 2.4%, with a
3.9% return. The index rallied strongly to 1,602pts on 29 Sept. However,
it could not sustain the 1,600 level and closed the month at 1,585.67pts,
up 1.54% m-o-m. The SET Index is up 22.1% YTD.
From our recent company visits to Siam Commercial Bank (SCB TB,
NEUTRAL, TP: THB198.00), Kasikornbank (KBANK SB, BUY, TP:
THB264.20), Bangkok Bank (BBL TB, BUY, TP: THB220.00) and Krung
Thai Bank (KTB TB, BUY, TP: THB25.10), we gather there are similar
views regarding the third-quarter performance. The economy has
bottomed out but the recovery is slow. Non-performing loans (NPLs)
during this round of a cyclical downturn have stabilised to rise very
marginally at most banks, implying that NPLs have peaked in the range
of 2.5-2.6% for the big banks. The worst of provisioning is behind us,
although provisions may stay elevated at some banks.
Loan growth is picking up gradually and FY14 loan growth should be in
the range of 5-6%. The sector that has seen a significant increase in
loans is home loans, as transfers of homes remain strong. Retail and
SME loans remain muted while corporate loans are stable. Banks are
becoming more aggressive in raising deposits but the competition for
deposits remains manageable. Most banks are guiding for stable net
interest margins (NIMs). Overall 3Q14 earnings should see q-o-q and yo-y growth of around 5%.
Company Name
Ananda Development
Price
Target
P/E (x)
P/B (x)
Yield (%)
Dec-14F
Dec-14F
Dec-14F
Rating
THB3
THB3.7
11.2
1.6
1.7
BUY
Bangkok Bank
THB212
THB220
11.0
1.3
3.7
BUY
BIG C Supercenter
THB242
THB225
26.9
4.7
1.1
BUY
Central Pattana
THB48
THB55
31.0
5.2
-
BUY
Veena Naidu License No. 24418, +66 2862 9752
Central Plaza Hotel
THB41
THB38
36.0
4.9
-
NEUTRAL
[email protected]
Charoen Pokphand
THB31
THB34
23.5
2.1
1.2
BUY
THB320
THB396
8.9
1.2
3.9
BUY
PTT
Samart Corp PCL
THB28
THB34.5
14.4
3.8
3.5
BUY
Sino-Thai Engineering & Construction PCL
THB26
THB27.5
24.8
4.6
2.0
NEUTRAL
THB5
THB5.5
na
3.0
The Erawan Group PCL
-
BUY
3
Company Update, 8 October 2014
Krung Thai Bank (KTB TB)
Buy (Maintained)
Financial Services - Banks
Target Price:
Price:
THB26.00
THB23.00
Macro
Risks
Operations Stable In 3Q14
Growth
Value
Krung Thai Bank Plc (KTB TB)
Relative to Stock Exchange of Thailand Index (RHS)
24.0
111
22.0
107
20.0
103
18.0
98
16.0
94
14.0
180
160
140
120
100
80
60
40
20
90


Source: Bloomberg
Avg Turnover (THB/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (THB)
Free float (%)
Shareholders (%)
Financial Institution
Development
FundEurope
State Street Bank
Limited
Thai NVDR
1,024m/31.9m
9.1
13.0
15.5 - 24.4
45
13,976
55.1
4.8
4.7
YTD
1m
3m
6m
12m
Absolute
39.4
(4.6)
5.5
21.7
18.6
Relative
20.6
(2.0)
2.8
10.8
9.5
Shariah compliant

