p (USDm) Shares outstanding (m) 1,111.8 Major shareholders Dah Sing Financial (74.23%) Free float (%) 26 Avg daily value traded (USDm) 2.3
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Related recent research
Date
2008A 188.6 58.0 0.64 1.5 2.2
2009A 600.9 13.6 1.20 0.0 6.3
2010E 1,046.4 15.8 1.39 2.0 9.2
2011E 1,349.6 12.2 1.30 3.4 11.0
2012E 1,642.9 10.1 1.21 4.3 12.5
Hong Kong banks: Banks raise mortgage rates; slightly positive to NIM Sophia Lee 08 Nov 2010 Hong Kong banks: Why we are comfortable about property exposure Sophia Lee 16 Sept 2010 Hong Kong banks: RMB business; Hong Kong is the new London Sophia Lee 11 Aug 2010 DSBG: 1H10 results in line; maintain Buy Sophia Lee 09 Aug 2010
DB EPS is fully diluted and excludes non-recurring items Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the year end close
Deutsche Bank AG/Hong Kong Deutsche Bank AG/Hong Kong Page 11
10 November 2010
Strategy Asia Equities Daily Focus
Asia Hong Kong Banking/Finance Banks
9 November 2010
HSBC Holdings Reuters: 0005.HK Bloomberg: 5 HK Exchange: HKG Ticker: 0005
Company Update Buy Price at 8 Nov 2010 (HKD) Price target - 12mth (HKD) 52-week range (HKD) HANG SENG INDEX 86.70 97.50 98.00 - 69.55 24,964
Global Markets Research
Reading the runes (Pt II) Tracy Yu Research Analyst (+852) 2203 6191 tracy.yu@db.com
Key changes
Jason Napier, CFA Research Analyst (+44) 20 754-74433 jason.napier@db.com
Sophia Lee, CFA Research Analyst (+852) 2203 6226 sophia.lee@db.com
Price target 96.33 to 97.50 Provisioning (FYE) 15,432.3 to 14,699.6 Net int margin (FYE) 2.89 to 2.83 Net profit (FYE) 14,074.7 to 13,722.3
1.2% -4.7% -2.2% -2.5%
Price/price relative 160 120 80 40 0 11 /0 8 2/ 09 5/ 09 8/ 09 11 /0 9 2/ 10 5/ 10 8/ 10
Turning words into numbers HSBC's group trading update contains few numbers, but some hard analysis is possible. We have cut our 2010 and 2011 EPS forecasts by 2% and 5%, with the 2H10 pre-tax downgrade partially offset by a surprisingly low expected tax rate. Overall, the business is delivering a strong-than-expected turnaround in PFS NA more than offset by the a GBM revenue slowdown. The EPS downgrade adjusts our TP which is adjusted to HK$97.5 from HK$96.33 (using exchange rate of 7.749). Given upside remain Buy. Bumps ahead? Our interpretation of the trading update required a modest downgrade to EPS. But given the poor share performance (underperforming Eurobanks 7% YTD) we see this as more than in the price. What attracted our interest was that the company felt it necessary to highlight that the picture in EM is not as bright as it has been, saying that "Our latest data from emerging markets points to a slowdown in the rate of recovery and the likelihood of some bumps in the road ahead". The bank is heading in the right direction Though HSBC has grown more slowly in EM than we would have liked (group loans 04-1H10 CAGR 5%, StanChart 22% CAGR), and is in the process of running down certain EM loan portfolios (Mexico, Middle East), the reasons we like HSBC longer term are evident in the trading update: (1) Liquid balance sheet 每 LDR below 80%, falling another 4% as PFS NA runs-off; (2) Well capitalised: Produced 50bps of core tier 1 in the quarter aided by FX and good take-up of the scrip dividend, but still good on an underlying basis we believe; (3) Recovering US business: Non-Core runoff of U$7.5bn aided by business sale with HSBC Finance Core IFRS profit doubling QoQ; (4) EM growth: Early signs of a more determined approach to growth in EM, with confirmation of further strong growth in Asian Commercial Banking