090219 - UOBKH - Regional Morning Notes

8/14/2019 090219 - UOBKH - Regional Morning Notes

1/16

UOBKayHianReg iona l Morn ing No tes

Thursday, February 19, 2009

Please see important notice on last page Page 1 of 16

CHINA

Sector

Oil & Gas Page 2Sino-Russia 20-year oil supply contract positive for China; widening H- vsA-share discount presents buying opportunity. Maintain OVERWEIGHT.

Power Page 3Coal import only has marginal impact on both IPPs and coal miners.Maintain MARKET WEIGHT.

Update

Ping An Insurance (BUY/HK$34.75/Target: HK$47.75) Page 4January premiums up 23% yoy, reflecting an excellent start to the year.

HONG KONG

Sector

Property Page 6We double-check our price targets and assumptions, which are still amongthe most bearish in the market, and find they are not at all far-fetched.

MALAYSIA

ResultsLafarge Malayan Cement (SELL/RM3.86/Fair: RM3.50) Page 8FY08: Net profit of RM367.7m (+27.6% yoy) due to higher average sellingprices and demand. Results were above our and market expectations.

SINGAPORE

Results

Oversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) Page 104Q08: Disappointing results with spike in specific allowances due to newNPLs in overseas operations and manufacturing sector.

THAILAND

ResultsAdvanced Info Service(BUY/Bt77.00/Target: Bt101.76) Page 124Q08: Operating results in line with expectation. Expect performance tobe soft in 1H09 before picking up in 2H09.

Update

Dynasty Ceramic (NOT RATED/Bt11.80) Page 14Tile manufacturer offers impressive growth and high dividend yield.

Current Target Pot. +/-Price Price (%)

Ticker (lcy) (lcy)

Top BUYsChina Life 2628 HK 22.45 30.50 35.9China Mobile 941 HK 71.50 90.00 25.9China Petroleum 386 HK 4.23 6.93 63.8China Railway 390 HK 4.68 5.90 26.1China Shenhua 1088 HK 16.82 23.00 36.7Maanshan Iron 323 HK 2.88 3.70 28.5Bumi Resources BUMI IJ 740.00 1,010.00 36.5Public Bank PBK MK 9.10 10.90 19.8DBS Group DBS SP 8.10 10.55 30.2Indofood Agri IFAR SP 0.56 0.80 42.9SingTel ST SP 2.47 2.95 19.4Advanced Info ADVANC TB 77.00 101.00 31.2Quality Houses QH TB 0.86 1.49 73.3

Top SELLsAluminum Corp 2600 HK 4.07 3.00 (26.3)Parkson Retail 3368 HK 6.53 4.89 (25.1)Wharf Hldg 4 HK 16.72 14.60 (12.7)Spore Airlines SIA SP 10.22 9.70 (5.1)Spore Exchange SGX SP 4.90 3.00 (38.8)Amata Corp AMATA TB 3.60 2.52 (30.0)

Top BUYs/SELLs

GDP (% yoy) 2008 2009F 2010F

US* 1.3 (1.9) 1.8Euro Zone* 0.7 (1.8) 0.8Japan* (0.7) (2.9) n.a.Singapore 1.2 (4.0) 4.0Malaysia 5.1 0.9 4.0Thailand 4.2 0.5 4.3Indonesia 6.0 3.6 6.3

Hong Kong 2.2 (0.8) 1.5China 9.0 7.1 8.0

Brent Crude Oil (US$/bb l) 100 55 65Aluminium * (US$/MT) 2,623 1,763 2,090Copper * (US$/MT) 6,884 3,834 4,578Gold Price London * (US$/ounce) 873 942 981Iron Ore * (USc/dmtu) 153 107 99CPO (US$/MT) 818 520 685BDI 6,338 2,500 1,500* BloombergSource: UOB, UOB Kay Hian

Ke Assum tions

Venue Type Beg Close

China/Commodities-Energy Malaysia AP 18-Feb 19-FebChina/Commodities-Energy Hong Kong AP 20-Feb 20-Feb

* AP: analyst presentation

Cor orate Events

Key Indices Prev Close 1D % 1W % 1M % YTD %DJIA 7555.6 0.0 (4.2) (8.8) (13.9)FTSE 100 4006.8 (0.7) (5.4) (3.4) (9.6)AS30 3366.9 (1.3) (1.5) (4.6) (8.0)CSI 300 2275.8 (4.6) (2.4) 13.1 25.2FSSTI 1651.1 0.8 (4.1) (5.5) (6.3)HSI 13016.0 0.5 (3.9) (2.4) (9.5)JCI 1330.6 1.0 0.4 (1.5) (1.8)KLCI 895.2 (0.4) (0.2) 0.6 2.1KOSPI 1113.2 (1.2) (6.5) (3.3) (1.0)Nikkei 225 7534.4 (1.5) (5.2) (8.7) (15.0)SET 439.6 0.3 (1.0) 0.9 (2.3)TWSE 4498.4 0.1 (1.7) 3.0 (2.0)

BDI 1986 4.8 (3.4) 125.4 156.6CPO (RM/mt) 1935.5 (3.0) 0.0 6.5 18.7Nymex Crude

(US$/bbl) 34.6 (0.9) (7.8) (5.2) (22.4)

Source: Bloomberg

Key IndicesKEY STORY

ChinaOil & Gas Page 2Sino-Russia 20-year oil supply contract positive for China; widening H- vsA-share discount presents buying opportunity. Maintain OVERWEIGHT.

SingaporeOversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) Page 104Q08: Disappointing results with spike in specific allowances due tonew NPLs in overseas operations and manufacturing sector.


2/16


3/16

Regional Morning NotesThursday, February 19, 2009


Power

Coal import only has marginal impact

Local press reported that dominant IPPs and China Resources will import

coal, amid the deadlocked coal price negotiation. Given the limited importvolume, industry impact will likely be marginal. Maintain MARKET WEIGHT.

