Monday, April 28, 2014

Regional Daily, Maybank KE (2014-04-28)



Daily
28 April 2014
TOP VIEWS
  • Minmetals MMG (1208 HK) | High risk, higher reward
  • MediaTek (2454 TT) | A good start for the year
  • Malaysia Aviation Sector
HK: Minmetals MMG (1208 HK)
High risk, higher reward; initiate at BUY
Share Price: HKD1.78 | Target Price: HKD2.45 (+38%) | MCap (USD): 1.2B | ADTV: USD2M
  • Initiate at BUY, with DCF-based TP Street high of HKD2.45. Our DCF assumes long-term copper price of USD2.85/lb, 8% below consensus. Using Street price raises TP to HKD4.30.
  • We see 50% share price upside per year until the recently acquired Las Bambas copper mine hits full capacity in 2017. Strong backing from parent SOE China Minmetals alleviates balance sheet concerns on this under researched name.
  • Key catalysts: closing on the purchase of Las Bambas this September; updates on the same and the Dugald River zinc project by year-end; and higher forecast copper prices.
RGL: MediaTek (2454 TT)
A good start for the year
Share Price: TWD469 | Target Price: TWD599 (+28%) | MCap (USD): 24.3B | ADTV: USD90M
  • Maintain BUY with TWD599 TP. 1Q results and 2Q outlook, set to beat ours and consensus estimates, out on 30 April.
  • Better product mix and cost cuts to further drive margin expansion and therefore acceleration of earnings revision.
  • Slower-than-expected LTE adoption in China could work in favour of MTK's roll out schedule. Potential strong pent-up demand could drive 2H earnings.
Malaysia Aviation Sector
KLIA2 site visit - wonderful!
Special feature
  • KLIA2 still has some outstanding works to be done, but this should not hamper its 2 May launch date.
  • KLIA2 looks impressive, akin to an "airport within a mall". This is not a low cost terminal by any measure.
  • KLIA2 will greatly enhance Malaysia's aviation infrastructure and keep it ahead against the regional peers. (FULL REPORT TO BE OUT SOON)
COMPANY NOTES
  • China Minsheng Bank (1988 HK) | 1Q14: Revenue growth losing steam
  • China Construction Bank (939 HK) | 1Q14: Slower new NPL formation
  • Angang Steel (347 HK) | Sell as seasonal recovery falls short
  • China Shenhua Energy (1088 HK) | Good 1Q EPS, despite weak market
  • Agricultural Bank of China (1288 HK) | 1Q14: A good start
  • China Coal Energy (1898 HK) | SELL on weak profit outlook
  • BDO Unibank (BDO PM) | Strong core operations in 1Q14
  • First Gen (FGEN PM) | Near-term drag from gas plants
  • CDL Hospitality Trusts (CDREIT SP) | Maldives foray proves to be a gem
  • Sheng Siong Group (SSG SP) | Efficiency initiatives shine through
  • Erawan Group (ERW TB) | Swimming in black ink
China Minsheng Bank (1988 HK)
1Q14: Revenue growth losing steam
Share Price: HKD7.80 | Target Price: HKD5.80(-26%) | MCap (USD): 5.8B | ADTV (USD): 56M
  • Maintain SELL; cutting EPS forecast and TP.
  • Slower run-rate in new NPL formation.
  • Capital constraint will check dividend payout.
China Construction Bank (939 HK)
1Q14: Slower new NPL formation
Share Price: HKD5.31 | Target Price: HKD6.70(+26%) | MCap (USD): 164.6B | ADTV (USD): 178M
  • Steady NIM and net fees growth; strong insurance income.
  • Slower new NPL formation but weakening non-loan quality.
  • Strong CAR supports dividend payout. Maintain BUY and TP.
Angang Steel (347 HK)
Sell as seasonal recovery falls short
Share Price: HKD4.86 | Target Price: HKD4.00(-18%) | MCap (USD): 4.5B | ADTV (USD): 4M
  • Reiterate SELL with 18% downside to our TP on below consensus EPS based on weak forecast steel prices due to record industry production amid weak seasonal demand.
  • We maintain unchanged EPS and DCF based TP of HKD4.00, equating to PBR of 0.5x on our 2014 estimates. This appears more than fair given the weak ROE at 1.8% in 2014E.
  • Profit should weaken in 2H HoH as Yuan depreciation slightly raises imported iron ore costs negating the weak seasonal increase in steel prices experienced thus far.
China Shenhua Energy (1088 HK)
Good 1Q EPS, despite weak market
Share Price: HKD21.05 | Target Price: HKD24.00(+14%) | MCap (USD): 54.0B | ADTV (USD): 44M
  • Though down YoY on lower coal prices and coal sales vols., 1Q14 EPS beat consensus, as well as our est. due to lower unit coal costs, higher coal prices, and lower tax rate.
  • The earnings trend is likely to soften in 2Q as the decrease of coal prices hit the P&L and in 2H due to seasonal factors. The 1Q annualized coal sales rate was below guidance and either poses upside potential or more downside risk for 2H14 EPS.
