Regional Daily, Maybank KE (2014-11-24)

Daily 24 November 2014 TOP VIEWS China Banks | OVERWEIGHT China Property | OVERWEIGHT Longfor Properties (960 HK) | Rating change Genting Malaysia (GENM MK) | Results review China Banks Rates cut & liberalization: No panic Sector update Asymmetric interest rate cuts and further deregulation. Negative impact on NIM and PBT of 4-8bps and 2-5.4%. BOC & small banks will be least affected. Keep OVERWEIGHT. Click here for report » China Property | OVERWEIGHT Positive surprise from rate cut Sector update China interest rate cut came earlier than expected; We believe China developers with high gearing levels such as GZ R&F and Poly Prop should benefit more in interest savings than lower geared companies like COLI and SOHO China. We also like Sino-Ocean and Shimao for its solid fundamentals and landbanking in key Tier 1 and 2 cities in the past several months, and see good upside from here. Positive impact on China property sector is two-fold: 1) developers� on-shore borrowing costs will come down and 2) homebuyers� mortgage rates which are benchmarked against PBoC lending rate will drop. 1st home buyers typically enjoy 5-10% discount off 5+ year PBoC benchmark rate (prev. 6.55%, now 6.15%) for mortgages; assuming a 10% discount, first-time home buyers will enjoy 36bps drop in mortgage rate after the rate cut. We expect this to help create a short-term boost to property transactions. Click here for report » Longfor Properties (960 HK) | Rating change A better market in 1H15; U/G BUY Share Price: HKD9.29 | Target Price: HKD10.96 (+18%) | MCap (USD): 6.A5B | ADTV (USD): 3M Upgrade to BUY from HOLD with TP of HKD10.96 pegged to 40% discount to NAV. For 2015, we expect no. of new launches to exceed this year�s, w/ projects to be launched in Guangzhou, Nanjing, etc. Co. is comfortable w/ 10% contract sales growth in 2015 but we believe it can achieve 13-15%. We expect stable GPMs of 29-30% over 2014-2016E, with its efforts to contain construction costs per sq m to kick in, which should be partly facilitated by hiring people from competitors including from COLI. Co. should be able to achieve 17% of underlying ROE over 2014-2016E per our estimates, which would be quite good for a company w/ modest net gearing (est 62% for end-2014). Minimal risk of future share placement given there�s already proposed placement of 366m shares to Madam Wu and Cai Kui for consolidation of an 8.7% stake in its main project co. (Full note will be out soon) Genting Malaysia (GENM MK) | Results review Banishing the ghost of 2Q14 Share Price: MYR4.08 | Target Price: MYR5.05 (+24%) | MCap (USD): 7.2B | ADTV (USD): 4M core net profit was in-line and rebounded 28% QoQ; VIP and mass market volumes up YoY. Trim earnings estimates by 3-4%, imputing higher marketing and payroll costs. Maintain BUY on marginally lower TP of MYR5.05 (-2%). Click here for report » COMPANY NOTES Tech Mahindra (TECHM IN) | Rating change Genting Bhd (GENT MK) | Results review Lafarge Malaysia (LMC MK) | Company update Sarawak Oil Palms (SOP MK) | Results review 7-Eleven Malaysia Holdings (SEM MK) | Results review Concepcion Industrial Corp (CIC PM) | Results review Courts Asia (COURTS SP) | TP revision Tech Mahindra (TECHM IN) USD5b revenue milestone priced in Share Price: INR2,704 | Target Price: INR2,887 (+7%) | MCap (USD): 9.9B | ADTV (USD): 27M TECHM rallied 62% since we initiated coverage in Dec 13�. D/G to non-consensus HOLD due to limited upside from our TP of INR2,887(17x FY16F PER). Acquisition of US-based Lightbridge Communications Corp will enable TECHM to achieve its revenue target of USD5b