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Tue, 08 Nov 2016
Equi ty Research Tongda (698 HK) TMT/ China
Riding on the ramp of smartphone metal casing with 3D Glass and waterproof components Well-positioned to reap the increasing metal casing penetration in China
smartphones market from FY16E onwards and potential upside on 3D glass casing from FY17E onwards
Successfully tap into US client supply chain via waterproof featured components from 3Q16 onwards
Margin expansion by metal casing and waterproof component orders Initiate BUY with TP HK$2.75 based on 15x FY17E PE
Market leader in China smartphone metal casing, 3D glass casing a new earnings growth driver. Tongda is the primary metal casing supplier for leading China smartphone vendor such as OPPO, Huawei and Xiaomi. Given metal casing penetration in global smartphone market is expected to improve from 25% in 2015 to 54% in 2018E, we expect Tongda to ship 44mn/55mn/63mn units of metal casing in FY16/17/18E from 20mn/11mn units in 1H16/FY15 and metal casing revenue to reach HK$4.0bn/HK$5.6bn/HK$5.9bn in FY16/17/18E, representing 55%/63%/62% of total revenue and 65% 3 year sales CAGR. Tongda also completed the R&D on 3D glass casing and is currently in discussion with leading China smartphone vendor. We expect 3D glass casing sales to materialize in 2H17E as Apple’s next generation iPhone 8 is likely to adopt 3D glass casing for better outlook and wireless charging efficiency. We estimate HK$25mn/HK$247mn revenue from 3D glass casing in FY17/18E, representing 0.3%/2.6% total revenue in FY17/18E.
Penetrating into new US client’s supply chain in waterproof featured component. Tongda successfully tapped into a leading US client’s supply chain from 3Q16 by shipping waterproof featured components, comprising 2 LSR and 4 O-rings and 10-15% order allocation from this new US client. We forecast 12mn/45mn units shipment in FY16/17E with ASP US$1.3, thus we forecast revenue from waterproof feature component to reach HK$117mn/HK$456mn in FY16/17E, representing 2%/5% of total revenue. Tongda will set up a new plant in Xiamen to assure the waterproof components to that US client.
Margin expansion driven by increasing metal casing penetration, pick up in high margin waterproof component sales growth Metal casing, 3D glass casing, and waterproof components all enjoy 30% GPM, higher than company blended 24% GPM in 1H16. Ramping up of these products sales are likely to drive up margin from FY16E onward and we estimate GPM to improve from 24.9% in FY15 to 25.5%/26.5%/26.6% in FY16/17/18E respectively.
Initial BUY. We initiate our BUY rating on Tongda with target price HK$2.75 based on 15x FY17E PE. We expect Tongda to deliver 21% earnings CAGR, as it is well positioned to reap the new technology trend in smartphones, including metal casing, 3D glass casing and waterproof components.
Risks: 1) lower than expected smartphone shipment growth, especially china smartphone; 2) ASP erosion and margin squeeze of metal casing, 3D glass casing and waterproof component; 3) lower than expected 3D glass casing and waterproof components adoption.
Chloe Liu
+852 2135 0209
Yuji Fung
+852 2135 0236
Initial Coverage
BUY
Close price: HK$2.09
Target Price: HK$2.75 (+31.6%)
Key Data
HKEx code 698
12 Months High (HK$) 2.15
12 Month Low (HK$) 1.18
3M Avg Dail Vol. (mn) 24.60
Issue Share (mn) 5,743.45
Market Cap (HK$mn) 12,003.81
Fiscal Year 12/2015
Major shareholder (s) Landmark worldwide (30.13%)
Source: Company data, Bloomberg, OP Research
Closing price are as of 07/11/2016
Price Chart
1mth 3mth 6mth
Absolute % 8.9 29.7 33.0
Rel. MSCI CHINA % 14.7 27.3 20.2
PE
Company Profile
Tongda Group Holdings Ltd is a one-stop
service provider of consumer electronics
casing products. The Group has established
a solid presence in handset, notebook
computer casings, electrical appliances, and
related products.,
Exhibit 1: Forecast and Valuation Year to Dec (HK$ mn) FY14A FY15A FY16E FY17E FY18E
Revenue 4,791 6,074 7,162 8,982 9,552
Growth (%) 32.1 26.8 17.9 25.4 6.3
Net Profit 501.7 702.8 826.9 1,178.5 1,262.7
Growth (%) 39.3 40.1 17.6 42.5 7.1
Diluted EPS (HK$) 0.093 0.119 0.129 0.184 0.197
EPS growth (%) 26.4 27.9 8.3 42.5 7.1
Change to previous EPS (%)
0.0 0.0 0.0
Consensus EPS (HK$)
0.169 0.203 0.232
ROE (%) 16.2 18.3 19.1 23.0 20.8
P/E (x)
17.6 16.2 11.4 10.6
P/B (x) 3.1 2.9 2.6 2.1 1.8
Yield (%) 1.4 1.8 1.8 2.6 2.8
DPS (HK$) 0.030 0.037 0.039 0.055 0.059
Source: Bloomberg, OP Research
0.0
0.5
1.0
1.5
2.0
2.5
Nov/15 Feb/16 May/16 Aug/16
HK$698 HK MSCI CHINA
0
2
4
6
8
10
12
14
Dec/13 Jun/14 Dec/14 Jun/15 Dec/15 Jun/16
Forward P/E Ratio
+1std.
avg.
-1std.
Tue, 08 Nov 2016
Tongda (698 HK)
Page 2 of 24
Table of Contents
Table of Contents ......................................................................................................................................... 2
Riding on increasing metal casing penetration, 3D glass casing is a new growth driver ............................... 3
Penetrating leading US smartphone vendor’s supply chain in waterproof featured component .................... 9
Margin expansion driven by increasing metal casing penetration, pick up in high margin waterproof
component sales growth .............................................................................................................................13
Initiate BUY on promising earnings growth and successful penetration of US smartphone camp ................15
Investment risks ..........................................................................................................................................18
Management profiles ..................................................................................................................................19
Shareholding structure ................................................................................................................................20
Financial Summary .....................................................................................................................................21
Tue, 08 Nov 2016
Tongda (698 HK)
Page 3 of 24
411 438 464 492 522
891 995 992 1,031
1,088
1,302
1,433 1,456 1,523
1,610 28%
10%
2%5% 6%
7% 6%
6%6%
0%
10%
20%
30%
0
1,000
2,000
2014 2015 2016E 2017E 2018E
China Shipment Non-China Shipment Global yoy % China yoy %
(mn units)
182356
544725
871
1119
1077912
798739
1,302
1,433 1,456 1,523
1,610
14%
25%
37%
48%
54%
0%
10%
20%
30%
40%
50%
60%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2014 2015 2016E 2017E 2018E
Metal casing shipment Non-metal casing shipment Metal casing penetration
(mn units)(mn units)
Riding on increasing metal casing penetration, 3D glass casing is a new growth driver
Increasing metal casing penetration in smartphones
China smartphone shipment growth has outpaced global shipment growth. With
~6% yoy growth rate from FY15 to FY18E, and China smartphone vendors are
grabbing global market share aggressively, especially in China market, benefiting
upstream China smartphone component manufacturers.
