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.
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.
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
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
GREATER CHINA 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. INDONESIA Update Waskita Karya (WSKT IJ/BUY/ Rp1,305/ Target: Rp1,720): Rp43.7t cash inflow received; expect 66% yoy core earnings growth in 2020. MALAYSIA Results Pavilion REIT (PREIT MK/BUY/RM1.73/Target: RM1.90): 2019: Earnings were hit by higher expenses. We continue to like Pavilion REIT for its high-quality assets. Update British American Tobacco (ROTH MK/HOLD/RM11.94/Target: RM12.92): ...
Operating cash flow could turn positive in 2019 after receiving Rp43.7t cash from construction projects and land clearing reimbursement. A Rp17.6t loan repayment would have slashed net gearing to 2.3x in 2019. Subsidiary WSBP targets 36% contracts growth in 2020. We forecast WSKT to record 66% core net income growth in 2020. WSKT is trading at -1.5SD forward PE. Maintain BUY. Target price: Rp1,720.
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