bnp-daily-20140806

8/11/2019 BNP-daily-20140806

1/28

PREPARED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (ASIA) CO LTDTHIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIXON PAGE 26

6 August 2014

**************************************************************************************DOWNGRADETaiwan:

Uni-President: Steady growth but fairly valued (Jenny Tsai)

1216 TT; D/g to HOLD from Buy; CP: TWD56.90; TP: TWD62.00 (from TWD60.80)

Downgrade to HOLD with a TP of TWD62

2014E: P/E 24.2x, P/B 3.4x, Yield 2.5%

Click here for full story PAGE 4

**************************************************************************************

SECTOR RESEARCH / THEMATIC RESEARCH

India Banks: RBI in wait and watch mode (Avneesh Sukhija) Key benchmark rates unchanged, commentary slightly hawkish

RBI acknowledges risk to inflation; rate cut unlikely in near future

Other announcements: SLR requirement/HTM ceiling cut by 50bps


**************************************************************************************MACRO-ECONOMICS & EQUITY STRATEGY

Asian Instant Insights

Indonesia: GDP - Q2 2014 (Philip McNicholas)


Philippines: CPI - Jul 2014 (Philip McNicholas)Click here for full story PAGE 7

India: RBI Bi-Monthly Policy Decision (Mole Hau)


Australia: RBA Decision - August 2014 (Mark Walton)


**************************************************************************************

COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA)HK/China:

HKT:Question marks remain over mobile (Zoe Zhu)

6823 HK; HOLD (unchanged); CP:HKD9.02; TP: HKD8.30 CSL consolidated; DPU after rights issue unchanged y-y

2014E: P/E 24.1x, P/B 1.8x, Yield 5.3%


.

Taiwan:

CTBC FHC:Expecting a stronger 2H (Frank Yuen)

2891 TT; BUY (unchanged); CP:TWD20.25; TP: TWD23.60

In line results excluding one-off distortions

2014E: P/E 11.2x, P/B 1.3x, Yield 2.0%


BNP Paribas Events

CONFERENCE / CORPORATE DAY

Energy & Commodities Experts &Corporate Day

2 Sep 14

Korea Healthcare Corporate Day 22-23 Sep 14

COMPANY ROADSHOWS (By Location)

HK/China

Yangzijiang Shipbuilding(YZJSGD SP)

8 Aug 14

Wharf (4 HK) 12 Aug 14

Citic Telecom (1883 HK) 12-13 Aug 14Wheelock (20 HK) 14 Aug 14

China Longyuan Power (916 HK) 21 Aug 14

Matahari Department Store(LPPF IJ)

15-16 Sep 14

Korea

BASF (BAS GR) 7-8 Oct 14

Singapore

Yangzijiang Shipbuilding(YZJSGD SP)

6-7 Aug 14

Europe

Summit Ascent (102 HK) 29 Aug -2 Sep 14

China Telecom (728 HK) 29 Aug - 4 Sep 14

TCL Communication Technology(2618 HK)

1-4 Sep 14

Sino Land (83 HK) 1-4 Sep 14

Petronas Chemicals (PCHEMMK)

2-5 Sep 14

Huadian Power (1071 HK) 4-10 Sep 14

Matahari Department Store(LPPF IJ)

8-12 Sep 14

Shimao Property Holdings(813 HK)

23-26 Sep 14

US

Samsung Electronics (005930 KS) 4-8 Aug 14

AirAsia X (AAX MK) 25-26 Aug 14

SMIC (981 HK) 25-28 Aug 14

Delta (2308 TT) 8-12 Sep 14

Far EastTone (4904 TT) 22-26 Sep 14

Lite-On Tech (2301 TT) 29 Sep - 3 Oct 14

Others

SMIC (981 HK) 4 Sep 14
http://www.bnppresearch.com/?E=dcigekbfjgahttp://www.bnppresearch.com/?E=dcjahkbfjgahttp://www.bnppresearch.com/?E=dcjahkbfjgahttp://www.bnppresearch.com/?E=dcjahkbfjgahttp://www.bnppresearch.com/?E=dcjackbfjgahttp://www.bnppresearch.com/?E=dciiikbfjgahttp://www.bnppresearch.com/?E=dcijckbfjgahttp://www.bnppresearch.com/?E=dciiekbfjgahttp://www.bnppresearch.com/?E=dcijgkbfjgahttp://www.bnppresearch.com/?E=dcjafkbfjgahttp://www.bnppresearch.com/?E=dcigekbfjga

8/11/2019 BNP-daily-20140806

2/28

SPOTLIGHT ON ASIA 6 AUGUST 2014

BNP PARIBAS

Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contactyour salesperson for authorisation. Please see the important notice on the back page.

**************************************************************************************COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA) (CONTD)

PCSC:Tepid growth in the near term (Jenny Tsai)

2912 TT; HOLD (unchanged); CP:TWD240.00; TP: TWD230.00 (from TWD208.00)

Stronger 2014E EPS growth on Muji disposal

2014E: P/E 28.3x, P/B 9.2x, Yield 2.5%


.

Korea:

Daewoo Shipbuilding:Defining moment for DSME in 2Q14 (H James Yoon)

042660 KS; BUY (unchanged); CP:KRW25,200; TP: KRW32,300 (from KRW38,000)

Provisions remain biggest risk to 2Q14 earnings

2014E: P/E 16.7x, P/B 0.9x, Yield 1.2%


.

Japan:

Chiba Bank:Adjusted NP at pre-Lehman level (Toyoki Sameshima)

8331 JP; BUY (unchanged); CP:JPY730.00; TP: JPY850.00 1Q NP sharply ahead of BNPPe and consensus

2015E: P/E 11.3x, P/B 0.8x, Yield 1.8%


Dainippon Screen:2Q orders to grow; a good start (Yoshitsugu Yamamoto)

7735 JP; BUY (unchanged); CP:JPY475; TP: JPY600

1Q OP - JPY2.2b; 1H guidance raised above current consensus

2015E: P/E 12.5x, P/B 1.2x, Yield 0.6%


Daikin Industries:Short-term reversal likely (Christopher Cintavey)

6367 JP; HOLD (unchanged); CP:JPY7,034; TP: JPY6,800 1Q FY3/15 results reported post-market

2015E: P/E 19.8x, P/B 2.3x, Yield 1.3%


Kubota Corp:Balancing act (Christopher Cintavey)

6326 JP; REDUCE (unchanged); CP:JPY1,292; TP: JPY1,150

Reported better-than-expected 1Q FY3/15 results post-market

2015E: P/E 14.5x, P/B 1.6x, Yield 2.1%


Toyota Motor:FY3/15 1Q: strong start to the year (Clive Wiggins)

7203 JP; BUY (unchanged); CP:JPY6,042; TP: JPY7,300 All-round strength

2015E: P/E 9.5x, P/B 1.2x, Yield 3.0%


.

Malaysia:

Airasia:Conservative pax capacity growth (Arnaud Bouchet)

AIRA MK; BUY (unchanged); CP:MYR2.43; TP: MYR3.29

Change in ASK/RPK computation methodology

2014E: P/E 9.7x, P/B 1.2x, Yield 2.6%


.

BNP Paribas Events

COMPANY ROADSHOWS (By Date)

4-8 Aug 14

Samsung Electronics (005930 KS) US

6-7 Aug 14

Yangzijiang Shipbuilding (YZJSGD SP) SG8 Aug 14

Yangzijiang Shipbuilding (YZJSGD SP) HK

12 Aug 14

Wharf (4 HK) HK

12-13 Aug 14

Citic Telecom (1883 HK) HK

14 Aug 14

Wheelock (20 HK) HK

21 Aug 14

China Longyuan Power (916 HK) HK

25-26 Aug 14

AirAsia X (AAX MK) US

25-28 Aug 14

SMIC (981 HK) US

29 Aug 2 Sep 14

Summit Ascent (102 HK) EU

29 Aug 4 Sep 14

China Telecom (728 HK) EU

1-4 Sep 14

TCL Communication Technology(2618 HK)

EU

1-4 Sep 14

Sino Land (83 HK) EU

4 Sep 14

SMIC (981 HK) Others2-5 Sep 14

Petronas Chemicals (PCHEM MK) EU

4-10 Sep 14

Huadian Power (1071 HK) EU

8-12 Sep 14

Delta (2308 TT) US

Matahari Department Store (LPPF IJ) EU

15-16 Sep 14

Matahari Department Store (LPPF IJ) HK

22-26 Sep 14

Far EastTone (4904 TT) US

23-26 Sep 14Shimao Property Holdings (813 HK) EU

29 Sep 3 Oct 14

Lite-On Tech (2301 TT) US

7-8 Oct 14

BASF (BAS GR) KR

2
http://www.bnppresearch.com/?E=dciidkbfjgahttp://www.bnppresearch.com/?E=dcijfkbfjgahttp://www.bnppresearch.com/?E=dcijdkbfjgahttp://www.bnppresearch.com/?E=dcijakbfjgahttp://www.bnppresearch.com/?E=dcijikbfjgahttp://www.bnppresearch.com/?E=dcijekbfjgahttp://www.bnppresearch.com/?E=dcjabkbfjgahttp://www.bnppresearch.com/?E=dcfickbfjga

8/11/2019 BNP-daily-20140806

3/28

SPOTLIGHT ON ASIA 6 AUGUST 2014

BNP PARIBAS

Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contactyour salesperson for authorisation. Please see the important notice on the back page.

**************************************************************************************COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA) (CONTD)

Singapore:

Capitaland: Optimizing its portfolio (Chong Kang Ho)

CAPL SP; BUY (unchanged); CP:SGD3.44; TP: SGD3.77

1H14 results operating PATMI up 30% y-y

2014E: P/E 18.9x, P/B 0.9x, Yield 1.7%


Far East Hospitality Trust: Challenging outlook ahead (Chong Kang Ho)

FEHT SP; HOLD (unchanged); CP:SGD0.87; TP: SGD0.91

1H14 results tracking lower

2014E: P/E 14.9x, P/B 0.9x, Yield 6.7%


Global Logistic Prop: A surge in development starts (Chong Kang Ho)

GLP SP; BUY (unchanged); CP:SGD2.80; TP: SGD3.22

1QFY15 tracking ahead

2015E: P/E 39.4x, P/B 1.2x, Yield 1.1%Click here for full story PAGE 22

.

