2020年5月亚太地区投资策略分析.docx

4 June 2020Global ResearchEquity StrategyAsia PacificTim SmartProduct Manager +852-3712 4501William VanderpumpProduct Manager +852-2971 7140Niall MacLeodStrategist +852-2971 6186UBS Key Calls-APACMay 2020 - A host of new additionsNew joiner Ayala Corp was the top performerThe UBS APAC Key Call list has underperformed the MSCI APAC index by 2.4% during May. Ayala Corp was May's top performer, outperforming its local index, PHS Composite, by 13.4% since its inception on May 6,h. The most notable laggard in May was Murata, underperforming TOPIX by 6.9%. UBS Key Calls represent our highest- conviction single-stock research ideas within our APAC coverage universe. A one-page summary of our investment thesis (Thesis Map) on each stock begins on page 3.Added Ayala Corp, Land & Houses, Telkom Indonesia and L&T as Key Calls> Despite earnings and macro policy risks due to COVID-19, we added Ayala Corp as a Key Call Buy, on the back of attractive valuations and overdone regulatory concerns. Ayala's relatively resilient core businesses and strong balance sheet could help mitigate headwinds.- > With expectations of a sharp rise in inventory, a challenging funding outlook and potential for fiercer price competition in Thailand's residential property sector, we add Land & Houses as a Key Call Sell. Despite, L&H's focus on the low-rise segment, we believe it is not immune to the industry's low-profitability cycle and dividend cuts.- > Results of the latest UBS Evidence Lab consumer survey show Telkomsel maintaining its dominance in the mobile market, while extending its near-monopoly in the fast growing fixed broadband segment. This coupled with our detailed balance sheet and FCF analysis across the region; we conclude that Telkom Indonesia's dividends are amongst the safest in regional telcos. We add Telkom Indonesia as a Key Call Buy.- > We promote L&T to Key Call Buy. Our analysis indicates that L&T's competitors could suffer more significant balance-sheet deterioration, which will weaken their ability to bid for new projects. This combined with the trend of CAPEX composition shifting towards more complex projects, where L&T has a decisive edge, will lead to market share gain for L&T.- > We removed Afterpay from the Key Call list on May 4th after Tencent took a 5% stake in the company.Figure 1: UBS APAC Key CallsNote: Above data as of 31 May 2020. *Relative performance against local indices: KOSPI for Samsung Electronics; HSCEI for Ping An, Sun Art Retail. Longi Green Energy and Guangzhou R&F; HIS for CLP Holdings; JCI for Telkom Indonesia; SENSEX for L&T; TOPIX for Murata Mfg and Fujitsu; and ASXAO for Aristocrat. Source: Reuters, UBS estimates. "N/A" is shown if comparison date is before inception date. For SELL calls, performance is multiplied by a factor of -1. We slightly changed the price target of Telkom Indonesia on 3,d June,2020.StockReuters codeRatingInception dayMarket cap (US$ bn)Share pricePrice targetAbs perf since inceptionRei perf since inception*Relative perf vs. MSCI APAC since inceptionPE (x) 2019EPE (x)2020EPing An Insurance2318.HKBuy22-Jun-18180.3HKS76.50HK$96.900.5%16.4%11.3%9.39.6AristocratALL.AXBuy8-May-1910.9AS25.72AS31.800.1%8.1%6.2%19.240.6CLP Holdings0002.HKBuy3-Sep-1924.7HKS75.95HKS95.00-3.1%7.3%-1.9%19.616.4Fujitsu6702.TBuy5-Sep-1920.7¥11100.00¥13000.0032.8%29.0%34.6%14.011.4Murata Mfg.6981.TBuy17-Sep-1935.9¥6015.00¥7000.0018.1%21.0%23.7%17.319.3Guangzhou R&F2777.HKBuy25-Nov-194.3HKS9.57HKS22.00-25.2%-16.2%-17.3%4.42.5Sun Art Retail6808.HKBuy5-Mar-2014.6HKS11.86HK$14.6817.4%26.6%21.9%23.134.3Samsung Electronics005930.KSBuy17-Mar-20244.6Won50700.00Won74000.003.7%-14.7%-11.7%15.716.1Longi Green Energy601012.SSBuy17-Apr-2017.1Rmb32.41Rmb41.0023.3%24.4%17.2%16.617.5Land & HousesLH.BKSell5-May-202.7Bt7.30Bt5.501.4%4.5%7.0%16.417.5Ayala CorpAC.PSBuy6-May-209.2P747.50P850.0016.3%13.4%11.4%16.617.3Telkom IndonesiaTLKM.JKBuy11-May-2021.2Rp3150.00Rp4300.00-1.3%-4.7%-4.2%15.816.9L&TLART.BOBuy26-May-2017.3Rs932.30Rs1195.0014.3%8.5%11.0%21.714.2This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 17. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Samsung 日ectronicsWHAT'S PRICED IN?Buy (Price target Won74,000)UBS Research THESIS MAPPIVOTAL QUESTIONSQ: Is the memory upcycle still in play amidst COVID-19?Yes for DRAM. We forecast marginal DRAM oversupply in 2H20, followed by a strong upcycle in 2021. We are less sanguine on NAND flash, and forecast NAND oversupply to come back by 3Q20 and to deepen in 2021. On the supply side, we believe COVID-19 has likely removed for now the upside risk to supply addition later in 2020.