Regional Daily, Maybank KE (2014-05-05)

Daily 05 May 2014 TOP VIEWS Indonesia Construction Sector | OVERWEIGHT Regional Materials Regional Oil & Gas | OVERWEIGHT ASEAN Exports & Currencies Construction Sector Indonesia Construction Sector 1Q14 earnings summary Maintain at OVERWEIGHT as structural story remains intact. Rolled over valuation to 2015 and change top picks to PTPP and ADHI. Maintain BUY on WIKA, WSKT, and ACST. 1Q14 earnings are seasonally the lowest but not a major concern given solid carry over project growth of 17% YoY. PTPP has the strongest carry over growth. Expect slew of new awards to unfold in the following quarters. Maintain 21% sector earnings growth in 2014. Click here for report » Materials Sector Regional Materials Gems, Picks & Shovels Asia nickel ore import prices reach new highs on strong Chinese demand to replace those banned out of Indonesia. Indonesia mulling over export tax changes to copper concentrate but no change seen in ore export ban. We believe it is increasingly likely iron ore prices will face a hard fall, particularly if Chinese buyers renege on contracts in a falling market, leaving iron ore suppliers and traders with losses. Nickel prices have run past our earlier forecast and a consolidation in price and the related equities is possible over the next few months until the supply deficit worsens later this/early next year. Click here for report » Oil & Gas Sector Regional Oil & Gas Growing and maturing The FPSO and jack up rig markets remain robust but deepwater rigs are experiencing short term weakness. Local contents and cost management are growing trends. Continues to like Bumi Armada, Yinson in the FPSO space and UMWOG, Perisai and PV Drilling in the JU drilling segment. Click here for report » Economics ASEAN Exports & Currencies Translation vs Transmission ASEAN exports strengthened so far this year. But it was more of �translation effect� from weaker currencies amid modest �transmission effect� from firmer external demand. Based on our econometric analyses, no support to the �conventional wisdom� that weaker currencies boost exports and improve trade balances. Click here for report » COMPANY NOTES Bharti Airtel (BHARTI IN) | Results Review Gudang Garam (GGRM IJ) | Results Review Semen Indonesia (SMGR IJ) | Company Update Indocement (INTP IJ) | Company Update Kalbe Farma (KLBF IJ) | Results Review Matahari Putra Prima (MPPA IJ) | Results Review ACE Hardware (ACES IJ) | Results Review Matahari Department Store (LPPF IJ) | Results Review Mitra Adiperkasa (MAPI IJ) | Results Review Sri Rejeki Isman (SRIL IJ) | Results Review Westports Holdings (WPRTS MK) | Results Review SMRT (MRT SP) | TP Revision Sembcorp Marine (SMM SP) | Rating Change Siam Makro (MAKRO TB) | Flash Note Thanachart Capital (TCAP TB) | Company Update Quality Houses (QH TB) | Results Preview San Miguel Pure Foods Co., (PF PM) | Company Update Bharti Airtel (BHARTI IN) | Results Review India business continues to drive growth Share Price: INR335 | Target Price: INR392(+17%) | MCap (USD): 22.2B | ADTV (USD): 25.8M Maintain BUY with TP of INR392 based on discounted CF. India business� 4QFY14 EBITDA margins (+86bps QoQ to 36.8%) drove 52bps increase in overall EBITDA margins to 32.8% vs. our estimate of 32.5%. Pickup in the performance of the Africa business and divestment of tower infrastructure in Africa and Bangladesh remain the key catalysts for the stock in the near term. FULL NOTE WILL BE OUT SOON Gudang Garam (GGRM IJ) | Results Review 1Q results above estimates Share Price: IDR56,500 Target Price: IDR65,000(+15%) | MCap (USD): 9.4B | ADTV (USD): 6M Reiterate BUY and TP of IDR65,000. We expect strong volume growth trend and ASP increase to continue. 1Q14 net earnings grew 35% YoY to IDR1.4tn (28% of our FY14F), above our and consensus expectations. Revenue grew 24% YoY in 1Q14, which implies strong volume growth of 12% YoY as Gudang Garam raised ASP by 11% YoY. EBIT margin improved by 150bps vs. 1Q13 on aggressive ASP hike and milder cost increase. 