Quam Pulse
EQUITIES HONG KONG STRATEGY
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE MONDAY JANUARY 12, 2015
QUAM PULSE Chinese Ministry to Help Dairy Farmers Amid Milk Dumping (China Daily)– The Ministry of Agriculture said on Sunday that it would help dairy farmers in Northern China who have resorted to throwing out milk and killing their cows through lack of sales avenues. The ministry is encouraging diary firms to increase purchasing, starting dairy production monitoring on a weekly basis, and strengthening policy support for the dairy industry. The ministry said it had talked to major diary firms including Yili Industrial and Mengniu Dairy Group and urged them to purchase more milk, stabilize prices and safeguard the interest of dairy farmers. The ministry will work together with other central government departments including the MoF to map out more supportive policies to help dairy farmers to overcome their plight. Our Take: We believe the oversupply of raw milk was due to dairy farmers flocking to purchase large numbers of dairy cows at high prices to boost production in late 2013 as a result of a production decrease caused by disease and farmers leaving the industry. However, in mid-2014, foreign milk prices began to fall drastically due to overproduction. Hence, dairy companies resorted to buying cheaper imported raw milk, which pushed down the dairy prices even further. However, we believe the government should not intervene. It should let the market correct its oversupply problem. Any intervention would suggest a failure in the market mechanism. It would be disadvantage to China Mengniu Dairy (2319 HK) if it is forced to purchase domestic raw milk, which is selling at a higher price than overseas imports. We believe the above policy aimed at stabilizing raw milk prices would not be effective and downward pricing pressure for downstream retail prices will persist in 2015. Mengniu currently trades at 20x P/E for FY2015E, according to Bloomberg consensus estimates.
QUAM RESEARCH CTEG (1363.HK, Current Price: HK$7.92, Rating: HOLD)– “Further Expansion of Hazardous Waste Treatment Albeit on a Smaller Scale” We upped our earnings estimate for CTEG in FY15/16E slightly by ~3.5% after the announcement of an operation agreement on a hazardous wastewater treatment facility in Zengcheng Guangzhou with Menghui Technology (MT). The designed capacity is relatively small at ~40,000m3 per annum, but it marks CTEG’s 2nd expansion into hazardous waste treatment following the acquisition of the dangerous waste treatment plant in Nansha District last Dcec. The project requires a cash outlay of RMB80mn. We maintain our TP of HK$7.7 based on DCF valuation. CTEG trades at 23.3x P/E 2015E, a premium to its industrial peers. Hence, we reiterate our HOLD rating. Analyst: Jennifer So +852 2971 5433
CHINA TAKEAWAYS
HSI TOP MOVERS Leaders Ticker CHINA UNICOM CATHAY PAC A BOC HONG KON WHARF HLDG CHINA LIFE I
Laggers % 5.26 2.91 2.14 1.98 1.67
Ticker GALAXY ENTER CHINA SHENHU TINGYI SINOPEC CORP SANDS CHINA
% -2.07 -1.72 -1.56 -0.96 -0.94
Close
1D Chg
1D % Chg
HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY
23919.95 12081.24 3546.72 9215.58 1924.70 3338.44 1732.44 27458.38 8284.50
84.42 57.49 -12.54 -22.45 20.05 -6.67 4.38 183.67 49.90
0.35 0.48 -0.35 -0.24 1.05 -0.20 0.25 0.67 0.61
SET JCI PCOMP ASX
1529.42 5216.67 7402.72 3528.05
7.80 4.84 35.09 -7.42
0.51 0.09 0.48 -0.21
Close
1D % Chg
YTD % Chg
48.87 50.83 2.97 134.04
0.16 -0.26 1.33 -0.04
-8.26 -11.34 2.67 -8.95
273.95 1211.07 16.28 1221.99
-1.08 0.19 -0.52 0.28
-3.04 2.25 3.62 1.16
Corn Wheat Soybeans Coffee Sugar Cotton
395.50 564.50 1048.25 180.60 14.86 60.57
0.32 -0.44 0.00 2.09 -0.13 0.02
-0.38 -4.28 2.42 8.40 2.34 0.50
Baltic Dry
724.00
-2.69
-7.42
Asia
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China to Allow Online Sales of Prescription Drugs as Early as This Month – According to Reuters, China will allow online sales of prescription drugs as early as this month, a policy that will open up an over RMB1tr market to online pharmacy operators like Alibaba Group Holding Ltd and Wal-Mart Stores Inc. The China Food and Drug Administration(CFDA) is finalising which prescription medicines to approve for sale, a senior healthcare policy advisor told Reuters. The policy will be released in January or February and the CFDA is actively working on it, said the advisor. Stock Options to be Launched in Shanghai – The China Securities Regulatory Commission announced on Friday that a stock options trial program will be launched at the Shanghai Stock Exchange on 9 Feb, with the Shanghai Composite 50 ETF option being the first trial product. Individual stock options are not included in the trial program. The market cap of Shanghai Composite 50 ETF amounted to RMB25.9bn with daily average turnover of ~RMb890mn, ranking the first in ETF market.
