Regional Daily, Maybank KE (2015-03-17)

Daily 17 March 2015 TOP VIEWS Philippine Strategy | OVERWEIGHT Quality Houses (QH TB) | Company visit MediaTek (2454 TT) | Rating change China Materials � coal | UNDERWEIGHT Philippine Strategy PSEi not held back by politics etc Strategy Optimism over growth prospects remains the market�s driving force. Index rise not deterred by politics and regulatory uncertainty because due processes being followed. Model portfolios outperform the PSEi by 241bps as of Friday, replace JFC with FPH. Click here for report » Quality Houses (QH TB) Q Sukhumvit beats all expectations Share Price: THB3.98 | Target Price: THB6.00 (+51%) | MCap (USD): 1.1B | ADTV (USD): 5M Maintain BUY and TP of THB6.0 based on SOTP. QH is our Top Pick in the residential property sector. Take-up rate of Q Sukhumvit exceeded all expectations. Project has achieved c.40% take-up rate vs our target of 25% and QH�s target of 15%. Positive view intact; expect strong earnings growth of 17% YoY to THB3.9b in FY15F and presales growth of 24% YoY to THB24b. Click here for report » MediaTek (2454 TT) Blame it on EM FX; Cut to HOLD Share Price: TWD432 | Target Price: TWD450 (+4%) | MCap (USD): 21.4B | ADTV (USD): 84M Downgrade to HOLD and cut TP to TWD450 from TWD600 (15x FY15 PER) as we lower FY15/16 EPS by 16% each. Risk of weakening EM demand is rising as FX in the region is softening rapidly which we have warned in our Lenovo and TCL notes on 15 Mar. Despite gaining shares against QCOM in 4G space in China, MTK�s FY15 earnings are unlikely to grow on the shortfall of EM market and raising OPEX. Click here for report » China Materials � coal Supply cuts won�t chg. weak trend Sector update The NDRC is targeting illegal projects that could reduce production by 200-250mt (5-7%) this year. But 1bt of capacity has been approved for construction the next few years and 2015 capacity is 4.0bt vs. consumption of 3.9bt. The market surplus is likely to continue despite the cuts. Coal prices are down 9% YTD with consumption growth negative YoY for the 2nd year and imports rising. Also, a power tariff cut flagged last month is forthcoming (6-8% cut). Most impacted from lower coal sales volumes, prices, power tariff rates, and rising resource taxes would be Shenhua (1088 HK; HKD19.40; SELL). We also have a SELL on China Coal (1171 HK; HKD3.98) and Yanzhou (1171 HK; HKD6.23). Click here for report » COMPANY NOTES Regional Plantations | NEUTRAL Hong Kong Banks | NEUTRAL Bank of Baroda (BOB IN) | Company update DiGi.com (DIGI MK) | Company update Eversendai Corp (EVSD MK) | Company update KNM Group (KNMG MK) | Company update Sime Darby (SIME MK) | Company update GT Capital Holdings Inc (GTCAP PM) | Flash Note Int�l Container Terminal Services (ICT PM) | Transfer coverage Regional Plantations 4.5% CPO export tax in April Sector update Malaysia will impose a 4.5% CPO export tax this April 2015 in its bid to help refiners boost exports of processed palm oil. Positive for downstream operators in Malaysia - FGV, IOI, KLK, Sime, SOP, GENP, Wilmar, and Mewah Int�l. Losers are the purer upstream players. Top BUYs in the region are BAL, FR, GENP, SOP and SIME. SELL IOI Corp for its steep valuation. Click here for report » Hong Kong Banks Capital requirement for SIFIs Sector update HKMA identified five domestic systemic important financial institutions (SIFIs), requiring extra CET1 CAR of 1-2ppts. Maintain NEUTRAL. We see higher chance for BOCHK than HSB to pay special DPS. Tough