17 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 22,718.15-219.23-0.96 3.17-1.39 HSCI 3,080.61-29.62-0.95 2.47-1.10 HSCCI (Red Chips) 3,698.48-45.50-1.22 2.01-3.10 HSCEI (H-Shares) 9,666.09-121.25-1.24 2.07 1.31 Mkt T/O ($ Mn) 56,860.52 68.71 0.12-20.70-5.65 Source: Bloomberg Market Outlook Eric Yuen - ericyuen@masonsec.com Hang Seng Index closed down 1.0% at 22,718. Market turnover was almost unchanged at $56.9 billion. Heavily weighted HSBC (5), Tencent (700) and China Mobile (941) shrank 1.3%-1.5%. Nine local property stocks in Hang Seng Index cut an average 1.2% among which Hang Lung Properties (101) retreated 2.1%. Gaming operator Sands China (1928) and Galaxy Entertainment (27) slid 0.4%- 0.7%. Consumption stocks were mixed. China Mengniu Dairy (2319) tumbled 2.8% whilst Hengan Int l (1044) and Lenovo (992) added 0.6%-0.7%. Local banks were little changed. Cathay Pacific (293), the best performing index stock, jumped 3.0%. Power Assets (6), Cheung Kong Infrastructure (1038) and CK Property (1113) formed a JV to acquire $43.1bn utility assets in Australia. Power Assets (6) surged 2.8% due to a potential distribution of special dividend. Cheung Kong Infrastructure (1038) rose 1.0%. CK Property (1113) fell 1.3%. HSCEI declined 1.2% led by oil, insurance and securities companies. BYD Company (1211) was the worst performing HSCEI stock, down 3.8%. Banking, insurance and securities stocks in HSCEI dropped an average 1.0%, 1.8% and 1.8% respectively among which China Life (2628), New China Life (1336) and Huatai Securities (6886) slumped 2.2%-2.5%. Eight largest Chinese property developers dropped an average 1.6%. PetroChina (857) and CNOOC (883) decreased 1.8% and 1.3% respectively. Railway related counters had no direction. China Railway Construction (1186) plunged 2.1% but CCCC (1800) grew 0.3%. We believe further upside for the Hang Seng Index is limited and recommend short-term investors to take profit. Oversea DJIA 19,885.73-5.27-0.03 0.21 9.63 NASDAQ 5,574.12 26.63 0.48 2.52 6.90 Shanghai SE Composite 3,103.43-9.34-0.30-0.63 2.05 Crude Oil Futures (US$) 52.51 0.14 0.27 1.18 5.15 Gold Futures (US$) 1,203.30 7.10 0.59 5.79-4.24 Baltic Dry Index 925.00 15.00 1.65-2.22 3.70 USD / Euro 1.0604 0.0000 0.00 1.53-3.61 Yen / USD 114.130 0.0200-0.02 2.27-8.95 HSCEI HSI 20-Day MA 9,480.97 22,208.85 50-Day MA 9,573.26 22,444.37 9-Day RSI 56.97 60.33 We believe further upside for the Hang Seng Index is limited and recommend short-term investors to take profit. Remarks: Mason Securities Ltd ( Mason Securities ) is licensed by the Securities and Futures Commission to carry on Types 1, 4, 6 and 9 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. Securities Futures
