View
1
Download
0
Category
Preview:
Citation preview
1
Yum Cha 飲 茶 November 14, 2017
RESEARCH NOTES
Source: Bloomberg
INDICES Closing DoD%
Hang Seng Index 29,182.2 0.2
HSCEI 11,684.5 (0.5)
Shanghai COMP 3,447.8 0.4
Shenzhen COMP 2,045.2 0.3
Gold 1,278.4 0.2
BDIY 1,464.0 (1.1)
Crude Oil, WTI(US$/BBL) 56.8 0.0
Crude Oil, BRENT(US$/BBL) 63.2 (0.6)
HIBOR, 3-M 1.0 0.4
SHIBOR, 3-M 4.5 0.9
RMB/USD 6.6 (0.0)
DATA RELEASES DUE THIS WEEK
Nov 17 China October Property Prices
TECHNOLOGY HARDWARE INDUSTRY UPDATE - In general, we continue to see
divergence in the share price performance of the HK-listed technology hardware
names with a) bigger caps outperforming small-mid caps, and b) hot sectors vs.
lagging sectors. Those with exposure to high-growth areas, such as optical
communications and semi-conductors (AI related), outperformed the sector, and the
HSI and MSCI on a one-month basis. Recent data points from Taiwan-listed
technology names may suggest that growth in the sector continued in Oct 2017 vs.
Sep 2017, and it seems that iPhone X is one of the growth drivers. Sector wide,
materials & equipment, foundries, casings, lenses, ODMs, components, optical
communications, distribution and terminals saw higher top-line YoY growth in Oct
2017 vs. Sep 2017. Apple-related companies reported faster turnover growth in Oct
2017 vs. Sep2017, which suggests that camera modules, 3D sensing, casings and
displays are major beneficiaries of the official launch of iPhone X. Apple still has first-
mover advantage over the Android camp. Regarding specific components, we still
believe that camera modules/lenses, displays and PCBs (flexible & substrate grade)
look more interesting, since the market is talking about next stage of development,
such as hybrid lens solutions, 3D sensing and flexible OLEDs. The Chinese IC supply
chain, especially HK-listed foundries, was re-rated in past month, given news flow,
government support, and the fact that semi-conductors are a key segment in the
development of new technologies such as AI and cloud computing.
RED STAR MACALLINE [1528.HK; HK$9.58; NOT-RATED] - Red Star Macalline
(RSM) is the largest operator of Home Improvement and Furnishings shopping mall
chains in China, with a 214-mall network across the nation. Its self-owned malls,
which are located in Tier 1 and 2 cities, account for 32% of its malls, but 68% of its
revenue. The Company has underperformed its peers YTD and is now trading at
10.5x PER and 5% yield. We believe the Company’s property backing (at 0.68x book
value) and the upcoming A-share listing may provide upside for the share price.
KAISA [1638.HK; HK$4.59; NOT RATED] - Last week we met with Kaisa
management, who shared some updates with us. They stated that the operation crisis
and debt issues had been addressed and that all debt had been disclosed at
~RMB100bn (gearing ratio 300%), i.e. no more hidden debt. Therefore management
can now focus on operations and the future development of the Company. The
Company owns a decent and sizable landbank in the GMH (Guangdong Macau &
Hong Kong) area, and it started to get back on track after the resumption of trading.
Its valuation looks undemanding at 6.5x 2017E PER (assuming RMB28.5bn revenue
booking for the whole year and a not-aggressive 13% core profit margin for a China
property developer). The valuation is near the low end of the range compared to its
peers of similar scale. We see the potential to narrow the valuation gap, but it will take
time to rebuild investor confidence after a trading suspension of two years.
2
SNIPPETS
China Glass Makers. According to industry news flow, about 10 float glass production lines in the Shahe region will be shut
down, as they failed to comply with emission standards. The 10 production lines account for about 2.8% of total production
lines in China and 4.3% of total operating production lines. The production capacity shut down in the Shahe region is just
the start of the whole process. More capacity is expected to be shut down on a nationwide basis. The float glass price in
China has continued to move up; the average float glass price rose to RMB1,572.2/tonnes yesterday, a YTD high. We had
discussions with the management of both China Glass [3300.HK] and Xinyi Glass [0868.HK] last night, and they share our
view that both Companies are the beneficiaries of capacity shutdown. Apart from the China market, both China Glass and
Xinyi Glass will continue to expand their global footprint by establishing more production bases in overseas markets. The
news flow confirms our view that the float glass industry in China will see more favourable supply/demand dynamics. We
have a BUY rating on Xinyi Glass, with a target price of HK$10.13. We also suspect that CNBM Group will utilize China
Glass as a platform to consolidate glass operations under CNBM Group. Given its volatile earnings record and low trading
liquidity, it will take time for the market to build confidence in CGH, but increasing marketing activity by China Glass’ senior
management may attract market interest. We suggest investors put China Glass on their radar screen.
800.0
900.0
1000.0
1100.0
1200.0
1300.0
1400.0
1500.0
1600.0
01/14 06/14 11/14 04/15 09/15 02/16 07/16 12/16 05/17
RMB/tonne
170.0
180.0
190.0
200.0
210.0
220.0
230.0
240.0
250.0
260.0
02/12 09/12 04/13 11/13 06/14 01/15 08/15 03/16 10/16 05/17
Average float glass price in China No. of operating float glass production lines in China
Source: WIND, Bloomberg, CGIS Research Source: WIND, Bloomberg, CGIS Research
1
COMPANY / INDUSTRY NEWS
Analyst: Mark Po, CFA; Tel: (852) 3698 6318; markpo@chinastock.com.hk
TECHNOLOGY HARDWARE INDUSTRY UPDATE – Oct 2017 data suggests iPhone X is the growth driver. Growth of IC
and optical communications continue.
Growth rate held up in Oct 2017. In general, we continue to see divergence in the share price performance of the HK-listed technology hardware names with a) bigger caps outperforming small-mid caps, and b) hot sectors vs. lagging sectors. Those with exposure to high-growth areas, such as optical communications and semi-conductors (AI related), outperformed the sector, and the HSI and MSCI on a one-month basis. Because of positive messages from Apple and Oct 2017 shipment figures released by Taiwanese listed peers, those with exposure to several components such as a) OLED (Truly [0732.HK], Varitronix [0710.HK] and Solomon Systech [2878.HK]), b) hybrid lenses/3D sensing (AAC [2018.HK and Sunny Optical [2382.HK]), and c) flexible PCBs, also did well recently, outperforming other handset component names. Recent data points from Taiwan-listed tech-nology names may suggest that growth in the sector continued in Oct 2017 vs. Sep 2017, and it seems that iPhone X is one of the growth drivers. The Taiwan-listed technology names (materials & equipment, wafers, semiconductors, IC design, LEDs, TFT-LCDs, packaging & testing, lenses, DRAMs, ODMs, optical components & casings, networking, PCBs, auto electronics, terminals and distribution) reported their Oct 2017 turnover, and we note that overall top-line growth in Oct 2017 was sustainable in Oct 2017 vs. Sep 2017. Sector wide, materials & equipment, foundries, casings, lenses, ODMs, components, optical communications, distribution and terminals saw higher top-line YoY growth in Oct 2017 vs. Sep 2017. Even though we didn’t see a pick-up in the growth rate in other sectors, like IC design, wafers, PCBs and packaging & testing, in Oct 2017 vs. Sep 2017, they didn’t decelerate further. Apple-related companies, like TSMC, Win Semi, Catcher, Merry, Largan, TPK and Foxconn Technology, reported faster turnover growth in Oct 2017 vs. Sep2017, which suggests that camera modules, 3D sensing, casings and displays are major beneficiaries of the official launch of iPhone X. Recent news flow confirms our view that the market is still somewhat confident about iPhone X sales (even with the shift to 2018 instead of Q4 2017), as Apple still has first-mover advantage over the Android camp. We still suggest that investors hold a medium- to long-term view of the Apple supply chain, as it will take time for Android to catch up with Apple. Regarding specific components, we still believe that camera mod-ules/lenses, displays and PCBs (flexible & substrate grade) look more interesting, since the market is talking about next stage of development, such as hybrid lens solutions, 3D sensing and flexible OLEDs. The Chinese IC supply chain, especially HK-listed foundries, was re-rated in past month, given news flow, government support, and the fact that semi-conductors are a key segment in the development of new technologies such as AI and cloud computing.
Regarding the PC side, Acer reported YoY turnover growth in Oct 2017 vs. negative growth in Sep and positive YoY growth in Aug and Jul 2017, but Asustek reported negative YoY turnover growth in Oct 2017 vs. positive growth in Sep 2017 and negative in Apr-Aug 2017. So far the news flow (including MSI and Gigabyte) in our view, still suggests that the PC industry continues to perform well despite concerns about the growth outlook. In the Hong Kong market, messages from both Sunny Optical [2382.HK] and Q-Tech [1478.HK] indicate that the growth outlook can vary for different players in the same industry. Sunny Optical released its Oct 2017 shipment figures, which showed a pick-up in growth of shipments of camera mod-ules, which increased 5.3% MoM and 11.9% YoY to about 29.5m units (Sep 2017: 16.7% MoM decline and 6.5% YoY growth). It seems that Sunny Optical is benefitting from the release of flagship models by major customers such as Huawei. QTech’s total Oct 2017 camera module shipments rose 2.5% MoM and dropped 24.9% YoY to 15.1m units. In the camera module segment, 8MP and below rose 29.5% MoM and dropped 50.8% YoY to about 7m units in Oct 2017, and 13MP and above dropped 13.2% MoM and increased 38.6% YoY to about 8.1m units. It seems that Q-Tech’s Oct 2017 product mix is not as favourable as that in Sep 2017, as lower-end products (8MP and below) should offer lower margins than the higher-end products. We would like to highlight that NewMax’s shipment figures remained weak in Oct 2017, which is a concern to us. To a certain extent, we still maintain our cautious view of QTech. AAC [2018.HK] released its Q3 2017 results, which also cleared up market concerns.
Handsets. We saw divergence in the share price performance of HK-listed handset component suppliers, given: a) increasing attention to certain sub-segments, such as OLED displays and hybrid lens solutions, and b) the release of results and shipment figures by leading names such as AAC, Sun-ny Optical and Q-Tech. Hybrid lens solutions names and OLED display names, such as AAC [2018.HK], Sunny Optical, Truly [0732.HK] and Varitronix [0710.HK], outperformed. Apart from Apple’s results and guidance, the Oct 2017 turnover figures of Apple suppliers (TSMC, Catcher, TPK, GIS, Flex-ium, Merry, Largan and WINS) remained on the positive side, which boosted sentiment on Apple-related names that have exposure to casings, lenses, 3D sensing, PCBs and acoustics. We saw a major re-rating of AAC and Sunny Optical, given their exposure to the optics segment and compa-ny-specific reasons: e.g. a) AAC’s WLG maybe a disruptive development for the industry, and b) Sunny Optical’s partnership with ams and its inclu-sion in the HSI boosted sentiment. Apart from exposure to OLED, we may see re-rating potential for Truly. Industry news flow suggests that Oppo and Xiaomi will adopt 3D-sensing solutions for models to be launched in 2018, as well as solutions that are being developed by Himax & Qualcomm and sensor modules being produced by Truly. At this stage, we can’t verify the news. But if Truly is selected as a supplier of 3D sensing modules, in our view, it will change market sentiment on Truly significantly, as the market used to treat Truly as a laggard in new technology development. At this stage, we haven’t seen Q-Tech’s strategy and roadmap on lens development and 3D sensing. Investors might switch from Q-Tech if the Company lags behind in new technology development. We are somewhat positive on names like Cowell [1415.HK] and FIT Hon Teng [6088.HK] even though they don’t have exposure to high-growth areas. Their current valuation and share price partly reflects market concerns. They may catch up if market sentiment stabilizes. We still suggest investors take a long-term view. We would like to highlight that Apple had a major product upgrade in 2017, and even if shipment volume is flat (which we don’t think will happen, as iPhone’s huge installed base should support volume growth), the component sup-pliers will benefit from an ASP increase. Apple is likely to have an advantage in key component supply, such as OLED displays and 3D sensing mod-ules, and the Chinese brands are unlikely to catch up in the near term.