Exhibit 2: Global/China smartphone shipments
Source: IDC, OP Research
Penetration of metal casing in global smartphone market is expected to improve
from 25% in 2015 to 54% in 2018E, to become the standard configuration of
smartphones at RMB1,000 level or above given that metal casing is lighter,
aesthetic with good heat dissipation. Metal casing ASP is US$6 – US$15, 0.5 to
3.0 times higher than plastic casing ASP.
Exhibit 3: Metal casing penetration in global smartphone market
Source: IDC, Apple, Samsung, Huawei, OPPO, vivo, Xiaomi, OP Research
Increasing global market share of
China smartphone vendors
benefiting upstream component
manufacturers
Penetration of metal casing in
global smartphone is expected to
improve from 25% in 2015 to 54%
in 2018E, becoming the standard
configuration of smartphones at
RMB1,000 level or above
Tue, 08 Nov 2016
Tongda (698 HK)
Page 4 of 24
Primary metal casing supplier for Huawei, OPPO and Xiaomi
Major handset metal manufacturers in China include BYD Electronic (285 HK),
Everwin Precision Technology (300115 SZ) and Tongda (698 HK), Tongda and
Everwin’s customers are mainly china smartphone vendors and BYD Electronic
supplies to Samsung and china smartphone vendors.
Tongda is the primary metal casing supplier for Huawei, OPPO and Xiaomi,
handset models include Huawei P9 Lite, Redmi Note3, and OPPO R9.
Exhibit 4: Major handset metal casing manufacturers in China
Company
FY16E handset metal
casing revenue
As % of FY16E
revenue Major customers
BYD Electronic (285 HK) RMB6.7bn 21% Samsung, Huawei, Xiaomi, LeEco
Everwin Precision Technology (300115 SZ) RMB4.0bn 67% Huawei, OPPO, vivo, Xiaomi, LeEco
Tongda (698 HK) RMB3.4bn 55%
Huawei, OPPO, Xiaomi, Coolpad,
Asus
Source: BYD Electronic, Everwin, Company, OP Research
Tongda masters three technologies of metal casing, including Metal 1.0, 2.0 and
3.0. In general ASP of Xiaomi’s metal casing is lower at ~US$6, as it needs
shorter CNC processing time, while OPPO’s and Huawei’s metal casing enjoys
higher ASP at ~US$15, as it requires 10-15 minutes CNC time per unit.
Exhibit 5: Tongda’s metal casing technology
Technology Metal 1.0: CNC Uni-body
Metal 2.0: Metal stamping + NMT
molding + CNC processing
Metal 3.0: Composite Die-casting
middle frame
Internal components
CNC lead time 15~20 mins 10~15mins 2~10 mins
Fixed asset investment High Lower Lowest
ASP US$15 ~ US$20 US$10 ~ US$15 US$6 ~ US$8
Yield rate Low Medium High
Major application Handset casing or middle frame Handset casing Handset middle frame, can match
different materials back covers
3D glass casing combinability ✓
Adopted smartphone models Huawei P9 Lite, OPPO R7,
Coolpad FengShang Max,
Qiku360 Flagship,
Asus Zenfone 3/ Deluxe/ Ultra
Maimang 5/ 4, Redmi Note3,
OPPO R9/ A59, Ivvi i3
Honor V8/ 5C, Redmi 3, Mi Max,
Mi 4C Meizu Pro6
Source: Company, OP Research
Tongda is one of the major
handset metal casing
manufacturers in China
Tongda is the primary metal
casing supplier for Huawei, OPPO
and Xiaomi
ASP of Xiaomi’s metal casing is
US$6, and OPPO and Huawei’s
metal casing ASP is US$15
Tue, 08 Nov 2016
Tongda (698 HK)
Page 5 of 24
7%
22%
55%
63% 62%
23.9%
24.9%
25.5%
26.5%26.6%
22%
24%
26%
28%
0%
20%
40%
60%
80%
FY14A FY15A FY16E FY17E FY18E
Metal casing revenue proportion(LHS) Blended GPM(RHS)
Order allocation gain from China No. 1 smartphone brand, OPPO,
from 2H16 onwards to drive up metal casing ASP
Top China smartphone vendors for 9M16, Huawei, OPPO and Xiaomi are all
Tongda’s clients. Both Xiaomi and Huawei account for 20% each of total revenue
respectively and OPPO accounts for 11% of total revenue in 1H16, from 3% in
FY15.
Exhibit 6: Chinese smartphone vendors
9M16
Ranking
Vendors 9M16 9M15 yoy% FY16E 1H16 as FY16E
1 Huawei 94.2 71.2 32% 140 67%
2 OPPO 59.9 26.2 129% 100 60%
3 Vivo 49.4 24 106% 80 62%
4 Xiaomi 40.5 48.1 -15.8% Not disclosed n.a.
Source: Company, OP Research
We expect OPPO’s revenue contribution to keep increasing given its 9M16
shipment growth up 129% yoy and market share gain in China and global market.
We forecast OPPO’s revenue contribution will increase to 15%-20% in 2H16E
from 11% in 1H16, thanks to the hot sale of its star model, R9, and launch of new
series R9S in Oct16. As OPPO’s metal casing enjoys higher ~US$15 ASP, we
believe it will drive up Tongda blended metal casing ASP in 2H16E.
Ramp up metal casing sales contribution to drive margin expansion
Metal casing GPM is ~30%, 7ppts higher than plastic casing GPM. Given ramp
up of metal casing sales contribution, we estimate Tongda blended GPM to
improve 0.6ppt/1ppt yoy to 25.5%/26.5% in FY16/17E.
