1、Global Research8 February 2019ASEAN ConsumerEquitiesAsiaConsumer, Non-CyclicalPermada DarmonoAnalyst HYPERLINK mailto:permada.darmono permada.darmono+65-6495 3137Edward TeatherEconomist HYPERLINK mailto:edward.teather edward.teather+65-6495 5965Natchutha Na PattaloongAnalyst HYPERLINK mailto:natchut

2、ha.na-pattaloong natchutha.na-pattaloong+662-613 5734Jody SantiagoAnalyst HYPERLINK mailto:jody.santiago jody.santiago+632-784 8812Nicole GohAnalyst HYPERLINK mailto:nicole.goh nicole.goh+603-2781 1133UBS Evidence Lab inside: Time to overweight sin stocksWe favour sin stocks among ASEAN consumers st

3、ocks in 2019UBS Evidence Lab conducted five surveys of over 8,000 consumers in total across ASEAN during 2018. In general, consumers economic expectations over the next 12 months have improved compared with the prior 12 months. While most consumers expect prices to rise, we do not think this will be

4、 a major concern given our relatively benign inflation forecast for the region. UBS consumer analysts across ASEAN also forecast higher FY19 revenue and earnings growth than FY18 as well as stable or improving margins, suggesting positive earnings momentum for the sector this year. However, valuatio

5、ns have been quick to catch up with this positive sentiment with many of the sector averages trading close to 1 SD above their five-year historical means. As a group, we tend to favour sin stocks (ie, alcohol and tobacco producers among others) this year due to their relatively more attractive valua

6、tions and positive earnings outlook. Our preferred names in ASEAN consumer are: LT Group, HM Sampoerna, Gudang Garam, Thai Bev, Minor International, Central Plaza Hotel and BAT Malaysia.Fast-moving consumer goods (FMCG) revenue growth will likely be slowerIn recent years we have noticed a trend in s

7、lowing revenue growth among many of the FMCG companies under coverage. We look at various factors such as GDP growth, inflation, lifestyle changes, income, consumption behavior and competition to ascertain the key drivers behind the trend. We think FMCG growth is likely to be lower than in the past.

8、 The largest key drivers behind our view are: 1) inflation is likely to remain low relative to history; 2) limited disposable income appears to be the driver behind the recent slowdown; and 3) income improvement is likely to result in consumption basket changes tilting away from FMCG. We believe suc

9、h an outcome is not priced in.Ecommerce continues to grow particularly in apparel and footwearIn our January 2018 HYPERLINK /shared/d2oXzDTjXck ASEAN retailers report we previously highlighted that online retail migration is happening faster than the market anticipates. We think department stores ar

10、e the most vulnerable format to disruption, both from ecommerce and specialty retailing. UBS Evidence Labs most recent survey of over 6,000 ASEAN consumers (as part of a wider survey of 14,175 consumers across 14 key APAC markets) suggests that ecommerce continues to grow rapidly, particularly in ap

11、parel and footwear, but also in grocery retailing. Within retail we like Puregold, Robinsons Retail and Mobile World.ASEAN consumer sin stocks preferred namesCompany nameTickerRatingPrice (LC)Price target(LC)Div yield (2019E)Market cap (US$ m)PE (x) 2019EPE (x) 2020EEV/EBITDA(x) 2019EEV/EBITDA(x) 20

12、20ENet debt/EVROE 2019EEPS CAGR 2018-21ELT GroupLTG.PSBuy15.3621.502.0%3,1798.89.118.816.31.4%11.2%6.6%HM SampoernaHMSP.JKBuy3,7104,5003.2%31,00831.428.122.920.339.4%10.8%Gudang GaramGGRM.JKBuy81,30095,0003.7%11,24016.214.511.110.110.7%20.5%13.4%Thai BevTBEV.SIBuy0.740.832.8%13,61418.016.814.413.030

