Tuesday, April 29, 2014

Regional Daily, Maybank KE (2014-04-29)



Daily
29 April 2014
TOP VIEWS
  • China Water Sector | OVERWEIGHT
  • NetEase Inc. (NTES US) | BUY
  • Thailand Banks | NEUTRAL
China Water Sector
Poised for a golden era
Sector Initiation
  • Initiate coverage of Chinas water sector with OVERWEIGHT. Expect rapid growth in next three years, driven by rising water price, government support and industry consolidation.
  • Initiate with BUYs on SIIC Environment and Hankore Environment, HOLD on United Envirotech.
  • Good asset quality, project sourcing capability and financial muscle will be key to success. SOEs have natural advantage, given their ties with government and access to cheap funds.
NetEase Inc. (NTES US)
Triple wins!
Share Price: USD71.12 | Target Price: USD102.00(+43%) | MCap (USD): 9.2B | ADTV: USD56M
  • Maintain BUY with Street-high target price of USD102.
  • We see NetEases recent share-price outperformance partially reflects its successful launch of four mobile games, announcement of major PC title launches and continuous development of its YiChat platform.
  • We see Street earnings upgrades and strong catalysts in the next six months to re-rate the stock.
Thailand Banks
Auto loans unlikely to recover
Sector update
  • Auto lenders would continue to see high credit cost due to the weak auto demand and falling asset quality in the used car segment
  • The 1Q14 sector earnings were flat YoY though up 5% QoQ and the large banks performing better than small-medium banks. Fee and insurance were the cushion
  • Maintain NEUTRAL rating. SETBANK has outperformed the market by 5.6% YTD - we expect a pullback ST. Large banks remain the safer bets due to diversify revenue structure and healthier asset quality.
COMPANY NOTES
  • Chongqing Rural Commercial Bank (3618 HK) | BUY
  • China Merchants Bank (3968 HK) | BUY
  • Pembangunan Perumahan (PTPP IJ) | BUY
  • Express Transindo (TAXI IJ) | HOLD
  • Union Bank of the Philippines (UBP PM) | HOLD
  • Raffles Medical (RFMD SP) |
  • Thai Market Compass
  • Pruksa Real Estate (PS TB) | HOLD
Chongqing Rural Commercial Bank (3618 HK)
1Q14: Decline in NPLs
Share Price: HKD3.34 | Target Price: HKD4.35(+30%) | MCap (USD): 4.0B | ADTV (USD): 5M
  • Strong loan growth offset by weaker NIM and net fees.
  • Decline in NPLs but maintaining high excess provisions.
  • Stable cost-income ratio. Maintain BUY with TP cut.
China Merchants Bank (3968 HK)
1Q14: Strongest revenue growth
Share Price: HKD13.84 | Target Price: HKD16.20(+17%) | MCap (USD): 8.2B |
  • We lower our NIM but raise our non-interest income forecasts
  • Rising new NPLs offset by surge in credit costs
  • Using AIRB to raise CET1 CAR. Maintain BUY with higher TP
Pembangunan Perumahan (PTPP IJ)
A good start; Raise TP
Share Price: IDR1,785 | Target Price: IDR2,200(+23%) | MCap (USD): 747M | ADTV (USD): 3M
  • Maintain BUY, and raise TP to IDR2,200 (implying PEG of 1 vs. 0.8 previously) from IDR1,700 given it has the strongest carry-over projects growth at 29% YoY.
  • 1Q14 earnings were in line at IDR61b (+44% YoY), suggesting a good start and on track to reach full-year target.
  • 1Q14 new project growth was flat, but the slew of new projects in the following quarters will pave way for total order book to grow 20% YoY in 2014.
Express Transindo (TAXI IJ)
Softer growth ahead; cut to HOLD
Share Price: IDR1,335 | Target Price: IDR1,400(+4.9%) | MCap (USD): 260M | ADTV (USD): 2M
  • Cut 2014-2015 earnings by 20-30% and downgrade to HOLD from BUY with lower TP of IDR1,400 (from IDR1,700). This lowers our 3yrs earnings CAGR from 46% to 20%.
  • Higher direct costs due to higher depreciation from new taxi pool and from shorter depreciation period of 6 years instead of 7 years in new fleet.
  • Interest costs will be higher than previously expected as the company will issue IDR1tn bond at once instead of taking bank loan of IDR500bn per annum to fund the new fleet expansion of 2,000 units taxi p.a.
Union Bank of the Philippines (UBP PM)
Boosting core income on weak tradingH
Share Price: PHP121.00 | Target Price: PHP127.00(+5%) | MCap (USD): 1.7B | ADTV (USD): 0.1M
  • Maintain FY14 forecast and HOLD rating.
  • Weaker trading gains in 1Q14 caused net earnings to drop 61.5% YoY to PHP1.5b.
  • Recurring income supports with 25% rise in net interest income and 73% surge in fee-based earnings.
Raffles Medical (RFMD SP)
Still positioned for growth
Share Price: SGD3.42 | Target Price: SGD3.95(+15%) | MCap (USD): 1.5B | ADTV (USD): 1M
  • 1Q14 results slightly below expectations on slower-than-expected revenue growth. But margins remained healthy.
  • Tight capacity at existing Raffles Hospital may curtail growth for now but significant medium-term growth beckons with completion of extension projects in 2016.
  • Maintain BUY. Trim DCF-derived TP to SGD3.95, on lower earnings forecasts.
Thai Market Compass
March exports down, few positives for stocks
Sector update
  • Contracting 3% YoY in USD terms, the Mar-14 exports pulled 3M14 growth to -1% from 0.6% for 2M14. In THB terms Mar-14 posted 5% growth putting 3M14 cumulative growth at 7% YoY. The bullish spin is that Mar-13 was a high base. The bearish spin is that to meet the MoCs 5% YoY growth target, Thai exports have to hit USD20bn/month for the rest of the year looks like a struggle at this point.
  • Imports contracted 15.5% YoY in bringing the 3M14 contraction to 15.4% YoY. We read this as negative signal on the short term economic activity.
  • Stocks potentially positively affected by the export trends (USD based) are limited to PRANDA (Jewelry), SNC (Aircon), SAT (Auto), TWS (Tapioca Starch) & KCE, DELTA (Electronics). Agri-based exports overall remain weak, Rubber (-16.5% YoY), Processed seafood (-15% YoY), Sugar (-21% YoY). Stocks potentially negatively affected include STA, CPF, TUF, KSL and KBS.
Pruksa Real Estate (PS TB)
No visible catalyst; prefer AP & SPALI
Share Price: THB21.90 | Target Price: THB21.90(+0%) | MCap (USD): 1.5B | ADTV (USD): 3M
  • HOLD, TP THB21.90; limited upside and challenging outlook. Prefer AP (BUY TP THB6.5) and SPALI (BUY TP THB23).
  • 1Q14F earnings expect to be THB1,038m (EPS THB0.47), up 34% YoY but down 54% QoQ. Results announce 12-May.
  • 1Q14 pre-sales of THB8.2b, -34% YoY; account for 20% and 25% of managements target and our estimate.
ECONOMICS
  • Thailand Economics
Thailand Economics
Exports fell from agriculture
Not easy to achieve MoCs 5% target
  • Negative export growth partly due to base effect, last years highest export value in Mar, and reduction in agricultural products (rubber) caused by unusually severe drought.
  • We maintain forecast of 4% export growth this year against MoCs guidance of 5% following a 0.31% contraction last year.
   

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