Left Brain Right B - the DBS Vickers Securities Equities Research

More documents

Recommendations

Info

Regional Equity Strategy 4Q 2009 Country Assessment Sector recommendation and stock picks for China (Cont’d) SECTOR REMARKS STOCK SELECTION Oil & Gas Positive Pharmaceutical and Healthcare Positive Technology Power Positive Positive We continue to recommend investors to switch their investment focus from the upstream plays, Petrochina and CNOOC, to the downstream play, Sinopec in 4Q09. In view of the revival of market concern over the US recovery, we believe the near-term crude price lacks fundamental support to increase materially from current level in 4Q09, especially given the weak recovery from world’s oil demand in market. Sinopec remains our top pick in the sector, in view of its attractive mid-cycle valuation but at up-cycle earnings level in 2009-10. Given the recent positive government’s decision to improve the domestic product oil price flexibility and the relatively stable crude price level around US$70, we believe it is the most favourable condition for Sinopec to maintain high refining margin in 2009. As expected, the strong interim results and the possible IPO of Sinopharm at high PE are the key catalysts for the market to re-rate the pharmaceutical counters. For those major counters under our coverage, we identified several have already reached their share prices to historical highest level, such as Sino Biopharmaceutical, China Shineway and China Pharmaceutical. However, given their promising growth outlook, attractive value, strong balance sheet and favourable policy support, we believe the re-rating of the sector has just begun and has a long road ahead. Indeed, the pharmaceutical industry has shown that its growth is resilient to any unpredictable economic risk ahead. In the sector, our top picks are Sino Biopharmaceutical, Guangzhou Pharmaceutical and China Shineway. 1H 2009 results have generally revealed a more sustained recovery of demand, as it is clear that the bounce back is more than mere restocking of inventories. As expected, we have seen marked improvement in 2Q QoQ growth figures as well as improved optimism in 2H guidance. In terms of earnings, we are starting to see the cost savings measure executed earlier in the year to have more significant impact. The recovery of demand has also improved profitability of underutilized capacities. The results and guidance from industry players have mostly pointed to a resilient consumer market, whilst corporate customers are still mostly in defensive mode. We believe this is likely to change, as the recent stability in the business environment will likely spur the relaxing of some corporate spending. Stock valuations have continued to improve in general in 3Q, reflecting the increased optimism in the sector. For exposure in this sector, we continue to like AAC Acoustics (2018 HK), which should enjoy market share gains in major customers such as Nokia as well as ASP and margin improvements from volume shipments of new platforms. Despite recent pullbacks, we also like ASM Pacific (522 HK) for its strong market position, strong balance sheet and its ability to benefit from the improved business environment. A more volatile market should benefit Chinese IPPs because they offer resilient domestic earnings. Improving earnings outlook for IPPs is evident in the stronger 1H09 results and we continue to expect sustainable growth ahead with stronger demand and stable coal price. CR Power and Huaneng remain our picks for their relatively higher leverage to a demand recovery and still attractive valuations. We also upgraded Datang to Buy recently as the sell-down provides an excellent opportunity to accumulate. Sinopec (386) Sino Biopharmaceutical (1177 ) Guangzhou Pharmaceutical (874 ) ASM Pacific (522) AAC Acoustics (2018) CR Power (836) Huaneng (902) Page 79
