Regional Daily, Maybank KE (2014-07-30)

Daily 30 July 2014 TOP VIEWS Thailand Construction | U/G OVERWEIGHT China Property | OVERWEIGHT Malee Sampran (MALEE TB) | Results preview Regional Plantations | NEUTRAL Thailand Construction | U/G OVERWEIGHT Sector upgrade Zero to Hero Upgrade sector to OVERWEIGHT from UNDERWEIGHT; Top Pick is CK (TP THB32). STEC (TP THB28) and ITD (TP THB6.0) also BUYs. Big players are prime beneficiaries. Recent approval of THB2.4trn infrastructure plan (2015-2022) by junta is major development for construction industry. The execution should be smoother than under previous gov't as we expect fewer objections from public. We're turning positive on the junta's execution of infra investment. We estimate a c.THB570b initial investment spread over 3-5 years. Bidding should start in 4Q14. Click here for report » China Property | OVERWEIGHT Sector update 1H muted; margin outlook & cashflow key Interim results coming soon, we believe they�ll generally be lackluster, w/ trends of 1) higher gearing HoH due to slower-than-expected cash collection ratio, 2) most developers maintaining contract sales targets for 2014 w/ a few exceptions (potentially Hopson, Sino-Ocean), 3) lower margin guidance for some that have not guided down (recall Agile, CG and Shimao already guided lower GPMs before blackout). Stocks under our coverage up an avg 21% in past month. KWG is nearing our TP; we believe some profit taking is reasonable but remain bullish on sector over long run. Still see upside to YTD underperformers like CG and Agile in short term. Large developers COLI and Vanke expect full year China GFA sold to be flattish YoY, implying vol. pick up in 2H. Various SMID caps eg Sino-Ocean are more cautious on physical mkt. Click here for report » Malee Sampran (MALEE TB) | Results preview 2Q14 in line; BUY this dip Share Price: THB39.25 | Target Price: THB47(+20%) | MCap (USD): 173M | ADTV (USD): 0.9M Maintain BUY on under-researched stock w/ 12M TP of THB47 - Gordon growth based at 42% avg ROE, 3% terminal growth. 2Q14 net profit expected to grow 17% YoY to THB107m on sales growth of 6% to THB1.5b. Meeting our forecast puts MALEE's performance on track to meet our target. We expect a sequential improvement in sales and profitability driven by rising utilization rate from growth in brands and new contract manufacturing customers (CMG). Stock dropped nearly 10% this week on combined profit taking and possibly delayed negative reaction to an online media posting about quality issues. Buy this dip. Click here for report » Regional Plantations | NEUTRAL Sector preview 2Q14 Results Preview 2Q14 plantation profits will be stronger YoY boosted by strong FFB output and higher CPO ASP. Bumitama, TSH, AALI and GENP posted strongest YoY FFB output growth in 2Q14; slower growth by FGV, THP and FR. Sector NEUTRAL maintained, lacks short-term catalysts. Click here for report » COMPANY NOTES Hong Kon g Banks | NEUTRAL Wing Hang Bank (302 HK) | Dropping Coverage Cairn India (CAIR IN) | Results Review Havells India (HAVL IN) | Rating Change Larsen & Toubro (LT IN) | Results Review UMW Holdings (UMWH MK) | Company Update Raffles Medical (RFMD SP) | Results Review Union Bank of the Philippines (UBP PM) | Results Review Bumrungrad Hospital (BH TB) | Results Preview Khonburi Sugar (KBS TB) | Results Preview Hong Kon g Banks | NEUTRAL Sector Update 1H looks good, but lofty valuations Market expects 1H14 net profit growth of 3-14% YoY Solid loan growth, widening NIM; Weak non-interest income. Slight rise in credit costs. NEUTRAL. Top Picks DSB & DSF. Click here for report » Wing Hang Bank (302 HK) | Dropping Coverage Delisting on successful acquisition Share Price: HKD121.80 | Target Price: HKD126.62(+4%) | MCap (USD): 4.8B | ADTV (USD): 12M OCBC has acquired 97.52% of WHB. There will be compulsory acquisition on the remaining shares of WHB. WHB will be delisted from HKEx. Dropping coverage. Click here for report » Cairn India (CAIR IN) | Results Review Production and reserves improving Share Price: INR309 | Target Price: INR400(+29%) | MCap (USD): 9.8B | ADTV (USD): 17M Maintain BUY and DCF-based TP of INR400. Investors sold down the stock (-12%) in the last three days on concerns of a INR48b loan given to a group company. 