Loan growth to moderate in 2H14. After expanding its loans by an
annualised 11.6% in 1H14 (the strongest among large Thai banks), KTB
expects a moderation in loan growth in 2H14 as demand for credit has
softened in tandem with the domestic economy. Management expects
loan growth of 5-7% y-o-y by Dec 2014.
Expects stable NIM in 3Q14. Net interest margin (NIM) is expected to
be stable in 3Q14 (2Q14: +12bps q-o-q), helped by lower deposit costs
on the back of policy rate cuts in late 2013 and a moderation in deposits
growth. That said, management expects NIM to slip in 4Q14 as KTB
would likely step up the pace in deposit growth.
NPLs expand further, but at a slower pace. Management guided that
KTB would report a modest rise in non-performing loans (NPLs) in 3Q14
as the real economy remains sluggish. Management remains
comfortable with overall asset quality as it expects the SME and retail
segments to recover once GDP growth rebounds in 4Q14. We foresee a
possible decline in annualized credit cost in 3Q14 (2Q14: 120bps) as we
do not expect KTB to repeat 2Q14’s move to set aside THB3.0bn in
additional provisions.
TP rises to THB26.00, reiterate BUY. We lift our earnings forecasts by
1-3% for FY14F-FY16F, as we fine-tuned our assumptions on NIM,
credit costs and non-interest income. Our TP rises to THB26.00 on
upward revisions in assumptions for long-term growth and ROAE, as we
value the stock at 1.4x FY15F P/BV and 9.5x P/E, which is at +1SD from
its historical mean. KTB is the best-performing Thai bank stock, with a
YTD gain of 39%. We believe this outperformance is sustainable as the
bank is expected to be a major beneficiary of the government’s planned
investments in major infrastructure projects. We foresee net profit rising
by a healthy 17% in FY15F. Reiterate BUY.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Net interest income (THBm)
58,122
64,481
69,257
74,306
80,530
Reported net profit (THBm)
23,366
33,929
32,832
38,438
43,510
37.4
45.2
(3.2)
17.1
13.2
23,366
33,929
32,832
38,438
43,510
Net profit growth (%)
Recurring net profit (THBm)
Fiona Leong +603 9207 7638
Recurring EPS (THB)
1.67
2.43
2.35
2.75
3.11
[email protected]
DPS (THB)
0.73
0.88
0.95
1.12
1.29
Recurring P/E (x)
13.8
9.5
9.8
8.4
7.4
P/B (x)
1.76
1.56
1.41
1.28
1.16
Dividend Yield (%)
3.2
3.8
4.1
4.9
5.6
14.9
17.4
15.1
16.0
16.4
Return on average assets (%)
1.1
1.4
1.3
1.4
1.4
(0.8)
1.2
3.4


2

.
2
0
.
3
0
0
.
2
0
0
We expect Krung Thai Bank (KTB) to post a modest improvement in its .
0
coming 3Q14 results, supported mainly by stable NIM and lower credit 0
cost. We expect the imminent roll-out of mega infrastructure to 0
underpin a 17% rebound in FY15F earnings and sustain its share price
outperformance. Reiterate BUY, with a higher TP of THB26.00 (from
THB25.10) reflecting a c.13% upside and 1.4x FY15F P/BV and 9.5x P/E.

Aug-14
Jun-14
Feb-14
Apr-14
115
Dec-13
26.0
Oct-13
Vol m
Price Close




4
Buy (Maintained)
Consumer Non-cyclical - Food & Beverage Products
Target Price:
Price:
SGD4.50
SGD3.95
Macro
Risks
Building a Strong Position
Growth
Value
Price Close
Relative to Straits Times Index (RHS)
4.30
122
4.10
117
3.90
112
3.70
107
3.50
102
3.30
97
3.10
92
2.90
3
87
2

2
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
1
Oct-13
Vol m
1

Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Shareholders (%)
0.44m/0.35m
-2.0
14.0
3.10 - 4.20
34
611
Prudential
Aberdeen
Columbia Wanger Asset Management
5.0
5.0
2.0

