Written by Yong Yen Nie
Monday, 13 July 2009 10:39
KUALA LUMPUR: With ample opportunity to invest in regional stocks, many investors are looking beyond the local stock exchange to diversify their investment portfolios.
Intermitttent weakness and corrections in Asian equities have also renewed opportunities for investors, including those who had missed the boat in the earlier run-up of prices.
The equity markets of Indonesia, China, Thailand and Singapore have especially caught regional brokerages’ attention as those that are either cheap in valuations or have higher potential in earnings growth.
The Edge Financial Daily offers a glimpse of some of the regional stocks recommended by various brokerages in their Asian strategy reports over the past two weeks. (Note: As of last Friday’s closing prices, some stocks may already have gone beyond their target prices, but may still be under their buy recommendations. Investors are advised to exercise their own discretion and judgment prior to investing in these stocks.)
Morgan Stanley
Hong Kong/ China
China Mobile Ltd(Last Friday’s close: HK$73.85; Target price: HK$85.50)
China’s largest telecommunications provider and world’s largest by subscriber count plans to pump in 58.8 billion yuan (RM30.8 billion) this year to develop 3G network.
PetroChina Company Ltd(HK$7.94, TP: HK$7.10)
The listed arm of state-owned petroleum company China National Petroleum Corporation. The oil company last Friday received approval from the Chinese government to take a stake in Nippon Oil Corp’s Osaka refinery as as part of its strategy to expand its operations in Asia.
Industrial and Commercial Bank of China (HK$5.06; TP: HK$5.50)
ICBC is the world’s largest bank in terms of market capitalisation. The banking group had last week received regulatory approval to issue up to 40 billion yuan (RM20.98 billion) subordinated bonds in the interbank bond market.
India
Indian Oil Corp Ltd(548.8 rupees, TP: 546 rupees)
The country’s largest commercial enterprise and widest network of fuel stations. Last week, traders said it had bought at least two million barrels of Nigerian crude for September. The group, which operates about 10 refineries across India, tenders several times a month to buy crude, mainly West African barrels.
Reliance Communications Ltd(242.7 rupees , TP: 170 rupees)
India’s No 2 mobile operator with a customer base of 48 million as on April 30, 2008, including over 1.5 million individual overseas retail customers. It recently got shareholders’ approval to raise an unknown amount of funds via a share sale to institutions.
Macquarie Research
Taiwan
Chunghwa Picture Tubes Ltd (NT$5.53; TP: NT$7.20)
Taiwan’s third largest flat panel maker had last week said it might see profits by the end of the year as panel prices rebound to above cost. Reviving demand has helped boost the prices for liquid-crystal-display (LCD) panels over the past four months and is likely to extend into this month as an insufficient supply of key component glass substrate has limited increases in panel output. This, the company said, might help it return to the black by the third quarter.
Chi Mei Optoelectronics(NT$18.70, TP: NT$21.80)
Taiwan’s second largest LCD maker for televisions and monitors. It distributes its products principally in Taiwan, Japan, the US, Europe and China. The group expects its TV panel shipments to grow up to 30% in the second quarter and laptop panel shipments to rise up to 40% in the period, mainly due to recovery in demand.
United Microelectronics Corp (NT$11.85 , TP: NT$16)
The world’s second largest chipmaker saw its June sales rise 1.6% from a year earlier, which marked its first rise in a year, mainly due to recovery in demand. UMC has benefitted from a pick-up in demand for personal computers and other consumer gadgets, especially from China as a result of stimulus spending on the mainland.
South Korea
Hyundai Motor Company (77,300 won: TP: 80,000 won)
South Korea’s top carmaker recently launched its first hybrid car in the domestic market to satisfy a growing appetite for fuel-saving vehicles and to improve the image of the company’s technology. Hyundai is also due to launch its first gasoline-electric hybrid, a version of the flagship Sonata in the latter half of 2010.
Shinhan Financial Group(34,000 won; TP: 37,600 won)
South Korea’s second largest commercial banking group had in end-June issued a US$500 million (RM1.8 billion) three-year global bonds. The bonds received strong demand, despite turbulent credit markets.