PCs. PCB and gaming notebook suppliers, including MSI and Gigabyte, reported faster monthly YoY sales growth in Oct 2017 vs. Sep 2017. Acer
also picked up in monthly YoY sales in Oct 2017 vs. Sep 2017.ODMs, on average, continued to report solid monthly turnover figures in Oct 2017. The
PC supply chain shouldn’t offer any major downside surprises. HK-listed PC-related names, such as Lenovo [0992.HK], didn’t generate major positive
news flow with their results, but any improvement in sentiment may boost Lenovo’s share price performance. However, at this stage, we can’t find a
major re-rating catalyst for Ju Teng [3336.HK] which is expected to continue to underperform.
November 14, 2017
2
COMPANY / INDUSTRY NEWS
Analyst: Mark Po, CFA; Tel: (852) 3698 6318; markpo@chinastock.com.hk
TECHNOLOGY HARDWARE INDUSTRY UPDATE – Sep 2017 data suggests the impact of the new iPhone launch has
peaked in the near term. IC and optical communications outperform.
Semiconductors. The semiconductor supply chain in Taiwan, including IC design, wafer manufacturing and foundries, reported healthy MoM turnover
growth in Oct 2017. Foundries in particular reported faster YoY growth in Oct 2017. Vanguard’s weaker performance in Oct 2017 may have been due
to its high exposure to the display sector. The semiconductor supply chain was the most discussed segment in the hardware sector last month; the
supply chain outperformed the whole hardware sector on a one-month basis. The market has re-rated the HK-listed foundries, such as Hua Hong
[1347.HK] and SMIC [0981.HK], focusing especially on the latter, since after the recruitment of industry experts, SMIC has a high chance of making a
major breakthrough in the 14nm/10nm FinFET process. Mobile processors with AI features (refer to our previous industry update on 06 Oct 2017) are
manufactured using the 10nm FinFET process. A breakthrough in 14nm/10nm FinFET will narrow the gap between SIMC and its peers. We maintain
the view that SMIC can deliver growth both organically from industry growth and from market share gains from its peers, such as UMC and Global-
foundries. SMIC also has exposure to packaging through JECT, which may help it gain market share. SMIC seems to be lagging behind the leading
global players regarding EUV development. However, EUV development requires huge CAPEX and expertise, and in our view, it is not a bad idea for
SMIC not to release its plan for EUV development. Overall, given their uniqueness, the HK-listed listed foundries have been re-rated recently, as they
are not trading at the higher end of their historical PBV range. We continue to suggest clients broaden their radar screen from foundries to IC design
names (CE Huada [0085.HK], Solomon Systech [2878.HK] and Shanghai Fudan [1385.HK], materials (AVIC Int’l [0161.HK]’s Shannan Circuits), and
equipment (ASMPT [0522.HK]. We reiterate that the impact of off-loading by a major shareholder is expected to fade and that shares of ASMPT are
expected to be supported by its share buy-back program. ASMPT is a global leader in packaging equipment, and we suspect that ASMPT might look
interesting to Chinese companies as an M&A target, as ASMI has reduced its stake in ASMPT to 25%. Despite their smaller cap and lower trading
liquidity, HK-listed IC design houses, such as Solomon Systech, Fudan and CE Huada, are also doing well, as the market has been re-rating the
whole IC supply chain in China. There are suggestions in the market that Hauwei’s V9 is using Solomon Systech’s maXTouch display driver. Solomon
Systech is also co-operating with Visionox (an OLED developer in China). Solomon Systech’s small market cap. and lower trading volume may be a
concern to investors, but if the Company can leverage maXTouch to penetrate the OLED display segment, there will be a major re-rating of Solomon
System. Investors should put Solomon Systech on their radar screen.
Displays. Top-line growth of AUO and Innolux in Oct 2017 continued to slow down vs. Sep 2017. Amtran continued to report weak top-line figures in
Oct 2017. However, we haven’t seen a major pick-up in demand for TFT-LCD panels even though panel prices stabilized in late Oct 2017. Shares of
TV makers, especially Skyworth [0751.HK] and TPV [0903.HK], have been under pressure recently, and we don’t think this is the end of the de-rating.
Sharp (selling mostly TVs) ranked no.7 and was ranked even higher than Midea (no. 10) on the Tmall platform during Double 11. We believe that the
major reason for Sharp becoming one of the top-selling brands during “Double Eleven” was its aggressive price cutting, which is likely to put pressure
on the leading Chinese brands. The operating environment is even more challenging for TV makers like Skyworth without in-house panel support.
Skyworth’s Nov 2017 shipments may be impacted. We still prefer TCL Multimedia (TCLM) [1070.HK], which is gaining market share in developed
markets such as the US and support from CSOT. Based on our understanding, TCLM is the TV supplier for Roku Inc. [ROKU.US], and according to its
official website, Roku TV is a smart TV with the added functionality and features of a Roku® streaming player. From one simple interface, Roku TV
provides subscribers with access to all entertainment sources, such as a game console, cable box, antenna and streaming channels like Netflix, The
Roku Channel and YouTube. Roku’s recent share price rally may also trigger a re-rating of smart TV platforms, which would be positive for TCLM.
Optical communications. The average turnover growth rate of Taiwanese optical communications names accelerated in Oct 2017 vs. Sep 2017
(fastest YoY growth since Apr 2017). Major names such as Landmark reported better turnover figures in Sep 2017, which has attracted market atten-
tion to optical communications names. Recent messages from Taiwanese optical communications names have reaffirmed our positive view of the
optical communications segment. We maintain a positive view on the outlook for ZTE [0763.HK], YOFC [6869.HK] and O-Net [0877.HK], given the
continuous investment in wired networks, 5G and IoT networks by telecom operators. We note that shares of ZTE and YFOC rebounded after a cor-
rection in Oct 2017, as they are treated as proxies for optical communications investment. O-Net has been underperforming YOFC and ZTE. We be-
lieve that O-Net is likely to catch up, given its exposure to both the telecom and datacom segments.
Others. Regarding other hardware names, we maintain the view that energy storage names such as BYD [1211.HK] and Xinyi HK [8328.HK] will re-
port good growth in the coming years, given government policy promoting the energy storage industry. In our view, the market will also look at HK-
listed auto electronics names. In HK, FIT Hon Teng and Truly have exposure to the auto electronics segment. Even though it is in a transformation
phase, TUS Intl [0872.HK] is on track to become an ADAS equipment and solutions supplier. We believe that TUS Intl’s future corporate activity will
attract market attention. Meitu’s [1357.HK] underperformance, in our view, is disappointing, as the Company may be treated as a quasi-AI name and
because of recent TMT IPO activity. We still maintain the view that the strong share performance of AI names will boost sentiment on Meitu.