13、.7%18.9%15.5%Minor IntlMINT.BKBuy38.5045.001.8%5,72920.918.711.410.531.4%10.5%27.4%Central PlazaCENTEL.BKBuy45.0050.001.4%1,98827.724.613.011.69.8%16.6%11.9%BAT MalaysiaBATO.KLNeutral38.0038.404.8%2,65320.219.515.414.83.0%139.6%6.1%Note: Above data as of 7 February 2019. Source: Refinitiv, UBS estim

14、ates HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities Pte. Ltd. (Reg. No. 198500648C). ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 54. UBS does and seeks to do business with companies covered in its research reports. As a result, inves

15、tors 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.Contents HYPERLINK l _TOC_250000 OUR THESIS IN PICTURES4PIVOTAL QUESTIONS6Q: Which AS

16、EAN consumer companies have the highest earnings quality potential this year?6Q: Are FMCG companies poised for lower future growth relative to history? 24Q: Are ASEAN retailers facing disruptive threats?41WHATS PRICED IN?48Permada DarmonoAnalyst HYPERLINK mailto:permada.darmono permada.darmono+65-64

17、95 3137Edward TeatherEconomist HYPERLINK mailto:edward.teather edward.teather+65-6495 5965Natchutha Na PattaloongAnalyst HYPERLINK mailto:natchutha.na-pattaloong natchutha.na-pattaloong+662-613 5734Jody SantiagoAnalyst HYPERLINK mailto:jody.santiago jody.santiago+632-784 8812Nicole GohAnalyst HYPERL

18、INK mailto:nicole.goh nicole.goh+603-2781 1133ASEAN ConsumerUBS Research THESIS MAP MOST FAVOUREDLEAST FAVOUREDLT Group, HM Sampoerna, Gudang Garam, Thai Bev, Minor Intl, Centel, BAT MalaysiaCP All, SM Investments, Unilever Indonesia, Kalbe FarmaPIVOTAL QUESTIONSQ: Which ASEAN consumer companies hav

19、e the highest earnings quality potential in 2019? We have a preference for sin stocks this year from our ASEAN consumer universe as we see attractive valuations combined with solid earnings momentum. Our preferred names across the region are: LT Group from the Philippines; HM Sampoerna and Gudang Ga

20、ram from Indonesia; Thai Bev, Minor International and Centel from Thailand; and BAT Malaysia. HYPERLINK l _bookmark1 more Q: Are FMCG companies poised for lower future growth relative to history?Very likely. Many of the FMCG companies that we cover have experienced slowing top-line growth in recent

21、years relative to their history and, in general, we forecast the packaged food industry as a major component of FMCG to grow slower. Falling inflation and limited disposable income (possibly driven by weak income growth) are more dominant drivers than lifestyle changes and competition, in our view.

22、HYPERLINK l _bookmark8 more Q: Are ASEAN retailers facing disruptive threats?Very likely. Ecommerce penetration continues to rise across ASEAN particularly in apparel and footwear which places department stores as the most vulnerable of the retail formats to disruption. Online penetration of grocery

23、 retailing remains comparatively low but is growing. Minimarkets have proven to be a disruptive force for larger format grocery retailers in Indonesia. We believe this is a potential emerging threat for large format grocery retailers in the Philippines. HYPERLINK l _bookmark31 more WHATS PRICED IN?I

24、mproving economic outlook and earnings growth expectations. Most ASEAN consumer markets are trading above their five-year historical mean PE and close to 1 SD above their mean, reflecting positive investor sentiment in these markets. HYPERLINK l _bookmark35 more UBS VIEWTime to overweight sin stocks

25、. UBS consumer analysts across ASEAN have named sin stocks in each of their markets as their preferred names due to a combination of attractive valuations, positive earnings momentum, and defensive characteristics (in the case of BAT Malaysia). Our preferred names across ASEAN consumer are: LT Group

26、, HM Sampoerna, Gudang Garam, Thai Bev, MINT, Centel and BAT Malaysia.EVIDENCELower FMCG sales growth relative to history and ecommerce disruption appears likely. Limited disposable income and low inflation appear to be key drivers affecting FMCGs slowing growth, while ecommerce penetration continue