Institutional Research Team [email protected] Jennifer So, Head of Research Christopher Ho, Analyst
+852 2971-5433 +852 2971-5436
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China’s Electric Car Production Grows in 2014 – China’s electric car production jumped fourfold to 83,900 vehicles in 2014, the Ministry of Industry and Information Technology said on Friday. In 2014, output of pure electric passenger cars rose 300% from a year earlier to 37,800, with plug-in hybrid passenger cars rising to 16,700 units. Output of pure electric and plug-in hybrid commercial vehicles went up by 400% and 200% respectively. Alibaba to Invest Over USD500mn in Indian Startup – Chinese e-commerce giant Alibaba is reportedly interested in investing ~USD575mn in Delhi-based online shopping site Paytm, Indian newspaper The Economist Times reported on Sunday. According to the Economist Times, if Alibaba Group Holding Ltd and Singapore-based Temasek Holdings invest in Paytm, they will gain a 25-30% stake in a mobile Internet company One97 Communications Ltd, the parent firm of Paytm. The potential deal would raise Paytm’s value to USD1.5-1.9bn.
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QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
CATHERINE FONG
Associate Director
+852 2217 2854
[email protected] [email protected] [email protected]
If you w ant to trade w ith us, please feel free to contact our institutional sales team above 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.
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INSTITUTIONAL RESEARCH: TRADING PLACES
DATE MONDAY JANUARY 12, 2015
QUAM PULSE Chinese Ministry to Help Dairy Farmers Amid Milk Dumping (China Daily)– The Ministry of Agriculture said on Sunday that it would help dairy farmers in Northern China who have resorted to throwing out milk and killing their cows through lack of sales avenues. The ministry is encouraging diary firms to increase purchasing, starting dairy production monitoring on a weekly basis, and strengthening policy support for the dairy industry. The ministry said it had talked to major diary firms including Yili Industrial and Mengniu Dairy Group and urged them to purchase more milk, stabilize prices and safeguard the interest of dairy farmers. The ministry will work together with other central government departments including the MoF to map out more supportive policies to help dairy farmers to overcome their plight. Our Take: We believe the oversupply of raw milk was due to dairy farmers flocking to purchase large numbers of dairy cows at high prices to boost production in late 2013 as a result of a production decrease caused by disease and farmers leaving the industry. However, in mid-2014, foreign milk prices began to fall drastically due to overproduction. Hence, dairy companies resorted to buying cheaper imported raw milk, which pushed down the dairy prices even further. However, we believe the government should not intervene. It should let the market correct its oversupply problem. Any intervention would suggest a failure in the market mechanism. It would be disadvantage to China Mengniu Dairy (2319 HK) if it is forced to purchase domestic raw milk, which is selling at a higher price than overseas imports. We believe the above policy aimed at stabilizing raw milk prices would not be effective and downward pricing pressure for downstream retail prices will persist in 2015. Mengniu currently trades at 20x P/E for FY2015E, according to Bloomberg consensus estimates.
