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  • AEJ research summary report on JSW Steel from Nomura

    Published on September 7, 2011

    by NR INDRAN / INT

    1. First Look – Catcher Technology (2474 TT, Buy) – Better than expected Aug. sales ( TWD223.0 / PT: TWD310.0 )

    Eve Jung; Ariana Kuo

    Valuation/Action: Retain Buy; Good timing to accumulate
    We retain our positive view on Catcher as we think 3Q11 sales will surprise on the upside. Catcher’s share price has dropped 17% since 1 August owing to the market’s increasing concerns of slowing momentum from HTC’s smartphone orders, intensifying competition from Pegatron’s metal casings subsidiary Riteng, and rising adoption of low-end smartphones. However, we think the market is over-concerned on Catcher’s top-line growth and margin pressure given Catcher’s recent project wins and remaining high entry barrier in metal casings business. Catcher trades at 11x FY12E EPS. We regard its valuation as attractive compared with other component names. We retain our Buy rating with a TP of TWD 310.

    2. Singapore Banks – DBS-OCBC merger scenario articulated

    Anand Pathmakanthan; Manjith Nair

    Action: BUY DBS, OCBC; M&A potential underscores undervaluation
    The timing for a possible DBS-OCBC merger focused on delivering internally driven revenue and cost synergies appears opportune, with the global economy facing a prolonged period of sluggish growth and competitors distracted by balance sheet and domestic market concerns. A merged banking group would rank well within the top-30 banks globally by market capitalisation and provide a distinct, wholly pan-Asian franchise headquartered in AAA-rated Singapore, boosting customer acquisition and franchise valuation.

    3. Genting Singapore (GENS SP, Reduce) – Re-setting our baseline assumption ( SGD1.56 / PT: SGD1.41 )

    Wai Kee Choong; Raashi Gupta

    Cutting price target

    Action: What’s new?
    To incorporate the recent disappointing Q2 earnings and a deteriorating macro environment, we are lowering our Q4 rolling chip volumes by 23% which still implies 9% sequential growth from Q3. However, we are cutting our EBITDA estimates by 3% toSGD372mn for 3Q11 and by 17% to SGD336mn for 4Q11 after incorporating bad-debt write-offs of SGD12mn and SGD38mn for the two quarters.


    Regional Sector Strategy / Regional Economic Analysis

    Asia Displays – Weak panel price to continue throughout 2011F

    James Kim; Greg Kang

    According to Witsview today, TV panel and IT panel prices dropped 2-4% and 1-3%, respectively, over the last two weeks. The continued panel price fall is attributed mainly to weaker-than expected TV and PC demand and global economy woes led mainly by Europe and the US. August is usually an inventory restocking season in preparation for the high-demand season, yet, coupled with demand weakness, restocking demand seems very weak as the whole supply chain (including set makers, panel makers and retailiers) tends to implement a tight inventory policy due to low visibility of demand, in our view.

    NOMURA: Asia Economic Alert: Australia – Business indicators point to a strong Q2 GDP

    Stephen Roberts; Tatiana Byrne

    Q2 business inventories rose in volume terms by a much greater-than-expected 2.5% q-o-q, sa (Consensus: 0.3%) which we believe will likely contribute 0.8 percentage points (pp) to Q2 GDP growth.

    Korea

    Korea Zinc [010130 KS] – Buy : Silver-lining in times of uncertainty ( KRW430,500 / PT: KRW620,000 )

    Hong Kong / China

    First Look – China Telecom (728 HK, Neutral) – Parentco may consider MVNO in UK ( HKD5.06 / PT: HKD4.90 )

    China Property Paradise – HPR: less impact on 2/3 tier cities

    Hong Kong Property – Recap of reporting season

    Singapore

    Singapore Telecom (ST SP, Neutral) – SingTel – life with and without Telkomsel ( SGD3.13 / PT: SGD3.45 )

    Malaysia

    Hong Leong Bank [HLBK MK] – Neutral : Highlights of FY11 results analyst briefing ( MYR12.3 / PT: MYR14.1 )

    Indonesia

    Krakatau Steel (KRAS IJ, Neutral) – Caught up at the wrong time ( IDR970 / PT: IDR1,080 )

    Australia

    Air New Zealand (AIR NZ, Buy) – Rugby World Cup to benefit FY12F ( NZD1.11 / PT: NZD1.35 )

    India

    JSW Steel [JSTL IN] – Buy : iron ore issues – a temporary solution ( INR722.95 / PT: INR1,038 )

    You can contact the Author at [email protected]

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