Morning Express 23 April 2018

Transcription

1 BOCOM Int l Research 23 April 2018 Focus of the Day China Market Strategy Great Powers Collide Hao Hong, CFA hao.hong@bocomgroup.com Let us recollect that peace or war will not always be left to our option; that however moderate or unambitious we may be, we cannot count upon the moderation, or hope to extinguish the ambition of others. Alexander Hamilton The cost of free trade; trade tension escalates; USD breaking down. In the Ricardian world of comparative advantage, a country will gain from trading by producing goods at a lower relative autarky price, even if it is more efficient in producing every single good than the other countries that it is trading with. The past two decades of hyper-globalization seem to have vindicated Ricardo s most powerful yet counter-intuitive theory. Only one issue remains China is different, with a vast pool of labor that is willing to work harder for less. An induction of such a significant player into the global trade system has gradually eroded the US s comparative advantage in manufacturing sectors. It is not equivalent to a small country with limited labor resources that will be quickly exhausted and then the disruption to the system would stop. But the free traders are content with lower consumer costs, as well lower interest rates as a result of globalization to brood rolling asset bubbles all at the loss of millions of US manufacturing jobs. These workers are the cost of free trade. With limited scope of skill upgrade, these jobs may have been permanently lost. ASM Pacific 522 HK Results & guidance both beat; outgrowing with Rating: Buy new drivers CP: HK$ TP: HK$ Upside: +37% Chris Yim christopher.yim@bocomgroup.com ASMPT's 1Q18 results and 2Q18 outlook are both ahead of expectations. 1Q18 EPS came in at HK$1.52 (above our estimate of HK$1.47), while more importantly, 1Q18 booking came in ~20% ahead of previous guidance. The company expects 2Q18 revenue to range between US$650m-710m, which is ~10% ahead of our estimate, and expects booking momentum to continue with 2Q18 booking up by a single-digit percentage YoY. While visibility remains limited for 2H18 partly due to macro uncertainty, we believe the outlook on many of the company's mid- to long-term drivers (incl. advanced packaging, memory, mini-led, industrial/auto demand) remains solid. BOCOM International is proud to be a Gold Sponsor of the 71st CFA Institute Conference to be held in Hong Kong. Global Stock Indices Close 1D % YTD % HSI 30, H shares 12, SH A 3, SH B SZ A 1, SZ B 1, DJIA 24, S&P 500 2, Nasdaq 7, FTSE 7, CAC 5, DAX 12, Key Commodity/Forex Indicators Close 3M % YTD % Brent Gold 1, Silver Copper 6, JPY GBP EUR bps change 3M 6M HIBOR US 10yr yield HSI Technical HSI 30,418 50D MA 30, D MA 29,165 14D RSI 48 Short sell (HK$ m) 11,734 Hao Hong, CFA Head of Research hao.hong@bocomgroup.com Analyst certifications, disclosures and disclaimer at the back forms part of this report and must be read. Download our reports from Bloomberg: BOCM or

2 We nudge up our 2018/19 EPS estimates by 1%/2% and introduce our 2020 estimate. Our unchanged TP of HK$147 is based on 20x 2018E P/E. Reiterate Buy. China Huarong 2799 HK Tap near-term opportunity as shares oversold; Rating: Buy upgrade to Buy CP: HK$ 2.80 TP: HK$ 3.70 Upside: +32.1% Li Wan, CFA Huarong s stock price plunged after trading resumption last Friday due to the resignation of chairman and management changes. We believe the big 4 AMCs still hold advantages in the distressed asset management industry. We estimate that changes in Huarong s top management will not affect the progress of the current capital raising plan. Huarong enjoys sharp edges in acquisition-and-restructuring business and has high provision coverage ratio. Huarong will focus more on its growth quality in We estimate the company will have higher ROAE than Cinda (1359 HK) and major state-owned banks, and its earnings will grow ~10% in It is trading at only 0.61x 18E P/B, which is close to that of Cinda, and much lower than those of the major state-owned banks. We suggest investors buy into recent weaknes, lift our rating to Buy and trim our TP to HK$3.70. Internet Sector As of 20 Apr 2018 Connie Gu, CPA Rating: Outperform connie.gu@bocomgroup.com Last week, Baidu s autonomous driving platform Apollo 2.5 version was launched to provide high-speed autonomous driving solution at low cost. According to App Annie, among the Top 10 grossing mobile games in Mar, Tencent and NetEase accounted for five apiece. Tencent released smart voice box. Alibaba announced its proprietary development of AI chip and acquisition of c-sky. We maintain our Outperform sector rating. We expect most of our covered companies to see margin pressure in 1Q18 due to weak seasonality for advertising and heavy investment in new initiatives by key internet companies. We prefer Sina (SINA US) as our 2018 top Buy, and recommend Tencent (700 HK), Alibaba (BABA US), Momo (MOMO US) and Kingsoft (3888 HK). Download our reports from Bloomberg: BOCM or 2

