Regional Daily, Maybank KE (2014-04-29)

Daily 29 April 2014 TOP VIEWS China Water Sector | OVERWEIGHT NetEase Inc. (NTES US) | BUY Thailand Banks | NEUTRAL China Water Sector Poised for a golden era Sector Initiation Initiate coverage of China�s water sector with OVERWEIGHT. Expect rapid growth in next three years, driven by rising water price, government support and industry consolidation. Initiate with BUYs on SIIC Environment and Hankore Environment, HOLD on United Envirotech. Good asset quality, project sourcing capability and financial muscle will be key to success. SOEs have natural advantage, given their ties with government and access to cheap funds. Click here for report » NetEase Inc. (NTES US) Triple wins! Share Price: USD71.12 | Target Price: USD102.00(+43%) | MCap (USD): 9.2B | ADTV: USD56M Maintain BUY with Street-high target price of USD102. We see NetEase�s recent share-price outperformance partially reflects its successful launch of four mobile games, announcement of major PC title launches and continuous development of its YiChat platform. We see Street earnings upgrades and strong catalysts in the next six months to re-rate the stock. Click here for report » Thailand Banks Auto loans unlikely to recover Sector update Auto lenders would continue to see high credit cost due to the weak auto demand and falling asset quality in the used car segment The 1Q14 sector earnings were flat YoY though up 5% QoQ and the large banks performing better than small-medium banks. Fee and insurance were the cushion Maintain NEUTRAL rating. SETBANK has outperformed the market by 5.6% YTD - we expect a pullback ST. Large banks remain the safer bets due to diversify revenue structure and healthier asset quality. Click here for report » COMPANY NOTES Chongqing Rural Commercial Bank (3618 HK) | BUY China Merchants Bank (3968 HK) | BUY Pembangunan Perumahan (PTPP IJ) | BUY Express Transindo (TAXI IJ) | HOLD Union Bank of the Philippines (UBP PM) | HOLD Raffles Medical (RFMD SP) | Thai Market Compass Pruksa Real Estate (PS TB) | HOLD Chongqing Rural Commercial Bank (3618 HK) 1Q14: Decline in NPLs Share Price: HKD3.34 | Target Price: HKD4.35(+30%) | MCap (USD): 4.0B | ADTV (USD): 5M Strong loan growth offset by weaker NIM and net fees. Decline in NPLs but maintaining high excess provisions. Stable cost-income ratio. Maintain BUY with TP cut. Click here for report » China Merchants Bank (3968 HK) 1Q14: Strongest revenue growth Share Price: HKD13.84 | Target Price: HKD16.20(+17%) | MCap (USD): 8.2B | We lower our NIM but raise our non-interest income forecasts Rising new NPLs offset by surge in credit costs Using AIRB to raise CET1 CAR. Maintain BUY with higher TP Click here for report » Pembangunan Perumahan (PTPP IJ) A good start; Raise TP Share Price: IDR1,785 | Target Price: IDR2,200(+23%) | MCap (USD): 747M | ADTV (USD): 3M Maintain BUY, and raise TP to IDR2,200 (implying PEG of 1 vs. 0.8 previously) from IDR1,700 given it has the strongest carry-over projects growth at 29% YoY. 1Q14 earnings were in line at IDR61b (+44% YoY), suggesting a good start and on track to reach full-year target. 1Q14 new project growth was flat, but the slew of new projects in the following quarters will pave way for total order book to grow 20% YoY in 2014. Click here for report » Express Transindo (TAXI IJ) Softer growth ahead; cut to HOLD Share Price: IDR1,335 | Target Price: IDR1,400(+4.9%) | MCap (USD): 260M | ADTV (USD): 2M Cut 2014-2015 earnings by 20-30% and downgrade to HOLD from BUY with lower TP of IDR1,400 (from IDR1,700). This lowers our 3yrs earnings CAGR from 46% to 20%. Higher direct costs due to higher depreciation from new taxi pool and from shorter depreciation period of 6 years instead of 7 years in new fleet. Interest costs will be higher than previously expected as the company will issue IDR1tn bond at once instead of taking bank loan of IDR500bn per annum to fund the new fleet expansion of 2,000 units taxi p.a. Click here for report » Union Bank of the Philippines (UBP PM) Boosting core income on weak tradingH Share Price: PHP121.00 | Target Price: PHP127.00(+5%) | MCap (USD): 1.7B | ADTV (USD): 0.1M Maintain FY14 forecast and HOLD rating. Weaker trading gains in 1Q14 caused net earnings to drop 61.5% YoY to PHP1.5b. Recurring income supports with 25% rise in net interest income and 73% surge in fee-based earnings. Click here for report » Raffles Medical (RFMD SP) Still positioned for growth Share Price: SGD3.42 | Target Price: SGD3.95(+15%) | MCap (USD): 1.5B | ADTV (USD): 1M 1Q14 results slightly below expectations on slower-than-expected revenue growth. But margins remained healthy. Tight capacity at existing Raffles Hospital may curtail growth for now but significant medium-term growth beckons with completion of extension projects in 2016. Maintain BUY. Trim DCF-derived TP to SGD3.95, on lower earnings forecasts. Click here for report » Thai Market Compass March exports down, few positives for stocks Sector update Contracting 3% YoY in USD terms, the Mar-14 exports pulled 3M14 growth to -1% from 0.6% for 2M14. In THB terms Mar-14 posted 5% growth putting 3M14 cumulative growth at 7% YoY. The bullish spin is that Mar-13 was a high base. The bearish spin is that to meet the MoC�s 5% YoY growth target, Thai exports have to hit USD20bn/month for the rest of the year � looks like a struggle at this point. Imports contracted 15.5% YoY in bringing the 3M14 contraction to 15.4% YoY. We read this as negative signal on the short term economic activity. Stocks potentially positively affected by the export trends (USD based) are limited to PRANDA (Jewelry), SNC (Aircon), SAT (Auto), TWS (Tapioca Starch) & KCE, DELTA (Electronics). Agri-based exports overall remain weak, Rubber (-16.5% YoY), Processed seafood (-15% YoY), Sugar (-21% YoY). Stocks potentially negatively affected include STA, CPF, TUF, KSL and KBS. Click here for report » Pruksa Real Estate (PS TB) No visible catalyst; prefer AP & SPALI Share Price: THB21.90 | Target Price: THB21.90(+0%) | MCap (USD): 1.5B | ADTV (USD): 3M HOLD, TP THB21.90; limited upside and challenging outlook. Prefer AP (BUY TP THB6.5) and SPALI (BUY TP THB23). 1Q14F earnings expect to be THB1,038m (EPS THB0.47), up 34% YoY but down 54% QoQ. Results announce 12-May. 1Q14 pre-sales of THB8.2b, -34% YoY; account for 20% and 25% of management�s target and our estimate. Click here for report » ECONOMICS Thailand Economics Thailand Economics Exports fell from agriculture Not easy to achieve MoC�s 5% target Negative export growth partly due to base effect, last year�s highest export value in Mar, and reduction in agricultural products (rubber) caused by unusually severe drought. We maintain forecast of 4% export growth this year against MoC�s guidance of 5% following a 0.31% contraction last year. Click here for report »     Click here for full Regional Daily report »