Philippines:

PLDT: Sales in line; margin disappoints (Kunal Vora)

TEL PM; BUY (unchanged); CP:PHP3,136.00; TP: PHP3,150.00

Mobile business disappoints; weak SMS and rising costs

2014E: P/E 17.0x, P/B 5.0x, Yield 5.5%


.

India:

Cummins India: Guidance increase in-line (Girish Nair)KKC IN; HOLD (unchanged); CP:INR626.65; TP: INR652.00 (from INR610.00)

1QF15 earnings disappoint on weak domestic sales

2015E: P/E 24.8x, P/B 6.1x, Yield 2.5%


Hero Motocorp: Margin concerns continue (Vijay Chugh)

HMCL IN; BUY (unchanged); CP:INR2,583.30; TP: INR3,000.00 (from INR2,775.00)

1QFY15 margin missed expectations because of duty anomalies

2015E: P/E 17.7x, P/B 7.4x, Yield 2.9%


3
http://www.bnppresearch.com/?E=dcjaikbfjgahttp://www.bnppresearch.com/?E=dcjaikbfjgahttp://www.bnppresearch.com/?E=dciickbfjgahttp://www.bnppresearch.com/?E=dcjaakbfjgahttp://www.bnppresearch.com/?E=dciihkbfjgahttp://www.bnppresearch.com/?E=dcijbkbfjgahttp://www.bnppresearch.com/?E=dcjaekbfjga

8/11/2019 BNP-daily-20140806

4/28

Steady growth but fairly valued

Downgrade to HOLD with a TP of TWD62

We forecast reported EPS of TWD2.50 for 2014 and TWD2.96 for

2015. We see earnings growth in 2014-15, attributable to recovery in

the F&B business and cost control. Net income contributions with

modest growth should continue from PCSC, Ton Yi Industrial and

Taiwan ScinoPharm. The upside risk is F&B operating marginrecovering to more than 4% in 2014 vs our current forecast of 2.8%.

2Q14 seasonally slow for F&B, but margins should improve

Preliminary 2Q14 sales came in at TWD106bn, down 2% q-q and

flattish y-y. We expect a q-q decline in net profit on smaller disposal

gains. We forecast gross margin of 31.5% and operating margin of

5.2% for 2Q. Although we expect a higher utilities bill, F&B operating

margin should still recover on the continued streamlining of stock-

keeping units (SKUs).

Beverage sales should be strong in 3Q14 on a seasonal peak

Summer is the peak season for the beverage business. Sales of both

UPE and Ton Yi Industrial saw a rebound in June. Thus, we expect

hot weather to lead to stronger q-q sales in 3Q14.

We roll forward to a 2015E valuation; SOTP-based TP of TWD62

Our target price implies a 20.9x 2015E P/E which compares to the

regional F&B peers average of 20.5x (Bloomberg consensus). Thus,

we believe UPEs valuation is fair and already reflects the companys

earnings stability supported by its portfolio diversification. UPE is due

to host its 2Q14 analyst meeting on 12 August 2014.

2014E net earnings split

Source: BNP Paribas estimates

TW & SE AsiaF&B

10.0%

UPC16.5%

Other ChinaF&B5.4%

PCSC31.6%

Ton Yi9.1%

ScinoPharm4.4%

Disposal9.8%

Others13.2%

6AUGUST 2014

TAIWAN/FOOD BEVERAGE &TOBACCO

UNI-PRESIDENT 1216 TT

HOLDFROM BUY

TARGET PRICE TWD62.00

CLOSE TWD56.90

UP/DOWNSIDE +9.0%

PRIOR TP TWD60.80

CHANGE IN TP +2.0%

HOW WE DIFFER FROM CONSENSUS MARKET RECS

TARGET PRICE (%) 6.5 POSITIVE 11

EPS 2014 (%) (6.0) NEUTRAL 9

EPS 2015 (%) (0.0) NEGATIVE 1

Jenny [email protected]

+8862 8729 7054

Patricia [email protected]

+886 2 87297063

KEY STOCK DATA

YE Dec (TWD m) 2013A 2014E 2015E 2016E

Revenue 423,056 443,578 479,167 520,180

Rec. net profit 11,064 12,846 16,467 17,416

Recurring EPS (TWD) 2.15 2.35 3.01 3.19

Prior rec. EPS (TWD) 2.37 2.73 3.06 -

Chg. In EPS est. (%) (9.3) (14.0) (1.6) nm

EPS growth (%) (14.5) 9.5 28.2 5.8

Recurring P/E (x) 26.5 24.2 18.9 17.8

Dividend yield (%) 2.3 2.5 2.4 2.9

EV/EBITDA (x) 9.8 9.3 8.6 8.0

Price/book (x) 3.4 3.4 3.1 2.9

Net debt/Equity (%) 43.9 55.2 56.9 55.0

ROE (%) 13.1 14.4 17.1 16.6

Share price performance 1 Month 3 Month 12 Month

Absolute (%) 2.0 10.5 (8.4)

Relative to country (%) 4.4 4.2 (26.0)

Next results August 2014

Mkt cap (USD m) 10,359

3m avg daily turnover (USD m) 12.7

Free float (%) 75

Major shareholder Board of director (20%)

12m high/low (TWD) 63.20/47.60

3m historic vol. (%) 14.2

ADR ticker -

ADR closing price (USD) -

Issued shares (m) 5,463

Sources: Bloomberg consensus; BNP Paribas estimates

(59)

(39)

(19)

1

28.00

38.00

48.00

58.00

68.00

Jul-13 Oct-13 Jan-14 Apr-14 Jul-14

(%)(TWD) Uni-President Rel to MSCI Taiwan

4
http://equities.bnpparibas.com/

8/11/2019 BNP-daily-20140806

5/28

RBI in wait and watch mode

Key benchmark rates unchanged, commentary slightly hawkish

The Reserve Bank of India (RBI) in its monetary policy review today maintained the

status quo on policy rates: repo rate of 8% (the key benchmark rate) and reverse

repo and MSF rates at 7% and 9% respectively. The RBI kept its inflation target at

8% for January 2015 and 6% for January 2016, but sees upside risks.

RBI acknowledges risk to inflation; rate cut unlikely in near future

RBIs tone in todays monetary policy seemed somewhat hawkish, as it closely took

note of the risks to inflation, such as a deficient monsoon, impact of geo-political

tensions on crude oil prices although it does not seem very concerned about

these yet. The RBI said that it is also cognizant of the supply side inflation that can

get triggered once growth starts to recover. BNPP economist Mole Hau sees the

possibility of a rate hike if monsoon or the quality of fiscal tightening disappoints.

Other announcements: SLR requirement/HTM ceiling cut by 50bps

Statutory liquidity ratio cut by 50bps:the RBI reduced the SLR by 50bps to

22%, as most public-sector banks hold SLR reserves well in excess of the

minimum requirement. Hence, the cost of funds for banks is unlikely to change.From a policy point of view, the liquidity coverage ratio (LCR) requirement under

BASEL III norms is due to be implemented in phased manner, starting at 60%, from

January 2015, and the investment in bonds required will likely be above the SLR

requirement at that point in time. Therefore, we see the possibility of further SLR

reduction. We believe todays cut is a pragmatic step by the RBI to avoid

unnecessary regulatory burden on banks.

Held-to-maturity limit at 24% (i.e., cut by 50 bps):currently, banks cannot hold

more than 24.5% of their SLR reserves as held-to-maturity (HTM) securities. Today,

the RBI reduced this ceiling by 50bps to 24%. This implies that banks will have to

transfer SLR securities earlier recognized as HTM into the available-for-sale (AFS)

or held-for-trading category (HFT) categories, after which these securities will haveto be sold in the secondary debt market. We believe this step of the RBI is aimed at

improving liquidity and creating depth in the government debt market.

What to do after the RBI policy review?

We do not expect any significant policy easing in the near term. Thus, we continue

to prefer banks with a strong retail franchise (that are not overly dependent on a

significant uptick in GDP/the infrastructure sector). We reiterate BUY on HDFC

Bank (HDFCB IN, CP INR813.00) IndusInd Bank (IIB IN, CP INR554.80) and ICICI

(ICICIBC IN, CP INR1,491.40).

6AUGUST 2014

EQUITIES RESEARCH

INDIA BANKS

Avneesh [email protected]

+91 22 6196 4352

Chetan [email protected]

+91 22 6176 5619

5

8/11/2019 BNP-daily-20140806

6/28

Market Economics 6August 2014

Asian Instant Insight

Indonesia: GDP (Q2 2014)Key Facts

Q2 GDP growth was weaker than expectedat 5.1% y/y, down f rom 5.2% y/y in Q1.

In q/q terms, GDP was up an estimated4.9% annualised, up from 4.0% in Q1.

Final domestic demand softened asinvestment remained weak.

Net trade boosted the headline as importvolumes fell faster than exports.

Indonesian growth momentum improved in Q2 despitea slight drop in the annual rate of expansion. Theimprovement, however, was largely a function ofcontinued import compression. Domestic demandsoftened further, with domestic final sales experiencinga broad-based dip in momentum. Meanwhile, exportscontinued to struggle with a drop in external demandand ongoing terms of trade shock. Going forward, whilesigns of recovery are emerging, a less flatteringstatistical base suggests y/y growth rates remain underpressure. Thus, we retain our 2014 full-year GDPgrowth forecast of 5.2%.

Indonesias economy expanded 5.1% y/y in Q2, down from5.2% y/y in Q1. The outcome was below consensusexpectations for GDP growth of 5.2% y/y but above our forecastof 5.0% y/y. On a sequential basis, however, the data suggest anascent recovery in economic momentum. We estimate GDPexpanded at a 4.9% q/q saar clip, up from 4.0% q/q saar in Q1.

Dissecting the data, we find the improvement was driven largelyby net exports, which contributed 1.4pp to the headline reading,up from 0.1pp in Q1. Moreover, the uplift to net exportscontinues to be led by import compression, as incomingshipment volumes fell at a 12% q/q saar clip, translating to a5% y/y drop. This gave a 1.9pp lift to headline GDP and morethan offset the 1.1% q/q saar dip in export volumes in Q2.

Private consumption remained resilient, registering growth of5.6% y/y and accounting for 3.5pp of the 4.7% y/y gain in finaldomestic sales. Beyond this the domestic economy providedfew positives. We estimate sequential momentum in domesticfinal sales slipped to 4.1% q/q saar from 5.5% q/q saar in Q2.Moreover, the dip was broad-based with all major componentsexperiencing a slowdown. This was most evident in governmentconsumption, which shrank 0.7% y/y (-6.6% q/q saar).However, investment spending momentum also ebbed, growingan estimated 3.9% q/q saar after growing 5.2% q/q saar in Q2,thanks to sluggish capital goods spending by foreign investors.

