投资金融之AsiaPerspectives(20041122).docxVIP

Asia PerspectivesHONG KONG22 November 2004SummaryPROPERTY DEVELOPERSAdrian NganMore conviction, less confusion. OverweightThe increased transparency of housing supply should help raise demand on the back of improving economicfundamentals. We expect more upside in home prices in 2005, fuelling higher earnings and greater NAVTAIWANupside for developers.Page 3TECHNOLOGY/TFT-LCDFrank SuTime to look for an entry point. NeutralWe upgrade the TFT-LCD sector to Neutral. The PC panel price is close to bottom, and a TV price war isunderway. We expect the cycle to bottom out in late 1Q05, one quarter earlier than originally expected. AUOMALAYSIAis our top pick.Page 5METALSChoong Wai Kee/Tan Soon HoeLion Corp (LION MK)Earnings preview. Outperform M$2.63Lions 1QFY05 results should confirm a turnaround story, albeit lower than projected due to a much longerTHAILANDfurnace upgrade. Nevertheless, the company is on track to achieve stronger quarterly profit.Page 13PROPERTYKasem PrunratanamalaNoble Development (NOBLE TB)Dont hold your breath. Underperform Bt3.40Noble expects a net profit of Bt381m this year and Bt418m next year, while our forecasts are 39% below forboth years. It will have 302 finished houses at year-end, which would take about a year to sell.Underperform.KEY DATAKey Buys & SellsUpcoming ResultsRecent Rating ChangesRecent Earnings RevisionsTop 60 by Market Cap One Month Price Performance(Please refer to the important notice on the back page)Page 16Page 20Page 21Page 22Page 23Page 2522 November 2004COMPANY VISIT SCHEDULEHONG KONGTAIWAN23 Nov Tuesday23 Nov TuesdayMALAYSIA23 Nov TuesdayINDONESIA22 Nov Monday22 Nov Monday22 Nov Monday22 Nov Monday22 Nov Monday22 Nov MondayK Wah InternationalRegal HotelTradewinds CorpAneka Kimia RayaIndocementSemen CibinongBank NISPAstra Agro LestariAstra International22 Nov Monday22 Nov Monday23 Nov Tuesday24 Nov Wednesday25 Nov Thursday25 Nov Thursday25 Nov ThursdayPHILIPPINES22 Nov Monday24 Nov WednesdayCMOFETNovatekHannstarOptimaxHon HaiGold CircuitDigitel CommunicationsICTSISource: BNP Paribas Peregrine2ASIA PERSPECTIVES22 November 2004PROPERTY DEVELOPERS HONG KONGOverweightUnchangedMore conviction, less confusionThe increased transparency of housing supply should help raise demand on theback of improving economic fundamentals. We expect more upside in homeprices in 2005, fuelling higher earnings and greater NAV upside for developers.EventSector update after release of housing supply by Housing Department.AnalysisIncreased housing supply transparency: For the first time, the Housing Department released quarterly figures revealing the supply ofprimary market housing units. The scheduled update of aggregate housing supply is aimed at increasing the transparency of the supply pictureand hence minimising unnecessary confusion. Although the government has not made any forecast of annual completion rates, the data doesshow the trend of private housing completions over the next few years (200507), and a preliminary indication of supply over the longer term, i.e.beyond 2007.Construction starts trending downward since 1998: One of the major positives has been the sharply downward trend in actual housingconstruction supply since 1998. This paves the way for a decline in completion rates over the next few years. In the first nine months of 2004,construction of some 13,000 units began compared to 14,100 in 2003. For 2004, housing starts are likely to be higher than in 2003. This wouldimply a pick-up in completions beyond 2007, which is in line with our projection.Significantly lower supply between 2005 and 2007: According to the governments figures, actual completions of private housing units upto September totalled 19,100 units vs our forecast of 26,500 for the full-year and 26,400 actual units in 2003. It seems that both our forecast andthe markets for 2004 are largely in line with some slight downward bias. Between 2005 and 2007, housing completions will decline steadily from2004s 26,500 units to approximately 15,140 in 2007 as a consequence of the drop in housing construction between 2001 and 2003.Relatively short supply pipeline: As at September, there were 63,000 private housing units ready and pending sale and presale,comprising 15,000 completed and unsold units and 48,000 under construction and not yet pre-sold. This is equivalent to 2.3 years of supply,based on an annual average take-up in the primary market between 2000 and 2004 amounting to 27,659 units. Unfortunately, there are nocomparable figures for past years, but this is definitely not a long supply pipeline, especially with demand expected to increase steadily on theback of improving economic confidence. Meanwhile, the Housing Department also revealed that there are about 10,000 units from disposed landon which construction has yet to start. These would include various projects from the land auctions resumed earlier this year, Urban RenewalAuthority projects, and the conclusion of several farmland conversion projects; however these units will form much of the supply beyond 2008.Inventories serving as near-term buffer: Of