China Unicom (762 HK)

Transcription

1 MARKET NEWS P R I C E C H A R T ( H a n g S e n g I n d e x ) HK stocks are facing consolidation pressure at highs yet the technical breakthrough has brought positive impact to the market Yesterday (13 November), the HSI rose 61 points to settle at 29,182 points. The HSCEI fell 61 points and closed at 11,684 points. The market turnover amounted to HK$ bn with 701 gainers and 997 losers. As the market has been waiting for the progress of the proposed tax reform, the three major indices only slightly closed higher. The better-than-expected JD.com s results became the market focus, with its Q3 net profit rose 359% yearly and hit a record high. As at the end of September, the number of active subscribers for the past 12 months was million, up 34% yearly. The stock rose 3.45% at market close. The Hang Seng Indexes Company Limited announced the results for quarterly review last Friday. Apart from the changes of the constituent stocks, another concern would be about the weighting of Tencent (700 HK). The weighting of Tencent has been lowered to 10% from the original 11.58% given the official upper limit of the weighting of a single constituent stock. Same issue was encountered by Tencent twice during the HSI reviews conducted in May and August, and the upward momentum of its share price has eased during the period between the result announcement and the official implementation. Therefore, the forced selling of passive index tracking fund is expected to become a barrier for the stock to move higher in short run. Investors shall be aware that, 70% of the Hang Seng constituent stocks fell yesterday. Excluding AIA (1299 HK) s contribution of 141 points, the market has been actually undergoing consolidation at highs. Nevertheless, the HSI stabilized above 29,000 points again yesterday, which confirmed a technical breakthrough, in turn paving way for the index to maintain its uptrend. Some stocks have consolidated amid the uptrend of the index, which could also help to relieve the selling pressure effectively before the index enters into the overbought zone. The Hong Kong stocks are expected to remain on the uptrend with minor pullbacks. WHAT S I N THE PACK JD.com (JD ) 3Q17: Top-line Growth In Line; Strong Bottom-line On Margin Improvement 3Q17 net revenue grew 39% yoy to Rmb83.7b, in line with consensus forecast. Non- GAAP diluted net income per ADS from continuous business was Rmb1.59, beating consensus estimate of Rmb0.64. Non-GAAP gross margin hit a historical high of 15.3% and non- GAAP operating margin expanded to 1.8% (2Q17: 0.6%, 3Q16: 0.9%). JD.com guided for 4Q17 revenue to grow 35-39% yoy to Rmb107b-110b, in line with our and consensus estimates of 35-37%. Maintain BUY. Target price: $ Microport (853 HK) Trading Buy Range: HK$ Last price: HK$8.95 Target price: HK$9.95 / HK$10.85 Protective stop: HK$8.75 China Unicom (762 HK) Trading buy: HK$12.18 Last price: HK$12.18 Target price: HK$12.70/ HK$13.24 Protective stop: HK$11.64 KEY I NDICES Prev Close Chg YTD HSI Index 29, HI1 Index 29, HSCEI index 11, SHCOMP index 3, DJI index 23, SPX index 2, NKY index 22, DAX index 13, CAC index Source: Bloomberg 5, TOP VOLUME Stock Price (HK$) Chg Value ($m) TENCENT % CHINA % PING AN % SUNNY OPTICAL % CHINA LIFE-H % TOP GAI N ERS Stock Price (HK$) Chg Value ($m) WINDMILL GROUP % 25.6 CISCO SYSTEMS % 0.0 WILLAS-ARRAY ELE % 3.2 ASIA GROCERY DIS % VERTICAL INTERNA % 56.2 TOP LOSERS Stock Price (HK$) Chg Value ($m) MODERN LIVING IN % 26.8 AMGEN INC % 0.0 MICROSOFT CORP % 0.0 APPLIED MATERIAL % 0.0 STARBUCKS CORP % 0.0 ANALYST Ivan Ip ivan.ip@uobkayhian.com.hk w w w. u t r a d e. c o m. h k 1