27、s to grow rapidly particularly in apparel and footwear.ASEAN private consumption expenditure growth has slowed in the second half of the decadePrice growth Volume growthNominal expenditure growth4.0Change in average % YoY growth rate: 2010-13 versus 2014-172.00.0-2.0-4.0-6.0-8.0-10.0IndonesiaMalaysi

28、aPhilippinesSingaporeThailandVietnamSource: Haver, UBSASEAN ConsumerUBS ResearchOUR THESIS IN PICTURESForecast ASEAN consumer average revenue growth14.9%12.8%10.4%12.3%12.2%10.5%7.3%8.7%7.3%4.3%20.2%19.2%UBS analysts are forecasting improving revenue growth this year across most ASEAN consumer marke

29、tsPhilippines Indonesia ThailandVietnamMalaysiaASEAN20182019Forecast average ASEAN consumer EBIT growth27.4%20.8%17.3%10.2%16.5%12.3%8.8%9.2%6.0%7.0%5.1%6.0%We project stronger average EBIT growth this year in the Philippines, Indonesia and Thailand; notably in Jollibee Foods, LT Group, HM Sampoerna

30、, Gudang Garam, ICBP, Minor International and Thai BevPhilippines Indonesia ThailandVietnamMalaysiaASEAN2018201950%Expected changes in economic situation - Indonesia40%30%20%10%UBS Evidence Labs surveys of over 8,000 people during 2018 suggests positive changes in economic situation particularly in

31、the Philippines, Indonesia, Vietnam and Malaysia0%TotalABC1Male Female 18 2930 3940 4950 64Nett: Better - Worse% YoY revenue growth of Indonesian FMCG30%25%20%15%10%While valuations imply positive earnings growth expectations, revenue (and bottom-line) growth in FMCG across ASEAN has been decelerati

32、ng. Is this likely to persist?5%0%2012201420162018E2020E2022E GGRMHMSPICBPKLBFUNVRASEAN ConsumerUBS ResearchOUR THESIS IN PICTURES10.0%8.0%Inflation rate as measured by consumer prices (%)6.0%4.0%2.0%0.0%Falling inflation rates and relatively low inflation dampen FMCG sales growth as they limit comp

33、anies ability to raise prices. UBS Evidence Labs surveys also suggested that limited disposable income may be a key driver as well-2.0%2012 2013 2014 2015 2016 2017 2018E 2019E 2020EPhilippinesIndonesiaThailandVietnam26.9%27.0%28.5%29.6%31.4%14.9%14.5%13.4%12.6%12.1%58.3%58.5%58.1%57.8%56.5%Indonesi

34、an grocery market share by formatOver time, however, the mix of consumption will likely change. Spending on food is likely to trend lower as a share of total spending as incomes rise. This implies food retail will underperform broader consumer spending growthEcommerce penetration continues to rise r

35、apidly particularly in apparel and shoes. The shift toward specialty retailing is another strong headwind for the department store formatWe think minimarkets have the potential to be a disruptive force in the Philippines grocery retailing industry looking at the Indonesian experience where large for

36、mat retailers have lost market share in recent years20142015201620179M18Traditional storesSuper HyperMinimarketSources for exhibits above: Company data, Haver, Alfamart, Nielsen, UBS estimates, UBS Evidence LabASEAN ConsumerUBS ResearchPIVOTAL QUESTIONS HYPERLINK l _bookmark0 return Q: Which ASEAN c

37、onsumer companies have the highest earnings quality potential this year?UBS VIEWWe have a preference for sin stocks this year from our ASEAN consumer universe as we see attractive valuations combined with solid earnings momentum. Our preferred names across the region are: LT Group from the Philippin

