ASEAN Consumer - DBS Research 2015-11-26: Food for thought ~ Hopeful for better 2016 servings

ASEAN Consumer - DBS Research 2015-11-26: Food for thought ~ Hopeful for better 2016 servings SHENG SIONG GROUP LTD OV8.SI  THAI BEVERAGE PUBLIC CO LTD Y92.SI 

Food for thought ~ Hopeful for better 2016 servings

  • Hopeful for a better 2016 after a dismal 2015. 
  • 3Q15 earnings were still disappointing, with earnings growth cut to just 2%. 
  • Start of year could still be rocky with uncertainties and possibility of kitchen-sinking 4Q15 results. 
  • Advocate safer bets for a start before looking to add /switch stocks as the year progresses. 

A lacklustre 2015 with 2% profit growth. 

  • It seems that we had more than we asked for in our recurring cautious stance this year. 2015 performance turned out to be lacklustre and we now expect a mediocre profit growth of just 2%, down from a 6% projected in September. 
  • In 3Q15 earnings season, we still saw 39% of stocks under our Asean consumer coverage reporting results below expectations, similar to 2Q15 on slower topline growth, currency impact and higher opex. 

Hopeful for a better 2016. 

  • As we enter 2016, we are marginally optimistic compared to 2015. 
  • We have projected an aggregate net profit growth of 13% in 2016. This is premised on our expectations that GDP growth will be better in 2016, volatility in regional currencies will ease, stimulus packages announced by authorities will come into effect, and 2015 will be a lower earnings base for companies to register growth. That said, based on our economists’ projections, GDP growth expectations are on a gradual upward trend rather than an upsurge. 
  • Amongst the Asean countries, Philippines looks to show most promise and consumer counters should be supported in 1H16 by the run up to its Presidential Election. 

Start could still be rocky. 

  • We think it could still be a rocky start as we enter 2016 and thus advocate for a safer strategy in terms of picks. 
  • We believe there could still be earnings risks for 4QCY15 (announcements around Feb – Mar’16) as companies may try to “kitchen-sink”, along with the pace of potential Fed rate hikes. 

Stable and safer plays. 

  • We are initially adopting a more prudent stance before taking on a more “risk-on” approach. 
  • In Singapore, we like ThaiBev (THBEV SP) and Sheng Siong (SSG SP) for their resilience, earnings visibility, and dividend yields. 
  • We also like Matahari Department Store (LPPF IJ) on its strong operating performance in spite of a slowdown in the domestic economy. 
  • We pick Minor International (MINT TB) for its exposure and leverage on a more optimistic Thailand tourism outlook. 
  • Lastly, we like Universal Robina Corp (URC PM) given its growth profile, regional presence and dominant position in the Philippines. 
  • But as the year progresses, we believe there should be opportunities to undertake a more “risk-on” approach.

Alfie Yeo DBS Vickers | Andy Sim DBS Vickers | http://www.dbsvickers.com/ 2015-11-26
DBS Vickers SGX Stock Analyst Report BUY MAINTAIN BUY 1.01 Same 1.01
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