in particular. TP adjusted to HK$97.5 from HK$96.33, Buy We have reduced our 2010 and 2011 adj EPS estimates by 2% and 5%, which leaves HSBC trading at 9.9x 2012 EPS and 1.8x 2010 TNAV. Though this is a premium to the Eurobanks, we think the stock inexpensive given strength of its liquidity and capital, and potential upside to earnings as management better capitalise on these advantages. Our sum-of-the-parts-based TP is adjusted to HK$97.5 from HK$96.33. Given upside to our TP we remain with a Buy. Share price downside risk derives from rising loan losses and larger-than-expected falloff in group net interest income in PFS and in GBM in particular. Forecasts and ratios Year End Dec 31 DPS (net) (USD) Yield (net) (%) ROE (%) Source: Deutsche Bank estimates, company data 1 2
HSBC Holdings
HANG SENG INDEX (Rebased)
Performance (%) 1m Absolute 6.5 HANG SENG INDEX 8.8
3m 4.8 15.2
12m -0.2 14.4
Stock data Market cap (HKDm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) 1,539,477 198,612 0.0 每 0 226.0
Key indicators (FY1) ROE (%) Loan/deposit ratio (%) Book value/share (USD) Price/book (x) NPL/total loans (%) Net int margin (%) Adjusted ROE (%) 10.4 78.0 7.57 1.5 3.6 2.83 每
2008A 0.64 4.7 5.2
2009A 0.34 3.7 5.1
2010E 0.36 3.2 10.4
2011E 0.39 3.5 12.1
2012E 0.42 3.8 13.4
DB EPS is fully diluted and excludes non-recurring items Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the year end close
Page 12
Deutsche Bank AG/Hong Kong
Deutsche Bank AG/Hong Kong
10 November 2010
Strategy Asia Equities Daily Focus
Asia ASEAN Singapore Conglomerates
9 November 2010
ST Engineering Reuters: STEG.SI Bloomberg: STE SP Exchange: SES Ticker: STEG
Results Buy Price at 9 Nov 2010 (SGD) Price target - 12mth (SGD) 52-week range (SGD) Straits Times Index 3.47 3.95 3.47 - 2.96 3,300
Healthy 3Q10 results; improving prospects Kevin Chong Research Analyst (+65) 6423 5549 kevin.chong@db.com
Key changes Price target Sales (FYE) Op prof margin (FYE) 3.65 to 3.95 6,115 to 6,146 8.7 to 8.9 8.2% 0.5% 1.2%
Price/price relative 4.4 4.0 3.6 3.2 2.8 2.4 2.0 1.6 11/08 2/09 5/09 8/09 11/09 2/10 5/10 8/10 STEngineering Straits Tim Index (Rebased) es
Decent earnings; healthy order book totaling S$10.8bn STE delivered decent 3Q10 results with revenues up 10% yoy to S$1,487.1m, while net income grew 8% yoy to S$130.2m. 9M10 net income grew 10.4% yoy to S$347m (72% of our FY10E; 9M09 was 71% of FY09A). Stripping out the Jobs Credit Scheme benefits, 9M10 net income grew at a firm 19% yoy to S$339m. STE expects higher turnover and PBT in FY10 (vs. FY09). The order book at 3Q10 totaled S$10.8bn (S$10.3bn at end-09) and cash/cash equivalents were S$1.6bn in 3Q10. STE's prospects appear to be improving; we maintain our Buy rating. Growth across all divisions; healthy prospects into 2011 9M10 net earnings grew in all divisions: Aerospace up 7% yoy to S$144m, Electronics up 16% to S$76m, Land Systems up 15% to S$68m, and Marine up 15% to S$62m. The income growth reflects improving operating conditions in the different sectors and prospects into 2011 appear to remain healthy, in our view. The group has operational stability through its 42% military exposure (of total sales) and another 10-15% in government-related contracts. ST Aero may benefit from continued Aerospace recovery IATA has reported healthy airline traffic and capacity growth, and we believe ST Aero will be in a strong position to benefit going into 2011. The division＊s recent airframe heavy maintenance contract wins totaling S$370m suggest some delayed benefit from the recovery in airline capacity