Industry / Corporate News Eric Yuen - ericyuen@masonsec.com Upgrade ANTA Sports (2020) to on potential M&A and strong earnings results for 2016 Upgrade to Proposed issue of RMB3.6bn corporate bonds implies a great chance of M&A in near term Risk Level: Medium Better-than-expected retail sales growth in 3Q16 guarantees strong earnings results for 2016 Company deserves a premium valuation given its leading market position, good earnings Time Horizon: Medium track record and a promising industry outlook Since our SELL commentary dated 6 October 2016, the stock price of ANTA Sports (2020, $23.15) has climbed 7.4% versus a 4.5% drop for the Hang Seng Index. We believe its stellar share price performance is driven by the release of better-than-expected trade fair results for 2Q17 in late October and proposed issue of corporate bonds in late November. We expect the company to report strong earnings results for 2016 next month. This combines with speculation on M&A may trigger a re-rating of the company in near term. The order value of ANTA branded products for the trade fair for 2Q17 achieved a mid-single-digit increase on a year-on-year basis, the same pace as that of 1Q17. However, the retail sales of ANTA branded products increased by a low double-digit in 3Q16 compared with a high single-digit in 2Q16 and mid-single-digit in 1Q16. The retail sales of non-anta branded products (such as FILA, FILA KIDS and DESCENTE branded products) posted a strong increase of 60%-70% in 3Q16 demonstrating its successful strategy of upgrading product mix from mass market to the high-end segment. On 22 November 2016, the company unexpectedly proposed a public issue of RMB3.6bn corporate bonds which we believe is prepared for future M&A to expand market share in the high-end segment. The company had net cash of RMB4.2-5.4bn and maintained high dividend payout of 61%-72% over the past five financial years. As a recap, the company posted strong interim results for 1H16. Revenue grew 20.2% to RMB6.14bn fueled by robust demand for ANTA products. Gross margin improved from 46.6% in 1H15 to 47.9% in 1H16 thanks to successful implementation of the multibrand strategy. Net profit surged 17.0% to RMB1.13bn. Basic EPS added 16.8%. DPS increased by 13.3% to $0.34 representing a dividend payout of 65%. Net margin declined from 18.9% to 18.4% but far above the industry average. Return on average equity expanded from 24.6% to 26.0%. Net cash increased to RMB5.88bn as at 30 June 2016 or equivalent to RMB2.35 per share. As at 30 June 2016, the company had 8,510 ANTA stores in China and 687 FILA stores in China, Hong Kong and Macau. According to Bloomberg estimates, the company s revenue is expected to reach RMB13.33bn in 2016 and RMB15.44bn in 2017, up 20% and 16% respectively. Earnings will grow 16% in both years to RMB2.37bn and RMB2.75bn respectively. Traded at 2017 PER of 18.7x compared to its 3-year average forward PER of 17.0x, ANTA Sports is not particularly cheap. Taking into account its leading market position, good earnings track record, potential M&A opportunity and a promising outlook for China s sportswear market, we believe the company deserves a premium valuation and therefore upgrade it to with a 6-month price target of $26.0 based on FY17 PER of 21.0x. Analysts consensus price target is $24.0. Recent Recommendations Stock Pick Rating Recommendation Highlights TP Texhong Textile (2678) Valuation dipped below the historical average Maintain on Texhong