Exhibit 7: Key assumptions
Metal Casing Plastic Casing
FY16E Shipment 44mn 17mn
FY16E ASP RMB90 RMB40
FY16E GPM 30% 23%
Source: OP Research
Exhibit 8: Metal casing revenue proportion and blended GPM
Source: Company, OP Research
Xiaomi, Huawei and OPPO are
Tongda’s top3 clients in 1H16
We expect OPPO’s revenue
contribution will increase to
15%-20% in 2H16E from 11% in
1H16, thanks to hot sale of R9 and
R9S, thus drive up blended metal
casing ASP
Metal casing GPM is 7 ppts higher
than plastic casing GPM, which
helps on margin expansion by
0.6ppt/1ppt yoy to 25.5%/26.5% in
FY16/17E
Tue, 08 Nov 2016
Tongda (698 HK)
Page 6 of 24
High-end smartphone begins to adopt 3D glass casing for
ergonomic and aesthetic reasons
3D glass is likely to become the new trend in smartphone spec as it adds a slight
curve to the normally straight edge and also use curved display, which is usually
flexible AMOLED display. 3D glass is suitable for OLED display, complicated
antenna designs of 4G and 5G handsets, and also can solve signal interference
issue in wireless charging. Currently, there are few models adopting 3D glass
casing from smartphone vendors including Samsung Galaxy S7 edge, Vivo
Xplay5 and Xiaomi Mi5 and Note2, and Huawei Mate9 Porsche Design.
Exhibit 9: Comparison table of 2D, 2.5D and 3D glass
2D glass casing 2.5D glass casing 3D glass casing
Difference Straight edge and display Curved edge and straight display Curved edge and display
Advantages Cheap and high yield rate Enhance touch screen
user experience
Aesthetic experience
Suitable for OLED display
Solve signal interference issue
of wireless charging
Suitable for complicated
antenna design of 4G and 5G
handsets
Light and thin
Current models iPhone5/5s iPhone6/6s, Samsung Note 5,
OPPO R9, Huawei P9, vivo X6S
Samsung Galaxy S7 edge, VivoXplay5,
Xiaomi Mi 5, Xiaomi Note2, Huawei Mate9
Porsche Design
Likely Upcoming models iPhone8, OPPO Find9, Mi Edge, Meizu
Pro6 Plus
ASP of glass RMB5-6 RMB20-30 RMB80
Source: Company, OP Research
BOM of 3D glass casing is relatively high at RMB80, ~3 times of 2.5D glass, and
~10 times of 2D glass. ASP of 3D glass casing is RMB80-RMB100 and, if
combined with metal frame, ASP can go up to RMB260+. The high BOM of 3D
glass casing, mainly 3D glass material cost, is a key issue in solving mass
adoption in mid-end smartphones.
Market rumor is that the next generation of Apple iPhone 8 will adopt 3D glass
casing in all models, we expect China smartphone vendors will likely follow in
launching more glass casing models from FY17E onwards, which will help lift 3D
glass casing adoption similar to iPhone7 Plus dual camera model. We currently
estimate that the penetration of 3D glass casing in China will improve from 5% in
2016E to 25% in 2018E.
3D glass is probability the new
trend of smartphone spec as it is
suitable for OLED display, and
solves signal interference issue
of wireless charging
BOM of 3D glass casing is RMB80,
three times of 2.5D glass, which is
a key issue in solving mass
adoption in mid-end smartphones
Market rumor is that iPhone8 will
all adopt 3D glass casing, which
helps lift 3D glass casing
adopting in China from 5% in
2016E to 25% in 2018E
Tue, 08 Nov 2016
Tongda (698 HK)
Page 7 of 24
25
58
159
0%
5%
10%
25%
0%
20%
40%
0
100
200
2015 2016E 2017E 2018E
Shipment Penetration
(mn units)
Glass substrate
Corning (GLW US)
Asahi Glass (5201 JP)
Upstream: basic materials and semi productsMidstream: 3D glass casing
End product:
smartphones
Sapphire
Monocrystal
Sapphire Tech
Aurora (600666 CH)
TDG (600330 CH)
Cover glass
Biel Crystal
Lens Tech (300433 CH)
G-tech (3149 TT)
Firstar
Chunghwa Picture Tube
(2475 TT)
Taiwan
Foxconn Tech (2354 TT)
Catcher (2474 TT)
Apple
Assembly/ODM
Hon Hai (2317 TT)
BYD-E (285 HK)
PRC
BYD-E (285 HK)
Tongda (698 HK)
Everwin Precision (300115 CH)
Samsung
Huawei
Oppo
Vivo
Xiaomi, etc
Downstream:
Assembly/ODM
Exhibit 10: Shipment and penetration of 3D glass casing in China
Source: OP Research
Major 3D glass casing manufacturers are located in Taiwan and China. We
expect Tongda will be the major 3D glass casing supplier for China smartphone
vendors from FY17E onwards, together with Everwin (300115 CH), BYDE (285
HK), and Foxconn Tech (2354 TT). iPhone8 3D glass casing is expected to be
mainly supplied by Foxconn Tech, and Samsung Galaxy S7 edge 3D glass
casing is supplied by BYDE. Tongda purchases cover glass mainly from
Chunghwa Picture Tube (2475 TT).
Exhibit 11: 3D glass casing value chain
Source: OP Research
We expect Tongda will be the
major 3D glass casing supplier
for China smartphone vendors
from FY17E onwards, and it
purchases cover glass mainly
from Chunghwa Picture
Tube(2475 TT)
Tue, 08 Nov 2016
Tongda (698 HK)
Page 8 of 24
Semi-finished
glass products
Double-sided
polishing
Curve surface
fitting
Chemical
hardening
Multi-
metallization
In-Mold
lamination (IML)
25 247
1,334
2,535
0%3%
12%
21%
0%
10%
20%
30%
0
1,000
2,000
3,000
FY17E FY18E FY19E FY20E
Revenue Revenue contribution
(HK$mn)
Exhibit 12: 3D glass casing manufacturing process of Tongda
Source: Company, OP Research
We have currently factored in HK$25mn/HK$247mn 3D glass casing revenue in
FY17/18E, and 367% revenue CAGR from FY17E to FY20E, and revenue
contribution ramp up from 0% in FY17E to 21% in FY20E.