Regional Equity Strategy 4Q 2009 Bank of China Hong Kong Bloomberg: 2388 HK | Reuters: 2388.HK BUY HK$18.56 HSI : 21,769 Price Target : 12-month HK$ 20.00 Potential Catalyst: Further improvement in bond market and economic recovery in HK and China Analyst Jasmine Lai +852 2971 1926 jasmine_lai@hk.dbsvickers.com Price Relative HK$ 25.70 20.70 15.70 10.70 5.70 Relative Index 2005 2006 2007 2008 2009 Bank of China Hong Kong (LHS) Relative HSI INDEX (RHS) Forecasts and Valuation FY Dec (HK$ m) 2008A 2009F 2010F 2011F Pre-prov. Profit 16,755 16,790 21,349 23,328 Pre-prov. Profit Gth (%) (14) 0 27 9 Pretax Profit 4,078 15,833 20,860 22,785 Net Profit 3,343 12,842 16,983 18,525 EPS (HK$) 0.32 1.21 1.61 1.75 EPS Gth Pre Ex (%) (78) 284 32 9 PE (X) 56.8 15.3 11.6 10.6 DPS (HK$) 0.44 0.79 1.04 1.14 Div Yield (%) 2.4 4.3 5.6 6.1 BV Per Share (HK$) 7.82 8.67 9.24 9.85 P/Book Value (x) 2.4 2.1 2.0 1.9 ROAE (%) 3.8 14.7 17.9 18.4 ROAE (ex-exceptional 3.9 14.1 17.9 18.4 ROA (%) 0.27 1.14 1.45 1.51 Earnings Rev (%): - - - Consensus EPS (HK$): 1.10 1.41 1.65 ICB Industry: Financials ICB Sector: Banks Principal Business: Offers a range of financial products and services to retail and corporate customers and is one of the three banknote issuing banks in Hong Kong Source of all data: Company, DBSV, Bloomberg, HKEX 208 188 168 148 128 108 88 68 48 Tighter cooperation with parent • News about Vice Chairman selling c. 623K shares and recent exclusion from FTSE red-chip index should only have short-term negative impact on BOC HK’s share price • Closer co-operation with its parent brings in more cross-border businesses • More MTM loss write-backs possible and NIM should gradually recover • ROE will almost return to peak level by 2010, justifying further re-rating More cross-border business referrals. BOC HK will continue to be a major beneficiary of rising economic integration between HK and China. This should enable its stock-broking, RMB businesses and other cross-border services to continue outperforming bank peers. In 1H09, BOC HK’s stock-broking fee was strong (+44% h-o-h vs industry’s +2%), thanks to referrals of mainland retail and institutional investors from parent, as well as, fund flows from China into HK. BOC HK also has niches in RMB trade settlement, trade financing and deposit-taking businesses, given it is the only designated settlement bank in HK and Macau. Besides, BOC HK can also provide cash management, custody and other cross-border services to corporate customers referred by its parent. Growing beyond HK in loan syndication. In early 2008, BOC HK was appointed by its parent as a Syndicated Loan Centre in the Asia Pacific. This paved way for BOC HK to expand its strength in loan syndication beyond HK, which saw the bank outdo bank peers in terms of growth in loan (+3% h- o-h) and loan fee (+59% h-o-h) during 1H09. Still cheap. We peg its target P/B at 2.2x Sep-10 book (vs 0.8-2.7x historically). BOC HK should trade well above mid-cycle P/B, given its ROE will be almost back to peak level by 2010. This will be driven by: 1) gradual NIM recovery as Hibor should normalize over time (we forecast 50bps US rate hike starting 2Q10) and 2) abovepeers growth in loan and fee in light of closer collaboration with parent. Trading at 11.6x 2010 P/E and 2.0x 2010 P/B, the counter is still cheap. At A Glance Issued Capital (m shrs) 10,573 Mkt Cap (HK$m/US$m) 196,231 / 25,319 Major Shareholders (%) Bank of China 66.06 Free Float (%) 33.94 Avg Daily Volume (m shrs) 20.9 Page 80 www.dbsvickers.com Refer to important disclosures at the end of this report ed- LM / sa- RM
Page 1:
Equity Strategy and Large Cap Stock
Page 4 and 5:
Regional Equity Strategy 4Q 2009 Ta
Page 6 and 7:
Regional Equity Strategy 4Q 2009 St
Page 8 and 9:
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31: Regional Equity Strategy 4Q 2009 St
Page 40 and 41: Regional Equity Strategy 4Q 2009 Re
Page 42 and 43: Regional Equity Strategy 4Q 2009 Co
Page 56 and 57: Regional Equity Strategy 4Q 2009 Mo
Page 58 and 59: Regional Equity Strategy 4Q 2009 Si
Page 60 and 61: Regional Equity Strategy 4Q 2009 SP
Page 62 and 63: Regional Equity Strategy 4Q 2009 Su
Page 64 and 65: Income Statement (S$ m) Balance She
Page 82 and 83: Regional Equity Strategy 4Q 2009 Ba
Page 84 and 85: Regional Equity Strategy 4Q 2009 Ba
Page 86 and 87: Regional Equity Strategy 4Q 2009 Ch
Page 88 and 89: Regional Equity Strategy 4Q 2009 Ch
Page 90 and 91: Regional Equity Strategy 4Q 2009 MT
Page 108 and 109: Income Statement (RM m) Balance She
Page 110 and 111: Regional Equity Strategy 4Q 2009 MI
Page 126 and 127: Regional Equity Strategy 4Q 2009 Si
Page 128 and 129: Regional Equity Strategy 4Q 2009 Th
Page 130 and 131:
Regional Equity Strategy 4Q 2009 To
Page 132 and 133:
Regional Equity Strategy 4Q 2009 Co
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Income Statement (Rp bn) Balance Sh
Page 142 and 143:
Income Statement (Rp bn) Balance Sh
Page 144:
Regional Equity Strategy 4Q 2009 2)
show all

Left Brain Right B - the DBS Vickers Securities Equities Research

Create successful ePaper yourself

Delete template?

Save as template?