3
COMPANY / INDUSTRY NEWS
Sources: Bloomberg , CGIS Research
Figure 1: Monthly YoY turnover growth of Taiwan-listed companies Sector Ticker Name 03/17 04/17 05/17 06/17 07/17 08/17 09/17 10/17 YoY growth picked up in May vs Apr 2017 YoY growth picked up in Jun vs May 2017 YoY growth picked up in Jul vs Jun 2017 YoY growth picked up in Aug vs Jul 2017 YoY growth picked up in Sep vs Aug 2017 YoY growth picked up in Oct vs Sep 2017
Materials & Equipment 2360 TT Equity CHROMA ATE INC -19.4 23.9 -10.5 23.4 -28.6 31.7 52.2 94.2 Yes Yes Yes Yes
2395 TT Equity ADVANTECH CO LTD -1.6 1.9 4.3 12.3 4.7 6.8 11.1 14.1 Yes Yes Yes Yes Yes
6414 TT Equity ENNOCONN CORP 23.8 17.4 7.6 28.9 180.3 203.2 237.5 280.0 Yes Yes Yes Yes Yes
6166 TT Equity ADLINK TECHNOLOGY INC 20.6 12.8 18.5 16.4 24.8 10.2 42.5 20.3 Yes Yes Yes
1590 TT Equity AIRTAC INTERNATIONAL GROUP 26.8 19.0 16.7 34.0 37.7 34.1 43.6 33.1 Yes Yes Yes
6510 TT Equity Chunghwa Precision 52.9 36.4 30.1 21.2 25.4 21.8 19.2 -2.4 Yes
2049 TT Equity HIWIN TECHNOLOGIES CORP 37.1 23.9 14.0 14.3 22.5 39.2 38.4 35.4 Yes Yes Yes
8215 TT Equity BENQ MATERIALS CORP -12.0 -16.0 -16.0 -12.9 -14.2 -14.2 -12.3 -19.3 Yes Yes Yes
16.0 14.9 8.1 17.2 31.6 41.6 54.0 56.9 Yes Yes Yes Yes Yes
IC design 3034 TT Equity NOVATEK MICROELECTRONICS COR 2.24 2.09 3.70 3.81 3.60 0.64 5.19 10.37 Yes Yes Yes Yes
2379 TT Equity REALTEK SEMICONDUCTOR CORP -0.60 -1.24 -0.79 5.73 8.29 3.94 7.48 6.29 Yes Yes Yes Yes
6462 TT Equity EGIS TECHNOLOGY INC 2231.06 534.48 51.58 758.73 370.99 200.06 187.22 26.66 Yes
2454 TT Equity MEDIATEK INC -2.43 -22.91 -25.16 -11.97 -23.57 -13.04 -19.95 -11.74 Yes Yes Yes
5274 TT Equity ASPEED TECHNOLOGY INC 39.53 52.31 25.73 67.15 37.45 33.05 22.95 17.05 Yes
2344 TT Equity WINBOND ELECTRONICS CORP 6.62 3.28 9.96 12.91 13.39 18.49 18.84 21.06 Yes Yes Yes Yes Yes Yes
2337 TT Equity MACRONIX INTERNATIONAL 35.88 17.54 20.20 42.65 34.09 62.78 46.52 67.68 Yes Yes Yes Yes
6138 TT Equity ANPEC ELECTRONICS CORP 16.12 19.12 26.85 15.07 26.19 17.06 8.62 10.60 Yes Yes Yes
6411 TT Equity AMAZING MICROELECTRONIC CORP 26.15 11.38 14.60 14.58 0.92 6.22 10.64 6.28 Yes Yes Yes
3014 TT Equity ITE TECHNOLOGY INC 4.34 6.72 -0.29 -12.11 4.13 -5.31 1.62 8.31 Yes Yes Yes
4947 TT Equity ON-BRIGHT ELECTRONICS INC 0.34 8.11 5.21 4.13 17.30 20.77 27.14 32.17 Yes Yes Yes Yes
2436 TT Equity WELTREND SEMICONDUCTOR INC 28.96 4.98 14.61 19.21 9.70 16.97 24.22 11.74 Yes Yes Yes Yes
8261 TT Equity ADVANCED POWER ELECTRONICS 19.01 17.07 24.20 34.69 5.71 21.31 28.85 27.32 Yes Yes Yes Yes
8262 TT Equity NIKO SEMICONDUCTOR CO LTD -1.48 -3.93 -14.13 -0.21 18.88 11.62 10.34 -2.84 Yes Yes
6435 TT Equity SINOPOWER SEMICONDUCTOR 20.76 29.34 51.51 15.87 46.35 27.81 27.45 23.89 Yes Yes
4966 TT Equity PARADE TECHNOLOGIES LTD -4.41 2.86 24.29 24.55 84.46 22.65 7.00 15.19 Yes Yes Yes Yes
5269 TT Equity ASMEDIA TECHNOLOGY INC 92.33 111.24 121.23 116.59 98.87 14.36 6.57 61.53 Yes Yes
3443 TT Equity GLOBAL UNICHIP CORP -15.00 38.29 62.49 41.72 92.32 23.38 31.08 76.33 Yes Yes Yes Yes
6202 TT Equity HOLTEK SEMICONDUCTOR INC 20.63 2.45 8.33 6.07 -2.73 13.97 3.76 15.30 Yes Yes Yes
132.63 43.85 22.32 61.01 44.54 26.14 23.98 22.27 Yes
Wafer 3523 TT Equity EFUN TECHNOLOGY CO LTD -36.95 -42.02 -44.45 -28.42 -63.58 -76.42 -87.11 -90.70 Yes
6488 TT Equity GLOBALWAFERS CO LTD 232.06 174.21 177.80 208.16 169.62 179.41 193.25 175.67 Yes Yes Yes Yes
6182 TT Equity WAFER WORKS CORP 15.54 4.47 12.71 21.33 17.40 28.55 28.64 28.52 Yes Yes Yes Yes
70.22 45.55 48.69 67.03 41.15 43.84 44.93 37.83 Yes Yes Yes Yes
Foundry 2330 TT Equity TAIWAN SEMICONDUCTOR MANUFAC 17.49 -14.92 -1.06 3.44 -6.26 -2.54 -1.25 3.77 Yes Yes Yes Yes Yes
2303 TT Equity UNITED MICROELECTRONICS CORP -1.30 10.79 -1.52 -3.16 2.34 0.87 -6.83 7.60 Yes Yes
5347 TT Equity VANGUARD INTERNATIONAL SEMI 9.91 -20.11 -10.77 3.68 -11.02 -0.90 4.91 -7.32 Yes Yes Yes Yes
3105 TT Equity WIN SEMICONDUCTORS CORP 5.99 10.21 5.26 6.34 11.40 17.40 44.74 67.99 Yes Yes Yes Yes Yes
8.02 -3.51 -2.02 2.57 -0.89 3.70 10.39 18.01 Yes Yes Yes Yes Yes
LED 2393 TT Equity EVERLIGHT ELECTRONICS CO LTD 3.82 -6.64 2.44 -1.89 -2.72 -14.23 -8.33 -2.89 Yes Yes Yes
2448 TT Equity EPISTAR CORP -0.08 -4.51 2.67 6.25 3.12 5.26 12.77 -2.92 Yes Yes Yes Yes
6271 TT Equity TONG HSING ELECTRONIC INDUST -10.22 -10.64 -14.37 -9.15 -3.57 0.46 7.76 6.64 Yes Yes Yes Yes
3603 TT Equity UPEC ELECTRONICS CORP -64.48 -67.57 -80.95 -82.57 -77.24 -69.11 -70.70 -71.54 Yes Yes
3698 TT Equity LEXTAR ELECTRONICS CORP 1.67 -18.71 -15.66 -12.60 6.71 -9.95 -20.28 -17.58 Yes Yes Yes Yes
-13.86 -21.61 -21.18 -19.99 -14.74 -17.51 -15.76 -17.66 Yes Yes Yes Yes
Optical Communications 3081 TT Equity LAND MARK OPTOELECTRONICS -43.33 -35.18 -28.43 -11.26 -7.40 1.39 68.24 93.30 Yes Yes Yes Yes Yes Yes
3450 TT Equity ELITE ADVANCED LASER CORP 8.07 7.01 5.81 15.26 3.49 -7.94 4.22 -1.54 Yes Yes
3234 TT Equity TRUELIGHT CORP 17.77 9.29 -8.62 -3.01 7.68 -7.94 -7.94 4.84 Yes Yes Yes
4979 TT Equity LUXNET CORP 9.88 8.49 9.95 15.66 20.67 18.33 21.63 25.76 Yes Yes Yes Yes Yes
-1.90 -2.60 -5.32 4.16 6.11 0.96 21.54 30.59 Yes Yes Yes Yes
PCBs 2377 TT Equity MSI 7.09 -4.69 -2.84 13.55 12.43 -10.10 -4.14 3.04 Yes Yes Yes Yes
6269 TT Equity FLEXIUM INTERCONNECT INC -2.04 -7.92 4.93 23.59 11.31 15.38 42.49 28.48 Yes Yes Yes Yes
4958 TT Equity ZHEN DING TECHNOLOGY HOLDING -4.78 -9.75 -4.29 17.14 37.93 46.91 44.61 19.30 Yes Yes Yes Yes
3044 TT Equity TRIPOD TECHNOLOGY CORP 8.94 -2.82 -0.59 2.57 2.57 5.45 9.48 9.59 Yes Yes Yes Yes Yes
2376 TT Equity GIGABYTE TECHNOLOGY CO LTD -11.55 1.88 36.13 14.18 26.29 10.03 8.70 9.39 Yes Yes Yes
3189 TT Equity KINSUS INTERCONNECT TECH -12.24 -9.26 -15.95 -18.86 -12.36 -4.12 7.85 26.39 Yes Yes Yes Yes
6510 TT Equity Chunghwa Precision 52.94 36.40 30.11 21.16 25.40 21.81 19.25 -2.39 Yes
6415 TT Equity SILERGY CORP 33.32 21.13 21.91 21.74 21.52 25.47 17.29 11.96 Yes Yes
3037 TT Equity UNIMICRON TECHNOLOGY CORP -11.55 -10.71 -4.53 6.47 -4.04 6.62 17.37 15.67 Yes Yes Yes Yes
6153 TT Equity CAREER TECHNOLOGY CO LTD 0.38 -20.47 -10.64 -8.58 -5.24 -9.89 -1.87 -7.15 Yes Yes Yes Yes
6141 TT Equity PLOTECH CO LTD 18.24 24.75 16.95 20.64 24.51 36.66 26.99 20.29 Yes Yes Yes
7.16 1.68 6.47 10.33 12.76 13.11 17.09 12.23 Yes Yes Yes Yes Yes
TFT-LCD 2409 TT Equity AUO 18.19 7.60 4.73 3.97 5.00 4.11 -3.82 -9.89 Yes
3481 TT Equity Innolux 67.63 35.57 24.82 19.99 11.05 8.66 1.24 -11.86
6116 TT Equity Hannstar 76.89 22.58 14.11 15.32 16.18 6.16 -25.71 -24.70 Yes Yes Yes
8069 TT Equity E INK HOLDINGS INC 41.79 21.22 -1.14 -7.22 9.95 2.72 11.27 39.88 Yes Yes Yes
8105 TT Equity GIANTPLUS TECHNOLOGY CO LTD 9.38 4.82 1.33 12.10 24.34 12.73 11.04 5.14 Yes Yes
3049 TT Equity HANNSTOUCH SOLUTION INCORPOR 15.20 805.50 17.44 8.02 -18.34 -11.64 -29.63 -40.47 Yes
38.18 149.55 10.22 8.70 8.03 3.79 -5.94 -6.98
Packaging & Testing 6147 TT Equity CHIPBOND TECHNOLOGY CORP 11.76 19.66 -3.36 11.10 8.73 8.45 4.53 4.08 Yes
2311 TT Equity ADVANCED SEMICONDUCTOR ENGR -3.32 1.31 9.01 5.99 2.99 2.24 -0.31 7.55 Yes Yes
2325 TT Equity SILICONWARE PRECISION INDS 3.85 -3.99 -6.27 -6.96 -0.75 -0.76 1.54 -0.38 Yes Yes
2449 TT Equity KING YUAN ELECTRONICS CO LTD 6.72 -1.80 -4.99 -5.76 -5.54 -5.45 -3.30 -5.51 Yes Yes Yes
6239 TT Equity POWERTECH TECHNOLOGY INC 19.71 20.70 17.52 30.63 24.91 31.61 27.40 24.17 Yes Yes
