Quam Pulse
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE MONDAY
EQUITIES HONG KONG STRATEGY
APRIL 28, 2014
QUAM PULSE 70 Out of 150 New Zealand Brands of Milk Powder May Not Be Imported into China (CBN) - According to CBN, the Chinese government now requires New Zealand milk powder importers to seek contract manufacturers based in China in order to be granted a license. There are 150 brands of milk powder produced by 50 companies being imported into China every year. Currently only 13 companies have been granted a license. However, most of the brands imported are not produced by contract manufacturers in China. As a result, 70 out of 150 brands may not be able to be imported into China. Our take: The government is accelerating the consolidation process in the dairy industry. The original aim of the government is to establish 10 local dairy companies to account for 80% of the market share in China by 2018. The new rule will further limit the supply of milk powder in China. 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 30x, 20.8x, and 17.2x respectively. Valuation is demanding. As a result, we expect their share price performance to be in-line with the market only.
HSI TOP M OVERS Leaders Ticker CHIN A RES PO CITIC PA CIFI LEN O VO GRO UP PETRO CHIN A C CHIN A M ERCHA
Analyst: Jennifer So +852 2971 5433
CHINA TAKEAWAYS
Ticker SIN O LA N D CO SA N DS CHIN A CHIN A RES LA GA LA XY EN TER N EW WO RLD DE
% -3.59 -3.15 -2.94 -2.81 -2.69
Close
1D Chg
1D %Chg
22223.53 9798.70 2167.83 8774.12 1971.66 3267.57 1860.98 22688.07 6782.75 1408.16 4897.64 6685.10 3584.32
-339.27 -141.93 -22.65 -171.33 -26.68 -16.36 -4.30 -188.47 -58.05 -14.51 6.56 -46.23 -7.81
-1.50 -1.43 -1.03 -1.92 -1.34 -0.50 -0.23 -0.82 -0.85 -1.02 0.13 -0.69 -0.22
Close
1D %Chg
YTD %Chg
101.36 109.89 4.69 307.42
-0.57 -0.40 -0.26 -0.50
4.19 0.36 14.60 4.09
308.15 1295.31 19.59 1415.37
-0.21 0.15 -0.39 0.12
-8.66 7.80 0.60 3.24
Corn Wheat Soybeans Coffee Sugar Cotton
509.75 700.00 1474.50 212.40 17.79 92.28
0.49 0.50 0.31 -1.12 0.28 -0.99
16.65 13.50 16.61 84.54 6.34 9.88
Baltic Dry
962.00
0.63
-57.75
Asia HSI HSCEI SHSZ300 TWSE KO SPI FSSTI KLCI SEN SEX N IFTY SET JCI PCO M P A SX
QUAM RESEARCH New World Department Store (825.HK, Current Price: HK$3.74, Rating: Hold)– “Announcement of Special Dividend, Dividend Yield will Reach 8.8%”: NWDS announced after the market closed last Friday, a proposed special cash dividend of th HK$0.20/ sh, due to the Company’s 20 anniversary and satisfactory performance for the past year. The dividend will be payable on or before 27 Jun 2014 to shareholders. Our estimate DPS for FY06/2014E is HK$0.13, and together with this special dividend, total DPS this year will reach HK$0.33, representing a dividend yield of ~8.8%. We have a HOLD rating, TP HK$4.30.
Laggers % 0.81 0.43 0.00 -0.34 -0.4
COM M ODITIES Energy WTI Brent N atural Gas Gasoline
M etals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Profits Earned by China’s Industrial Companies Picked up in March– According to the NBSC, profits earned by China’s industrial companies in March were up 10.7% YoY, which was faster than +9.4% YoY recorded in the Jan-Feb period. During 1Q14, profits of industrial companies +10.1% YoY. Industrial companies include mining firms, manufacturers and power generators. Analysts see initial signs of stabilization in the Chinese economy due to the government’s targeted measures to underpin growth. 1.3
Slower Rise in Property Loans in China – Loans in China’s real estate sector rose at a slower pace in the first quarter as the housing market gradually cooled. By the end of March, financial institutions in China had lent RMB15.42tri to the property sector, +18.8% YoY, which is 0.3ppt. slower than the rate at the end of 2013, according to a PBOC report. Outstanding loans for real estate development amounted to RMB4.9tri as at the end of Mar, while loans for individual purchases jumped 20.1% to RMB10.29tri, down 0.9ppt from the end of last year.