Exhibit 13: 3D glass casing revenue from FY17E to FY20E
Source: Company, OP Research
3D glass casing revenue is
expected to deliver 367% CAGR
from HK$25mn in FY17E to
HK$2,535mn in FY20E
Tue, 08 Nov 2016
Tongda (698 HK)
Page 9 of 24
8%
15%
25%
30%
35%
0%
10%
20%
30%
40%
2016E 2017E 2018E 2019E 2020E
Penetrating leading US smartphone vendor’s supply chain in waterproof featured component
Waterproof smartphone models – the next trend
Waterproof is becoming a critical spec for mid-to-high-end smartphones, as
people’s increasing demand for photography in various locations, including
underwater, and to alleviate water damage. Currently, iPhone7/7 Plus, Galaxy
S7/S7 Edge, Galaxy S7 Active, and Sony Xperia X Performance are the
representatives models of waterproof smartphones.
Waterproof smartphones have certifications by IP rating, known as IP67 or IP68.
The first number refers to the protection against solids, such as dust and sand, 6
is the highest number for the smartphone that is dust-tight. The second number
designates protection against liquids. iPhone7/7 Plus is water-resistant with IP67,
which means that it is completely protected against dust, and can go underwater
down to 1 meter for up to 30 minutes, Samsung Galaxy S7 is water-resistant with
IP68, thus it is completely dust-resistant and can go 1-1.5 meters under water for
up to 30 minutes. It is expected that iPhone8 will upgrade from IP67 to IP68, and
we expect the China smartphone vendors will follow to launch water-proof models
from FY17E onwards. Hence, we estimate water-proof penetration in smartphone
to grow to 35% in 2020E from 8% in 2016E.
Exhibit 14: Penetration of waterproof in smartphones from 2016E to 2020E
Source: OP Research
Waterproof is becoming a critical
spec for mid-to-high-end
smartphones, representative
models include iPhone7/7 Plus,
Galaxy S7/S7 Edge
iPhone7/7 Plus is rated as IP67,
and Galaxy S7/S Edge is IP68, it is
expected that iPhone8 will be
upgraded to IP68, thus improving
the waterproof penetration in
smartphones from 8% in 2016E to
35% in 2020E
Tue, 08 Nov 2016
Tongda (698 HK)
Page 10 of 24
LSR between lighting
connector and microphones
LSR in the plastic SIM eject plug
LSR on the SIM tray
LSR on the left edge of display EMI shield
LSR on home button
LSR on the ring/silent switch
First waterproof component began shipment to US client in Aug
2016
According to iPhone7 Plus teardown of iFixit, Liquid Silicone Rubber (LSR) is
mainly used in six parts, connecting between lighting connector and microphones,
SIM eject plug, SIM tray, left edge of display EMI shield, home button and
right/silence switch, leading to the improved dust and water resistance with IP67
rating.
Exhibit 15:LSR used in iPhone 7 Plus
Source: iFixit, OP Research
Tongda began shipping the first waterproof components (home key) to a US
smartphone vendor in Aug 2016. One set of the waterproof products include 2
Liquid Silicone Rubber (LSR) and 4 O-rings, with ASP of US$1.3 per set. LSR is
the ideal material for rubber O-ring as it is resistant to compression, tears and
stress, and enjoys high stability and durability. LSR and O-ring are mainly applied
in the Home key of the new US client.
LSR is mainly used in six parts of
iPhone7 plus
Tongda began shipping
waterproof components (2 LSR+4
O-rings) to US client from Aug
2016, with ASP of US$1.3 per set,
which is mainly applied in the
Home Key
Tue, 08 Nov 2016
Tongda (698 HK)
Page 11 of 24
Exhibit 16: Liquid silicone rubber (LSR)
Source: Company, OP Research
Exhibit 17: Rubber compression molding
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 12 of 24
117
456 502
552
2%
5% 5% 5%
0%
5%
10%
0
200
400
600
FY16E FY17E FY18E FY19E
Revenue Revenue contribution
(HK$mn)
4 month contribution in FY16E and full year sales contribution in
FY17E with order allocation gain to drive up sales and blended
margin
We estimate 12mn units of water-proof component shipments to the new US
client in FY16E as Tongda commenced shipments from Aug 2016. In FY17E,
Tongda will set up a new plant in Xiamen to cater to the new US client’s orders,
and we expect the shipments will increase to 45mn in FY17E given full year
contribution. Thus, we expect waterproof components revenue will achieve
HK$117mn/HK$456mn in FY16/17E, representing 2%/5% of total revenue, and
hit 68% 3-year CAGR from FY16E to FY19E.
Besides the waterproof component for Home Key, Tongda is in discussions with
the new US client for other waterproof component parts in the smartphone. We
have only taken into account the waterproof component for Home Key in our
forecast in which we see upside risks on our current estimates if Tongda is able to
secure more order allocations and different waterproof parts from the new US
client.
Given waterproof components enjoy a higher GPM over 30%, which helps on
margin expansion, as blended GPM in 1H16 is 24%.
Exhibit 18: Revenue and revenue contribution of waterproof components
Source: OP Research
As 4 month/12month contribution
in FY16/17E, we estimate
12mn/45mn units shipments of
waterproof components in
FY16/17E, leading to
HK$117mn/HK$456mn revenue
High GPM of waterproof
components at 30% helps margin
expansion
Tue, 08 Nov 2016
Tongda (698 HK)
Page 13 of 24
Margin expansion driven by increasing metal casing penetration, pick up in high margin waterproof component sales growth
Margin expansion in FY16E driven by 3 times shipment growth of
metal casing
Metal casing shipment is expected to hit 44mn in FY16E from 11mn in FY15,
300% yoy growth, thanks to increasing penetration of metal casing in China
smartphones, and market share gain of Tongda’s top clients in China smartphone
market, such as OPPO and Huawei. As metal casing enjoys a higher GPM at
30%, compared to plastic metal casing GPM at 23%, we expect Tongda to
achieve 0.6ppt margin improvement in FY16E to 25.5% GPM.
Waterproof component contribution increase to drive up FY17E
margin
Waterproof component will be a key growth driver from FY17E onwards as
Tongda commenced shipments of waterproof components to new US client from
3Q16, we estimate 12mn/45mn units waterproof components in FY16/17E and
HK$117mn/HK$456mn revenue in FY16/17E, representing 2%/5% of total
revenue. Waterproof components enjoy high GPM pf over 30%, which also helps
in 1ppt margin expansion from FY17E onwards on top of increasing metal casing
sales.
