GREATER CHINA Results Kingsoft Corp (3888 HK/HOLD/HK$18.48/Target: HK$19.60): 3Q19: Top-line beat with improved operating margin; remain cautious on game performance. Link REIT (823 HK/BUY/HK$81.10/Target: HK$98.85): 1HFY20: Within expectations; special dividend sustains high DPU growth. Tencent Holdings (700 HK/BUY/HK$327.40/Target: HK$412.00): 3Q19: Fintech margin improvement drives margin recovery, strong deferred revenue growth. Update Anta Sports (2020 HK/BUY/HK$75.65/Target: HK$81.00): P...
GREATER CHINA Economics Inflation: Divergence in CPI and PPI inflation to widen ahead of Spring Festival. Trade: Work in progress. Results AAC Technologies (2018 HK/SELL/HK$51.60/Target: HK$44.80): 3Q19: Improving but enough; downgrade to SELL. Update China Resources Cement Holdings (1313 HK/BUY/HK$9.00/Target: HK$9.69): Takeaways from ground visit to Guangxi. Tencent (700 HK/BUY/HK$327.20/Target: HK$416.00): 3Q19 results preview: Cautious on game revenue growth; Fintech to be the next growth en...
In the “Law on the Protection of Minors†(Amendment Draft), published on 21 October and submitted to the Standing Committee, a special chapter on “Internet protection†was added. It proposed the implementation of online games time management for minors, and specific measures prescribed by the State Council. The supervision and enforcement of the online game behavior of minors will probably be mainly the responsibility of the local press and publishing authorities. However, we believe the...
CHINA Sector Automobile: 1H19 results preview; maintain OVERWEIGHT. Results TAL Education Group (TAL US/BUY/US$37.51/Target: US$41.00): 1QFY20: Results in line but 2QFY20 revenue guidance below estimates. Update Tencent (700 HK/BUY/HK$372.40/Target: HK$437.00): 2Q19 results preview: Recovery in games growth, upgrade to BUY. HONG KONG Sector Property: 1H19 results preview: On track to meeting sales targets; prefer SHKP as top BUY. INDONESIA Update Malindo Feedmill (MAIN IJ/HOLD/Rp1,135/Target: Rp...
Driven by supportive policies and developments in 5G and AI, the global AV (autonomous vehicles) market will probably grow by 5-10x in the next decade, and China will likely become the biggest market. This will drive demand for relevant technologies and components, eg ADAS, sensors and IoV. However, we do not see AVs revolutionising the OEM business as fully AVs will not be feasible in the foreseeable future. Top pick: Nexteer.
KEY HIGHLIGHTS CHINA Economics Economic Activity Apr 19: More stimulus needed in 2H19. Sector Paper Downgrade on unexpected break-up of trade deal. Results Alibaba Group (BABA US/BUY/US$174.84/Target: US$206.00) 4QFY19: In-line results; heavy investments down the road. Tencent Holdings (700 HK/HOLD/HK$374.00/Target: HK$400.00) 1Q19: Soft top-line growth, margins improve as fewer games released; downgrade to HOLD. HONG KONG Results Ausnutria Dairy (1717 HK/BUY/HK$14.80/Target: HK$17...
Tencent reported mixed 1Q19 results. Revenue grew only 16% yoy, missing consensus by 3.5% but earnings beat consensus by 5% due to lower R&D and marketing costs on lack of new games. Gross margin shrank 3.8ppt yoy to 46.6% due to higher contributions from FinTech and the cloud business, but this was better than consensus estimate of 43%. Non-GAAP EPS of Rmb2.19 was up 14% yoy, in line with consensus. Downgrade to HOLD with a lower target price of HK$400.00. Entry price: HK$360.00.
KEY STORY MALAYSIA Initiate Coverage Velesto Energy (VEB MK/BUY/RM0.28/Target: RM0.35): Initiate coverage with BUY and target price of RM0.35 based on annualised 12x EV/EBITDA by 2H19. VEB is the best proxy to local upstream demand in 2019. CHINA Economics Economic Activity: Apr 19: More stimulus needed in 2H19. Sector Paper: Downgrade on unexpected break-up of trade deal. Results Alibaba Group (BABA US/BUY/US$174.84/Target: US$206.00): 4QFY19: In-line results; heavy investments down the road...
