ASIASUPERTEN：ANEQUITYPORTFOLIOREFLECTINGOURBESTIDEASINASIA1213

1、equity strategy asia asia super ten an equity portfolio reflecting our best ideas in asia abc global research growth stays modest. ow: china, korea and indonesia. sector preference: consumer discretionary, energy and it add: hyundai dept store, mediatek, sun pharma and zoomlion keep: cathay pacific,

2、 china mobile, company cathay pacific china mobile hyundai department store kasikornbank li 2) relatively stable sssg owing to high sales contribution from its seoul stores; and 3) strong operating leverage leading a rebound in 2013 earnings especially with the expansions at the coex store completed

3、. mediatek semiconductors, taiwan mediatek is preferred owing to its low-cost chip design lowering entry barriers for white-box smart phones in china. the theme of low-cost smartphones plays into yolanda wangs bullish call on mediatek that has enabled a long tail of brands to survive the transition

4、from feature-phones. sun pharma pharmaceuticals, india we prefer sun pharma among the large caps given it has the most differentiated pipeline with a mix of injectables, controlled substances and much larger portfolio of topicals including dermaceuticals, nasal sprays and ophthalmics. the recent acq

5、uisition of dusa pharma adds medical drug-device combination technology to its portfolio. hsbc asia super ten model portfolio of 10 equally weighted stocks company namebbg codecountrysectorshare pricehsbc ratinghsbc analysthsbc potential target pricereturn cathay pacific china mobile 293 hk 941 hk h

6、k china airlines diversified telecoms 13.6 (hkd) 88.6 (hkd) ow ow mark webb tucker grinnan 17.5 (hkd) 103 (hkd) 29% 16% hyundai dept store069960 ks koreamultiline retail157000 (krw)ow(v)karen choi 190000 (krw)21% kasikornbank li therefore, we are reiterating our ow rating. potential return equals th

7、e percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 13 equity strategy asia 13 december 2012 china mobile (ow, 941 hk) the integration of chips that support both china mobiles 3g standard (td-scdma) and 4g standard (td-l

8、te) in mass- market handsets will level the playing field in china best 3g net adds in 3q and dramatically raised fy13 handset sales target suggest the wireless data revenue uplift story is beginning to play out ow. tp of hkd103 implies 21% potential return (including 3.5% prospective dividend yield

9、) abc investment case and catalysts. the introduction of multi-mode handsets will level the technology playing field in china. we expect the next iphone to support china mobiles 3g td-scdma standard within 3-6 months. we expect this to boost sales growth and drive a major rerating of the stock. our

10、competitors believe 4g for china mobile (td-lte) will be a late 2014-15 event. our focus on qualcomms technology road-map and china technology policy means we believe it will happen much earlier, in 2h13. cms 3g net adds were up 9.3% m-o-m to 3.46m with 62.7% of wireless net additions on the 3g netw

11、ork in aug-sep 2012. 100m td handset sales target for earnings therefore, we are reiterating our ow rating. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. * = based on hsbc eps (fully dilut

12、ed) 14 equity strategy asia 13 december 2012 hds (ow(v), 069960 ks) attractive valuation: 0.9x 2013e adjusted pb on 11.3% roe we anticipate an earnings recovery in 2013 with sssg at coex store set to return to positive territory ow(v). tp of krw190,000 implies 21% potential return (including 0.4% pr

13、ospective dividend yield) abc investment case and catalysts. while we believe a recovery in private consumption may take more time, we remain positive on hds given: 1) attractive valuation; 2) relatively stable sssg owing to high sales contribution from its seoul stores; and 3) strong operating leve

14、rage leading a rebound in 2013e earnings, especially with the expansion at the coex store completed. valuation compelling. hds shares trade at 1.2x 2013e pb. however, for better comparison, we revalue its land by 216%, using lotte shopping as a benchmark. this lowers 2013e pb to 0.9x on 11.3% roe (v

15、s. peer average pb of 0.7x on 8% roe). strong operating leverage to outshine peers. as we assume only a mild recovery on the macro front, operating leverage has become more critical for retail earnings. while negative sssg at hds coex store had burdened operations in 2h12, with earnings therefore, w

16、e are reiterating our ow(v) rating. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 15 equity strategy asia 13 december 2012 kasikornbank (ow, kbank tb) best play on fee income wave moving i

17、nto higher-margin businesses ow. tp of thb220 implies 13.1% potential return (including 2% prospective dividend yield) abc best play on surge in fee income. we expect thai banks to post the widest roa expansion in asia over the next two years. and within the sector, kbank is set to deliver the wides

18、t expansion, owing to its strong 18-19% pa fee income growth. transactional, bancassurance and cash management / trade finance fees should continue to be the key drivers of its already solid non-interest income platform (35% of total income on its 38% stake). moving into higher-margin businesses. in