3 Economic data releases for this week US Date Event Survey Prior 23-Apr Existing Home sales (m) Apr New Home sales (k) Apr MBA mortgage applications (%) Apr Initial jobless claims (k) Apr Durable goods order (%) Economic data releases for this week China Date Event Survey Prior BOCOM Research latest reports Data Report Analyst 20 Apr ASM Pacific (522 HK) - Results & guidance both beat; outgrowing with new drivers Chris Yim, Xinhe Deng 20 Apr Property Sector Weekly - As of 19 Apr 2018 Carmen Wong, Alfred Lau, CFA, FRM, Philip Tse CFA, FRM 20 Apr Aviation Services Sector - 1Q18 traffic stayed strong led by peak-season surges Luya You, Fay Zhou, Maggie Wang, Geoffrey Cheng, CFA 20 Apr Hua Hong Semiconductor (1347 HK) - One of the best semis plays in China; reiterate Buy Chris Yim, Xinhe Deng 20 Apr China Gas Holdings (384 HK) - Expect a strong finish in FY18; lift TP Wallace Cheng, Spencer Luo 20 Apr Baidu (BIDU US) - New Apollo 2.5 as low-cost, high-speed self-driving solution Gu Xinyu (Connie), CPA, Sun Mengqi (Brandy), Zhou Zhe (Gigi) 19 Apr Renewable Energy Sector Weekly - As of 18 Apr 2018 Louis Sun, Bob Wen 18 Apr Healthcare Sector Weekly - As of 17 Apr 2018 Lilian Wan, Grace Zhao, Li Zhao, Kent Lin 18 Apr Automobile Sector - Minor impact from removing auto JV shareholding cap Angus Chan 18 Apr Banking Sector - RRR cut to lower funding cost, not loosen market liquidity Jaclyn Wang, Hannah Han 17 Apr Transportation & Infrastructure Sector Weekly - As of 13 Apr 2018 Geoffrey Cheng, CFA, Fay Zhou, Luya You, Maggie Wang 16 Apr HNA Infrastructure (357 HK)- Expanding horizons: Hainan to be free-trade zone by 2020 Luya You, Fay Zhou, Maggie Wang, Geoffrey Cheng, CFA 16 Apr Banking Sector - China Credit Monitor March 2018 Jaclyn Wang, Hannah Han 16 Apr Internet Sector Weekly - As of 13 Apr 2018 Gu Xinyu (Connie), CPA, Sun Mengqi (Brandy), Zhou Zhe (Gigi) 13 Apr Automobile Sector Monthly- March PV sales volume up 3.5% YoY Angus Chan 13 Apr Property Sector Weekly- As of 12 Apr 2018 Carmen Wong, Alfred Lau, CFA, FRM, Philip Tse CFA, FRM 13 Apr China Everbright Greentech (1257 HK)- Project development on track; lift TP Wallace Cheng, Spencer Luo 12 Apr Lenovo (992 HK) - PC market stable; earnings likely to remain depressed Chris Yim, Xinhe Deng 12 Apr HNA Infrastructure (357 HK) - Post-results meeting sheds more light on company's future Luya You, Fay Zhou, Maggie Wang, Geoffrey Cheng, CFA 12 Apr Renewable Energy Sector Weekly - As of 11 Apr 2018 Louis Sun, Bob Wen Source: BOCOM Int l Download our reports from Bloomberg: BOCM or 3