On a sector level, a modest sequential pick up in manufacturingoutput and construction activity allowed output growth amonggoods producing industries to remain unchanged at 4.1% y/y inQ2. Unfortunately, persisting weakness in the mining-linked

activity, especially for oil & gas, indicates downward pressureon annual gains will intensify in H2. This is particularlymeaningful for fiscal balances and the current account deficit asit implies further deterioration in the oil & gas balance ifpoliticians continue to avoid fuel subsidy rationalisation.

Meanwhile, service sector growth momentum ebbed to 5.6%q/q saar in Q2 from 6.6% q/q saar in Q1, translating to a gain of6.2% y/y. While still relatively robust, this expansion wasroughly half a standard deviation below the average pace ofservice sector growth since 2000. Softer transport activity, likelyreflecting weaker import demand, and a contraction ingovernment service provision, resulting from fiscal cutbacksneeded to sustain subsidy spending, caused the slowdown inservices. This was offset by gains in wholesale & retail trade aswell as financial and business service activity.

Although less than stellar, as the outcome is broadly in line withour expectations and shows nascent signs of recovery in keysectors, we leave our 2014 and 2015 full year GDP growthforecasts unchanged at 5.2% and 5.6%, respectively. We would

caution, however, that base effects are more challenging in H2,especially in Q4 where we currently expect GDP growth will slipbelow 5.0% y/y for the first time since Q3 2009.

On a more positive note, this was the fourth consecutivequarter of double-digit nominal growth. This, coupled withrelative IDR stability, suggests the Q2 current account deficit,which we estimate at USD8.5bn, will be equal to 4% of GDP,keeping the H1 cumulative current account deficit around 3% ofGDP. Given Bank Indonesias (BI) focus on the current accountdeficit as the intermediate target for monetary policy, concernsurrounding the full-year target should ease and with it anyimpetus for further policy tightening. That said, data also showsthe ongoing terms of trade shock is still taking a toll on externalbalances. Based on the national accounts data, we estimategoods exports shrank at a 2.7% q/q saar pace, while imports

were flat. The implied deterioration clearly suggests headwindsto sustained current account improvement persist, constrainingBIs ability for a more accommodative policy bias.

Phil ip McNicholas 852 2108 [email protected]

Key Chart: Some signs of recovery

Source: CEIC, BNP Paribas

Key Chart: but domestic economy still w eak


6

8/11/2019 BNP-daily-20140806

7/28



Philippines: CPI (Jul 2014)Key Facts

Headline CPI rose 4.9% y/y in July, upfrom 4.4% y/y in June.

Food prices rose 8.8% y/y in July, up f roma 7.8% y/y gain in June.

Non-food prices rose 2.5% y/y in July,down f rom 2.3% y/y in June.

Core inflation rose to 3.0% y/y in July,from 2.8% y/y in June.

July CPI was stronger than expected due totyphoon-linked supply shocks. Government policyefforts to address food supply constraints have yetto have an effect, heightening risk of inflationexpectations becoming untethered. In response, weexpect BSP to hike the OBR a further 25bp, taking itto 4.00% in September, before pausing. Yet, themove is unlikely to affect economy-wide borrowingcosts. Thus far, BSP continues to drain funds viathe SDA. However, as 2015 CPI may breach BSPs

target range, a further 25bp hike in the SDA ratetaking it to 2.50%, is likely in Q4.

Typhoon-linked supply shocks caused Philippines CPI torise to 4.9% y/y in July, up from 4.4% y/y in June. The printwas stronger than the 4.6% y/y gain both consensus andourselves had expected. The surprise gain lifted CPImomentum to a 4.6% 3m/3m saar pace from 3.0% 3m/3msaar in June. In light of this, we raise our forecast for 2015average CPI to 4.0% y/y from 3.8% y/y previously.

Core CPI rose 3.0% y/y, slightly above consensusexpectations of a 2.9% y/y gain but softer than the 3.1%y/y rise we had forecast. On a sequential basis, weestimate core CPI rose at an annualised pace of 2.1%

3m/3m sa. On a forward-looking basis, this suggestsdemand-pull price pressures are contained for themoment. However, given the Philippines low income level,inflationary expectations are very closely tied todevelopments in food prices. On that front, developmentsare far less helpful.

While non-food CPI ticked up to 2.5% y/y from 2.3% y/y inJune, food prices continued surge, rising 8.7% y/y up from7.8% y/y. Rice prices, which alone account for 8.9% of theCPI basket, rose 1.8% m/m and translated to a 14.4% y/ygain. By our estimates, rice price momentum picked up to13.2% 3m/3m saar from 11.5% 3m/3m saar in June. Thiswas the 11

th consecutive month rice prices rose at a

double-digit annualised pace. Garlic prices are also acause for concern among policy makers as garlic supplyshortages have attributed to a 16.5% y/y rise in vegetableprices.

Media reports suggest price pressures have started to

ease in vegetable markets as the government hasincreased imports to address supply shortages. Similarefforts are starting for rice with President Aquinohighlighting a substantial increase in imports in last weeksState of the Nation Address (SoNA).

As Indian policy makers have found, inflation breakoutsamong key consumer staples are the most difficult toaddress given their limited responsiveness to monetarypolicy. This is especially the case in the Philippines wherethe banking system is small and financial literacy is low.Effectively tackling the breakout will require thegovernment to continue importing fresh rice supplies untilonshore prices are again moving in tandem with Asian

benchmarks. In tandem with this, Bangko Sentral ngPilipinas (BSP) will hope to keep inflation expectationsanchored and curb potential second round effects throughanother 25bp hike in the Overnight Borrowing Rate (OBR)to 4.00% in September before pausing for the rest of 2014.

Yet, with 3-month treasury bills yielding a paltry 1.37% p.a.,reflecting ample onshore liquidity and limited bond supply,economy-wide borrowing costs are likely to be unaffectedby this. Hikes in Special Deposit Account (SDA) rate(currently 2.25%), which has become the de facto policyrate, are likely to be more meaningful. Thus far, weeklydata indicates BSP is luring funds back to the SDA, easingexcess liquidity concerns. That said, as we now see BSP

struggling to keep 2015 CPI within its target range of 2.0-4.0%, at least one more hike in the SDA appears likely in2014, though not at the September review.

Phil ip McNicholas 852 2108 [email protected]

Key Chart: Problematic rice breakout


Key Data Table

% Mar Apr May Jun Jul

CPI (m/m) -0.1 0.4 0.5 0.4 0.6

CPI (y/y) 3.9 4.1 4.5 4.4 4.9

Core (y/y)2006=100

2.8 2.9 3.1 2.8 3.0

Food (y/y) 6.0 6.5 7.1 7.8 8.8


7

8/11/2019 BNP-daily-20140806

8/28



India: RBI Bi-Monthly Policy DecisionKey Facts

RBI leaves the key policy rate the repo rate unchanged at 8% as expected.

SLR was cut further to 22%, but largelysymbolic given banks excess holdings.

Junes mention of headroom for an easingof the policy stance was removed.

New mention of upside risks to 2016 CPI

target signals limited scope for easing.

As expected, RBI lef t its key policy rate unchanged atits first bi-monthly policy review since the budget wasannounced. RBI looked more confident than twomonths ago that its 8% CPI target by early 2015 will bemet. Yet, inclusion of new language acknowledgingupside risks to its 6% target by early 2016 and removalof mention of scope for policy easing shifted the policystatement in a slightly more hawkish direction as RBIwas probably underwhelmed by the budget, wheretough decisions on subsidy control were once againskirted. Like RBI, we still regard inflation risks asskewed to the upside, with the crystallisation of thoserisks largely determined by the progress of this yearsmonsoon and the quality of fiscal tightening. If eitherdisappoint, upside risks are likely to become real andrate hikes could come back onto the agenda in 2015.

As expected, Reserve Bank of India (RBI) left its key policyrate unchanged at its first bi-monthly policy review since thebudget was announced. Changes to the language and toneshifted the accompanying policy statement in a slightly morehawkish direction relative to two months ago. This movecan probably best be seen as a reflection of RBI GovernorRajan being left underwhelmed by the maiden budgetdelivered by the Finance Ministry of the Modi administrationlast month.

The statement explicitly acknowledged the recently better

than expected inflation data, as headline CPI inflation inJune, at 7.3% y/y, substantially undershot RBIs projections(even outside the 90% confidence interval) as suggested byits fan-chart in the last policy statement published in earlyJune. The benign inflation data also led RBI to sound moreconfident than two months ago that inflation at around 8per cent in early 2015 seems likely, noting that overallrisks are more balanced than in June.

The key change to the policy statement, however, was theinclusion of new language acknowledging that the risks forRBIs target of 6% by early 2016 are to the upside whileJunes mention of headroom for an easing of the policystance was dropped. INRs recent movement andstrengthening activity were added to the list of upsideinflation risks uncertainty over monsoon conditions, geo-political tensions and uncertainty over administered prices from two months ago. The prospect of better fiscalconsolidation, previously cited as one of the potentialdisinflationary factors, was absent in todays statement.

The tweaks in the language of the policy statement wereprobably a reflection of RBI being underwhelmed by theFinance Minister Arun Jaitleys budget. The admittedly-dovish tone of the June statement was more of an attemptby RBI Governor Rajan to extend a welcome hand to theruling NDA government ahead of its maiden budget in ourview. The budget ambitiously aimed to stick to the 4.1% ofGDP target for FY2015 set out by the previous government,but merely by betting once again on dubious expectationsfor subsidy control and tax-base buoyancy. With Mr. Jaitley

eschewing the opportunity to come clean on subsidies, thebudget does little to help RBI in regaining inflation control.

While necessarily stopping short of formally adoptinginflation targeting, RBI in todays statement reiterated theguidance issued in June that it remains committed tokeeping the economy on a disinflationary course, taking CPIinflation to 8% by January 2015 and 6% by January 2016.

The rapid pace of improvement in the monsoon over thepast few weeks is good news, but only to the point that ithas helped narrow the rainfall deficiency. Still 21% deficientto date, below par monsoon rains still threaten to leave thecountry on course for the worst drought since 2009 and seefood price inflation back up to double-digit territory.

