GREATER CHINA Update China Yongda Auto Services Holdings (3669 HK/BUY/HK$5.61/Target: HK$8.50): Earnings momentum improving on all fronts. Shenzhou International (2313 HK/BUY/HK$106.00/Target: HK$120.00): Multi-year visibility on capacity expansion; upgrade to BUY. INDONESIA Update Pembangunan Perumahan (PTPP IJ/BUY/Rp1,460/Target: Rp2,100): 2020 net income expected to grow by 44% yoy. MALAYSIA Sector Plantation: 3Q19 results wrap-up: Mixed earnings with big disappointment from SDPL on large impairment for Liberia. SOP surprised on upside from all business segments. Results Sapura Energy...
KEY HIGHLIGHTS Update China Yongda Auto Services Holdings (3669 HK/BUY/HK$5.61/Target: HK$8.50) Earnings momentum improving on all fronts. Shenzhou International (2313 HK/BUY/HK$106.00/Target: HK$120.00) Multi-year visibility on capacity expansion; Upgrade to BUY. TRADERS’ CORNER WuXi AppTec (2359 HK): Trading Buy Range BOC Aviation (2588 HK): Trading Buy Range
Feasibility Study Results in December to be a Catalyst for this Junior
Slot machine distributor and concession operator RGB’s growth visibility will remain high through 2020-21, riding on the burgeoning casinos in the emerging ASEAN countries (mainly new concessions in the Philippines and Indochina). RGB is expected to deliver net profit growth of 10-20% p.a. in 2020-22, with the lucrative concession division expected to grow 23.3% in the three-year period. It currently trades at 6.0x FY20F PE and offers a lush yield of 4.5-5.0%. Maintain OVERWEIGHT on the sector.
The cement industry is on track for a recovery in 2020, evident from the easing of the price war and we expect demand to pick up gradually. On the other hand, the outbreak of the coronavirus will exert greater pressure on steel prices as there are concerns of a further slowdown in China’s economy, the world’s biggest steel producer and consumer. Maintain MARKET WEIGHT on the building materials sector but OVERWEIGHT on the cement segment. Our top pick is Hume.
KEY HIGHLIGHTS Sector Update Building Materials –Malaysia: Cement recovery progressing well; coronavirus weighing on steel segment. Gaming – Malaysia: Sold-down RGB provides an excellent opportunity to accumulate. A proxy for thriving ASEAN gaming jurisdictions, RGB trades at a prospective PE of only 6x and yield of >5%. TRADERS’ CORNER MKH (MKH MK): Technical BUY Gadang Holdings (GADG MK): Technical BUY
CATL’s 4Q19 core net profit of Rmb633m-1,258m (-45% yoy to +10% yoy) came in above our estimate but below consensus forecast. We raise 2019-21 core EPS by 14%/37%/54%, based on stronger sales growth given no EV subsidy cut in China this year and an EV subsidy hike by Germany. Our 2019-21 core EPS are still 11-32% below consensus forecasts, as we expect China’s subsidy cut on 26 Jun 19 and EV subsidy expiry by 2021, coupled with rising foreign competition, to squeeze CATL’s margins. Maintain SELL. Raise target price to HK$58.00.
We expect China’s automobile sales volume growth to reverse from -8.0% in 2019 to +0.5% in 2020 due to the low base for PV sales in 2019 and pick-up in replacement demand for CV. We prefer the CV segment to the PV segment. In the PV universe, we favour Japanese JV names and luxury plays over Chinese brands due to the former’s increasing market shares amid replacement cycles in tier-1 and tier-2 cities. Maintain MARKET WEIGHT. Top picks: Weichai and DFM. SELL GWM and BYD.
KEY HIGHLIGHTS Economics Money Supply A mixed bag. Sector Automobile Automobile market stabilising on low base. Macau Gaming The worst should be over, but long road to recovery. TRADERS’ CORNER Link REIT (823 HK): Trading Buy Range Sino Biopharm (1177 HK): Trading Buy Range