4 HSI constituents Company Stock Current Mkt 5D YTD 52-week P/E Yield P/B name code price cap chg chg High Low E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (x) (x) (x) (%) (x) CKH HOLDINGS 1 HK , HANG LUNG PPT 101 HK , CKI HOLDINGS 1038 HK , HENGAN INTL 1044 HK , CHINA SHENHUA-H 1088 HK , HANG SENG BANK 11 HK , CHINA RES LAND 1109 HK , CK ASSET HOLDING 1113 HK , HENDERSON LAND D 12 HK , AIA 1299 HK , ICBC-H 1398 HK ,577, CHINA MERCHANTS 144 HK , WANT WANT CHINA 151 HK , N/A SHK PPT 16 HK , NEW WORLD DEV 17 HK , GEELY AUTOMOBILE 175 HK , SWIRE PACIFIC-A 19 HK , SANDS CHINA LTD 1928 HK , WHARF REAL ESTAT 1997 HK , N/A CLP HOLDINGS 2 HK , COUNTRY GARDEN 2007 HK , AAC TECHNOLOGIES 2018 HK , BANK EAST ASIA 23 HK , PING AN 2318 HK ,473, MENGNIU DAIRY 2319 HK , SUNNY OPTICAL 2382 HK , BOC HONG KONG HO 2388 HK , CHINA LIFE-H 2628 HK , CITIC 267 HK , GALAXY ENTERTAIN 27 HK , WH GROUP LTD 288 HK , HONG KG CHINA GS 3 HK , BANKCOMM-H 3328 HK , SINOPEC CORP-H 386 HK ,005, HKEX 388 HK , BANK OF CHINA-H 3988 HK ,342, HSBC HOLDINGS PL 5 HK ,543, POWER ASSETS 6 HK , MTR CORP 66 HK , CHINA OVERSEAS 688 HK , TENCENT 700 HK ,803, CHINA UNICOM 762 HK , LINK REIT 823 HK , SINO LAND 83 HK , CHINA RES POWER 836 HK , PETROCHINA-H 857 HK ,666, CNOOC 883 HK , CCB-H 939 HK ,025, CHINA MOBILE 941 HK ,496, LENOVO GROUP 992 HK , N/A HSI Index 30, ,700, , , Download our reports from Bloomberg: BOCM or 4

5 HSCEI constituents Company Stock Closing Mkt 5D YTD 52-week P/E Yield P/B name code price cap chg chg High Low E 2018E 2017E 2017E (HK$) (HK$ m) (%) (%) (HK$) (HK$) (x) (x) (x) (%) (x) HENGAN INTL 1044 HK , CHINA SHENHUA-H 1088 HK , CSPC PHARMACEUTI 1093 HK , SINOPHARM-H 1099 HK , CHINA RES LAND 1109 HK , BYD CO LTD-H 1211 HK , ABC-H 1288 HK ,502, NEW CHINA LIFE-H 1336 HK , PICC GROUP-H 1339 HK , CHINA CINDA-H 1359 HK , ICBC-H 1398 HK ,577, POSTAL SAVINGS-H 1658 HK , CRRC CORP LTD -H 1766 HK , GF SECURITIES-H 1776 HK , CHINA COM CONS-H 1800 HK , CGN POWER-H 1816 HK , MINSHENG BANK-H 1988 HK , CHINA VANKE-H 2202 HK , GUANGZHOU AUTO-H 2238 HK , SHENZHOU INTL GP 2313 HK , PING AN 2318 HK ,473, PICC P&C-H 2328 HK , GREAT WALL MOT-H 2333 HK , CHINA PACIFIC-H 2601 HK , CHINA LIFE-H 2628 HK , CITIC 267 HK , GUANGDONG INVEST 270 HK , BANKCOMM-H 3328 HK , CHINA GAS HOLDIN 384 HK , SINOPEC CORP-H 386 HK ,005, ZHUZHOU CRRC T-H 3898 HK , CHINA RAIL GR-H 390 HK , CM BANK-H 3968 HK , BANK OF CHINA-H 3988 HK ,342, DONGFENG MOTOR-H 489 HK , CITIC SEC-H 6030 HK , ZHONGAN ONLINE-H 6060 HK , N/A N/A HAITONG SECURI-H 6837 HK , CGS-H 6881 HK , HUATAI SECURIT-H 6886 HK , TENCENT 700 HK ,803, CHINA TELECOM-H 728 HK , AIR CHINA LTD-H 753 HK , PETROCHINA-H 857 HK ,666, CNOOC 883 HK , HUANENG POWER-H 902 HK , CONCH CEMENT-H 914 HK , CCB-H 939 HK ,025, CHINA MOBILE 941 HK ,496, CITIC BANK-H 998 HK , HSCEI Index 12, ,685, , , Download our reports from Bloomberg: BOCM or 5

