HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

With more than half of the double festival holidays of China have now passed, we took an on-the-ground check for the business in the Golden Week. A walk along the Nanjing Road Pedestrian Walk in Shanghai with visits to various retail stores showed that consumption has witnessed a good, but not yet full, recovery.
We stopped by mobile phone, sportswear, jewellery and high-end luxury stores, and saw that mobile phone stores are witnessing the best customer patronage. Based on our visits, we observed that: 1.) Apple store (<a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a>) is doing better than Huawei, 2.) Nike and Adidas (<a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (6110 HK)</a>) &gt; FILA (<a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>) and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a>, 3.) <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a> &gt; Lao Miao (<a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>) and 4.) high-end luxury goods are in good demand, and this is positive to <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>. Read on for pictures and more details.

With more than half of the double festival holidays of China have now passed, we took an on-the-ground check for the business in the Golden Week. A walk along the Nanjing Road Pedestrian Walk in Shanghai with visits to various retail stores showed that consumption has witnessed a good, but not yet full, recovery.
We stopped by mobile phone, sportswear, jewellery and high-end luxury stores, and saw that mobile phone stores are witnessing the best customer patronage. Based on our visits, we observed that: 1.) Apple store (Apple Inc (AAPL US)) is doing better than Huawei, 2.) Nike and Adidas (Topsports International (6110 HK)) &gt; FILA (Anta Sports Products (2020 HK)) and Li Ning Co Ltd (2331 HK), 3.) Chow Tai Fook Jewellery (1929 HK) &gt; Lao Miao (Fosun International (656 HK)) and 4.) high-end luxury goods are in good demand, and this is positive to Hang Lung Properties (101 HK) and China Tourism Group Duty Free Corp Ltd (601888 CH). Read on for pictures and more details.

China on the Ground: Hey, How's Your Golden Week?

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut dividend. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 150+ and 20+ companies, respectively, that have a high likelihood of raising/cutting dividends, over the next five years.
<div class="content-highlight">
What's Original?
<ul>
<li>We have two separate models, one for forecasting Dividend Raise and the other for Dividend Cut.</li>
<li>Our back test results are very encouraging with &gt;90% hit rate for our Dividend Raise model and 100% hit rate for our Dividend Cut model.</li>
<li>For our Dividend Raise model, we apply a combination of eight stringent parameters and use last 7Y historical data to find companies that have consistently performed strong, lending our model a high hit rate.</li>
<li>For our Dividend Cut model, we differentiate from other models by focusing on companies that have had high dividend payout ratio (&gt;50%) over last 3Y. This criterion helps us in identifying companies where there is limited scope for dividend growth through increase in dividend payouts. In our observation, such companies are most vulnerable to cut dividend when faced with weakening fundamentals or deteriorating balance sheet.</li>
</ul>
</div>
<h3>Insight Flow</h3>
<ul>
<li>Live Dashboard</li>
<li> Methodology
<ul>
<li>Philosophy</li>
<li>Dividend Raise Model</li>
<li>Dividend Cut Model</li>
</ul>
</li>
<li>Universe</li>
<li>Back Test Results
<ul>
<li>Dividend Raise Model</li>
<li>Dividend Cut Model</li>
</ul>
</li>
<li>Model Results
<ul>
<li>Companies with High Probability of Dividend Raise</li>
<li>Companies with High Probability of Dividend Cut</li>
</ul>
</li>
<li>Model Risks &amp; Limitations</li>
<li>Conclusion</li>
</ul>

In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut dividend. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 150+ and 20+ companies, respectively, that have a high likelihood of raising/cutting dividends, over the next five years.

What's Original?

We have two separate models, one for forecasting Dividend Raise and the other for Dividend Cut.
Our back test results are very encouraging with &gt;90% hit rate for our Dividend Raise model and 100% hit rate for our Dividend Cut model.
For our Dividend Raise model, we apply a combination of eight stringent parameters and use last 7Y historical data to find companies that have consistently performed strong, lending our model a high hit rate.
For our Dividend Cut model, we differentiate from other models by focusing on companies that have had high dividend payout ratio (&gt;50%) over last 3Y. This criterion helps us in identifying companies where there is limited scope for dividend growth through increase in dividend payouts. In our observation, such companies are most vulnerable to cut dividend when faced with weakening fundamentals or deteriorating balance sheet.


Insight Flow

Live Dashboard
 Methodology

Philosophy
Dividend Raise Model
Dividend Cut Model


Universe
Back Test Results

Dividend Raise Model
Dividend Cut Model


Model Results

Companies with High Probability of Dividend Raise
Companies with High Probability of Dividend Cut


Model Risks &amp; Limitations
Conclusion


Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20, against a loss of Rmb120m in 1Q20. Sales at its Sanya and Haikou outlets surged a significant 12.2% and 136% YoY in the period, and this is even before the favourable Hainan duty free policy being rolled out in Jul.Initial figures indicated that for 1 Jul to 18 Aug, total duty free sales in Hainan reached Rmb5bn, a 2.5x YoY increase with average daily sales of over Rmb100m.  Also, some 5m tourists visited Hainan in Jul, a decline of just 10.1% YoY. These figures add evidence to the strong momentum to CTG Duty Free's profit recovery in 2H20 and support the positive outlook for next two years.