growth. Accordingly, we think there should be continued flow through benefits from the industry recovery in 2011. Maintaining Buy with a new target price of S$3.95 We have slightly raised our earnings forecasts for the next three years and have incorporated Deutsche Bank＊s latest Rf (down from 2.8% to 2.5%) and Rp (down from 4.7% to 4.5%). Accordingly, we raise our DDM-based target price (7.1% COE) from S$3.65 to S$3.95. Downside risks relate to project execution, US dollar depreciation and worse-than-expected aircraft grounding (see p. 5 for details). Forecasts and ratios Year End Dec 31 Sales (SGDm) EBITDA (SGDm) Reported NPAT (SGDm) Reported EPS FD (SGD) DB EPS FD (SGD) OLD DB EPS FD (SGD) % Change DB EPS growth (%) PER (x) EV/EBITDA (x) DPS (net) (SGD) Yield (net) (%) Source: Deutsche Bank estimates, company data 1 2
Performance (%) 1m Absolute 5.2 Straits Times Index 4.7
3m 7.8 10.2
12m 16.1 22.5
Stock data Market cap (SGDm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) 10,399 8,077 3,003.6 Temasek (49.19%) 51 6.2
Key indicators (FY1) ROE (%) Net debt/equity (%) Book value/share (SGD) Price/book (x) Net interest cover (x) Operating profit margin (%) 30.6 -9.3 0.54 6.5 每 8.9
2008A 5,344.5 686.8 473.6 0.16 0.16 0.16 0.0% -6.9 18.6 12.2 0.16 5.4
2009A 5,547.8 656.7 443.9 0.15 0.15 0.15 0.0% -6.4 17.7 11.6 0.13 5.1
2010E 6,146.4 727.0 486.7 0.16 0.16 0.16 1.6% 9.6 21.5 13.8 0.15 4.2
2011E 6,777.3 825.8 555.6 0.18 0.18 0.18 1.7% 14.2 18.8 12.0 0.17 4.8
2012E 7,472.3 944.1 650.2 0.22 0.22 0.21 2.4% 17.0 16.1 10.3 0.19 5.6
DB EPS is fully diluted and excludes non-recurring items Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the year end close
Deutsche Bank AG/Hong Kong Deutsche Bank AG/Hong Kong Page 13
10 November 2010
Strategy Asia Equities Daily Focus
Asia ASEAN Singapore Telecommunications
9 November 2010
Starhub Reuters: STAR.SI Bloomberg: STH SP Exchange: SES Ticker: STAR
Forecast Change Buy Price at 9 Oct 2010 (SGD) Price target - 12mth (SGD) 52-week range (SGD) Straits Times Index 2.80 2.95 2.80 - 1.93 3,300
So much for the EPL: 3Q10 robust, TP up & maintain Buy William Bratton Wei-Shi Wu Grace Lee Research Analyst (+852) 2203 6186 william.bratton@db.com Research Analyst (+65) 6423 4114 wei-shi.wu@db.com Research Assistant (+852) 2203 8267 grace-yn.lee@db.com
Key changes Price target Sales (FYE) Op prof margin (FYE) Net profit (FYE) 2.62 to 2.95 2,195 to 2,271 16.6 to 14.9 283.0 to 262.2 12.6% 3.5% -10.0% -7.4%
Price/price relative 4.4 4.0 3.6 3.2 2.8 2.4 2.0 1.6 11/08 2/09 5/09 8/09 11/09 2/10 5/10 8/10 Starhub Straits Tim Index (Rebased) es
Still our preferred Singapore telco: Maintain Buy STH＊s S$82m 3Q10 profit was the highest since 3Q09 as the company lost fewer pay TV subscribers than expected, actually acquired cable broadband subscribers (versus our net loss forecast) and as margins continued to recover from their 1Q10 lows. We tweak our medium term estimates (increase both future revenues and EBITDA), increase our FY11e NPAT by 8% and revise up STH＊s target price by 13% to S$2.95. Despite STH＊s good recent performance, it remains out top pick in the Singapore telco sector. Maintain Buy for the TP upside and 7.1% yield. 