Textile (2678) $13.0 Sands China (1928) Reiterate on Sands China (1928) as recent retreat creates a good entry point $40.7 SMIC (981) HOLD No longer undervalued plus a risk of equity fund raising Downgrade SMIC (981) to HOLD $12.0 Lee & Man Paper (2314) Reiterate on Lee & Man Paper (2314) as oversupply situation of paper industry has eased $7.90 Hua Hong Semiconductor (1347) Promising industry outlook and cheap valuation - Maintain Hua Hong Semiconductor (1347) $10.7 Sunny Optical (2382) Reiterate on Sunny Optical (2382) as shipment of handset lens sets in December remains intact $42.6 Luk Fook (590) Improvement in tourist arrivals and same store sales Maintain Luk Fook (590) $24.8 Chalco (2600) CCCC (1800) Maanshan Iron (323) on Chalco (2600) amid better alumina price trend and lower cost pressure compared to peers Both China and U.S. are likely to accelerate infrastructure investments Maintain CCCC (1800) Reiterate on Maanshan Iron (323) as China sees no signs to loosen its de-capacity measures $4.27 $10.5 $3.07
Technical Ideas GOME (493, $1.01) TP: $1.11 Risk: Low Time Horizon: Short GOME Electrical Appliances retails household appliances and consumer electronic products in China. The counter rose 4.1% yesterday with exceptional turnover, surpassing SMA50, SMA100 and SMA250, indicating the counter s strong uptrend momentum ahead.. Short-term target at $1.11. Cut loss at $0.95. Consensus 2017 PER: 21.4x Consensus target price: $1.07 Source: Bloomberg, Mason Securities HKBN (1310, $9.03) TP: $9.93 Risk: Low Time Horizon: Short HKBN Ltd. provides telephone voice and data communications services. The company offers wireless internet service, IDD and IPTV service, local telephony services, and other valueadded services. The counter advanced 4.0% yesterday with exceptional turnover, surpassing its critical resistance at $9.00 and SMA250, indicating the counter s further upside potential ahead.. Short-term target at $9.93. Cut loss at $8.46. Consensus 2017 PER: 19.5x Consensus target price: $11.18 Source: Bloomberg, Mason Securities
RSI Indicator Overbought (9-day RSI> 80) Tickers 124, 148, 293, 316, 338, 431, 442, 540, 692, 718, 801, 881, 992, 1028, 1076, 1083, 1182, 1193, 1234, 1566, 1658, 1833, 1913, 2086, 2688, 3669, 3708 Oversold (9-day RSI<20) Tickers 400, 1236, 1678, 1970 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Golden Meditech 801 1.23 11.8 44.7 N/A N/A N/A HKT Trust And HKT 6823 10.40 9.5 5.0 16.3 4.8 16.0 Summit Ascent 102 2.29 9.0 2.6 33.9 4.8 46.7 Sino Haijing 1106 0.20 6.0 3.7 N/A N/A N/A Zhongsheng Group 881 8.69 6.0 5.1-15.1 3.8 15.8 Maanshan Iron & Steel 323 2.72 5.8 2.5-8.9 3.5 18.3 Chinese Estates 127 14.96 4.9 9.4 N/A N/A N/A China Harmony New Energy Auto 3836 3.00 4.5 3.8 64.3 5.0 6.6 PCCW 8 4.58 4.3 2.7 4.5 3.8 17.7 Gome Electrical Appliances 493 1.01 4.1 3.4 5.9 3.7 35.9 HKBN 1310 9.03 4.0 3.7 23.8 4.8 25.2 BYD Electronic 285 5.80 3.9 2.2 18.4 3.8 9.6 Prada S.P.A. 1913 33.25 3.9 4.9 7.5 2.5 34.6 Cathay Pacific Airways 293 10.86 3.0 8.2-14.5 1.7 56.0 China Packaging 1439 1.38 3.0 2.9 N/A N/A N/A Power Assets 6 72.50 2.8 2.1 7.5 4.2 20.4 2016 PER* 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.
