20140819-大华继显-Regional_Morning_Notes_45页_2mb

Regional Morning Notes Summary

Core Content

This document is a financial summary and analysis report from Tuesday, 19 August 2014, covering the Hong Kong, Singapore, Malaysia, Indonesia, and Thailand markets. It includes updates on key companies, market indices, corporate events, and investment recommendations.

Main Points

China Market Highlights

• Goodbaby (1086 HK): Initiated with a BUY recommendation. Target price is HK$4.42. The company is expanding its market share both locally and overseas, with a strong brand presence in China, a direct sales model in North America, and recovery in overseas OEM business. Expected revenue CAGR of 17% for 2014-2016 and net profit CAGR of 26%. Gross margin is expected to expand from 22.9% to 24.6% by 2015.
• China Galaxy Securities (6881 HK): Initiated with a BUY recommendation. Target price HK$7.00. 1H14 earnings were robust from margin business.
• China Resources Power Holdings (836 HK): Maintained a HOLD recommendation. Net profit increased 13.8% yoy, slightly below expectations.
• Shanghai Electric Group (2727 HK): Upgraded to BUY. 1H14 results met expectations, with a pick-up in thermal power equipment ASP and acceleration of nuclear project approvals.
• Sunny Optical (2382 HK): Maintained BUY. Net profit up 30.5% yoy due to module shipments. Expected margin rebound in 2H14.
• Tingyi (322 HK): Upgraded to BUY. 2Q14 results showed surprise gains in beverage market share and margin expansion, offsetting weaker noodle performance.
• Zhaojin Mining (1818 HK): Maintained BUY. 1H14 results were in line with expectations, with a sustained production growth outlook despite cost pressure.
• Jiangxi Copper (358 HK): Updated to HOLD due to improving copper price outlook.

Potential Impact of a 10% Tax on Online Shopping

• The National Tax Bureau is finalizing new regulations to impose a 10% tax on online shopping.
• C2C platforms such as Taobao and Paipai.com are likely to be the most impacted, while B2B and B2C platforms are already taxed.
• Low-margin sellers may face significant pressure, leading to potential consolidation.
• Physical retailers such as Lianhua (980 HK), Wumart (1025 HK), and Sun Art (6808 HK) may benefit from the shift in consumer spending back to offline channels.
• Large B2C platforms such as JD.com and Tmall are expected to gain market share due to increased consumer trust and quality perception.

Key Information

Key Indices

Top Picks (BUY)

Sell

• UMWH Holdings (UMWH MK): SELL. Price RM1.52, target RM1.00. Potential downside 19.1%.

Corporate Events

• Dah Chong Hong Luncheon: Hong Kong, 19 Aug
• China U-Ton Holdings: Hong Kong, 20 Aug
• Corporate Roadshow: Multiple locations (Hong Kong, Singapore, Kuala Lumpur)
• Asia Gases Conference: Singapore, 8 Oct
• Tiangong International: Hong Kong, 20 Aug
• Singamas Container Holdings: Hong Kong, 22 Aug
• China Power New Energy: Hong Kong, 22 Aug
• Kaisa Group Holdings Luncheon: Hong Kong, 22 Aug
• China Pioneer Pharma Holdings: Hong Kong, 29 Aug
• Top Glove Corporate Roadshow: Montreal, 2 Sep
• China Traditional Chinese Medicine: Taipei, 3 Sep

Market Outlook

Singapore

• 2Q14 results were mostly in line with expectations, with limited upside surprises.
• FSSTI is expected to reach a year-end target of 3,400.
• The Property sector is expected to benefit from the Thomson-East Coast line.

Thailand

• Quality Houses (QH TB): Maintained BUY. 2Q14 net profit exceeded expectations by 14.6%. Target price is Bt4.68.

Key Assumptions

Key Financials for Goodbaby (1086 HK)

Key Metrics

Valuation and Recommendation

• Goodbaby (1086 HK): Initiated with a BUY recommendation. Target price HK$4.42, with +19.1% upside.
• Gold and jewellery retailers are considered the most immune to the structural changes in the retail sector.
• Luk Fook (590 HK): Maintained BUY due to its resilience against online shopping trends.

Earnings Risks

• Slower-than-expected recovery in overseas markets.
• RMB appreciation may weigh on gross margins.
• Longer-than-expected consolidation of new brands like Evenflo and Cybex.

Summary

This report provides an overview of the regional financial markets, with a focus on the China market, particularly on Goodbaby (1086 HK). The report highlights the potential 10% tax on online shopping and its implications on C2C platforms, physical retailers, and B2C players. It also includes key financial metrics, market indices, corporate events, and investment recommendations. Overall, the report suggests positive outlook for certain sectors and companies, with Goodbaby being a key BUY recommendation.