Regional Daily, Maybank KE (2014-08-21)

Daily 21 August 2014 TOP VIEWS WHA Corp (WHA TB) | Initiation Singapore Aviation Services | UNDERWEIGHT Chalco (2600 HK) | Rating change CH. Karnchang (CK TB) | Company visit WHA Corp (WHA TB) B2S suits the times; Initiate BUY Share Price: THB35.50 | Target Price: THB47.22 (+33%) | MCap (USD): 1.1B | ADTV (USD): 5M Initiate at BUY with 12M price target of THB47 based on average values of 7.5% cap rate and DCF at 10.69% WACC. At our PT, WHA will trade at 1.3x PEG supported by 22% pa net profit CAGR, well in excess of Market growth rates. Demand for build-to-suit (B2S) warehouses will ride the capacity expansion of food, beverage & pharmaceuticals companies as well as expansion in both physical and e-based retailing. WHA ahead of any local players in the B2S warehousing and should gain first-mover advantage among the manufacturers. Click here for report » Singapore Aviation Services Flying at lower altitude; D/G UNDERWEIGHT Sector downgrade Rich valuations against challenging outlook. Downgrade to Underweight from Overweight. Top SELL is SATS. Switch to HAECO in North Asia. Changi Airport�s flight traffic growth slowed to 2.9% YoY in 6M14, weakest since GFC. Workload under pressure. Rising cost pressures amid smaller workload to hit near-term profitability. DPS set to decline. Click here for report » Chalco (2600 HK) Time to reassess and take profit; D/G SELL Share Price: HKD3.48 | Target Price: HKD3.20 (-8%) | MCap (USD): 6.1B | ADTV (USD): 8M Downgrade to SELL from BUY as 1H14 results likely to disappoint and upside in Chinese aluminium prices will be limited as production is restarted. Also, our 2014E and 2015E EPS (unchanged) are well below consensus as cost improvements are too slow in coming and Shanghai aluminium prices are underperforming LME prices. Chalco shares have performed well and are trading above our DCF-based TP of HKD3.20 (unchanged). Recommend investors continue to trade this high-cost and heavily leveraged play on aluminium rather than hold it longer term. Click here for report » CH. Karnchang (CK TB) Positive feedback on NDR Share Price: THB26.25 | Target Price: THB32.00 (+22%) | MCap (USD): 1.4B | ADTV (USD): 38M Reiterate BUY. Our Top Pick with SOTP-based TP of THB32; a prime beneficiary of infrastructure investment and promising outlook for its listed subsidiaries will support further rerating. We took CK on NDR in KL. Feedback is positive on the upcoming junta-backed infrastructure investment. Gearing is a key concern. Expect THB86b worth of infrastructure projects to open for bidding this year. CK expects a 25-30% win rate. Click here for report » COMPANY NOTES Biostime (1112 HK) | TP Revision Far East Horizon (3360 HK) | Results Review Country Garden (2007 HK) | Rating Change MSM Malaysia (MSM MK) | Results Review Kossan Rubber Industries (KRI MK) | Results Review Bumi Armada(BAB MK) | Results Review Star Publications (Malaysia) (STAR MK) | Company Visit MY Banking Sector | NEUTRAL Boustead Plantations (BPLANT MK) | Resuklts Review Gas Malaysia (GMB MK) | Results Review Kuala Lumpur Kepong (KLK MK) | Results Review IOI Corporation (IOI MK) | Results Review AirAsia(AIRA MK) | Rating Change MBM Resources (MBM MK) | Company Update Bangkok Dusit Medical Services (BGH TB) | Company Update Biostime (1112 HK) Sexy online story but still a risky bet Share Price: HKD33.05 | Target Price: HKD27.30(-17%) | MCap (USD): 2.6B | ADTV (USD): 9M Maintain SELL and new TP of HKD27.3 (16X FY15F PER from FY14/15F) on low sales visibility, surging OPEX burden and high execution risks. Unresolved concerns are potential: i) internal conflicts; ii) cannibalisation; iii) external conflicts; iv) new online strategies backfiring; and v) competition. POS additions progress was respectable (+18%/48% in 6M/YoY) but sales from maternity stores was flat YoY (despite O2O), while