A-H Share Premium / Discount (%) Average AH Shanghai Listed -35.8% Premium/Discount (%) Shenzhen Listed -35.2% 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 5.18-82 1336 601336 New China Life 45.8 37.35-27 811 601811 Xinhua Winshare 20.69 6.79-71 6886 601688 Huatai Securities 18.16 15-27 187 600860 Jingcheng 9.73 3.3-70 6837 600837 Haitong Securities 16.58 13.94-25 300 600806 Kunming Machinery Machine 7.21 2.61-68 1053 601005 Chongqing Iron 2.52 2.15-24 38 601038 First Tractor 12.11 4.4-68 1186 601186 CRCC 11.88 10.24-23 1033 600871 SSC 3.9 1.46-67 525 601333 Guangshen Railway 5.61 4.95-21 2866 601866 CSCL 3.92 1.59-64 6818 601818 Everbright Bank 3.97 3.61-19 2727 601727 Shanghai Electric 8.42 3.51-63 323 600808 Magang 2.96 2.72-18 995 600012 Anhui Expressway 14.06 5.89-63 1988 600016 Minsheng Bank 9.2 8.53-18 317 600685 COMEC 30.27 12.7-63 2607 601607 Shanghai Pharma 20.7 19.32-17 2238 601238 GAC Group 24.73 10.42-63 1088 601088 China Shenhua 16.89 16.1-15 553 600775 Nanjing Panda 14.94 7.07-58 168 600600 Tsingtao Brewery 30.4 29.2-15 1065 600874 Tianjin Capital 8.02 3.93-56 2601 601601 CPIC 28.67 27.6-14 3993 603993 China Moly 3.99 1.98-56 3328 601328 BoComm 5.92 5.74-14 2880 601880 Dalian Port 2.68 1.35-55 6030 600030 Citic Securities 16.36 16.02-13 1919 601919 China Cosco 5.2 2.73-53 3988 601988 Bank of China 3.5 3.5-11 991 601991 Datang Intl Power 3.77 2-53 2196 600196 Fosun Pharma 23.93 24-11 670 600115 China Eastern 6.93 3.68-53 386 600028 Sinopec 5.96 6.02-10 1618 601618 Airlines MCC 5.28 2.86-52 3968 600036 CMB 18.58 18.94-9 1171 600188 Yanzhou Coal 10.32 5.71-51 1288 601288 ABC 3.16 3.23-9 564 601717 Zhengzhou Coal 7.17 4.15-49 939 601939 CCB 5.61 5.8-8 1055 600029 China South Air 7.28 4.26-48 1398 601398 ICBC 4.55 4.73-8 1800 601800 CCCC 15.51 9.18-47 2318 601318 Ping An Insurance 36.19 40.1-1 2883 601808 COSL 12.53 7.46-47 177 600377 Jiangsu Express 8.89 9.86-1 107 601107 Sichuan Exp 4.91 2.96-46 914 600585 Anhui Conch 18.12 22.8 12 588 601588 Beijing North Star 4.07 2.46-46 3606 600660 Fuyao Glass 18.24 23.3 14 1138 600026 China Shipping 7.03 4.29-46 1071 600027 Huadian Power 5.1 3.33-42 A-H Shares Shenzhen Listed 358 600362 Jiangxi Copper 17.91 11.86-41 1057 002703 Zhejiang Shibao 35.07 8.92-77 2009 601992 BBMG 4.17 2.77-41 568 002490 Shandong Molong 9.91 2.7-76 1072 600875 Dongfang Electric 10.79 7.27-40 42 000585 Northeast Electric 7.18 2.37-71 1898 601898 China Coal Energy 5.69 3.85-40 719 000756 Xinhua Pharma 12.75 5.57-61 902 600011 Huaneng Power 7.36 5.07-39 921 000921 Hisense Kelon 9.85 6.67-40 338 600688 Sinopec Shanghai 6.72 4.67-38 895 002672 Dongjiang Env 17.4 12.68-35 753 601111 Air China 7.5 5.22-38 1812 000488 Chenming Paper 10.75 8.08-33 2333 601633 Great Wall Motor 11.15 7.95-37 2039 000039 China Int'l Marine 15.05 11.34-33 1766 601766 CRRC Corp 10.01 7.22-36 1513 000513 Livzon Pharm 56.37 43.7-31 390 601390 China Railway 9.05 6.54-36 2208 002202 Xinjiang Goldwind 16.02 12.62-30 857 601857 Petrochina Group 8.52 6.17-36 