Sector Events

IPPs will import more coal this year. According to local press, the fivemajor power groups, including Huaneng Group, Huadian Group, DatangGroup, Guodian Group and China Power Investment Group, together withChina Resources Group, have teamed up to import coal from overseassuppliers to satisfy their own demand. In the meantime, the contractnegotiations for thermal coal are still deadlocked.

Sector Impact

Marginal impact for both IPPs and coal miners. We think coal imports will

merely serve as a strategic warning to coal miners under the currentdeadlocked coal price negotiation. In fact, the volume of imported coal willonly account for less then 5% of the total coal demand for IndependentPower Producers (IPPs). Even if IPPs are able import more coal, importedcoal can only be used in coastal cities given transportation problems. Fromthe business perspective, importing coal is actually not a good choice forIPPs as international coal price and supply are usually more volatile, eventhough prices may now be cheaper. Therefore, we expect coal imports tohave only a marginal impact on the domestic coal prices. On the other hand,we think it will support international coal price and narrow the price gapbetween China and overseas coal due to higher demand.

IPPs coal cost will depend on domestic demand/supply dynamics.There has been much news or speculation concerning the thermal coal pricenegotiation. However, we think investors should be focussing more on thecurrent coal demand/supply dynamics and spot price, as both parties candefault if there is price divergence.

Recommendation

Maintain MARKET WEIGHT for the power sector given the uncertain coalprice negotiation and coal price trend. Currently, we continue to prefer well-diversified IPPs, including CR Power and Datang Power, given their lowercoal cost risk in the longer term and better earnings visibility. Maintain BUYfor both companies with a DCF-based target prices of HK$17.70(WACC=9.6%, g=3%) and HK$4.90 ((WACC=8.5%, g=3%) respectively.

Sector Comparison

CR Powers financials are in HK$Source: Company data, UOB Kay Hian

Price Net Profit EPS PE ROE Market Yield

Company Ticker Rec. 18 Feb 09 2007 2008F 2009F 2007 2008F 2009F 2007 2008F 2009F 2007 Cap 2007

(HK$) (Rmbm) (Rmbm) (Rmbm) (Rmb) (Rmb) (Rmb) (x) (x) (x) (%) (HK$m) (%)DatangPower 991 HK BUY 3.60 3,406 510 3,169 0.29 0.04 0.27 11.9 79.5 12.8 13 11,632 4.2CRPower 836 HK BUY 14.08 3,161 563 4,132 0.80 0.14 1.01 17.6 102.7 14.0 17 18,493 1.8HuanengPower 902 HK SELL 5.17 6,161 (3,979) 2,281 0.51 (0.33) 0.19 9.1 n/a 24.6 12 15,796 6.4HuadianPower 1071 HK SELL 1.65 1,197 (1,362) 116 0.20 (0.23) 0.02 7.5 n/a 77.3 6 2,361 4.2

ChinaPower 2380 HK HOLD 1.43 592 (782) 403 0.16 (0.22) 0.11 8.0 n/a 15.2 6 2,855 5.1

CHINA

Power

MARKET WEIGHT

CR Power (836 HK)BUYCurrent Price: HK$14.08Target Price: HK$17.70

Datang Power (991 HK)

BUYCurrent Price: HK$3.60Target Price: HK$4.90

Huaneng Power (902 HK)SELLCurrent Price: HK$5.17Fair Price: HK$4.70

Huadian Power (1071 HK)SELLCurrent Price: HK$1.65Fair Price: HK$1.50

China Power (2380 HK)HOLDCurrent Price: HK$1.43Fair Price: HK$1.70

Analyst

Yan Shi (8621) [email protected]


4/16



Ping An Insurance

January premiums up 23% yoy, reflecting excellent start to the year

January premiums up 23% yoy, better than consensus estimates. Earnings

recovery expected this year as key negatives have been mostly factored intoearnings. Maintain BUY.

Corporate Events

Ping An announced January premiums of Rmb13.3b, up 23% yoy, whichexceeded consensus expectations. Property and casualty (P&C) premiumscame in at Rmb3.6b, up 12.7% yoy.

Stock Impact

Like China Life, Ping An is off to an excellent start to the year in terms ofpremium growth. Premium growth is particularly impressive, given thatJanuary was a shortened working month due to the Chinese New Year andthe very strong loan growth experienced in Jan 08.

We believe Ping Ans premium growth was further helped by Ping Anmaintaining its universal life credit rate, which remained unchanged at 5.25%for a 138bp spread above the five-year benchmark deposit rate.

P&C premiums were also slightly better than expected given the shortenedmonth of January. Going forward, P&C premium growth will be challenged byslowing auto sales. However, China Insurance Regulatory Commissions(CIRC) enforcement of insurer solvency and strict regulation of commissionsmay help Ping An break even in terms of underwriting this year.

Earnings Risk

A-share market volatility and prolonged period of low interest rates.

RecommendationWe maintain our BUY recommendation on Ping An as we believe the majorityof the headwinds it faced in 2008 have been fully priced in. Earnings ofChinese life insurers will also likely recover this year. With the A-sharemarket being the top performing market in the world year-to-date, theinvestment outlook has also improved substantially from last year. Our targetprice remains HK$47.75, reflecting 2.5x P/EV and 25x NBV. However, ChinaLife remains our top pick for the insurance sector due to its simple businessstructure, dominance in the rural business and absence of loss-makingforeign investments.

