Regional Daily, Maybank KE (2014-08-28)

Daily 28 August 2014 TOP VIEWS Thailand Market Compass Ajisen (China) (538 HK) | TP Revision Security Bank Corp (SECB PM) | TP Revision KNM Group (KNMG MK) | Company Update Thailand Market Compass Market Update Jul-14 exports weak; NEUTRAL to SET Jul-14 exports weakened, after painting positive picture in Jun-14; Risk remains on the export and GDP growth projections. However, the weak export print likely to be neutral to SET as most investors have moved their timeline to 2015 when a stable government and resumption of government spending are expected to bear fruit. Companies whose 3Q14 earnings could be affected by the soft exports such as STA (SELL), KSL (BUY), KBS (HOLD), KCE (BUY) and HANA (Not Rated) are mostly SMIDs, except CPF and TUF; But for these two, the impact is likely to be negligible owing to highly diversified base. Click here for report » Ajisen (China) (538 HK) Cooking up new ideas Share Price: HKD6.36 | Target Price: HKD10.26 (+61%) | MCap (USD): 894�bADTV (USD): 1M Reiterate BUY on encouraging SSSG trend (Jul-Aug) and as execution of various new revenue streams and cost-cutting initiatives on track. New TP of HKD10.26 remains pegged at 25X FY15F PER. We adjust FY14/15/16F EPS by (5)%/7%/12%. Other than store sales efficiency improvements, management�fs priority is to actively explore ways to capitalise on its diversified store network and central kitchens. In-store sales of homemade chili sauce is the first imitative with more to follow, such as pre-cooked soups. Generous pay-out practices and good cash cushion should imply at least ~3% dividend yield return to investors other than potential capital gains on successful new strategies. (FULL REPORT WILL BE OUT SOON) Click here for report » Security Bank Corp (SECB PM) Higher earnings to boost ROE & TP Share Price: PHP126.90 | Target Price: 172 (+36%) | MCap (USD): 1.7B | ADTV (USD): 2M Raise TP to Street-High PHP172, maintain BUY on 36% upside. Strong 2Q14 earnings prompted our FY14 earnings upgrade. Growing consumer segment to drive loan growth. Click here for report » KNM Group (KNMG MK) 1H on track; expect a stronger 2H Share Price: MYR1.00 | Target Price: MYR1.50 (+50%) | MCap (USD): 0.5B | ADTV (USD): 4.7M 1H�s performance is on track to meet our FY forecast. Expect stronger 2H; more contract positives in the pipeline. Maintain BUY and MYR1.50 TP on 0.7x EV/backlog. Click here for report » COMPANY NOTES Lonking Holdings (3339 HK) | Results Review AAC Technologies (2018 HK) | TP Revision China Child Care Corporation (1259 HK) | TP Revision Dah Sing Banking (2356 HK) | TP Revision Dah Sing Financial (440 HK) | TP Revision Datang International Power (991 HK) | TP Revision Hengan International (1044 HK) | TP Revison International Housewares Retail (1373 HK) | Company Update Yuexiu Property (123 HK) | Results Review Axiata Group (AXIATA MK) | Results Review Bumi Armada (BAB MK) | Company Update Genting Plantations (GENP MK) | Results Review Hock Seng Lee (HSL MK) | Results Review RHB Capital (RHBC MK) | Results Review Telekom Malaysia (T MK) | Results Review Manila Water Co. (MWC PM) | TP Revision Silverlake Axis (SILV SP) | Results Reivew Bangkok Dusit Medical Services (BGH TB) | Company Update Ann Joo Resources (AJR MK) | Rating Change Cahya Mata Sarawak (CMS MK) | Rating Change Padini (PAD MK) | Results Review UMW Holdings (UMWH MK) | Results Review Lonking Holdings (3339 HK) Best of the breed Share Price: HKD1.37 | Target Price: HKD1.83 (+34%) | MCap (USD): 757M | ADTV (USD): 1.0M Maintain BUY with TP of HKD1.83 (12x FY14E PER). Catalysts are market-share gains, lower finance expense and better cost management. Best play in HK-listed construction machinery sector 1H14 earnings grew 0.8% YoY to CNY346m, in line. Gross margins up 3.2ppts YoY and 0.4ppt HoH to 25.5%. Gearing could fall to 10% by end-FY14E on strong operating cashflow and low capex. Expect 45% payout to yield 4.7%. Click here for report » AAC Technologies (2018 HK) Not everything positive; HOLD Share Price: HKD47.65 | Target Price: HKD45.00 (-6%) | MCap (USD): 7.5B | ADTV (USD): 17M Maintain HOLD and raise our estimates and TP to HKD45 from HKD31 (from 12x FY14F to 14x FY15F) to reflect higher ASP assumption for Haptics. However, faces competition on its acoustic components and potential margin dilution from non-acoustic business such as Haptics/optical/antenna. 