Recent ground-checks suggest a strong position in modern trade.
In Jakarta, Indonesia, Petra Food’s (Petra) products continue to
dominate the chocolate confectionary shelves, with a more than 50%
space. This appears to be consistent across all formats, but particularly
in convenience stores. We note that foreign brands are making an effort
to expand their share, paying for promotional spaces, but the appeal is
still more niche, ie towards higher-end consumers.
Goya well-represented on Manila shelves. Petra has a 10% market
share in the Philippines but, in our recent visit to capital city Manila, we
believe Goya’s shelf-space in modern trade is higher than that. With its
“premium-looking” packaging, affordable price point and wide variety, we
observed many interested consumers. Petra has been steadily growing
its market share since acquiring the business in 2006 and we expect this
to continue, given that it is benefiting from the growth of modern trade.
M&A opportunities will add scale to the business. Since the
divestment of its cocoa ingredients business in Dec 2012, management
has not made any moves despite sitting on an estimated USD250m war
chest. We believe M&As and/or new strategic product categories are
likely to happen once ongoing litigation with Barry Callebaut (BARN SW,
NR) reaches certainty, as this will add scale to its consumer business
and strengthen its bargaining position with retailers.
Reiterate BUY. Our DCF-based SGD4.50 TP implies 30.9x FY15F P/E.
We believe a premium to its Indonesian peers (22.2x) is justifiable, given
its excellent management track record and purer exposure. However, we
note that the IDR’s further weakness against the USD in the last month
may erode profitability, given that more than 70% of sales are still IDRdenominated.
YTD
1m
3m
6m
12m
Absolute
22.7
2.1
4.5
6.8
12.5
Total turnover (USDm)
Relative
20.0
5.0
5.1
5.8
9.1
Shariah compliant
James Koh +65 6232 3839
[email protected]
Dec-12
Dec-13
Dec-14F
Dec-15F
472
509
541
640
783
Reported net profit (USDm)
25.7
20.5
58.0
71.3
91.6
Recurring net profit (USDm)
54.3
59.3
58.0
71.3
91.6
Recurring net profit growth (%)
38.9
9.1
(2.1)
22.8
28.6
Recurring EPS (USD)
0.09
0.10
0.09
0.12
0.15
DPS (USD)
0.04
0.06
0.04
0.05
0.07
Recurring P/E (x)
34.7
31.9
32.5
26.5
20.6
P/B (x)
5.78
6.51
5.86
5.23
4.59
2.1
22.6
21.4
19.1
1.3
2.1
1.4
1.7
2.2
23.6
20.2
19.4
15.7
12.2
P/CF (x)
Juliana Cai +65 6232 3871
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
Net debt to equity (%)
na
8.3
6.7
120.5
net cash
19.0
20.9
Dec-16F
23.7
net cash
net cash
net cash
(9.6)
(8.2)
(5.1)
Source: Company data, OSK-DMG


2

.
1
0
.
3
0
0
.
2
0
0
In our recent visits to Jakarta and Manila, we observed Petra is strongly .
0
positioned for the structural growth of modern trade channels in its two 0
core markets. Particularly, we believe its Goya brand enjoys greater 0
shelf-space than its 10% market share suggests. We keep our BUY call
and SGD4.50 TP (implying 14% upside), continuing to like Petra for its
pure exposure to Asean’s two biggest chocolate confectionery markets.

3




5
Sector Update, 7 October 2014
Regional Real Estate


1

1

1
Monthly Highlights
1
Tightening measures in the regional property market seem to have
paused. The Chinese market has recently seen some loosening of
policies to address the country’s ailing housing market. For Malaysia, all
eyes will be on the 2015 Budget announcement, and we do not expect
further tightening. Meanwhile, Thai developers’ presales remain
encouraging, with strong take-ups in a few new launches.



Loong Kok Wen CFA +603 9207 7614
[email protected]
Alia Arwina +603 9207 7608
[email protected]
Goh Han Peng +65 6533 1818 ext 893

[email protected],com
Ivan Looi +65 6232 3841
[email protected],com
Lydia Suwandi +62 21 2598 6888 ext 612
[email protected]

Wanida Geisler +66 2862 9748
[email protected]
John So +852 2103 5888
[email protected]