“Foundalions for a NIE earnings recovery" 5/26/2020-»Q: Will Displays profits become less volatile?Yes. Post adjustment for negative end-demand impact from COVID-19 we expect RGB (Mobile) OLED panels to generate c.10% OP margin in 2020E. We now factor in as our Base Case Samsung exiting the LCD panels sector, and focusing on QD Display (large panels OLED).'Foundations for a *21E earnings recovery" 5/26/2020-*Q: Could we see upside to shareholder returns?Yes longer term. Samsung sets its policy at 50% of ex M&A FCF '18-20E with a "floor" being the set dividend (Won28.8tn aggregate). We expect Samsung to at least roll over or expand its shareholder returns policy to subsequent years, the upside being indicating a gross cash target.2Epundatiorrs for a ,21E earnings recovery0 5/26/2020-UBS VIEWWhilst we expect some DRAM oversupply in 2H20, we estimate that DRAM supply growth will trail demand as it normalizes into 2021 post COVID-19 and expect a strong cyclical uptick. NAND flash may see oversupply again by 3Q20, but Samsung is very likely to increase its share of industry profits. Mobile and Displays could benefit from Huawei potentially losing share, whilst the move to QD OLED from LCD could help smooth profits over time. We are positive on FCF returns longer term.EVIDENCEOur industry analysis indicates that (1) 3Q20 server DRAM demand remains solid on aggregate; (2) Mobile demand is bound to weaken further into 3Q; (3) Capacity additions remain limited. The 1Q20 UBS Evidence Lab Smartphones Survey shows high retention rates for Samsung smartphones at 73%.Samsung is trading at 1.25x NTM P/BV, implying LT ROE of 8.9% vs. UBSe est. of (2020-24E) 13.2%.UPSIDE / DOWNSIDESPECTRUM005930. KS Price8Sz00080,00075,00070,00065,00060,0005S.00050,00045,00040,00035,0006.957 x5.266 x11.Upside： 47%14 lxB3： 36%P/E (U8S) ImpliedUpsklc to Downside L5 to ieo.ooo.o « 74,000.0 -201820192020Value driversDRAM ASP %YoY '20Er21ENAND ASP %YoY '20E/'21E'20E/'21EOP,18-20E FCF returnsW80,000 upside-8%/+39%+9%/-11%Won32.6/65.5tnWon33.4tnW74.000 base case-11%/+24%+2%/-31%Won28.8/46.8tnWon28.8tnW37.000 downside-13%/-15%-2%/-38%Won26.2/26.3tnWon28.8tn10.0x Downside: -32%Scarce. UBS AeMOUbSource: UBS est.COMPANYDESCRIPTIONSamsung Electronics is a leading global electronics conglomerate, with a presence in handsets, tablets, PCs/PC peripherals, networking, consumer electronics, appliances and.Full report »Nicolas Gaudois, Analyst, , +852-2971 5681Longi Green EnergyTechnologyBuy (Price target Rmb41.00)UBS Research THESIS MAPPIVOTAL QUESTIONSQ: What's the size of the addressable solar power market in China?Backed by UBS Evidence Lab,s SPTA model, we conclude that: 1) solar installation is utilising less than 3% level in sample areas of Beijing, and 2) the implied land conversion rate of sample areas of Beijing is 1.2MW/sqkm, far below our estimated national level of 45MW/sqkm. These findings strongly support our previous conclusion that China's addressable solar-power market exceeds 5.000GW, and shows substantial long-term solar installation growth potential, based on the current national level.“China Solar Sector: UBS Evidence Lab inside: +5*OOOGW solar in China if cities are equipped with so山r panels?” 1/6/2020Q: When will China achieve solar and wind grid parity?We believe China achieved end-user solar/wind grid parity (solar/wind power costs below the end-user power sales price) in 2016. We expect level 1 supply-side grid parity (solar/wind power costs below the coal-fired power tariff) in 2019-20 and level 2 parity (solar/wind power costs below coal-fired power costs) in 2021-22.“China Renewable Eneray Sector: When, how and what if qrid parity is achieved" 1111/2018+ Q: What are long-term sustainable margins in the solar supply chain likely to be?With the improving supply/demand outlook, we expect GMs to expand further and then gradually stabilise. Based on the: 1) entry barriers; 2) consolidation; 3) supply/demand dynamics; and 4) cost curve in each segment, we estimate tier-1 suppliers* long-term sustainable GMs at: 1) 25-30%/20-30%/12- 15%/10-15%/30-35% for polysilicon/wafers/cells/modules/solar glass.“China Solar Sector: What could be the key drivers of a further rally?" 