1Q14 results above expectation Click here for report » Semen Indonesia (SMGR IJ) | Company Update Right strategy, right place Share Price: IDR14,850 | Target Price: IDR17,100(+15%) | MCap (USD): 7.6B | ADTV (USD): 13M Maintain BUY (target price IDR17,100) on positive business strategy and potential beneficiary of demand growth in Eastern Indonesia. Stock trades at fair 15.0x PER and 9.9x EV/EBITDA for 2015F, in line with its three-year means. Cement demand recovery and ASP increase in 2H14 would be the main catalysts for the stock. Click here for report » Indocement (INTP IJ) | Company Update More than volume growth Share Price: IDR21,950 | Target Price: IDR26,300(+20%) | MCap (USD): 7.0B | ADTV (USD): 7M Maintain BUY with IDR26,300 TP. Top pick in sector due to volume growth, strong balance sheet and high efficiency. Stock�s (ex-cash) PER now at discount to historical mean. Main catalysts: strong demand recovery and higher ASP in 2H14. Click here for report » Kalbe Farma (KLBF IJ) | Results Review 1Q14 results in line Share Price: IDR1,545 | Target Price: IDR2,000(+29%) | MCap (USD): 6.3B | ADTV (USD): 8M Maintain BUY, TP of IDR2,000. 1Q14 earnings of IDR493bn, +11% YoY, made up 22% of our estimates and 21% of consensus estimates for FY14F (vs. 1Q13�s 22% of FY13), in line with expectation. Revenue +17% YoY to IDR4.1tn on the growth in both pharma and consumer businesses. EBIT margin was relatively stable at 15.8% vs. 4Q13�s 15.7%. We expect ASP hike to continue over the year to pass on the cost increase from electricity tariff hike and raw material price increase. Click here for report » Matahari Putra Prima (MPPA IJ) | Results Review 1Q14 results in-line Share Price: IDR2,770 | Target Price: IDR3,500(+26%) | MCap (USD): 1.3B | ADTV (USD): 9M Maintain BUY and TP of IDR3,500. 1Q14 results in line with our expectations, with net earnings making up 15% of our FY14F vs. 1Q13�s 14% FY13. Net earnings fell 19% YoY to IDR51bn due to one-off earnings in1Q13, while gross revenue rose20% YoY to IDR3.3tn and EBIT jumped 102% to IDR40bn. Matahari Putra remains our top pick in the retail sector on the expectation of continuous strong revenue growth and margin improvement in the medium term. Click here for report » ACE Hardware (ACES IJ) | Results Review 1Q14 results above expectation Share Price: IDR745 | Target Price: IDR620(-17%) | MCap (USD): 1.1B | ADTV (USD): 2M 1Q14 net earnings grew48% YoY to IDR137bn. It made up 23% of our earnings forecast and 26% of consensus for FY14F. Revenue grew a strong 21% YoY while EBIT margin expanded 260bps to 15% vs. 1Q13. On a quarterly basis however, EBIT margin contracted 330bps. Retain cautious view on middle upper segment retail on concern of margin pressure. We note however, the impact on Ace Hardware may be more limited. TP under review. Click here for report » Matahari Department Store (LPPF IJ) | Results Review 1Q14 results in line Share Price: IDR15,000 | Target Price: IDR12,000(-20%) | MCap (USD): 3.8B | ADTV (USD): 5M 1Q14 net earnings +50% YoY to IDR123bn. The results were as expected with net earnings made up8% of ours and consensus FY14Fearnings estimates. Maintain HOLD.TP under review. Gross revenue grew a milder than expected 13% YoY on SSSG of 9% over the same period. EBIT margin based on gross revenue expanded by 90bps from 1Q13 to 9.8% along with gross margin expansion. The company targets to add another 10-12 stores (+69-83K sqm) and10-18K sqm existing store expansion throughout the year. Click here for report » Mitra Adiperkasa (MAPI IJ) | Results Review 1Q14 results below expectation Share Price: IDR6,375 | Target Price: IDR5,600(-12%) | MCap (USD): 915M | ADTV (USD): 1M Maintain HOLD and IDR5,600 TP as we remain cautious on middle upper-end retail as margin pressure persists. 1Q14 earnings -28% YoY to IDR46bn (12% of our earnings estimates but only 10% of consensus estimates for FY14F)despite 26% YoY revenue growth as EBIT margin narrowed by 120bps to 4.6% vs 1Q13. 