3D glass casing to drive margin improvement as also automobile
decorations FY18E onwards
We expect 3D glass casing adoption to ramp up from 2H17E onwards given
iPhone 8 is likely to adopt 3D glass casing and China smartphone vendors are
expected to follow in FY17E. Moreover, 3D glass casing is suitable for AMOLED
display, and wireless charging hence we estimate a significant ramp up of 3D
glass casing shipments from FY18E onwards and driving Tongda margin
improvement given 3D glass casing enjoys 30% GPM
Tongda also manufactures automotive decorations, including door trims, steering
wheels, shift knobs, door handles, speedometers, lights panels. Tongda acquired
4 new automobile clients in 1H16, as automotive component has long life cycle of
5-10 years, it takes 2 years from tapping into supply chain to mass production,
therefore, significant sales is expected to commence from FY18E onwards. We
expect automotive decorations revenue will ramp up from HK$30mn in FY15 to
HK$100mn/HK$200mn/HK$315mn in FY16/17/18E, representing 8%/13%/18%
of communication facilities, automotive and others revenue and 1%/2%/3% of
total revenue. Since automotive decorations also enjoy high GPM of 30%, we see
a promising margin improvement trend in FY16E - FY18E.
3 times shipment growth of metal
casing in FY16E helps 0.6ppt
margin expansion to 25.5% in
FY16E
2%/5% revenue contribution from
waterproof components in
FY16/17E helps in margin
expansion to 26.5% in FY17E
3D glass casing adoption ramp
up from 2H17E helps margin
expansion in FY18E
Significant automotive
decorations revenue growth is
expected from FY18E onwards,
as new clients acquired in 1H16
and it takes 2 year for mass
production, thus driving up
blended GPM in FY18E
Tue, 08 Nov 2016
Tongda (698 HK)
Page 14 of 24
23.9%
24.9%
25.5%
26.5% 26.6%
22%
24%
26%
28%
30%
FY14A FY15A FY16E FY17E FY18E
Metal casing revenue ramp up from 22% of total revenue in FY15 to 55% in FY16E
Waterproof componentrevenue ramp up from 2% of total revenue in FY16E to 5% in FY17E
3D glass cover /automotivedecoration revenue ramp up from 0%/2% of total revenue in FY17E to 3%/3% in FY18E
Exhibit 19: Blended GPM from FY14 to FY18E
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 15 of 24
4,791 6,074
7,162
8,982 9,552
502 703 827 1,178 1,263
0
2,000
4,000
6,000
8,000
10,000
12,000
FY14A FY15A FY16E FY17E FY18E
Revenue Net profit
(HK$mn)
7%
22%
55%63% 62%
44%
39%
9%4% 3%
3%2%5% 5%
12%
10%8%
6% 6%
13%8% 5%
1%14% 8% 4% 3% 3%
10% 14% 17% 17% 19%
0%
20%
40%
60%
80%
100%
FY14A FY15A FY16E FY17E FY18E
Metal casings Non-metal casings3D glass cover Waterproof componentsElectrical appliances NotebookIronware parts Communication facilities and others
Initiate BUY on promising earnings growth and successful penetration of US smartphone camp
We initiate our BUY rating on Tongda with TP HK$2.75 based on 15x FY17E PE
given: 1) ramp up metal casing shipments to drive up ASP and revenue from
FY16E onwards, and potential upside on 3D glass casing, as iPhone8 is
expected to adopt 3D glass casing and China smartphone vendors are likely to
follow in FY17E; 2) penetrate into non-China based smartphone vendor supply
chain via waterproof component from 3Q16 onwards and full year contribution in
FY17E; and 3) margin expansion driven by increasing sales of high margin metal
casing, 3D glass casing, waterproof components and automotive decorations all
of which enjoy higher GPM at 30%. Tongda currently trades at 11x FY17E PE and
3% yield.
Exhibit 20: Revenue and Net profit from FY14 to FY18E
Source: Company, OP Research
Exhibit 21: Revenue contribution from FY14 to FY18E
Source: Company, OP Research
Initiate BUY rating on Tongda
with TP HK$2.75 based on 15x
FY17E PE, Tongda currently
trades at 11x FY17E PE with 3%
yield
Tue, 08 Nov 2016
Tongda (698 HK)
Page 16 of 24
Exhibit 22: Key assumptions of metal casing, waterproof components and
3D glass casing
FY16E FY17E FY18E
Metal Casing
Shipment(mn units) 44 55 63
ASP(HK$) 90 103 93
Revenue(HK$mn) 3,960 5,643 5,905
Waterproof
Shipment(mn units) 12 45 50
ASP(HK$) 10 10 10
Revenue(HK$mn) 117 456 502
3D Glass Casing
Shipment(mn units) 0 0 1
ASP(HK$) 250 250 225
Revenue(HK$mn) 0 25 247
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 17 of 24
Exhibit 23: Result summary
HK$ mn 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16E
Revenue 1,690 1,937 2,101 2,690 2,881 3,193 3,239 3,924
COGS (1,334) (1,495) (1,619) (2,029) (2,204) (2,358) (2,449) (2,937)
Gross profit 356 442 482 661 678 834 790 987
Other income & gains 15 32 0 26 18 8 11 23
Selling exp (40) (39) (43) (69) (75) (73) (61) (120)
Admin exp (129) (149) (177) (153) (176) (269) (256) (294)
Other opex (5) (16) 0 (27) (6) (10) 6 (28)
Operating profit (EBIT) 197 270 262 439 438 490 490 568
Provisions or other items 0 0 0 0 0 0 0 0
Finance costs (21) (30) (27) (30) (27) (29) (34) (27)
Profit after financing costs 175 240 235 409 411 461 456 540
Associated cos (0) (0) (0) (2) (0) 0 0 (0)
Jointly controlled cos 0 0 0 0 0 0 1 1
Pre-tax profit 175 240 235 407 411 461 457 541
Tax (37) (9) (48) (47) (81) (53) (82) (97)
Minority interests (8) (1) (20) (26) (36) 0 5 3
Net profit 130 230 167 335 294 409 380 447
HoH%
Revenue 15% 8% 28% 7% 11% 1% 21%
Gross profit
24% 9% 37% 2% 23% -5% 25%
Net profit 76% -27% 100% -12% 39% -7% 18%
YoY%
Revenue 24% 39% 37% 19% 12% 23%
Gross profit
36% 49% 40% 26% 17% 18%
Net profit 28% 46% 76% 22% 29% 9%
Key ratios
GPM 21.0% 22.8% 23.0% 24.6% 23.5% 26.1% 24.4% 25.1%
Selling exp 2.3% 2.0% 2.0% 2.6% 2.6% 2.3% 1.9% 3.1%
Admin exp 7.6% 7.7% 8.4% 5.7% 6.1% 8.4% 7.9% 7.5%
EIT 21.2% 3.7% 20.2% 11.4% 19.7% 11.6% 18.0% 18.0%
Net margin 7.7% 11.9% 8.0% 12.4% 10.2% 12.8% 11.7% 11.4%
Revenue by segment
Electrical fittings 1,317 1,566 1,569 2,068 2,311 2,470 2,619 3,051
Handsets 823 1,037 958 1,457 1,756 1,957 2,091 2,539
Electrical appliances 270 195 324 265 328 260 352 236
Notebook computers 224 334 287 346 227 253 177 159
3D glass casings 0 0 0 0 0 0 0 0
Waterproof internal component 0 0 0 0 0 0 0 117
Ironware parts 224 268 314 374 323 149 196 87
Communication facilities and others 148 104 218 249 247 575 423 786
HoH%
Electrical fittings 19% 0% 32% 12% 7% 6% 16%
Handsets
26% -8% 52% 21% 11% 7% 21%
Electrical appliances
-28% 66% -18% 24% -21% 36% -33%
Notebook computers
49% -14% 20% -34% 12% -30% -10%
Ironware parts
20% 17% 19% -14% -54% 32% -56%
Communication facilities and others -30% 110% 14% 0% 132% -26% 86%
YoY%
Electrical fittings 19% 32% 47% 19% 13% 24%
Handsets
16% 41% 83% 34% 19% 30%
Electrical appliances
20% 36% 1% -2% 7% -9%
Notebook computers
28% 4% -21% -27% -22% -37%
3D glass casings
n.a. n.a. n.a. n.a. n.a. n.a.