3Q10 operational performance better than expected STH＊s S$534m 3Q10 service revenues were up 3.6% YoY. Although it did lose pay TV subscribers, the 4k net loss was far less than we had anticipated and the 8% YoY fall in pay TV revenues was better than DBe. Similarly, STH actually acquired broadband users in 3Q10 (by 4k to a total 412k subscriber base) which offset ARPU compression. Mobile revenue growth remained robust (+8% YoY to a new S$298m high) while fixed line revenues were up 7% YoY to a new S$85m high. Continued margin recovery driving 41% QoQ profit growth 3Q10 EBITDA margin reached 31.2% (the third highest margin over the last eight quarters) despite mobile SACs reaching a two year high and mobile acquisitions remaining robust (65k in the quarter). Importantly cost of services was the lowest since 3Q08 reflecting the absence of the English Premier League expense. As a result of the margin recovery, NPAT was up 41% QoQ to S$82m and just 4% down YoY. In addition, management maintained their FY10e guidance. Estimates tweaked and target price up 13% to S$2.95 FY10e NPAT is adjusted down 7% to reflect 9M10 but with the improved pay TV and broadband outlook and expected medium-term margin recovery, we revise up FY11e profit by 8% to S$333m. Given these changes and revisions to used WACC (to align with DB＊s Ke assumptions), our price target is lifted 13% to S$2.95 (implying a 6.8% target yield). STH＊s 30% YTD price gain has out-performed M1 (+18%), STel (+7%) and the benchmark STI (+14%), but given the 12.5% total 12M return offered by our S$2.95 DCF based target price (see p9) and 7.1% yield, we maintain Buy. Risks include competition, regulation and dividend sustainability. Forecasts and ratios Year End Dec 31 Sales (SGDm) EBITDA (SGDm) Reported NPAT (SGDm) DB EPS FD(SGD) OLD DB EPS FD(SGD) % Change PER (x) Yield (net) (%) Source: Deutsche Bank estimates, company data 1 2
Performance (%) 1m Absolute 8.9 Straits Times Index 4.7
3m 20.7 10.2
12m 43.6 22.5
Stock data Market cap (SGDm) 4,803 3,730 Market cap (USDm) Shares outstanding (m) 1,714.6 Major shareholders Asia Mobile Holdings (49%) Free float (%) 33 Avg daily value traded (USDm) 4.5
Key indicators (FY1) ROE (%) Net debt/equity (%) Book value/share (SGD) Price/book (x) Net interest cover (x) Operating profit margin (%) 307.1 每 0.03 106.9 15.0 14.9
2008A 2,127.6 644.5 311.4 0.18 0.18 0.0% 14.7 6.7
2009A 2,150.0 653.5 319.7 0.19 0.19 0.0% 11.0 9.2
2010E 2,270.5 594.0 262.2 0.15 0.17 -7.4% 18.3 7.1
2011E 2,324.4 681.0 333.2 0.19 0.18 7.8% 14.4 7.1
2012E 2,392.0 705.6 351.6 0.20 0.19 5.5% 13.7 7.1
DB EPS is fully diluted and excludes non-recurring items Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the year end close
Page 14
Deutsche Bank AG/Hong Kong
Deutsche Bank AG/Hong Kong
10 November 2010 Strategy Asia Equities Daily Focus
Company
Asia India Automobiles & Components
10 Nov 2010 - 12:07:29 AM IST
Global Markets Research
COMPANY ALERT Tata Motors Ltd 2QFY11: JLR continues to deliver; raising TP to Rs 1465 Price (INR) Price target (INR) 52-week range (INR) Market cap (USDm) Shares outstanding (m) Net debt/equity (%) Book value/share (INR) Price/book (x) 1,270.55 1,465.00 1,270.55 593.75 17,519 611.0 100.9 332.44 3.8
Forecast Change Buy Reuters:TAMO.BO Exchange:BSE Ticker:TAMO
FYE 3/31 Sales (INRm) Net Profit (INRm) DB EPS (INR) PER (x) Yield (net) (%)
2010A
2011E
2012E
904,568 1,213,557 1,463,988 -5,698.4 17.10 31.1 3.0 98,704.9 124,599.5 153.42 8.3 1.3 187.36 6.8 1.3
* Raising target price: Tata Motors 2QFY11 results were significantly above street and DB estimates driven by very robust results from Jaguar/ Land Rover (JLR). Consolidated revenue was Rs 288bn (4% above DBest) and PAT came at Rs 21bn (29% above DBest). We are increasing FY11/12/13 EPS estimates by 22%/27%/30% respectively to Rs 153 /187/ 212. We maintain our BUY recommendation with a 30% increase in target price to Rs 1465 (15% upside). We valu