1157 000157 Zoomlion 4.44 3.51-30 2600 601600 Chalco 4.57 3.38-34 763 000063 ZTE Corp 14.64 12-27 998 601998 China Citic Bank 6.87 5.09-34 1211 002594 BYD 47.76 42.35-21 2899 601899 Zijin Mining 3.45 2.64-32 2202 000002 China Vanke 21 19.26-18 548 600548 Shenzhen Express 8.61 6.61-32 1776 000776 GF Securities 17 16.3-15 874 600332 Guangzhou Pharm 23.89 18.8-30 347 000898 Angang Steel 5.45 5.4-12 2628 601628 China Life 26.2 21.05-29 2338 000338 Weichai Power 10.34 12.84 10
HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index 1 3-2 -4 Hang Seng China Ent Index 1 2 1-2 Outperform Underperform Mixed Airline, Automobile, Consumer, PRC Property, Utility Insurance, PRC Securities, Telecom Power, 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 2333 GreatWall Motor 9 10-4 -13 11 Hang Seng Bank 1 2 7 0 1099 Sinopharm 7 10-6 -8 1766 CRRC 1 1 3-7 836 China Res Power 7 7-3 -4 1 CK Hutchison 1 1-7 -8 2202 China Vanke 7 0-1 -19 144 China Mer Port 1 5-5 -6 17 New World Dev 5 7-5 -7 3898 CRRC Times 1 4 7-3 83 Sino Land 5 10-1 -3 700 Tencent 1 7-6 -9 914 Anhui Conch 5 3 11-2 390 China Railway 0-2 13-8 1088 China Shenhua 5 6 3-8 2601 CPIC 0-3 -4-10 688 China Overseas 4 8-5 -9 941 China Mobile 0 4-10 -10 6 Power Assets 4 5 1-2 494 Li & Fung 0-1 -10-11 3 HK & China Gas 3 5-2 -7 2628 China Life 0 3 2-7 293 Cathay Pac Air 3 7 6 0 1186 China Railway 0 1 10-13 1880 Belle Int'l 3 6-12 -15 168 Tsingtao Construction Brew 0-4 -11-11 101 Hang Lung Prop 3 5 4-2 135 Kunlun Gas 0 1 1-1 489 Dongfeng Group 3 1-3 -4 1928 Sands China 0 5-1 -11 992 Lenovo 3 9 1 0 1211 BYD Company 0-1 -15-20 386 Sinopec Corp 3 6 5-1 3988 Bank of China 0 1 2-3 753 Air China 3 4 2-2 1038 CKI Holdings 0-1 -2-6 1109 China Res Land 3 6-3 -7 857 PetroChina 0 5 15-2 2388 BOC Hong Kong 2 6 12-1 27 Galaxy Entertain 0 4 16-8 1299 AIA 2 5-11 -12 883 CNOOC 0-2 -6-8 2 CLP Hldgs 2 4-2 -5 388 HKEx 0 0-10 -11 4 Wharf 2 10 5-4 1359 China Cinda 0 3-4 -7 12 Henderson Land 2 4-6 -8 1113 CK Property -1-1 -10-15 1044 Hengan Int'l 2 5-4 -7 939 CCB -1 5 2-3 902 Huaneng Power 2 5 5-1 998 CITIC Bank -1 2 0-2 16 SHK Prop 2 6-5 -8 5 HSBC Hldgs -1-1 9-4 6837 Haitong Securities 1 0 2-8 728 China Telecom -1 1-10 -12 2018 AAC Technologies 1 10-3 -5 6030 CITIC Securities -1-4 -6-13 19 Swire Pacific 1 6-6 -6 1288 ABC -1 2-1 -2 1398 ICBC 1 4 0-2 1816 CGN Power -1-1 -5-9 3968 CM Bank 1 2-1 -4 6881 Galaxy Securities -1-3 0-11 1988 Minsheng Bank 1 3-2 -7 1776 GF Securities -1-4 -4-10 2318 Ping An 1-1 -1-7 823 Link REIT -1 4-5 -6 2319 Mengniu Dairy 1-2 -1-11 267 CITIC Ltd -2-2 1-8 1800 China Comm Cons 1 5 11-2 6886 HTSC -2-6 -8-17 3328 BOCOM 1 2-1 -5 1339 PICC Group -2-4 -3-8 151 Want Want 1 2 2-5 916 Longyuan Power -2 7-1 -3 1336 New China Life 1 3 7-7 2328 PICC P&C -3-4 -8-11 23 Bank of E Asia 1 3 0-4 762 China Unicom -6-4 -11-11 66 MTR Corporation 1 2-10 -12
Upcoming Events Date Stock Company Name Event Jan 19 626 Public Financial Holdings Final Jan 20 752 Pico Far East Holdings Final Jan 20 1928 Sands China 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, 6 and 9 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.