QUAM RESEARCH CTEG (1363.HK, Current Price: HK$7.92, Rating: HOLD)– “Further Expansion of Hazardous Waste Treatment Albeit on a Smaller Scale” We upped our earnings estimate for CTEG in FY15/16E slightly by ~3.5% after the announcement of an operation agreement on a hazardous wastewater treatment facility in Zengcheng Guangzhou with Menghui Technology (MT). The designed capacity is relatively small at ~40,000m3 per annum, but it marks CTEG’s 2nd expansion into hazardous waste treatment following the acquisition of the dangerous waste treatment plant in Nansha District last Dcec. The project requires a cash outlay of RMB80mn. We maintain our TP of HK$7.7 based on DCF valuation. CTEG trades at 23.3x P/E 2015E, a premium to its industrial peers. Hence, we reiterate our HOLD rating. Analyst: Jennifer So +852 2971 5433
CHINA TAKEAWAYS
HSI TOP MOVERS Leaders Ticker CHINA UNICOM CATHAY PAC A BOC HONG KON WHARF HLDG CHINA LIFE I
Laggers % 5.26 2.91 2.14 1.98 1.67
Ticker GALAXY ENTER CHINA SHENHU TINGYI SINOPEC CORP SANDS CHINA
% -2.07 -1.72 -1.56 -0.96 -0.94
Close
1D Chg
1D % Chg
HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY
23919.95 12081.24 3546.72 9215.58 1924.70 3338.44 1732.44 27458.38 8284.50
84.42 57.49 -12.54 -22.45 20.05 -6.67 4.38 183.67 49.90
0.35 0.48 -0.35 -0.24 1.05 -0.20 0.25 0.67 0.61
SET JCI PCOMP ASX
1529.42 5216.67 7402.72 3528.05
7.80 4.84 35.09 -7.42
0.51 0.09 0.48 -0.21
Close
1D % Chg
YTD % Chg
48.87 50.83 2.97 134.04
0.16 -0.26 1.33 -0.04
-8.26 -11.34 2.67 -8.95
273.95 1211.07 16.28 1221.99
-1.08 0.19 -0.52 0.28
-3.04 2.25 3.62 1.16
Corn Wheat Soybeans Coffee Sugar Cotton
395.50 564.50 1048.25 180.60 14.86 60.57
0.32 -0.44 0.00 2.09 -0.13 0.02
-0.38 -4.28 2.42 8.40 2.34 0.50
Baltic Dry
724.00
-2.69
-7.42
Asia
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China to Allow Online Sales of Prescription Drugs as Early as This Month – According to Reuters, China will allow online sales of prescription drugs as early as this month, a policy that will open up an over RMB1tr market to online pharmacy operators like Alibaba Group Holding Ltd and Wal-Mart Stores Inc. The China Food and Drug Administration(CFDA) is finalising which prescription medicines to approve for sale, a senior healthcare policy advisor told Reuters. The policy will be released in January or February and the CFDA is actively working on it, said the advisor. Stock Options to be Launched in Shanghai – The China Securities Regulatory Commission announced on Friday that a stock options trial program will be launched at the Shanghai Stock Exchange on 9 Feb, with the Shanghai Composite 50 ETF option being the first trial product. Individual stock options are not included in the trial program. The market cap of Shanghai Composite 50 ETF amounted to RMB25.9bn with daily average turnover of ~RMb890mn, ranking the first in ETF market.
Institutional Research Team [email protected] Jennifer So, Head of Research Christopher Ho, Analyst
+852 2971-5433 +852 2971-5436
1
China’s Electric Car Production Grows in 2014 – China’s electric car production jumped fourfold to 83,900 vehicles in 2014, the Ministry of Industry and Information Technology said on Friday. In 2014, output of pure electric passenger cars rose 300% from a year earlier to 37,800, with plug-in hybrid passenger cars rising to 16,700 units. Output of pure electric and plug-in hybrid commercial vehicles went up by 400% and 200% respectively. Alibaba to Invest Over USD500mn in Indian Startup – Chinese e-commerce giant Alibaba is reportedly interested in investing ~USD575mn in Delhi-based online shopping site Paytm, Indian newspaper The Economist Times reported on Sunday. According to the Economist Times, if Alibaba Group Holding Ltd and Singapore-based Temasek Holdings invest in Paytm, they will gain a 25-30% stake in a mobile Internet company One97 Communications Ltd, the parent firm of Paytm. The potential deal would raise Paytm’s value to USD1.5-1.9bn.
2
QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
CATHERINE FONG
Associate Director
+852 2217 2854
[email protected] [email protected] [email protected]
If you w ant to trade w ith us, please feel free to contact our institutional sales team above 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