CHINA

Ping An Insurance (2318 HK)

BUYCurrent Price: HK$34.75Target Price: HK$47.75

Sector Insurance52-Wk Avg Daily Vol. (m) 21.8Market Cap (HK$m) 264,147

(US$m) 33,865

Major Shareholders (%)HSBC 16.80

Book NTA per Share (Rmb) 13.36ROE (%) 24.3

Results DueInterim AugustFinal April

Price Chart

2.00

12.00

22.00

32.00

42.00

52.00

62.00

72.00

82.00

Feb-08 May -08 Aug-08 Nov -08

(HK$)

Source: Bloomberg

Analyst

Nan Sheng (8621) 5404 7225 [email protected]

Net Earned Net EPS

Year to Premium EBITDA Profit EPS Growth PE P/EV DPS Yield

31 Dec (Rmbm) (Rmbm) (Rmbm) (Rmbm) (%) (x) (x) (Rmb) (%)

2006 63,013 8,548 7,838 1.05 53.8 29.8 3.0 0.34 0.88

2007 73,606 22,004 18,688 2.50 138.4 12.5 1.5 0.50 1.30

2008F 92,297 2,068 437 0.06 -97.7 535.4 2.1 0.01 0.032009F 108,560 16,700 13,848 1.85 3069.9 16.9 1.8 0.37 0.96

2010F 131,647 21,169 18,316 2.45 32.3 12.8 1.6 0.47 1.22

Consensus Net Profit FY08: Rmb3,552m FY09: Rmb14,897m


5/16



Monthly Life Premiums

Rmbm

0

2,000

4,000

6,0008,000

10,000

12,000

14,000

Jul-06

Aug-06

Sep-06

Oct-0

6

Nov-0

6

Dec-0

6

Jan-07

Feb-07

Mar

-07

Apr-0

7

May

-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-0

7

Nov-0

7

Dec-0

7

Jan-08

Feb-08

Mar

-08

Apr-0

8

May

-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-0

8

Nov-0

8

Dec-0

8

Jan-09

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Premiums Growth

Source: Ping An, UOB Kay Hian

Monthly P&C Premiums

Rmbm

0

500

1,000

1,500

2,000

2,500

3,000

3,5004,000

Aug-06

Sep-06

Oct-06

Nov-0

6

Dec-06

Jan-07

Feb-07

Mar-07

Apr-0

7

May

-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-0

7

Dec-07

Jan-08

Feb-08

Mar-08

Apr-0

8

May

-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-0

8

Dec-08

Jan-09

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Premiums Growth


Universal Life Credit Rate

Five-year deposit

rate

Ping An

Universal Life

Credit Rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Ja

n-07

Mar

-07

May

-07

Jul-07

Se

p-07

Nov-07

Ja

n-08

Mar

-08

May

-08

Jul-08

Se

p-08

Nov-08

Ja

n-09


Profit & Loss

Balance Sheet

Year to 31 Dec (Rmbm) 2006 2007 2008F 2009F 2010FNet earned premiums 63,013 73,606 92,297 108,560 131,647Net Investment income 12,198 15,257 17,373 20,279 27,265Net profit 7,838 18,688 437 13,848 18,316

EPS 1.27 2.54 0.06 1.85 2.45

Year to 31 Dec (Rmbm) 2006 2007 2008F 2009F 2010FInvestment Assets 341,557 511,825 488,286 536,718 635,331

Total Assets 493,539 691,298 730,993 815,870 924,191

Total Liabilities 446,559 577,447 613,917 689,661 785,795

Equity 46,375 113,851 114,202 125,328 139,477


6/16



Property

We are not overly pessimistic

Our price targets, which are based on another 25% fall in residential prices this

year, are still among the most bearish in the market. We double-check ourassumptions and are satisfied that they are not far-fetched at all.

Sector Events

We differ. Overall, the market was shocked by the surge in unemployment to4.6% in January (released on Tuesday). While that has effectively removed thelast thread of hope that anyone might still be holding on property prices remainingstable, many commentators are only expecting residential prices to fall 10-15% thisyear, much smaller than our 25%. One reason we are more pessimistic thanothers is because unemployment could reach 7% by year-end, against themarkets typical 6%.

Utmost task to preserve employment. Unemployment rose 16,400 in January,triple that of the 4,900 in December, even before the massive closure of

businesses expected to take place after the Lunar New Year. The governmentsprime aim now is to ease pressure on the job market. The Budget, to be releasednext Wednesday (25 February), will focus on this area. In order to hold up the fast-eroding confidence, the government has recently announced these plans:

a) To create 55,000 construction jobs in fiscal year 2009-10 by acceleratinginfrastructure and minor works projects,

b) To recruit 7,700 civil servants and create 4,000 temporary openings in the next14 months,

c) Over 20 statutory bodies will recruit some 6,000 employees and create about2,000 temporary jobs or internship opportunities this year, and

d) The Labour Department will continue to organise larger-scale job fairs inshopping malls and community centres.

Question on implementation. For a start, we are sceptical on how fast theseplanned government jobs can actually materialise, particularly in view of the largenumber involved. In the private sector, there are already reports that companiesare pulling out of the job fairs as expansion plans are halted.

Even if successfully implemented, unemployment could still top 7%. Here isa rough calculation: 14,300 jobs were lost in January. Assuming an average of14,000 jobs will be gone in each of the next 11 months, a further 154,000 positionswill be lost by December. Assuming all the proposed government jobs will becreated this year, 74,700 new positions will be added, reducing the net loss in jobsto 79,300. Adding 38,500 new headcounts (based on the 10-year average) to thelabour force, such as graduates and school-leavers, unemployment could rise from157,700 at present to 275,500, or over 7%, by year-end.