China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20, against a loss of Rmb120m in 1Q20. Sales at its Sanya and Haikou outlets surged a significant 12.2% and 136% YoY in the period, and this is even before the favourable Hainan duty free policy being rolled out in Jul.Initial figures indicated that for 1 Jul to 18 Aug, total duty free sales in Hainan reached Rmb5bn, a 2.5x YoY increase with average daily sales of over Rmb100m.  Also, some 5m tourists visited Hainan in Jul, a decline of just 10.1% YoY. These figures add evidence to the strong momentum to CTG Duty Free's profit recovery in 2H20 and support the positive outlook for next two years. 

CTG Duty Free Corp (601888 CH): Good 2Q20 and Brighter Outlook for 2H20

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas.In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn.In this insight, we will highlight inflows into <a href="https://www.smartkarma.com/entities/goertek-inc-a" target="_blank" data-smartkarma-citation="entities:11547:1" rel="noopener">Goertek Inc A (002241 CH)</a>, <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a>, as well as outflows from <a href="https://www.smartkarma.com/entities/yonghui-superstores-co-ltd" target="_blank" data-smartkarma-citation="entities:15910:1" rel="noopener">Yonghui Superstores Co., (601933 CH)</a> and <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas.In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn.In this insight, we will highlight inflows into Goertek Inc A (002241 CH), Luxshare Precision Industry (002475 CH), as well as outflows from Yonghui Superstores Co., (601933 CH) and China Tourism Group Duty Free Corp Ltd (601888 CH).

SH/​​SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

Duty free sales in Hainan reached Rmb2.219bn for 1-27 Jul, an impressive 234.2% YoY growth on the back of the government's introduction of favourable duty free policies starting Jul. Average duty free spending of the Hainan shoppers was Rmb7,897 in Jul, a significant 134% YoY increase. In our view, these figures are supportive towards the positive earnings outlook for <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> (CTG Duty Free).Moreover, the new policies have encouraged more high value duty free sales in Hainan, with sales of items with individual value of over Rmb8,000 accounted for 27.7% of total sales, up from 15.6% in Jul 2019 and 17.4% in Jun 2020. The introduction of more premium brands and shops, for example, Bulgari and <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>, in Haikou in end-Jul/early-Aug, we expect CTG Duty Free's 2H20 sales will be benefited in a period where outbound travel remains lacklustre.

Duty free sales in Hainan reached Rmb2.219bn for 1-27 Jul, an impressive 234.2% YoY growth on the back of the government's introduction of favourable duty free policies starting Jul. Average duty free spending of the Hainan shoppers was Rmb7,897 in Jul, a significant 134% YoY increase. In our view, these figures are supportive towards the positive earnings outlook for China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free).Moreover, the new policies have encouraged more high value duty free sales in Hainan, with sales of items with individual value of over Rmb8,000 accounted for 27.7% of total sales, up from 15.6% in Jul 2019 and 17.4% in Jun 2020. The introduction of more premium brands and shops, for example, Bulgari and Chow Tai Fook Jewellery (1929 HK), in Haikou in end-Jul/early-Aug, we expect CTG Duty Free's 2H20 sales will be benefited in a period where outbound travel remains lacklustre.

CTG Duty Free Corp (601888 CH): Solid Jul Duty Free Sales in Hainan

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free Corp Ltd (601888 CH)

Price Gauge
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China Tourism Group Duty Free Corp Ltd (601888 CH)

China on the Ground: Hey, How's Your Golden Week?

With more than

Osbert Tang, CFA

Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies

Methodology Back Test Results Companied

Ankit Agrawal, CFA

CTG Duty Free Corp (601888 CH): Good 2Q20 and Brighter Outlook for 2H20

China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20,...

Osbert Tang, CFA

SH/SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the...

Ke Yan, CFA, FRM

CTG Duty Free Corp (601888 CH): Solid Jul Duty Free Sales in Hainan

Duty free sales in Hainan reached Rmb2.219bn for 1-27 Jul, an impressive 234.2% YoY growth on the back of the government's introduction of...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China on the Ground: Hey, How's Your Golden Week?

With more than

Osbert Tang, CFA

Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies

Methodology Back Test Results Companied

Ankit Agrawal, CFA

CTG Duty Free Corp (601888 CH): Good 2Q20 and Brighter Outlook for 2H20

China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG Duty Free) reported a sharp QoQ turnaround in bottomline with profit of Rmb1.05bn in 2Q20,...

Osbert Tang, CFA

SH/​​SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the...

Ke Yan, CFA, FRM

CTG Duty Free Corp (601888 CH): Solid Jul Duty Free Sales in Hainan

Duty free sales in Hainan reached Rmb2.219bn for 1-27 Jul, an impressive 234.2% YoY growth on the back of the government's introduction of...

Osbert Tang, CFA

SH/SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism