Company profile
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE TUESDAY MAY 20, 2014
EQUITIES HONG KONG STRATEGY
QUAM PULSE 1/3 of Baby Formula Producers To be Eliminated By End of Month (CBN) - According to CBN, the government has issued a new policy requiring all baby formula producers to apply for production license by the end of month in order to continue production. Among 127 registered baby formulas producers, it is estimated that 1/3 of them may not be granted with a license. Moreover, the government has gathered a team of nutritional experts to inspect on every products made by the companies. Baby formulas produced with the similar recipes or with similar functions but branded under different names will not be approved for production. Among the 300 baby formula products produced by 3 companies based in Shanghai, only 87 of them received approval from the government. Furthermore, baby formulas producers are required to impose strict monitoring on its production facilities, and install GPS tracking system on its logistics units. Our take: The government is accelerating the consolidation process for the dairy industry. China Mengniu (2319.HK), Yashili International (1230.HK), Huishan Dairy (6863.HK) were the ones selected by the government to be included in the government’s support list for the dairy sector reform. However, they are currently trading at 2014 P/E of 27.5x, 19.3x, and 16.5x respectively. Valuation is demanding. As a result, we expect their share price performance to be in-line with the market only.
HSI TOP MOVERS Leaders Ticker COSCO PAC LT HONG KG CHIN HUTCHISON WH TENCENT HSBC HLDGS P
China Unicom Added ~895,000 Monthly Users in April - China Unicom merely added ~895,000 new mobile users in April, marking the lowest number of users added monthly since Oct 2009. China Unicom has 290.6mn accumulated mobile users as at Apr 2014. It added ~2.11mn mobile broadband users in April, with the lowest new 3G users added since Aug 2011.
% -3.65 -3.16 -2.00 -1.82 -1.62
Close
1D Chg
1D % Chg
22704.50 9915.29 2115.29 8899.90 2015.14 3261.82 1888.72 24362.58 7267.55 1407.75 4980.06 6870.90 3626.33
-8.41 -40.06 -30.66 11.45 1.70 -0.77 5.38 240.84 64.55 2.49 -51.51 53.19 -11.58
-0.04 -0.40 -1.43 0.13 0.08 -0.02 0.29 1.00 0.90 0.18 -1.02 0.78 -0.32
Close
1D % Chg
YTD % Chg
102.53 110.09 4.45 299.08
0.50 0.31 0.73 0.58
5.40 0.98 8.05 2.24
317.50 1300.10 19.55 1477.13
0.89 0.51 0.93 0.83
-5.88 8.19 0.41 7.74
Corn Wheat Soybeans Coffee Sugar Cotton
481.00 670.75 1467.75 186.65 17.97 89.80
-0.52 -0.52 0.19 0.86 0.34 -0.02
10.07 8.76 16.07 62.16 7.41 6.93
Baltic Dry
1027.00
0.59
-54.90
HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP ASX
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Analyst: Andy Wong +852 29715434
CHINA TAKEAWAYS
Ticker LI & FUNG LT BELLE INTERN CHINA UNICOM WHARF HLDG KUNLUN ENERG
Asia
QUAM RESEARCH Macau Legend (1680.HK, Current Price: HK$5.66, Unrated) – The Company is engaged in gaming and hotel operations in Macau. Its core assets are: Landmark Macau (Landmark Hotel and Pharaoh’s Palace Casino) and Fisherman’s Wharf (Rocks Hotel and Babylon Casino). Currently, its core revenue is derived from the mass gaming tables in the Pharaoh’s Palace Casino, contributing to 56.4% of FY2013 total revenue. The Company placed 188mn shares to raise HK$1.35bn at the beginning of the year, and drew down HK$2.62bn of 5 years loan facility in April 2014. The funds raised will be used for the redevelopment of Fisherman’s Wharf. Upon the completion of the redevelopment in 2016, 350 gaming tables (+233% from FY2013) and 1272 hotel rooms will be added (249% from FY2013). Thus, adjusted EBITDA is expected to expand at a CAGR of 54.9%. However, at the current price of HK$5.81, it is trading at an estimated 2016 EV/EBITDA of ~10.5x. Meanwhile, the peers are trading at a 2016 EV/EBITDA of~ 9.2x. As a result, our target price is HK$5.10. Current valuation is stretched, and has already factored in the explosive earnings growth expected from the Fisherman’s Wharf redevelopment.
Laggers % 1.57 1.10 1.07 1.03 0.8
4.4 3.9 3.4 2.9 2.4 1.9 1.4
CSRC Plans to Have ~100 IPOs in 2H14 - The China Securities Regulatory 0.9 Commission had a meeting yesterday to discuss the implementation of new rules for the 0.4Jul-2013 Aug- Sep- Oct- Nov- Dec- Jan- Feb2013 2013 2013 2013 2013 2014 2014 development of capital markets proposed by the State Council. Several measures that HSI Index 1680 HK Equity will be implemented include launching a pilot trading program on stock ETFs and options Share Performance of 1680 HK on the Shanghai Stock Exchange, issuing ~100 IPOs in the second half of this year, establishing a private equity regulation system and launching crude oil futures.