China’s Internet sector delivered mixed 4Q18/2H18 results. Game sector growth was still weak due to tight regulation. China’s e-commerce sector recorded solid top-line results led by Alibaba, and bottom-line beat consensus forecasts for both Alibaba and JD.com. For 1H19, we are positive on online travel sector growth, maintain neutral on ecommerce sector growth, and remain cautious on online game sector due to the tightening regulation. Maintain OVERWEIGHT.
Tencent reported in-line 4Q18 results with bottom-line beating consensus forecast by 5%. Total revenue was Rmb84.9b, up 28% yoy, in line with our estimate and 2% above consensus’. Non-GAAP operating margin fell 6.5ppt yoy and 1.6ppt qoq to 26% in 4Q18. Non-GAAP EPS of Rmb2.07 went up 13% yoy, 5% ahead of consensus, mostly on lowerthan- expected S&M and tax expenses. We maintain BUY with an unchanged target price of HK$418.00.
KEY HIGHLIGHTS CHINA Results Geely Auto (175 HK/BUY/HK$14.42/Target: HK$18.00) 2018: Net profit up 18% yoy, in line; earnings bottom out in 2H18. Tencent Holdings (700 HK/BUY/HK$363.00/Target: HK$418.00) 4Q18: Results in line; bottom-line beats expectations. HONG KONG Results CK Asset Holdings (1113 HK/HOLD/HK$67.20/Target: HK$68.35) 2018: Below expectations; growth dependent on M&As. Razer Inc (1337 HK/HOLD/HK$1.44/Target: HK$1.55) 2018: Top-line momentum continues; bottom line missed ...
CHINA Results Geely Auto (175 HK/BUY/HK$14.42/Target: HK$18.00): 2018: Net profit up 18% yoy, in line; earnings bottom out in 2H18. Tencent Holdings (700 HK/BUY/HK$363.00/Target: HK$418.00): 4Q18: Results in line; bottom-line beats expectations. HONG KONG Results CK Asset Holdings (1113 HK/HOLD/HK$67.20/Target: HK$68.35): 2018: Below expectations; growth dependent on M&As. Razer Inc (1337 HK/HOLD/HK$1.44/Target: HK$1.55): 2018: Top-line momentum continues; bottom line missed expectations. INDONE...
KEY HIGHLIGHTS CHINA Sector Education Potential turning point for K12 private school operators in 1Q19. Update Tencent Holdings (700 HK/BUY/HK$317.60/Target: HK$418.00) 2019: More balanced focus on all segments with game approval restarted. TRADERS’ CORNER HEC Pharm (1558 HK): Trading Buy Range Zhejiang Expressway (576 HK): Trading Buy
CHINA Sector Education: Potential turning point for K12 private school operators in 1Q19. Update Tencent Holdings (700 HK/BUY/HK$317.60/Target: HK$418.00): 2019: More balanced focus on all segments with game approval restarted. INDONESIA Update Bumi Serpong Damai (BSDE IJ/HOLD/Rp1,460/Target: Rp1,550): Lack of catalysts for further re-rating. Downgrade to HOLD. MALAYSIA Sector Plantation: Dec 18: Malaysia palm oil inventory remains high at 3.22m tonnes (vs Nov 18’s 3m tonnes) due to high produ...
We expect the restart of game licence approvals to benefit leading companies and Tencent’s and NetEase’s new games to be approved in 1Q-2Q19. We are cautious on the sector’s overall growth in 2019 in view of the tighter review of game content, peaking user numbers and games’ shortening life cycle. We think Tencent will no longer just rely on game growth in 2019 but will have a more balanced focus on its segments via structural drivers such as advertising, cloud and payment.
S$P500 hit its 2019 Yearly uptrend level on Friday, the critical impetus for a sharp countertrend bounce. TCEHY is also at its Yearly trend. Elsewhere, USDCAD is the main directional move in DMFX; US Treasuries point higher.. See GMR Macro Technicals for specific price levels and detailed Trade Strategy.
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