While this is unlikely to be sufficient to blow CPI inflationdecisively off its target of 8% by early-2015, another freshbout of inflation in food items, which comprise over 45% ofthe CPI basket and hence play an outsized role inhouseholds inflation perceptions, will almost certainlyimpede the re-anchoring of inflation expectations. That willadd to the challenge in lowering core inflation, withaggregate demand also seen by the central bank as oncourse to strengthen.

Tight monetary policy that re-anchors household inflationexpectations is critical to RBIs disinflationary strategy.Pulling inflation expectations down from their existingdouble-digit territory is slow progress given their tendency toonly respond adaptively to current inflation. As RBI remains

committed to bringing down CPI inflation down to 6% byearly 2016, further policy tightening may be required in 2015.

Mole Hau 852 2108 [email protected]

Key Chart: Monsoon Risks

Source: BNP Paribas, IMD

8

8/11/2019 BNP-daily-20140806

9/28



Australia: RBA Decision (August 2014)Key Facts

The RBA maintains the cash rate at 2.5%,as widely expected.

Its assessment of the broad growthdrivers remains unchanged.

A period of stabi li ty in interest rates isstill the most l ikely outcome.

The RBA also maintained its view that theexchange rate remains high.

The RBA has made a habit of delivering boringmonetary policy statements this year, and thismornings was no exception. As well as leaving thepolicy rate unchanged at 2.5%, the Board also opted tocarry over nearly all of the phrasing from a month agoin its media release. The key signal of intent themost prudent course is likely to be a period of stabilityin interest rates was retained. Consistent with this,our core view remains that rates will be on hold until2016. The RBA also continued to limit its publicdiscomfort about the level of the exchange rate to it

remaining high by historical standards . The stockstandard nature of the media release suggests FridaysStatement of Monetary Policy could also be a ho humaffair, though we see some risk the RBA will be moreovert about lower inflation in coming quarters.

The only notable addition in the media release was theinclusion of a sentence acknowledging the Q2 CPI data,which showed an increase in inflation, with both headlineand underlying measures affected by the decline in theexchange rate last year. In a statement devoid of any othersignificant changes in language, it was likely this mention ofhigher inflation that provoked a minor rally in AUDimmediately following the announcement.

There are no other signs that the RBA has any concerns onthe inflation front, however. Indeed, the above sentence isfollowed immediately by a re-iteration of the RBAs long-promulgated argument that wage growth has declined, isexpected to remain modest for some time and should keepinflation consistent with the target.

Moreover, the RBAs description of its growth outlook was all-but lifted verbatim from last months policy decision. Exportsgrowth is slowing after being boosted by new mining capacityearlier in the year, resource sector investment is falling in linewith the sharp correction in iron ore and coal prices, andpublic spending is scheduled to be subdued. Consumerdemand growth is simply moderate, with the only cleartailwind for GDP growth being a strong expansion in housing

construction. Overall the RBA remains hopeful thataccommodative monetary policy settings will engender anupswing in growth, but over the medium term the Bank stillexpects growth to be a little below trend over the year ahead.The RBAs expectation of below trend growth further cementsthe view that disinflationary forces are likely to dominate over

coming quarters.

In contrast to the impression given by the further increase inthe measures of headline and underlying inflation in the mostrecent, Q2, CPI data, other indicators strongly suggest thatinflation has peaked. TD Securities monthly gauge providesperhaps the clearest signal, having been a relatively accurateleading indicator of swings in official headline inflation overthe past decade, dropping to 2.6% y/y in July, and

representing the biggest decline since mid-2013. From themost recent data, movements in the retail sales implicit pricedeflator, producer price indices, house prices and commodityprices all point to lower inflation in coming quarters. Adding tothis disinflationary impetus, the impact of the decline in theexchange rate last year, to which the RBA is careful toattribute the rise in Q2 CPI inflation, is likely to counterimported inflation as AUD moves into positive year-on-yearterritory. Overall, we see a high chance of headline inflationdropping back to the middle of the 2-3% target band in Q3.

Todays relatively dull media release suggests that more ofthe same could be on offer in Fridays Statement of MonetaryPolicy. That said, with forward inflationary indicators nowpointing downwards, contrary to the upward move in the most

recent CPI print, we wonder whether the RBA may take theopportunity to lower its inflation profile a notch.

Mark Walton 852 2108 [email protected]

Key Chart: AUD helped pushed CPI higher...

-3

-2

-1

0

1

2

3

4

5

6

7

02 03 04 05 06 07 08 09 10 11 12 13 14

Australia CPI inflation, % y/y

TradablesNon-tradables

Total

RBA target band

Source: BNP Paribas, Reuters EcoWin Pro

Key Chart: but d isinflation already at work

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

04 05 06 07 08 09 10 11 12 13 14

Australia CPI inflation, % y/y

TD Securities monthly inflation gauge

Official headline

Source: BNP Paribas, Reuters EcoWin Pro

9

8/11/2019 BNP-daily-20140806

10/28

Question marks remain over mobile

CSL consolidated; DPU after rights issue unchanged y-y

HKT reported 1H14 interim results today, the first reporting since CSL

consolidation in May. TSS remained stable with revenue +4% y-y and

EBITDA +2% y-y; the mobile business, with CSL included from May,

now makes up 23% of group revenue and 22% of group EBITDA and

the contribution should increase to one third on a full year basis. Dueto the CSL consolidation and reclassification of handset sales into

mobile from TSS previously, the y-y mobile performance in 1H is

unclear. On an enlarged basis after the rights issue, AFF per Share

Stapled Unit was down 9% y-y; interim DPU is kept the same as last

year at HKD0.21.

Some early wins from CSL integration

HKT expects to realise more synergies in the next 18-24 months as

the CSL integration continues, with savings from spectrum and cell

sites rationing, mobile plans and brand simplification, etc. It guided a

10-15% saving in mobile opex previously, which we expect to be

realised gradually as the integration progresses. According to thecompany, mobile integration has gone fairly smoothly, with low staff

turnover and fewer customer complaints.

Question marks remain over mobile

HKT indicated some future mobile tariff increases in the briefing

today, citing the cost pressures operators faced. We are of the view

that operators have always been seeking ways to pass cost

pressures onto consumers, regardless of market consolidation,

hence the tariff hike in Sep 2013, even before the CSL deal. We think

the real question is how repeatable (given the ceiling of the mobile

bill consumers are willing to bear out of disposable income) any tariff

increase can be, and whether it can be reinforced given the instability

in market segments among the operators in order to offset the mid-

to high-single-digit growth of mobile opex in general for a data centric

market like HK. HOLD with TP of HKD8.30.

6AUGUST 2014

RESULTS FLASH

HKT 6823 HKHONG KONG/DIVERSIFIED TELECOMMUNICATION

HOLD

TARGET PRICE HKD8.30

UP/DOWNSIDE -8.0%

CLOSE HKD9.02


TARGET PRICE (%) (5.7) POSITIVE 7

EPS 2014 (%) 10.8 NEUTRAL 9

EPS 2015 (%) 8.0 NEGATIVE 1

Zoe [email protected]

+852 2825 1120

Alen [email protected]

+8862 8729 7061

KEY STOCK DATA

YE Dec (HKD m) 2013A 2014E 2015E 2016E

Revenue 22,832 30,362 36,579 39,263

Rec. net profit 2,376 2,837 3,435 3,976

Recurring EPS (HKD) 0.37 0.37 0.45 0.53

EPS growth (%) 49.2 1.2 21.1 15.7

Recurring P/E (x) 24.4 24.1 19.9 17.2

Dividend yield (%) 5.0 5.3 6.0 6.5

EV/EBITDA (x) 10.0 8.3 7.4 6.8

Price/book (x) 1.9 1.8 1.8 1.7

Net debt/Equity (%) 71.1 80.9 78.8 75.1

ROE (%) 7.7 8.2 8.9 10.2


Absolute (%) 3.3 11.5 15.5

Relative to country (%) (1.4) (0.7) 4.6



Free float (%) 32

Major shareholder PCCW (63%)

12m high/low (HKD) 9.30/6.22


ADR ticker -




(48)

(28)

(8)

12

3.00

8.00

13.00

18.00

23.00

28.00


(%)(HKD) HKT Rel to Hang Seng Index

10

8/11/2019 BNP-daily-20140806

11/28

Expecting a stronger 2H

In line results excluding one-off distortions

CTBC held its 1H14 results briefing today. Excluding a one-off gain

from negative goodwill (NTD14.7b), 1H14 NP was NTD13.5b or 51%

of our full-year forecast. The bright spot was strong FCY corporate

loan growth of 31% y-y in 1H14, outpacing NTD loan growth of 5.3%

y-y and driven by strong credit demand in overseas branches (+7.2%q-q) in SG and the US and, to a lesser extent, by its offshore banking

unit (-5.2% q-q). CTBCs tier 1 ratio rose back to 10.1%, within our

expectation. Its credit cost stayed low at 5bp with the corporate NPL

ratio falling further to 18bp (-7bp q-q). The group NPL ratio rose to

1.1% with the addition of Tokyo Star Bank (TSB).

Softer growth momentum in 2Q along with the sector

CTBCs wealth management fee income growth softened from the

peak in 1Q14 due to stop-selling effects. Its TMU quarterly revenue

was one of its weakest in the past two to three years. CTBCs bank

NIM contracted by 5bp to 1.54% (2bp on higher FCY funding cost

and 3bp on the consolidation of TSB). CTBC attributed the higherfunding cost to its overseas subsidiaries in the US and Indonesia that

actually strengthens its funding base, rather than from deposit

competition in the domestic market.

Expecting a stronger 2H on multiple fronts

We expect stronger earnings growth in 2H14 given an increased

contribution from TSB (its ROA improved from 19bp in 2012 to 41bp

in 2013). Management is confident it can lower TSBs funding cost

and is guiding for an annual contribution of JPY12b to represent

c17% of group earnings. CTBC is also expecting TMU momentum to

recover in 4Q14 as volumes have started to normalize since the end

of 2Q14. The shares are trading at 1.3x 12-month forward P/B and

have strong FYC growth potential. We have a BUY rating and CTBC

is our top-pick among the TW bank-centric financials.