1Q14SSSG was 12%. Department store and specialty store divisions� EBIT margin based on net revenue contracted by 190bps and 180bps respectively vs. 1Q13. Click here for report » Sri Rejeki Isman (SRIL IJ) | Results Review 1QFY14 within expectations Share Price: IDR206 | Target Price: IDR362(+76%) | MCap (USD): 332M | ADTV (USD): 1M 1QFY14 formed 20% of full year forecast as garment production still in ramp-up phase during quarter. Completion of garment expansion and secured orders especially for uniforms will drive better margin and earnings. Maintain BUY with TP of IDR362 based on 15x FY14E EPS, 8% discount to regional peers valuation. FULL NOTE WILL BE OUT SOON Westports Holdings (WPRTS MK) | Results Review Sustainable strong volume Share Price: MYR2.51 | Target Price: MYR2.70 (+8%) | MCap (USD): 2.6B | ADTV (USD): 1M 1Q14 results within expectations with record high volume. P3 alliance concerns offset by sustainable strong volume growth. Maintain BUY with unchanged DCF-based TP of MYR2.70; decent dividend yield of 4.3%. FULL NOTE WILL BE OUT SOON. SMRT (MRT SP) | TP Revision Capex guidance a negative surprise Share Price: SGD1.22 | Target Price: SGD0.50(-59%) | MCap (USD): 1.5B | ADTV (USD): 2M Capex for FY3/15E to be maintained at FY3/14 levels of SGD650m, contrary to our expectations for SGD280m. Still no visibility on the specifics of the new business models for its fare-based business. Lower FY3/15E-17E earnings by 14-51% to reflect higher depreciation charges. TP falls to SGD0.50, still based on 14x FY3/15-17E P/E. Reiterate SELL. Click here for report » Sembcorp Marine (SMM SP) | Rating Change Fails to measure up; cut to Hold Share Price: SGD4.06 | Target Price: SGD4.36(+7%) | MCap (USD): 6.8B | ADTV (USD): 9M Another disappointing quarter; without a ramp-up in ship repair volume, operating margin stayed flat QoQ at 11.1%. Benefits of the new Tuas yard may take longer than expected to materialise; we see risk for order wins to taper off in 2H14 as deepwater day rates have softened. Downgrade to HOLD, SOTP-based TP cut to SGD4.36. Click here for report » Siam Makro (MAKRO TB) | Flash Note 10 new stores: aggressive, expensive Share Price: THB32.75 | Target Price: THB25.00(-24%) | MCap (USD): 4.9B | ADTV (USD): 0.2M Maintain SELL. Aggressive expansion during slow consumption period raises risk of greater degree of cannibalisation; Ten new stores this year at a THB5bn budget implies 31% escalation of store cost; capex THB8bn > 2014 EBITDA Guidance of 12% YoY growth in 1Q14 sales is line with our preview; slowing momentum and lower profits are the new trends. 12M TP of THB25 � DDM based with a 15% liquidity discount. Ex discount stock is fully valued. Click here for report » Thanachart Capital (TCAP TB) | Company Update Most vulnerable bank Share Price: THB34.75 | Target Price: THB29.00(-17%) | MCap (USD): 1.4B | ADTV (USD): 3M Maintain SELL and TP of THB29, implying 0.7x 2014 P/BV, assuming 10.5% long-term ROE and 13% COE. Prefer KBANK and KTB. Slow loan growth due to weak auto segment, TCAP has low competitiveness in corporate and SME segments. TCAP�s coverage ratio is still lower than the sector average and other auto lenders (KKP and TISCO). FULL NOTE WILL BE OUT SOON. Quality Houses (QH TB) | Results Preview Driven by momentum Share Price: THB3.26 | Target Price: THB2.30(-29%) | MCap (USD): 925M | ADTV (USD): 4M Maintain contrarian SELL with THB2.3 TP; expect core operation to remain weak in FY14 but positive momentum from rumours of divestment of LHBANK spurs speculation. 1Q14 presales were THB4.2b, down 42% YoY. THB3.3b (+6% YoY) from landed properties and THB900m (-79%YoY) from condos. Estimate 1Q14F core earnings to be THB624m (EPS THB0.07), up 6% YoY but down 14% QoQ. Results out on 9-May. Click here for report » San Miguel Pure Foods Co., (PF PM) | Company Update Healthy recovery in 2014F Share Price: PHP233.60 | Target Price: PHP310.00(+33%) | MCap (USD): 875M | ADTV (USD): 0.5M Maintain BUY with PHP310 TP. 2014 net income to common forecast raised 2.8% to PHP3.2b, 11% higher YoY. Operating income expected to jump 26% on higher sales but more on better margins this year. Cheap at 12x PER and 5.7x EV/EBITDA versus PER of 19-20x for the market and 23x for the Philippine consumer sector. Click here for report » ECONOMICS Thailand Econs | Inflation at 12-mth high Thailand Econs Inflation at 12-mth high Upside risks to cost-push inflation Expect inflation in Thailand to be curbed by weak domestic demand. Reasonable to say that negative real interest rate reduces room for additional policy easing. However, additional confirmation of economic weakness from 1Q14 GDP due on 19 May and April BoT data due end-May to be an important input for the BoT monetary policy meeting in June. Click here for report »