Regional Daily, Maybank KE (2014-09-03)

Daily 03 September 2014 TOP VIEWS Malaysia Strategy | NEUTRAL Regional Materials Indonesia Consumer | UNDERWEIGHT Philex Mining (PX PM) | TP revision Malaysia Strategy 2Q report card: Disappointing Strategy 2Q14 core net profit of our research universe was down 3.3% YoY; the results season has been disappointing. 2014/2015 KLCI core earnings are now expected to grow a slower 4.1%/7.8% after our earnings cut by 2.8%/3.0%. Maintain our 1,940 end-2014 KLCI target, implying 16.7x 12M forward earnings. Click here for report » Regional Materials Gems, Picks & Shovels Sector update Interim results in China disappointed as weak prices and negative volume growth offset cost cuts. Increasing were non-recurring items, restatements, and accounting changes. Managements remain downbeat despite improving seasonal factors, particularly for coal and steel during 2H 2014. The weakness in steel is undermining iron ore and coking coal prices, which have returned to low levels. Supply side cuts signal a potential bottoming in prices. We see moderate upside for thermal coal prices the next few years on rising China/India imports and slowing exports from Indonesia. We remain with sell ratings in steel (Angang Steel; 347 HK; HKD5.30; SELL), aluminum (CHALCO; 2600 HK; HKD3.53; SELL), and thermal coal (China Coal; 1898 HK; HKD4.88; SELL). We continue to favor VALE Indonesia (INCO IJ; IDR4,245; BUY; TPIDR4,800) and MMG (1208 HK; HKD2.84; BUY; TP HKD3.40). Click here for report » Indonesia Consumer Marketing feedback � SG, MY Sector update Our recent marketing trip to SG and MY showed there is still high interest on Indonesian consumer sector. However, the market stance on the sector appears more Neutral. Fuel subsidy removal is already within market expectation but our view on higher minimum wage hike was relatively new. Stocks that gain most interest are Gudang Garam, Matahari Putra, Ramayana, and MAP. Click here for report » Philex Mining (PX PM) BUY even with valuation changes Share Price: PHP11.44 | Target Price: PHP15.98 (+40%) | MCap (USD): 1.3B | ADTV (USD): 2M More conservative assumptions lower TP to PHP15.98 from PHP17.19. Still, potential upside is 40%, maintain BUY. Until remedial measures to deal with lower grades and higher costs in Padcal mine bear fruit, we cut earnings and valuation estimates. Pre-feasibility study affirms viability of Silangan mine but throughput assumption lower than expected. Click here for report » COMPANY NOTES China Banking Corp (CHIB PM) | TP Revision China Banking Corp (CHIB PM) Earnings downgrade on weak trading Share Price: PHP51.85 | Target Price: PHP55.00 (+6%) | MCap (USD): 1.7B | ADTV (USD): 0.2M Lower TP to PHP55, at 1.5x 2015F PBV and 15.3x PER. Lower FY14-15 net profits on weaker-than-expected trading. Expect earnings improvement in FY15 from new ventures. Click here for report »