data show the channel saw 8% YoY sales growth. We believe it may have lost traction in this key channel. Co. said it will not bear any O2O logistics costs for maternity stores but we think customers particularly large ones have limited incentive to take the online orders. Of note, 1H14 avg points per store (proxy of SSSG) fell 10% YoY for stores operated since 2011 or before (34% of its maternity stores). Click here for report » Far East Horizon (3360 HK) Remains in good shape Share Price: HKD6.32 | Target Price: HKD7.15(+13%) | MCap (USD): 2.7B | ADTV (USD): 3M Maintain BUY, keep TP at HKD7.15. Minimize NIM pressure and keep loan underwriting standard. Low leverage helps sustain high dividend payout. Click here for report » Country Garden (2007 HK) Gearing, margin concerns; D/G to HOLD Share Price: HKD3.68 | Target Price: HKD4.00(+9%) | MCap (USD): 9.1B | ADTV (USD): 20M D/G to HOLD and lower TP toHKD4.0 from HKD4.6as CG�s story doesn�t look very compelling and we cut NAV due to slower sales and lower margin assumptions. Stronger contract sales likely in2H14 vs 1Hbutwe worry gearing and margin recovery might take longer. Trim 2016 earnings 6%; 2014&2015 profit forecasts little changed. We see the quality of 1H14 results as not high.1H14 core profit wasCNY4.71b, up 14% YoY and ahead of Bloomberg consensus. But interest capitalization ratio was high and core NPM dropped 3pptYoY to 12.3% in 1H14. Pre-LAT GPM down to 28.6%. We expect 2H booked GPM to be lower HoH. On the surface, net gearing was fine as of June at 67%.But if we adjust for CNY3.1b of perpetual securities treated as equity as debt instead and adjust for some revaluation gains booked, its net gearing would be much higher at 78%. Click here for report » MSM Malaysia (MSM MK) 2Q14: Within expectations Share Price: MYR4.75 | Target Price: MYR5.00(+5%) | MCap (USD): 1.1B | ADTV (USD): 0.1M 2Q14 results are in line at 58% of our and consensus full-year forecasts. Awaiting a cessation to the issuance of new APs. Maintain HOLD with an unchanged TP of MYR5.00. Click here for report » Kossan Rubber Industries (KRI MK) Stronger growth ahead Share Price: MYR3.97 | Target Price: MYR5.00(+26%) | MCap (USD): 804M | ADTV (USD): 1M Slight earnings dip in 2Q14 as water rationing affected production. Expect stronger earnings in 2H14 on new capacities. Maintain BUY and TP of MYR5.00 (17x FY14 PER). (Full report will be out soon) Bumi Armada(BAB MK) Results on track Share Price: MYR3.33 | Target Price: MYR4.55 (+37%) | MCap (USD): 3.1B | ADTV (USD): 2.8M 1H14 earnings are on track to meet our full-year estimates but are significantly below consensus. Job wins and tender pipelines are healthy; execution is key. Rights and bonus issues to conclude soon. Maintain BUY; SOP-based TP of MYR4.55 is under review. Click here for report » Star Publications (Malaysia) (STAR MK) Already in the price Share Price: MYR2.77 | Target Price: MYR2.89(+4%) | MCap (USD): 646M | ADTV (USD): 0.4M The great 2Q14 results may be short-lived. Nonetheless, we raise DPS estimate by 20% to 18 sen p.a.. Maintain HOLD call but raise TP by 16% to MYR2.89. Click here for report » MY Banking Sector Deposit competition still intense Sector update Positively, rate competition on the lending side appears to have eased. Conversely, deposit competition is still intense. Still room for NIMs to expand, but any rebound is likely to be mild. NEUTRAL on the sector, BUY picks continue to be AFG, AMMB, HL Bank and HL Financial Group. Click here for report » Boustead Plantations (BPLANT MK) Downside capped by its land value Share Price: MYR1.58 | Target Price: MYR2.16(+37%) | MCap (USD): 816M | ADTV (USD): 3M 2Q14 results were below expectations. Share price downside is supported by its MYR3.08/sh RNAV, backed by its strategic land that has development potential. Maintain BUY with a SOP-TP of MYR2.16. Click