Mar2014
Apr2014
May2014
1
US Launches Anti-dumping Probe against China Container Makers – Chinese container makers Singamas Container Holdings Ltd and China International Marine Containers (Group) Co Ltd said US authorities were investigating them for anti-dumping practices. The probes are in response to a petition alleging that the companies’ 53-foot domestic dry containers being sold in the United States are subsidized by the Chinese government, both companies said in separate filings to the Hong Kong bourse on Monday. < http://www.chinadaily.com.cn/business/2014-05/19/content_17518319.htm>
2
QUAM INSTITUTIONAL BUSINESS UNIT RESEARCH
SALES
JENNIFER SO
+852 2971 5433
STANLEY NG
+852 2217 2857
ANDY CK WONG
+852 2971 5434
GUY STILLE
+852 2217 2853
CHRISTOPHER HO
+852 2971 5436
quam research@quam group.com 18/F China Building, 29 Queen's Road Central, Hong Kong
Disclaimer and Risk Statement This document is published by Quam Securities Company Limited (“Quam Securities”), a licensed corporation (central entity number AAC557) regulated by the Securities and Futures Commission in Hong Kong. This document is for distribution in Hong Kong only to persons who are “Professional Investors” as defined in Part 1 of Schedule 1 of Securities and Futures Ordinance (Cap 571) of Hong Kong and any rules made thereunder. This document is not intended for distribution to or use by, any person or entity who is a citizen or resident of any jurisdiction where such distribution or use would be contrary to applicable law or regulation within such jurisdiction. This document does not constitute an offer or a solicitation of an offer to buy or sell any securities. This document is circulated to addresses solely and may not be reproduced or redistributed to any other person or published, in whole or in part, for any purpose. The research is based on information obtained from sources believed to be reliable, but Quam Securities does not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without prior notice. Any recommendation does not have regard to specific investment objectives, financial situation and particular needs of any specific addressee. Quam Securities accepts no liability whatsoever for any direct or consequential loss arising from any use of this document. Quam Securities and its affiliates as well as persons associated with any of them from time to time may or may not have interests in the securities mentioned in this document. The prices of securities may move up or down, and past performance is not an indication of future performance. Investors shall consider seeking separate legal or financial advice before making investment decisions.
3
DATE TUESDAY MAY 20, 2014
EQUITIES HONG KONG STRATEGY
QUAM PULSE 1/3 of Baby Formula Producers To be Eliminated By End of Month (CBN) - According to CBN, the government has issued a new policy requiring all baby formula producers to apply for production license by the end of month in order to continue production. Among 127 registered baby formulas producers, it is estimated that 1/3 of them may not be granted with a license. Moreover, the government has gathered a team of nutritional experts to inspect on every products made by the companies. Baby formulas produced with the similar recipes or with similar functions but branded under different names will not be approved for production. Among the 300 baby formula products produced by 3 companies based in Shanghai, only 87 of them received approval from the government. Furthermore, baby formulas producers are required to impose strict monitoring on its production facilities, and install GPS tracking system on its logistics units. Our take: The government is accelerating the consolidation process for the dairy industry. China Mengniu (2319.HK), Yashili International (1230.HK), Huishan Dairy (6863.HK) were the ones selected by the government to be included in the government’s support list for the dairy sector reform. However, they are currently trading at 2014 P/E of 27.5x, 19.3x, and 16.5x respectively. Valuation is demanding. As a result, we expect their share price performance to be in-line with the market only.
HSI TOP MOVERS Leaders Ticker COSCO PAC LT HONG KG CHIN HUTCHISON WH TENCENT HSBC HLDGS P
China Unicom Added ~895,000 Monthly Users in April - China Unicom merely added ~895,000 new mobile users in April, marking the lowest number of users added monthly since Oct 2009. China Unicom has 290.6mn accumulated mobile users as at Apr 2014. It added ~2.11mn mobile broadband users in April, with the lowest new 3G users added since Aug 2011.