Waterproof internal component
n.a. n.a. n.a. n.a. n.a. n.a.
Ironware parts
40% 40% 3% -60% -39% -42%
Communication facilities and others 47% 140% 13% 131% 71% 37%
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 18 of 24
Investment risks
Shrinking market share of Xiaomi As of Sep 2016, Xiaomi dropped to No.4
from No. 2 in Sep 2015 in China’s smartphone market with the shipments
decreasing 16% yoy to 49mn. Since Xiaomi is the current largest customer of
Tongda with 20% revenue contribution, further shrinking in Xiaomi’s market share
would reduce Tongda’s revenue and profitability. However, Tongda would secure
more orders from OPPO and Huawei both of which maintained robust growth, we
believe it would partially offset the downturn risk of Xiaomi.
ASP erosion and margin pressure of smartphone casing ASP and GPM may
drop faster than expected due to intensifying competition and improvement of
technology. However, we believe the ASP and margin pressure can be relieved
by (1) product portfolio upgrade to metal and 3D glass metal casing; (2)
introducing waterproof products and penetration of automobile interior decoration
market.
Lower than expected adoption of 3D glass casing The penetration of 3D glass
may be lower than expected if the BOM of 3D glass casing remains high at
RMB200 together with metal frame, as most low-to-mid end smartphones within
RMB1,500 may not adopt it. However, as iPhone 8 is going to adopt glass casing,
we believe it can promote the adoption of 3D glass in high-end series of Chinese
smartphone brands from FY17E onwards.
Tue, 08 Nov 2016
Tongda (698 HK)
Page 19 of 24
Management profiles
Exhibit 24: Management profiles
Name Age Position Role and responsibilities Description
Mr. Wang Ya Nan 58 Chairman, CEO Overall strategic planning
and business development
Mr. Wang joined the group in 1988 and has over 20 years of experience in
the electronics and electrical industry.
Mr. Wang obtained Executive Master of Business Administration degree in
Xiamen University and serves as a member of the Standing Committee of
the Chinese People’s Political Consultative Conference.
Mr. Wang is a brother of Mr. Wong Ah Yeung, Wong Ah Yu and Wang Ya
Hua.
Mr. Wang Ya Hua 60 Vice Chairman,
general manager
Overall management and
product development
Mr. Wang joined the group in 1988 and has over 20 years of experience in
the electronic and electrical industry.
Mr. Wang mainly focuses on product development, preparation and
monitoring of annual production plans and operating budget. He focuses on
day-to-day operations in Xiamen, Fujian province.
Mr. Wong Ah Yu 63 Deputy general
manager
Overseeing and manage
the operation
Mr. Wong joined the group in 1988 and has over 20 years of experience in
the electronic and electrical industry.
Mr. Wong focuses on day-to-day operations in Shishi city, Fujian Province.
Mr. Wong Ah Yeung 66 Deputy general
manager
Overseeing and manage
the operation
Mr. Wong joined the group in 1988 and has over 20 years of experience in
the ironware and electrical industry.
Mr. Wong focuses on day-to-day operations in Shenzhen, Guangdong
Province.
Mr. Choi Wai Sang 60 Executive director Development of overseas
market and technical
support
Mr. Choi joined the group in 1988.
Mr. Choi obtained Bachelor and Master of Science degrees in electrical
engineering from the University of Illinois, USA.
Mr. Wang Ming Che 40 Executive director Overseeing the operation
and sales in Shenzhen
Mr. Wang joined the group in 2002.
Mr. Wang is the son of Mr. Wong Ah Yeung.
