Regional Daily, Maybank KE (2014-11-03)

Daily 03 November 2014 TOP VIEWS Lenovo Group (992 HK) | Results Preview DBS Group (DBS SP) | Company Update Bharti Airtel (BHARTI IN) | Rating Change Italian-Thai Development (ITD TB) | Company visit Lenovo Group (992 HK) The moment of truth Share Price: HKD11.48 | Target Price: HKD8.80 (-23%) | MCap (USD): 15.4B | ADTV (USD): 58M 2Q15 results to be released on 6 Nov and we expect it to be a record high but� �management guidance on costs of merger of x86 server and Moto smartphone business is a key consideration while� �valuations remain at elevated level leaving no room for error. Maintain SELL as risk & reward remains unfavourable. Click here for report » DBS Group (DBS SP) Realistically positive Share Price: SGD18.33 | Target Price: SGD23.40 (+28%) | MCap (USD): 35.2B | ADTV (USD): 49M Loan guidance lowered by 1-2ppts to 7% on slower trade loan growth. NIM likely to be intact. Asset quality sound with no signs of stress. DBS still our top sector BUY. TP based on 13x FY15E EPS. Key beneficiary of rising rates. Click here for report » Bharti Airtel (BHARTI IN) Africa business continues to hurt Share Price: INR398 | Target Price: INR353 (-11%) | MCap (USD): 25.9B | ADTV (USD): 29M D/G to SELL factoring in continued pressure in the Africa business and higher capex to support growth in data business and spectrum renewal. New TP of INR353 (from INR417) based on DCF. Prefer IDEA in the sector. 2QFY15 consolidated revenue and EBITDA missed our estimate, impacted by QoQ decline in revenue and EBITDA of the Africa business. Consolidated recurring EPS of INR3.9 beat our estimate due to QoQ decline in depreciation. We expect the Africa business to continue to be a drag on BHARTI�s overall performance. We cut FY15/16F EPS by 4%/7%. Sale of tower assets in Africa business remains the only near-term catalyst. Click here for report » Italian-Thai Development (ITD TB) Awakening tiger Share Price: THB5.65 | Target Price: THB7.00 (+24%) | MCap (USD): 846M | ADTV (USD): 18M Maintain BUY. Higher THB7 TP from THB6 after rollover to FY15E, still at 2.7x P/BV. Multiple catalysts, including potash listing in Singapore, progress in Dawei Phase I and more infrastructure bids. Risk is capital-raising to fund investments. Click here for report » COMPANY NOTES Hong Kong Banks | NEUTRAL Chongqing Rural Commercial Bank (3618 HK) | TP Revision China Auto OEM | NEUTRAL MGM China Holdings (2282 HK) | Results Review ICICI Bank (ICICIBC IN) | Results Review Yes Bank (YES IN) | Results Review Kalbe Farma (KLBF IJ) | Results Review ACE Hardware (ACES IJ) | Results Review Gudang Garam (GGRM IJ) | Results Review Indofood CBP (ICBP IJ) | Results Review Erajaya Swasembada (ERAA IJ) | Results Review Mitra Adiperkasa (MAPI IJ) | Results Review Lippo Karawaci (LPKR IJ) | Results Review Matahari Putra Prima (MPPA IJ) | Results Review Ramayana Lestari (RALS IJ) | Results Review Tenaga Nasional (TNB MK) | Results Review Malaysia Banking | NEUTRAL Felda Global Ventures (FGV MK) | Company Update SMRT (MRT SP) | Results Review Kasikornbank (KBANK TB) | Company Update Hong Kong Banks Sector Update Sep 2014: LDR remains healthy Moderate loan & deposit growth in Sep 2014. Keep NEUTRAL. HKD LDR was Easing HKD funding cost should help stabilize NIM in 2H14. (FULL REPORT WILL BE OUT SOON) Chongqing Rural Commercial Bank (3618 HK) Best 3Q14 results among peers Share Price: HKD3.73 | Target Price: HKD4.75 (+27%) | MCap (USD): 4.5B | ADTV (USD): 4M Maintain BUY; Raising EPS forecasts with new TP of HKD4.75. Room to maintain strong loan and net fees growth. Accumulate excess provisions; Slow capital consumption. Click here for report » China Auto OEM Sector Update 3Q results show signs of softening We expect tougher competition in 4Q and more aggressive price cuts amid challenging YoY comparison. We continue to like SAIC given its attractive valuation, its healthy inventory level with stable sales & profit growth. Improving inventory condition along with introduction of fuel efficiency subsidy will continue to support recovery of select domestic brands. This offers trading opportunity. Click here for report » MGM China Holdings (2282 HK) Margin growth, mass-market boost Share Price: HKD24.15 | Target Price: HKD28.95 (+20%) | MCap (USD): 11.8B | ADTV (USD): 19M Maintain BUY with HKD28.95 TP as the strong results confirm our positive view on MGM China. 