Regional Daily, Maybank KE (2014-07-08)

Daily 08 July 2014 TOP VIEWS India - Pre-budget view | Strategy Philippines Strategy Thailand Market Compass Gamuda (GAM MK) | Rating change India - Pre-budget view Big expectations, bigger challenges Strategy Maintaining our NIFTY target of 7,800 for 2014. YTD the NIFTY is up 23% and fully reflects the upbeat sentiment for the central budget on 10 Jul (risk from failed monsoon and Iraq crisis yet to be priced in). Key expectations are for tax reform and boost to infrastructure. But government must boldly cut subsidies to fund infrastructure projects. We are skeptical of such moves as the government is considering rolling back the price hikes inherited from the previous administration. Catalysts for a more positive stance would be fiscal consolidation and long-term measures to increase savings in the economy. We will revisit our NEUTRAL view on NIFTY if the government surprises on stake sales in state-owned units. Click here for report » Philippines Strategy A long-term growth story Strategy Recent updates in official targets put GDP growth at a low of 6.5% this year and a high of 8.5% in 2016. Likely to be achieved as long as investment in basic infrastructure sustained. Earnings of listed companies bound to benefit on domestic-demand-driven growth, justifying above-average multiples. Click here for report » Thailand Market Compass Marketing Trip Feedback Strategy UK-based investors remain negative on the Thai stock market. The reasoning is that the political divide is difficult to bridge in the short to medium term hence political conflict tends to recur disrupting economic activity and growth. On this basis, the risk-reward is unfavorable. Singapore-based investors are divided but most have exposure to the Thai market so we classify them as overweight. Long-only Hong Kong-based investors remain negative but hedge funds are looking for trading opportunities. Based on our 2014/15 EPS forecast, SET value could range 1500/1616, a limited upside from here. However, we also see the downside as limited on flush domestic liquidity until interest rates start to rise on credit market improvements. Some banks have started deposit campaigns but the trend is very new and scale small, we observe. Our stock picks are: BGH, BTS, INTUCH, KBANK, SCC, DCC, HEMRAJ, MINT, SPALI and TUF. Click here for report » Gamuda (GAM MK) | Rating change Turning positive; upgrade to BUY Share Price: MYR4.88 | Target Price: MYR5.30 (+11%) | MCap (USD): 3.4B | ADTV (USD): 5M Penang integrated transportation project to lift its orderbook but still at preliminary stage; KVMRT 2 will go through. Water deal likely to conclude at higher value which could in turn lead to a special dividend payout. Upgrade to BUY with a higher TP of MYR5.30 (+19%). Click here for report » COMPANY NOTES Datang Int'l Power (991 HK) | Company update Datang Int'l Power (991 HK) | Company update Back on the right track Share Price: HKD3.03 | Target Price: HKD3.10(+2%) | MCap (USD): 5.2B | ADTV (USD): 4M Entered framework agreement with China Reform Corp (CRC) for a proposed reorganization of the coal-to-chemical and related businesses. CRC will acquire the assets or equity interest in these non-core businesses. We are positive on the sale of the non-core operations. In 2013, the coal-to-chemical project suffered a CNY910m loss due to high depreciation and coal-to-gas projects Keqi and Fuxin also bear delay risks, in our view. Transaction price not yet determined. We think it may induce a one-off disposal loss, but could help long-term cash flow and earnings visibility. Maintain HOLD. Click here for report » ECONOMICS Thailand 2H14 outlook Thailand 2H14 outlook V-shape recovery remains to be seen Economics Given international pressure, we expect an election could be held earlier than late 2015 as currently outlined by junta. Since yet-announced interim gov�t is expected to be in office only a year, its commitment to long-term infra program will likely be weak and execution risk is still high. We focus on the first-year investment budget (in FY15) for the plan. As fiscal policy will now take care of economic growth, monetary policy will take care of price stability and we expect MPC to keep key rate at 2.00% for rest of this year. USD/THB will likely rise to 33.50 by end-2014 due to a resurgent dollar in 4Q14, underpinned by more entrenched US growth and end of Fed QE program, and the start of global interest rate upcycle led by the US. Click here for report » FLASH NOTE Q&M Dental Group (QNM SP) | Flash Note Q&M Dental Group (QNM SP) | Flash Note Completes Aoxin acquisition Share Price: SGD0.47 | Target Price: SGD0.55(+18%) | MCap (USD): 229M | ADTV (USD): 0.7M Deal completed. Largest acquisition so far, Aoxin Stomatology now part of Q&M China. Maintain BUY, TP SGD0.55. Aoxin-style earnings-accretive acquisitions are what to expect. We expect more such deals in the pipeline. When acquisitions fully kick in next year, FY15E P/E valuation will be reduced from 37x to as low as 27x. Click here for report »