2Q14 speaker box sales down 24% QoQ and 20% YoY, underperforming mild YoY growth of its peers. It implies intensified price competition if not order dilution. Non-acoustic GM was only 21-27% in 1H14. We assume GM of 35% in 2H14 based on performance of existing players, below AAC�s average GM of 40-43%. Click here for report » China Child Care Corporation (1259 HK) Show me the money; HOLD for now Share Price: HKD2.16 | Target Price: HKD2.00 (-7%) | MCap (USD): 282M | ADTV (USD): 0.7M Maintain HOLD on lack of concrete signals on special dividends, strategic investors and meaningful buybacks. Also, core product sales in 1H14 disappointed and we note limited improvement in 2H14F amid competition and weak demand. Mgmt admitted its POS maintenance in modern trade channels is not satisfactory, but it is rectifying the problem. It will also hopefully solve issues including out-of-stock situations and unorganized stock displays. Stable SG&A control as promised is a key merit as more attention on enhancing POS efficiency following tremendous new market expansion efforts in the last two years. We expect stable margins over FY14-16F as in-house manufacturing benefits offsets more active discounts. Click here for report » Dah Sing Banking (2356 HK) Splendid earnings outlook Share Price: HKD14.04 | Target Price: HKD16.10 (+15%) | MCap (USD): 2.3B | ADTV (USD): 2M 1H14 earnings beat consensus. Earnings upgrade on lower credit costs and higher net fees growth. We expect CET1 CAR to revive to above 11% by end-2014. Maintain BUY and raise TP to Street-high HKD16.10. Click here for report » Dah Sing Financial (440 HK) Buy one, get one free Share Price: HKD43.45 | Target Price: HKD54.50 (+25%) | MCap (USD): 1.7B | ADTV (USD): 2M 1H14 earnings well above consensus forecast. Raising earnings forecasts of DSB, BOCQ and insurance. Maintain BUY and raise TP to HKD54.50 from HKD52.80. Click here for report » Datang International Power (991 HK) Divest the value-destroyed part Share Price: HKD4.24 | Target Price: HKD3.90 (-8%) | MCap (USD): 7.3B | ADTV (USD): 11M Reported 1H14 net profit of CNY2,029m, up 0.5% YoY, slightly below our expectation. Profit from power generation was strong at CNY5.5b, up 46% YoY. We think it is a good strategy to divest its coal-to-chemical projects due to high depreciation costs and low utilization rate. Chemical sector recorded loss of CNY1.4b in 1H14 compared to loss of CNY0.5b in 1H13. Maintain HOLD and raise TP to HKD3.90. Click here for report » Hengan International (1044 HK) A&P peaked; capacities cut & better sales & profit trend; BUY Share Price: HKD82.30 | Target Price: HKD98.00 (+19%) | MCap (USD): 13.1B | ADTV (USD): 16M Maintain BUY on peaked A&P, tissue capacities cut and accelerating sanitary napkin & diaper sales. Product mix upgrade and wood pulp cost trend bode well for margins. Bread-and-butter napkin business to maintain 20%+ sales CAGR over FY14-16F on the back of above-sector volume growth (c.10%) and product portfolio optimization. We cut our FY14/15/16F est. by 17%/13%/11% post 1H14 higher-than-expected SG&A. We also include FX drag in 1H14. New HKD98 TP is pegged at 27x PER, but roll over valuation basis from FY14/15F to FY15F. Click here for report » International Housewares Retail (1373 HK) Placement to remove overhang Share Price: HKD3.05 | Target Price: HKD4.00 (+31%) | MCap (USD): 285M | ADTV (USD): 0.3M Maintain BUY with unchanged TP of HKD4.00 on this under-researched