Regional Daily, Maybank KE (2014-09-30)

Daily 30 September 2014 TOP VIEWS Philippines Consumer | OVERWEIGHT Regional Materials China Gas Holdings (384 HK) Ayala Corp (AC PM) | TP revision Philippines Consumer Top picks lead in earnings Sector update Consumer spending remains strong in the Philippines highlighted by consumer companies� generally higher sales. URC and JFC continue to be our high-conviction picks. Among retailers (ex-JFC) we prefer RRHI. Stay OVERWEIGHT. (Full note will be out soon) Regional Materials Gems, Picks & Shovels Sector update Asia seaborne thermal coal prices could find support the next 3 months as Indonesia implements a new export licensing regime October 1st that could impact 20% of domestic coal production. In addition, India�s supreme court recently cancelled coal blocks that were misallocated from 1993-20009 resulting in large fines and potential production stoppages. Favorably impacted would be Coal India (COAL IN; Not Rated) and unfavorably Hindalco (HNDL IN; INR159.70; SELL). The resurgent US dollar and weak Chinese growth are putting downwards pressure on exchange traded metals prices (copper, nickel, aluminum). We recommend defensive growth play MMG (1208 HK; HKD2.86; BUY) with its new Las Bambas copper project driving a near doubling of EBITDA to USD1.5b when in full production in 2017. We would sell over capacity sectors where prices are falling: Angang Steel (347 HK; HKD4.92; SELL), Posco (005490 KS; Not Rated), and Chalco (2600 HK; HKD3.21; SELL). For nickel, wait for selling pressures to ease before adding to positions in expectation of firmer markets next year (2015 up 19% YoY to avg. USD9.50/lb or USD21,000/t). China�s nickel ore stockpile is being partially replenished by Philippine ores while China�s stainless producers ease production of nickel containing stainless steels until prices settle. Our top nickel pick is Vale Indonesia (INCO IJ; IDR3,845; BUY) where an more attractive entry point could arise if the Indonesian stock market retreats on our forecast fuel subsidy cut this November. Click here for report » China Gas Holdings (384 HK) NDR: Sound growth strategy Share Price: HKD13.60 | Target Price: HKD16.00 (+18%) | MCap (USD): 8.8B | ADTV (USD): 22M We expect China Gas� strong exposure to Southwest and Northeast China could allow it to enjoy more gas from Myanmar and Russia to support higher growth in long run. Vehicle CNG business will be near-term growth driver, but gas for heating business will provide long-term growth, in our view. We believe upside potential of LPG operation could be the sweet spot to China Gas. Maintain BUY and DCF-based TP of HKD16. Click here for report » Ayala Corp (AC PM) Raise NAV, maintain BUY Share Price: PHP724.00 | Target Price: PHP905.00 (+25%) | MCap (USD): 9.7B | ADTV (USD): 6M Raise NAV to PHP905 from PHP769. TPs of Ayala Land (ALI), Globe Telecom (GLO) and Manila Water (MWC) raised as forecasts and assumptions revised. With ALI almost 60% of AC�s NAV and positive outlook on property subsidiary, reiterate BUY on AC. Click here for report » COMPANY NOTES Hong Kong Retail Innovalues (IP SP) | Company update Japfa Ltd (JAP SP) | Company visit Gamuda (GAM MK) | Results review MY Strategy Ebbs & Flows Siam Commercial Bank (SCB TB) | Company update Kasikornbank (KBANK TB) | Company update Hong Kong Retail Occupy Central: More downside Sector update HK retail stocks retreated yesterday as stores closed amid the Occupy Central movement spreading to key tourist shopping districts. As flagged in our note last week, rising political tension and weaker visitor flows will weigh on HK retailers near term. If reaction of Thai stocks to the country�s recent political protests serves as a reference, we are concerned this is still the early stage of the correction for HK retail names. Click here for report » Innovalues (IP SP) NDR: Positive outlook reinforced Share Price: SGD0.33 | Target Price: SGD0.52 (+60%) | MCap (USD): 82M | ADTV (USD): 0.5M Strong investor interest in Innovalues NDR, in which management expressed confidence in their outlook. Recent direct qualification by two major auto makers could catapult Innovalues into big leagues. 3Q14 results will demonstrate strong outlook. Maintain BUY with TP of SGD0.52 (10x FY15E P/E). Click here for report » Japfa Ltd (JAP SP) An emerging Asia consumer play Share Price: SGD0.87 | Target Price: na | MCap (USD): 1.2B | ADTV (USD): 5M Leading agri-food company recently listed on SGX. Top three in all its markets. What impressed most is its dairy farming in China. No forecasts or rating yet for the stock. Click here for report » Gamuda (GAM MK) Proxy to infrastructure boom Share Price: MYR4.81 | Target Price: MYR5.30 (+10%) | MCap (USD): 3.4B | ADTV (USD): 7M Record breaking FY7/14 results were in line. Our earnings forecasts are largely unchanged after reflecting a higher stake in Kesas and lower property sales target. Maintain BUY with an unchanged RNAV-based TP of MYR5.30. Click here for report » MY Strategy September fund flows Strategy update Foreigners were net seller sin September. YTD net sell has totally reverse out their net buys in 2013. No change to our market, sector and stock calls. Click here for report » Ebbs & Flows Funds continue to exit EM Regional Quants This is a weekly fund flows tracker for emerging markets. Click here for report » Siam Commercial Bank (SCB TB) Healthy NIM to offset weak loan demand Share Price: THB183.00 | Target Price: THB220.00 (+20%) | MCap (USD): 19.7B | ADTV (USD): 29M Maintain BUY and TP of THB220, implying 12.5x 2015 PER, 2.3x P/BV and 20% ROE. Expect 3Q14F earnings to grow 9% YoY to THB13.8b, due to strong NIM and lower credit cost. SCB expects 1.6% and 4.5% GDP growth for this year and next; manufacturing production will recover and drive business loan demand starting in 4Q14. Click here for report » Kasikornbank (KBANK TB) Expect resilient earnings in 3Q14F Share Price: THB234.00 | Target Price: THB265.00 (+13%) | MCap (USD): 17.5B | ADTV (USD): 30M Maintain BUY with THB265 TP, implying 2.1x 2015 P/BV and 19% ROE. One of our favourites in banking sector. Expect 3Q14F net profit of THB11.7b, up 10% YoY, due to strong loan growth QTD with healthy NIM. We conservatively forecast 6% loan growth this year, driven by SME segment, vs the bank�s target of 7-8% growth. Click here for report » ECONOMICS Thailand August exports tumbled Thailand August exports tumbled Positive agri momentum Economics August exports down 7.40% YoY to USD18.94b, much worse than expected, exacerbated by gold exports that fell 92.90%. Second month of fall. Agriculture exports rose 2.70%, third month of rise. Falling exports to China (-14.40%). Continued growth to CLMV (+12.60%). Looking at growth of no more than 1.00% in 2014 as this requires exports of USD20b/month till year-end & 4.50% in 2015. Click here for report »