daiwa !! to · [analyst alan kam] taiwan mobile held its fy11 results conference call on 1/19....

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Monday Jan 30th,

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Pan Asia: Asia Hotels – Time to check out? HK/China: Hong Kong Property Sector – Positive undercurrents on the way

Korea: Korea Refinery Sector – INITIATE with a positive view Taiwan: Taiwan Mobile (3045 TT) – Up to 8% Yield

ASEAN: Manila Water (MWC PM) – Rate adjustments to help India: India Power T&D – Channel checks provide no reason to turn bullish

Japan: Nippon Electric Glass (5214 JP) – Short-term recovery expected to emerge in 1Q FY12

Pan Asia: Asia Hotels – Time to check out? [Analyst Gavin Ho] After a year of strong operating performance gone by, the Asia Hotel sector is now expected to take a breather. Daiwa analyst Gavin Ho today downgrades the sector from a Positive to Neutral stance as RevPar growth for luxury hoteliers are set to only grow by 5% in 2012e vs 15-18% in 2011. Plugging these numbers into his models, Gavin has cut his EBITDA f/casts for the sector by 9%-43% over the next 2 years though he expects Shangri-La (Outperform, TP HK$18.06) to stand out given its superior positioning in China and the growth of domestic travel in that market. On valuations, the sector trades on a 1yr forward 12.5x EV/EBITDA, broadly in-line with its 10 yr average but lacks the catalysts to outperform meaningfully over the next 6 months. Specifically, we downgrade Hong Kong and Shanghai Hotels and Mandarin Oriental to Hold (previously Outperform). Tactically, investors should use the recent ~20% bounce in share prices of all these operators to trim exposures in the sector. http://asiaresearch.daiwacm.com/eg/cgi-bin/files/AsiaHotelsSector120127.pdf#page=1 HK/China: Hong Kong Property Sector – Positive undercurrents on the way [Analyst Jonas Kan] Our HK property analyst believes that amidst the uncertainties in the physical property market in 2012, there lie hidden opportunities. We see three positive signs that support our positive sector rating. 1) Some of the wealthy and long-term investors appear to have returned to the residential market to look for quality units at reasonable prices. 2) Demand has just been suppressed but not vanished as people look for a better entry level. Pent up demand is building up and there could be surprise on the upside. 3) Bernake’s latest comments about no rate hikes until 2014 should boost investing appetite in both property stocks and the physical market. Moreover, we believe government policy overhang could subside and the government may consider relaxing some of its previous measures such as that on LTV. Even after the recent rally, share prices are still overdiscounted as the disconnection between the physical market and stock prices are still large. Valuation still looks cheap in terms of both P/NAV and PBR. Our top picks are SHK [16 HK] with price target of HK$144.70 based on 1.21x PBR, followed by Sino Land [83 HK] with price target of HK$15.93 based on 1.04x PBR. http://asiaresearch.daiwacm.com/eg/cgi-bin/files/20120127hk_HKPropertySector.pdf#page=1 Korea: Korea Refinery Sector – INITIATE with a positive view [Analyst Jihye Choi] The stock prices of major local refinery companies have corrected by 35% since their peak in 2011, putting the sector on just 7.5x 2012 earnings. Daiwa Analyst, Jihye Choi believes that the sector is oversold, and current stock price levels offer a good entry point. We expect refinery margins to remain above the past 8-yr avg on back of: 1) limited downside risk to the crude oil px (eg, Iran sanctions); 2) firm PX-naphta spread outlook; and 3) limited net supply additions through facility shutdown in developed countries. The risks to our positive long term view on sector is if global crude prices are much weaker than expected and Korean government regulatory issues. Top pick is SK Innovation (096770 KS, BUY, TP: W 220,000), as the sole oil E&P player in Korea, cheap valuation and entry into new businesses such as car batteries. Jihye also maintains her positive view on S-Oil (010950 KS, O/PF, TP: W 135,000) and

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/AsiaHotelsSector120127.pdf#page=1

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/20120127hk_HKPropertySector.pdf#page=1