Malaysia: OVERWEIGHT. We expect investors’ interest in the property
sector to be tepid ahead of the 2015 Budget that will be tabled on 10 Oct.
However, we encourage investors to buy on weakness, as we do not
foresee any drastic measures to be imposed on the property sector nor
relaxation of policies to be announced. We believe the set of cooling
measures imposed in the 2014 Budget achieved its objective, and in the
meantime, we think it is too early to relax some of the measures, as the
Government remains under pressure to contain property price growth in
order to ensure housing affordability. Affordable housing players are the
safer bets. We like Tambun Indah (TILB MK, BUY, TP: MYR3.00), Matrix
Concepts (MCH MK, BUY, TP: MYR3.93) and Hua Yang (HYB MK, BUY,
TP: MYR2.74), as they are still the safer bets.
Singapore: OVERWEIGHT. Keppel Land (KPLD SP NR) and Keppel
REIT (KREIT SP TP: SGD1.66) announced the long-awaiting proposed
acquisition for Marina Bay Financial Centre (MBFC) Tower 3. We like the
acquisition as it is yield accretive and it provides income stability with
longer weighted average lease expiry (WALE) for its portfolio. Within the
REITs sector, our preference remains in commercial, retail and industrial
sub-sectors, given their more favourable demand-supply dynamics. We
continue to like Keppel REIT (KREIT SP, BUY, TP: SGD1.66), Cache
Logistics (CACHE SP, BUY, TP: SGD1.42) and Frasers Centrepoint Trust
(FCT SP, BUY, TP: SGD2.22).
Thailand: OVERWEIGHT. Our upgrade on the Thai property sector last
month is reinforced with the fast recovery in property presales after the
military coup. The recent sales performance of Asian Property (AP TB,
NEUTRAL, TP: THB8.00), Ananda (ANAN TB, BUY, TP: THB3.70) and
Supalai (SPALI TB, NEUTRAL, TP: THB27.00) is very encouraging. These
three developers have just launched their condo projects near the mass
transit stations, and received 90%, 98.5% and 70% take-up. This had
prompted us to review our forecast and TP on Ananda. For stock picks, we
continue to like Quality Houses (QH TB, BUY, TP: THB5.50) and Pruksa
(PS TB, BUY, TP: THB43.00).
Indonesia: NEUTRAL. The potential cut in fuel subsidies, and hence the
resulting inflationary pressure, could hurt property demand over the near
term. However, the long-term prospects of the Indonesian property
developers remain attractive, backed by a large population. We continue to
favour Summarecon Agung (SMRA IJ, BUY, TP: IDR1,600) and Ciputra
Surya (CTRS IJ, BUY, TP: IDR4,830).
Hong Kong: NEUTRAL. China’s Central Government has loosened
mortgage restrictions just recently. Purchasers of second homes can now
be considered as first-time buyers. They can make down payments of 30%
(from 60% or such buyers would not qualify for a housing loan previously).
Banks can also offer some 30% discount on benchmark rates for
mortgages. Therefore, such policy relaxation should lift up share prices of
property stocks over the short term. We like KWG (1813 HK, BUY, TP:
HKD7.60) and Sunac (1918 HK, BUY, TP: HKD7.60) as they should fare
better, given their more solid fundamentals.
6
Regional Weekly, 7 October 2014
Weekly Spices
Focus on China’s Railway, Leave Aside Occupy Central
Bank Central Asia (BBCA) is attractive within the
NEUTRAL-weighted Indonesian banking sector
On the Occupy Central backdrop, we highlight HKEx-listed stocks that
remain attractive as they do not have direct exposure to Hong Kong.
With the recently-announced upper limit on Indonesia’s time deposit
rates, we still see larger Indon banks maintaining the upper hand. This
week, we initiated coverage on China’s railway and construction sector
with an OVERWEIGHT call.
The Occupy Central movement in Hong Kong attracted keen media and
investor interest last week. Since started on 27 Sep’s evening, it has turned
ugly with protesters clashing with the police, who responded with tear