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 20 of 24
30.13% 59.08%
Landmark
Worldwide
HoldingsPublic
10.79%
Wang Ya Nan
(Chairlman)
Shareholding structure
Exhibit 25: Shareholding structure
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 21 of 24
Financial Summary Year to Dec FY14A FY15A FY16E FY17E FY18E
Year to Dec FY14A FY15A FY16E FY17E FY18E
Income Statement (HK$ mn)
Ratios
Electrical fittings 3,637 4,780 5,671 7,168 7,490
Gross margin (%) 23.9 24.9 24.8 25.3 25.4
Ironware parts 688 472 283 283 283
Operating margin (%) 14.6 15.3 14.8 16.6 16.6
Communication facilities and others 467 822 1,209 1,530 1,778
Net margin (%) 10.5 11.6 11.5 13.1 13.2
Turnover 4,791 6,074 7,162 8,982 9,552
Selling & dist'n exp/Sales (%) 2.3 2.4 2.5 2.2 2.2
YoY% 32 27 18 25 6
Admin exp/Sales (%) 6.9 7.3 7.7 6.6 6.7
COGS (3,648) (4,562) (5,386) (6,711) (7,121)
Payout ratio (%) 32.3 31.1 30.0 30.0 30.0
Gross profit 1,144 1,512 1,777 2,271 2,430
Effective tax (%) 14.6 15.4 18.0 18.0 18.0
Gross margin 23.9% 24.9% 24.8% 25.3% 25.4%
Total debt/equity (%) 26.9 58.6 62.1 51.3 43.9
Other income 27 26 34 35 38
Net debt/equity (%) 13.8 35.5 40.1 35.5 23.8
Selling & distribution (112) (149) (181) (200) (213)
Current ratio (x) 1.8 1.8 1.7 1.7 1.8
Admin (330) (445) (551) (591) (637)
Quick ratio (x) 1.2 1.3 1.2 1.2 1.3
R&D 0 0 0 0 0
Inventory T/O (days) 140 128 128 128 128
Other opex (27) (16) (21) (27) (29)
AR T/O (days) 165 161 161 161 161
Total opex (469) (610) (753) (818) (878)
AP T/O (days) 133 126 126 126 126
Operating profit (EBIT) 701 928 1,058 1,488 1,590
Cash conversion cycle (days) 172 164 164 164 164
Operating margin 14.6% 15.3% 14.8% 16.6% 16.6%
Asset turnover (x) 0.9 0.8 0.8 0.8 0.8
Provisions 0 0 0 0 0
Financial leverage (x) 1.8 1.9 2.1 2.1 2.0
Finance costs (57) (56) (62) (68) (68)
EBIT margin (%) 14.6 15.3 14.8 16.6 16.6
Profit after financing costs 644 873 996 1,421 1,523
Interest burden (x) 0.9 0.9 0.9 1.0 1.0
Associated companies & JVs (2) (0) 2 2 2
Tax burden (x) 0.8 0.8 0.8 0.8 0.8
Pre-tax profit 642 872 998 1,423 1,524
Return on equity (%) 16.2 18.3 19.1 23.0 20.8
Tax (94) (134) (179) (256) (274)
ROIC (%) 16.4 16.3 14.5 17.4 16.7
Profit from discontinued operations 0 0 0 0 0 Minority interests (47) (35) 8 12 12
Year to Dec FY14A FY15A FY16E FY17E FY18E
Net profit 502 703 827 1,178 1,263 Balance Sheet (HK$ mn)
YoY% 39 40 18 43 7
Fixed assets 1,873 2,740 3,221 3,590 3,847
Net margin 10.5% 11.6% 11.5% 13.1% 13.2%
Intangible assets & goodwill 62 58 58 58 58
EBITDA 873 1,123 1,333 1,828 1,989
Associated companies & JVs 3 3 4 6 8
EBITDA margin 18.2% 18.5% 18.6% 20.3% 20.8%
Long-term investments 0 0 0 0 0
EPS (HK$) 0.093 0.119 0.129 0.184 0.197
Other non-current assets 163 254 254 254 254
YoY% 26 28 8 43 7
Non-current assets 2,101 3,054 3,537 3,907 4,167
DPS (HK$) 0.030 0.037 0.039 0.055 0.059
Inventories 1,401 1,606 1,896 2,362 2,507
Year to Dec FY14A FY15A FY16E FY17E FY18E
AR 2,166 2,683 3,164 3,967 4,219
Cash Flow (HK$ mn)
Prepayments & deposits 204 301 355 445 473
EBITDA 873 1,123 1,333 1,828 1,989
Other current assets 134 183 183 183 183
Chg in working cap (491) (472) (483) (806) (253) Cash 360 762 844 708 1,141
Others 52 41 0 0 0
Current assets 4,266 5,535 6,441 7,666 8,523
Operating cash 434 693 850 1,021 1,736 Tax (106) (106) (192) (179) (256)
AP 1,329 1,572 1,856 2,313 2,454
Net cash from operations 328 588 658 842 1,481
Tax 177 192 179 256 274
Accruals & other payables 196 324 383 480 510
Capex (547) (986) (766) (719) (669)
Bank loans & leases 629 976 1,450 1,450 1,450
Investments 0 0 0 0 0
CB & othe debts 0 0 0 0 0
Dividends received 0 0 0 0 0
Other current liabilities 0 0 0 0 0
Sales of assets 13 1 0 0 0
Current liabilities 2,332 3,065 3,868 4,498 4,689
Interests received 5 8 10 10 12 Others (209) (304) 0 0 0
Bank loans & bonds 351 519 552 552 552
Investing cash (738) (1,282) (756) (708) (657)
CB & leases 0 873 873 873 873
FCF (409) (694) (98) 134 824
Deferred tax & others 48 92 62 62 62
Issue of shares 672 0 0 0 0
MI 0 0 (8) (20) (32)
Buy-back 0 0 0 0 0
Non-current liabilities 399 1,484 1,479 1,467 1,455
Minority interests 19 0 0 0 0 Dividends paid (142) (201) (235) (202) (323)
Total net assets 3,636 4,039 4,631 5,607 6,547
Net change in bank loans 130 516 506 0 0 Interests paid (57) (56) (62) (68) (68)
Shareholder's equity 3,636 4,039 4,631 5,607 6,547
Others (29) 902 (30) 0 0
Share capital 55 57 57 57 57
Financing cash 593 1,161 179 (270) (391)
Reserves 3,582 3,982 4,574 5,550 6,490
Net change in cash 184 467 82 (136) 433
BVPS (HK$) 0.53 0.68 0.72 0.81 0.98
Exchange rate or other Adj (1) (65) 0 0 0 Opening cash 178 360 762 844 708
Total debts 980 2,369 2,875 2,875 2,875
Closing cash 360 762 844 708 1,141
Net cash/(debts) (502) (1,433) (1,857) (1,993) (1,560)
CFPS (HK$) 0.061 0.099 0.103 0.131 0.231
Source: Company, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 22 of 24