Unemployment vs Residential Price Index

0

1

2

3

4

5

6

7

8

9

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 090

20

40

60

80

100

120

Unemployment rateResidential price index (RHS)

(%)

Unemploym ent at 7%

Residential

prices af ter

f alling 40%

f rom peak

Source: HKSAR, Centaline

HONG KONG

Property

UNDERWEIGHT

Analyst

Sylvia Wong (852) 2236 [email protected]


7/16



40% drop in residential prices from peak not that remote. For some time,we have been holding the view that residential prices will have to fall 40%from peak before bottoming. This will bring prices back to levels last seen in1Q04. Many find this retrenchment hard to comprehend. But if we areindeed facing a financial crisis that only takes place once in a hundred years,it follows that perhaps none of us is in a position to comprehend the likely

outcome.We saw that in the past. Moreover, the Unemployment vs Residential PriceIndex chart shows unemployment hit 7% twice in the last seven years. The lasttime was in May 04, and at the time residential prices were hovering on levelsequivalent to a 36% fall from the 2008 peak. In Mar 02, prices were even lower,equivalent to some 46% below the 2008 peak. Thus, our 40% base-case declineis not that far-fetched. One might argue new supply is much tighter now, but atthe same time, the local or the global economy was not under as much stressthen.

Downward spiral on prices. Suffice to say, the lack of job security willsignificantly undermine any desire to buy a new home. Moreover, without anysalary increase (let alone the possibility of pay cuts), upgrading demand will also

dissipate. We expect developers to start cutting prices more notably, especiallyon unsold inventories. This will only prompt the few that are still looking to buy aflat at this stage to wait for lower prices, drying up transaction volume further,which will put more pressure on prices. A downward spiral has been formed.Residential prices fell 20% in 2H08, thus we expect another 25% drop this year.

Potential Price Cuts On Unsold Inventories

Originallaunch date Project Location Developer

No. ofunits

Unitssold

Unitsunsold

Avglaunchprice

Currentprice in

area

Potential price

cut

HK$psf HK$psf %

Jan 09 The Sail at Victoria Western District Hongkong Land 95 2 93 10,000 7,000 (30)

Jan 09 Vista Sham Shui Po Sino Land 173 106 67 5,200 4,400 (15)

Dec 08 Le Billionaire Kowloon City Chinachem 488 92 396 6,000 5,000 (17)

Dec 08 Cite 33 Prince Edwards Henderson Land 107 47 60 6,300 5,000 (21)Nov 08 Peak One Shatin SHKP 519 200 319 7,300 5,800 (21)

Noc 08 La Grove Yuen Long SHKP 543 400 143 3,200 3,000 (6)

Oct 08 The Dynasty Tsuen Wan Sino Land 256 90 166 6,200 4,800 (23)

Aug 08 One Madison Cheung Sha Wan Sino Land 126 60 66 6,000 5,000 (17)

Jun 08 York Place Wanchai Chinese Estates 94 35 59 15,000 10,000 (33)

Jun 08 Beacon Lodge Cheung Sha Wan SHKP 166 60 106 7,000 5,000 (29)

May 08 Celestial Heights Homantin Cheung Kong 939 490 449 10,000 7,000 (30)

Dec 07 Harbour Place Hunghom SHKP/New World 2,470 1,530 940 7,000 5,200 (26)

Nov 07 Island Lodge North Point Swire 184 98 86 10,000 7,000 (30)

Oct 07 Long Beach Tai Kok Tsui Hang Lung Prop. 1,829 605 1,224 7,200 5,300 (26)

Source: UOB KayHian

Stock Recommendation

We are not overly bearish. Our target prices are among the most bearish in themarket for two reasons: a) our base-case assumption of a 40% fall in residentialprices from the peak is still among the most pessimistic, and b) they are basedon trough discount to NAV during past crises. By definition, the trough discountrepresents an overshooting situation and thus would appear aggressive. Shareprices could rebound swiftly after hitting the trough levels.

Target Price Based On Trough Discount to NAV

Ticker Rating

Share price

18 Feb 09 End-09 NAVDiscount to End-

09 NAV

Avg troughdiscount to NAV

during past crises

Target basedon past trough

discountDownsideto target

(HK$) (HK$) (%) (%) (HK$) %

Cheung Kong 1 HK SELL 66.70 77.31 (13.7) (33) 51.80 (22)

Hang Lung Prop 101 HK SELL 14.28 15.75 (9.3) (38) 9.71 (32)

Henderson Land 12 HK HOLD 25.30 45.15 (44.0) (42) 26.18 3Kerry Properties 683 HK SELL 14.70 41.68 (64.7) (70) 12.50 (15)

New World Dev 17 HK SELL 7.34 16.54 (55.6) (65) 5.79 (21)

Sino Land 83 HK SELL 6.32 10.65 (40.7) (63) 3.91 (38)

SHK Properties 16 HK SELL 62.25 81.60 (22.9) (38) 50.32 (20)

Source: UOB Kay Hian


8/16



Lafarge Malayan Cement

FY08: Results above expectation

FY08 net profit of RM367.7m (+27.6% yoy) was above our and consensus

estimates due to higher average selling prices (ASP) and a slight increasein demand. Going forward, demand growth is expected to weaken.

FY08 Results

Source:Lafarge, UOB Kay Hian

Results

FY08 net profit of RM367.7m, +27.6% yoy, was above our and consensusestimates on the back of higher ASPs and sales volume. There was also anon-recurring gain of RM29.6m on the sale of CERs (Certified EmissionReductions). A dividend of 15 sen was declared, bringing the total dividendfor FY08 to 30 sen/share (yield: 7.8%)

Stock Impact

ASPs are expected to be adjusted downwards by 2-5% in 2Q09. With therecent 5% reduction in electricity tariff effective 1 Mar 09 and the pullback incoal and fuel prices (from US$195/tonne and US$147/tonne to US$80/tonneand US$35/tonne respectively), we think manufacturers will pass on the costsavings (approximately RM20-30/tonne) to end users via a 2-5% reduction inASPs. We think there will another round of price adjustment should domesticdemand continue to shrink.

