4 th Jan, 2017 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 22,150.40 149.84 0.68-1.84-6.50 HSCI 3,011.03 16.42 0.55-2.31-5.68 HSCCI (Red Chips) 3,601.35 13.36 0.37-4.17-7.71 HSCEI (H-Shares) 9,459.55 64.68 0.69-3.29-3.05 Mkt T/O ($ Mn) 49,328.61-4,446.81-8.27-39.00 1.41 Source: Bloomberg Market Outlook Eric Yuen - ericyuen@masonsec.com Hang Seng Index closed up 0.7% at 22,150. Market turnover reduced to $49.3bn. Heavily weighted HSBC (5) advanced 1.2%. Tencent (700) and China Mobile (941) cut 0.2%. Three local banks and nine local property companies in Hang Seng Index grew an average 2.4% and 2.4% respectively, among which Wharf (4) and Bank of East Asia (23) jumped 3.5%-4.4%. Li & Fung (494) surged 4.1%. CK Hutchison (1) added 3.3%. Three largest Chinese property developers including China Overseas Land (688), China Resources Land (1109) and China Vanke (2202) soared 0.6%-1.0%. Consumption stocks showed mixed performance. Hengan Int l (1044) increased 1.8% whilst Want Want China (151) retreated 0.2%. Gaming operator Sands China (1928) and Galaxy Entertainment (27) tumbled 0.3% and 1.3% respectively. HSCEI rose 0.7% led by financial plays. CCB (939) was the worst performing HSCEI stock, down 1.8%. Other insurance, banking and securities stocks in HSCEI all increased with an average gain of 1.5%, 1.2% and 1.0% respectively, among which China Life (2628), New China Life (1336) and CITIC Bank (998) climbed 2.0%-3.0%. Anhui Conch (914) and Air China (753) edged up by 1.4%-1.7%. Automobile, power and railway related stocks were mixed. BYD Company (1211), Zhuzhou CRRC Times Electric (3898) and CGN Power (1816) increased 0.5%-1.3%. Great Wall Motor (2333), CCCC (1800) and China Longyuan (916) plunged 0.7%-1.1%. We take a neutral view on stock market and expect Hang Seng Index to vary between 21,200 and 22,800 this month. Oversea DJIA 19,881.76 119.16 0.60 3.71 9.43 NASDAQ 5,429.08 45.97 0.85 3.30 2.64 Shanghai SE Composite 3,135.92 32.28 1.04-3.33 4.37 Crude Oil Futures (US$) 52.61 0.28 0.54 1.80 8.05 Gold Futures (US$) 1,158.10-3.90-0.34-1.67-8.79 Baltic Dry Index 953.00-8.00-0.83-19.31 2.03 USD / Euro 1.0420-0.0007-0.07-3.22-6.91 Yen / USD 117.620 0.1900-0.16-3.57-12.47 HSCEI HSI 20-Day MA 9,538.67 22,193.24 50-Day MA 9,576.42 22,544.99 9-Day RSI 50.81 53.65 We take a neutral view on stock market and expect Hang Seng Index to vary between 21,200 and 22,800 this month. Remarks: Mason Securities Ltd ( Mason Securities ) is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Ltd. Securities Futures Bullion
Industry / Corporate News Becky Yuen, CFA beckyyuen@masonsec.com Reiterate on Sands China (1928) as recent retreat creates a good entry point Maintain Risk Level: Medium Time Horizon: Medium Concerns on China curbing capital outflow is overdone as December GGR remains strong Quality of mass players are improving as number of overnight visitors continues to grow Current trading at 14.3x 2017 EV/EBITDA with dividend yield of 5.9% Macau gaming counters saw some share price correction last month after a strong run from September to November. We believe this is mainly due to increasing concerns that China is taking a more serious approach to monitor its capital outflow amid the continuous renminbi depreciation trend, especially that two related policies were implemented in Macau during the first ten days of December: 1) Proposal of a new currency declaration system in Macau on Dec 1 which requires all travelers with cash more than MOP 120,000 (or more than US$15,000) have to declare at the border; 2) On Dec 9, UnionPay cut its ATM cash withdrawal limits per