3/19,2019TUBS VIEWWe believe Longi is well positioned in the solar supply chain under the impact from COVID-19, mainly because of its: 1) cost and scale leaderships, 2) highest R&D spending among peers, and 3) global sales channels and brand. We think the market has priced in too many downsides to its ASP and margin, while we think the ASP downside will be reduced when global demand being recovered from COVID-19 and Longi can offset the downside to margins through further cost reduction.EVIDENCE1) Although mono-silicon wafer price dropped by 16% YTD, it's currently still the segment with one of the highest margins across the solar supply chain, given the price even increased in 2019 when most of the other product prices were declining. 2) Longi still reiterated its full-year 2020 shipment guidance (58W wafer and 20GW module), even considering the impacts from COVID-19 outbreak.WHAT'S PRICED IN?We estimate Longi is currently trading at 13.Ox 2021E P/E, significantly lower than its historical average of 14.Ox and current A-share sector average of 15.4x. We believe the market has fully priced in: 1) potential impacts from COVID-19 on global solar demand, and 2) further solar wafer and model ASP cut. However, we think Longi's ASP/margin could be better-than-market consensus, driven by the recovering demand in the next few quarters and potential catalysts from more supportive policies.UPSIDE / DOWNSIDESPECTRUMMJ1012.SS PriceRmb32.O212/21EImpliedI j4 toi50.0 45.0 45.00=2.40x18.8xUpside:*41%.4LOO-2 30x178xBase:>28%35.0,:23.00.1.80x12 8xDownside:-28%15Q03 Jun*12 mo.10.0 ， 20 IS20192020Scvrc* UBS PawarehValue driversWafer Wafer ASP YoY Module shipment Module ASP YoYModule(2021E)productionchangegrowthchangeproduction costgrowthYoY changeRmb45.00 upside45.0%-8.0%65.0%-5.0%-12.0%Rmb41.00base34.5%-10.0%52.6%-10.0%-10.0%Rmb23.00 downside25.0%-12.0%40.0%-15.0%-8.0%Source: UBS-S estimatesLongi Green Energy Technology (Longi) is the largest monocrystalline wafer manufacturer in the worldCOMPANYDESCRIPTIONby capacity. The company has expanded from upstream monocrystalline wafer.Full report->Alex Liu, Analyst, , +86-213-866 8857Land & HousesLand & HousesSell (Price target Bt5.5O)UBS Research THESIS MAPPIVOTAL QUESTIONS Q: What are the implications of COVID-19 for pre-sales and EBIT margin in 2020?We forecast LH's pre-sales to decline 30% YoY in 2020 and anticipate a slow recovery in 2021 given deteriorating household income and unemployment outlook. With second-tier developers' increasingly challenging funding outlook, we expect LH's EBIT margin to be under pressure and forecast a decline of 2.3% in 2019-21.Q: Are developers financially able to withstand this shock?We expect LH's balance sheet to remain intact and forecast net D/E to increase from 0.86x in 2019 to 0.95x in 2020 as we factor in lower CAPEX as a result of launch delays. Despite this, we believe there are risks of higher-than-expected funding costs due to weak demand in the bond market.UBS VIEWWe downgraded Land & Houses, from Buy to Sell as we forecast a sharp contraction in pre-sales (30%) and earnings (50%) in 2020 due to an economic slowdown as a result of COVID-19 and anticipate a slow recovery in 2021 given the deteriorating household-income and unemployment outlook. Following a large industry inventory glut, we expect LH to offer modest promotions that could result in its EBIT margin contracting by 2.3% YoY in 2019-21. Although we expect LH's balance sheet to remain in-tact, we believe there is a risk of a sharp increase in credit costs and think its lower dividend yield has not been discounted in the price.EVIDENCELH's presales turned negative in May after flat growth in April and a 1.6% YoY increase in Q120. According to REC, developer sentiment in Q120 and expectations for the next six months fell to their lowest points since the severe flooding in 2011. Foreign buyers could account for only 10% of purchases in 2020, down from 20% two years ago, according to REIC. Feedback from developers suggests that prices for the condominium segment could discount by 30-60%.WHAT'S PRICED IN?LH is trading at a 12M forward PE of 16.5x , close to its 10-year historical average but well below our implied price target of 11.6x FY21E (-1.4SD). We believe the risk of a sustained period of both low profitability and dividends has not been discounted.UPSIDE / DOWNSIDELH.BK PriceBt7.65EPS (UBS)吃(UBS)Upside to DownsideSPECTRUM13.012/21EImplied1 to 912.09.08.0 一ft AAA UC -Upside:*5%7.06.0=U.52 X15.4x“5.50 m0.48 x11.6xBase:-28%5.003 Jun=0.32 x14.1xDownside: -41%4.020182019202012 mo.Source: L6S ReseatValue driversPre-salesReal estaterevenueGross margin2021E(Bt bn)(Bt bn)Bt8.00 upside24,34222,47331.1%Bt5.50 base21,29920,03930.6%Bt4.50 downside9,50910,60729.6%COMPANYDESCRIPTIONLand & Houses (LH) was founded in 1983 and listed on the Stock Exchange of Thailand in 1992. LH is Thailand's leading reside