7.74 7.18 2.38 7.00 6.07 7.22 5.97 5.98 Yes Yes Yes
Casings 2474 TT Equity CATCHER TECHNOLOGY CO LTD -22.84 -14.90 3.51 29.97 24.23 21.74 48.23 51.49 Yes Yes Yes Yes
5264 TT Equity CASETEK HOLDINGS LTD -28.47 -29.89 25.44 74.31 17.36 28.79 18.74 36.13 Yes Yes Yes Yes
6235 TT Equity WAFFER TECHNOLOGY CO LTD 51.79 35.15 19.98 39.02 26.10 44.85 56.23 35.89 Yes Yes Yes
0.16 -3.21 16.31 47.77 22.56 31.79 41.07 41.17 Yes Yes Yes Yes Yes
LENs 3008 TT Equity LARGAN PRECISION CO LTD 20.01 18.86 11.72 7.35 -3.27 3.95 9.87 10.66 Yes Yes Yes
3406 TT Equity GENIUS ELECTRONIC OPTICAL CO 19.03 2.26 -26.14 -14.30 -10.02 20.37 24.88 12.59 Yes Yes Yes Yes
3019 TT Equity ASIA OPTICAL CO INC 11.48 9.34 4.64 9.64 0.78 -7.84 -1.59 2.12 Yes Yes Yes
3630 TT Equity NEWMAX TECHNOLOGY CO LTD 13.98 5.62 -28.93 -29.59 -14.31 -25.45 -27.26 -31.29 Yes
3441 TT Equity UNIQUE OPTICAL INDUSTRIAL CO 0.63 100.29 31.92 51.12 20.04 17.37 4.80 55.67 Yes Yes
6209 TT Equity KINKO OPTICAL CO LTD -3.30 -6.27 -2.03 -1.30 2.39 -7.42 -24.52 -17.54 Yes Yes Yes Yes
4976 TT Equity CALIN TECHNOLOGY CO LTD 8.07 7.01 5.81 15.26 3.49 -7.94 4.22 -1.54 Yes Yes
9.99 19.59 -0.43 5.45 -0.13 -0.99 -1.37 4.38 Yes Yes
DRAMs 2408 TT Equity NANYA TECHNOLOGY CORP 27.05 45.11 42.06 36.98 32.14 25.95 32.83 32.73 Yes
3006 TT Equity ELITE SEMICONDUCTOR MEMORY 45.67 32.53 6.28 25.66 1.90 -11.21 20.92 -6.33 Yes Yes
36.36 38.82 24.17 31.32 17.02 7.37 26.88 13.20 Yes Yes
Components 3152 TT Equity ADVANCED CERAMIC X CORP 17.78 16.95 11.91 8.22 0.48 -1.20 -4.22 -7.36
3673 TT Equity TPK HOLDING CO LTD 6.37 14.48 23.56 55.60 29.17 2.02 22.72 21.18 Yes Yes Yes
6121 TT Equity SIMPLO TECHNOLOGY CO LTD -10.50 -9.17 -8.09 -3.57 7.22 6.57 9.11 4.00 Yes Yes Yes Yes
6456 TT Equity GENERAL INTERFACE SOLUTION 19.89 50.09 206.90 178.87 149.89 120.85 92.58 58.64 Yes
2308 TT Equity DELTA ELECTRONICS INC 2.36 2.85 -2.80 4.59 2.33 6.32 5.79 6.80 Yes Yes Yes
2439 TT Equity MERRY ELECTRONICS CO LTD 114.21 39.89 63.64 34.47 6.25 42.24 44.19 73.75 Yes Yes Yes Yes
3026 TT Equity HOLY STONE ENTERPRISE CO LTD 17.77 9.29 -8.62 -3.01 7.68 -7.94 -7.94 4.84 Yes Yes Yes
2492 TT Equity WALSIN TECHNOLOGY CORP 9.88 8.49 9.95 15.66 20.67 18.33 21.63 25.76 Yes Yes Yes Yes Yes
5317 TT Equity KAIMEI ELECTRONIC CORP -21.42 -21.52 -9.73 -6.49 -10.13 -9.54 -21.58 -13.76 Yes Yes Yes Yes
5328 TT Equity HUA JUNG COMPONENTS CO LTD -19.84 -22.74 -28.27 -16.98 6.27 -17.05 -10.43 -10.17 Yes Yes Yes Yes
2327 TT Equity YAGEO CORPORATION -2.85 3.75 6.87 7.29 9.62 10.32 15.99 26.39 Yes Yes Yes Yes Yes Yes
4943 TT Equity CONCRAFT HOLDING CO LTD 41.54 24.71 55.37 118.05 184.77 145.20 138.15 162.99 Yes Yes Yes Yes
3665 TT Equity BIZLINK HOLDING INC 31.66 16.39 82.86 78.53 84.13 90.89 89.51 90.80 Yes Yes Yes Yes
1536 TT Equity HOTA INDUSTRIAL MFG CO LTD 16.97 19.83 12.36 8.45 20.64 22.73 27.93 12.02 Yes Yes Yes
2231 TT Equity CUB ELECPARTS INC -2.38 -0.98 4.31 3.45 0.17 4.42 0.52 5.23 Yes Yes Yes
14.76 10.16 28.01 32.21 34.61 28.94 28.26 30.74 Yes Yes Yes Yes
ODMs 2324 TT Equity COMPAL ELECTRONICS 13.70 31.80 23.65 18.17 23.86 21.58 8.10 12.10 Yes Yes
2382 TT Equity QUANTA COMPUTER INC -1.82 1.48 6.09 32.28 19.09 25.11 25.94 48.31 Yes Yes Yes Yes Yes
2356 TT Equity INVENTEC CORP 2.91 2.16 1.08 4.19 13.38 9.84 10.06 16.54 Yes Yes Yes Yes
2317 TT Equity HON HAI PRECISION INDUSTRY 0.61 0.12 -5.27 3.32 7.53 1.31 -3.70 2.87 Yes Yes Yes
2354 TT Equity FOXCONN TECHNOLOGY CO LTD -2.63 -16.81 -1.24 67.05 66.35 94.19 165.19 176.91 Yes Yes Yes Yes Yes
3231 TT Equity WISTRON CORP 20.99 33.52 33.38 29.15 38.70 13.93 27.82 36.81 Yes Yes Yes
4938 TT Equity PEGATRON CORP -16.87 26.01 18.16 -13.92 13.88 7.89 1.74 10.40 Yes Yes
2.41 11.18 10.84 20.04 26.11 24.84 33.59 43.42 Yes Yes Yes Yes
OBMs 2451 TT Equity TRANSCEND INFORMATION INC 5.44 -5.00 -6.29 -7.53 0.52 -4.33 5.61 -12.35 Yes Yes
2353 TT Equity ACER INC -7.98 2.69 3.67 -14.28 6.24 5.71 -0.77 11.74 Yes Yes Yes
2357 TT Equity ASUSTEK COMPUTER INC -7.23 -6.85 -1.60 -8.30 -5.34 -5.14 1.11 -9.51 Yes Yes Yes Yes
2489 TT Equity AMTRAN TECHNOLOGY CO LTD 15.48 -7.36 -29.92 -59.28 -41.48 -15.96 -50.33 -42.81 Yes Yes Yes
2498 TT Equity HTC CORP 25.41 -18.03 -32.91 8.38 -1.97 -54.39 -30.24 -25.79 Yes Yes Yes
6.22 -6.91 -13.41 -16.20 -8.41 -14.82 -14.92 -15.75 Yes
Distribution 3702 TT Equity WPG HOLDINGS LTD 3.12 -4.20 -6.06 -3.09 4.73 5.38 0.57 2.80 Yes Yes Yes Yes
2347 TT Equity SYNNEX TECHNOLOGY INTL CORP -0.08 -10.78 -5.35 6.25 -0.24 14.14 15.97 19.10 Yes Yes Yes Yes Yes
3036 TT Equity WT MICROELECTRONICS CO LTD 37.14 36.93 30.10 34.88 39.39 18.79 15.05 28.04 Yes Yes Yes
13.39 7.32 6.23 12.68 14.63 12.77 10.53 16.64 Yes Yes Yes
Terminals 8114 TT Equity POSIFLEX TECHNOLOGY INC 72.84 63.02 59.64 35.12 42.35 51.51 7.96 8.87 Yes Yes Yes
6105 TT Equity PORTWELL INC -20.99 -35.85 -16.62 6.47 -4.83 18.32 -16.89 Yes Yes Yes Yes
3545 TT Equity FOCALTECH SYSTEMS CO LTD -7.76 -15.95 -9.00 -12.00 -4.48 11.06 15.65 6.45 Yes Yes Yes Yes
5388 TT Equity SERCOMM CORPORATION -5.00 -0.70 -0.36 2.00 5.02 10.28 17.41 13.56 Yes Yes Yes Yes Yes
2387 TT Equity SUNREX TECHNOLOGY CORP -7.83 -4.73 -16.08 -10.02 -24.72 -28.75 -18.52 -17.47 Yes Yes Yes
6285 TT Equity WISTRON NEWEB CORP 1.77 6.84 14.11 22.99 -0.56 7.69 6.43 25.44 Yes Yes Yes Yes
2397 TT Equity DFI INC -7.88 -22.49 0.53 17.26 -11.58 4.24 25.75 3.61 Yes Yes Yes Yes
3.59 -1.41 4.60 8.83 0.17 10.62 5.40 6.75 Yes Yes Yes Yes
4
COMPANY / INDUSTRY NEWS
Sources: Bloomberg , CGIS Research
Figure 2: Peer comparison Ticker Company
Price Market Cap 2017F 2018F 2019F 2017F 2018F 2019F 2016 2017F 2016 2017F 2016 2017F 2016 2017F 1M 3M 6M 12M YTD 1D
Lcy US$m x x x x x x x x % % % % % % % % % % % %
HK listed names
2878 HK Solomon Systech (Intl) Ltd 0.52 165 n.a. n.a. n.a. n.a. n.a. n.a. 1.7 n.a. -6.6 n.a. -5.3 n.a. 0.0 n.a. 36.8 57.6 40.5 48.6 55.2 26.8
1385 HK Shanghai Fudan Microelect-H 7.93 670 n.a. n.a. n.a. n.a. n.a. n.a. 3.1 n.a. 19.1 n.a. 13.7 n.a. 0.0 n.a. 26.3 56.7 36.5 21.3 35.6 -2.0
85 HK China Electronics Huada Tech 1.72 448 n.a. n.a. n.a. n.a. n.a. n.a. 2.0 n.a. 68.4 n.a. 3.1 n.a. 1.7 n.a. 19.4 62.3 16.2 -5.0 10.3 -0.6
1679 HK Risecomm Group Holdings Ltd 3.23 335 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 24.9 n.a. 15.1 n.a. n.a. n.a. 30.2 2.5 n.a. n.a. n.a. 3.9
981 HK Semiconductor Manufacturing 14.36 8,581 49.7 36.1 15.3 10.2 8.3 7.2 1.8 1.9 9.6 3.9 3.3 1.6 0.0 0.0 42.7 99.4 71.4 28.2 17.9 3.8
3355 HK Advanced Semiconductor Man-H 1.24 244 n.a. n.a. n.a. n.a. n.a. n.a. 1.6 n.a. 3.4 n.a. 6.0 n.a. 0.0 n.a. 4.2 44.2 55.0 103.3 93.8 0.8
1347 HK Hua Hong Semiconductor Ltd 16.20 2,149 15.5 13.8 12.4 7.7 6.6 5.9 1.3 1.3 8.6 8.7 7.3 7.1 0.0 1.7 46.7 53.7 42.1 75.3 87.1 2.1
522 HK Asm Pacific Technology 131.00 6,852 19.9 19.7 17.8 14.0 13.3 12.0 5.1 4.9 17.2 27.8 15.0 17.2 1.8 2.2 11.6 37.7 10.3 74.0 59.5 4.9
2018 HK Aac Technologies Holdings In 179.20 28,070 34.6 26.1 21.4 25.2 19.1 16.1 12.5 10.4 31.6 32.6 22.7 20.5 0.9 1.1 28.0 67.9 86.7 160.3 154.4 5.8
2382 HK Sunny Optical Tech 149.00 20,952 52.4 36.5 27.2 40.3 27.9 21.8 24.4 19.7 29.1 42.9 18.8 19.4 0.5 0.5 22.2 54.4 133.5 280.6 338.9 6.0
1415 HK Cowell E Holdings Inc 3.64 388 7.9 6.5 6.2 4.4 3.8 3.7 1.3 1.1 9.8 15.3 8.7 8.7 2.7 3.0 3.4 12.0 52.3 64.0 86.7 -1.9
1478 HK Q Technology Group Co Ltd 17.56 2,466 32.8 21.9 17.0 22.6 15.7 12.6 9.4 8.0 13.7 26.9 9.1 9.7 0.2 0.5 10.7 39.6 170.6 344.6 339.0 -4.0