here for report » Gas Malaysia (GMB MK) Potential dividend bummer? Share Price: MYR3.43 | Target Price: MYR3.80(+11%) | MCap (USD): 1.4B | ADTV (USD): 0.6M 1H14 net profit was in line at 50% of our full-year forecast, and 47% of consensus. A lower interim DPS of 5sen was declared (6 sen in 1H13), placing into doubt a 100% payout in 2014. Maintain HOLD, TP unchanged at MYR3.80. Click here for report » Kuala Lumpur Kepong (KLK MK) A traditionally weak 3Q Share Price: MYR23.86 | Target Price: MYR23.20(-3%) | MCap (USD): 8.1B | ADTV (USD): 5M 3QFY9/14 results within our and street estimates. Expect stronger QoQ results ahead on improved FFB output, contracted forward sales, and higher downstream margins. Maintain HOLD with a revised TP of MYR23.20 as we trim our FY9/14-15 earnings forecasts by 2.8%/3.8%. Click here for report » IOI Corporation (IOI MK) Pricey on forward earnings Share Price: MYR5.00 | Target Price: MYR3.97(-21%) | MCap (USD): 10.2B | ADTV (USD): 8M FY6/14 results was within our and street estimates. IOI is the most expensive plantation stock regionally at EV/ha of MYR163k, 26x FY6/15 PER. We forecast profit to fall 20%. IOI risks being taken off the Shariah list this November review. Maintain SELL. Click here for report » AirAsia(AIRA MK) It was a mirage, 2014 will be tough Share Price: MYR2.38 | Target Price: MYR2.55 (+7%) | MCap (USD): 2.1B | ADTV (USD): 5.2M 2Q14 core net income of MYR25.4m (-77% YoY, -80% QoQ) was below expectations; our FY14 earnings cut by 28%. Yields were lower and unit costs were higher than expected. Cut to HOLD (from BUY) with a lower target price of MYR2.55 (from MYR2.65) as we also rollover to FY15 as base year. Click here for report » MBM Resources (MBM MK) Excitement from Perodua Share Price: MYR2.78 | Target Price: MYR3.42 (+23%) | MCap (USD): 0.3B | ADTV (USD): 0.2M Fundamentals remain intact with improving earnings outlook. Trim FY15 earnings by 5% on further delays in securing orders by OMI�s alloy wheel plant. Maintain BUY but shave our TP to MYR3.42 on unchanged 9x FY15 PER. Compelling valuations at 7.3x FY15 PER. Click here for report » Bangkok Dusit Medical Services (BGH TB) Best Guarded Hospital Share Price: THB18.10 | Target Price: THB22.00(+22%) | MCap (USD): 8.8B | ADTV (USD): 22M Targets to increase its portfolio from 34 to 50 hospitals by the end of 2015. There are nine greenfields and seven M&A hospitals in the pipeline with total investment of THB19-22b. Acquisition of Save Drug Center for THB380m will create synergy and value over long term. Management sticks with 11-13% growth forecast. Sets 22-23% EBITDA margin and targets net profit margin of 12%. Maintain BUY with DCF-based TP of THB22, implying 37x PER, 6x P/BV and 1.3x PEG for FY15F. Medium to long-term outlook intact. M&A is a short-term catalyst. (Full report will be out soon) ECONOMICS Malaysia CPI, July 2014 Malaysia CPI, July 2014 Eased but still above3.0% Economics Inflation rate eased slightly in July 2014 to +3.2% YoY from +3.3% YoY posted in June 2014. Our measure of core inflation (excluding the key subsidised components of CPI) was stable at +2.1% YoY (June 2014: +2.1% YoY). Keeping our full-year inflation rate forecast of +3.5% for now (YTD 2014: 3.3% YoY), but tweak our 2015 forecast to 4.0%-4.5% range (previous: +4.0%). (Full report will be out soon) FLASH NOTE Neptune Orient Lines (NOL SP) | Flash Note Neptune Orient Lines (NOL SP) Potential sale of APL Logistics? Share Price: SGD0.98 | Target Price: SGD1.05(+7%) | MCap (USD): 2.0B | ADTV (USD): 1M NOL selling logistics unit for USD750-900m, according to Reuters. If so, net gearing could drop below 1.8x from 2.2x. Likely use of proceeds: 1) pay down debt; 2) reinvest in new vessels; and 3) M&As. Special DPS possible, but debt paydown more prudent. Maintain HOLD and TP of SGD1.05, based on 1.0x FY15E P/BV. Click here for report »