Asia ex-Japan Morning Research Summary

Equity Research Hong Kong Open | 19 January 2015Asia ex-Japan Morning Research SummaryRead the latest Japan Equity Research Summary »This summary is compiled from research reports previously published by Barclays Equity Research. A full list of all publications isavailable on Barclays Live. VIEW SETTLEMENT DISCLOSURES, ANALYST CERTIFICATIONS AND OTHER IMPORTANT DISCLOSURES Company ResearchAxis Bank (AXBK.NS)Bajaj Auto Ltd. (BAJA.NS)HTC Corp. (2498.TW)Reliance Industries (RELI.NS)Wipro Limited (WIPR.NS)Industry ResearchASEAN Coal Sector: Cost deflation in 2015 is a headwind for pricing recoveryAsia Themes: Autos & Auto Parts: Assessing global volume trends for 2015Asia Themes: Internet & Media: Plotting valuations for global social media stocksChina Insurance: Life is better without P&CChina Oil & Gas: Decade-low oil price averages loom; downgrade PetroChina, CNOOC to EWChina Power and Utilities: SZ grid reform trial - lower tariffsChina Property: Our new survey indicates a better property outlook in 2015Japan Precision Instruments (Neutral): TSMC 4Q FY12/14 results: Implications for Japanese SPE manufacturersKorean Gaming & Leisure: Government announces plan for two additional IRs and four new DFS licensesMINED MATTERS 19/1/15: Relief for battered copper - with record 24% y/y increase in grid spending targeted in ChinaSingapore Real Estate and REITs: 2014 developer sales down 51% y/y to 7,378 unitsEquity StrategyAsia Themes: India in the next decadeMacro ResearchGlobal Economics Weekly: Central banks rock and roll marketsGlobal Macro Daily (Sydney Open): A positive end to a volatile weekGlobal Portfolio Manager's Digest: Sharp moves to the downsidesIndia: December trade deficit returns to normal levelsSingapore: December NODX - Electronics rebounds, but trend remains weak Publications Summary | ReportsBasic IndustriesASEAN Coal Sector: Cost deflation in 2015 is a headwind for pricingrecoveryAsia ex-Japan Metals & MiningEphrem Ravi+852 2903 4892ephrem.ravi@barclays.comBarclays Bank, Hong Kong Krishan Agarwal+852 2903 4543krishan.agarwal@barclays.comBarclays Bank, Hong Kong Dixon Lau, CFA+852 2903 4838dixon.lau@barclays.comBarclays Bank, Hong Kong Ada Dai+852 2903 4052ada.dai@barclays.comBarclays Bank, Hong Kong 19 January 2015Seaborne coal prices at US$60/t reached another post-2008 low last week while thechances of a significant recovery in prices in the near term are growing slim. Miners,however, have got further ammunition to withstand lower coal prices with a c50%decline in oil prices as fuel costs are ranging between 20% and 30% of the costbase. Costs, however, have further potential to come down in 2015 with most of theminers re-negotiating their contractor service rates (e.g. contractor charges for Bumiwere less than 50% of its cash costs in 1H14). Rising strip ratios should partly offsetthe cost tailwinds, especially for junior miners, while large miners could attempt tocushion this rise by raising strip ratios gradually. We continue to prefer PTBA (OW)in our ASEAN coal coverage. We update our estimates by marking to the marketcommodity prices and make several PT changes, but our ratings remain unchanged.PTBA (OW; PT: IDR 14,000, down from IDR 15,000): Mix improvement should havehelped PTBA outperform its peers on 2014 earnings while its fundamentally betterposition to grow its volumes keeps us positive medium term. We expect PTBA tocontinue to re-rate as it is relatively immune from strip ratio led cost rises. We expectPTBA to be a net beneficiary of any IDR weakening as its ROE is to average 25% innext three years.Adaro Energy (EW; PT: IDR 1,100, down from IDR 1,150): Its strong operationaldiscipline in the past 18-24 months has helped Adaro to sustain its profitability andimprove cash flows. Despite our estimate of an increase in the strip ratio atend-2014, we expect Adaro to keep its increase gradual given its large mine life andcut costs further.Bumi Resources (EW; PT: IDR 100): Continuing low coal prices have exacerbatedthe cash flow (e.g. debt servicing) challenges for Bumi. Time-bound completion ofoutstanding debt deals (i.e. BRM stake sale) could further cut its debt while thecompany is most geared to potential cost deflation to sustain its profitability in 2015.ITMG (EW; PT: IDR 17,500, down from IDR 18,500): We expect ITMG to retain itsrelatively defensive earnings vs. its peers, but it has the highest strip ratio, posinggreater risk to costs. Maintaining its coal ASP relatively stronger in 2015 is a key toearnings.Harum Energy (EW; PT: IDR 1,600): A significant reversal in the strip ratio and lowcoal prices have already led Harum to close its SB Coal mine. While its net cashposition remains a positive, we see its profitability continuing to remain underpressure in 2015.Banpu (EW; PT: THB 28, down from THB 30): Stronger ASPs at its Centennial Coaloperations could help cushion the impact of falling coal prices in near term.Expanding footprints in power remain a key positive in medium term