732 HK Truly International Holdings 3.83 1,532 35.1 13.0 9.1 8.2 6.2 5.1 1.6 1.6 8.4 4.5 -0.2 0.8 1.3 1.2 6.4 58.3 44.5 18.9 26.8 -0.5
710 HK Boe Varitronix Ltd 6.71 632 n.a. n.a. n.a. n.a. n.a. n.a. 1.8 n.a. 2.2 n.a. 2.0 n.a. 0.4 n.a. 44.0 72.1 59.0 114.4 107.1 -1.0
334 HK China Display Optoelectronic 1.15 307 13.4 9.7 8.6 9.9 7.4 6.0 4.9 4.2 38.5 31.4 8.6 5.9 0.0 2.4 9.5 9.5 -0.9 55.4 59.7 -8.0
877 HK O-Net Technologies Group Ltd 5.28 540 19.3 14.0 11.0 11.8 9.5 n.a. 2.4 2.3 9.5 13.2 6.6 8.2 0.0 0.4 -11.3 13.8 5.2 23.4 45.9 -5.0
259 HK Yeebo International Hldgs 3.79 486 n.a. n.a. n.a. n.a. n.a. n.a. 2.4 n.a. 16.1 n.a. 24.3 n.a. 1.6 n.a. 2.4 -6.9 -4.1 28.5 -16.2 1.6
1979 HK Ten Pao Group Holdings Ltd 1.70 218 7.8 6.0 4.9 4.9 3.9 3.2 3.7 2.7 49.8 42.1 13.6 14.9 3.2 3.8 -38.8 -29.5 -10.1 4.9 20.6 -6.6
3336 HK Ju Teng International Hldgs 2.59 381 6.0 5.7 4.8 4.2 3.8 3.5 0.4 0.4 7.8 7.6 2.5 2.8 3.9 3.8 -13.1 -15.6 -11.3 9.3 7.9 -1.5
285 HK Byd Electronic Intl Co Ltd 22.95 6,629 16.3 13.6 12.0 8.8 7.7 7.0 3.4 3.1 11.1 20.1 9.1 10.7 3.4 1.1 -9.1 24.7 73.6 225.5 276.2 0.0
698 HK Tongda Group Holdings Ltd 2.20 1,707 12.3 9.4 7.7 9.0 7.2 6.0 2.7 2.4 23.0 20.9 8.8 10.1 2.2 2.5 -0.9 12.8 -18.5 1.4 10.0 0.5
6088 HK Fit Hon Teng Ltd 5.48 4,730 22.0 17.1 14.9 10.3 8.7 7.9 n.a. 2.4 13.6 13.8 6.9 7.1 n.a. 1.7 -2.3 21.8 n.a. n.a. n.a. 14.4
Average 23.0 16.6 12.7 12.8 9.9 8.4 4.4 4.4 18.6 20.8 9.1 9.6 1.2 1.7 12.2 34.0 42.6 83.8 90.8 1.8
A share listed names
300433 CH Lens Technology Co Ltd-A 38.18 15,051 46.2 30.2 24.1 26.9 20.1 17.1 6.8 6.0 9.9 14.1 4.8 8.7 n.a. 0.3 28.9 25.4 37.0 66.8 65.9 0.2
300136 CH Shenzhen Sunway Communicat-A 55.93 8,277 53.9 34.7 25.6 49.3 30.7 22.2 21.0 18.6 32.1 38.0 24.0 27.6 n.a. 0.1 21.1 51.3 54.3 130.6 96.2 1.2
300408 CH Chaozhou Three-Circle Grou-A 22.50 5,854 31.0 22.9 16.5 25.7 16.8 11.2 7.1 6.7 22.6 20.5 16.2 18.5 n.a. 1.0 -8.9 9.3 2.3 27.0 41.7 1.0
300115 CH Shenzhen Everwin Precision-A 30.22 4,110 30.4 20.1 14.5 19.1 14.0 10.1 6.2 5.8 18.7 19.6 8.8 12.5 n.a. 0.6 -10.3 -6.4 13.2 8.3 16.0 0.3
002456 CH Shenzhen O-Film Tech Co-A 25.90 10,589 47.3 31.6 24.8 31.4 22.8 18.9 7.8 7.1 10.2 16.1 4.4 5.4 n.a. 0.3 16.1 38.7 67.4 66.0 88.9 6.1
002241 CH Goertek Inc -A 22.80 11,141 32.0 25.4 21.9 20.5 16.5 14.4 5.2 5.6 16.3 18.8 8.1 10.3 n.a. 0.5 9.5 17.2 31.8 57.0 71.9 3.4
002273 CH Zhejiang Crystal-Optech -A 30.90 3,085 52.9 35.6 24.9 n.a. n.a. n.a. 6.5 6.3 9.1 11.8 10.3 9.9 n.a. 0.3 14.0 36.2 48.7 34.7 55.3 1.3
300083 CH Guangdong Janus Intellig-A 8.81 1,900 19.6 13.5 10.4 13.7 9.3 7.2 2.3 2.2 2.6 11.4 4.5 6.6 n.a. 0.7 -2.5 -4.0 4.3 6.9 19.9 -1.7
002475 CH Luxshare Precision Industr-A 25.79 12,322 44.5 31.9 25.2 31.2 23.6 18.5 6.7 6.2 13.8 14.6 7.0 8.2 n.a. 0.4 21.0 25.9 39.8 85.4 86.4 0.1
300207 CH Sunwoda Electronic Co Ltd-A 12.50 2,432 26.4 20.0 16.6 21.8 17.1 13.6 6.1 5.4 22.1 22.9 5.3 6.3 n.a. 1.2 0.8 10.2 -2.2 -13.2 -10.1 -0.1
000725 CH Boe Technology Group Co Lt-A 6.41 33,414 27.3 22.8 18.8 10.5 9.0 7.7 2.7 2.5 2.4 10.0 4.0 4.9 n.a. 0.6 25.7 73.2 68.7 133.9 124.1 -1.4
300207 CH Sunwoda Electronic Co Ltd-A 12.50 2,432 26.4 20.0 16.6 21.8 17.1 13.6 6.1 5.4 22.1 22.9 5.3 6.3 n.a. 1.2 0.8 10.2 -2.2 -13.2 -10.1 -0.1
603160 CH Shenzhen Huiding Technolog-A 116.27 7,953 53.6 47.9 41.2 48.0 42.8 36.9 18.9 14.6 43.9 30.9 37.2 31.4 0.3 0.5 22.8 31.0 24.3 -32.0 13.2 5.2
002008 CH Han'S Laser Technology In-A 57.43 9,228 36.8 31.1 25.2 28.8 25.9 21.1 8.9 9.3 15.0 27.1 12.9 13.8 n.a. 0.8 27.9 63.2 87.7 146.6 154.1 0.4
002185 CH Tianshui Huatian Technolog-A 9.37 3,007 38.1 29.4 22.7 16.9 13.0 10.6 3.8 3.7 8.2 10.1 6.0 7.1 n.a. 0.4 10.2 39.4 50.8 48.1 55.1 3.5
603690 CH Pnc Process Systems Co Ltd-A 27.07 858 91.8 59.5 41.5 59.6 38.7 25.8 14.4 10.5 16.7 12.3 8.1 6.3 n.a. 0.1 26.8 80.0 47.5 n.a. n.a. 1.5
300162 CH Ledman Optoelectronic Co-A 9.01 474 n.a. n.a. n.a. n.a. n.a. n.a. 3.2 n.a. 2.6 n.a. 0.9 n.a. n.a. n.a. -14.4 -6.3 -20.3 -48.0 -37.0 -1.1
600584 CH Jiangsu Changjiang Electro-A 25.69 5,260 77.6 42.8 28.7 12.6 10.4 9.1 3.8 4.1 2.4 4.8 0.7 1.8 n.a. 0.2 31.7 73.1 53.9 31.1 45.6 5.4
002808 CH Suzhou Goldengreen Technol-A 15.49 448 n.a. n.a. n.a. n.a. n.a. n.a. 5.7 n.a. 10.0 n.a. 8.9 n.a. 0.4 n.a. -8.3 -7.5 -26.8 -58.0 -39.4 -1.5
300604 CH Hangzhou Chang Chuan Techn-A 73.10 839 98.5 71.1 57.0 n.a. n.a. n.a. 18.7 18.6 20.4 18.7 16.7 15.2 0.2 n.a. 50.2 135.8 34.6 n.a. n.a. 2.4
300493 CH Shanghai Fortune Techgroup-A 17.22 778 n.a. n.a. n.a. n.a. n.a. n.a. 10.7 n.a. 10.6 n.a. 6.3 n.a. 0.3 n.a. 6.3 48.1 28.0 -28.6 -11.1 3.1
603986 CH Gigadevice Semiconductor B-A 163.12 4,979 66.4 44.7 38.5 53.3 34.3 24.0 25.5 18.5 19.1 29.2 13.7 24.2 0.0 0.4 24.3 138.5 67.6 83.3 83.3 0.0
300346 CH Jiangsu Nata Opto-Electron-A 30.10 729 301.0 100.3 60.2 n.a. n.a. n.a. 4.0 n.a. 0.6 n.a. 1.8 n.a. n.a. n.a. 4.5 30.0 8.8 -13.6 -1.1 2.7
002371 CH Naura Technology Group Co-A 46.26 3,190 147.8 95.4 61.1 n.a. n.a. n.a. 6.5 6.3 3.5 5.1 1.8 5.0 n.a. 0.1 54.3 102.9 91.4 33.8 73.9 10.0
300672 CH Goke Microelectronics Co-A 72.80 1,225 n.a. n.a. n.a. n.a. n.a. n.a. 8.6 n.a. 7.5 n.a. 6.4 n.a. n.a. n.a. 27.9 174.8 n.a. n.a. n.a. 6.0
002049 CH Unigroup Guoxin Co Ltd-A 42.12 3,849 85.1 73.3 64.8 68.6 70.0 67.4 7.6 7.3 11.1 8.9 5.9 5.0 n.a. 0.1 22.5 76.7 36.4 17.2 27.9 3.2
300458 CH All Winner Technology Co L-A 31.85 1,595 45.7 32.0 24.4 n.a. n.a. n.a. 5.3 3.3 8.3 9.3 4.2 6.0 0.5 n.a. 2.3 36.1 20.9 -36.6 -30.2 3.1
300233 CH Shandong Jincheng Pharmace-A 19.40 1,148 21.3 15.8 12.8 n.a. n.a. n.a. 2.0 n.a. 11.7 n.a. 7.0 n.a. n.a. n.a. -9.3 -0.4 -15.7 -25.1 -20.4 -0.4
300623 CH Jiangsu Jiejie Microelectr-A 89.00 1,254 n.a. n.a. n.a. n.a. n.a. n.a. 12.5 n.a. 25.4 n.a. 22.6 n.a. 0.6 n.a. 20.7 43.7 18.1 n.a. n.a. 3.3
300613 CH Shanghai Fullhan Microelec-A 240.87 1,612 72.6 49.6 36.5 n.a. n.a. n.a. 29.5 14.7 52.7 23.6 41.4 19.9 n.a. 0.0 25.5 88.7 44.1 n.a. n.a. 2.9
Average 63.0 40.1 30.2 31.1 24.0 19.4 9.1 8.2 15.0 17.4 10.2 11.3 0.3 0.5 14.7 47.8 31.5 28.3 38.4 2.0
Taiwan listed names
2330 TT Taiwan Semiconductor Manufac 239.50 205,742 18.2 16.3 14.4 9.2 8.2 7.4 4.3 4.0 25.6 23.3 19.3 17.5 n.a. 3.1 0.8 12.7 16.3 32.0 32.0 -0.4
2303 TT United Microelectronics Corp 15.65 6,545 21.9 21.9 18.8 3.9 3.8 3.7 0.9 0.9 3.8 4.0 2.7 2.1 n.a. 3.2 -1.9 11.4 27.2 37.9 37.3 -1.3
3034 TT Novatek Microelectronics Cor 116.00 2,338 14.3 12.8 12.0 9.2 8.3 7.8 2.6 2.5 17.7 17.5 12.6 11.8 n.a. 6.0 1.3 5.5 -2.5 11.0 8.9 -2.1
5347 TT Vanguard International Semi 58.80 3,193 21.4 18.4 16.6 11.2 10.1 9.4 3.6 3.4 19.7 15.9 14.2 13.2 n.a. 4.9 6.7 11.6 5.4 1.4 4.6 -0.7
2311 TT Advanced Semiconductor Engr 37.25 10,767 13.5 12.6 11.1 7.0 6.4 6.1 1.7 1.8 13.8 13.4 6.7 6.3 n.a. 4.1 -2.1 -1.6 -0.5 9.4 13.0 0.3
2379 TT Realtek Semiconductor Corp 115.50 1,938 16.7 15.1 13.7 8.3 8.0 7.4 2.9 2.5 13.5 15.2 5.5 6.0 n.a. 4.7 3.6 4.1 15.4 15.4 14.3 0.0
6462 TT Egis Technology Inc 225.50 522 22.5 10.1 7.1 16.5 6.9 5.5 8.6 7.4 7.8 37.2 20.8 22.2 n.a. 1.4 -9.8 -9.1 33.8 -2.0 -14.9 -2.2
3105 TT Win Semiconductors Corp 272.00 3,628 30.7 22.8 20.0 16.6 13.2 11.4 6.3 5.8 17.9 18.6 10.4 12.7 n.a. 1.7 16.7 59.5 109.2 227.7 199.2 2.6
3152 TT Advanced Ceramic X Corp 349.00 798 26.9 22.0 16.3 18.6 15.2 11.5 7.7 7.2 25.6 26.7 25.1 23.2 n.a. 3.2 -3.6 -6.7 15.2 46.0 46.9 -2.5