  • Shenhua is our best thermal coal pick in a low price volatility environment. Reiterate BUY with a DCF-based TP of HKD24. Also, the dividend yield is a healthy 4.4%.
Agricultural Bank of China (1288 HK)
1Q14: A good start
Share Price: HKD3.21 | Target Price: HKD4.45(+39%) | MCap (USD): 12.7B | ADTV (USD): 73M
  • We raise our NIM forecasts and lower our net fees forecasts.
  • Higher provisions to offset faster rise in new NPLs.
  • Maintain BUY and TP; sustainable dividend payout ratio.
China Coal Energy (1898 HK)
SELL on weak profit outlook
Share Price: HKD4.18 | Target Price: HKD3.25(-22%) | MCap (USD): 7.1B | ADTV (USD): 18M
  • Reiterate SELL with estimates and TP of HKD3.25 unchanged. Reported weak 1Q14 EPS 24.5% below consensus. We expect downwards revisions closer to our 2014 EPS est.
  • While coal prices have bottomed, we forecast weak upside volatility vs. prior periods due to credit constraints on industry, thermal power share losses, and ample coal supply.
  • Trading oriented accounts may wish to buy the shares for the seasonal upside in coal prices later this year. But for longer-term investors, we see the shares as a value trap.
BDO Unibank (BDO PM)
Strong core operations in 1Q14
Share Price: PHP87.10 | Target Price: PHP93.50(+7%) | MCap (USD): 7.0B | ADTV (USD): 6M
  • 1Q14 income down 46% but core businesses grows robustly.
  • Declares special cash dividend of PHP0.90/sh.
  • Management guidance close to our forecast, maintain HOLD.
First Gen (FGEN PM)
Near-term drag from gas plants
Share Price: PHP19.30 | Target Price: PHP20.94(+8%) | MCap (USD): 1.5B | ADTV (USD): 2M
  • Downgrade to HOLD despite slightly higher TP of PHP20.94 due to limited upside.
  • Revised forecasts for 2014 higher by 2% but implies 25% YoY decline due to costs of new gas projects.
  • Preliminary profit estimates of new projects could change substantially because of market and execution risks.
CDL Hospitality Trusts (CDREIT SP)
Maldives foray proves to be a gem
Share Price: SGD1.83 | Target Price: SGD1.91(+4%) | MCap (USD): 1.4B | ADTV (USD): 1M
  • Singapore Airshow boosted 1Q14 occupancy by 1.2ppt YoY and RevPAR by 0.5% YoY; 2H14 should benefit from opening of Sports Hub and hosting of more world-class events.
  • Maldives resorts did better than expected, contributing 12% of 1Q14 NPI; DPU raised by 2.5% to reflect this.
  • TP raised to SGD1.91 (from SGD1.75); reiterate BUY.
Sheng Siong Group (SSG SP)
Efficiency initiatives shine through
Share Price: SGD0.62 | Target Price: SGD0.63(+2%) | MCap (USD): 683M | ADTV (USD): 0.2M
  • Upgrade to HOLD on better-than-expected 1Q14 results due to higher same store sales growth and margin improvement. TP raised to SGD0.63, pegged to 20x FY14E P/E.
  • Even after normalising the effect of rebates received from suppliers, gross margin appears to be on the uptrend. This is a testament to the companys continual drive for efficiency.
  • Revenue growth from new stores likely to remain limited, but margins are likely to stay strong.
Erawan Group (ERW TB)
Swimming in black ink
Share Price: THB3.86 | Target Price: THB4.50(+17%) | MCap (USD): 299M | ADTV (USD): 1M
  • Maintain BUY with TP of THB4.5. Replacement costs 20% above our DCF-based target price. Medium term outlook remains positive
  • Expect 1Q14F NP of THB7m, and this would 8% of our FY forecast. However, Bloomberg consensus put estimates at THB43m, thus if ERW delivers to our forecast it would be a disappointment for the market. A correction in the share price is an opportunity to accumulate the stock.
  • Occupancy rate in 1Q14 is expected to hit 65% (78% in 4Q13, 85% in 1Q13), and ADR to rise 1% QoQ and 2% YoY. RevPAR is forecast to drop 15% QoQ and 22% YoY. ERWs hotels in Bangkok are the main drag, affected by the political rally.
ECONOMICS
  • Economics | Singapore IPI, Mar 14
Economics
Singapore IPI, Mar 14
Broad-based double-digit growth
  • Industrial Production (IP) growth sustained its double-digit pace in Mar 2014 as it expanded by +12.1% YoY after reaching a two year high of +13.1% YoY in Feb 2014.
  • Last months and last quarters growth were broad-based, driven by Electronics, Biomedical and Transport Engineering.
  • Data suggests Singapore economy is benefiting from the uplift in G3 economies that offset slowdown in the Large Emerging Markets, namely China.
   

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