capital requirement may trigger the sale of DSB. Top picks remain BOCHK, CHB and DSB. Click here for report » Bank of Baroda (BOB IN) 4Q would be soft, FY16 better Share Price: INR179 | Target Price: INR240 (+34%) | MCap (USD): 1.2B | ADTV (USD): 13M We recently met the management of BOB. Interactions reveal that 4Q15 would be soft on higher restructuring and NPLs. However, the performance will be better than 3QFY15. Management plans to grow at 2-4% higher than the industry for FY16. Focus area for growth is retail, SME & farm credit. Maintain BUY with revised TP of INR240 based on 1.1x FY17F P/BV. Change in TP driven by increase in BV post capital infusion of INR12.6b and roll over to FY17F. (Full report will be out soon) DiGi.com (DIGI MK) A change of guards Share Price: MYR6.28 | Target Price: MYR6.10 (-3%) | MCap (USD): 13.1B | ADTV (USD): 16M COO Albern Murty becomes CEO effective Apr 2015, replacing Lars-Ake Norling, who becomes CEO of DTAC in Thailand. Having spent over a decade in various roles at Digi, Albern is well-poised to continue Digi�s drive for mobile internet leadership. Digi�s track record in execution and earnings delivery has been exemplary, but appears to have been largely priced-in. Maintain HOLD with an unchanged TP of MYR6.10. Click here for report » Eversendai Corp (EVSD MK) Another sizeable MYR246m win Share Price: MYR0.82 | Target Price: MYR0.87 (+7%) | MCap (USD): 170M | ADTV (USD): 0.3M Won two new jobs worth MYR246m in Saudi Arabia, lifting outstanding orderbook to MYR1.8b. Strong jobflows YTD and bright prospect will drive earnings rebound in FY15-16. Maintain BUY and TP of MYR0.87 (12x FY15 PER). Click here for report » KNM Group (KNMG MK) JV with Hansol EME for RE projects Share Price: MYR0.73 | Target Price: MYR1.00 (+37%) | MCap (USD): 325M | ADTV (USD): 6M This 40:60 KNM-Hansol EME JV offers KNM a hand into the latter�s renewable energy (RE) technology. Expect more strategic technology tie-ups for RE works. No change to our earnings forecasts. Maintain BUY; MYR1.00 TP (0.6x EV/backlog) under review. Click here for report » Sime Darby (SIME MK) An unlikely match in SP Setia Share Price: MYR9.25 | Target Price: MYR10.20 (+10%) | MCap (USD): 15.6B | ADTV (USD): 11M Proposed acquisition of SP Setia will likely benefit SP Setia but not Sime; we see no compelling reason for the merger. The enlarged Sime will need to consolidate BPS�s debt, estimated to hit ~GBP2b in 2017, impeding future growth. Maintain BUY with an unchanged TP of MYR10.20 on 18x 2016 PER peg. Catalysts are M&A and listing of key divisions. Click here for report » GT Capital Holdings Inc (GTCAP PM) Preferred shares SRO to ease foreign ownership Share Price: PHP1,330 | Target Price: PHP1,410 (+6%) | MCap (USD): 5.2B | ADTV (USD): 5M Maintain BUY with adjusted TP of PHP1,410, implied 2015F PER is 20.9x. New issue of voting preferred shares will lower foreign ownership share to 16.9% from 33.7%. Broadens investor base for future capex-intensive investments. Click here for report » Int�l Container Terminal Services (ICT PM) Assimilating port acquisitions Share Price: PHP112.30 | Target Price: PHP120.50 (+7%) | MCap (USD): 5.2B | ADTV (USD): 3M Transfer coverage to Katherine Tan. Raise 12-month TP by 15% to PHP120.50, equivalent to 33.4x 2015F PER and 13.2x EV/EBITDA. Maintain HOLD on limited upside. Expansion strategy of acquiring small- to medium-sized ports in emerging economies remains intact but will keep costs elevated this year. Click here for report »