FW: HTI Asia-Ex Daily 20160722 (Initiation with a SELL rating on SunArt (6808 HK), negative on the supermarket in general; SELL on Tingyi (968 HK), continue weak demand outlook; Update on Xinyi Solar (968 HK) with results likely be better than we expected

[Ye Tian (James)]

 

 

Asia Ex Key Market Focus
Company/ Market	Focus
Quality 100 A-Share (Q100) Index	Rebalance and Monthly Snapshot
Sun Art Retail (6808 HK, SELL)	Leading Supermkt Operator in CH Faces Challenges from Online
Tingyi Holding (322 HK, SELL)	Dampened Demand Due to Floods in Southern China
Xinyi Solar (968 HK, BUY)	Results Likely to Be More Resilient than We Expected
Li Ning (2331 HK. BUY)	Gaining Confidence in a Turnaround
ANTA Sports (2020 HK, BUY)	June Performance Likely to Pick Up
Bizlink (3665 TT, BUY)	Implication from Tesla’s New Master Plan
Cathay Specific	Outbound Direct Investment Surges in H1
Haitong International
Updates   Quality 100 A-Share (Q100) Index Rebalance and Monthly Snapshot (Desmond Chan) l   Grew of 6.7% in Q2 FY16: The buoyant property market and government stimulus boosted demand for factory output has helped the economy to avoid a hard landing n Investment contributed only 2.5% to GDP growth n Consumption contribution rose to 4.9% l   Good news for Consumption: Retail sales grew 10.6% in June, however, industrial economy continues to suffer from unrestrained overcapacity and deflation l   Performance of Q100 A-Share Index: Added 3.67% through July 15, slightly underperformed the CSI300 Index by 0.94% in the month n Top three sectors in the in the Q100 index are Financials, Consumer Discretionary, and Consumer Staples l   Regaining Confidence in the A-share: We think it is happening since Brexit has indirectly helped to reduce concerns of a ‘risk off’ shock from China l   Performance and Rebalance: The Q100 index recorded one-year vol of 14.49%, down from 38.97% in June with the information ratio stood at of 1.78x.  We have made 10 additions and deletions to the index which is shown on page 8 of the reports   http://equities.htisec.com/x/pdfView?_S=Ico6aU7JPwNAe84Y8OSwzxT0al     Sun Art Retail Group (6808 HK, SELL (Initiation), TP: HK$4.50, -20% Downside) – Leading Supermarket Operator in China Faces Challenges from Online (Jessica Hong / Jessica Ye) l   Structural Downtrend: With margins and market share declining due to the rapid adoption of e-commerce, which we estimate to last for another five to eight years l   Our Estimate on SSSG: We expect SSSG to fall by 1% YoY in FY16-18 l   Difficulty for online Grocery Store: We argue that it is difficult for an online grocery store to make profits because the smaller average order value does not generate sufficient margin to cover handing and delivery costs l   Valuation too High: The current PER of 19.5x on our FY17 EPS estimate is too high given the negative NP CAGR we estimate l   Valuation: TP is based on a PER of 15.6x our FY17 EPS estimate l   Catalysts: Negative one include announcement of weaker SSSG in Q2 FY16 than the 1.1% YoY in Q1   http://equities.htisec.com/x/pdfView?_S=3YbGATnc6cVBZtEB0FJoJHbOkP     Tingyi (Cayman Islands) Holding (322 HK, SELL (From NEUTRAL), TP: HK$5.70, -19% Downside) – Dampened Demand Due to Floods in Southern China (Nicolas Wang) l   Sluggish Sales Volume Outlook: We think it will be sluggish in the medium term, and floods in Southern China should significantly dampen demand for beverages and beer products in Q2 FY16 and part of Q3 FY16 l   Impact of New Pricing: The new pricing policy for instant noodles and beverages is expected to start having positive effect on sales in at least two to three quarters l   Excessive Production Capacity: It remains a heavy burden and the utilization rate is expected to stay low l   Earnings: We revise down our EPS forecasts by 24-28% for FY16-18, to reflect our lower expectations for production utilization rates than before l   Valuation: TP is based on a 15x our FY17 EPS forecast l   Catalysts: Shorter-term negative one include the floods in southern China   http://equities.htisec.com/x/pdfView?_S=feOqYINmMwBylJt3kDuwxAORHo     Xinyi Solar Holdings (968 HK, BUY, TP: HK$4.00, +29% Upside) – Results Likely to Be More Resilient than We Expected (Fook Tat Cho) l   Result Announcement: Expect the Co to announce H1 FY16 results in early August, the Co expects H1 FY FY16 NP to rise by 70-80% YoY, a 50% rise in sales volume + margin expansion l   Full Year Number Could Exceed our Forecasts: H1 FY16 NP is expected to be equivalent to 64-71% of our prior forecast for FY16 l   Earnings: Revise up our FY16-18 NP estimates by 5-13% and now forecasting a 50%, 34% and 13% YoY growth for the next three fiscal year respectively l   Valuation: TP is based on15x our FY16 EPS forecast, raised from HK$3.9 to HK$4.0 l   Catalysts: New solar-glass production lines starting up in Anhui and Malaysia over Q4 FY16 – Q1 FY17 and a possible spin-off of the solar-farm business   http://equities.htisec.com/x/pdfView?