gas/pepper spray. The event had an adverse impact on the Hong Kong
equity market. Investors turned risk-averse against stocks, including
small/mid caps that do not have direct exposure to HK such as Tongda
Group Holdings (698 HK, BUY, TP: HKD1.53), China Fiber Optic Network
System Group (3777 HK, BUY, TP: HKD3.00), SPT Energy Group (1251 HK,
BUY, TP: HKD4.30), Hilong Holding (1623 HK, BUY, TP: HKD5.00) and HC
International (8292 HK, BUY, TP: HKD24.57). At current levels, we still see
upside to their TPs.
Source: Bloomberg
China’s railway sector sets to gain from fixed asset
investment; BUY on China Railway Group (390 HK)
Source: Bloomberg
Leng Seng Choon, CFA +65 6232 3890
[email protected]
Hong Kong Research
Indonesia Research
Malaysia Research
Singapore Research
Thailand Research
Singapore banks with more significant HK exposure such as DBS (DBS SP,
BUY, TP: SGD21.00) and OCBC (OCBC SP, NEUTRAL, TP: SGD10.55)
suspended services at their HK branches but resumed operations lately. We
expect the impact from the protest to be manageable for both banks, despite
their relatively large HK exposure. For instance, Greater China (including
HK) accounted for 31% or SGD762m of DBS’ 1H14 core pretax profit.
OCBC, meanwhile, delivered c.SGD625m or 23.5% of proforma 1H14 pretax
profit (including Wing Hang’s 1H14 profit). Wing Hang derived 70%, or
SGD515m, of its 1H14 profit from Hong Kong – with Macau and Taiwan
accounting for the balance.
Effective from 1 Oct 2014, Indonesia Financial Services Authority (OJK) has
imposed an upper limit on time deposit (TD) rates for banks which are under
BUKU-3 (those with core capital between IDR5trn and IDR30trn) and BUKU4 categories (those with core capital above IDR30trn). We believe the TD
rate caps may distort market mechanism and weaken mid-sized banks’
ability to compete for deposits, which could in turn hurt growth. We see
smaller banks with high TDs may benefit only in the short term on lower cost
of funds, while large banks will likely maintain the upper hand. As the
regulators’ ultimate goal seems to be lowering lending rates, caps on lending
rates cannot be ruled out going forward should these TD caps yield little
impact. We remain NEUTRAL on Indonesian banks, with BUYS on Bank
Central Asia (BBCA IJ, TP: IDR14,400), Bank Mandiri (BMRI IJ, TP:
IDR11,800) and Bank Rakyat Indonesia (BBRI IJ, TP: IDR13,800).
Earlier this week, we initiated coverage on China’s railway and construction
sector with an OVERWEIGHT rating. We are positive on this sector mainly
on: i) China's growing railway fixed asset investment (FAI), which we project
a 15% CAGR over 2013-2016F and may reach a new high of CNY950bn in
2015F, ii) strong demand for affordable housing – we forecast 2014-2016F
construction volume to be maintained at 7m units per year, driven by Premier
Li Keqiang’s "shanty town" redevelopment plan, and iii) the sector's generally
undemanding valuations. Our Top Picks are China Railway Group (390 HK,
BUY, TP: HKD6.55), China State Construction (3311 HK, BUY, TP:
HKD14.60) and China CNR (6199 HK, BUY, TP: HKD8.47).
Powered by Enhanced Datasystems’ EFATM Platform
7
Axis REIT (AXRB MK)
Neutral (Maintained)
Property - REITS
Market Cap: USD519m
Target Price:
Price:
MYR3.60
MYR3.65
Macro
Risks
Smooth As SiLC
Growth
Value
Axis REIT (AXRB MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
3.90
106
3.70
101
3.50
96
3.30
91
3.10
86
2.90
81
2.703
76
0
0
.
2
0
0
Axis REIT (Axis) yesterday announced the proposed acquisition of an .
0
industrial asset in the SiLC industrial area, Johor. We view this 0
positively, as it may help to further drive its earnings growth. Axis is 0
targeting to complete the injection by year-end. We lift our FY15F
estimates by 5% after imputing the contribution from this acquisition.
Our DDM-based TP rises to MYR3.60 (-1.5% upside) post earnings
revision. Maintain NEUTRAL.

