Regional Daily, Maybank KE (2014-07-14)

Daily 14 July 2014 TOP VIEWS Malaysia Strategy | NEUTRAL Economics | Outlook & Lookout United Overseas Bank (UOB SP) | Rating Change Bolina Holding (1190 HK) | Rating Change Malaysia Strategy | NEUTRAL Market Strategy Riding the wave The KLCI should scale higher in 2H 2014 riding on global liquidity which is likely to stay elevated. That said, KLCI valuations are also elevated at 2.2x PEG; this would cap a significant re-rating. We switch to stocks with improved outlooks but which have underperformed; also, the value stocks. Click here for report » Economics | Outlook & Lookout Outlook & Lookout Uneven & Eventful� Global, regional and local economies have been uneven and eventful year-to-date. Continue to expect moderate pick up in global economy of +3.4% in 2014 and +3.8% in 2015. No change in Malaysia�s real GDP growth forecast of +5.4% in 2014 and +5.1% in 2015. Click here for report » United Overseas Bank (UOB SP) | Rating Change Uncharacteristic move; cut to HOLD Share Price: SGD23.20 | Target Price: SGD25.70(+11%) | MCap (USD): 30.2B | ADTV (USD): 41M Cut UOB to HOLD from BUY given its impressive price outperformance. Maintain TP at SGD25.70. Relative valuation to its local peers has widened significantly, reducing the risk-reward attractiveness of the stock. For exposure, we prefer DBS which is better positioned if liquidity tightens and interest rates start to rise. Click here for report » Bolina Holding (1190 HK) | Rating Change Rock and hard place; D/G to SELL Share Price: HKD2.91 | Target Price: HKD2.37(-19%) | MCap (USD): 381M | ADTV (USD): 1M D/G to SELL post 22-25% EPS cut to FY14F-16F on struggling domestic business albeit strong exports. Lower TP multiple to 10X (from 12X) but rolling forward our basis to FY14/15F. We note worse-than-expected margin squeeze as a result of aggressive price cuts and bundled sales given weak end market demand and intense industry competition. Projected profit decline YoY in FY14F and lack of growth engines in near term are key concerns. We anticipate sluggish set of interim number to be key negative catalyst. Click here for report » COMPANY NOTES China Transport | OVERWEIGHT China Lesso Group Holdings (2128 HK) | Company Update Ajisen (China) (538 HK) | Company Visit Infosys (INFO IN) | Results Review Metro Pacific Investments (MPI PM) | TP Revision TISCO Financial Group (TISCO TB) | Results Review Midas Holdings (MIDAS SP) | Company Update Genting Plantations (GENP MK) | Company Update Malaysia Building Society (MBS MK) | Company Update Sasbadi Holdings (SASB MK) | Special Feature China Transport | OVERWEIGHT Sector Update Rates slip but load factors still high China�s Jun exports to the EU (+13.1% YoY) and the US (+7.5% YoY) demonstrate long-haul demand continued to be solid despite the pull-back in rates last week. Cooperation between Maersk and MSC in a vessel-sharing agreement will again force CSCL to explore options of joining an alliance. CSCL�s partnership with Alibaba to form an e-commerce logistics platform is positive, but we do not expect significant near-term earnings impact. Click here for report » China Lesso Group Holdings (2128 HK) | Company Update NDR: Overhang gone; Solid growth Share Price: HKD4.19 | Target Price: HKD7.20(+72%) | MCap (USD): 1.7B | ADTV (USD): 2M Maintain BUY and HKD7.20 TP intact (~11X FY14F PER). We raiseFY14/15/16 EPS by 1%/5%/4%post one-off senior note redemption and exercise of pre-IPO options yet offset by lower refinancing cost(to be reflected from 2H14F onwards). Last of the pre-IPO options were fully exercised and sold by several management team members by end-June to comply with SAFE regulation, which has thus removed the overhang. Above-sector sales growth and good margin stability should be achievable under industry consolidation while its home building materials should be the new growth engine ahead. Click here for report » Ajisen (China) (538 HK) | Company Visit Improvement signals emerge Share Price: HKD5.71 | Target Price: HKD8.75(+53%) | MCap (USD): 803M | ADTV (USD): 1M Reiterate BUY. Latest Shanghai visit revealed