transaction in Macau from MOP10,000 to MOP5,000 while keeping the daily withdrawal limit unchanged at MOP10,000. We believe the above policies have limited impact to the recovery trend of Macau s gross gaming revenue (GGR) being seen since July 2016, which was mainly driven by 1) number of overnight visitors of Macau continues to increase in 2H16, who are being drawn to Macau amid new attractions and lower room rates and 2) improved liquidity of junkets which are usually linked with China s economic growth and commodity price trend. In fact, Macau s GGR in December saw an 8% yoy growth. While the number was slightly below the market expectation of a 9% growth and slowed from the 14% yoy growth posted in November, it still signals that the GGR uptrend remains intact despite the ongoing curb of capital outflow by China. Macau s GGR in 2H16 surged 5.7% yoy, which was the first positive yoy growth for a halfyear period since 1H14. The consistently strong GGR figures in 2H16 should reaffirm our view that the worst time for the industry is already behind us. We expect Macau s GGR to see another 9% yoy increment in 1H17, given the low base of GGR in 2Q16 (daily run rate was only MOP567mn in 2Q15 vs MOP598mn in 3Q16 and MOP657mn in 4Q16 respectively). At the same time, we are encouraged to see that number of overnight visitors in Macau continued to improve in 2016 (1H16 + 8.3% yoy; Jul- Nov 16 +9.9% yoy). This trend suggests that the quality of Macau mass players has been improving over the past year and could also be the reason behind the recovery of premium mass segment during the period, especially with the opening of two new casinos in 2H16. The upcoming mass gaming revenue performance during Chinese New Year holidays could be a positive share price catalyst for Sands China (1928, $33.60) in our view, as it has the highest mass market exposure among Macau gaming counters. Recall that Sands China reported 3Q16 results back in early November, which saw its adjusted property EBITDA up 29% qoq and 15% yoy respectively to US$629mm, beating market expectation by more than 10%. For the first 18 days of operation, Parisian already reported a net revenue of US$68.6mn, with adjusted property EBITDA at US$19.2mn. The strong qoq gaming revenue growth of 18%, 10% and 39% for Venetian Macao, Sands Cotai Central and Plaza Casino at Four Seasons respectively (vs industry s 7% qoq growth) suggests that there is limited cannibalization at its existing properties despite the opening of the new landmark Parisian. Most importantly, management of Sands mentioned that premium mass revenue grew 15% yoy (first positive yoy growth in two years) which we see as a strong indication that not only traffic but also the quality of casino players is improving. We maintain our view that for 2016/2017, total EBITDA of Sands China will post a 5%/26% growth to US$2,144mn/US$2,695mn on the back of a -1%/14% revenue increase. Counter is now trading at 14.3x 2017 EV/EBITDA which we believe is not demanding in view of company s earnings recovery pace and high dividend yield of 5.9%. We therefore reiterate with unchanged 6-month target price of $40.7, implying a 17x 2017 EV/EBITDA. Recent Recommendations Stock Pick Rating Recommendation Highlights TP Shenzhou Int l (2313) Impact of potential US trade protectionism on Shenzhou Int l (2313) is limited. Reiterate $62.5 Xinyi Glass (868) Reiterate on Xinyi Glass (868) amid company s positive earnings alert for 2016 $7.73 Pacific Basin (2343) Maintain Pacific Basin (2343) as the uptrend in BDI is sustainable into 2017 $1.41 China Maple Leaf Education Leading