19、 a bid to improve nim (loan yield spreads have continued to improve over the last seven quarters), kbank is on track to increasing its market share in higher-yielding areas, such as the smaller smes, while gradually building up in the auto hire purchase and personal loan segments. key financials mit

20、igating the risk of additional capital required. valuation. our gordon growth model-based tp of thb220 is based on the following assumptions: 17.2% sustainable roe, 11.4% cost of equity, and 7.0% growth rate. our tp implies a 2013e pb of 2.1x and a 2013e core pe of 11x. risks: 1) larger-than-expecte

21、d nim compression and 2) higher-than-expected provision charges. xiushi cai* analyst the hongkong and shanghai banking corporation limited, singapore branch +65 6658 0617 .sg *employed by a non-us affiliate of hsbc securities (usa) inc, and is not registered/ qualified pursuant to finra regulations

22、share price: thb198.00market cap: thb 473.8bn year to 12/2011 12/2012e 12/2013e 12/2014e hsbc eps (thb) 10.1 14.1 17.3 19.9 eps growth (%) 20.8 39.5 22.6 14.7 pe (x) 19.6 14.0 11.4 10.0 dividend yield (%) 1.3 1.8 2.0 2.4 notes: price at close of 7 december 2012 (10 december was a public holiday). so

23、urce: company data, hsbc estimates. under our research model, for stocks without a volatility indicator, the neutral band is 5ppts above and below the hurdle rate of 10% for thailand stocks. at the time we set our target price it implied a potential return above the neutral band; therefore, we rate

24、kbank stock ow. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 16 equity strategy asia 13 december 2012 li management expects it to reach 34.6% in 2013 (same level as 2010) on track to deli

25、ver usd100m cost savings in 2013e. we forecast 2013 earnings to grow 73% yoy ow(v). tp of hkd17.80 implies 39.3% potential return (including 3.4% prospective dividend yield) abc investment case and catalysts. li 2) lf guided for double-digit revenue growth by its top 30 us trading accounts in 2013e

26、on market share gains; 3) dsg (jv with wal-mart) was profitable in 2012e and should continue to expand next year; and 4) lf asia and lf logistics are two outperforming segments that should be major growth drivers for the group over three years, amid scale enlargements. earnings and 2) asp increases.

27、 its cost savings target of usd100m by 2013e is on track, with usd60m achieved ytd and the group expecting to achieve the remaining usd40m in early 2013e. chris zee* analyst the hongkong and shanghai banking corporation limited +852 2822 2912 .hk *employed by a non-us affiliate of hsbc securities (u

28、sa) inc, and is not registered/ qualified pursuant to finra regulations share price: hkd13.10market cap: usd 14,030m year to 12/2011 12/2012e 12/2013e 12/2014e hsbc eps (hkd) 0.077 0.057 0.104 0.127 eps growth (%) 8.4 -26.0 82.4 22.1 pe (x) 21.8 29.5 16.2 13.2 dividend yield (%) 4.0 2.6 3.4 4.6 note

29、s: price at close of 10 december 2012. source: company data, hsbc estimates. under our research model, for stocks with a volatility indicator, the neutral band is 10ppts above and below the hurdle rate of 8.5% for hong kong stocks. our target price implies a potential return of 39%, above the neutra

30、l band; therefore, we are reiterating our ow(v) rating. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 17 equity strategy asia 13 december 2012 valuation. our hkd17.80 tp is based on 1.0 x

31、peg or 22.0 x fy13e pe, one standard deviation below the historical trading average of 29.3x. we argue li therefore, we are reiterating our ow rating. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when in

32、dicated. 19 equity strategy asia 13 december 2012 prada (ow(v), 1913 hk) market share gains continue and they come with significant operating margin expansion product flow capabilities and channel consolidation could continue to generate further positive growth surprises ow(v). tp of hkd80 implies 1

33、5.1% potential return abc investment case and catalysts. prada benefits from a “snowball effect”: the success story of the brand with retail operators as well as end consumers is basically building the basis for future success as well. as the prada core brand is seen gradually as an alternative to t

34、he bigger brands in the space and as sales are a third of those at lv and store count c190 units lower, increasingly discerning consumers are embracing the discrete positioning of prada more and more. conversely, retail operators who have witnessed the hefty market share gains over the past 2-3 year

35、s are willing to give prada more space, better locations and preferential rates. product flexibility and channel shift to help. we believe the principle of so-called “flash collections” is still not fully understood by the market. as 75% of skus at prada change every year on the back of monthly prod

36、uct flows, we believe the debates earnings therefore, we rate prada stock as ow(v). potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 20 equity strategy asia 13 december 2012 samsung electroni

37、cs (ow, 005930 ks) turnaround of components to support earnings growth brighter outlook for handsets in 1h13 ow. tp of krw1.9m implies 27.8% potential return (including 0.4% prospective dividend yield) abc turnaround of components. 1) sec is one of the key beneficiaries of specialty memory growth as