38、es; HM Sampoerna and Gudang Garam from Indonesia; Thai Bev, Minor International and Centel from Thailand; and BAT Malaysia. In terms of pecking order, we like the Philippines the most as we have the most number of Buy-rated stocks there followed by Indonesia and Thailand in joint second place. Vietn

39、am and Malaysia are our fourth and fifth preferred markets for ASEAN consumer stocks.EVIDENCEUBS analysts generally forecast improving earnings growth and profitability in 2019 compared with 2018 for ASEAN consumer stocks under coverage. UBS Evidence Labs survey of over 8,000 consumers across the re

40、gion suggests improving economic sentiment for 2019. While most consumers expect prices to increase, we forecast relatively benign inflation this year.WHATS PRICED IN?We believe the market is pricing in an improving economic outlook across ASEAN and better top- and bottom-line growth from consumer c

41、ompanies, reflected in their rising valuation multiples.UBS top-down viewIn HYPERLINK /shared/d2sk6V5yc7uC Our base case for 2019, Head of APAC Equity Strategy, Niall MacLeod, outlined UBSs base-case view for Asia Pacific (APAC) which includes ASEAN. A summary of this can be seen in HYPERLINK l _boo

42、kmark3 Figure 2. From a top-down perspective, our in-house view is Overweight Singapore and Indonesia, Neutral on Malaysia and Underweight on Thailand and the Philippines. What are the implications of UBSs equity strategy view for the ASEAN consumer sector and stocks under coverage? HYPERLINK l _boo

43、kmark2 Figure 1 shows our country strategy and bottom-up views from a ratings perspective. It shows that in the Philippines we have the most number of Buy-rated consumer stocks even though UBS is Underweight the country, while for Indonesia only the tobacco sector is Buy rated despite our top-down c

44、ountry Overweight view.Figure 1: ASEAN consumer sector strategy viewConsumer sector strategy viewNumber of Buy-rated stocksNumber of Sell-rated stocksPreferred consumer stocksPhilippinesPreferred sector from a country perspective5 out of 71 out of 7PGOLD, URC and LTIndonesiaOverweight consumer stapl

45、es and consumer discretionary2 out of 62 out of 6HMSP and GGRMThailandPreferred sector2 out of 51 out of 5TBEV and MINTMalaysiaPrefer defensive companies2 out of 40 out of 4BATOSingaporePrefer Thai Bev1 out of 10 out of 1TBEVVietnamPrefer Mobile World2 out of 20 out of 2MWGSource: UBS estimatesFigur

46、e 2: Summary of UBSs regional equity allocation recommendations in ASEANUBS strategy viewKey debatesRisks to our viewOVERWEIGHTSingaporeInexpensive valuations and earnings picture is improving, supported by stabilizing property prices and better banks outlook (rising NIMS and falling credit costs).

47、The adjustment undertaken in recent years leaves Singapore less vulnerable to higher US rates, and MAS policy can cushion the impact.When will higher oil prices support the Singapore industrials?Is the asset price adjustment over?How much will a trade slowdown drag on the economy?Quicker Fed rate hi

48、kesProperty policy tighteningOil priceTrade tensions escalateIndonesiaAttractive P/BV valuations already pricing in headwinds from higher global yields. Attractive real bond yields and low real effective exchange rate also suggest limited downside from here. The economy has stabilized which looks re

49、latively attractivecompared with worsening EPS momentum in the rest of AxJ.When will consumption recover?Are recent actions enough to drive improving current account?Current account deteriorationPolitics (April election)Fed rate hikes and higher US ratesCommodity prices (CPO and coal)NEUTRALMalaysia

50、Relatively defensive sector make-up should help Malaysia in a tough economic backdrop, but it is unlikely to outperform in a recovery. Valuations look broadly fair.Can oil prices keep rising?Where does the currency go from here?Do policy changes change the growth outlook?Oil pricePoliticsCurrencyUND

51、ERWEIGHTThailandEquity valuations are expensive with limited upside given Thai bond yields are already below US Treasuries. Chinese tourism, infrastructure spending and higher oil prices have helped earnings growth, but valuations are at risk should any of these turn.Impact from upcoming electionWil

