20181018-大华继显-Regional_Morning_Notes_31页_1mb

报告摘要

Money Supply Growth: Despite a surge in new Total Social Financing (TSF), there was no meaningful rebound in China's M1 and M2 growth in September 2018. M1 grew to 4.0% yoy and M2 to 8.3% yoy.
TSF Surge: New TSF reached Rmb2.2t in September 2018, driven by the inclusion of local government special bonds in the calculation. Excluding these bonds, the growth of new TSF fell by 17.6% yoy.
Outstanding TSF: Outstanding TSF grew to 10.6% yoy in September 2018, with the growth of outstanding TSF (excluding special bonds) at 9.7% yoy.
Central Bank Action: The PBOC is expected to increase lending efforts, particularly to SMEs, as corporate funding costs have not improved and banks remain cautious about credit defaults.

Company Overview: A leading online literature platform and IP bank in China, subsidiary of Tencent. As of 1H18, it had 7.3m writers and 10.7mn literary works, with 214m MAU.
Revenue Sources: Mainly from online reading, which accounted for 81.1% of total revenue in 1H18, up from 84.9% in 1H17.
Performance:
- Online reading revenue increased by 13.3% yoy to Rmb1.85b.
- IP operations revenue rose by 104% yoy to Rmb317m, contributing 13.9% to total revenue.
Financials:
- Revenue increased by 18.6% yoy to Rmb2.3b in 1H18, missing street estimates by 12%.
- Gross margin rose to 52.4%, and operating margin surged to 24.9%.
- Net margin increased to 22.1% from 11.1% in 1H17.
Valuation:
- Trading at 24.7x 2019F PE, higher than the average for China and global social media companies.
- Bloomberg consensus expects 2018 EPS of Rmb1.10 and 2019 EPS of Rmb1.50.
Risk:
- Tightening policy may lead to lower IP sales and reduced revenue.
Peer Comparison:
- Compared to peers like iReader and Hangzho Anyso, China Literature has a higher PE and EV/EBITDA ratio but a better ROE.

Performance: 3Q18 earnings were in line with expectations.
Strategy: Focusing on postpaid opportunities to drive future earnings while controlling costs.

Corporate Action: Acquiring a 50% stake in JAA, which holds a 10% interest in the Worsley Alumina Project, moving upstream in the aluminum industry.

Preview: Expected to report good quarterly earnings with improved yoy and qoq performance in oilseeds & grains and palm & lauric segments.

Arbitrage Opportunity: Considered an attractive investment with a target price of S$0.90.

Index	Prev Close	1D %	1W %	1M %	YTD %
DJIA	25706.7	(0.4)	0.4	(2.1)	4.0
S&P 500	2809.2	(0.0)	0.8	(3.3)	5.1
FTSE 100	7054.6	(0.1)	(1.3)	(3.4)	(8.2)
AS30	6047.1	1.2	(1.9)	(3.5)	(1.9)
CSI 300	3118.2	0.6	(5.0)	(4.6)	(22.6)
FSSTI	3071.1	1.2	(1.9)	(2.2)	(9.8)
HSCEI	10198.3	0.5	(2.1)	(2.5)	(12.9)
HSI	25462.3	0.1	(2.7)	(5.5)	(14.9)
JCI	5868.6	1.2	0.8	1.0	(7.7)
KLCI	1740.6	0.2	0.3	(2.9)	(3.1)
KOSPI	2167.5	1.0	(2.7)	(6.1)	(12.2)
Nikkei 225	22841.1	1.3	(2.8)	(2.5)	0.3
SET	1695.0	(0.2)	(0.1)	(2.8)	(3.3)
TWSE	9979.1	(0.0)	(4.7)	(7.3)	(6.2)
BDI	1578	(0.4)	5.7	16.3	15.5
CPO (RM/ml)	2100	0.4	0.5	(4.9)	(12.2)
Brent Crude	80	(1.7)	(3.7)	2.6	19.7

Country/Region	2017 GDP (%)	2018F GDP (%)	2019F GDP (%)
US	2.2	2.7	2.3
Euro Zone	2.4	2.1	1.8
Japan	1.7	1.2	1.1
Singapore	3.6	3.2	2.8
Malaysia	5.9	4.8	4.8
Thailand	3.9	4.5	4.2
Indonesia	5.1	5.3	5.4
Hong Kong	3.8	3.8	2.8
China	6.9	6.4	6.2
CPO (RM/mt)	2,783	2,400	2,500
Brent (US$/bbl)	55.00	71.60	71.00