1.2 1.1 1.0 0.9 0.8
0.7 0.6 0.5 0.4 Apr2013
May2013
Jun2013
Jul2013
Aug2013
Sep2013
Oct2013
Nov2013
Dec2013
CSRC Sets Deadline for IPO Disclosures for June– Most companies whose HSI Index 825 HK Equity applications for initial public offerings are being evaluated will make their preliminary disclosures by the end of June, a spokesman for the CSRC said on Fri. The disclosures, Share performance of 825 HK which explain the size and the purpose of an issue will be posted on the CSRC website. For the period of Apr 18-24, there had been 97 companies that posted disclosures. Among them 47 applied for offerings in Shanghai and 50 in Shenzhen.
Jan2014
Feb2014
Mar2014
1
Apr2014
< http://www.chinadaily.com.cn/business/2014-04/26/content_17467431.htm Yili to Develop O2O Business with Tencent – Inner Mongolia Yili Group, one of the top dairy companies in China, has reached a strategic cooperation agreement with an affiliate company of Tencent(700 HK). They will start strategic cooperation on big data, health industry, and application of selling resources areas, and are in discussion over cooperation in the Online-to-Offline(O2O) business. Baidu and Xiaomi to Invest in Cheetah Mobile – Baidu and Xiaomi will become the cornerstone investors of Cheetah Mobile, formerly known as Kingsoft Internet Software Holdings Limited, according to an updated IPO document. The two cornerstone investors will receive USD20mn worth of A-class ordinary shares. Real Estate Fund Harvest Fund Halted Chinese Investments - A real estate fund which had once managed ~2.8bn yuan and was focused on Chinese properties has halted Chinese operations and is now looking abroad. Fund management firm Harvest Real Estate Investment, run jointly by Beijing-based asset manager Harvest Fund Management and London-based Grosvenor Fund Management, has halted its investments in China.
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 MONDAY
EQUITIES HONG KONG STRATEGY
APRIL 28, 2014
QUAM PULSE 70 Out of 150 New Zealand Brands of Milk Powder May Not Be Imported into China (CBN) - According to CBN, the Chinese government now requires New Zealand milk powder importers to seek contract manufacturers based in China in order to be granted a license. There are 150 brands of milk powder produced by 50 companies being imported into China every year. Currently only 13 companies have been granted a license. However, most of the brands imported are not produced by contract manufacturers in China. As a result, 70 out of 150 brands may not be able to be imported into China. Our take: The government is accelerating the consolidation process in the dairy industry. The original aim of the government is to establish 10 local dairy companies to account for 80% of the market share in China by 2018. The new rule will further limit the supply of milk powder in China. 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 30x, 20.8x, and 17.2x respectively. Valuation is demanding. As a result, we expect their share price performance to be in-line with the market only.