Earnings Revision

We revise downward our net profit forecasts for FY09F and FY10F by 6.6%(from RM321.7m to RM300.4m) and 12% (from RM361.2m to RM318.1m)

respectively on the back of a 5% downward adjustment to ASPs.Valuation/Recommendation

Maintain SELL as its share price has exceeded our revised fair price ofRM3.50, based on DCF discounted at cost of equity of 17% to incorporate thegloomy outlook in 1H09 as well as uncertainty over 2H09.

Lafarge is currently trading at 10.9x FY09F PE and 10.3x FY10F PE. Basedon our fair price of RM3.50, we see trading opportunities for the stock shouldshare price decline to RM3.10.

MALAYSIA

Lafarge Malayan Cement(LMC MK)

SELLCurrent Price: RM3.86Fair Price: RM3.50(Previous: RM3.60)

Sector Cement

52-Wk Avg Daily Vol. ('000) 590.5

Market Cap (S$m) 3,279.8(US$m)

896.9Major Shareholders (%)

Lafarge S.A 61.2

Book NTA per Share (RM) 2.15

ROE (%) 12.4

Net Debt per Share 0.38

Results Due

1Q: May 2Q: Aug

3Q: Nov Final: Feb

Price Chart

2.00

2.50

3.003.50

4.00

4.50

5.005.50

6.00

6.50

Feb 08 Apr 08 Jun 08 Aug 08 Sep 08 Nov 08 Jan 09

(RM)

Source: Bloomberg

Analyst

Malaysia Research Team (603) 2143 [email protected]

(RMm) FY08 FY07yoy

% chg Remarks

Revenue 2530.8 2173.5 16.4

- Cement & &clinker 1964.1 1645.6 19.3

Boosted by higher ASPs and higherexport volume

- Others 754.0 715.9 5.3

EBIT 412.0 310.0 32.5

- Cement &clinker 389.1 309.5 25.7

Improvement in plant performance,higher ASPs and sales volume

Others 22.9 1.4

Net Profit 367.7 288.1 27.6Includes non-recurring gain on sale ofCERs (Certified Emission Reductions)

EBIT Margin (%) 14.3 16.3


9/16



Profit & Loss

Balance Sheet

Cash Flow

Year to 31 Dec (RM m) 2007 2008 2009F 2010F 2011F

Turnover 2173.5 2530.8 2545.1 2547.8 2574.5

EBIT 310.9 412.0 388.1 407.5 401.5

Pre-tax Profit 318.1 397.8 380.1 402.2 396.4

Net Profit 288.1 367.7 300.4 318.1 313.4EPS (sen) 33.9 43.3 35.4 37.4 36.9


Operating 497.3 551.9 464.2 491.3 476.6

Investing (59.5) (122.3) (100.0) (150.0) (200.0)

Financing (430.7) (450.5) (374.9) (297.8) (308.4)

Net Cash In/out flow) 7.1 (21.0) (10.6) 43.5 (31.8)

Begin Cash & Cash Equiv. 155.0 162.1 141.2 130.5 174.1

Endg Cash & Cash Equiv. 162.2 142.9 130.5 174.1 142.2


Current Assets 920.7 981.7 940.6 981.2 960.2

Total Assets 4,255.3 4,303.0 4,201.0 4,230.7 4,263.1

Current Liabilities 1,014.4 573.5 435.9 436.3 440.6

Long-Term Loans 7.2 359.0 359.0 359.0 359.0

Shareholders' Funds 2,909.0 3,032.0 3,152.2 3,279.4 3,404.8

Total Equity & Liabilities 4,255.3 4,303.0 4,201.0 4,230.7 4,263.1


10/16



Oversea-Chinese Banking Corp

4Q08: Credit costs starting to bite

Disappointing results with spike in specific allowances due to new NPLs in

overseas operations and manufacturing sector. NPL related to smallerdevelopers could surface in 2009 and 2010. Downgrade to HOLD.

Results

Net profit of S$301m in 4Q08 (down 29.5% yoy) was below consensusestimate of S$389m even though the results included tax refunds and write-backs of S$51m.

Financial PerformanceYear to 31 Dec 4Q07 1Q08 2Q08 3Q08 4Q08

Net Interest Income (S$m) 613 639 679 684 783

yoy % chg 25.1 25.8 21.7 20.8 27.7

Fees & Commissions (S$m) 202 212 202 199 159

yoy % chg 25.5 19.1 -6.9 -5.7 -21.3

Insurance (S$m) 197.0 24.0 62.0 177.0 145.0

yoy % chg 38.7 -79.1 -55.1 43.9 -26.4

Net Profit (S$m) 427 623 426 402 301

Cost/Income Ratio (%) 45.0 41.8 45.4 43.6 44.4

Source: OCBC

Loans & AdvancesYear and 31 Dec 4Q07 1Q08 2Q08 3Q08 4Q08

Customer Loans (S$m) 71,316 73,977 76,989 79,925 79,808

yoy % chg 20.2 20.2 20.9 20.2 11.9

Customer Deposits (S$m) 88,788 92,867 92,371 94,678 94,078

yoy % chg 18.2 19.1 12.3 10.5 6.0

Loans/Deposits Ratio (%) 80.3 79.7 83.3 84.4 84.8

Net Interest Margin (%) 2.14 2.17 2.24 2.18 2.47Source: OCBC

Impressive margin expansion. Loans were flat on a sequential basis withgrowth in Building & Construction (+4.3% qoq) offset by contraction inManufacturing (+5.8% qoq) and General Commerce (+12.0% qoq). Depositswere also relatively unchanged with customers shifting funds from fixeddeposits to lower-cost savings deposits and current accounts. Loan-depositratio was maintained at 84.8%.

Net interest margin expanded from 2.18% in 3Q08 to an impressive 2.47% in4Q08 due to improved credit spread and lower funding costs. OCBC alsobenefitted from gapping opportunities due to the steep yield curve. Netinterest income increased 27.7% yoy and 14.5% qoq to S$783m.