1Q recurring EPS of INR14.5 above Street expectations but in line w/ our estimate. We cut our FY15 EPS estimate due to change in deprec. policy and higher cost of exploration. Our new INR60 EPS for FY15 is 10% lower than prev. forecast. CAIR�s 5.1x PER, 0.8x P/B and 4% div. yield are compelling and shield against a material downside in the stock. Although we do not support CAIR�s decision to lend to a group company, we believe it is a temporary distraction. Production and reserves, which are improving, will be back in focus. (FULL NOTE WILL BE OUT SOON) Havells India (HAVL IN) | Rating Change Earnings growth potential priced-in Share Price: INR1,237 | Target Price: INR1,126(-9%) | MCap (USD): 2.6B | ADTV (USD): 6M We downgrade HAVL to HOLD from BUY as current PER of 22x FY16F (vs 3-yr avg of 15x) factors in the strong earnings potential. HAVL�s stock is up 53%+ Y-T-D. At its analyst call, HAVL re-iterated its positive outlook and gave growth guidance for FY15 at 15% on expectations of improved consumer sentiment and a pick-up in industrial activity in 2HF15. We think this is factored in for now and we look forward for event that could generate an incremental trigger like acquisition in domestic market. (FULL NOTE WILL BE OUT SOON) Larsen & Toubro (LT IN) | Results Review Share Price: INR1,656 | Target Price: INR2,000(+21%) | MCap (USD): 25.5B | ADTV (USD): 61M Starts FY15 with a bang Recurring earnings are in line with our estimates with revenue +5% YoY, EBITDA +140bp YoY, and profit +10% YoY. Order inflow increased 10% YoY. Order book now stands at INR1.9t (1.8x FY15F revenue). One-time gain of INR8.6b from stake sale in the finance and ports businesses boosted reported EPS growth of 100%. We maintain BUY with SOTP-based TP of INR2,000. (FULL NOTE WILL BE OUT SOON) UMW Holdings (UMWH MK) | Company Update Rationalising non-core M&E assets Share Price: MYR11.70 | Target Price: MYR12.44 (+6%) | MCap (USD): 4.3B UMWH�s disposal of non-core M&E assets in India is positive, in line with its strategy to streamline its core operations. No change to our earnings from this development; potential upside from stronger-than-expected Toyota vehicle sales. Reiterate BUY with an unchanged MYR12.44 SOTP-based TP. Click here for report » Raffles Medical (RFMD SP) | Results Review Short-term murkiness Share Price: SGD3.95 | Target Price: SGD3.94(-0%) | MCap (USD): 1.8B | ADTV (USD): 1M Key negative: The lucrative hospital services posted its second consecutive quarter of slow YoY growth. No clarity over expansion plans in China, while a new rival in Singapore is emerging. HOLD with unchanged DCF-derived TP of SGD3.94. Click here for report » Union Bank of the Philippines (UBP PM) | Results Review Core lending supports weak trading Share Price: PHP118.00 | Target Price: PHP127.00(+8%) | MCap (USD): 1.7B | ADTV (USD): 0.1M Maintain HOLD with share price upside of just 8%. Earnings in 2Q14 down 25% YoY to PHP1.6b due to a 75% drop in treasury gains to PHP566m. Net interest income increased 33% with 23% loan growth amid better funding mix. (FULL NOTE WILL BE OUT SOON) Bumrungrad Hospital (BH TB) | Results Preview Single digit growth Share Price: THB122.00 | Target Price: THB115.00(-6%) |MCap (USD): 2.8B | ADTV (USD): 5M Price could increase 9% YoY to offset 5% YoY drop in overall patient traffic. Hospital revenue is expected to jump 4% YoY. EBITDA margin could be maintained at 27%. Forecast 2Q14F net profit of THB620m, -3% QoQ and 7% YoY, this would be 23% of our FY14 projection. Earnings growth driven by annual price adjustment and rising price intensity. Maintain HOLD with TP of THB115, based on DCF at 8.5% WACC and 3% terminal growth. Our TP implies 2015F multiples (fully dilute) are 34x PER, 7x PBV, and 1.4x PEG. (FULL NOTE WILL BE OUT SOON) Khonburi Sugar (KBS TB) | Results Preview Outlook turning lacklustre; HOLD Share Price: THB11.80 | Target Price: THB12.60(+7%) | MCap (USD): 204M | ADTV (USD): 0.5M Maintain non-consensus HOLD, DCF-based TP of THB12.60. 2Q14 earnings expected to drop 8% YoY on weaker prices and lower volume sales; If met, 1H14 will be 78% of FY forecast and that is fine as 4Q tends to be a loss-making quarter. The sugar market has turned sluggish due to high carry over inventory and good harvest. The demand-driven price recovery has now gone free fall. The prospect of earnings upgrade is limited at this point. Click here for report »     Click here for full Regional Daily report »