5264 TT Casetek Holdings Ltd 116.50 1,317 17.1 12.5 10.0 5.2 4.1 3.5 1.4 1.4 9.4 7.7 5.2 4.7 n.a. 2.6 21.6 19.1 43.6 48.2 35.6 -2.9
2474 TT Catcher Technology Co Ltd 329.50 8,410 11.1 9.0 8.0 4.4 4.0 3.5 2.0 1.9 18.5 17.7 12.3 11.8 n.a. 3.2 5.4 -11.4 3.3 52.2 47.1 -2.4
3008 TT Largan Precision Co Ltd 5700.00 25,330 27.3 18.7 15.6 19.5 13.7 11.6 9.1 8.3 32.4 32.9 27.2 26.7 n.a. 1.3 2.7 2.4 16.7 67.9 50.4 -0.7
3673 TT Tpk Holding Co Ltd 83.00 1,118 11.7 10.3 10.0 3.9 3.9 4.0 1.0 0.9 -4.9 8.1 2.3 3.1 n.a. 2.0 -20.6 -30.3 -19.8 67.0 39.5 -3.6
2360 TT Chroma Ate Inc 156.00 2,095 26.5 22.4 19.8 20.1 17.0 14.7 5.6 5.1 17.2 20.6 9.6 12.6 n.a. 2.5 20.9 66.0 68.3 103.4 106.9 -2.5
2317 TT Hon Hai Precision Industry 107.00 61,427 12.4 10.4 9.6 7.1 6.1 5.8 1.7 1.6 14.3 13.0 6.5 5.6 n.a. 4.2 -0.9 -8.2 4.4 35.4 27.1 -0.5
2454 TT Mediatek Inc 317.50 16,636 27.5 18.4 15.4 21.8 12.9 10.2 2.0 2.0 9.8 7.3 5.6 4.6 n.a. 2.7 -1.4 11.0 48.9 48.5 47.5 -2.6
Average 20.0 15.9 13.7 11.4 8.9 7.7 3.8 3.5 15.1 17.4 11.6 11.5 n.a. 3.2 2.5 8.5 24.1 50.1 43.5 -1.3
Korean listed names
066570 KS Lg Electronics Inc 93000.00 13,576 9.2 9.5 8.5 5.1 4.6 4.4 1.2 1.2 0.6 13.9 2.4 4.8 n.a. 0.5 5.1 26.7 14.5 103.3 80.2 -1.5
011070 KS Lg Innotek Co Ltd 161000.00 3,399 19.1 11.4 10.5 6.8 5.1 4.7 2.1 1.9 0.3 10.5 2.6 4.5 n.a. 0.2 -1.5 -0.3 21.1 109.6 82.1 -5.8
009150 KS Samsung Electro-Mechanics Co 100000.00 6,663 41.4 19.6 16.6 8.9 6.6 5.9 1.7 1.7 0.3 4.2 0.0 2.7 n.a. 0.6 0.2 9.8 29.2 113.4 96.9 -4.3
005930 KS Samsung Electronics Co Ltd 2819000.00 324,629 9.5 7.9 7.7 4.0 3.4 3.3 1.8 1.8 10.9 20.5 11.4 15.0 n.a. 1.2 4.4 26.4 23.0 76.4 56.4 0.0
000660 KS Sk Hynix Inc 82300.00 53,445 5.5 5.0 5.7 3.2 2.7 2.9 2.1 1.8 13.0 37.1 19.7 29.2 n.a. 1.2 -4.4 34.0 48.8 106.5 84.1 0.4
091700 KS Partron Co Ltd 9020.00 436 60.3 12.9 10.4 8.9 5.7 5.1 1.5 1.4 6.6 2.5 0.5 2.0 n.a. 2.2 3.8 7.0 -11.1 1.1 -12.9 1.0
Average 24.2 11.0 9.9 6.1 4.7 4.4 1.7 1.6 5.3 14.8 6.1 9.7 n.a. 1.0 1.3 17.3 20.9 85.1 64.5 -1.7
US & Europe listed names
LITE US Lumentum Holdings Inc 57.15 3,543 17.0 14.7 14.9 11.7 9.4 9.6 5.5 6.8 -0.7 22.3 -9.3 9.5 0.0 n.a. -1.0 10.0 7.0 56.1 47.9 3.1
OLED US Universal Display Corp 175.90 8,274 76.3 56.8 39.6 50.3 40.8 27.7 13.3 12.4 9.7 18.3 14.8 15.3 0.1 0.1 31.1 57.8 54.0 179.9 212.4 3.7
FNSR US Finisar Corporation 18.96 2,159 13.2 10.0 9.5 5.8 5.0 4.7 1.3 1.3 3.1 4.7 11.5 2.9 0.0 n.a. -14.4 -19.0 -22.2 -38.9 -37.4 3.7
STM FP Stmicroelectronics Nv 20.46 21,706 26.6 20.6 18.7 13.2 10.6 10.1 4.1 4.1 3.6 15.8 6.2 9.1 3.3 1.0 20.9 46.4 34.8 147.5 89.8 -0.1
SOI FP S.O.I.T.E.C. 66.01 2,430 51.9 32.5 23.8 27.2 18.5 14.8 13.4 10.3 n.a. 18.5 2.3 n.a. n.a. 0.0 19.3 35.7 50.1 262.7 124.5 -0.7
VIAV US Viavi Solutions Inc 8.55 1,944 22.0 17.4 18.6 10.5 8.4 n.a. 2.5 2.3 -11.1 4.7 4.5 0.7 0.0 n.a. -9.9 -18.7 -26.7 9.6 4.5 1.5
AMS SW Ams Ag 95.55 8,092 57.8 23.3 16.4 33.3 15.2 11.2 8.7 7.5 15.3 10.9 0.0 4.1 n.a. 0.4 33.4 40.7 48.6 254.4 232.3 1.2
ASML NA Asml Holding Nv 154.05 77,414 34.0 27.7 22.4 24.7 21.2 18.2 6.4 6.2 16.2 19.3 12.4 11.3 n.a. 0.8 3.9 21.1 24.7 68.9 44.4 0.7
ASM NA Asm International Nv 60.43 4,386 20.0 16.5 14.1 20.3 17.4 15.3 1.8 1.8 6.8 9.2 13.1 7.7 n.a. 1.2 8.9 24.6 8.9 56.1 41.8 0.7
KLAC US Kla-Tencor Corp 102.44 16,053 14.4 13.8 13.6 10.1 9.5 9.1 11.0 7.8 126.9 65.5 19.3 18.8 2.2 2.3 -2.7 13.4 2.4 35.8 30.2 0.0
INTC US Intel Corp 45.58 213,314 14.0 14.0 13.8 8.6 8.2 8.0 3.0 3.0 16.0 19.4 11.6 10.8 2.9 2.6 14.9 27.1 28.3 31.7 25.7 -1.6
NXPI US Nxp Semiconductors Nv 116.05 39,239 17.9 16.0 14.9 13.8 12.2 10.9 3.1 3.0 1.8 16.3 8.2 7.3 0.0 0.0 0.8 3.4 8.6 18.7 18.4 0.6
COHR US Coherent Inc 308.97 7,610 20.7 18.3 n.a. 11.6 10.2 n.a. 6.5 5.2 10.3 28.3 11.8 15.9 0.0 n.a. 21.8 44.0 24.1 145.4 124.9 4.1
TXN US Texas Instruments Inc 96.94 95,540 21.4 21.0 19.7 13.8 13.1 12.7 8.7 8.7 34.8 41.3 26.5 26.5 2.1 2.2 3.6 19.8 20.1 38.8 32.8 -0.1
Average 33.3 23.3 19.2 20.7 15.6 13.4 6.8 6.0 18.9 18.9 7.5 8.8 0.9 0.8 9.3 21.9 18.8 90.5 70.9 1.2
HSI Index Hang Seng Index 2.5 8.6 16.0 29.5 32.6 0.2
HSCEI Index Hang Seng China Ent Indx 1.4 10.5 13.6 23.9 24.4 -0.5
SHCOMP Index Shanghai Se Composite 1.7 7.5 11.8 7.9 11.1 0.4
MXCN Index Msci China 3.0 14.6 27.7 48.5 52.1 -0.1
Share Price PerformancePE EV/EBITDA P/B ROE ROA Div yield
COMPANY / INDUSTRY NEWS 14 November 2017
Company Meeting – Red Star Macalline (1528.HK) Analyst: Johnson Cheung (johnsoncheung@chinastock.com.hk; Tel: (852) 3698 6275)
Red Star Macalline (RSM) is the largest operator of Home Improvement and Furnishings shopping mall
chains in China, with a 214-mall network across the nation. Its self-owned malls, which are located in
Tier 1 and 2 cities, account for 32% of its malls, but 68% of its revenue. The Company has
underperformed its peers YTD and is now trading at 10.5x PER and 5% yield. We believe the Company’s
property backing (at 0.68x book value) and the upcoming A-share listing may provide upside for the
share price.
Investment Highlights
Largest Home Furnishings Mall Operator
Red Star Macalline Group Corp. Ltd (RSM) is a unique China landlord, which focuses on the Home Improvement
and Furnishings sector. Under the “Red Star Macalline” brandname, it operates the largest shopping mall chain
in the industry, with over 214 malls in 150 cities across the country. The Company owns 69 malls, which are
located mostly in Tier 1 and 2 cities, with a total GFA of 5.33m sq.m. This includes over 1m sqm GFA in Beijing
and Shanghai. RSM plans to add another 21 portfolio (self-owned) malls this year.
RSM’s malls are designed to facilitate the moving and storage of heavy furniture, with features such as special
lifts, parking bays, and reinforced support for each floor. The tenants also benefit from RSM’s brand power, and
payment and after-sales services. The size of the malls means they can offer one-stop service for end-customers.
As consumers’ brand awareness of home furnishing products is usually limited, RSM offers them a convenient
aggregation of reputable vendors with a full range of products catering for different price points, styles and
accessories.
Annual revenue from its own portfolio malls, including rental income and management fees, is estimated to reach
RMB6.4bn a year. The aggregate book value of its properties is now RMB69bn. Its average operating margin is
over 50%; in addition, the fair value gains on investment properties was over RMB2.6bn last year.
Figure 1: RSM’s Porfolio Malls vs. Managed Malls
Number of GFA Avg. GFA Per Mall Revenue in H1 2017
Malls (mn sq.m) (sqm) (RMBm)
Portfolio Malls 69 5.33 77,246 3,189
Managed Malls 145 7.97 54,966 1,482 Sources: Bloomberg, CGIS Research
Asset-Light Model by Cooperating with Property Developers
With its seasoned management and historically consistent record in opening successful malls, RSM is
leveraging its branding power through an asset-light model, whereby RSM cooperates with other property
developers and local governments, with RSM introducing tenants to shopping malls located in Tier 3 and 4 cities.
In return, RSM receives an initial amount and a regular management fee. This is a rich asset-light model, with an
operating profit margin of slightly less than 50%. Contribution from this business segment was RMB1.48bn in H1
2017, and RMB3bn for the whole year. There are now 145 such managed malls, with a total GFA of 7.97m sq.m.