name. Placement from EQT Partners provides a good BUY opportunity. Structural expansion in SG along with stable growth in HK remains intact. EQT, the second-largest shareholder, placed old shares after market close at a discount of 7.9-11.5%. Shares may face near-term pressure due to the discount, however, this should remove the Street�s overhang concerns and liquidity improvement will be positive. Click here for report » Yuexiu Property (123 HK) On a steady growth path Share Price: HKD1.69 | Target Price: HKD2.00 (+18%) | MCap (USD): 2.0B | ADTV (USD): 5M Maintain BUY. GPM was higher than expected at 34.4% in 1H due to high Guangzhou booking but we believe FY14 is likely to hover around 30% as mgmt previously guided for more non-Guangzhou projects delivery. Unbooked contract sales reached CNY17.24b, and we estimate around 40% of next year�s revenue is locked in. Slightly better than expected 1H14 results, with core net profit of CNY992m, up 11% YoY, locking in 59% of full year Bloomberg consensus estimate of CNY1.69b. We raise our 2014 earnings forecast by 14%. 1H14 cash collection was lacklustre at 66%, but management expects 2H ratio to increase to 80%. Needs CNY11.4b of contract sales in 2H to achieve full year target of CNY22b, implying 57% sell-through ratio compared to 2H available for sale resources of around CNY20b � looks achievable. 5 new launches in 2H. Click here for report » Axiata Group (AXIATA MK) Stagnant Celcom Share Price: MYR6.94 | Target Price: MYR7.60 (+9%) | MCap (USD): 18.9B | ADTV (USD): 17M 1H14 core net profit and EBITDA were in line with both ours and consensus expectations. Celcom�s service revenue has remained flat owing to �lost opportunities�; growth should resume in 2015. Uncertainty over XL�s post-merger financials is clearing up, reiterate BUY on Axiata with an unchanged TP of MYR7.60 Click here for report » Bumi Armada (BAB MK) Rights and private placement Share Price: MYR3.04 | Target Price: MYR4.55 (+50%) | MCap (USD): 2.8B | ADTV (USD): 3.5M Rights issue priced at MYR1.35/unit to raise MYR2b. OBSB placed out up to 215m secondary shares (7.3% of share base), effectively reducing its stake to 35%. Maintain BUY; MYR4.55 SOP-TP (cum-price) under review. Click here for report » Genting Plantations (GENP MK) Promising property sales Share Price: MYR10.20 | Target Price: MYR11.20 (+10%) | MCap (USD): 2.5B | ADTV (USD): 2M 2Q14 core net profit within expectations. 2014-16 EPS cut by 13%/5%/5% respectively on lower CPO ASP assumption, tax adjustments and higher biotech losses. Maintain HOLD and our sum-of-parts TP of MYR11.20. Click here for report » Hock Seng Lee (HSL MK) Construction projects took off Share Price: MYR1.90 | Target Price: MYR2.25 (+18%) | MCap (USD): 366M | ADTV (USD): 0.2M 2Q14 results were below estimates on slight margin shortfall. Positively, progress of its major construction projects have accelerated. Earnings and TP unchanged. Maintain BUY with MYR2.25 TP. Click here for report » RHB Capital (RHBC MK) Aided by lower provisions Share Price: MYR9.10 | Target Price: MYR8.70 (-4%) | MCap (USD): 7.5B | ADTV (USD): 4.2M 1H14 net profit of MYR1.0b (+22% YoY) was in line at 50% of our and consensus full-year forecasts. Loans growth continues to be robust, efficiency management is a key priority. TP maintained at MYR8.70 on unchanged 2014 P/BV target of 1.2x (ROE: 11.3%). HOLD. Click here for report » Telekom Malaysia (T MK) Lower DPS from normalising taxes Share Price: MYR6.27 | Target Price: MYR6.55 (+5%) | MCap (USD): 7.1B | ADTV (USD): 10M 1H14 net profit was below ours and consensus expectations on higher taxes; EBITDA was in line. Tax rates have normalised as per guidance, further tax incentives appear unlikely. Earnings and dividends lowered on normalisation of tax rates; maintain HOLD, with a revised TP of MYR6.55. Click here for report » Manila Water Co. (MWC PM) Higher profit, TP but uncertainty reigns