by end-4QFY16. However, it would not benefit TECHM's earnings over FY16-17F. We revise up our FY16F revenue by 11% to USD4.8b but maintain our earnings forecast. We now forecast revenue CAGR (in USD) of 21.3% (17.4% earlier) and maintain EPS CAGR of 20%(at INR60/USD) over FY14-17F. Click here for report » Genting Bhd (GENT MK) Fair valuations Share Price: MYR9.40 | Target Price: MYR10.00 (+6%) | MCap (USD): 10.5B | ADTV (USD): 6M 3Q14 results within expectations but wary of GENS� outlook. Trim earnings estimates by 3-7%. Maintain HOLD with a trimmed TP of MYR10.00 (-19sen). Click here for report » Lafarge Malaysia (LMC MK) Seeking ASP stability Share Price: MYR9.80 | Target Price: MYR9.35 (-5%) | MCap (USD): 2.5B | ADTV (USD): 2M Expect earnings rebound in 4Q on seasonally strong volume. Future ASP volatility to be cushioned by savings in fuel cost. Cut FY14-16 EPS by 8%/18%/20%; TP lowered to MYR9.35 (22x 2016 PER). Maintain HOLD on decent DY of 3.2-3.8%. (Full report will be out soon) Sarawak Oil Palms (SOP MK) Long term prospects intact Share Price: MYR5.90 | Target Price: MYR6.90 (+17%) | MCap (USD): 770M | ADTV (USD): 0.1M 3Q14 core net profit was within expectation. We lower 2014 earnings by 7% to realign with our adjusted industry-wide CPO ASP forecast of MYR2,430/t (-3%). BUY with unchanged TP of MYR6.90 on 15x 2015 PER. Next catalyst is unlocking of estates for property development. Click here for report » 7-Eleven Malaysia Holdings (SEM MK) Expect a decent finish Share Price: MYR1.65 | Target Price: MYR1.78 (+8%) | MCap (USD): 604M | ADTV (USD): 0.5M 9M14 core net profit of MYR45m within expectations. Expect on-going margin improvement from better product mix and higher contribution from new/existing stores. Maintain HOLD with an unchanged TP of MYR1.78. Click here for report » Concepcion Industrial Corp (CIC PM) On course to meet full-year targets Share Price: PHP39.00 | Target Price: PHP46.00 (+18%) | MCap (USD): 294M | ADTV (USD): 0.1M Earnings up 20% YoY in 3Q14 and 36% in 9M14. 3Q14 earnings driven by robust BIS revenues and EBIT margin improvements across main business units. Maintain BUY with forecast and TP unchanged. (Full report will be out soon) Courts Asia (COURTS SP) Reaching lowest point Share Price: SGD0.44 | Target Price: SGD0.40 (-8%) | MCap (USD): 188M | ADTV (USD): 0.1M Poor consumer sentiment in Singapore/Malaysia to continue. Cut FY15E-17E EPS by 3-36% for lower sales. On bright side, Indonesian expansion could turn things around. Extreme cost-cutting at home lifting margins. Maintain HOLD as all negatives likely priced in. TP down to SGD0.40 from SGD0.52, at 8x FY16E-17E EPS. Click here for report » ECONOMICS Malaysia Econs | CPI, Oct 2014 Malaysia Econs | Fuel Subsidy Malaysia Econs Malaysia CPI, Oct 2014 Macro Inflation rate quickened in Oct 2014 to +2.8% YoY on RON95 and diesel retail price hikes during the month. Tweaked our full-year 2014 inflation rate estimate to +3.2% (earlier +3.3%; YTD 2014: +3.2% YoY). Widen our inflation rate forecast range for 2015 to 4.0%-5.0% from 4.5%-5.0% as fuel prices will be �volatile� under �managed float� pricing mechanism effective 1 Dec 2014, besides GST introduction on 1 Apr 2015. Click here for report » Malaysia Econs | Fuel Subsidy Fuel Subsidy No More� Macro Government announced RON 95 and diesel prices will be �managed floated� on 1 Dec 2014 Falling crude oil price has result in convergence between subsidised prices and market prices of fuels The move should allay concerns on 2015 budget deficit target of -3% of GDP as the Government will not be spending the MYR11b allocation. Click here for report »