38、 it possesses technology leadership in every area. we estimate its specialty portion will reach 85% of total dram in 2013 from 75-80% in 2012. also, better nand and pc dram price trends will lead to better asp assumptions. 2) system lsi to show strong growth with ap orders increase amid new product

39、launches. less depreciation will lift opm to 14% in 2013e from 10% in 2012e. 3) lcd margin should improve further to 8% from 6% in 3q, along with panel price stabilization and cost reduction. stronger amoled growth thanks to adoption by mid-tier smartphone makers. amoled area growth will reach c70%

40、while asp declines by c15% in 2013e. delayed capacity investment to end-2013 and less depreciation costs should keep opm above 20%. earnings therefore, we are reiterating our ow rating. potential return equals the percentage difference between the current share price and the target price, including

41、the forecast dividend yield when indicated. 21 equity strategy asia 13 december 2012 sun pharma (ow, sunp in) despite taros strong performance, us business should rise on continued taro beat and 136 pending anda launches differentiated pipeline with mix of proprietary technology assets makes sun mos

42、t protected against “patent cliff” decline ow. tp of inr815 implies potential return of 16.4% (including 0.7% prospective dividend yield) abc investment case and catalysts. having already hit the bottom of the “patent cliff”, generics will rely on differentiated products in the us, which offer limit

43、ed competition to support growth. we highlight sunp whose pipeline of 136 pending andas contains a mix of injectables, controlled substances, and much larger portfolio of topicals including dermaceuticals, nasal sprays and ophthalmics. sizeable differentiated launches in the us include sumatriptan a

44、utoinjector and geffexor xr tablets. while a differentiated gkeppra sr filing could be some way off a launch, the recent acquisition of dusa adds patented drug-device combination technology in the attractive actinic keratoses market. earnings therefore, we are reiterating our ow rating. potential re

45、turn equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 22 equity strategy asiaabc 13 december 2012 valuation. we value sunp at 24x sep 2014 eps. our target multiple is at a 20% premium to the sector average an

46、d to peers such as dr reddys and lupin; we believe this is justified due to better india business and outperformance in the us. risks: 1) sharp price correction in taro brands in the us, 2) product approval delays in the us and 3) adverse litigation outcome in the gprotonix case. 23 equity strategy

47、asia 13 december 2012 zoomlion (ow(v), 1157 hk) property construction bodes well for construction machinery demand in 2013; zoomlion to benefit as the industry leader with diversified product machinery usage hours holding up with gradual improvement which should lower the default risk on finance lea

48、se related sales ow(v). tp of hkd14.60 implies 40.7% potential return (including 3.2% prospective dividend yield) abc investment case and catalysts. we think zoomlion is well placed in the chinese construction machinery sector given its market leading position in concrete machinery and strong balanc

49、e sheet. two key demand drivers are infrastructure and property construction. we saw infrastructure construction pick up in 2h12 and property construction activity should pick up in 2013. infrastructure construction is estimated to make up 40-50% of machinery demand and property construction c30%. t

50、he newly formed chinese government has indicated investment will be as important as domestic consumption in economic policy in 2013. we would not be surprised to see policy encourage property construction activity in 2013. investors have been concerned about finance earnings therefore, we are reiter

51、ating our ow(v) rating. potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. 24 equity strategy asiaabc 13 december 2012 disclosure appendix analyst certification the following analyst(s), econom

52、ist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or

53、will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: herald van der linde, devendra joshi, garry evans, mark webb, tucker grinnan, karen choi, xiushi cai, chris zee, yolanda wang, erwan rambourg, ricky seo, girish bakhru and anderson ch

54、ow important disclosures stock ratings and basis for financial analysis hsbc believes that investors utilise various disciplines and investment horizons when making investment decisions, which depend largely on individual circumstances such as the investors existing holdings, risk tolerance and othe

55、r considerations. given these differences, hsbc has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to

56、identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. hsbc has assigned ratings for its long-term investment opportunities as described

57、below. this report addresses only the long-term investment opportunities of the companies referred to in the report. as and when hsbc publishes a short-term trading idea the stocks to which these relate are identified on the website at details of these short-term investment opportunities can be foun

58、d under the reports section of this website. hsbc believes an investors decision to buy or sell a stock should depend on individual circumstances such as the investors existing holdings and other considerations. different securities firms use a variety of ratings terms as well as different rating sy

59、stems to describe their recommendations. investors should carefully read the definitions of the ratings used in each research report. in addition, because research reports contain more complete information concerning the analysts views, investors should carefully read the entire research report and should not infer its contents from the rating. in any case, ratings should not be used or relied on in isolation as investment advice. rating definitions for long-term investment opportunities stock ratings hsbc assigns ratings to its stocks in this sector on the following basis: for each stock we