2 COMPANY RESULTS JD.com (JD ) 3Q17: Top-line Growth In Line; Strong Bottom-line On Margin Improvement 3Q17 net revenue grew 39% yoy to Rmb83.7b, in line with consensus forecast. Non- GAAP diluted net income per ADS from continuous business was Rmb1.59, beating consensus estimate of Rmb0.64. Non-GAAP gross margin hit a historical high of 15.3% and non-gaap operating margin expanded to 1.8% (2Q17: 0.6%, 3Q16: 0.9%). JD.com guided for 4Q17 revenue to grow 35-39% yoy to Rmb107b-110b, in line with our and consensus estimates of 35-37%. Maintain BUY. Target price: $ RESULTS GMV growth affected by merchant brands withdrawal. JD.com s (JD) 3Q17 net revenue grew 39% yoy to Rmb83.7b, in line with consensus estimates. GMV was Rmb302.5b under the company's new definition, up 32% yoy (2Q17: +46%). We attribute this to the low season of 3Q and the negative impact from over 100 (according to management) fashion and FMCG brands withdrawing from JD.com since 2Q17. Annual active buyers grew 34% yoy to 266.3m. Marketplace merchants grew 45% yoy and 23% qoq to 160,000. Margins continued to improve, thanks to operating leverage. Non-GAAP gross margin hit the historical high of 15.3% (2Q17: 13.4%, 3Q16: 14.0%). Non-GAAP operating margin expanded to 1.8% (2Q17: 0.6%, 3Q16: 0.9%), thanks to improving economies of scale from direct sales. Non-GAAP fulfilment edged up to 7.4% of revenue in 3Q17 (3Q16: 7.3%) due to higher warehousing and staff costs. As of end-sep 17, JD operated 405 warehouses (2Q17: 335), with total warehouse GFA of 9m sqm (2Q17: 7.1m sqm). Cash flow continued to improve due to favourable payable/receivable days gap. On a trailing 12 months basis (TTM), operating cash flow from continuing operations (ex-jd Finance) was Rmb19.9b in 3Q17 (3Q16: Rmb11.4b). Free cash flow (FCF) excluding the impact of JD Baitiao was Rmb14.6b in 3Q17 (3Q16: Rmb15.0b) on several accretive capital investments cost of Rmb10b in 3Q17 (3Q16: Rmb4b). Inventory turnover improved to 36.9 in 2Q17 (3Q16: 37.3), payable days rose to 58.4 from 51.5 in 3Q16, while receivable days increased slightly to 1.3 in 3Q17 from 1.2 in 3Q16. Cooperation with traffic giants bearing fruit. During the past three months, JD.com expanded its strategic partnerships with Tencent, Baidu, Qihoo 360, NetEase, Sogou and iqiyi, leveraging these companies strong traffic, big data resources and AI algorithm technologies to strengthen the collaboration in precision marketing. In addition, thanks to JD s in-house AI technologies, its advertising revenue achieved triple-digit growth during the ANALYST(S) Julia Pan Meng Yao ext 808 juliapan@uobkayhian.com Pierce Qian ext 801 pierceqian@uobkayhian.com w w w. u t r a d e. c o m. h k 1

3 quarter, according to management. EARNINGS REVISION/RISK We maintain our revenue estimates of unchanged, but lift 2017 net profit forecast by 10% on better-than-expected 3Q17 results. We expect non-gaap net margins to expand to 1.5% and 1.8% in respectively, thanks to the improving operating leverage. We are optimistic of JD's margin potential over time, partly driven by on scale and better order economics. VALUATION/RECOMMENDATION Maintain BUY. We estimate revenue to increase 39% and 26% yoy in respectively. We maintain our valuation methodology of EV/sales, based on the average of its peers Amazon and Vipshop. Our target price of $54.00 remains unchanged, pegged at 1.2x 2018F EV/sales, vs Amazon s 2.1x and Vipshop s 0.4x. SHARE PRICE CATALYST Better-than-expected margin expansion, and the expansion of logistics services to internal and external customers. w w w. u t r a d e. c o m. h k 2

4 TRADERS CORNER Microport (853 HK) Trading Buy Range: HK$ Last price: HK$8.95 Target price: HK$9.95 / HK$10.85 Protective stop: HK$8.75 The stock just broke above a rising channel (formed since May 17) on Monday and is challenging the neckline of a round-bottom pattern (formed since 2010). The rising 20-day moving average is playing a supporting role and maintaining the upside bias. The RSI also broke above a bearish trendline and is heading up. The MACD is staying bullish above its signal line as well as the 0-level. Source: MetaStock Investors should enter once share price breaks above the round-bottom pattern s neckline at HK$9.20. The buying range is HK$ , with further targets at HK$9.95 and HK$ Stop-loss is at HK$8.75 (the upper boundary of rising channel) to control risk. Abort this trade idea if the stock cannot hit the entry price range within three trading days. Average time frame: 1.5 months China Unicom (762 HK) Trading buy: HK$12.18 Last price: HK$12.18 Target price: HK$12.70/ HK$13.24 Protective stop: HK$11.64 The stock is trading within a bullish channel, which confirms our positive outlook. In addition, share price broke above the bearish cloud on Monday with a larger candle. The 20-day moving average is playing a supporting role and maintaining the upside bias. The RSI broke above a bearish trendline, while the MACD is staying bullish above its signal line as well as the 0-level. Source: MetaStock As long as HK$11.64 holds on the downside, look for a further advance towards HK$12.70 and HK$ A break below HK$11.64 would indicate that the upside breakout of the cloud is false and investors should close their positions to control risk. ANALYST Joyce Chan CMT Joyce.chan@uobkayhian.com.hk w w w. u t r a d e. c o m. h k 3