3Q14 EBITDA up 13% YoY, despite VIP volumes dropping. Results within expectations of our full-year forecast. Mass market revenue up 34% YoY. 15% YoY margin expansion. Click here for report » ICICI Bank (ICICIBC IN) Mixed underlying trends Share Price: INR1,612 | Target Price: INR1,765 (+10%) | MCap (USD): 30.3B | ADTV (USD): 62M Maintain BUY with SOTP-based TP of INR1,765. ICICIBC delivered a mixed set of numbers. Healthy NII growth aided by margin expansion, steady CASA and retail-loans-driven growth were positives. While stress in asset quality and weak core fee income disappointed. We forecast 14% EPS CAGR over FY14-17. Sharp NIM expansion looks difficult. Higher dividend from subsidiaries and repatriation income will support earnings. ROE will expand by 140bps to 15.4% on increase in leverage. Click here for report » Yes Bank (YES IN) Fairly priced Share Price: INR663 | Target Price: INR620 (-6%) | MCap (USD): 4.5B | ADTV (USD): 28M Maintain HOLD and raise TP to INR620 based on 1.8x one-year forward P/BV. EPS grew 11% ahead of estimates on higher-than-expected loan growth and fee income. Driven by wholesale book, loans grew strongly at 30% YoY. NIM expansion was on the back of recent capital infusion. We raise EPS estimates by 3%/2% for FY15/16 to factor in higher loan growth and NIM. Current valuations of 2.0x FY16E BV prices in all positives. (FULL NOTE WILL BE OUT SOON) Kalbe Farma (KLBF IJ) 9M14 results in line Share Price: IDR1,705 | Target Price: IDR2,000 (+17%) | MCap (USD): 6.6B | ADTV (USD): 7M 9M14 net earnings grew 9% y-y to IDR1.5tn, in line with our expectation. It made up 68% of our FY14F earnings (vs. 9M13 earnings� 71% FY13). Pharmaceuticals and consumer businesses still showed solid revenue growth of 17% y-y (combined). Distribution revenue were flattish (+2% y-y). Retain Buy on LT growth potential from Indonesia healthcare development and consumers� better health awareness. (FULL NOTE WILL BE OUT SOON) ACE Hardware (ACES IJ) 9M14 results slightly above Share Price: IDR810 | Target Price: IDR700 (-14%) | MCap (USD): 1.1B | ADTV (USD): 1M 9M14 net earnings of IDR376bn (+18% y-y) were slightly above our expectation. It made up 67% of our FY14F earnings estimates (vs. 9M13 earnings� 63% FY13). Revenue grew by 20% y-y to IDR3.4tn while EBIT increased by 22% y-y as EBIT margin expanded by 30bps vs. 9M13. We retain our cautious view on middle upper segment retail including ACES, on potential margin pressure from higher wage increase expected for FY15F and rising competition. (FULL REPORT WILL BE OUT SOON) Gudang Garam (GGRM IJ) Margin improvement continues Share Price: IDR57,750 | Target Price: IDR75,000 (+30%) | MCap (USD): 9.2B | ADTV (USD): 3M 9M14 net earnings of IDR4tn (+25% y-y) came slightly above our expectation. It was driven by strong revenue growth (+20% y-y) and margin improvement. Based on our observation, GGRM products� ASP has gone up by 7-13% over 9M14, which suggest overall strong blended volume growth for the company. Upgraded FY15-16F earnings by 13% respectively and adjusted up our TP to IDR75,000 (from IDR65,000), which implies 22x PE FY15F similar to previous TP. (FULL REPORT WILL BE OUT SOON) Indofood CBP (ICBP IJ) Still a tough quarter Share Price: IDR11,050 | Target Price: IDR12,500 (+13%) | MCap (USD): 5.3B | ADTV (USD): 3M 9M14 net earnings of IDR2.1tn (+12% y-y) were in line with our expectation. It made up 80% of our FY14F earnings estimates (vs. 9M13 earnings� 83% FY13). Revenue for 9M14 grew by 21% y-y to IDR22.8tn on the back of ASP increase and addition of new business (beverages). EBIT margin compressed by 150bps to 10.9%. Noodle remained as the biggest contributor for revenue and EBIT, 66% and 98% respectively as per 9M14. (FULL REPORT WILL BE OUT SOON) Erajaya Swasembada (ERAA IJ) Inventory pressure easing Share Price: IDR1,020 | Target Price: IDR1,229 (+20%) | MCap (USD): 245M | ADTV (USD): 2M 3Q14 below due to higher expenses and financing costs. EPS cut by 15-18%. Successfully working with Samsung to manage sales channels. Inventory back to more typical levels. Maintain BUY. Lower TP of IDR1,229 from IDR1,449 after EPS cuts, still at 10x FY15E P/E. Catalysts from continued Indonesian smartphone adoption. Click here for report » Mitra Adiperkasa (MAPI IJ) 9M14 results below Share Price: IDR5,300 | Target Price: IDR5,500 (+4%) | MCap (USD): 728M | ADTV (USD): 0.8M 9M14 net earnings of IDR111bn (-51% y-y) was below our expectation. It only made up 36% of our FY14F earnings estimates (vs. 9M13 earnings� 69% FY13) Although revenue grew a strong 25% y-y to IDR8.7tn, EBIT margin compressed 340bps to 4.1% mainly