Wealth management suffered. Fees & commissions fell 21.3% yoy and20.1% qoq to S$159m due to a severe 51.4% qoq decline in contribution fromwealth management. Profit from life insurance dropped 36.1% yoy and20.7% qoq to S$115m. Great Easterns non-participating fund was affectedby corrections in the equity market and increases in insurance contractliabilities (decrease in applicable interest rate to discount liabilities). Itnevertheless expanded market share for weighted premium products inSingapore from 22.5% to 29% in 2008.

SINGAPORE

OCBC (OCBC SP)

DOWNGRADE TO HOLDCurrent Price: S$4.89Fair Price: S$5.27(Previous: S$5.85)

Sector Banking

52-Wk Avg Daily Vol. ('000) 7,676Market Cap (S$m) 15,226.4

(US$m) 9,963.3

Major Shareholders (%)Lee Foundation 19.2

Book NAV per Share (S$) 4.51

ROE (%) 9.9

Net Debt per Share (S$) n.a.

Results Due

1Q: May 2Q: Aug

3Q: Nov Final: Feb

Price Chart

4.00

5.00

6.00

7.00

8.00

9.00

Feb

08

Apr

08

Jun

08

Aug

08

Oct

08

Dec

08

(S$)

Source : Bloomberg

Analyst

Jonathan Koh (65) 6539 [email protected]

Total Net EPS Div

Year to Income PPOP Profit EPS Growth PE DPS Yield

31 Dec (S$m) (S$m) (S$m) (S ) (%) (x) () (%)2007 4,281 2,555 2,071 65.9 3.9 7.4 28.0 5.7

2008 4,427 2,526 1,752 54.7 (17.0) 8.9 28.0 5.72009F 4,609 2,671 1,220 36.9 (32.6) 13.3 28.0 5.72010F 4,909 2,849 1,586 48.5 31.7 10.1 28.0 5.72011F 5,133 2,980 1,905 58.8 21.1 8.3 28.0 5.7

Consensus Net Profit - FY09: S$1478.3m- FY10: S$1602.9m


11/16


12/16



Advanced Info Service

4Q08: Net profit lower due to goodwill provision

Given the prospects of a recovery and a new 3G licence in 2H09, AIS remains

our top pick. We also see limited downside as share price trades near thelowest PE band and sits on a high Z-score. Maintain BUY

2008 Consolidated Results


Results

Operating results are in line with our expectation. Sales slowed down in 4Q08but still grew on a yoy basis, backed by subscribers expanding to 27m as at end-08. Margins remained healthy both in 4Q08 and FY08 due to positive netinterconnection charge (IC: Bt347m in 4Q08 and Bt737m in 2008), reduction inmaintenance costs, lower bad debts provision and a drop in marketing expenses.Although pre-tax profit in 2008 is in line with forecast, net profit was 38% lowerdue to the provision of DPCs goodwill and tax expenses related to the provision.

Stock Impact

As we move into a sluggish economy in 2009, we expect AIS sales to remainweak in 1H09 but will gradually increase in 2H09 as the government stimuluspackages kick in. The companys focus will be on quality customers rather thanquantity. Provincial markets remain its growth area via a strong distributionshipamong its dealers. We therefore expect AIS to add 2.5m net new subscribersthis year. Promotions on on-net call will keep net IC positive and reducecongestion on its network. So its capex may be kept at Bt13b-15b (excluding 3Gexpansion). EBITDA margin in 2009 is likely to remain strong at 43%. Overall,we maintain our 2009 forecasts- sales to grow 2% and net profit to increase 14%

(excluding further provision on DPCs goodwill.AIS catalyst is the new 3G licence to be issued by the NTC. The new licencemay halve AIS operating cost. This would create a new era for the Thai mobilelandscape. We expect the new licence to be issued in 2H09. However, thecommercial roll-out may have to wait until mid-10.

Earnings Revision/Risk

As 3Q08 results are in line with our expectation, we maintain our sales andearnings forecasts for this year. No change in our FY09-10 forecasts as wehave factored in the slowdown in the economy in our model.

THAILAND

Advanced Info Service(ADVANC TB)

BUYCurrent Price: Bt77.00Target Price: Bt101.76

Sector Telecom

52-Wk Avg Daily Vol. ('000) 4,771.2

Market Cap (Btb) 228.1

(US$b) 6.5

Major Shareholders (%)Shin Corporation 42.7

Singtel Strategic Investment 19.2

Book NTA per Share (Bt) 24.8ROE (%) 22.0

Net Debt per Share (Bt) 7.9

Results Due

1Q: May 2Q: Aug

3Q: Nov Final: Feb

Price Chart

0

20

40

60

80

100

120

Feb-

08

Apr-

08

Jun-

08

Aug-

08

Oct-

08

Dec-

08

(Bt)

Feb-

09

Source: Bloomberg

Analyst

Kowit Pongwinyoo (662) [email protected]

Net EPS EV/Year to Turnover EBITDA Profit EPS Growth PE EBITDA DPS Yield31 Dec (Btm) (Btm) (Btm) (Bt) (%) (x) (x) (Bt) (%)2007 108,453 43,898 16,290 5.5 0.1 14.0 5.6 6.3 8.22008 110,792 46,503 16,409* 5.5 0.6 13.9 5.3 6.3 8.22009F 113,357 49,515 18,640 6.3 13.6 12.2 4.7 6.3 8.22010F 119,125 52,453 20,761 7.0 11.4 11.0 4.2 7.2 9.32011F 123,117 55,138 23,837 8.0 14.8 9.6 3.8 8.4 11.0

Consensus Net Profit FY09:18,023m * Include extraordinary gain and loss FY09:19,254m

Consolidated 4Q08 yoy 2008 yoy RemarksYear to 31 Dec (Btm) % chg (Btm) % chg

Sales 26,271 (34.1) 110,792 2.2 Closure of airports and sloweconomy led to a weak 4Q08.