6AUGUST 2014

RESULTS FLASH

CTBC FHC 2891 TTTAIWAN/BANKS

BUY


UP/DOWNSIDE +16.5%

CLOSE TWD20.25



EPS 2014 (%) (13.2) NEUTRAL 2

EPS 2015 (%) (2.2) NEGATIVE 1

Frank Yuen, [email protected]

+852 2825 1863

Leif [email protected]

+8862 8729 7057

KEY STOCK DATA

YE Dec (TWD m) 2013A 2014E 2015E 2016E

Operating Profit 21,552 31,238 33,893 36,425

Rec. net profit 21,503 26,585 28,525 30,641


EPS growth (%) (13.5) 14.0 7.3 7.4

Recurring P/E (x) 12.8 11.2 10.4 9.7

Dividend yield (%) 1.9 2.0 3.2 3.3

Price/book (x) 1.5 1.3 1.1 1.0

ROE (%) 11.8 12.3 11.3 10.9

ROA (%) 0.95 0.88 0.75 0.73


Absolute (%) 1.5 11.9 10.0




Free float (%) 85

Major shareholder Nan Shan Life (5%)

12m high/low (TWD) 21.70/17.71


ADR ticker -

ADR closing price (USD; Date) -



(24)

(14)

(4)

6

16

10.00

15.00

20.00

25.00


(%)(TWD) CTBC FHC Rel to MSCI Taiwan

11

8/11/2019 BNP-daily-20140806

12/28

Tepid growth in the near term

Stronger 2014E EPS growth on Muji disposal

We forecast reported EPS of TWD9.15 for 2014E and TWD9.3 for

2015E. In 2014E, stronger reported EPS growth of 18% y-y is due to

the one-off disposal gain of TWD1/share pre-tax from the Muji

investment in 1Q. We expect TW 7-Eleven PSD (per store daily

sales) to see low single-digit growth in 2014 and overall sales growthof 4.5% y-y, rising to 7.7% y-y in 2015E due to rapid store expansion.

Modest growth outlook in the near term; long-term positive

We are positive on PCSCs subsidiaries, such as Taiwan/Shanghai

Starbucks, 7-Eleven Philippines and Cosmed, for their L/T earnings

growth prospects. In the near term, we think margin recovery is likely

with continuing SKU adjustments, although this recovery may be

slower due to increased CVS IT expenses on store expansion.

Missing near-term catalyst to justify current high valuation

The 2Q14 preliminary sales came in at TWD51.65b, up 3.75% q-q

and 4.25% y-y. Year-to-date, PCSCs sales have risen 3.6% y-y.

However, we do not expect a strong margin recovery in 2014/2015

and subsequent improvement in recurring earnings that could justify

the current high valuation.

Maintain HOLD with TWD230 target price (24.7x 2015E P/E)

Our DCF-based TWD230 target price implies 24.7x reported 2015E

P/E vs regional peers on 22.8x (Bloomberg). Though we like PCSCs

leading position, solid execution, long-term strategies and growing

list of subsidiaries, we find its current valuation unattractive

1Q14 earnings breakdown large disposal gain from Muji investment

Source: PCSC

7-ElevenTaiwan39.1%

StarbucksShanghai

4.0%President

Pharmaceu-tical3.5%7-Eleven

Philippines1.2%

Cosmed1.8%

Disposal gains34.7%

Others15.7%

6AUGUST 2014

TAIWAN/FOOD &STAPLES RETAILING

PCSC 2912 TT

HOLDUNCHANGED


CLOSE TWD240.00

UP/DOWNSIDE -4.2%

PRIOR TP TWD208.00

CHANGE IN TP +10.6



EPS 2014 (%) (1.2) NEUTRAL 6

EPS 2015 (%) (4.9) NEGATIVE 1

Jenny [email protected]

+8862 8729 7054

Patricia [email protected]

+886 2 87297063

KEY STOCK DATA

YE Dec (TWD m) 2013A 2014E 2015E 2016E

Revenue 200,611 209,646 225,744 244,127

Rec. net profit 8,224 8,806 9,822 10,864


Prior rec. EPS (TWD) 7.91 8.65 9.58 10.52

Chg. In EPS est. (%) 0.0 (2.0) (1.4) (0.7)

EPS growth (%) 18.2 7.1 11.5 10.6

Recurring P/E (x) 30.3 28.3 25.4 23.0

Dividend yield (%) 2.0 2.5 3.0 3.0

EV/EBITDA (x) 14.3 13.2 11.8 10.6

Price/book (x) 10.5 9.2 8.5 7.7

Net debt/Equity (%) (87.4) (84.7) (86.4) (89.9)

ROE (%) 35.3 34.7 34.9 35.2


Absolute (%) 0.8 6.0 9.1

Relative to country (%) 3.2 (0.4) (8.6)




Free float (%) 54

Major shareholder Uni-President (1216 TT) (45.4%)

12m high/low (TWD) 248.00/181.50


ADR ticker -




(39)

(29)

(19)

(9)

1

11

108.00

158.00

208.00

258.00


(%)(TWD) PCSC Rel to MSCI Taiwan

12
mailto:[email protected]:[email protected]://equities.bnpparibas.com/mailto:[email protected]

8/11/2019 BNP-daily-20140806

13/28

Defining moment for DSME in 2Q14

Provisions remain biggest risk to 2Q14 earnings

We remain cautious on DSMEs ability to increase its OPM through a

reduction in provisions, as it has undertaken various offshore projects

that could require further provisions. Interpretation of perceived risks

should be the determining factor.

How much provisioning is enough?

Provisions for doubtful accounts receivable rose by KRW76b y-y in

2012, KRW111b in 2013 and another KRW12b in 1Q14. While the

total amount of bad debt provisioning taken in 2013 remains unclear,

DSME gradually recognised bad debt provisioning each quarter to

total KRW256b in 2011 and KRW446b in 2012.

Order target may be difficult to attain in 2014

DSME has surpassed management targets in the past couple of

years, but we see a risk of not attaining the target this year, as only

36% (USD5.281b) of the 2014 new order target of USD14.5b has

been fulfilled YTD. However, there have been no offshore orders.

Maintain BUY, but with a more conservative TP of KRW32,300

We reduce our TP by 15% to KRW32,300 based on a lower target

P/B of 1.2x (previously 1.4x) as we believe the shares should trade at

a discount to our sector top pick SHI due to more uncertainty in both

earnings and order trends.

DSME P/BV discount to SHI P/BV

Source: Bloomberg

(60)

(40)

(20)

0

20

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

(%) DSME - SHI Average (since 2009)

6AUGUST 2014

KOREA/SHIPBUILDING

DAEWOO SHIPBUILDING 042660 KS

BUYUNCHANGED

TARGET PRICE KRW32,300

CLOSE KRW25,200

UP/DOWNSIDE +28.2%

PRIOR TP KRW38,000

CHANGE IN TP -15.0%



EPS 2014 (%) (18.3) NEUTRAL 5

EPS 2015 (%) (18.5) NEGATIVE 1

H James [email protected]

+822 2125 0533

KEY STOCK DATA

YE Dec (KRW b) 2013A 2014E 2015E 2016E

Revenue 15,305 15,998 16,028 16,129

Rec. net profit 314 289 397 395

Recurring EPS (KRW) 1,641 1,512 2,072 2,064

Prior rec. EPS (KRW) 1,641 1,512 2,072 2,064

Chg. In EPS est. (%) 0.0 0.0 0.0 0.0

EPS growth (%) (10.9) (7.8) 37.0 (0.4)

Recurring P/E (x) 15.4 16.7 12.2 12.2

Dividend yield (%) 1.2 1.2 1.2 1.2

EV/EBITDA (x) 17.2 16.9 13.3 12.6

Price/book (x) 1.0 0.9 0.9 0.8

Net debt/Equity (%) 135.6 127.4 106.9 90.1

ROE (%) 6.5 5.7 7.5 7.0


Absolute (%) (5.8) (11.4) (12.2)

Relative to country (%) (8.4) (16.4) (19.8)




Free float (%) 50

Major shareholder KDB (31%)

12m high/low (KRW) 38,400/23,950


ADR ticker -


Issued shares (b) 191.3


(52)

(32)

(12)

8

14,370.00

24,370.00

34,370.00

44,370.00


(%)(KRW) Daewoo Shipbuilding Rel to MSCI Korea

13

8/11/2019 BNP-daily-20140806

14/28

Adjusted NP at pre-Lehman level

1Q NP sharply ahead of BNPPe and consensus

Chiba Bank reported 1Q NP of JPY23b, to significantly eclipse

BNPPe (JPY19.2b) and the IFIS consensus (JPY19.9b). 1Q included

a JPY7b profit due to negative goodwill through consolidation of

subsidiaries, but after adjustment, NP totalled JPY16b, roughly the

same as its FY3/08 level of JPY15.8b. Chiba Bank achieved a 42.5%run rate versus the full-year guidance of JPY54b, and even after

stripping out the negative goodwill, the run rate was 34%.

Int. on securities, credit costs, gains on equity sales contribute

Revenue totalled JPY42b in 1Q, on a par with the BNPPe

(JPY41.4b). Net interest income (JPY32.5b) beat the BNPPe thanks

to interest on securities, which totalled JPY6.8b vs. the BNPPe of

JPY5.6b. NIM was 1.16% in 1Q compared to the BNPPe of 1.13%.

The difference largely reflects a JPY100m credit-cost reversal vs. our

forecast of JPY800m credit costs. We were impressed by JPY1.1b

capital gains on sale of cross-shareholding equities rather than the

likes of ETF sales. According to the bank, the domestic loan yieldlikely fell 8bp y-y, which would be a concern if this continues in 2Q.

If shares weaken, opportunity to buy on dips

Management left NP guidance unchanged (1H JPY33b, full-year

JPY54b). The share price has corrected 4% after hitting JPY760 on

22 July. Therefore, we expect a positive reaction to the results.

However, if the shares soften, this would be a good opportunity to

accumulate.