52、l Chinese tourism growth slow?Will infrastructure spending continue to support growth after the election?Politics (2019 election)Infrastructure spendingThai bond yieldsChina tourismOil pricesPhilippinesValuations are less expensive than they were, but the macro backdrop has deteriorated. The credit

53、cycle has remained firm, driving deterioration in the current account and inflation has risenabove the central banks target.Impact on rates and FX from FedHow much will inflation slow?Inflation and policyProgress on reformsCurrent accountPolitics (mid-term elections in 2019)Source: UBS estimatesMeas

54、uring earnings quality potentialWe use earnings quality to screen through the list of our preferred stocks across UBSs ASEAN consumer universe to identify top picks within the sector. Most consumer stocks (FMCG and retail) are valued using earnings or a cash-flow-based approach making earnings quali

55、ty an important driver of stock price performance. We think there are two simple approaches that we can use to measure earnings quality potential: (1) earnings growth; and (2) margin trajectory.Earnings growthHere we simply take a look at the EBIT and EPS growth projections for 2019 across our ASEAN

56、 consumer universe by country to gauge the sector growth forecast for 2019.Figure 3: ASEAN consumer FMCG and retail coverageCompanyTickerRatingFY18* revenue growth (%)FY19E revenue growth (%)FY18* EBITgrowth (%)FY19E EBITgrowth (%)FY18* EPSgrowth (%)FY19E EPSgrowth (%)PhilippinesJollibeeJFC.PSNeutra

57、l22.4%16.5%11.5%21.3%8.8%14.5%LT GroupLTG.PSBuy13.8%8.5%-5.4%57.8%45.1%13.0%Puregold Price ClubPGOLD.PSBuy13.0%11.8%12.1%12.4%10.0%15.0%Robinsons RetailRRHI.PSBuy12.4%10.1%8.7%13.1%7.7%10.9%SM InvestmentsSM.PSSell11.8%8.9%11.3%13.5%9.5%19.8%San Miguel Food & BeverageFB.PSBuy13.4%9.6%11.4%12.5%-69.6%

58、13.8%Universal RobinaURC.PSBuy2.6%7.5%-7.9%14.9%-6.9%15.6%Average12.8%10.4%6.0%20.8%0.7%14.7%IndonesiaGudang GaramGGRM.JKBuy13.3%10.9%4.4%18.1%5.8%18.2%HM SampoernaHMSP.JKBuy8.2%11.8%1.1%10.2%0.8%7.8%Indofood CBPICBP.JKNeutral8.8%10.5%19.2%14.5%13.0%15.6%Kalbe FarmaKLBF.JKSell6.8%8.0%2.9%7.1%2.7%8.0

59、%Matahari Dept StoreLPPF.JKNeutral4.5%2.6%4.3%2.6%-35.1%69.9%Unilever IndonesiaUNVR.JKSell2.2%8.5%-1.6%8.7%27.6%-16.1%Average7.3%8.7%5.1%10.2%2.5%17.2%ThailandCP AllCPALL.BKSell5.9%7.2%-8.5%8.7%-4.4%13.8%Central Plaza HotelCENTEL.BKBuy6.0%3.6%10.1%5.9%7.6%4.5%Home ProHMPRO.BKBuy7.5%6.2%15.1%13.6%16.

60、8%14.3%Minor InternationalMINT.BKBuy25.2%82.5%18.3%74.6%-0.4%58.8%Robinson PCLROBINS.BKNeutral8.0%7.3%16.7%15.9%15.4%13.7%Thai BevTBEV.SIBuy20.9%14.4%-15.6%45.6%-46.3%34.8%Average12.3%20.2%6.0%27.4%-1.9%23.3%VietnamMobile World InvestmentMWG.HMBuy35.3%15.9%34.9%18.3%28.9%15.1%Vietnam DairyVNM.HMBuy3