_S=cLXHYFE1JCJwLGLegt2nCArvzd     Li Ning (2331 HK, BUY, TP: HK$4.90, +19% Upside) – Gaining Confidence in a Turnaround (Jessica Ye / Jessica Hong) l   Operational Update: Will announce its interim on August 11 and plans to issue an operational update for Q2 FY16 in the meantime l   Growth in Q2 FY16: Expect the Co is likely to show some sequential improvement in both growth and profitability l   Our Expectation: Co to achieve NP of Rmb297mn for FY16, due to the 13% YoY rev growth and net margin expansion to 3-4% l   Valuation: TP is based on 20x PER to our FY17 EPS forecasts l   Catalysts: Interim results, scheduled to be announced in August   http://equities.htisec.com/x/pdfView?_S=Xm0IrBvT0WkKNGQg3blaNQMQA9     ANTA Sports Products (2020 HK, BUY, TP: HK$23.50, +31% Upside) – June Performance Likely to Pick Up (Jessica Ye / Jessica Hong) l   Result Announcement: Will be in late August and we expect the announcement of a separate operational update in late July is likely l   Retail Sales Growth Likely to Pick Up: It should have been pick up in June with better weather and ANTA Kids is showing relatively high growth l   Long-Term Perspective: Given its proven operational capabilities and strong management team n It is bringing in high-end brands and diversification of product mix should provide a driver for long-term growth n Expect the OPM to stay high from OPM expansion l   Earnings: We forecast growth of 17.3% and 14.8% at the top and bottom lines, respectively, for FY16 l   Valuation: TP is based on 21x our FY16 EPS forecasts l   Catalysts: A pick up in retail sales growth in June, which is likely to be announced in late July   http://equities.htisec.com/x/pdfView?_S=GzmLdjdV2yetug6D7X5USrFvWq     Bizlink Holding (3665 TT, BUY, TP: NT$232.2, +23% Upside) – Implication from Tesla’s New Master Plan (Gary Cheung) l   New Vehicles of Tesla: Two new vehicles ti be released in 2017 which could present as new growth drivers for Bizlink (assuming these models use the same battery tech as previous models) n Heavy Duty Truck & Bus l   More Car Models Planned After Mass-market Models: Tesla also aims to address more segment in the consumer market with a future compact SUV and a new kind of pickup truck other than Model3 l   Our View: We maintain our BUY rating and think Bizlink should be benefit from Tesla’s volume ramp     Cathay Specific: Outbound Direct Investment Surges in H1 (Leanne Wang) l   Macro News and A-share Strategy: According to the Ministry of Finance & Commerce, China’s outbound direct investment (ODI) jumped 45% MoM to Rmb100bn in June.  Total ODI for the first six months of 2016 reached Rmb580bn, up 59% from the end of 2015 l   Yonghui Superstores (601933 CH): Received Approval from the CSRC for its Rmb6.5bn private placement plan l   Zhejiang China Commodities City Group (600415 CH): H1 FY16 preliminary earnings for Zhejiang China Commodities City Group show NP up 150-180% YoY l   Muyuan Foodstuff (002714 CH): Muyuan Foodstuff reported a 2,189.9% YoY jump in NP to Rmb1.1bn   http://equities.htisec.com/x/pdfView?_S=KxlH4IRHnDxsct8PVqyxO7601e
Upcoming Analyst Marketing Analyst name/Sector Region Marketing/Date Billy Leung / China Internet HK / Jul 20 – 25 Billy Leung / China Internet Taipei / Jul 28 – 29 Nicolas Wang & Hongwei Wen / (CH Healthcare + Consumer) USA / Aug 1 – 5 Yuan Yuan Ji / (China Small Cap) SZ and GZ / Aug 1 – 2 Yuan Yuan Ji / (China Small Cap) SH / Aug 3 – 5 Billy Leung / China Internet SZ and GZ / Aug 8 - 9 Billy Leung / China Internet SH / Aug 10 - 11
Upcoming Primary Sources Date – Location Company Jul 25 – 29 / HK Project Sunrise - ECM Aug 8 / HK Xinyi Glass (868 HK) / NDR Aug 19 / HK Li Ning (2331 HK) / NDR Aug 22 – Sept 7 / Conf Call Asics (7936 JP) / NDR Aug 22 – Aug 25 / Conf Call Suzuki Motor (7269 JP) / NDR Auf 26 / HK Whitehaven Coal (WHC AU) / Breakfast Meeting Aug 29 – 30 / SGP SITC (1308 HK), NDR Aug 31 / Taiwan SITC (1308 HK), NDR Aug 31 / HK Emperor Watch and Jewel. (887 HK) / NDR Sept 1 / HK Genscript (1548) / NDR - ECM Sept 1 / Shanghai SITC (1308 HK), NDR Sept 2 / Guangzhou, Shenzhen SITC (1308 HK), NDR

 

 

 

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