STX Pan Ocean Co Ltd(10,350 won; TP: 16,000 won)
STX Pan Ocean is a shipping company offering a range of marine transportation services including tramper service, breakbulk liner service, container service and tanker services. In May, it formed a joint venture with PT Pertamina, a state-owned oil and gas company, to advance into the ocean logistics business in Indonesia.
DBS Vickers
Hong Kong/China
Want Want China Holdings Ltd (HK$4.42, TP: HK$4.65)
Has leading market position in China’s snack food market, established brand reputation, and extensive distribution network. Want Want’s strong margins and efficient asset employment has enabled it to register high ROE, in fact among the highest in the food and beverage universe.
China Construction Bank(HK$5.60, TP: HK$6.90)
CCB is the only bank with licence to provide financial advisory on infrastructure projects. It should therefore benefit the most from a secular uptrend in property market and continued infrastructure spending as a key government economic stimulus.
China BlueChemical Ltd(HK$3.86; TP: HK$5.93)
The largest fertiliser manufacturer in terms of production volume. A recovery in the fertiliser market and the government’s proposed 716 billion yuan (RM375.6 billion) spending on the agriculture sector this year are positive earnings drivers. It is also considering coal-based urea production to enlarge its urea business, if it successfully acquires a 45% stake in a Shanxi coal mine.
Singapore
United Overseas Bank Ltd(S$14.58; TP: S$16.50)
UOB had underperformed its peers and the market, due to the impairment to its book value back in 4Q08. It aims to grow its Singapore loan book to take advantage of rising loan yields. However, its prudent strategy also means that it remains cautious in expanding regionally.
SIA Engineering Company Ltd (S$2.57; TP: S$3.20)
A major provider of aircraft maintenance, repair and overhaul services. It plans to save about S$12 million to S$15 million per year by negotiating unpaid leave for employees and salary cuts for senior management. The group will also look to restructure and realign its workforce to compensate lower hangar work with more line maintenance activities. It has a client base of more than 80 airlines.
Singapore Press Holdings Ltd (S$3.25; TP: S$3.70)
SPH, a media organisation, experienced a fall of about 9% in its advertising expenditure in April 2009, but significantly better than the 25% year-on-year fall in January. As newsprint spot price is at about US$550 (RM1,974) per tonne, this is positive for SPH from a cost aspect.
Indonesia
Semen Gresik Persero(Rp5,150; TP: Rp6,100)
The largest cement producer in Indonesia. The company plans to build two new cement factories in Tonasa, Sulawesi and Central Java. Although this will temporarily raise its capex, the completion of the new plants and de-bottlenecking programme will expand the group’s production capacity by 30%.
Bank Central Asia(Rp3,525; TP: Rp4,400)
Based in Jakarta, BBCA is favoured for its strong transactional banking franchise, strong deposit franchise resulting in low cost of funds and for being main beneficiary of recovery in lending market.
Tambang Batubara Bukit Asam (Rp11,300, TP: Rp16,450)
One of the country’s largest coal miners, the stock is expected to be boosted by strong domestic coal demand and several projects underway to utilise vast reserves.
Credit Suisse
Kajima Construction Corporation Ltd (¥269; TP: ¥360)
The construction player is expected to enjoy orders recovery from both public and private works, especially after the government decided to invest significantly in Tokyo infrastructures and potentially another huge sum if Tokyo wins the 2016 Olympic bid.
Tokyo Tatemono Co Ltd(¥447; TP: ¥720)
The real estate company’s share price fell in response to increased credit risk, although it has no concerns in terms of fund procurement. It is currently trading below price to book of one time, which is cheap considering its unrealised gains.
Daiwa Securities Group(¥516; TP: ¥740)
Brokerage firm Daiwa has strong likelihood of turning to black in the third financial quarter, as major underwriting deals and gains on exit from private-equity investments in flow. It is also cheaper than Nomura Holdings.
This article appeared in The Edge Financial Daily, July 13, 2009.