SSSG bottomed out in Apr and consistently trended upward as of first week of July, which lately has even been better than 1Q�s 5%. Marketing campaigns featuring new popular Korean spokesperson have been gradually released including online/offline promotions and �Lemon cup gift� set menu. New LT initiatives such as home delivery services, electronic ordering and free Wi-Fi are either under a trial run or about to debut shortly. UCC Coffee afternoon tea sets will also be soft launched in 30 stores in coming one to two months. Click here for report » Infosys (INFO IN) | Results Review Underperformance here to stay Share Price: INR3,293 | Target Price: INR2,859(-13%) | MCap (USD): 31.5B | ADTV (USD): 72M Maintain non-consensus SELL with lower end of the Street TP of INR2,859 based on 13x FY16F PER. 1QFY15 revenue growth (in USD) of 2% QoQ was in line with our expectations. However, EPS of INR50.5, -3.5% QoQ, and +21.6% YoY was a beat driven by higher employee utilisation, change in depreciation policy and higher other income. We factor in change in depreciation policy and tweak our FY15-16F EPS. We still expect INFO to underperform the sector in FY15/FY16, with 8%/9.7% revenue growth (in USD). Click here for report » Metro Pacific Investments (MPI PM) | TP Revision Vote of confidence in MER Share Price: PHP4.94 | Target Price: PHP6.30(+28%) | MCap (USD): 3.0B | ADTV (USD): 3M Maintain BUY as additional stake acquired in MER raises our NAV/ sh to PHP7.92 and TP to PHP6.30. Upgrade 2014 earnings estimate by 2% as MPI will now have 5% direct stake in MER, translating to 34% growth YoY. We believe MPI will continue to acquire more shares of subsidiaries, particularly Beacon and Maynilad Water. (FULL NOTE WILL BE OUT SOON) TISCO Financial Group (TISCO TB) | Results Review 2Q14 � Hit by weak asset quality Share Price: THB42.00 | Target Price: THB42.50(+1%) | MCap (USD): 1.0B | ADTV (USD): 2M Maintain HOLD and THB42.5 TP, implying 8x 2014F PE, 1.3x P/BV and 17% ROE 2Q14 net profit fell 14%YoY to THB992m (EPS:THB1.24), in line with our estimate, due to weak non-interest income and higher credit cost Cut 2014F earnings by 10% to reflect the weak loan demand, fee income growth and high provision expenses Click here for report » Midas Holdings (MIDAS SP) | Company Update Buying back stake from JV partner Share Price: SGD0.45 | Target Price: SGD0.75(+69%) | MCap (USD): 437M | ADTV (USD): 2M To acquire 45% stake in Jilin Midas Light Alloy, currently under construction, from JV partner for CNY306m. We expect this plant to be an important growth driver for Midas starting from FY16E. Another round of high-speed train tender is reportedly on the cards, auguring well for Midas. Maintain BUY. Click here for report » Genting Plantations (GENP MK) | Company Update Venturing into palm oil derivatives Share Price: MYR11.36 | Target Price: MYR11.20 (-1%) | MCap (USD): 2.7B | ADTV (USD): 1M GENP�s venture into palm oil derivatives with technology partner Elevance is long-term positive. Expect muted financial impact until 2017 when the plant starts operation. Maintain HOLD on GENP and unchanged SOP-TP of MYR11.20. Click here for report » Malaysia Building Society (MBS MK) | Company Update A listed mega-Islamic Bank? Share Price: MYR2.46 | MCap (USD): 2.1B | ADTV (USD): 2.3M A possibility could be for MBSB to be the listed vehicle for the Islamic banking operations of the CIMB-RHB-MBSB group. Upside of 14-32% assuming P/BV range of 1.3-1.5x for FY14E ROE of 11.1%; base case FV of MYR3.03 (1.4x P/BV, +23%). Trading angle on MBSB; risk to this is if the merger falls through or pricing/structure is materially different. Click here for report » Sasbadi Holdings (SASB MK) | Special Feature Looking beyond FY8/14 IPO Price: MYR1.19 | MCap (USD): 47.2M One of the most established publishers in Malaysia. Net profit expected to be weaker by ~6% in FY8/14 on loss of YGMB contract; we project 2.5% FY8/13-16 earnings CAGR. We derive an indicative fair value of MYR1.30 on 12.8x PER, representing an upside potential of 9%. Click here for report »     Click here for full Regional Daily report »