Shenzhou International Group Holdings is an investment holding company. Through its subsidiaries, Co. is principally engaged in the manufacturing of knitwear on an Original Equipment Manufacturer basis. Co. focuses on producing sport wear and casual wear with major international clients including UNIQLO, ADIDAS NIKE, and PUMA. In addition, Co. is involved in property leasing in Hong Kong; import and export of commodities in China and Hong Kong; property management in China; trading company in Macau, Japan and China; and retail in China.
We believe the sportswear sector will sustain its robust growth, driven by rising health awareness, increasing sports participation and policy support. Domestic brand recognition has recovered, due to multi-brand strategies that can help capture opportunities from the mass to affordable-luxury markets. In our view, the three stronger domestic brands will stay resilient. Maintain OVERWEGHT. Top pick: Anta.
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...
Yongda is improving on all fronts in 4Q19, in new car sales growth, new car sales margins and after-sales service revenue. New car sales growth momentum has recovered in 4Q19, and management has kept 2019 sales volume growth target of 10% (9M19: +9.8% yoy, 3Q19: 5.5%). New car sales gross margin is improving in tandem with the pricing for BMW. After-sales service revenue growth has also picked up in 4Q19. All these imply potential earnings upside. Maintain BUY. Target price: HK$8.50.
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
KEY HIGHLIGHTS Update MicroPort Scientific Corporation (853 HK/BUY/HK$8.91/Target: HK$11.00) 2019 results preview: Domestic growth accelerates, weak overseas businesses may regain growth momentum in 2020. TRADERS’ CORNER China Res Gas (1193 HK): Trading Buy Range Geely Auto (175 HK): Trading Sell Range
GREATER CHINA Sector Dairy: 2020 outlook: Product premumisation is key. Update Shenzhen Mindray Bio-Medical Electronics (300760 CH/BUY/Rmb193.27/Target: Rmb235.00): 2019 results preview: Expect net profit to grow 20-30% yoy, in line with expectations. INDONESIA Results Bank Negara Indonesia (BBNI IJ/BUY/Rp7,625/Target: Rp9,800): 2019: Earnings up only 2.5% yoy on aggressive provisioning. MALAYSIA Results DiGi.Com (DIGI MK/HOLD/RM4.51/Target: RM4.60): 4Q19: Results at lower end of expectation; stock offers sustainable dividend yield of 4.2%. IGB REIT (IGBREIT MK/BUY/RM1.95/Target: RM2.09): 2019...
Dairy is the key beneficiary of the growing middle class in China which pays more attention to health and lifestyle. Dairy products’ premiumisation is the dominant driver of sales growth in 2020 as the middle class upgrades its consumption preference. Although new births have declined in numbers, we believe large domestic infant milk formula (IMF) players can still gain growth via product differentiation and market share gains. Maintain OVERWEIGHT on the dairy sector.
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