Financial Position
As at the end of June 2017, RSM had total assets of RMB91bn, and shareholders’ equity of RMB38.5bn.
Approximately 75% of the total assets were investment properties, which consisted mainly of its portfolio malls. It
had cash of RMB7.75bn, but approximately RMB33bn of debt. With net assets of RMB38.5bn, RSM’s net
debt-to-equity ratio is approximately 65%. The debt is a combination of mortgages, bank loans, and bonds. The
average interest rate is 5%. With the Company generating RMB 4bn in cashflow from operations, we believe
RSM’s financial position is reasonable. RSM’s annual capex target is approximately RMB5bn, mainly for the
construction of its own portfolio shopping malls.
Shareholder Structure
The Company was founded in 1992 and listed in the Hong Kong market in June 2015 at HK$13.28 per share.
Chairman Che’s family has a 68.44% interest. Warburg Pincus has a 11% stake, having sold 100mn H shares at
HK$9 per share to China Lesso (2128.HK, HK$5.29) in March 2017; its potential disposal could be an overhang.
The Company is also considering an A-share issue, but this is likely to enhance the book value per share.
Largest Home Furnishings Mall Operator
RSM’s share price is up 18% YTD, and 18% since June, so its share price performance has trailed other
Mainland property plays. Its valuation, at 0.67x book and 10.4x earnings, is among the lowest in the industry. The
closest A-share comparable is Zhejiang China Commodities, which is trading at a 100% PER premium. With a
DPS of RMB0.42 (on a dividend payout of 50% of core profit), RSM has a dividend yield of 5%+.
Figure 2: Valuation of Red Star Macalline and its peers Property Companies Bloomberg Price Mark Cap 20D Avg PER (x) P/B(x) Yield Price Change
Code 11/13/2017 (HK$m) TO (HK$m) FY16 FY17E FY18E FY16 (%) MTD QTD HTD YTD
SHENZHEN INTL HOLDINGS 152 HK 14.78 29,972 45.2 13.4 12.1 11.6 1.55 2.9 (1) 1 3 31
CHINA SOUTH CITY* 1668 HK 1.99 15,936 110.8 4.5 3.7 14.2 0.61 2.5 (9) (11) 37 23
CHINA JINMAO HOLDINGS GROUP817 HK 3.61 38,538 88.0 12.9 9.1 7.3 1.13 2.6 3 (8) 12 73
ZHEJIANG CHINA COMMODITIES-A600415 CH 6.70 42,828 128.7 35.3 22.0 16.1 3.60 0.9 (4) (5) (7) (23)
RED STAR MACALLINE GROUP C-H1528 HK 9.58 34,717 18.3 7.3 10.5 9.3 0.68 5.1 3 (1) 20 20
Median * Year End March 12.9 10.5 11.6 1.13 (1) (5) 12 23 Sources: Bloomberg, CGIS Research
Figure 3: RSM’s Share Price and Historic PE Chart
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
5
6
7
8
9
10
11
12
13
14
Share Price (LHS) PER (RHS) Average (RHS)+1 STD (RHS) -1 STD (RHS)
Sources: Bloomberg, CGIS Research
Figure 4: RSM’s Historic PB Chart
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
PBR Average +1 Std -1 Std
Sources: Bloomberg, CGIS Research
Figure 5: RSM’s Simplified Consolidated Statement of Profit and Loss
Year Ended December 31 (RMB m) 2014 2015 2016
Revenue 7,935 8,756 9,282
Cost of goods sold (2,054) (2,242) (2,658)
Gross profit 5,881 6,514 6,624
Other income and gains, net 2,398 2,370 2,284
Other operating expenses (1,977) (2,079) (2,355)
Operating profit 5,924 6,804 6,554
Finance costs (856) (854) (949)
Other gains/ (expenses) 282 (8) 123
Profit before tax 5,350 5,942 5,727
Income tax expense (1,428) (1,573) (1,359)
Profit after tax 3,922 4,370 4,368
Attributable profit to shareholders 3,633 4,098 4,036
Minority interest 289 272 332 Sources: Bloomberg, CGIS Research
Figure 6: RSM’s Simplified Consolidated Statement of Financial Position
Year Ended December 31 (RMB m) 2014 2015 2016
Non-current assets
PPE 63,328 70,926 77,444
LT investments & receivables 237 516 705
Others 3,227 3,887 4,894
Total non-current assets 66,792 75,329 83,043
Current assets
Inventories 38 16 36
Account receivables 1,392 1,788 2,509
Bank balances and cash 3,665 5,954 6,150
Others 30 103 100
Total current assets 5,125 7,861 8,795
Total assets 71,918 83,190 91,837
Current liabilities
Account payables 5,104 5,766 6,599
ST borrowings 2,326 2,297 2,787
Others 2,991 2,559 4,161
Total current liabilities 10,420 10,623 13,547
Non-current liabilities
LT borrowings 9,435 7,376 8,867
Other non-current liabilities 14,650 19,922 21,735
Total non-current liabilities 24,085 27,299 30,602
Total liabilities 34,505 37,921 44,150
Shareholders’ equity
Share capital 3,235 9,241 9,241
Reserves 30,210 31,904 34,230
Total shareholders’ equity 33,445 41,145 43,471
Minority interest 3,968 4,124 4,217
Total equity 37,413 45,268 47,688 Sources: Bloomberg, CGIS Research
1
14 Nov, 2017
Last week we met with Kaisa management, who shared some updates with us.
They stated that the operation crisis and debt issues had been addressed and
that all debt had been disclosed at ~RMB100bn (gearing ratio 300%), i.e. no
more hidden debt. Therefore management can now focus on operations and the
future development of the Company. The Company owns a decent and sizable
landbank in the GMH (Guangdong Macau & Hong Kong) area, and it started to
get back on track after the resumption of trading.
Its valuation looks undemanding at 6.5x 2017E PER (assuming RMB28.5bn
revenue booking for the whole year and a not-aggressive 13% core profit margin
for a China property developer). The valuation is near the low end of the range
compared to its peers of similar scale. We see the potential to narrow the valua-
tion gap, but it will take time to rebuild investor confidence after a trading sus-
pension of two years.
Background: Property projects no longer frozen by the authorities
Kaisa was suspended from trading from 31 Mar 2015 to 25 Mar 2017, after
being accused of political issues and hidden debt. In 2015, some projects in
Shenzhen were frozen and prohibited from being sold. But they were all unfro-
zen by the end of 2016 and contributed partly to FY16 full-year sales of
RMB29.8bn. Management reiterated that all the financial issues had been ad-
dressed.
Financials
Management expects to maintain the current gearing ratio instead of reducing it,
as business expansion is the first priority given the favourable market at present.
As shown in Figure 4, the gearing ratio was 310% as at 30 June 2017. There-
fore, the Company is likely to skip its dividend payment for this financial year.
Management declared that the Company’s total debt was shown in the latest
financial reports as at 30 Jun 2017. Total debt amounted to ~RMB100bn. Fi-
nance costs were 8% both at home and overseas. Near-term financing pressure
should be manageable, as the refinancing needs in the next 12 months amount
to about RMB12bn, which is expected to be refinanced by bonds and bank
loans.
The gross profit margin of FY14, FY15 and FY16 was unusually low for a prop-
erty developer. Management explained that this was because of the debt issue.
As stated above, if the debt issue has been resolved and the P&L reflects the
true situation, the FY17 gross profit margin will be back on track.
Decent land bank with potential to increase from urban redevelopment
Among its 22m sqm land bank, which is sufficient for 5 to 6 years of project
development, 55% is in the GMH area and 18% is in Shenzhen. Another 14m
sqm of urban redevelopment area is under negotiation; of this, Shenzhen ac-
counts for 60% and Guangzhou accounts for 39%.
Many potential buyers are thought to be interested in the good quality landbank
in GMH. Cashing out by selling the projects and unlocking their value would be
the last resort. But so far, management has managed to keep the wheel rolling
and is rather reluctant to do that.
COMPANY UPDATE KAISA GROUP HOLDINGS LTD. [1638.HK; HK$4.59; NOT RATED] -
BUSINESS RESUMING, AWAITING CONSTANTLY STRONG EXECUTION
Market Cap: US$3,556m; Free Float: 31.9%; 3-months Average Daily Turnover: US$33.3m
Analyst: Rachel Chui Tel: 3698 6391 Email: rachelchui@chinastock.com.hk
Source: Bloomberg, Company data, CGIS Research
[KAISA GROUP HOLDINGS LTD. ]
Core competency - urban redevelopment business
For historical reasons, Shenzhen’s local regulations and practices are the
most comprehensive in the country, and this is where Kaisa started its
business. Of the four types of urban redevelopment projects in the Main-
land, Kaisa began with uncompleted/suspended buildings (烂尾楼) before
it was listed. Later the Company mastered the skill-sets required and ap-
plied it to other types of urban redevelopment, i.e. villages in the city (城中
村), old residential communities (旧住宅小区) and unused factories (厂房
改造). The end products aim at mass market first-time home buyers and
are mainly 90-100 sqm (2 bedrooms or 3 bedrooms)
Urban redevelopment is a domain that is rather difficult for property devel-
opers to get into. It features high margins, long development times and
great effort. Getting such projects done is like raising children; it often
takes more than a decade. Therefore, management did not sell any of
these jewels even during the chilly winters of past years.
The construction cost of Kaisa’s projects is HK$4,300-4,500 per sqm, a bit
higher than the industry average. This is probably due to the re-start of
projects and temporarily weak bargaining power with contractors. But with
the help of the low land cost of these urban redevelopment projects, the
gross profit margin can usually hit 40%, and sometimes even 60%.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
0
1
2
3
4
5
6
7
Trading value (HK$ 000) - RHS Price (HK$)
Dec year end FY13 FY14 FY15 FY16
Revenue (RMB m) 19,523 19,600 10,927 17,772
Gross profit (RMB m) 6,600 2,871 343 2,312
Gross margin 33.8% 14.6% 3.1% 13.0%
Adjusted net profit (RMB m) 2,077 (4,828) (4,904) (4,752)
Adjusted EPS (RMB cents) 0.58 (0.26) (0.22) (0.12)
Dividend yield (%) 3.2% N/A N/A N/A
PER (x) 6.2 N/A N/A N/A
PBR (x) 1.3 1.5 1.7 1.8
2
Source: Company data, CGIS Research
Sales and booking outlook: Contracted sales expected to grow at a CAGR of 30% in the coming three years
Contracted sales in FY16 were RMB29.8bn, and the target for FY17 is RMB40bn. Sales in the first 10 months were RMB34.5m (30.8%+ YoY). Manage-
ment expects a CAGR of 30% for sales in the next three years, similar to that of many of its major peers. Revenue booked in 1HFY17 was RMB8.5bn and
expected bookings in 2HFY17 are RMB20bn, for a total of RMB28.5bn in FY17, implying 61% growth YoY. The FY17 gross profit margin is expected to be
25-30%.
The 33% gross profit margin of 1HFY17 incorporated the sale of 50% equity shares in an urban redevelopment project in Shenzhen (the equity partner is
Zhongzhi, a related party), which resulted in booking cash income of RMB2bn (27% gross profit margin if this part is taken out). The remaining RMB1.2bn
cash income for this project is expected to be booked in 2HFY17.
Strategy in future sales and land replenishment
In first-tier cities, a high profit margin is the top priority for the Company’s sales deployment. However, in second and third tier cities, fast-asset turnover is
preferred.