5 FOC NEWS Market News On Monday (13 November), the balance of Northbound Trading of Shanghai-Hong Kong Stock Connect was RMB billion, accounted for about 98.51% of the daily quota of RMB 13 billion. The balance of Southbound Trading was RMB billion, accounted for about 70.60% of the daily quota of RMB 10.5 billion. The balance of Northbound Trading of Shenzhen-Hong Kong Stock Connect was RMB billion, accounted for about 95.85% of the daily quota of RMB 13 billion. The balance of Southbound Trading was RMB billion, accounted for about 81.14% of the daily quota of RMB 10.5 billion. PBOC News The People s Bank of China conducted RMB 80 billion of 7-day reverse repos at the interest rate of 2.45%, RMB 70 billion of 14-day reverse repos at the interest rate of 2.6%, and RMB 30 billion of 63-day reverse repos at the interest rate of 2.9% yesterday. The matured reverse repos for yesterday amounted to RMB 30 billion. There was a net injection of RMB 150 billion for yesterday. Stock Results Tingyi (322 HK, HK$12.50) announced the third quarter results. During the quarter, net profit came in at RMB1.238 billion, up 30% yearly. Revenue increased 8.5% yearly to RMB billion during the period. EBITDA added 14% yearly to RMB3.419 billion. The stock rose 1.1% yesterday. Sunart Retail (6808 HK, HK$8.60) announced that for the first three quarters as of the end of September, the net profit rose 14% yearly to RMB2.315 billion. Turnover rose 2.2% yearly to RMB billion. Gross profit rose 3.5% yearly to RMB billion. The trading of its shares was suspended yesterday. Yue Yuen Industries (551 HK, HK$31.90) announced that in October 2017, net consolidated operating revenue of the company for the current month was $782 million, up by 9.6% yearly. Net consolidated accumulative operating revenue of the company for the ten months ended 31 October 2017 was $7.5 billion. The stock rose 1.4% yesterday. Pou Sheng International (3813 HK, HK$1.47) announced that the net consolidated operating revenue of the company for October amounted to RMB1.779 billion, up 19.4% yearly. From January to October, the net operating revenue rose 14.7% yearly to RMB billion. The stock fell 2% yesterday. Stock News Sunny Optical (2382 HK, HK$149.00) and Country Garden (2007 HK, HK$12.98) were included in Hang Seng Index constituent stocks, while Kunlun Energy (135 HK, HK$6.84) and Cathay Pacific Air (293 HK, HK$12.22) were removed. Zhongan Online (6060 HK, HK$77.95) was also included in Hang Seng Composite LargeCap & MidCap Index. Sunny Optical rose 6%; Country Garden rose 5.7%; Kunlun Energy fell 3.9%; Cathay Pacific Air fell 1%; Zhongan Online rose 2.2%. Sun Life Financial on-market disposed of million shares of Esprit Holdings (330 HK, HK$4.15) at an average price of HK$4.266 per share on 8 November. The shareholding percentage reduced to 11.95% from 12.25%. The stock fell 2.6% yesterday. E C O N O M I C C A L E N D A R Event Period Survey Prior Nov 16 (Thu) Total Net TIC Flows Sep -- $125b EC CPI YoY Oct % Initial Jobless Claims Philadelphia Fed Business Outlook Industrial Production MoM Nov 17 (Fri) Nov Nov Oct 0.5% 0.3% Housing Starts Oct 1165k 1127k Building Permits Oct 1239k 1215k Nov 20 (Mon) Leading Index Oct % Nov 21 (Tue) Chicago Fed Nat Activity Index Existing Home Sales Nov 22 (Wed) EC MBA Mortgage Applications Initial Jobless Claims Durable Goods Orders Consumer Confidence U. of Mich. Sentiment Nov 23 (Thu) EC EC Markit Eurozone Manufacturing PMI Markit Eurozone Composite PMI Nov 24 (Fri) Markit Manufacturing PMI Markit Composite PMI Source: Bloomberg (HK Time), UOBKayHian Oct Oct m Nov Nov Oct 0.7% 2% Nov Nov Nov Nov Nov Nov BAIC Motor (1958 HK, HK$9.01) announced that the company and Daimler Greater China Ltd. contributed capital of RMB140 million and RMB260 million to Mercedes- Benz Leasing Co., Ltd. Respectively. The registered capital of MBLC will be increased to RMB2.097 billion. Upon completion of the Capital Increase, BAIC Motor will continue to hold 35% of the equity interests in MBLC. The stock fell 0.8% yesterday. Fosun Pharma (2196 HK, HK$40.40) announced that Shanghai Fosun Hospital Investment (Group) Co., Ltd., a subsidiary of the company, and Shenzhen Hengsheng Industrial Group Co., Ltd. etc. entered into an equity transfer agreement, w w w. u t r a d e. c o m. h k 4