6AUGUST 2014

RESULTS FLASH

CHIBA BANK 8331 JPJAPAN/BANKS

BUY

TARGET PRICE JPY850.00

UP/DOWNSIDE +16.4%

CLOSE JPY730.00



EPS 2015 (%) 1.8 NEUTRAL 5


Toyoki [email protected]

+81 3 6377 2250

KEY STOCK DATA

YE Mar (JPY m) 2014A 2015E 2016E 2017E

Operating Profit 70,578 71,059 76,145 83,960

NPAT 46,438 54,629 50,724 55,814

EPS (JPY) 54.89 64.57 59.95 65.97

EPS growth (%) 6.9 17.6 (7.1) 10.0

P/E (x) 13.3 11.3 12.2 11.1

Dividend yield (%) 1.7 1.8 1.8 1.9

Price/book (x) 0.8 0.8 0.7 0.7

ROE (%) 6.3 7.0 6.2 6.5

ROA (%) 0.41 0.46 0.41 0.45


Absolute (%) (1.6) 12.7 1.1




Free float (%) 86

Major shareholder Mitsubishi UFJ Financial Group (7%)

12m high/low (JPY) 760.00/604.00


ADR ticker -


Issued shares (m) 846


(35)

(25)

(15)

(5)

5

362.00

462.00

562.00

662.00

762.00

862.00


(%)(JPY) Chiba Bank Rel to TOPIX Index

14

8/11/2019 BNP-daily-20140806

15/28

* Correction: Please note amended last sentence on front page

2Q orders to grow; a good start

1Q OP: JPY2.2b; 1H guidance raised above current consensus

1QFY3/15 OP of JPY2.2b beat the JPY1.4b Bloomberg consensus

helped by a reversal gain from inventory loss provisioning and fixed

cost reductions. SPE orders at JPY36.6b (+4% q-q) were in line with

initial guidance of JPY35b. 1H OP guidance was raised to JPY4.7b

from JPY3.5b (Bloomberg consensus: JPY3.9b).

SPE orders to trend up in 2Q and 3Q

Management guided for 2Q SPE orders of JPY38b-40b with NAND

demand rising, and foundry demand falling in the US but rising in

Taiwan. Management expects 3Q demand to be stronger depending

on foundry orders in Taiwan.

Two positives: OP outperformance and order recovery

Our JPY600 TP is based on 1.5x FY3/15E P/B. Near-term share

price performance tends to correlate closely with SPE orders. We

think investors are likely to feel positive about company guidance for

2Q and 3Q.

6AUGUST 2014

RESULTS FLASH

DAINIPPON SCREEN 7735 JPJAPAN/SEMICONDUCTORS

BUY

TARGET PRICE JPY600

UP/DOWNSIDE +26.3%

CLOSE JPY475



EPS 2015 (%) 5.7 NEUTRAL 7


Yoshitsugu [email protected]

+813 6377 2259

KEY STOCK DATA

YE Mar (JPY b) 2015E 2015C 2016E 2017E

Revenue 242.0 241.0 239.6 230.2

Op profit 12.5 11.2 13.0 11.2

Recurring profit 11.5 10.5 12.0 10.2

Net profit 9.0 8.3 9.5 7.7

EPS (JPY) 38 35 40 32

P/E (x) 12.5 13.6 11.9 14.6

Dividend yield (%) 0.6 1.1 0.6 0.6

EV/EBITDA (x) 6.7 - 6.2 6.4

Price/book (x) 1.2 - 1.1 1.0

Net debt/equity (%) 1.4 - (6.4) (12.5)

ROE (%) 9.9 - 9.5 7.2


Absolute (%) (6.9) 5.1 (12.7)




Free float (%) 81

Major shareholder Master Trust Bank of Japan (10%)

12m high/low (JPY) 613/420


ADR ticker -



Sources: Bloomberg; Company estimates (C); BNP Paribasestimates

(55)

(45)

(35)

(25)

(15)

(5)

252.00

352.00

452.00

552.00

652.00


(%)(JPY) Dainippon Screen Rel to TOPIX Index

15

8/11/2019 BNP-daily-20140806

16/28

Short-term reversal likely

1Q FY3/15 results reported post-market

1Q sales were JPY489b (+5% y-y, +9% q-q, BNPPe: JPY501b), OP

was JPY54b (+28% y-y, +50% q-q, BNPPe: JPY50b) and net income

was JPY36b (+29% y-y, +99% q-q). 1Q fixed costs were lower than

we had expected, partially due cost appropriation between 1Q and

2Q on our estimates. Domestic and European HVAC sales wereslightly lower than we had expected.

Costs are key to an FY3/15 beat (as in FY3/14)

We assume fixed labour costs grow JPY25b in FY3/15, which

appears conservative given these results. In FY3/14, costs were the

story behind rising market expectations for Daikins earnings. The

same could be true in FY3/15. We suspect Daikin, in addition to its

usual cost control programme, could pull in more synergies from the

Goodman Global deal than either we or inventors currently assume.

Priced in for now, could rally later in the year

Daikins shares fell steadily today (and could fall further in the shortterm), implying these results and the outlook for 2Q FY3/15 and

beyond are priced in for now. We expect Kubota (6326 JP, REDUCE,

CP JPY1,291.5) to reverse its recent relative under-performance

versus Daikin on the back of the two companies results today. If

earnings expectations for Daikin rise and given our relatively

conservative 9x FY3/15E target EV/EBITDA, the shares could rally in

4Q CY14.

Daikin/Kubota relative share price

Source: Bloomberg

65

115

165

215

2007 2008 2009 2010 2011 2012 2013 2014

(%) (Jan 2007=100)

6AUGUST 2014

RESULTS FLASH

DAIKIN INDUSTRIES 6367 JPJAPAN/CAPITAL GOODS

HOLD

TARGET PRICE JPY6,800

UP/DOWNSIDE -3.3%

CLOSE JPY7,034



EPS 2015 (%) (0.6) NEUTRAL 11

EPS 2016 (%) (5.5) NEGATIVE 0

Christopher [email protected]

+81 3 6377 2258

KEY STOCK DATA

YE Mar (JPY b) 2015E 2015C 2016E 2017E

Revenue 1,941.4 1980.0 2,031.2 2,115.2

Op profit 184.5 170.0 193.7 196.9


Net profit 103.3 98.0 109.4 111.8

EPS (JPY) 354 336 375 384

P/E (x) 19.8 - 18.7 18.3

Dividend yield (%) 1.3 - 1.3 1.4

EV/EBITDA (x) 9.5 - 8.9 8.3

Price/book (x) 2.3 - 2.1 2.0

Net debt/equity (%) 16.0 - 2.7 (8.2)

ROE (%) 12.3 - 11.9 11.1


Absolute (%) 2.4 16.6 63.6

Relative to country (%) 4.1 9.7 56.9



Free float (%) 84

Major shareholder Nomura Asset Management (4%)

12m high/low (JPY) 7,253/4,300


ADR ticker -




0

20

40

60

2,403.00

4,403.00

6,403.00

8,403.00


(%)(JPY) Daikin Industries Rel to TOPIX Index

16

8/11/2019 BNP-daily-20140806

17/28

Balancing act

Reported better-than-expected 1Q FY3/15 results post-market

For 1Q FY3/15, Kubota reported sales of JPY361b (flat y-y/-15% q-q)

vs our JPY336b estimate and OP of JPY52b (+11% y-y/-10% q-q) vs

our JPY41b estimate. Net income was JPY33b (+8% y-y/-6% q-q).

Kubotas European and North American (new model releases)

machinery & engine sales were better than we had expected; fixedcosts were in-line with expectations. Asian sales were JPY69b (-21%

y-y/+1% q-q), led by Thailand. Domestic machinery & engine sales

were JPY74b (-18% y-y). However, Kubotas European and North

American significantly outperformed apparent organic market growth

to allow machinery & engine sales to be flat y-y at JPY300b.

Company-specific growth continues while the regions shift

Kubotas 1Q FY3/15 fundamental performance was in keeping with

its history of using company-specific sales well above the end-market

trend in one or more regions to cover for weakness elsewhere.

Weaker y-y JPY benefits come off from 2Q FY3/15, but we believe

fighting local FX sales expansion in Europe and North Americashould remain a losing battle in 2Q FY3/15 and beyond.

Short term, we expect the stock to be a relative outperformer

We expect Kubotas share price to react positively to the result

tomorrow, followed by relative outperformance versus the broader

Japan machinery sector and peer Daikin (6367 JP; HOLD; CP:

JPY7034, TP: JPY6,800), which also reported 1Q FY3/15 earnings

today. In our opinion, investors looking to FY3/16 and beyond are

unlikely to be shaken from their holding on the back of these results,

pointing to Kubotas continued ability to engender company-specific

sales growth above market while limiting relative damage in

obviously weak end-markets.

6AUGUST 2014

RESULTS FLASH

KUBOTA CORP 6326 JPJAPAN/CAPITAL GOODS

REDUCE


UP/DOWNSIDE -11.0%

CLOSE JPY1,292



EPS 2015 (%) (13.3) NEUTRAL 11

EPS 2016 (%) (11.4) NEGATIVE 2

Christopher [email protected]

+81 3 6377 2258

KEY STOCK DATA

YE Mar (JPY b) 2015E 2015C 2016E 2017E

Revenue 1,468.4 1,550 1,518.6 1,523.0

Op profit 181.5 200.0 203.1 193.5


Net profit 111.6 130.0 124.9 119.3

EPS (JPY) 89 104 100 95

P/E (x) 14.5 - 12.9 13.5


EV/EBITDA (x) 6.7 - 5.9 5.8

Price/book (x) 1.6 - 1.5 1.4

Net debt/equity (%) (22.9) - (25.4) (28.3)

ROE (%) 11.5 - 11.8 10.4


Absolute (%) (10.5) (3.4) (13.1)




Free float (%) 95

Major shareholder Capital World Investors (4%)

12m high/low (JPY) 1,821/1,282


ADR ticker KUBTY US

ADR closing price (USD; 04 Aug 2014) 64.49



(41)

(31)

(21)

(11)

(1)

9

769.00

1,269.00

1,769.00


(%)(JPY) Kubota Corp Rel to TOPIX Index

17

8/11/2019 BNP-daily-20140806

18/28

FY3/15 1Q: strong start to the year

All-round strength

1Q earnings were reassuringly strong, with group OPM reaching

10.8% (10.6% excluding above-line valuation gains). Prior to the

announcement, we had regarded the Asian slowdown and weak cost

control as the greatest risks to 1Q margins, but our fears were not

realized. In line with usual management practice at the 1Q stage,headline guidance numbers were unchanged.

Margin sustainability is key

Key metrics are shown in the table overleaf. By geography, a firm

North America and Middle East offset weak Japan (but not as bad as

we initially feared) and Asean. Margin delivery of the core business

appears to be basically sustainable: fixed costs were in line with

seasonal levels (although management did forecast a rising 2Q-4Q

burden); one-time valuation gains (JPY16b) were a relatively small

part of the upside surprise; normalized financial services OPM of

22% was broadly as we expected. Reflecting Toyotas broad reach,

Asia volumes were down a modest 2% y-y despite the fact thatThailand retail units were down as much as 28%. Below-line, slightly

better-than-expected net financial income, associate income and

exceptionals offset a higher-than-expected tax rate (34%, vs 32%).