the 15,000 completed and unsold units, some 67% come from projects finished in 2003 and2004 (see table 1). Furthermore, Hunghom Peninsula, which became a private housing project early this year and is owned by NWS/SHKP, isresponsible for some 2,470 units. As the consortium is likely to demolish the project for the redevelopment of luxury apartments, the number ofcompleted and unsold units would decline by 16.4% within the next six months, and Hunghom Peninsula will probably become new supply in200809 with a smaller number of units. The near-term buffer includes projects in which the launch has been deliberately held back bydevelopers, given the improving market, e.g. the Harbourside in Kowloon Station.Higher prices in primary market supported by rejuvenation of secondary market: To conclude, the supply of private residential unitsover the next two to three years is expected to dwindle, which helps housing prices given our expectation of increasing demand on the back of amore sanguine economic outlook, declining real interest rates, historically low mortgage rates, and the increasing influx of liquidity from MainlandChina. Table 2 demonstrates that the take-up of primary market flats began to surpass completions in 2003, but that transactions in the secondarymarket remain sluggish. With demand growth sustained in 2004 and supply on a gradual decline, the secondary market has begun to benefit.Transactions in the secondary market have grown substantially this year, and on an annualised basis should hit a post 1997 high of around80,700. This is largely a result of excess demand that has spilt over from the primary market.Expecting 2025% increase in prices in 2005: With supply in the primary market continuing to decline, we expect transactions in thesecondary market to continue to pick-up, and hence the price differential with the primary market will narrow further. This virtuous cycle shouldhelp fuel further increases in overall housing prices in coming years. Mass residential property prices have rebounded 8.0% since August after amild 4.5% adjustment between May and August. To-date, average prices have gone up a sharp 30%. We maintain our positive view of homeprices in 2005, despite the strong price surge since the trough in 2003 (up 53.3% since August 2003). Having said that, the price increase in 2005will be milder at 2025%.Stock picks: Our Overweight call on property developers is still intact although the sector as a whole is less attractive compared to 12months ago and some stocks look somewhat fairly valued. As a result, our stock picks are now more selective, with bias towards small mid-capstocks and turnaround/re-rating plays still trading on undemanding valuations. Our top picks in the sector are Henderson Land, Sino Land, KerryProperties, and New World Development.AnalystAdrian NganBNP Paribas Peregrine Securities Ltd(852) 2825 18123ASIA PERSPECTIVES22 November 2004Further analysisChart 1: Private housing units commencement of construction vs completion(No. of units)40,000Commencement of constructionCompletion35,00030,00035,20031,30030,10031,10025,00030,90022,90026,40020,00015,00010,00022,00014,70017,10024,00018,30017,80014,10019,10013,0005,000019971998199920002001200220032004 (upto Sep)Source: Housing Department of the HKSARTable 1: Major completed projects and unsold units as at September 2004ProjectIsland HarbourviewRoyal PeninsulaIsland ResortMarbellaGrand TerraceCoastal SkylineBeverly HillHong Kong GardenMetro Harbourview IAqua Marine129 Repulse Bay RoadHarboursideMetro Harbourview IISummit Terrace18 Farm RoadShum Wan TowerHunghom PeninsulaDeveloperSino Land/KerrySHKP/HendersonSino Land/Ng familyChinachemNan FungHKRHendersonChinachemHendersonHang LungChinachemHang LungHendersonNan FungSHKPSHKPNWS/SHKPLocationTai Kok TsuiHunghomSiu Sai WanMa On ShanMid-levelsTung ChungTai PoTsing Lung TauTai Kok TsuiCheung Sha WanRepulse BayWest KowloonTai Kok TsuiTsuen WanHo Man TinAp Lei ChauHunghomCompleted20002001200120012001200220022002200220032003200320032003200420042004Unsold units1122162412671893693723212771,6161849415072052952392,470Sources: Centaline Properties; BNP Paribas Peregrine estimatesTable 2: Historical and forecast supply and take-up of private housing unitsCompletions Take-up Year19971998199920002001200220032004*2004*2004E2005E2006E2007E2008EActual/BNPPP forecast14,70017,10030,90024,00022,90031,10026,40019,10025,46626,50022,50018,50015,14019,598Primary market Secondary market20,380 171,64931,599 65,50621,577 70,69417,830 60,34021,314 61,60327,414 51,41228,556 50,32621,175 60,58028,233 80,773 Total192,02997,10592,27178,17082,91778,82678,88281,755109,007* As at September; * AnnualisedSources: Housing Department; Centaline Properties; BNP Paribas Peregrine estimates4ASIA PERSPECTIVES22 November 2004TECHNOLOGY/TFT-LCD TAIWANNeutralChanged from UnderweightTime to look for an entry pointWe upgrade the TFT-LCD sector to Neutral. The PC panel price is close tobottom, and a TV price war is underway. We expect the cycle to bottom out inlate 1Q05, one quarter earlier than originally expected. AUO is our top pick.EventSector and stock recommendation