Monday Jan 30th,

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GS Holdings (078930 KS, O/PF, TP: W 64,000). http://asiaresearch.daiwacm.com/eg/cgi-bin/files/KoreaRefinerySector120127.pdf#page=1 Taiwan: Taiwan Mobile (3045 TT, m/c US$1 bn, Outperform) – Up to 8% Yield [Analyst Alan Kam] Taiwan Mobile held its FY11 results conference call on 1/19. Generally 4Q11 earnings were in-line. Smartphone accounts for 64% of total handset sales for 4Q11 (from 50% in 3Q11), driving smartphone penetration to 21% at end of 2011, better than its target of 20%. TWM will introduce more mid-to-low smartphones in 2012 to drive the penetration further. Alan expects mid-to-low end smartphone to account for >60% of total handset sales from 50% in 2011. Management expects the earnings impact of iPhone 4S (launched in early Dec) will continue to weigh on profitability in 1Q12. Taiwan Mobile guided 2012 with 1) 25% YoY in revenue driven by mobile data, device sales and Momo contribution; 2) 5% YoY growth in EBITDA with EBITDA margin to -5.3ppt as Momo has lower margin; 3) 13.6% YoY in EPS due to capital reduction (~NT$1 incremental EPS). Total cash yield would be 5-6% w/o a capital reduction and 7-8% with capital reduction. ASEAN: Manila Water (MWC PM, m/c US$980 mill, BUY) – Rate adjustments to help [Analyst Alvin Arogo] We believe there is a justifiable case for the regulator to increase the annual rebasing rate for MWC as the company is currently generating negative returns on its operations and investments. This should be corrected through a rebasing-rate adjustment to allow the company to generate positive returns. MWC is scheduled to submit a rebasing-rate adjustment proposal (for the rebasing period spanning 1 January 2013 to 31 December 2017) on or before April 2012. The regulator will review and discuss the proposal with the company until December 2012. A new rebasing rate, if any, would probably be implemented on January 2013. We incorporate an upward adjustment of the current rate to P1.5/m3 for the period 2013-17E resulting in average revenue growth of 10.9% over the period. On our estimates, the stock is pricing in no change in its rebasing rate for 2013-17E (P1.0/m3), whereas we expect an upward rebasing adjustment (P1.5/m3) that results in our new target price of P26.60. MWC is trading currently at a 2012E PBR of 1.7x (based on our BVPS forecast), slightly below its past-five-year average multiple of 1.8x. Our new target price of P26.60 (assuming a rebasing-rate increase to P1.5/m3) would imply a 2012E PBR of 2.1x, slightly below the stock’s past-five-year average+1SD PBR of 2.2x. Even if status quo is maintained, Alvin’s fair value of P22.00/share suggests slight upside of ~5% from current levels. http://asiaresearch.daiwacm.com/eg/cgi-bin/files/ManilaWater120127.pdf#page=1 India: India Power T&D – Channel checks provide no reason to turn bullish [Analyst Saurabh Mehta] Having recently met with number of T&D equipment cos, Saurabh finds it hard to turn bullish and believes sector prospects remain dim due to slowdown in orders and greater pricing pressure leading to a fall in sector ROEs. Strong PGCIL ordering so far this year (~Rs111bn, 30% in sub-stations) shouldn't be seen as an indicator of the overall trend as PGCIL only accounts for 20-25% of total substation orders with the rest coming in from SEBs/pvt utilities etc, where the outlook remains grim. Structural issues of SEB funding & coal shortages have led to a decline in generation capex which is a disincentive for T&D capex and reduces the visibility beyond 2-3 years. Further, with the implementation of competitive bidding for transmission projects, there is no visibility on orders by PGCIL in the 13th Five-Year Plan (2017-22). In the interim, Saurabh expects substation orders to peak this year (FY12) and at best show zero growth over FY13-15. His channel checks suggest recent easing in competition from Chinese/Korean players to be short-lived and highlights the seriousness of Chinese players to set up transformer mfg capacity in India. ABB (ABB IN) remains our top sell in the sector. http://asiaresearch.daiwacm.com/eg/cgi-bin/files/IndiaT&DSector120127.pdf#page=1

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/KoreaRefinerySector120127.pdf#page=1

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/ManilaWater120127.pdf#page=1

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/IndiaT&DSector120127.pdf#page=1


Monday Jan 30th,

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Japan: Nippon Electric Glass (5214 JP, m/c US$4.5 bn, Neutral) – Short-term recovery expected to emerge in 1Q FY12 [Analyst Ando]Earnings continued to decline in 3Q. However, 3Q shipment volume of LCD glass appears to have recovered 7-8% QoQ and Ando estimates a further 6-7% QoQ improvement in 4Q. The decline in ASPs has moderated from a 7-8% drop in 2Q to a 5-6% decline in 3Q. Ando expects earnings to deteriorate further in 4Q on 1) a continued decline in LCD glass prices (down 7-10% q/q), 2) increasing depreciation costs (up over Y2b q/q) & 3) costs related to production capacity expansion. Profitability should recover short-term starting 1Q FY12 when the cost burden is reduced, but from a medium term perspective, the earnings environment is likely to remain harsh. Ando does not find the stock undervalued trading at FY12 P/E of 12.3x. http://www2.us.daiwacm.com/jpe/report/English\/2012/20120127_jp_5214.pdf