3
2
2

Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
1
Oct-13
Vol m
1
Source: Bloomberg
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Shareholders (%)
0.78m/0.24m
-8.2
-1.5
2.80 - 3.69
57
464
EPF
KWAP
13.6
7.2
YTD
1m
3m
6m
12m
Absolute
24.6
4.3
9.3
7.4
7.4
Relative
26.0
5.6
11.8
8.2
3.5
Shariah compliant


2

.
2
0
.
2






New yield-accretive acquisition. Axis has announced the proposed
sale-and-leaseback of a steel fabrication facility in the Southern
Industrial and Logistics Clusters (SiLC) industrial area, Johor, for total
consideration of MYR153.5m. The gross asset yield is decent, at about
7.6%. The asset has a total gross floor area (GFA) of 504k sq ft, and
comprises six buildings. The asset will be funded entirely through debt.
The REIT expects to ink the deal by year-end. Based on the
announcement, the tenant will be signing a 15-year lease with a rent
step-up of 10% every three years.
Positive prospects ahead. Axis had previously guided that it could be
injecting more assets into its portfolio by year-end. Although there could
be concerns on the assets’ location within the Nusajaya region, we
believe that Axis will be insulated from any vacancy risks. This is due to
the assets’ long-term lease and that fact that industrial assets remain
popular in Johor despite the property market slowdown. Post-acquisition,
management expects its gearing to increase to 0.39x, which is still below
the Securities Commission’s 0.5x gearing cap. That said, we expect
gearing to be pared down to c.0.34x in FY15 once the Axis completes
the placement of about 83.5m new units by early-2015.
Earnings forecasts. We do not expect any major impact to our FY14
earnings forecasts. However, we lift our FY15F earnings by about 5%
after imputing the contributions from this acquisition.
Maintain NEUTRAL. We maintain NEUTRAL on Axis, but raise our
DDM-based TP to MYR3.60 (from MYR3.34) after we revised our
earnings estimates and ascribe a lower COE of 7.38% (vs. 7.51%
previously). We view its aggressive asset acquisitions in recent months
positively and believe that more yield-accretive acquisitions could be in
the cards going forward to further drive earnings growth.
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (MYRm)
136
144
147
177
179
Net property income (MYRm)
116
123
126
152
154
Reported net profit (MYRm)
82
87
91
108
110
Total distributable income (MYRm)
82
87
91
108
110
0.19
0.19
0.21
0.20
0.20
Alia Arwina +603 9207 7608
DPS (MYR)
[email protected]
DPS growth (%)
8.1
(0.5)
13.8
(6.0)
1.2
Recurring P/E (x)
20.2
19.2
18.9
17.4
18.2
P/B (x)
1.68
1.62
1.36
1.53
1.53
Dividend Yield (%)
5.1
5.1
5.8
5.4
5.5
8.5
8.6
7.8
8.3
8.4
Return on average assets (%)
5.7
5.4
4.9
5.3
5.3
4.68
4.61
4.98
4.63
4.56
(0.7)
2.9
(5.5)
Interest coverage ratio (x)
8
Sector Update, 8 October 2014
Timber
Neutral
Macro
Risks
Not All Engines Are Firing
Growth
Value


2

2

2




2
USD/JPY and MYR/JPY movement
While we continue to like the timber sector on a standalone basis on
promising prospects for the log sub-division, this is offset by the
flattish outlook for the plywood segment due to the unexciting demand
prospects from Japan and the weaker outlook for CPO prices. We
maintain our NEUTRAL call on the sector, with our Top Pick being WTK
Holdings, which is the purest timber play.

Source: Bloomberg
CPO price trend

Source: Bloomberg


Hoe Lee Leng +603 9207 7605
[email protected]
Not all engines firing. We recently downgraded the timber sector to
NEUTRAL (from Overweight) on the back of a downward revision in our
CPO price assumptions. While we continue to like the sector on a
standalone basis on promising prospects for the log sub-division, this is
offset by the flattish outlook for the plywood segment due to the
unexciting demand prospects from Japan and weaker outlook for CPO
prices.
Mixed bag. Despite a 6.9% y-o-y increase in log production in Sarawak
in 1H14, export log prices rose 16% y-o-y in August on the back of
stronger demand from India. On the plywood front, however, the impact
of Japan increasing its sales tax, the seasonal slowdown during the
summer holiday months as well as the weakening yen has led to slower
housing starts. As a result, plywood demand has slowed even though
prices remain relatively flat y-o-y. On the CPO front, while FFB
production growth will continue to be in the double digits for Jaya Tiasa
(JT MK, SELL, TP: MYR1.81) and Ta Ann (TAH MK, NEUTRAL, TP:
MYR3.80) this would be offset by the weaker CPO prices.
Maintain NEUTRAL on the sector. Going forward, although we expect
continued strong log demand, rising log prices and increasing FFB
production from improving maturity of oil palm plantations hectarage,
these would likely be offset by weaker plywood volume and lower CPO
prices.
WTK is our Top Pick. We maintain our target 2015F P/Es of 10.0-12.0x
for the timber divisions and 16.0x for the plantation divisions. We keep
our NEUTRAL recommendations on Ta Ann and WTK (WTKH MK, TP:
MYR1.32), with WTK being the purest timber play under our coverage.
We also retain our SELL recommendation on Jaya Tiasa due to its rich
valuations.
P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
MYR1.81
15.5
1.1
1.2
SELL
MYR3.95
MYR3.80
14.9
1.3
1.4
NEUTRAL
MYR1.30
MYR1.32
9.8
0.4
2.1
NEUTRAL
Com pany Nam e
Price
Target
Jaya Tiasa Holdings
MYR2.08
Ta Ann Holdings
WTK Holdings
Rating
9
Sector News Flash, 7 October 2014
NEUTRAL (Maintained)
Macro
Risks
New Petroleum Exploration Bidding To Begin Soon
Growth
Value