upgrade.AnalysisTFT-LCD sector upgraded to Neutral, based on the following:1)2)3)PC panel prices bottoming out: Due to strong demand for monitor panels and loss-making panel prices, the top management of aleading TFT-LCD maker in Taiwan has informed its sales department to stop cutting PC panel prices. We believe this indicates thatdownside will be limited for PC panel prices that are approaching cash cost.Price elasticity kicking in: The street price of 17-inch LCD monitors has fallen to about US$280 at present (vs US$463 in May), and isexpected to fall below the threshold of US$250 that will stimulate delayed purchases by consumers.LCD industry excessive global inventory to drop to only one week at end-1Q05 from peak of 4.6 in 3Q04: This assessment isbased on our proprietary inventory analysis. Inventory levels in the notebook (NB) and LCD monitor segments will return to normal,while the LCD TV segments will drop to 8.5 weeks in 1Q05 from 17.7 in 3Q04.Foresee two risks ahead to result in negative sentiment in market and open opportunities for investors to accumulate shares: Thefirst is the tumbling of the TV panel price, which has the most impact on CMO; the second is the worst-than-expected 4Q04 result, which wascaused by a greater-than-anticipated price fall and inventory write-off. The retail-driven Taiwanese stock market will approach these two scenariosnegatively, but we regard the situation as an opportunity for investors to accumulate shares.Upgrade AUO to Outperform as earnings to bottom out in 4Q04: We lower AUOs earnings forecast for 2004 by 6% due to worse-than-expected 4Q04 losses of NT$2.9b vs the companys guidance of NT$1.2b. However, the stabilising panel price, falling cost of PC panels, and apick-up in small and medium panel business will enable AUOs margin to improve from 1Q05. AUO has only 10% exposure to TV panels, so thetumbling TV panel price has less impact on the company. We raise our target price to NT$52, based on 2.0x 2005 BV.Upgrade CMO to Market perform: The major risk for CMO is the falling TV panel price, given that CMO has 30% exposure to the TVbusiness. We are concerned that inventory write-off could impact CMOs bottom-line in 4Q04. Nevertheless, once TV panel prices bottom out,CMO will be the primary beneficiary of the TV replacement cycle in 2H05.Cycle could bottom out in late 1Q05, one quarter earlier than expected: The key catalyst triggering TV replacement demand and turningthe cycle around is the 32-inch panel price falling to US$500, enabling the 32-inch LCD TV retail price to reach US$1,000; 32-inch panels now sellfor US$700. (Please refer to our report, Access entry point for next upcycle, published in September.) Given that the TV panel price war is heatingup earlier than expected, we now foresee the 32-inch LCD TV panel price dropping to US$500 in March 2005 vs our original expectation of May.As a result, the best time to be aggressive on the sector would be 1Q05.Earnings and valuation summary of Taiwanese TFT-LCD stocksShareTarget Upside/ EPS P/BV PE Bloombergcodeprice(NT$)price downside(NT$) (%)2004E 2005E(NT$) (NT$)2004E 2005E(x) (x)2004E 2005E(x) (x)RatingAUOCMOQDI2409 TT3009 TT3012 TT41.7040.5018.4052.00 2542.00 415.60 (15)5.51 0.934.88 1.071.58 (0.45)1.6 1.51.5 1.51.2 1.37.6 44.98.3 37.911.7 nmOPMPUPSectorOP = Outperform; UP = Underperform; MP = Market performSource: BNP Paribas Peregrine estimatesAnalystFrank SuBNP Paribas Peregrine Securities LtdTaiwan Representative Office(886 2) 6601 02325ASIA PERSPECTIVESNeutral22 November 2004Further analysisPC panel price bottoming outPrice discipline in PC segment improving: Due to stronger-than-expected demand, the seniormanagement of a leading TFT-LCD maker in Taiwan has informed its sales department to stop cutting PCpanel prices. We believe this indicates the limited downside for PC panel prices that are approaching theircash cost. Given that PC panel prices have fallen below cost, and that demand is returning to retailchannels, price discipline will improve in the PC panel market.17-inch and 19-inch monitor panel prices(US$)5004003002001000Jan-03Source: BNP Paribas Peregrine estimates19-inch17-inchJan-04ForecastsUS$220US$150Jan-05Price elasticity kicking inStreet price falling close to threshold to trigger release of pent-up demand: The stiff fall in themonitor panel price was not reflected in the street price until September. The retail price of a 17-inchmonitor dropped US$40 to US$398 (9% m-m) in September. DELL is now selling its 17-inch LCD monitorfor only US$248 on its website, and other vendors will soon address the tactic with aggressive pricingstrategies. This is likely to enable the global 17-inch LCD monitor price to fall close to US$250 by year-end the threshold that will spur the release of pent-up demand by consumers. As a result, we believe thestrong LCD monitor demand could last through 1Q05.17-inch and 19-inch LCD monitor street prices(US$)1,00075050019-inchForecastsUS$35017-inch250US$2200Jan-03Source: BNP Paribas Peregrine estimatesJan-04Jan-05Global excessive inventory forLCD industry will drop to oneweek at end-1Q05Inventory l