For future land replenishment, the Company will endeavour to accelerate the acquisition of old villages/developments (14m sqm in progress) as well as try
to win public tenders at a reasonable price.
The Chairman resides in Hong Kong. Kaisa is also interested in Hong Kong and other overseas projects.
Diverse business for stronger bargaining power with government
In the coming decades, the profit margin of the property development business will undoubtedly be squeezed. Because of the decreasing availability of
high quality land parcels, companies must seek new drivers to differentiate themselves from their competitors. Kaisa started to investigate and invest in
tourism, hotels and healthcare industries. This allows the Company Development to propose different themes to local governments.
Most other major developers started to do this years ago as well. We will see which one prevails in the market later.
Risks: Policy risks, corporate governance, rate hikes and an ASP drop.
Figure 1: Shareholding structure
Figure 3: Contracted sales in FY17
Source: Company data, CGIS Research
Monthly
contracted
sales
(RMB bn)
Monthly
contracted
sales
increase YoY
Contracted
saleable
GFA (sqm)
Contracted
saleable GFA
increase YoY
ASP
(RMB/sqm)
ASP
increase
YoY
Cumulative
contracted
sales in FY
(RMB bn)
Cumulative
contracted
sales in FY
increase YoY
Cumulative
Contracted
saleable GFA
(sqm)
Cumulative
Contracted
saleable GFA
increase YoY
Total ASP
(RMB/sqm)
Total ASP
increase
YoY
Feb-17 2,185 N/A 145,037 N/A 15,068 N/A 5,042 N/A 336,500 N/A 14,983 N/A
Mar-17 2,900 37.6% 175,688 9.5% 16,506 -25.7% 7,942 34.3% 512,188 30.5% 15,506 2.9%
Apr-17 3,272 12.1% 209,806 -17.0% 15,594 35.1% 11,214 27.0% 721,994 11.9% 15,532 13.5%
May-17 3,051 43.7% 208,622 17.0% 14,625 22.8% 14,265 30.2% 930,616 13.0% 15,328 15.2%
Jun-17 8,195 186.2% 458,793 53.5% 17,862 86.4% 22,460 62.5% 1,389,409 23.8% 16,165 31.3%
Jul-17 2,157 25.1% 166,320 -13.9% 12,968 -13.0% 24,616 47.4% 1,555,729 18.3% 15,823 24.7%
Aug-17 2,357 13.8% 164,466 -20.0% 14,072 7.8% 26,973 38.8% 1,723,196 13.0% 15,653 22.8%
Sep-17 3,211 1.2% 119,825 -21.3% 16,071 25.5% 30,184 33.1% 1,923,020 8.1% 15,696 23.1%
Oct-17 4,355 16.9% 332,795 40.2% 13,087 16.7% 34,539 30.8% 2,255,815 11.9% 15,312 16.9%
Shareholder o/s shares (m) % of total
Funde Sino Life Insurance Co., Ltd. 1,538 25.4%
KWOK Ying Shing 1,469 24.3%
KWOK Ying Chi 843 14.0%
Choi Chee Ming 268 4.4%
Others 1,926 31.9%
Total 6,043 100.0% 23.9 23.1
9.3
29.8
40.0
52.0
67.6
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
FY13 FY14 FY15 FY16 FY17e FY18e FY19e
Contracted sales (RMB bn)
Figure 2: Contracted sales in FY13-FY16 & management forecast
Source: Company data, CGIS Research
3
Figure 4: P&L
Source: Company data, CGIS Research
RMB m FY13 FY14 FY15 FY16 1HFY17
Revenue 19,523 19,600 10,927 17,772 8,587
Cost of sales (12,923) (16,729) (10,583) (15,460) (5,728)
- - - - -
Gross profit 6,600 2,871 343 2,312 2,859
Other gains and (losses), net (84) (1,742) (216) (561) 480
Selling and marketing costs (862) (799) (559) (843) (262)
Administrative expenses (952) (1,171) (1,066) (1,745) (788)
Changes in fair value of investment properties 729 3,627 3,825 4,161 1,320
Changes in fair value of financial derivatives 51 (86) (42) (22) (322)
Loss arising from the incident - (483) - - -
Operating profit 5,482 2,217 2,284 3,303 3,287
Share of results of associates - (1) (4) (41) (32)
Share of result of joint ventures - - - 8 (9)
Finance income 318 25 11 39 57
Finance costs (643) (776) (2,117) (2,160) (70)
- - - - -
Finance costs, net (326) (751) (2,106) (2,120) (13)
Gain on extinguishment of financial liabilities - - - 716 -
Profit before income tax 5,156 1,466 174 1,867 3,233
Income tax expenses (2,293) (2,766) (1,428) (2,214) (1,429)
- - - - -
Loss for the year 2,863 (1,300) (1,254) (348) 1,804
- - - - -
Other comprehensive loss, including
reclassification adjustments- - - (0.2) (12)
Total comprehensive loss for the year 2,863 (1,300) (1,254) (348) 1,792
(Loss)/profit for the year attributable to:
Equity holders of the Company 2,857 (1,287) (1,122) (612) 1,891
Non-controlling interests 5 (13) (133) 265 (87)
Total comprehensive (loss)/income for the
year attributable to:
Net profit 2,857 (1,287) (1,122) (613) 1,882
MI 5 (13) (133) 265 (90)
Core profit 2,077 (4,828) (4,904) (4,752) 883
Gain (loss) per share for loss attributable to
equity holders of the Company during the
year (expressed in RMB per share)
0.581 (0.255) (0.218) (0.119) 0.368
4
Source: Bloomberg, CGIS Research
Source: Company data, CGIS Research
Figure 5: Financial position
RMB m As at 30 Jun 17 As at 31 Dec 16
Total Assets 191,616 165,822
Total Liabilities 166,659 142,776
Net Current Assets 78,868 72,422
Total Equity 24,957 23,046
Total Debt 102,215 87,544
Cash and Bank Deposits 24,802 16,573
Net debt 77,413 70,971
Gearing Ratio 310% 308%
RMB m FY13 FY14 FY15 FY16 1HFY17
Revenue 19,523 19,600 10,927 17,772 8,587
Cost of sales (12,923) (16,729) (10,583) (15,460) (5,728)
Gross profit 6,600 2,871 343 2,312 2,859
GP margin 34% 15% 3% 13% 33%
Figure 6: Peers PE comparison
Ticker Company Price Market cap NAV
(HK$) (US$ m) 2017E 2018E (HK$)
81 HK Equity CHINA OVERSEAS G 4.06 1,188 6.1 5.5 10.23 -60%
119 HK Equity POLY PROPERTY 3.56 1,671 29.7 15.0 7.11 -50%
207 HK Equity JOY CITY PPT 1.34 2,445 19.3 14.4 3.16 -58%
3900 HK Equity GREENTOWN CHINA 9.58 2,660 9.2 8.5 16.59 -42%
1813 HK Equity KWG PROPERTY 7.43 3,005 5.5 4.5 11.91 -38%
410 HK Equity SOHO CHINA 4.57 3,046 67.1 61.7 6.51 -30%
884 HK Equity CIFI HOLDINGS GR 4.12 3,981 6.6 5.3 7.11 -42%
3377 HK Equity SINO-OCEAN GROUP 4.95 4,798 8.0 6.5 8.26 -40%
817 HK Equity CHINA JINMAO HOL 3.59 4,913 9.0 7.3 6.43 -44%
3380 HK Equity LOGAN PPT 7.08 4,991 7.9 5.9 11.28 -37%
3383 HK Equity AGILE GROUP HOLD 11.58 5,815 8.5 7.2 16.56 -30%
813 HK Equity SHIMAO PROPERTY 16.14 7,009 6.5 5.5 25.24 -36%
2777 HK Equity GUANGZHOU R&F -H 17.30 7,147 5.9 4.9 25.22 -31%
960 HK Equity LONGFOR PPT 18.88 14,273 9.6 7.9 26.51 -29%
1918 HK Equity SUNAC 36.90 19,602 31.9 13.7 27.14 36%
1109 HK Equity CHINA RES LAND 22.60 20,082 8.3 7.1 36.99 -39%
2007 HK Equity COUNTRY GARDEN 12.28 33,523 13.3 9.5 13.78 -11%
688 HK Equity CHINA OVERSEAS 24.55 34,484 7.5 6.6 37.16 -34%
2202 HK Equity CHINA VANKE-H 28.15 45,046 9.9 8.2 29.19 -4%
3333 HK Equity CHINA EVERGRAND 31.35 52,870 11.7 9.8 34.71 -10%
NAV
Discount
5
Disclaimer
This research report is not directed at, or intended for distribution to or used by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject China Galaxy International Securities (Hong Kong) Co., Limited (“Galaxy International Securities”) and/or its group companies to any registration or licensing requirement within such jurisdiction.
This report (including any information attached) is issued by Galaxy International Securities, one of the subsidiaries of the China Galaxy International Financial Holdings Limited, to the institutional clients from the information sources believed to be reliable, but no representation or warranty (expressly or implied) is made as to their accuracy, correctness and/or completeness.
This report shall not be construed as an offer, invitation or solicitation to buy or sell any securities of the company(ies) referred to herein. Past perfor-mance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regard-ing future performance. The recipient of this report should understand and comprehend the investment objectives and its related risks, and where necessary consult their own independent financial advisers prior to any investment decision.
Where any part of the information, opinions or estimates contained herein reflects the personal views and opinions of the analyst who prepared this report, such views and opinions may not correspond to the published views or investment decisions of China Galaxy International Financial Holdings Limited and any of its subsidiaries (“China Galaxy International”), directors, officers, agents and employees (“the Relevant Parties”).
All opinions and estimates reflect the judgment of the analyst on the date of this report and are subject to change without notice. China Galaxy Interna-tional and/or the Relevant Parties hereby disclaim any of their liabilities arising from the inaccuracy, incorrectness and incompleteness of this report and its attachment/s and/or any action or omission made in reliance thereof. Accordingly, this report must be read in conjunction with this disclaimer.
Disclosure of Interests
China Galaxy Securities Co., Ltd. (6881.HK; 601881.CH) is the direct and/or indirect holding company of the group of companies under China Galaxy International.
China Galaxy International may have financial interests in relation to the subjected company(ies) the securities in respect of which are reviewed in this report, and such interests aggregate to an amount may equal to or more than 1 % of the subjected company(ies)’ market capitalization.
One or more directors, officers and/or employees of China Galaxy International may be a director or officer of the securities of the company(ies) men-tioned in this report.
China Galaxy International and the Relevant Parties may, to the extent permitted by law, from time to time participate or invest in financing transac-tions with the securities of the company(ies) mentioned in this report, perform services for or solicit business from such company(ies), and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto.
China Galaxy International may have served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the last 12 months, significant advice or invest-ment services in relation to the investment concerned or a related investment or investment banking services to the company(ies) mentioned in this report.
Furthermore, China Galaxy International may have received compensation for investment banking services from the company(ies) mentioned in this report within the preceding 12 months and may currently seeking investment banking mandate from the subject company(ies).
Analyst Certification
The analyst who is primarily responsible for the content of this report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report.
Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the securities covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the securities covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong-listed companies covered in this report; and (4) have any financial interests in the Hong Kong-listed companies cov-ered in this report.
Explanation on Equity Ratings
Copyright Reserved
No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited.
China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459
20/F, Wing On Centre, 111 Connaught Road Central, Sheung Wan, Hong Kong. General line: 3698-6888.
BUY share price will increase by >20% within 12 months in absolute terms :
SELL share price will decrease by >20% within 12 months in absolute terms :
HOLD no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL :
Recommended