1

1

1




1
st
PTTEP expects to bid in the 21 petroleum concession round. We
believe that it is likely to win several concessions, but the success of
the exploration blocks will largely depend on the designated
exploration programmes and locations. We maintain our NEUTRAL call
on PTTEP, with a TP of THB171.10/share.



Bidding of new exploration blocks to begin this month. The Energy
st
Minister Narongchai Akrasanee expects the 21 round of petroleum
exploration bidding to open this month. This will cover 29 exploration
blocks, of which 17 blocks are in the northeast and the remainder in the
central of Thailand. The move is aimed at boosting Thailand’s petroleum
reserves. This bidding round has been delayed since 2011 due to
protests from the environmental activists. Proven domestic reserves are
expected to last only six more years, and production will decline starting
th
2016. The 20 round of exploration bidding was conducted in 2007. Of
the 28 blocks awarded, only five blocks found viable reserves. (Source:
Bangkok Post, 7 Oct 2014)
Bidding evaluation. The Department of Mineral Fuels (DMF) evaluates
bids based on work programme proposals included in the bid
submission. Proposals with more extensive work programmes are
typically favoured. Apart from this, the DMF also looks at the bidder’s
consortium profile, experience, financial backing and bank guarantee,
among others. In the last bidding round, 28 concessions were awarded,
with both large and small oil companies winning the bids. PTT
Exploration & Production (PTTEP) informs us that it will be bidding in this
round as well.
PTTEP likely to win bids. We believe that PTTEP is likely to win
several concessions, but the success of the exploration blocks will
largely depend on the designated exploration programmes and locations.
We maintain our NEUTRAL recommendation on PTTEP, with a TP of
THB171.10/share.
Company Name
PTT Exploration & Production
Price
THB154.00
Target
THB171.10
P/E (x)
P/B (x)
Yield (%)
Dec-14F
Dec-14F
Dec-14F
10.0
1.5
4.0
Rating
NEUTRAL
Kannika Siamwalla, CFA +66 2862 9744
[email protected]
10
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Disclosure & Disclaimer
All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or
warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer
to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for
information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does
not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the
information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or
financial advice to independently evaluate the particular investments and strategies.
This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s
strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such
information and accordingly investors should make their own informed decisions before relying on the same.
RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in
securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be
materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered
in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies),
may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or
underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this
research report.
RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise
from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are
alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature.
The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below
and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies.
All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior
consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect.
Malaysia
This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak,
50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital
Berhad.
Singapore
This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG &
Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment
Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a whollyowned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG &
Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this
report is therefore classified as a non-independent report.
As of 28 7 October 2014May 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have
proprietary positions in the securities covered in this report, except for:
a)
-As of 28 7 October 2014May 2014, none of the analysts who covered the securities in this report has an interest in such securities, except for:
a)
-Special Distribution by RHB
Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed
to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not
an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research
report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG &
Partners Securities Pte Ltd
Hong Kong
This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong
11
Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is
referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad.
RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company.
RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain
compensation for investment banking services from the subject company.
Risk Disclosure Statements
The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that
losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK
does not maintain a predetermined schedule for publication of research and will not necessarily update this report
Indonesia
This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a
subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned
subsidiary of RHB Capital Berhad.
Thailand
This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a
subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned
subsidiary of RHB Capital Berhad.
Other Jurisdictions
In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and
regulations of the jurisdictions.
DMG & Partners Research Guide to Investment Ratings
Kuala Lumpur
Hong Kong
Singapore
Malaysia
Tel : +(60) 3 9280 2185
Fax : +(60) 3 9284 8693
19 Des Voeux Road
Central, Hong Kong
Tel : +(852) 2525 1118
Fax : +(852) 2810 0908
Tel : +(65) 6533 1818
Fax : +(65) 6532 6211
Buy: Share price may exceed 10% over the next 12 months
Trading Buy:Malaysia
Share price
may exceed 15% over theRHB
nextOSK
3 months,
however longer-term outlook remains uncertain
Research Office
Securities Hong Kong Ltd. (formerly known
DMG & Partners
Neutral: Share
mayInstitute
fall within
months
as 12
OSK
Securities
Securities Pte. Ltd.
RHB price
Research
Sdn the
Bhdrange of +/- 10% over the next
Take Profit:
Target
price
has
been
attained.
Look
to
accumulate
at
lower
levels
Hong Kong Ltd.)
Level 11, Tower One, RHB Centre
10 Collyer Quay
Sell: Share price may
more than 10% over the next 12 months
Jalanfall
TunbyRazak
12th Floor
#09-08 Ocean Financial Centre
Lumpur
World-Wide House
Singapore 049315
Not Rated: Stock isKuala
not within
regular research coverage
DISCLAIMERS
Phnom
Penh
This research is issuedJakarta
by DMG & Partners Research Pte Ltd and it is forShanghai
general distribution only. It does not have any regard
to the
specific investment
objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular
PT RHB OSK and
Securities
Indonesia
(formerlyfinancial
known asadviser
RHB
OSK (China)
Advisory
Ltd. into any
RHBtransaction
OSK Indochina
Securities
Limited
(formerly
investments
consult
an independent
before
makingInvestment
any investments
or Co.
entering
in relation
to any
securities
or
PT OSKmentioned
Nusadana in this report.
(formerly known as OSK (China) Investment
known as OSK Indochina Securities Limited)
investment instruments
Securities Indonesia)
Plaza CIMB Niaga
Advisory Co. Ltd.)
Suite 4005, CITIC Square
No. 1-3, Street 271
Sangkat Toeuk Thla, Khan Sen Sok
Tel : +(6221) 2598 6888
Tel : +(8621) 6288 9611
Fax: +(855) 23 969 171
The information contained
herein has been obtained from sources 1168
we believed
to be reliable but we do not make any representation
or warranty nor
14th Floor
Nanjing West Road
Phnom Penh
accept any responsibility
or liability
as to its accuracy, completeness orShanghai
correctness.
are subject to change
Jl. Jend. Sudirman
Kav.25
20041Opinions and views expressed in this report
Cambodia
without notice.
Jakarta Selatan 12920, Indonesia
China
Tel: +(855) 23 969 161
Fax
: +(6221)
2598or6777
Faxof: +(8621)
6288
9633or sell any securities.
This report does
not
constitute
form part of any offer or solicitation
any offer
to buy
Bangkok
DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank
Berhad, Malaysia which have since merged into RHBRHB
Investment
Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a whollyOSK Securities (Thailand) PCL (formerly known
owned subsidiary of RHB Capital Berhad) and Deutsche Asiaas
Pacific
Holdings Pte
Ltd (a PCL)
subsidiary of Deutsche Bank Group). DMG & Partners Securities
OSK Securities
(Thailand)
Pte Ltd is a Member of the Singapore Exchange Securities Trading
Limited.
10th Floor,
Sathorn Square Office Tower
98, North Sathorn Road,Silom
Bangkok 10500
DMG & Partners Securities Pte Ltd and their associates, directors,Bangrak,
and/or employees
may have positions in, and may effect transactions in the securities
Thailand
covered in the report, and may also perform or seek to perform broking and
other corporate finance related services for the corporations whose securities
Tel: +(66) 2 862report.
9999
are covered in the report. This report is therefore classified as a non-independent
Fax : +(66) 2 108 0999
As of 7 October 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary
positions in the subject companies, except for:
a)
As of 7 October 2014, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for:
a)
DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)
12

Regional Daily Ideas Troika Top Stories

Transcription

Similar documents