% -3.65 -3.16 -2.00 -1.82 -1.62
Close
1D Chg
1D % Chg
22704.50 9915.29 2115.29 8899.90 2015.14 3261.82 1888.72 24362.58 7267.55 1407.75 4980.06 6870.90 3626.33
-8.41 -40.06 -30.66 11.45 1.70 -0.77 5.38 240.84 64.55 2.49 -51.51 53.19 -11.58
-0.04 -0.40 -1.43 0.13 0.08 -0.02 0.29 1.00 0.90 0.18 -1.02 0.78 -0.32
Close
1D % Chg
YTD % Chg
102.53 110.09 4.45 299.08
0.50 0.31 0.73 0.58
5.40 0.98 8.05 2.24
317.50 1300.10 19.55 1477.13
0.89 0.51 0.93 0.83
-5.88 8.19 0.41 7.74
Corn Wheat Soybeans Coffee Sugar Cotton
481.00 670.75 1467.75 186.65 17.97 89.80
-0.52 -0.52 0.19 0.86 0.34 -0.02
10.07 8.76 16.07 62.16 7.41 6.93
Baltic Dry
1027.00
0.59
-54.90
HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP ASX
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Analyst: Andy Wong +852 29715434
CHINA TAKEAWAYS
Ticker LI & FUNG LT BELLE INTERN CHINA UNICOM WHARF HLDG KUNLUN ENERG
Asia
QUAM RESEARCH Macau Legend (1680.HK, Current Price: HK$5.66, Unrated) – The Company is engaged in gaming and hotel operations in Macau. Its core assets are: Landmark Macau (Landmark Hotel and Pharaoh’s Palace Casino) and Fisherman’s Wharf (Rocks Hotel and Babylon Casino). Currently, its core revenue is derived from the mass gaming tables in the Pharaoh’s Palace Casino, contributing to 56.4% of FY2013 total revenue. The Company placed 188mn shares to raise HK$1.35bn at the beginning of the year, and drew down HK$2.62bn of 5 years loan facility in April 2014. The funds raised will be used for the redevelopment of Fisherman’s Wharf. Upon the completion of the redevelopment in 2016, 350 gaming tables (+233% from FY2013) and 1272 hotel rooms will be added (249% from FY2013). Thus, adjusted EBITDA is expected to expand at a CAGR of 54.9%. However, at the current price of HK$5.81, it is trading at an estimated 2016 EV/EBITDA of ~10.5x. Meanwhile, the peers are trading at a 2016 EV/EBITDA of~ 9.2x. As a result, our target price is HK$5.10. Current valuation is stretched, and has already factored in the explosive earnings growth expected from the Fisherman’s Wharf redevelopment.
Laggers % 1.57 1.10 1.07 1.03 0.8
4.4 3.9 3.4 2.9 2.4 1.9 1.4
CSRC Plans to Have ~100 IPOs in 2H14 - The China Securities Regulatory 0.9 Commission had a meeting yesterday to discuss the implementation of new rules for the 0.4Jul-2013 Aug- Sep- Oct- Nov- Dec- Jan- Feb2013 2013 2013 2013 2013 2014 2014 development of capital markets proposed by the State Council. Several measures that HSI Index 1680 HK Equity will be implemented include launching a pilot trading program on stock ETFs and options Share Performance of 1680 HK on the Shanghai Stock Exchange, issuing ~100 IPOs in the second half of this year, establishing a private equity regulation system and launching crude oil futures.
Mar2014
Apr2014
May2014
1
US Launches Anti-dumping Probe against China Container Makers – Chinese container makers Singamas Container Holdings Ltd and China International Marine Containers (Group) Co Ltd said US authorities were investigating them for anti-dumping practices. The probes are in response to a petition alleging that the companies’ 53-foot domestic dry containers being sold in the United States are subsidized by the Chinese government, both companies said in separate filings to the Hong Kong bourse on Monday. < http://www.chinadaily.com.cn/business/2014-05/19/content_17518319.htm>
2
QUAM INSTITUTIONAL BUSINESS UNIT RESEARCH
SALES
JENNIFER SO
+852 2971 5433
STANLEY NG
+852 2217 2857
ANDY CK WONG
+852 2971 5434
GUY STILLE
+852 2217 2853
CHRISTOPHER HO
+852 2971 5436
quam research@quam group.com 18/F China Building, 29 Queen's Road Central, Hong Kong
Disclaimer and Risk Statement This document is published by Quam Securities Company Limited (“Quam Securities”), a licensed corporation (central entity number AAC557) regulated by the Securities and Futures Commission in Hong Kong. This document is for distribution in Hong Kong only to persons who are “Professional Investors” as defined in Part 1 of Schedule 1 of Securities and Futures Ordinance (Cap 571) of Hong Kong and any rules made thereunder. This document is not intended for distribution to or use by, any person or entity who is a citizen or resident of any jurisdiction where such distribution or use would be contrary to applicable law or regulation within such jurisdiction. This document does not constitute an offer or a solicitation of an offer to buy or sell any securities. This document is circulated to addresses solely and may not be reproduced or redistributed to any other person or published, in whole or in part, for any purpose. The research is based on information obtained from sources believed to be reliable, but Quam Securities does not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without prior notice. Any recommendation does not have regard to specific investment objectives, financial situation and particular needs of any specific addressee. Quam Securities accepts no liability whatsoever for any direct or consequential loss arising from any use of this document. Quam Securities and its affiliates as well as persons associated with any of them from time to time may or may not have interests in the securities mentioned in this document. The prices of securities may move up or down, and past performance is not an indication of future performance. Investors shall consider seeking separate legal or financial advice before making investment decisions.
3