Headline guidance numbers were unchanged, within which

developed market volumes were raised and EM volumes lowered;

among OP drivers: volume/mix/marketing -JPY10b, cost reduction

+JPY10b, FX +JPY55b, others (including rounding) -JPY55b.

Managing the cycle

Amid weak Japan and Asean markets, 1Q reminded us of Toyotas

ability to manage the cycle well. We expect the ebb and flow of

markets as well as slightly higher costs including TNGA-related up-

front investment to cause the OPM to ease during the rest of

FY3/15. These areas will remain the focus of our future analysis and

questions to the company. That said, todays result reaffirms our

sense that market expectations are too low, and that Toyota is the

most attractive fundamental stock among Japans automakers at

9.5x and 8.4x our unadjusted FY3/15 and FY3/16 EPS, respectively.

6AUGUST 2014

RESULTS FLASH

TOYOTA MOTOR 7203 JPJAPAN/AUTOMOBILES &COMPONENTS

BUY


UP/DOWNSIDE +20.8%

CLOSE JPY6,042



EPS 2015 (%) 3.4 NEUTRAL 7


Clive [email protected]

+813 6377 2253

KEY STOCK DATA

YE Mar (JPY b) 2015E 2015C 2016E 2017E

Revenue 26,587.5 25,700 28,515.5 30,028.7

Op profit 2,588.3 2,300 2,845.5 3,016.5

Recurring profit 3,035.5 2,390 3,315.2 3,510.5

Net profit 1,997.9 1,780 2,215.0 2,346.9

EPS (JPY) 638 562 719 775

P/E (x) 9.5 - 8.4 7.8


EV/EBITDA (x) 2.7 - 2.3 1.9

Price/book (x) 1.2 - 1.2 1.1

Net debt/equity (%) (63.1) - (62.6) (62.2)

ROE (%) 13.5 - 14.1 14.1


Absolute (%) (2.6) 7.3 (5.0)

Relative to country (%) (0.9) 0.4 (11.7)



Free float (%) 78

Major shareholder Japan Trustee Service (10%)

12m high/low (JPY) 6,510/5,314


ADR ticker TM US




(24)

(14)

(4)

6

16

3,188.00

4,188.00

5,188.00

6,188.00

7,188.00


(%)(JPY) Toyota Motor Rel to TOPIX Index

18

8/11/2019 BNP-daily-20140806

19/28

Conservative pax capacity growth

Change in ASK/RPK computation methodology

In 2Q14, AirAsia changed its ASK/RPK computation methodology by

using the actual number of kilometres flown vs. the theoretical

number of kilometres flown (previously flight distance for each route

flown was set and did not take into account the actual flight data).

This led to ASK/RPK y-y growth of 3%/2% in 2Q14, vs.7.8%/7.3% y-ygrowth on a like-for-like basis. We believe the methodology change

will positively impact the operating cost/ASK metric as ASK has

mechanically increased. But, revenue per ASK should be negatively

impacted. So, the overall impact should be neutral for AirAsia.

A conservative approach towards seat growth

The number of passengers in 2Q14 grew only 1% y-y, in line with the

increase of seats offered (+1% y-y). The growth was much lower

than historical numbers as the average quarterly passenger capacity

growth was around 9% for the past three years. This suggests more

capacity control by Malaysia AirAsia and it should theoretically

positively impact yields, RASK and eventually profitability.

Passengers growth in Malaysia seems to have slowed

In 2Q14, Malaysia Airports Holdings (MAHB, Not rated) passenger

numbers increased 5.6% y-y, vs. the 18.3% y-y growth reported in

2Q13. This decrease was mainly due to lower seat capacity growth,

given the more conservative growth strategy by market players.

Seats traffic/capacity

Sources: AirAsia; BNP Paribas

0

5

10

15

20

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

(y-y %) Number of passengers carried Number of seats offered

6AUGUST 2014

NEWS FLASH

AIRASIA AIRA MKMALAYSIA/TRANSPORTATION

BUY

TARGET PRICE MYR3.29

UP/DOWNSIDE +35.3%

CLOSE MYR2.43



EPS 2014 (%) 8.70 NEUTRAL 7

EPS 2015 (%) 14.8 NEGATIVE 3

Arnaud [email protected]

+65 6210 1957

KEY STOCK DATA

YE Dec (MYR m) 2013A 2014E 2015E 2016E

Revenue 4,523 5,127 5,759 6,510

Rec. net profit 561 701 871 1,151

Recurring EPS (MYR) 0.20 0.25 0.31 0.41

EPS growth (%) (14.7) 24.8 24.4 32.1

Recurring P/E (x) 12.0 9.7 7.8 5.9

Dividend yield (%) 1.7 2.6 3.4 4.5

EV/EBITDA (x) 8.1 7.3 6.4 5.5

Price/book (x) 1.4 1.2 1.1 0.9

Net debt/Equity (%) 175.5 162.8 151.1 138.0

ROE (%) 10.8 13.2 14.7 17.0


Absolute (%) 6.6 10.5 (23.1)




Free float (%) 54

Major shareholder Tune Air Sdn Bhd (13%)

12m high/low (MYR) 3.18/2.20


ADR ticker -

ADR closing price (USD; Date) -



(70)

(50)

(30)

(10)

1.00

3.00

5.00

7.00

9.00


(%)(MYR) AirAsia Rel to MSCI Malaysia

19

8/11/2019 BNP-daily-20140806

20/28

Optimizing its portfolio

1H14 results operating PATMI up 30% y-y

1H sales fell to SGD1.5b, -9% y-y, due to lower revenue from

development projects in China and Singapore, but partially mitigated

by higher rentals from malls and serviced residences. 1H operating

PATMI, on the other hand, rose to SGD292m, +30% y-y, due to lower

finance costs, higher development profits from associates and higherrental contributions from malls.

Greater mix in recurring income

Post-CMA transaction, CAPL now has a resilient and stable income

stream. About 75% of its total assets are investment properties (ie

retail malls, serviced residences, etc) that generate recurring income,

and about 25% are residential development properties. We think this

could mitigate residential market headwinds in Singapore and China.

On track for targeted ROE of 8-12%

CAPL continues to target an ROE of 8-12% in the next three to five

years, especially with more development projects being completed.While interest cover improved from 5.7x at end-FY13 to 6.1x, we

note that net gearing has risen from 0.39x to 0.58x due to CAPL

having less cash and reduced minority interests. Singapore and

China remained the biggest contributors to EBIT (48.5% and 30.1%).

Discount to RNAV

Source: Company data, BNP Paribas

050

100

150

200

250

(80)

(30)

20

Jan-96

Jul-96

Feb-97

Sep-97

Apr-98

Nov-98

Jun-99

Jan-00

Aug-00

Mar-01

Oct-01

Apr-02

Nov-02

Jun-03

Jan-04

Aug-04

Mar-05

Oct-05

May-06

Dec-06

Jul-07

Jan-08

Aug-08

Mar-09

Oct-09

May-10

Dec-10

Jul-11

Feb-12

Sep-12

Apr-13

Oct-13

May-14

(SGD)(%)% premium/(discount) to RNAV (LHS)

Home price (RHS)

+1 SD = -15.2%Mean = -33.1%

-0.5 SD = -42.1%

-1 SD = -51.1%

6AUGUST 2014

RESULTS FLASH

CAPITALAND CAPL SPSINGAPORE/REAL ESTATE

BUY

TARGET PRICE SGD3.77

UP/DOWNSIDE +9.6%

CLOSE SGD3.44



EPS 2014 (%) 11.2 NEUTRAL 3


Chong Kang Ho, [email protected]

+65 6210 1956

KEY STOCK DATA

YE Dec (SGD m) 2013A 2014E 2015E 2016E

Revenue 3,977 3,939 5,023 4,101

Rec. net profit 850 781 816 795

Recurring EPS (SGD) 0.20 0.18 0.19 0.19

EPS growth (%) 9.6 (8.1) 4.5 (2.5)

Recurring P/E (x) 17.3 18.9 18.1 18.5

Dividend yield (%) 1.7 1.7 1.7 1.7

EV/EBITDA (x) 14.5 17.6 17.6 17.6

Price/book (x) 0.9 0.9 0.9 0.8

Net debt/Equity (%) 34.4 50.0 41.0 38.8

ROE (%) 5.5 4.8 4.9 4.6


Absolute (%) 8.2 11.0 4.9

Relative to country (%) 6.5 8.3 2.2



Free float (%) 60

Major shareholder Temasek Holdings (41%)

12m high/low (SGD) 3.45/2.72


ADR ticker CLLDY US




(26)

(16)

(6)

4

1.00

3.00

5.00

7.00

9.00

11.00


(%)(SGD) CapitaLand Rel to St rai ts Times Index

20

8/11/2019 BNP-daily-20140806

21/28

Challenging outlook ahead

1H14 results tracking lower

2Q14 revenue rose 1% y-y to SGD29.6m, partly due to the

contribution from Rendezvous Hotel (acquired in Aug-13), which was

offset by falling occupancy rates and weaker room rates. DPU fell

13.3% y-y to SGD0.0124, due to higher property expenses and a

larger share base. Annualized DPU works out to SGD0.0508, about10% below our and Bloomberg consensus FY14 forecasts.

Hotels remain the weak link

The hotel occupancy rate continued to decline to 80.1%, from 87.7%

in 2Q13, while the average daily rate reached SGD188, i.e., lower by

2% y-y. Overall, RevPAR was SGD150, down 10.5%. For the

serviced residences too, the occupancy rate fell to 87.2%, from

92.6%, although the average daily rate was maintained at SGD249.

Net-net, RevPAU reached SGD218, down 5.5%.

2H14 outlook remains challenging; HOLD

The weak 1H14 operational data was partly driven by slower touristarrivals, especially from China, given recent airline mishaps. On the

2H14 outlook, the management expects hotel operations to remain

weak, but is guiding for more stable serviced residences, as these

cater to corporate travellers. A key downside risk is the outbreak of a

disease, which would impact occupancy rates.

