Regional Daily, Maybank KE (2014-04-08)

Daily 08 April 2014 TOP VIEWS Thailand Construction | UNDERWEIGHT China Gas Holdings (384 HK) | Company Update Singapore Airlines (SIA SP) | Rating Change Lafarge Malaysia (LMC MK) | Merger Sector Update Thailand Construction A falling star; Initiate Underweight Initiate sector at contrarian Underweight. Top BUY is CH. Karnchang (CK, THB21 TP). Top SELLs: Sino-Thai E&C (STEC, THB14 TP) and Italian-Thai Development (ITD, THB3.0 TP). Sector to underperform the SET given lack of big public and private investments which are the key news-flow catalysts. EPS growth anemic at 3% vs market�s 15%. No dividend angle. Profits from existing orderbook could fall as working-capital needs could rise if there are delays in payment for completed works, a tendency during political uncertainty. Click here for report » China Gas Holdings (384 HK) NDR - strategy in line, maintain BUY Share Price: HKD12.36 | Target Price: HKD15.00(+21%) | MCap (USD): 8.0M | ADTV: USD10M Reiterate BUY and DCF-based TP of HKD15 (Street high) after hosting a NDR with the company and around 10 investors. We are positive on China Gas�s strategy to expand in CNG vehicle gas. We also believe its strong exposure in Southwest China will benefit from the China-Myanmar pipeline. Possible catalysts include potential co-operation with Beijing Enterprise, and gross margin upside in the LPG business. Click here for report » Singapore Airlines (SIA SP) Nascent signs of a recovery Share Price: SGD10.30 | Target Price: SGD12.00 (+17%) | MCap (USD): 9.7BM | ADTV: USD9M Upgrade to BUY with higher TP of SGD12.00 on sustained EPS growth over FY3/14E-17E (51% CAGR). Overcapacity in home base should ease as Singapore-based carriers scale back aggressive fleet expansion plans. We project moderate seat capacity growth of 4.3%/3.7% in 2014E/2015E for Singapore-based carriers. Click here for report » Lafarge Malaysia (LMC MK) Potential injection of Holcim? Share Price: MYR8.65 | Target Price: MYR9.90 (+14%) | MCap (USD): 2.3B | ADTV: USD1.4M The merger of its French parent and the Swiss Holcim may see the injection of Holcim Malaysia into Lafarge Malaysia There will be synergies from streamlining of operations, although small in earnings enhancement by our estimates. Maintain BUY and TP of MYR9.90 (21x FY15 PER). Click here for report » COMPANY NOTES China Banks | OVERWEIGHT Gudang Garam (GGRM IJ) | Company Update Sentul City (BKSL IJ) | Company Update Sime Darby(SIME MK) | Disposal East West Banking Corp (EW PM) | Company Update Bangkok Bank (BBL TB) | Company Update Krung Thai Bank (KTB TB) | Company Update Thai Market Compass China Banks | OVERWEIGHT Sector Update Higher New NPL formation ≠ Highercredit costs New NPL formation in 2013 > the level during 2007-12. Not a consistent uptrend in credit costs during 2011-13. Keep conservative asset-quality assumption & OVERWEIGHT. Click here for report » Gudang Garam (GGRM IJ) | Company Update Stepping up the game; BUY Share Price: IDR48,900 | Target Price: IDR65,000(+33%) | MCap (USD): 8.3B | ADTV (USD): 6M Maintain BUY with TP of IDR65,000 (22x PE FY15F). Based on our observation, GG�s ASP has been raised by 4% as of Mar-14. Mild products had relatively higher price hike vs. other products. GG appears to retain its dominance in the regular machine-rolled segment with its new launches, GG Signature and GG Surya Exclusive, gaining traction among smokers. Click here for report » Sentul City (BKSL IJ) | Company Update NDR key takeaways; BUY Share Price: IDR183 | Target Price: IDR200(+9%) | MCap (USD): 508M | ADTV (USD): 2M We took Sentul City for NDR to meet 15 investors in Kuala Lumpur on 3-4 April 2014. Receives high interest from investors generally unfamiliar with the company. Company states priorities this year include: completing full acquisition of Bukit Jonggol Asri; strengthening operational execution and refinancing bank loans. Maintain BUY and TP of IDR200 pending results review. Click here for report » Sime Darby(SIME MK) | Disposal Divesting Malaysian power business Share Price: MYR9.30 | Target Price: MYR10.20 (+10%) | MCap (USD): 16.8B | ADTV (USD): 15.6M Sime is disposing its 75%-stake in Port Dickson Power (PDP) plant and its O&M business for MYR300m cash. The disposal of this non-core business comes as no surprise as it is in line with Sime�s 5-year strategy blueprint. Maintain BUY and MYR10.20 TP pegged at 18x 2015 PER. Click here for report » East West Banking Corp (EW PM) | Company Update Strong core lending continues Share Price: PHP29.10 | Target Price: PHP31.80(+9%) | MCap (USD): 730M | ADTV (USD): 0.2M Maintain BUY and PHP31.80 TP following adjustments in loan growth and costs, implying 1.6x 2014F PBV and 12.9% ROE. Sustained growth in lending increases estimates for net interest income, fees, provisions and opex. FY14 profit forecast cut 4% to PHP2.7b, but implied growth still robust at 29%. Click here for report » Bangkok Bank (BBL TB) | Company Update 1Q14: An unexciting quarter Share Price: THB186.5 | Target Price: THB205.0 (+9.9%) | MCap (USD): 11.0B | ADTV (USD): 37M Maintain BUY with TP of THB205 implying 1.2x 2014P/BV and 12.2% ROE. We think BBL is resilient to the economic slowdown given balance sheet buffers and loan mix (highest coverage ratio and low consumer loans exposure). We expect BBL to post 1Q14 earnings of THB8.6bn (-5% YoY, +12% QoQ) due to flat loan growth, stable NIM and fee income on QoQ basis. Asset quality remains good in 1Q14. Loan growth should be flat QoQ in 1Q14 due to slowdown in term loans for project financing. We forecast 6% loan growth in FY14 as demand should pick up once the political situation improves in 2H14. Click here for report » Krung Thai Bank (KTB TB) | Company Update Anticipating softer 1Q14F profit Share Price: THB18.90 | Target Price: THB21.50(+14%) | MCap (USD): 8.1B | ADTV (USD): 23M Maintain BUY with revised TP of THB21.5 (from THB22) implying 1.3x 2014P/BV and 15% ROE. We cut 2014 earnings by 1% after revising down loan growth forecast by 2ppts to 6%. Expect 1Q14 earnings to drop 3% YoY and 15% QoQ to THB8.3bn as higher net interest income and fee income should be offset by extra provisions and lack of dividend income from Vayupak fund. Asset quality remains stable, we conservatively assume high provisioning for the Saha Farms and SSI exposures. Click here for report » Thai Market Compass Market strategy High investors� interest during Invest ASEAN The fifteen Thai corporates participating in Maybank Kim Eng�s INVEST ASEAN CONFERENCE receive strong interest from nearly 200 investors at the two-day event. General investor feedback suggests there are many good Thai corporates with strong earnings capability and strong franchises that can help them weather the ongoing economic slowdown. However, many investors seem baffled by SET�s resilient performance, up 13% from the Jan-14 bottom, and the high multiples, +1SD>LTM (11.4x) despite downtrend in earnings estimates and weakening economic data. Our unchanged view is to expect short term correction and remain very selective in stock picking. Click here for report »     Click here for full Regional Daily report »