Gross profit 9,104 (18.1) 38,752 2.8EBITDA 10,668 (16.5) 46,503 5.9Pre-tax Profit 5,482 (26.6) 26,586 11.4Tax (1,683) (27.8) (8,381) 10.8Net Profit 419 (91.8) 16,409 0.7 Bt3.6b provision of DPCs GWNet Profit (Ex EI) 3,783 (26.7) 18,149 11.0

EPS (Bt) 0.14 (91.9) 5.54 0.5

Gross margin (%) 34.7 35.0 Declining maintenance costs.EBITDA margin (%) 40.6 42.0 Fall in bad debt and mkt. expNet margin (%) 1.6 14.8


13/16



Valuation/Recommendation

The poor market sentiment has driven down the share price of AIS for thewrong reason. We continue to see good value in AIS and maintain our BUYwith a target price of Bt101.76 based on DCF model at a discount rate of 8%.The downside risk for AIS is limited as it trades near its lowest PE band and

sits on a high Altman Z-score of 5.19. Maintain BUYSubscribers continued to grow

In 4Q08, AIS added 536,000 subscribers, bringing its total subscriber base to27.3m. ARPU continued to decline due to more marginal subscribers fromthe provinces. MOU fell but at a slower rate due to promotions to utilisespare capacity during off-peak hours, and that helped to raise RPM.

Profit & Loss

Balance Sheet

Cash Flow

Year to 31 Dec (Btm) 2007 2008 2009F 2010F 2011F

Turnover 108,453 110,792 113,357 119,125 123,117

EBIT 25,581 28,211 28,169 31,046 35,136

Pre-tax Profit 23,860 26,586 26,956 30,029 34,487

Net Profit 16,290 16,409 18,640 20,761 23,837


Current Assets 20,586 26,958 26,113 37,491 34,904

Total Assets 128,942 128,081 115,240 117,759 107,373

Current Liabilities 28,157 24,860 19,602 33,391 20,407

Long-Term Liabilities 24,929 29,774 22,211 8,892 8,832

Shareholder Funds 75,461 73,436 73,418 75,468 78,127

Total Equity & Liabilities 128,942 128,081 115,240 117,759 107,373


Operating 31,800 37,900 43,773 42,534 44,174

Investing (14,982) (8,880) (13,833) (12,927) (12,594)

Financing (21,238) (11,956) (33,186) (18,753) (34,511)

Net Cash In/(Out) Flow (4,420) 17,064 (3,246) 10,854 (2,932)

Begin Cash & Cash Equiv. 12,860 8,440 16,527 13,281 24,134

End'g Cash & Cash Equiv. 8,440 25,504 13,281 24,134 21,203

Quarterly Subscribers

0.810.54

21.1 22.723.2 24.1

25.1 26.0 26.827.3

0

0.5

11.5

2

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

(m)

0

5

10

1520

25

30(m)

Quarterly Total

Source: AIS

Quarterly ARPU

742698

743 756 742 709 695

249 234 222 227 231 218 206 193

809

0

100

200

300

400500

600

700

800

900

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

(Bt)

Postpaid Prepaid

Source: AIS

Quarterly MOU

580501 507

568 589 570 548 544

228 218 224 239 260 266 262 242

0

100

200

300

400

500

600

700

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

(minute)

Postpaid Prepaid

Source: AIS

ValuationMethod Results (Bt) Remarks

Z-score test 5.19 Score is in safeposition


Share Price Trading Near Lowest PEBand

5

25

45

65

85

105

125

145

J an- 0 2 Oct - 03 Jul- 05 A pr- 07

(Bt)

PE 19.5x

PE 16.0x

PE 12.5x

PE 9.0x

Oct-08



14/16



Dynasty Ceramic

Impressive growth and high dividend yield.

DCC is still generating growth amid the economic slump. With earning

growth of 26% and offering a yield of 12%, DCC looks interesting, indeed.Events

As sales volume continued to grow from end 08 to Jan 09 (+5%), and thetrend is expected to continue into Feb 09 (exceeding 10%), management isconfident that a 10% growth target this year is achievable. The decreasingtrend of gas prices, which accounts for 30% of its production costs, mayincrease its gross margin to 40% in 2009. Dynasty Ceramic (DCC) alsoexpects to raise its dividend payout ratio from 70% to 80% for 2009.

Stock Impact

After achieving a 14% sales growth last year, DCCs sales remained strong atthe beginning of 2009. Management credits its nationwide network of factory

outlets for the companys success. Other tile manufactures have lost marketshares as they focus mainly on sales agents. Apart from the low cost nature,these factory outlets are accessible to locals. The reasonable prices ofagricultural product have also supported the high demand of tiles amonglocals. We believe part of the companys success is due to the widespreaduse of DCCs products for the construction of chapels and schools across thecountry. There are approximately 12,950 temples and 8,750 schools all overThailand.

With the declining trend of the world oil prices, its energy cost (mainly naturalgas) is also expected to be lower than last year. As the gas expense accountfor 30% of its total production cost, the lower price of gas will improve itsmargins. DCC expects its margin this year to reach 40% from 39% last year.If that is the case, we may see its net profit grow by 26% in 2009.

With a 70% payout ratio, DCC could pay Bt1.44/share as dividend this year,equivalent to a dividend yield of 12%. Currently, DCC has Bt816m of shortterm loans or a 0.3 net debt-to-equity ratio. The company intends to paymost of this debt by end 2009 so that the payout ratio could be raised to 80%.If that is the case, we may look for a yield of 14% next year.

Risks

There is risk of DCC missing its payout target should a prolonged droughtaffect many parts of the country. However, this is a rare phenomenon inThailand.