Taiwan Corporate Day Date in SG: Thu Feb 16th Venue: Daiwa SG Office (Level 26 DBS Bldg.) Date in HK: Fri Feb 17th Venue: Daiwa HK Office (26/F One Pacific Place) Taiwan Banks 2892TT First Financial (presenter: Mr Ming Ren CHIEN/CEO) 2886TT Mega Financial (presenter: Mr Jack LIN/IR Mgr) 2881TT Fubon Financial (presenter: Ms Amanda WANG/First VP) * HK ONLY Taiwan Electronics 6176TT Radiant Opto-Electronics (presenter: Mr Vincent Chang/Sp. Asst to Chairman) 3149TT G-Tech Optoelectronics (presenter: Mr Sunny LIN/VP of Financial Civ.)

NEW!

3 more India companies (GITG, GRASIM, GPPV) and 1

more Korea company (042660 KS)

As of today we have total of 309 corporates.

Kirin Holdings (2503 JP) and Nissin Foods Holdings

(2897 JP) still need more demand!

Analysts Marketing

<HK> Feb 6-7 - SY Chung – Trading Places (HK)

<SG> Feb 8-9 – SY Chung – Trading Places (SG) NEW Feb 21-22 – Justin Lau – Custom Product (SG)

http://www2.us.daiwacm.com/jpe/report/English/2012/20120127_jp_5214.pdf


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Hong Kong

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Regional Head of Asian Equities Sales Ester Li (852) 2532 4360 [email protected]

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Asian Equities Sales Kanako Ito (852) 2848 4450 [email protected]

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Asian Equities Sales William Han (852) 2532 4375 [email protected]

Asian Equities Sales (Japan Equities) Takayuki Saito (852) 6044 2110 [email protected]

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Asian Equities Sales Jeffrey Cahyadi (65) 6329 2111 [email protected]

ASEAN Equities Sales Lunar Lee (65) 6499 6510 [email protected]

ASEAN Equities Sales Tadashi Ishii (65) 6329 2131 [email protected]

India Specialist Navneet Babbar (65) 6329 2166 [email protected]

Korea Specialist Michael Greenberg (65) 6499 6511 [email protected]

Japan Specialist Takahito Otake (65) 6329 2192 [email protected]

Japan Specialist Takeo Kubota (65) 6321 3051 [email protected]

Taiwan

Head of Equity (Taiwan) William Chen (886) 2 8758 6171 [email protected]

Taiwan Specialist David Huang (886) 2 2345 3635 [email protected]

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Taiwan Specialist Tomoko Suto (886) 2 8758 6180 [email protected]

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Head of Equities (Korea) K Y Nam 82 (2) 787 9861 [email protected]

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Head of Equities (India) Sriram Iyer (91) 22 6622 1040 [email protected]

India Specialist Ashish Kalra (91) 22 6622 1055 [email protected]

India Specialist Deepa Arora (91) 22 6622 1000 [email protected]

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Australia

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Head of Sales (Philippines) Leon Jose Katigbak (632) 750 4411 [email protected]

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Asian & JP Equity Sales Ayami Miyoshi (1) 212 612 6929 [email protected]

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Asian Equity Sales Joshua Evans (1) 415 955 8100 [email protected] * This material has been compiled by Daiwa Capital Markets equity sales and marketing personnel from various publicly available sources, including newspapers and news services. This information has not been reviewed or approved by or in conjunction with Daiwa research. It is not intended to be a comprehensive summary of newsworthy business or economic events nor is it a substitute for Daiwa fundamental research, and it may not be relied upon as such. The information is not intended to reflect the views of Daiwa or any of its affiliates and the accuracy of the information is not guaranteed. The information does not constitute an offer, solicitation or recommendation for the purchase or sale of any securities or other financial instruments nor does the information constitute advice or an expression of our view as to whether a particular security or financial instrument is appropriate for you and meets your financial objectives. Daiwa and/or its affiliates may make markets, effect or have effected a transaction for their own account in any securities mentioned herein or in related investments and also may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned herein. *





daiwa !! to · [analyst alan kam] taiwan mobile held its fy11 results conference call on 1/19....

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