Share Price: PHP29.50 | Target Price: PHP31.70 (+7%) | MCap (USD): 1.4B | ADTV (USD): 0.9M 2014-15F earnings revised to reflect no change in basic rate this year and conservative assumption of rate cut in 2015. Lower capex this year in line with guidance, reductions in later years reflect uncertainty due to dispute with regulator. Although 2014-15F earnings higher, upside to revised TP minimal. Maintain HOLD. Click here for report » Silverlake Axis (SILV SP) No shortage of opportunities Share Price: SGD1.16 | Target Price: SGD1.40 (+21%) | MCap (USD): 2.1B| ADTV (USD): 2M Mid-teens revenue or PATMI growth pa guided for next five years. Order book of MYR280m offers visibility for next 15 months. Maintain BUY and DCF-based TP of SGD1.40 (WACC 9.3%). Opportunities from Malaysian bank mergers and OCBC�s recent acquisition of Wing Hang Bank. Strong finish to FY6/14. Core EPS beat by 12% on higher-than-expected sales. FY15E-17E EPS refined by -2% to +3%. Click here for report » Bangkok Dusit Medical Services (BGH TB) Acquisition in Phuket Share Price: THB19.30 | Target Price: THB22.00 (+14%) | MCap (USD): 9.4B | ADTV (USD): 22M Acquired entire business of Phuket International Hospital (PKI) with total cost of THB3.6b to strengthen its hospital network and support medical tourism. Implied PER was 25x, in-line with historical average. This creates synergies to BGH. This deal is expected to complete in 4Q14. PKI could post earnings 3-year CAGR of 19%. We expect PKI�s net profit could top up our forecast by 1.8% between 2015-2016F. Maintain BUY with new DCF-based TP of THB23, implying 37x PER, 6x P/BV and 1.3x PEG for FY15F. Medium to long-term outlook still attractive. M&A is a short-term rerating catalyst. (FULL REPORT WILL BE OUT SOON) Ann Joo Resources (AJR MK) Turning cautious Share Price: MYR1.34 | Target Price: MYR1.36 (+2%) | MCap (USD): 220M| ADTV (USD): 0.1M Share price gained 17% in 3-month on positive 1Q14 results. However, we are turning cautious on the influx of bars and wire rods import. Downgrade to HOLD with a lower TP of MYR1.36 (0.6x P/B). Click here for report » Cahya Mata Sarawak (CMS MK) Taking a breather Share Price: MYR4.19 | Target Price: MYR4.00 (-5%) | MCap (USD): 458M | ADTV (USD): 2M The strong set of 2Q14 results met our expectation. We raise our TP to MYR4.00 (+14%) after revising our SOP. Share price has risen 83% YTD and near term positive has been fairly priced-in. We now rate CMS a HOLD (from BUY). Click here for report » Padini (PAD MK) FY14: Results below expectations Share Price: MYR1.89 | Target Price: MYR2.20 (+16%) | MCap (USD): 395M | ADTV (USD): 0.7M Full year results came in at 93%/95% of our and consensus forecasts, below expectations. Store openings to drive growth but FY15/16 net profit forecasts lowered by 11%/9. Maintain BUY with a lower TP of MYR2.20 (-6%) on 14.8x FY15 PER (previously 14.8x CY14 PER). Click here for report » UMW Holdings (UMWH MK) Impacted by taxes, non-cores Share Price: MYR12.28 | Target Price: MYR13.82 (+13%) | MCap (USD): 4.6B | ADTV (USD): 8.0M 1H14 core net profit disappointed, accounting for 40%/41% of our/consensus initial full-year forecasts. Lowering our FY14/15/16 earnings by 12%/8%/8% on higher taxes and bigger losses estimates at its non-core operations. Maintain BUY; our SOTP-based TP of MYR13.82 is unchanged. Click here for report » ECONOMICS Thailand Economics Exports slipped in Jul due to gold/oil Core exports rising After first increase in four months in Jun, Thai exports in Jul fell 0.85% YoY to USD18.90b, much worse than expectations. But core exports that exclude gold and oil rose 2.47%. Both agricultural and industrial exports continued their positive momentum. Exports to the US, the EU15 and Japan rose. We continue to believe exports should pick up more but concede our 4% export growth forecast or even MOC�s 3.5% target is challenging. 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