Exhibit 26: Peer Group Comparison
Company Ticker Price
Mkt cap
(US$m)
3-mth
avg t/o
(US$m)
PER
Hist (x)
PER
FY1 (x)
PER
FY2 (x)
EPS
FY1
YoY%
EPS
FY2
YoY%
3-Yr
EPS
Cagr
(%) PEG (x)
Div yld
Hist (%)
Div yld
FY1 (%)
P/B
Hist (x)
P/B FY1
(x)
EV/
Ebitda
Hist
EV/
Ebitda
Cur Yr
Net
gearing
Hist (%)
Gross
margin
Hist (%)
Net
margin
Hist (%)
ROE
Hist (%)
ROE
FY1 (%)
Sh px
1-mth
%
Sh px
3-mth
%
Tongda Group Hld 698 HK 2.09 1,548 5.8 17.6 16.2 11.4 8.3 42.5 21.3 0.76 1.8 1.8 2.89 2.59 11.7 10.4 35.5 24.9 11.6 18.3 19.1 8.9 30.6
HSI 22801.40 12.3 12.6 11.5 -2.4 9.3 5.6 2.24 3.6 3.5 1.16 1.16 9.5 9.2 -4.4 3.0
HSCEI 9608.24 8.2 8.5 7.8 -2.9 8.6 4.8 1.78 3.8 3.5 0.94 0.94 11.5 11.1 -3.2 5.2
CSI300 3356.59 15.0 14.1 12.5 6.5 12.6 10.5 1.34 2.1 2.1 1.77 1.68 11.8 11.9 3.2 4.7
Adjusted sector avg* 10.9 13.3 10.8 -4.3 16.0 1.4 0.75 4.2 2.3 2.51 1.65 5.0 4.5 0.0 22.9 11.0 19.5 12.3 -5.3 -2.3
Byd Electronic 285 HK 6.39 1,856 8.2 14.0 10.4 9.1 33.8 14.6 19.1 0.55 1.2 1.6 1.12 1.08 4.7 3.6 0.0 6.5 3.1 9.9 10.8 -1.1 8.1
Fih Mobile Ltd 2038 HK 2.52 2,594 2.2 11.0 29.5 19.1 -62.8 54.5 -16.9 N/A 8.5 3.7 0.73 0.68 0.3 0.3 0.0 5.2 3.1 3.3 2.3 -1.9 -6.0
Aac Technologies 2018 HK 72.25 11,439 53.0 24.9 20.0 16.1 24.8 24.1 21.7 0.92 1.7 1.8 6.62 5.51 19.2 15.6 0.0 41.5 26.5 30.1 29.9 -8.7 -3.6
Cowell 1415 HK 2.29 246 1.7 3.9 5.3 4.4 -25.3 19.6 -0.4 N/A N/A 0.7 0.86 0.73 2.0 2.5 0.0 14.0 6.2 25.4 13.6 -18.5 -30.2
Catcher Tech 2474 TT 229.50 5,616 49.7 7.0 8.7 8.3 -19.1 5.4 -3.1 N/A 4.4 4.3 1.57 1.36 3.3 3.6 0.0 46.3 30.5 22.0 16.7 -6.3 5.0
Casetek Holdings 5264 TT 85.80 926 5.4 5.2 7.9 7.0 -34.3 12.0 -5.5 N/A 9.3 7.6 1.02 0.92 1.8 2.2 0.0 25.5 14.6 18.4 12.4 -26.0 -31.4
Foxconn Technolo 2354 TT 90.80 4,079 16.1 10.5 11.4 11.6 -8.2 -1.4 -5.2 N/A 3.3 3.1 1.43 1.30 3.9 3.8 0.0 16.4 12.3 13.1 12.1 -1.9 17.6
Shenzhen Everw-A 300115 CH 28.28 3,760 28.9 55.2 35.1 25.5 57.1 37.8 45.4 0.77 0.7 0.6 6.74 6.43 33.9 22.6 8.9 27.8 11.6 17.6 18.0 1.8 22.3
Source: Bloomberg, OP Research
Tue, 08 Nov 2016
Tongda (698 HK)
Page 23 of 24
Our recent reports
Date Company / Sector Stock Code Title Rating Analyst
27/10/2016 Sinotrans 598 9M16 figures as we expected BUY Bruce Yeung
25/10/2016 TCL Display 334
Name change for China Display Optoelectronics
Technology (CDOT) (華顯光電) for better showcase
BUY Chloe Liu/Yuji Fung
25/10/2016 TCL Multimedia 1070 3Q16 results as expected BUY Chloe Liu/Yuji Fung
14/10/2016 TCL Display 334 Upgrade on higher sales, better ASP BUY Chloe Liu/Yuji Fung
12/10/2016 Sunny Optical 2382 Sept shipments in-line SELL Yuji Fung
11/10/2016 Q Tech 1478 Upgrade on higher than expected 3Q16 shipments BUY Chloe Liu/Yuji Fung
04/10/2016 Canvest 1381 New project in Lufeng City BUY Bruce Yeung
28/09/2016 UMP 722 Fine-tuned and ready for takeoff BUY Chloe Liu/Yuji Fung
27/09/2016 Youyuan International 2268 A butterfly emerging from a cocoon BUY Bruce Yeung
20/09/2016 Q Tech 1478 Riding the dual camera ramp BUY Chloe Liu/Yuji Fung
12/09/2016 TCL Display 334 August shipments rising on track BUY Chloe Liu/Yuji Fung
12/09/2016 Sunny Optical 2382 Aug shipments as expected SELL Yuji Fung
12/09/2016 Chunli Medical 1858 1H16 results overwhelm GPM and opex BUY Chloe Liu/Yuji Fung
02/09/2016 Anta Sports 2020 Keep the momentum going in 2H16 BUY Walter Woo
02/09/2016 Peak Sport 1968 Lack of other upside catalysts HOLD Walter Woo
01/09/2016 EGL 6882 Looking forward FY17E HOLD Bruce Yeung
31/08/2016 Wasion Group 3393 Another cut in State Grid tenders HOLD Bruce Yeung
30/08/2016 Shenzhen International 152 1H16 results inline HOLD Bruce Yeung
29/08/2016 Tcl Display 334 Rising star of TCL BUY Chloe Liu/Yuji Fung
29/08/2016 Truly Intl 732 All-around play BUY Chloe Liu/Yuji Fung
29/08/2016 Lifetech SCI 1302 1H16 results beat on opex control BUY Chloe Liu/Yuji Fung
29/08/2016 Display Module Sector - Riding on Technology upgrade BUY Chloe Liu/Yuji Fung
25/08/2016 Sinotrans 598 Solid gains with 1H16 performance BUY Bruce Yeung
25/08/2016 Harmonicare 1509 Downgrade on hospitals revamping HOLD Chloe Liu/Yuji Fung
24/08/2016 Canvest 1381 Solid results at higher costs BUY Bruce Yeung
24/08/2016 Chinasoft Intl 354 Reiterate BUY on solid 1H16 results BUY Chloe Liu/Yuji Fung
23/08/2016 HC International 2280 Core business in transition BUY Yuji Fung
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Rating and Related Definitions
Buy (B) We expect this stock outperform the relevant benchmark greater than 15% over the next 12 months. Hold (H) We expect this stock to perform in line with the relevant benchmark over the next 12 months. Sell (S) We expect this stock to underperform the relevant benchmark greater than 15% over the next 12 month. Relevant Benchmark Represents the stock closing price as at the date quoted in this report.
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