P/BV band

Sources: Bloomberg consensus; Far East Hospitality Trust; BNP Paribas estimates

0.5

0.6

0.6

0.7

0.8

0.91.0

1.1

1.2

1.3

1.4

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

Aug13

Oct13

Dec13

Feb14

Apr14

(%)(x)

+1 SD = 1.1x

Mean = 1.0x

-1 SD = 0.9x

12M Sibor(RHS)

6AUGUST 2014

RESULTS FLASH

FAR EAST HOSPITALITY TRUST FEHT SPSINGAPORE/REAL ESTATE

HOLD


UP/DOWNSIDE +5.7%

CLOSE SGD0.87



DPS 2014 (%) 1.0 NEUTRAL 5

DPS 2015 (%) 1.7 NEGATIVE 3


+65 6210 1956

KEY STOCK DATA

YE Dec (SGD m) 2013A 2014E 2015E 2016E

Revenue 122 135 139 141

Rec. net profit 41 103 106 108

Recurring EPS (SGD) 0.02 0.06 0.06 0.06

EPS growth (%) 56.5 151.5 3.2 2.0

Recurring P/E (x) 37.4 14.9 14.4 14.1

Dividend yield (%) 6.5 6.7 6.9 7.1

EV/EBITDA (x) 21.5 21.0 20.9 20.8

Price/book (x) 0.9 0.9 1.0 1.0

Net debt/Equity (%) 43.2 50.8 53.5 56.2

ROE (%) 2.5 6.1 6.6 6.9


Absolute (%) (1.7) (2.3) (7.0)




Free float (%) 48

Major shareholder Far East Org (52%)

12m high/low (SGD) 0.95/0.76


ADR ticker -




(28)

(18)

(8)

2

0.70

0.80

0.90

1.00


(%)(SGD) Far East Hosp ital it y Trust Rel to St rai ts Times Index

21

8/11/2019 BNP-daily-20140806

22/28

A surge in development starts

1QFY15 tracking ahead

1QFY15 sales reached USD169m, up 18% y-y, driven by higher

rents and continuing lease-up of projects in China. Japan revenue

was up 9% y-y, driven by fund management fees. PATMI (ex-

revaluation) reached USD61m, up 27% y-y, adjusted for the

investment of 24.4% in GLP China by an investor consortium, and

sales of assets to J-REITs. Annualised, it is 7% ahead of our FY15E.

Strong development-starts, up 127% y-y

In 1QFY15, the groups development starts were up 127% y-y to

USD883m (we estimate about 32% of the companys FY15 target).

We believe this rise was driven by the Chinese and Brazilian

markets. Notably, in China, GLP started a record USD643m of

development projects, which represent about 39% of its FY15 target

for the country. GLP maintained its FY15 guidance for the group,

although we believe there is upside risk.

Rationale for forming strategic partnership with CMSTD

On 4 August 2014, with the support of the Chinese investor

consortium, GLP took a 15.3% stake in China Materials Storage and

Transportation Development Company (CMSTD, 600787 CH),

Chinas largest state-owned warehouse logistics provider. GLP also

formed a 49:51 JV with CMSTD, where GLP will be the exclusive

developer of modern logistic facilities on CMSTDs land resources of

more than 9m sqm. In our view, this is part of GLPs strategy to

secure land for future development, amid land constraints in China.

GLP 12-month forward P/BV

Sources: Bloomberg consensus; Global Logistic Prop; BNP Paribas estimates

0.6

0.8

1.01.2

1.4

Oct10

Dec10

Feb11

Apr11

Jun11

Aug11

Oct11

Dec11

Feb12

Apr12

Jun12

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

Aug13

Oct13

Dec13

Feb14

Apr14

Jun14

(x)

+1 SD = 1.2x

Mean = 1.0x

-1 SD = 0.8x

6AUGUST 2014

RESULTS FLASH

GLOBAL LOGISTIC PROP GLP SPSINGAPORE/REAL ESTATE

BUY


UP/DOWNSIDE +15.1%

CLOSE SGD2.80


TARGET PRICE (%) 0 POSITIVE 14

EPS 2015 (%) 2.3 NEUTRAL 3



+65 6210 1956

KEY STOCK DATA

YE Mar (USD m) 2014A 2015E 2016E 2017E

Revenue 598 719 871 1,063

Rec. net profit 277 276 318 357

Recurring EPS (USD) 0.06 0.06 0.07 0.07

EPS growth (%) (26.2) (4.0) 15.2 12.4

Recurring P/E (x) 37.8 39.4 34.2 30.4

Dividend yield (%) 1.4 1.1 1.2 1.2

EV/EBITDA (x) 24.3 21.4 18.2 15.9

Price/book (x) 1.2 1.2 1.1 1.1

Net debt/Equity (%) 11.1 11.8 12.4 13.9

ROE (%) 3.2 3.1 3.4 3.6


Absolute (%) 3.7 (0.4) (2.4)

Relative to country (%) 2.3 (2.4) (4.4)



Free float (%) 61

Major shareholder GIC Private Limited (36%)

12m high/low (SGD) 3.13/2.56


ADR ticker GBTZY US

ADR closing price (USD; 28 Jul 2014) 22.30



(23)

(13)

(3)

7

17

27

1.00

3.00

5.00

7.00

9.00


(%)(SGD) Global Logistic Prop Rel to Straits Times Index

22

8/11/2019 BNP-daily-20140806

23/28

Sales in line; margin disappoints

Mobile business disappoints; weak SMS and rising costs

PLDTs 1H revenue came in at 49.5% of our FY14 estimate, EBITDA

48.3% and PAT 50.1%. Mobile revenue and EBITDA declined by

1.3% and 5.7%, due to pressure on SMS and higher costs. SMS

revenue fell 12% y-y compared with -1.6% y-y at Globe (GLO PM;

BUY). Management mentioned it is looking to rationalise costs. Themobile subscriber base declined q-q following a clean-up of inactive

subscribers (measured by VLR) but this increased ARPU.

Fixed line business doing well, driven by data growth

Fixed-line revenue increased 4.9% y-y, driven by data growth of

9.5% y-y. EBITDA growth was 8% y-y. PLDTs strong fixed-line

revenue is offsetting the weakness in mobile. In the fixed-line

segment, ILD/NLD revenue is under pressure, and broadband DSL

and international leased lines have been the growth drivers.

Muted growth but attractive dividend yield

Management re-iterated its net income and capex guidance, andacknowledged there has been some shift in volumes from PLDT to

Globe on the back of Globes free Facebook offer. PLDT is looking

for a strategic acquisition in the internet space and hopes to close a

transaction shortly. PLDT is on track for its FY14 annual core net

income guidance of PHP39.5b and will continue paying out its

dividend; we forecast an attractive dividend yield of 5.5% in FY14

and like PLDT despite its muted growth prospects.

Mobile margins under pressure; lowest in 10 quarters

Source: PLDT

20

25

30

35

40

4550

55

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

(%) Mobile Fixedline Blended

6AUGUST 2014

RESULTS FLASH

PLDT TEL PMPHILIPPINES/DIVERSIFIED TELECOMMUNICATION

BUY

TARGET PRICE PHP3,150.00

UP/DOWNSIDE +0.4%

CLOSE PHP3,136.00



EPS 2014 (%) 1.0 NEUTRAL 9

EPS 2015 (%) (2.3) NEGATIVE 0

Kunal Vora, [email protected]

+91 22 6196 4384

KEY STOCK DATA

YE Dec (PHP m) 2013A 2014E 2015E 2016E

Revenue 168,331 171,050 175,765 180,920

Rec. net profit 38,717 39,957 40,229 41,639

Recurring EPS (PHP) 179 185 186 193

EPS growth (%) 2.8 3.2 0.7 3.5

Recurring P/E (x) 17.5 17.0 16.8 16.3

Dividend yield (%) 5.7 5.5 5.9 6.1

EV/EBITDA (x) 9.5 9.2 9.0 8.7

Price/book (x) 5.0 5.0 5.0 5.0

Net debt/Equity (%) 52.6 52.0 50.0 47.7

ROE (%) 27.1 29.1 29.3 30.3


Absolute (%) 4.0 8.6 2.0




Free float (%) 58

Major shareholder First Pacific (26%)

12m high/low (PHP) 3,136.00/2,582.00


ADR ticker PHI US




(23)

(13)

(3)

7

17

27

1,549.00

2,049.00

2,549.00

3,049.00

3,549.00


(%)(PHP) PLDT Rel to MSCI Philippines

23

8/11/2019 BNP-daily-20140806

24/28

Guidance increase in-line

1QF15 earnings disappoint on weak domestic sales

KKCs 1QFY15 sales missed our estimates by 9.8% on weaker than

expected domestic sales offsetting higher than expected exports.

EBITDA missed our estimates by 14.3% while Recurring PAT missed

by 19.3% on higher depreciation and lower other income which offset

lower taxes.

FY15 guidance raised in-line with our expectations

FY15 guidance was raised to 10-15% y-y growth from 0-5% on y-y

growth of 30% in exports and 5-10% in domestic sales. This was in-

line with our view that previous guidance was too conservative as it

did not factor a recovery in the domestic market, which we had.

CPCB II norms may not lead to a near-term margin increase

Costs and prices for power gensets rated above 750kVA will rise 15-

20% to comply with tighter emission norms from 1st July 2014. As

per management, higher prices may not dent demand. Also margins

would not go up in the near term due to teething troubles expected in

the new gensets. Long term, margins can improve on these gensets.

Raise TP to INR652; Maintain HOLD

We raise our TP 6.9% as we roll-over our valuation base from Jun-16

to Sep-16 . We continue to value KKC using its 10-year mean one-

year forward PE of 17.3x. We believe our earnings estimates price in

a recovery; we project earnings to grow 24.6% over FY14-17 and

believe the stock is fairly valued at c19x FY16 PE.

P/E band

Sources: Bloomberg; BNP Paribas estimates

0

5

10

15

20

2530

May-0

4

Oc

t-04

Fe

b-0

5

Ju

l-05

Nov-0

5

Apr-

06

Sep-0

6

Jan-0

7

Jun-0

7

Oc

t-07

Mar-

08

Aug-0

8

Dec-0

8

May-0

9

Sep-0

9

Fe

b-1

0

Ju

l-10

Nov-1

0

Apr-

11

Aug-1

1

Jan-1

2

Jun-1

2

Oc

t-12

Mar-

13

Ju

l-13

Dec-1

bnp-daily-20140806

Documents