In this briefing:
- New J. Hutton Exploration Report (Week Ending 18/1/19)
- Itochu Confirms Intent to Deepen Hold over Descente
- HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
- HDFC Bank – Quarterly Credit Deterioration
- TRACKING TRAFFIC/Chinese Express & Logistics: Inter-City Pricing -9.1%
1. New J. Hutton Exploration Report (Week Ending 18/1/19)
- Launching weekly exploration report
- Initial coverage of 318 companies
- Eventual ASX, TSX & AIM coverage
- Scientific approach to determine prospectivity
- Selective judgement on announcement materiality
- Preference for gold
- Targeting company maker projects
- Best exploration tenements, Magnesium, graphite, metallurgical coal
- Paladin Energy (PDN AU), Admiralty Resources Nl (ADY AU) , Jameson Resources (JAL AU), Golden Rim Resources (GMR AU), Orion Gold Nl (ORN AU) , Talga Resources (TLG AU), Barra Resources (BAR AU), King River Resources (KRR AU), Korab Resources (KOR AU), Lefroy Exploration Ltd (LEX AU)
2. Itochu Confirms Intent to Deepen Hold over Descente
Itochu (8001 JP) continues a battle of words and equity as it attempts to gain more control over sports firm Descente (8114 JP).
Meanwhile, Descente has brought in Wacoal (3591 JP) as a white knight and made a splash in the business media about its recent success.
Itochu insists that Descente needs Itochu’s management skills, particularly to build a stronger business in China and other overseas markets, and says the only way to make Descente listen is to buy more stock – more than its current nearly 30%.
3. HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this week’s HK Connect Discovery, we highlight that Tencent topped the weekly inflow by quantum and its shares held by mainland investors via Stock Connect is at one year low. Stocks exposed to mobile game sector experienced inflow too. In addition, we continue to observe that the mainland investors holding on Yichang HEC continue to rise.
4. HDFC Bank – Quarterly Credit Deterioration
The beloved bank reported exceptionally high growth in non-performing assets (NPAs) rising from INR111bn to INR119, from 2Q19 to 3Q19. And this is flattered, as it is after write-offs. Its doubtful 3 loans, rose by 33% in the quarter. The bank’s additions to NPAs during the period, also increased – a more objective figure, before write-offs. The figure was INR40bn in 1Q19: INR39bn in 2Q19; and rose to INR46bn in 3Q19. This is not data that we expect most analysts to focus on, as much lays hidden in the bank’s Pillar 3 disclosure. The result of deteriorating credit metrics: 21% higher growth in credit costs QoQ and 64% YoY in 3Q19.
5. TRACKING TRAFFIC/Chinese Express & Logistics: Inter-City Pricing -9.1%
Tracking Traffic/Chinese Express & Logistics is the hub for our research on China’s express parcels and logistics sectors. Tracking Traffic/Chinese Express & Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes.
This month’s issue covers the following topics:
- December express parcel pricing fell by over 9% Y/Y. Average pricing per express parcel fell by 9.1% Y/Y, the worst decline since Q216 (excluding January/February figures distorted by the Lunar New Year holiday).
- Express parcel revenue growth remained well below 20% last month. Weak pricing dragged sector revenue growth down to 17% in December, the 4th consecutive month of sub-20% growth.
- Intra-city pricing (ie, local delivery) was strong in 2018. Relative to weak inter-city pricing (down 3.1% Y/Y in 2018), pricing for intra-city express shipments was firm, rising by 0.1% last year. In fact, average pricing for intra-city express shipments has risen in four of the last five years.
- Underlying domestic transport demand remained firm in December. Although demand for inter-city express shipments appears to be moderating (from high levels), underlying transportation activity in December remained firm. The three modes of freight transport we track (rail, highway, air) in aggregate rose 6.6% Y/Y in December, even as the growth of air freight slowed.
We retain a negative view of China’s express industry’s fundamentals: demand growth is slowing and pricing for inter-city shipments appears to be falling faster than costs can be cut, leading to margin compression.
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