6 BOCOM International 10/F, Man Yee Building, 68 Des Voeux Road Central, Central, Hong Kong Main: (852) Fax: (852) Rating System Analyst Stock Ratings: Buy: The stock's total return is expected to exceed that of the corresponding industry over the next 12 months. Neutral: The stock's total return is expected to be in line with that of the corresponding industry over the next 12 months. Sell: The stock's total return is expected to be below that of the corresponding industry over the next 12 months. Not-Rated: The analyst does not have conviction regarding the outlook of the stock's total return relative to that of the corresponding industry over the next 12 months. Analyst Industry Views: Outperform: The analyst expects the industry coverage universe to be attractive relative to the relevant broad market benchmark over the next 12 months. Market perform: The analyst expects the industry coverage universe to be in line with the relevant broad market benchmark over the next 12 months. Underperform: The analyst expects the industry coverage universe to be unattractive relative to the relevant broad market benchmark over the next 12 months. Broad market benchmark for Hong Kong is the Hang Seng Composite Index, for China A-shares is the MSCI China A Index, for US-listed Chinese companies is S&P US Listed China 50 (USD) Index. Download our reports from Bloomberg: BOCM or 6

7 Analyst certification The authors of this report, hereby declare that: (i) all of the views expressed in this report accurately reflect their personal views about any and all of the subject securities or issuers; and (ii) no part of any of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report; (iii) no insider information/ non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations were being received by the authors. The authors of this report further confirm that (i) neither they nor their respective associates (as defined in the Code of Conduct issued by the Hong Kong Securities and Futures Commission) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of the report; (ii)) neither they nor their respective associates serve as an officer of any of the Hong Kong listed companies covered in this report; and (iii) neither they nor their respective associates have any financial interests in the stock(s) covered in this report except for one coverage analyst who is holding shares of Shimao Property Holdings Limited. Disclosure of relevant business relationships BOCOM International Securities Limited, and/or its associated companies, has investment banking relationship with Bank of Communications, Guolian Securities Co. Ltd.,,Bank of Zhengzhou Co. Ltd., Human Health Holdings Limited, COFCO Meat Holdings Limited, Hebei Yichen Industrial Group Corporation Limited, China Aircraft Leasing Group Holdings Limited, Orient Securities Company Limited, Wuxi Construction and Development Investment Co.China Development Bank Financial Leasing Co., Ltd, Phoenix Healthcare Group,Co. Ltd, Everbright Securities Company Limited, China First Capital Group Limited, Jiayuan International Group Limited, Luzhou Xinglu Water (Group) Co., Ltd., Postal Savings Bank of China Co., Ltd., China Merchants Securities Co., Limited, Shandong International Trust Co., Ltd, Guangdong Kanghua Healthcare Co., Ltd CSC Financial Co., Ltd, BOCOM International Holdings Company Limited, HPC Holdings Limited, Guotai Junan Securities Co., Ltd, Zhongyuan Bank Co., Ltd, Sichuan Energy Investment Development Co., Ltd and Light Year Holdings Limited within the preceding 12 months. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Orient Securities Company Limited. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Everbright Securities Company Limited. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Guolian Securities Co., Ltd. BOCOM International Global Investment Limited currently holds more than 1% of the equity securities of Guotai Junan Securities Co., Ltd. BOCOM International Prosperity Investment Limited currently holds more than 1% of the equity securities of China YuHua Education Corporation Ltd. BOCOM International Prosperity Investment Limited currently holds more than 1% of the equity securities of China Xinhua Education Group Limited. 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