6 pursuant to which Fosun Hospital Investment agreed to acquire an aggregate of 60% of the equity interest in Shenzhen Hengsheng Hospital in consideration of RMB909 million. The stock fell 1.6% yesterday. Wasion Group (3393 HK, HK$3.88) announced that its subsidiary Hunan Weiming proposed to acquire 44.13% interest in Zhuhai Zhonghui Microelectronics from the vendor at a total consideration of RMB million. U po n c o m pletion of t he Acquisition, Wasion will be interested in 94.18% of Zhuhai Zhonghui. The stock fell 2% yesterday. China Hongqiao (1378 HK, HK$10.32) issued a clarification in relation to the second negative report issued by the short seller Emerson. The stock fell 4.1% yesterday. Chalco (2600 HK, HK$5.60) announced that the trading in the A shares of the company has been suspended with effect from 12 September The company is expected to disclose the plan for the restructuring and apply for resumption of trading of the shares before 9 February The H-shares fell 3.6% yesterday. DTXS Silk Road (620 HK, HK$4.99) announced that it disposed of $44.5 million of the net asset value of the target group (after adjustment) plus 50% equity interest in Universal Harbour Investment Limited at $1.6 million. The expected disposal gain was expected to be HK$1.6 million. The stock fell 1.6% yesterday. Stock Data ZA Online (6060 HK, HK$77.95) announced that the aggregate gross written premiums of the company for the period from January 1, 2017 to October 31, 2017 were approximately RMB4.664 billion. The stock rose 2.2% yesterday. CR Land (1109 HK, HK$22.30) announced that, in the first 10 months of 2017, the group achieved accumulated contracted sales of RMB112.7 billion, with a contracted GFA of about million square meters, up 24% and 23% yearly respectively. The stock fell 1.3% yesterday. China State Construction (3311 HK, HK$10.74) announced that the group recorded an accumulated new contract value of HK$90.12 billion in the ten months ended 31 October 2017, up 23.6% yearly. The company achieved a 90.1% completion of the full year target of The stock fell 0.2% yesterday. Poly Property (119 HK, HK$3.55) announced that the group recorded contracted sales of approximately equivalent to RMB32.8 billion, up by 13.9% yearly, with contracted area sold totaling approximately million square metres for the ten months ended 31 October The stock fell 0.3% yesterday. Greenland HK (337 HK, HK$3.48) announced that for the first ten months of 2017, the contracted sales of the group amounted to approximately RMB24,552 million with a year-on-year increase of 59%. The contracted gross floor area sold amounted to approximately 1,857,900 square meters, representing an increase of approximately 53%. The corresponding average selling price amounted to approximately RMB13,215 per square meter. The stock rose 3% yesterday. Shenzhen Investment (604 HK, HK$3.39) announced that, for the first ten months of this year, the group recorded a total contracted sales of approximately RMB billion, representing a decrease of approximately 43.7% YoY, and the total contracted sales area was approximately 509,635 sq.m., down 40.7% YoY. The average selling price was approximately RMB 20,623 per sq.m.. The stock fell 0.6% yesterday. MCC (1618 HK, HK$2.51) announced that the value of newly signed contracts of the company from January to October in 2017 amounted to RMB billion, representing an increase of 24.7% from the same period of last year. The stock fell 1.2% yesterday. HN Renewables (958 HK, HK$2.45) announced that, the gross power generation for the ten months ended 31 October 2017 amounted to 17,721,800. MWh, representing an increase of 13.8% as compared with the ten months ended 31 October The stock fell 2% yesterday. w w w. u t r a d e. c o m. h k 5

7 IPO News On debut, Razer (1337 HK, HK$4.58) opened at HK$5.12, and it closed at HK$4.58, higher than the listing price of HK$3.88. Trio Industrial Electronics (1710 HK) has started IPO from yesterday through 16 November. The offer price ranges HK$ Entry fee is about HK$2, w w w. u t r a d e. c o m. h k 6

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