Regional Daily, Maybank KE (2014-07-11)

Daily 11 July 2014 TOP VIEWS India - Post budget view | OVERWEIGHT Regional Materials | OVERWEIGHT CIMB Group (CIMB MK) | Company update India - Post budget view Bold budget; Economy to resume growth Strategy We increase our NIFTY target by 7% to 8,355 for CY2014 (based on 15x 1-year forward earnings vs 14x earlier). We expect investors to take positive view of the budget�s long term measures, which will soon end the market correction. The FM surprised by: 1) maintaining the fiscal deficit of 4.1% to GDP set by previous government; 2) allocating incremental INR200b to infrastructure; and 3) leaving INR220b of direct tax cuts in the hands of consumers. Catalysts will emerge from the tax pass-through for property and infrastructure assets (billions of dollars of unlisted infrastructure assets) and clarifications given to foreign portfolio investors (capital gain tax vs tax on business income earlier). We prefer housing, road and power transmission sectors which have been given a big boost in the budget. Click here for report » Regional Materials 2015: soft recovery as imbalances ease Sector update Sector performance should improve in 2015 YoY on rising global consumption and falling production growth due to low prices and CAPEX cuts. China's PMI above 50 is positive, particularly as domestic equity markets have lagged and sector returns are highest coming out of a cyclical trough. While we continue to believe that China's materials intensity has peaked, the latest credit tightening cycle has ended and commodity financing abuses will delay, but not upend a soft recovery once inventory de-stocking ends. Consensus expectations for 2015 appear generally low as well. We look for nickel and copper prices to outperform in 2015, with zinc upside continuing. The underperformers we identified for 2014 - iron ore, gold, coal, and steel - offer limited performance other than for trading. Consensus expectations for 2015 appear too high for the Chinese steel sector and too low for nickel and copper. Click here for report » CIMB Group (CIMB MK) A tripartite merger in the making Share Price: MYR7.24 | Target Price: MYR8.00 (+10%) | MCap (USD): 19B | ADTV (USD): 14M CIMB, RHB Cap and MBSB�s merger will create Malaysia�s largest financial group with assets 6% larger than Maybank�s. Possible negative knee-jerk reaction to CIMB�s share price on expected dilution in ROE, but BVPS likely to increase; our TP of MYR8.00 is thus unchanged. HOLD maintained on CIMB and RHB Cap (TP: MYR8.70) pending further developments. Click here for report » COMPANY NOTES Yanzhou Coal (1171 HK) | Initiation Bank Central Asia (BBCA IJ) | Results preview Bank Negara Indonesia (BBNI IJ) | Results preview Holcim Philippines Inc (HLCM PM) | Company update OCBC Bank (OCBC SP) Regional Plantation | Sector update Yanzhou Coal (1171 HK) Awaiting more timely entry point Share Price: HKD5.86 | Target Price: HKD6.25(+7%) | MCap (USD): 3.7B | ADTV (USD): 8M Initiate at HOLD given the limited upside to our 0.6x 2014 PBR based TP of HKD6.25. Also, Yanzhou is a high beta play on coal price volatility, the outlook for which is low. We could be more positive at lower share price levels or if coal fundamentals improve. Consumption growth is negative YoY and supply ample, leaving coal markets oversupplied. Chinese coal prices lack a strong upside catalyst, but have limited downside at below the industry marginal cost. In this environment, we prefer Shenhua (1088 HK; HKD21.70; BUY) with its cheaper valuation and more stable growth outlook. Click here for report » Bank Central Asia (BBCA IJ) Results preview 1H14 Share Price: IDR11,300 | Target Price: IDR12,500(+11%) | MCap (USD): 24.0B | ADTV (USD): 12M We expect 1H14 net profit to reach IDR7.5t (+19% YoY), in line with our estimates. BBCA�s 1H14 financial results tentatively scheduled for 23 July. CASA base is likely to remain high. LDR should return to 75% on the back of acceleration in TD. Maintain HOLD. We think the bank still deserves a premium valuation but with limited upside to our TP of IDR12,500 (16.3x 2015F PER; 3.4x 2015F P/BV). Click here for report » Bank Negara Indonesia (BBNI IJ) Results preview 1H14 Share Price: IDR4,980 | Target Price: IDR5,800(+16%) | MCap (USD): 8.0B | ADTV (USD): 11M We expect 1H14 net profit to reach IDR4.8t (+12% YoY), in line with our estimates. BBNI�s 1H14 financial results are tentatively due to be announced on July 24. TD rate adjustment has mostly been reflected in 1Q14 and loans likely to begin accelerating from 2Q14 onwards. Maintain BUY with TP of IDR5,800. At 1.3x 2015F P/BV, current valuation starts to look attractive. Click here for report » Holcim Philippines Inc (HLCM PM) Prospects getting better Share Price: PHP13.90 | Target Price: PHP19.00 (+37%) | MCap (USD): 2.1B | ADTV (USD): 0.1M Earnings forecasts raised 5% this year and 10% net year on better margins. Buy rating, PHP19/sh target price maintained. Potential merger with LRI not yet factored in. (FULL REPORT WILL BE OUT SOON) OCBC Bank (OCBC SP) Positive sound bites from CEO Share Price: SGD9.45 | Target Price: SGD9.63(+2%) | MCap (USD): 26.6B | ADTV (USD): 29M Positive sound bites from CEO in an interview conducted by Bloomberg. The key message: Not considering to sell its insurance arm given its importance to OCBC group. No change to our negative view on the stock. For exposure, we prefer DBS followed by UOB. Reiterate HOLD. Click here for report » Regional Plantation Lower stocks to halt price decline Sector update June 2014 inventory declined 10% MoM on lower production, higher exports and domestic Ramadhan demand. We expect CPO price to trade between MYR2,400-2,600/t till Aug 2014, before pushing higher in 4Q14. Maintain 12M NEUTRAL view. Key upside risk to our view is the return of a strong El Ni�o and further tension in Iraq. Click here for report » ECONOMICS Malaysia Industrial Production, May�14 BNM Monetary Policy | Economics Malaysia Industrial Production, May�14 Continued positive momentum Economics Industrial production in May 2014 was a better than expected +6.1% YoY% (revised Apr 2014: +4.9% YoY). It expanded by +5.1% in Jan-May 2014 (Jan-May 2013: 2.2%). Revised full-year IP growth to 6.2% from 3.6% previously (2013: +3.3%). Click here for report » BNM Monetary Policy As expected, OPR raised by 25bps Economics Bank Negara Malaysia (BNM) raised the Overnight Policy Rate (OPR) by 25 bps to 3.25%. Tone of Monetary Policy Statement (MPS) still �hawkish� with continued reference to �financial imbalances� which has proven to be a strong signal of impending OPR hike. We expect a further 25bps increase by end-2014 with two meetings remaining i.e. 17-18 Sep and 5-6 Nov. Click here for report »