player with a promising industry outlook Maintain China Maple Leaf (1317) Education (1317) $6.10 Nine Dragons Paper (2689) Reiterate on Nine Dragons Paper (2689) as market supply tightness exceeds expectation $8.60 CCCC (1800) Both China and U.S. are likely to accelerate infrastructure investments Maintain CCCC (1800) $10.5 Angang (347) Reiterate Buy on Angang (347) amid a stronger than expected de-capacity measures taken in China $5.86 Techtronic Industries (669) Upgrade Techtronic Industries (669) to as valuation turns attractive again $31.7 AAC Technologies (2018) Reiterate on AAC Tech (2018) amid multiple earnings growth drivers ahead $81.7 Texhong Textile (2678) Valuation dipped below the historical average Maintain on Texhong Textile (2678) $13.0
Technical Ideas Sa Sa Int l (178, $3.27) TP: $3.60 Risk: Medium Time Horizon: Short Sa Sa International retails and wholesales cosmetics. The company also provides beauty and health club services to members. The counter surged 6.2% yesterday, surpassing its critical resistance at $3.25, SMA20 and SMA100. MACD showed positive crossing, indicating the counter s further upside potential ahead.. Short-term target at $3.60. Cut loss at $3.10. Consensus 2016 PER: 27.0x Consensus target price: $3.24 Source: Bloomberg, Mason Securities China CITIC Bank (998, $5.04) TP: $5.54 Risk: Low Time Horizon: Short China CITIC Bank provides a full range of commercial banking services including RMB and foreign currency deposit, loan, international and domestic settlement, currency trading, bank guarantee, and export credit. The counter rose 2.2% yesterday, surpassing its resistance at $5.00 and SMA50. 9-day RSI extended its increasing trend and exceeded 50, indicating the counter s strong upward momentum ahead.. Short-term target at $5.54. Cut loss at $4.84. Source: Bloomberg, Mason Securities Consensus 2016 PBR: 0.6x Consensus target price: $5.13
RSI Indicator Overbought (9-day RSI> 80) Tickers Oversold (9-day RSI<20) Tickers 225, 259, 273, 442, 801, 1103, 1115, 1367, 1381, 1733, 2633 367, 582, 1022, 1135, 2298, 3668 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Mason Financial 273 0.21 13.5 27.8 N/A N/A N/A Hanbo Enterprises 1367 3.52 12.1 2.3 N/A N/A N/A Source: Bloomberg, Mason Securities; *Based on consensus estimates ^ The Rating indicates analysts opinions on the security. It is calculated by converting analysts recommendations into a number from 1-5 and taking the average. 5 is the best while 1 is the worst. 2016 PER*
A-H Share Premium / Discount (%) Average AH Shanghai Listed -35.8% Premium/Discount (%) Shenzhen Listed -36.6% H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) 1108 600876 Luoyang Glass 25.61 5.06-82 874 600332 Guangzhou Pharm 23.94 19.66-26 187 600860 Jingcheng 11.68 3.66-72 2628 601628 China Life 25.25 20.8-26 811 601811 Xinhua Machinery Winshare 22.37 7.18-71 6886 601688 Huatai Securities 18.19 15.02-26 300 600806 Kunming Machine 7.88 2.55-71 1186 601186 CRCC 12 10.04-25 1033 600871 SSC 4.13 1.5-67 6837 600837 Haitong Securities 15.75 13.48-23 995 600012 Anhui Expressway 16.38 6.06-67 525 601333 Guangshen Railway 5.25 4.66-20 38 601038 First Tractor 11.59 4.35-66 2607 601607 Shanghai Pharma 19.86 17.7-20 2866 601866 CSCL 4.09 1.62-64 6818 601818 Everbright Bank 3.95 3.56-19 2238 601238 GAC Group 23.2 9.37-64 1088 601088 China Shenhua 16.19 14.64-19 2727 601727 Shanghai Electric 8.42 3.46-63 1988 600016 Minsheng Bank 9.11 8.41-17 317 600685 COMEC 30.31 12.48-63 1053 601005 Chongqing Iron 2.52 2.42-14 2880 601880 Dalian Port 2.83 1.36-57 2601 601601 CPIC 28.02 27.3-13 1171 600188 Yanzhou Coal 10.88 