Recommendation

Amid the economic slump, DCC has emerged as one of a few companies thatstill deliver satisfactory growth. It also offers an attractive dividend yield of upto 12% for 2009, increasing to 14% for 2010.

THAILAND

Dynasty Ceramic (DCC TB)

NOT RATEDCurrent Price: Bt11.80

Sector Construction.Materials

52-Wk Avg Daily Vol. ('000) 189.9

Market Cap (Btb) 4.8

(US$m) 136.4

Major Shareholders (%)

Saengsattra family 34.3

Watcharasurung family 9.5

Book NTA per Share (Bt) 6.0

ROE (%) 28.2

Net Debt per Share (Bt) 1.9

Results Due

1Q: May 2Q: Aug

3Q: Nov Final: Feb

Price Chart

0

3

6

9

12

1518

21

Feb-

08

Apr-

08

Jun-

08

Aug-

08

Oct-

08

Dec-

08

(Bt)

Feb-

08

Source: Bloomberg

Analyst

Kowit Pongwinyoo (662) [email protected]

Net EPS EV/Year to Turnover EBITDA Profit EPS* Growth PE EBITDA DPS Yield31 Dec (Btm) (Btm) (Btm) (Bt) (%) (x) (x) (Bt) (%)2004 3,739 1,178 675 1.7 35.0 7.1 4.9 1.2 10.0

2005 4,255 1,346 749 1.8 10.8 6.4 4.6 1.3 11.02006 4,452 1,259 567 1.4 (24.5) 8.5 5.0 1.0 8.22007 4,458 1,243 543 1.3 (4.2) 8.9 4.7 1.0 8.52008 5,089 1,376 666 1.6 22.7 7.2 4.0 1.2 10.6


15/16



Company Background. Dynasty Ceramic (DCC) is a manufacturer of walland floor tiles under the DYNASTY, TILE TOP, NAVAR and JAJUAR brandnames. The company has a 35% market share and its customers are lowincome earners in the provinces. In 2005, the company took over threeceramic distributors, allowing the company to implement its factory outletstrategy and lessen its dependence on sales agents. In contrast, other tileproducers still largely rely on sales agents. For DCC, this strategy hasproduced positive results and it is the main driver of the companys growth,

Profit & Loss

Balance Sheet

Cash Flow

Year to 31 Dec (Btm) 2004 2005 2006 2007 2008

Turnover 3,739 4,255 4,452 4,458 5,089EBIT 949 1,075 884 898 988Pre-tax Profit 968 1,067 797 842 959Net Profit 675 749 567 543 666

Year to 31 Dec (Btm) 2004 2005 2006 2007 2008Current Assets 1,275 1,492 1,687 1,598 1,647Total Assets 3,303 4,144 4,350 4,054 3,893Current Liabilities 1,592 2,230 2,247 1,730 1,397Long-Term Liabilities 0 0 15 2 0Shareholder Funds 1,670 1,871 2,044 2,277 2,450Total Equity & Liabilities 3,303 4,144 4,350 4,054 3,893

Year to 31 Dec (Btm) 2004 2005 2006 2007 2008

Operating 855 930 649 994 1,042Investing (244) (953) (378) (62) (250)Financing (601) 41 (266) (932) (785)Net Cash In/(Out) Flow 10 18 5 (0) 7Begin Cash & Cash Equiv. 10 20 38 43 43End'g Cash & Cash Equiv. 20 38 43 43 50


16/16


We have based this document on information obtained from sources we believe to be reliable, but we do not make anyrepresentation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to changewithout notice. Any recommendation contained in this document does not have regard to the specific investmentobjectives, financial situation and the particular needs of any specific addressee. This document is for the information ofthe addressee only and is not to be taken as substitution for the exercise of judgement by the addressee. This document

is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities.UOB Kay Hian and its affiliates, their Directors, officers and/or employees may own or have positions in any securitiesmentioned herein or any securities related thereto and may from time to time add to or dispose of any such securities.UOB Kay Hian and its affiliates may act as market maker or have assumed an underwriting position in the securities ofcompanies discussed herein (or investments related thereto) and may sell them to or buy them from customers on aprincipal basis and may also perform or seek to perform investment banking or underwriting services for or relating tothose companies.

UOB Kay Hian (U.K.) Limited, a UOB Kay Hian subsidiary which distributes UOB Kay Hian research for only institutionalclients, is an authorised person in the meaning of the Financial Services and Markets Act 2000 and is regulated byFinancial Services Authority (FSA).

In the United States of America, this research report is being distributed by UOB Kay Hian (U.S.) Inc (UOBKHUS)which accepts responsibility for the contents. UOBKHUS is a broker-dealer registered with the U.S. Securities andExchange Commission and is an affiliate company of UOBKH. Any U.S. person receiving this report who wishes to effecttransactions in any securities referred to herein should contact UOBKHUS, not its affiliate. The information herein hasbeen obtained from, and any opinions herein are based upon sources believed reliable, but we do not represent that it isaccurate or complete and it should not be relied upon as such. All opinions and estimates herein reflect our judgementon the date of this report and are subject to change without notice. This report is not intended to be an offer, or thesolicitation of any offer, to buy or sell the securities referred to herein. From time to time, the firm preparing this report orits affiliates or the principals or employees of such firm or its affiliates may have a position in the securities referred toherein or hold options, warrants or rights with respect thereto or other securities of such issuers and may make a marketor otherwise act as principal In transactions in any of these securities. Any such non-U.S. persons may have purchasedsecurities referred to herein for their own account in advance of release of this report. Further information on thesecurities referred to herein may be obtained from UOBKHUS upon request.

http://research.uobkayhian.com

MICA (P) 229/04/2008RCB Regn. No. 198700235E

Date post:	30-May-2018
Category:	Documents
Upload:	thomas-lau
View:	218 times
Download:	0 times

090219 - UOBKH - Regional Morning Notes

Documents