P.T. Charoen Pokphand Indonesia is a poultry feed, day old chicks and processed chickens production group based in Indonesia. Co. is focused on agro-business activities that encompass the entire spectrum of the poultry business, from the production of feed products, breeding of poultry stock and production of processed poultry products. Co. maintains a network of production facilities in Balaraja (West Java), Semarang (Central Java), Sepanjang and Krian (East Java), Bandar Lampung (Lampung), Medan (North Sumatra) and Makassar (South Sulawesi). Co. is also engaged in the production and supply of poultry breeding stock for layer and boiler chicken in Indonesia.
We view the government’s recent sixth round of culling when poultry prices were still quite high was triggered by the risk of price declines. We expect the government to take more anticipatory action in 2020 so as to maintain poultry prices. Every 5% increase in our broiler price assumption could increase the EPS of poultry companies by 11-25.9% and vice versa. Also, every 5% increase in our DOC price assumption could increase EPS of poultry companies by 0.6-14.9% and vice versa. Upgrade to OVERWEIGHT. Top picks: JPFA and MAIN.
Poultry More culling to stabilise poultry prices; upgrade to OVERWEIGHT. Medco Energi (MEDC IJ): Technical BUY Astra International (ASII IJ: Technical BUY
Feasibility Study Results in December to be a Catalyst for this Junior
Our analysis of the global oil & gas sector and the global rig market indicates that while there have been some positive developments, a new rig-building upcycle is some years away due to the excess supply of such assets. Given recent order wins, we see the offshore wind sector presenting opportunities while the EV sector does not yet present a threat to oil demand. We upgrade SMM to HOLD and maintain MARKET WEIGHT on the sector. KEP remains our top pick.
China’s M1 and M2 growth surprised on the upside, rising to 4.4% yoy and 8.7% yoy respectively, which may have been driven by the Rmb710b liquidity injection by the PBOC in Dec 19. However, the strength was not reflected in credit growth which saw growth in outstanding bank loans tumble to the lowest in over 17 years, at 12.3% yoy. In spite of the RRR cut in Jan 20, we expect loan growth to stay muted but special bond issuances should be a slight impetus to TSF growth.
Macau stocks have reacted more to macro-economic indicators, US-China trade deal progress, but less to (often negative) GGR data. Unfortunately, both macro forecasts and pro-Macau policies do not suggest operational recovery in 2020. We expect the share price rally to run out of steam, especially since the recent signing of the Phase 1 trade deal has been widely expected, while the expected GGR recovery will be a long-drawn affair. Maintain MARKET WEIGHT.
Poultry: Worst-case broiler price stress-test scenario indicates HOLD recommendations for CPIN and MAIN; JPFA is the most sensitive to changes in broiler prices. TRADERS’ CORNER PP Persero (PTPP IJ): Technical BUY Telekomunikasi Indonesia (TLKM IJ): Technical BUY
Poultry prices were disappointing in May 19. Broiler prices declined 16.3% yoy and 6.2% mom, while DOC prices fell 15.1% mom. Although DOC prices are still in line with our Rp6,000/chick assumption (5M19: Rp6,200), our concern lies with broiler prices which are still below the lower-limit benchmark price of Rp18,000/kg (5M18: Rp17,500). A broiler price stress-test indicates a HOLD recommendation at worst for CPIN and MAIN, and BUY on JPFA. Maintain MARKET WEIGHT.
CHINA Update Sunny Optical (2382 HK/BUY/HK$72.20/Target: HK$85.10): Maintains healthy growth despite Huawei turmoil; upgrade to BUY. INDONESIA Sector Poultry: Worst-case broiler price stress-test scenario indicates HOLD recommendations for CPIN and MAIN; JPFA is the most sensitive to changes in broiler prices. MALAYSIA Results Berjaya Sports Toto (BST MK/HOLD/RM2.60/Target: RM2.40): 4QFY19: Earnings in line and confirms resumption of industry growth; prefer Magnum for sector exposure. Top Glove (TOPG MK/HOLD/RM4.87/Target: RM4.60): 3QFY19: Below expectations. Margins take a steeper hit from ...