due to lower gross margin from discounting. Higher financing cost (+66% y-y) also contributed to the company�s margin pressure. (FULL REPORT WILL BE OUT SOON) Lippo Karawaci (LPKR IJ) 9M14 results below estimates Share Price: IDR1,070 | Target Price: IDR1,200 (+12%) | MCap (USD): 2.0B | ADTV (USD): 8M Net earnings were IDR1t, making up 69% and 62% of our and consensus FY14 earnings estimates. Healthcare segment continued to be robust at the expense of the property segment which yields higher margins. EBIT margin for 3Q14 was on the low side at 20%. Maintain HOLD with TP of IDR1,200 (41% discount to RNAV). Click here for report » Matahari Putra Prima (MPPA IJ) Growth sustained in 3Q14 Share Price: IDR3,145 | Target Price: IDR3,500 (+11%) | MCap (USD): 1.4B | ADTV (USD): 11M 9M14 core earnings (ex-one off income) of IDR269bn (+110% y-y) were slightly above our expectation (79% of our FY14F earnings estimates). Gross revenue for 9M14 grew 15% y-y to IDR10.6tn on the back of 6.7% SSSG. EBIT margin improved by 110bps to 3.7% vs. 9M13. As of Oct14, MPPA has opened 4 new Hypermart stores, leading to total store count to 103 outlets. (FULL REPORT WILL BE OUT SOON) Ramayana Lestari (RALS IJ) Flat growth Share Price: IDR810 | Target Price: IDR1,000 (+23%) | MCap (USD): 476M | ADTV (USD): 0.9M 9M14 net earnings of IDR340bn (-1% y-y) were in line with our expectations. It made up 87% of our FY14F earnings estimates (vs. 9M13 earnings� 88% FY13). Gross revenue was flat at IDR6.3tn on the back of SSSG of 1.3%. EBIT margin narrowed by 110bps to 5.3%. Reiterate BUY with TP of IDR1,000 (18x FY15F PER). We expect the company to benefit from its supermarket restructuring following the recent partnership with SPAR. (FULL REPORT WILL BE OUT SOON) Tenaga Nasional (TNB MK) A strong finish indeed Share Price: MYR13.36 | Target Price: MYR16.00 (+20%) | MCap (USD): 22.9B | ADTV (USD): 25M FY14 core net profit of MYR5.4b (a record-high) was in line with ours and consensus expectations. Positive earnings outlook as 1) coal generation trends up, 2) coal prices remain suppressed and 3) tax rate stays low. Raising FY15/16 earnings by 11%/13%, and TP to MYR16.00 (+14%); reiterate BUY. Click here for report » Malaysia Banking Sector Update Loan growth ticks up in September Industry loan growth ticked up to 9% YoY in Sep 2014 (8.6% YoY in Aug) supported by non-HH loan growth (+6.7% YoY); Positively, interest spreads continue to expand; keeping an eye on liquidity and consumer asset quality. Our 2014 loan growth forecast of 8.7% maintained. NEUTRAL on sector; BUY RHB, AFG, HL Bank, and HLFG. Click here for report » Felda Global Ventures (FGV MK) Bigger downstream plans in China? Share Price: MYR3.66 | Target Price: MYR3.97 (+8%) | MCap (USD): 4.1B | ADTV (USD): 2M FGV proposal to gain a 100%-control (presently 50%) of its downstream business in China is positive for the long term. Due to insufficient details, we are unable to assess its financial impact but we believe it is likely to be marginal. Maintain HOLD with unchanged SOP-based TP of MYR3.97. Click here for report » SMRT (MRT SP) No stock drivers yet Share Price: SGD1.49 | Target Price: SGD1.36 (-9%) | MCap (USD): 1.8B | ADTV (USD): 1M 2Q above on better costs. Fare-based business reverted to +SGD5.5m EBIT, lifting net income by 76% YoY to SGD25.3m. EPS raised by 82%. Still, stock could stay range-bound in absence of clarity over rail transition. Maintain HOLD & base-case SGD1.36 TP. Click here for report » Kasikornbank (KBANK TB) Hiking provisions in FY15 Share Price: THB233.00 | Target Price: THB265.00 (+14%) | MCap (USD): 17.1B | ADTV (USD): 32M Maintain BUY with THB265 TP, implying 2.1x 2015 P/BV and 19% ROE. Expect better loan growth and NIM next year; see upside risk on dividend payout ratio next few years. Raise 2014 earnings by 2.6% to reflect better NIM and cut 2015 earnings by 1.4% on higher credit cost. Click here for report » ECONOMICS Thailand Economics Consumption expansion resumed Government faces dilemma Private Consumption Index (PCI) expansion resumed, reversing to +1.20% YoY in Sep, from -0.80% in Aug. Private Investment Index slightly improved to -5.00% from -5.60%. This year, we still believe govt's short-term stimulus measures could further help economy achieve V-shaped recovery to some degree in 4Q14 and grow by around 2.00%. Next year, the government has to decide whether to continue with more populist policies or focus on economic reform and maintain a moderate pace of growth. Click here for report »