5.27-57 3328 601328 BoComm 5.81 5.67-13 1065 600874 Tianjin Capital 8.24 4.02-56 6030 600030 Citic Securities 16.19 15.8-13 670 600115 China Eastern 7.14 3.57-55 168 600600 Tsingtao Brewery 29.66 29.1-12 3993 603993 China Airlines Moly 3.75 1.88-55 2196 600196 Fosun Pharma 23.67 23.6-11 553 600775 Nanjing Panda 14.15 7.1-55 3988 601988 Bank of China 3.47 3.48-10 1919 601919 China Cosco 5.28 2.68-55 386 600028 Sinopec 5.51 5.57-9 991 601991 Datang Intl Power 3.84 2.03-53 3968 600036 CMB 17.96 18.32-9 2883 601808 COSL 12.94 7.28-50 1288 601288 ABC 3.12 3.21-8 1800 601800 CCCC 15.29 8.82-48 1398 601398 ICBC 4.43 4.68-5 564 601717 Zhengzhou Coal 7.25 4.19-48 939 601939 CCB 5.49 5.86-4 588 601588 Beijing North Star 4.17 2.41-48 2318 601318 Ping An Insurance 35.68 39.35-1 1055 600029 China South Air 7.03 4.08-48 177 600377 Jiangsu Express 8.61 9.78 2 107 601107 Sichuan Exp 5.09 2.97-48 914 600585 Anhui Conch 17.39 21.45 11 1618 601618 MCC 4.69 2.87-45 3606 600660 Fuyao Glass 18.67 23.9 15 2009 601992 BBMG 4.44 2.75-44 1138 600026 China Shipping 6.89 4.33-44 A-H Shares Shenzhen Listed 1898 601898 China Coal Energy 5.85 3.72-43 568 002490 Shandong Molong 9.79 2.7-75 1072 600875 Dongfang Electric 10.79 6.92-43 1057 002703 Zhejiang Shibao 31.05 8.6-75 338 600688 Sinopec Shanghai 6.5 4.2-42 42 000585 Northeast Electric 7.77 2.65-69 358 600362 Jiangxi Copper 17.08 11.1-42 719 000756 Xinhua Pharma 12.67 5.25-63 2333 601633 Great Wall Motor 10.99 7.19-41 921 000921 Hisense Kelon 10.23 6.22-45 1071 600027 Huadian Power 4.99 3.47-38 1513 000513 Livzon Pharm 59.8 44.75-33 753 601111 Air China 7.21 5.02-38 1157 000157 Zoomlion 4.54 3.42-32 1766 601766 CRRC Corp 9.84 6.98-36 895 002672 Dongjiang Env 17.47 13.18-32 390 601390 China Railway 8.93 6.34-36 1812 000488 Chenming Paper 10.71 8.18-32 902 600011 Huaneng Group Power 7.08 5.13-35 2208 002202 Xinjiang Goldwind 17.2 13.14-32 857 601857 Petrochina 7.97 5.8-35 2039 000039 China Int'l Marine 14.8 11.38-31 998 601998 China Citic Bank 6.75 5.04-33 763 000063 ZTE Corp 16.2 12.94-28 2899 601899 Zijin Mining 3.36 2.51-33 1211 002594 BYD 49.83 41.4-26 2600 601600 Chalco 4.24 3.2-32 2202 000002 China Vanke 20.73 17.8-23 323 600808 Magang 2.86 2.24-30 347 000898 Angang Steel 5.07 4.56-19 548 600548 Shenzhen Express 8.49 6.77-29 1776 000776 GF Securities 17.11 16.22-15 1336 601336 New China Life 45.01 36.3-28 2338 000338 Weichai Power 9.97 12.08 9
HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index 2-2 -6-8 Hang Seng China Ent Index 3-3 -2-5 Outperform Underperform Mixed PRC Bank, Financials, IT Airline, Automobile, Global Player, Oil&Gas Consumer, HK Property Price Change (%) Price Change (%) Stock vs 3M Stock vs 3M Company Name 5 D 1 M 3 M Company Name 5 D 1 M 3 M High High 939 CCB 8 1 1-2 388 HKEx 2-9 -10-12 1359 China Cinda 6 3 1-5 1088 China Shenhua 2-9 -5-16 4 Wharf 6-3 -5-10 688 China Overseas 2-7 -20-20 1044 Hengan Int'l 5-6 -10-11 23 Bank of E Asia 2-3 -6-7 2018 AAC Technologies 5 3-12 -12 2388 BOC Hong Kong 2-1 8-4 700 Tencent 4-1 -13-13 293 Cathay Pac Air 2 0-4 -4 1398 ICBC 4-1 -5-6 1109 China Res Land 1-7 -18-18 902 Huaneng Power 4 4 5 0 836 China Res Power 1-4 -9-12 83 Sino Land 4 2-13 -13 1211 BYD Company 1-9 -18-22 998 CITIC Bank 4 0-3 -3 267 CITIC Ltd 1-6 -1-9 2319 Mengniu Dairy 4-2 1-8 1816 CGN Power 1-9 -8-9 101 Hang Lung Prop 4-1 -4-5 728 China Telecom 1-3 -9-13 151 Want Want 4 0 1-4 1880 Belle Int'l 1 0-16 -19 2628 China Life 4-4 3-8 941 China Mobile 1-3 -14-16 3328 BOCOM 4-3 -5-7 2601 CPIC 1-8 -7-11 3988 Bank of China 4-2 -2-4 1776 GF Securities 1-8 -2-11 19 Swire Pacific 3-1 -11-11 1928 Sands China 1-8 -2-14 1800 China Comm Cons 3-5 8-6 883 CNOOC 1-5 0-9 3898 CRRC Times 3-4 -2-6 11 Hang Seng Bank 1 1 6-1 1988 Minsheng Bank 3-4 -6-8 1099 Sinopharm 1-11 -17-18 1336 New China Life 3-6 5-9 914 Anhui Conch 1-5 0-8 17 New World Dev 3-2 -14-14 6 Power Assets 1-4 -9-9 16 SHK Prop 3 0-11 -13 390 China Railway 1-9 13-11 823 Link REIT 3-3 -10-10 489 Dongfeng Group 1-2 -2-6 916 Longyuan Power 3-2 -6-8 6030 CITIC Securities 1-10 -5-14 12 Henderson Land 3-1 -10-11 3 HK & China Gas 1-3 -6-11 66 MTR Corporation 3 1-10 -12 5 HSBC Hldgs 1 3 10-4 1038 CKI Holdings 2-5 -8-9 1766 CRRC 1-8 -1-10 762 China Unicom 2-4 -4-8 2 CLP Hldgs 1-1 -9-9 1186 China Railway 2-10 12-14 2333 GreatWall Motor 0 1-6 -22 6837 Haitong Construction Securities 2-9 1-11 1113 CK Property 0-7 -15-17 992 Lenovo 2-1 -6-8 386 Sinopec Corp 0 2-2 -6 1 CK Hutchison 2-3 -9-9 2202 China Vanke 0-24 -12-26 3968 CM Bank 2-5 -7-8 857 PetroChina 0 6 13-4 144 China Mer Port 2 1-8 -11 27 Galaxy Entertain 0-7 11-13 6886 HTSC 2-14 -5-17 753 Air China -1-4 -7-7 2328 PICC P&C 2-5 -5-8 1299 AIA -1-3 -17-19 1339 PICC Group 2-4 -3-6 168 Tsingtao Brew -1-5 -9-11 2318 Ping An 2-6 -3-9 135 Kunlun Gas -1 1-2 -6 1288 ABC 2-1 -4-6 494 Li & Fung -2 6-11 -13 6881 Galaxy Securities 2-6 0-12
Upcoming Events Date Stock Company Name Event Jan 4 737 Hopewell Highway Infrastructure Dividend Jan 10 1353 Fujian Nuoqi Dividend Jan 12 6288 Fast Retailing Dividend Disclosures Investment Rating System Ratings Description Mason Securities Limited s investment Buy Expected positive return of > 10 % rating system is divided into investment Investment Ratings Hold Expected return range of ~ ±10 % ratings, risk rating and investment time Sell Expected negative return > 10% horizon. The rating scale is subject to change upon periodic review of market by High (H) 90-day volatility of > 50% research department. Assigned ratings are Risk Ratings Medium (M) 90-day volatility of > 30-50% based on company and sector historical Low (L) 90-day volatility of < 30% performance and analysts intrinsic Long (L) 6 12 Months valuation of the stock Investment Time Medium (M) 3 6 Months Horizon Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage Mason Securities Limited Portion 1, 12/F, The Center 99 Queen s Road Central Hong Kong Tel: (852) 2218-2828 Fax: (852) 2218-2992 This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither Mason Securities Limited nor any of its affiliates, nor any employees or other persons connected with any of them, accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the abovementioned companies or individuals may have used the research materials before publication. Mason Securities Limited (or any of its affiliates) and their respective officers, directors, analysts, or employees may or may not have a position in or with respect to the securities or financial instruments covered herein, and may, as principal or agent, buy and sell such securities or financial instruments. However, it is hereby declared that the writer, at the time of writing, does not have any interest in any of the securities or financial instruments covered in this report. An employee, analyst, officer, or a director of Mason Securities Limited( or any of its affiliates), may serve as a director for companies covered in this report. Mason Securities Limited (or any of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any companies covered in this report. Mason Securities Limited is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. Mason Futures Limited is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading service is provided by Mason Bullion Limited.