HSI TOP M OVERS Leaders Ticker CHIN A RES PO CITIC PA CIFI LEN O VO GRO UP PETRO CHIN A C CHIN A M ERCHA
Analyst: Jennifer So +852 2971 5433
CHINA TAKEAWAYS
Ticker SIN O LA N D CO SA N DS CHIN A CHIN A RES LA GA LA XY EN TER N EW WO RLD DE
% -3.59 -3.15 -2.94 -2.81 -2.69
Close
1D Chg
1D %Chg
22223.53 9798.70 2167.83 8774.12 1971.66 3267.57 1860.98 22688.07 6782.75 1408.16 4897.64 6685.10 3584.32
-339.27 -141.93 -22.65 -171.33 -26.68 -16.36 -4.30 -188.47 -58.05 -14.51 6.56 -46.23 -7.81
-1.50 -1.43 -1.03 -1.92 -1.34 -0.50 -0.23 -0.82 -0.85 -1.02 0.13 -0.69 -0.22
Close
1D %Chg
YTD %Chg
101.36 109.89 4.69 307.42
-0.57 -0.40 -0.26 -0.50
4.19 0.36 14.60 4.09
308.15 1295.31 19.59 1415.37
-0.21 0.15 -0.39 0.12
-8.66 7.80 0.60 3.24
Corn Wheat Soybeans Coffee Sugar Cotton
509.75 700.00 1474.50 212.40 17.79 92.28
0.49 0.50 0.31 -1.12 0.28 -0.99
16.65 13.50 16.61 84.54 6.34 9.88
Baltic Dry
962.00
0.63
-57.75
Asia HSI HSCEI SHSZ300 TWSE KO SPI FSSTI KLCI SEN SEX N IFTY SET JCI PCO M P A SX
QUAM RESEARCH New World Department Store (825.HK, Current Price: HK$3.74, Rating: Hold)– “Announcement of Special Dividend, Dividend Yield will Reach 8.8%”: NWDS announced after the market closed last Friday, a proposed special cash dividend of th HK$0.20/ sh, due to the Company’s 20 anniversary and satisfactory performance for the past year. The dividend will be payable on or before 27 Jun 2014 to shareholders. Our estimate DPS for FY06/2014E is HK$0.13, and together with this special dividend, total DPS this year will reach HK$0.33, representing a dividend yield of ~8.8%. We have a HOLD rating, TP HK$4.30.
Laggers % 0.81 0.43 0.00 -0.34 -0.4
COM M ODITIES Energy WTI Brent N atural Gas Gasoline
M etals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Profits Earned by China’s Industrial Companies Picked up in March– According to the NBSC, profits earned by China’s industrial companies in March were up 10.7% YoY, which was faster than +9.4% YoY recorded in the Jan-Feb period. During 1Q14, profits of industrial companies +10.1% YoY. Industrial companies include mining firms, manufacturers and power generators. Analysts see initial signs of stabilization in the Chinese economy due to the government’s targeted measures to underpin growth. 1.3
Slower Rise in Property Loans in China – Loans in China’s real estate sector rose at a slower pace in the first quarter as the housing market gradually cooled. By the end of March, financial institutions in China had lent RMB15.42tri to the property sector, +18.8% YoY, which is 0.3ppt. slower than the rate at the end of 2013, according to a PBOC report. Outstanding loans for real estate development amounted to RMB4.9tri as at the end of Mar, while loans for individual purchases jumped 20.1% to RMB10.29tri, down 0.9ppt from the end of last year.
1.2 1.1 1.0 0.9 0.8
0.7 0.6 0.5 0.4 Apr2013
May2013
Jun2013
Jul2013
Aug2013
Sep2013
Oct2013
Nov2013
Dec2013
CSRC Sets Deadline for IPO Disclosures for June– Most companies whose HSI Index 825 HK Equity applications for initial public offerings are being evaluated will make their preliminary disclosures by the end of June, a spokesman for the CSRC said on Fri. The disclosures, Share performance of 825 HK which explain the size and the purpose of an issue will be posted on the CSRC website. For the period of Apr 18-24, there had been 97 companies that posted disclosures. Among them 47 applied for offerings in Shanghai and 50 in Shenzhen.
Jan2014
Feb2014
Mar2014
1
Apr2014
< http://www.chinadaily.com.cn/business/2014-04/26/content_17467431.htm Yili to Develop O2O Business with Tencent – Inner Mongolia Yili Group, one of the top dairy companies in China, has reached a strategic cooperation agreement with an affiliate company of Tencent(700 HK). They will start strategic cooperation on big data, health industry, and application of selling resources areas, and are in discussion over cooperation in the Online-to-Offline(O2O) business. Baidu and Xiaomi to Invest in Cheetah Mobile – Baidu and Xiaomi will become the cornerstone investors of Cheetah Mobile, formerly known as Kingsoft Internet Software Holdings Limited, according to an updated IPO document. The two cornerstone investors will receive USD20mn worth of A-class ordinary shares. Real Estate Fund Harvest Fund Halted Chinese Investments - A real estate fund which had once managed ~2.8bn yuan and was focused on Chinese properties has halted Chinese operations and is now looking abroad. Fund management firm Harvest Real Estate Investment, run jointly by Beijing-based asset manager Harvest Fund Management and London-based Grosvenor Fund Management, has halted its investments in China.
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
