In today’s briefing:
- Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.
- Shimano (7309) | The Hangover
- [Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick
- Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring
- Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient
- UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market
- WuXi AppTec (2359.HK/603259.CH) 2023Q1 – The Signals Behind the Plunge in Stock Price
- Vivendi: Leadership Position in Media, Entertainment, Culture, and Communication
- Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice
Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.
- This insight is a short note that aims to ride on short term momentum for the stock
- Since April, southbound trade contributes to 72% of China Mobile H-share turnover. So, southbound trade is the major share driver
- For entire market, A-share is trading at 40% premium to H-share. For China mobile, the A/H premium is currently at 80%. Strong upside for H-share if premium is to narrow
Shimano (7309) | The Hangover
- Shimano reported Q1 results post close. Operating profit fell 26% YoY and full year guidance was cut 21%
- We believe that sales in 2023 have simply reverted back to trend. We expect sales to grow in 2024 as underlying demand drivers remain intact
- With the stock down 9% over the past year, we believe the market has discounted the profit revision. We see good value at 17x EV/EBIT
[Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick
- We estimate that Tencent 1Q23’s rev./non-IFRS net income beat cons. by 3.6%/4.5%. We forecast that VAS/ads/others will have 6.5%/15.3% /17.6% YoY growth in 1Q23.
- We maintain BUY rating for Tencent because of 1) video account, especially the rapid growth of Wechat Beans (微信豆); and 2) recovery of ads revenue from Ecommerce and gaming.
- We remove Tencent from our top buy ideas because: 1) current consensus has been high; 2) lack of hit title in upcoming pipeline; and 3) launch of DNF casts shadow
Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring
- Wynn’s issuance of US$600m in convertible bonds for its Macau subsidiary pushes out maturities by five years, easing investor concerns about debt levels.
- The Macau gaming market is in early stages of pent up demand recovery compared with Las Vegas which is in a mature stage of the cycle.
- Premium mass and VIP customers key to Wynn Macau business model are returning at a faster rate than industry observers have judged. Decline of junkets not hurting VIP in 2023.
Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- The census and statistics department data for watches and jewelry showed a sharp rebound for HK in Jan-Feb 2023 (up 63% YoY). China sales, we estimate, continue to be resilient.
- Over the last month, secondhand watch pricing has also shown an uptrend of 3-4%. This leads us to believe that demand is having a decent uptick in April.
- The stock trades at 7.2x PE FY23e, with >50% of the market capitalization in cash and a 15% dividend yield (assuming a 100% payout ratio).
CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient
- We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well.
- New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%.
- Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.
UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market
- UMP Healthcare (“UMP”) is Hong Kong’s leading private medical service network. Its network spans 1100+ service providers, 1mm+ scheme members, 2000+ contract customers, and over 1.13mm+ annual clinic visits.
- Despite the consistent track record, UMP trades at a 61% discount to its IPO price, 6x PE, and 8% yield with 45% of its market cap in net cash.
- We see ingredients in place for a multi-year re-rate, backed by HK’s new Healthcare Policy and the company’s strategic tilt towards higher margin service lines supporting future profit growth.
WuXi AppTec (2359.HK/603259.CH) 2023Q1 – The Signals Behind the Plunge in Stock Price
- Excluding COVID-19 projects, some of WuXi AppTec’s conventional CXO business growth rate has declined significantly. So, the fading of COVID-19 dividend period is not the only reason for the performance decline.
- The supply-side reform of innovative drugs is further deepened, and the effect of industry clearing is obvious. So, the “winner-takes-all” logic will be gradually deduced in the future.
- WuXi AppTec’s controlling shareholders seem to “have foreseen something”- They could continue to reduce holdings on rallies in the future. Together with longer-than-expected industry winter, valuation center could further decline.
Vivendi: Leadership Position in Media, Entertainment, Culture, and Communication
- For 2022, Vivendi reported a solid set of results as both revenues and EBITA grew strongly despite the challenging market environment
- For 2023, positive momentum is expected to be sustained, as management stays confident in the growth prospects.
- Underlying market growing close 4.6% CAGR to 2026. Solid growth prospects for the Company
Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice
- The latest release of the USDA Rice Crop Outlook Report (April 13) provides useful data on the global and US rice markets, which has implications for the rice-related businesses within Ricegrowers Limited, trading as SunRice (ASX:SGLLV).
- The global rice market is forecast to see the second consecutive year of demand exceeding supply (due mainly to supply issues), with global-ending rice stocks expected to be the lowest since 2017/2018 and equal to just four months’ demand.
- Prices for most grades, as a result, remain at record highs (US-medium-grain, which is a proxy for Australian grades) or trending higher in recent months (including Thailand +4%-5% and Vietnam +7%).
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