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Morning Bulletin Summary

Core Content Overview

This Morning Bulletin provides a comprehensive analysis of several listed companies in China and Hong Kong, focusing on their financial performance, strategic developments, and investment ratings. The report includes key insights on earnings guidance, valuation multiples, and potential risks or catalysts affecting their stock prices. It also highlights the current market environment and the research team's perspectives on each company.

Key Companies & Ratings

Biostime (1112 HK)

• Sector: Consumer
• Rating: SELL
• Target Price (TP): HKD48.00
• Consensus Target: HKD72.65
• Main Points:
  • Downgraded to SELL due to weaker-than-expected revenue growth and rising OPEX.
  • NPAT forecasts slashed by 13% for FY14/15F.
  • Valuation multiple reduced to 22X FY14F PER (from 25X).
  • Long-term initiatives like online-to-offline and personalized marketing are ongoing but unlikely to contribute significantly to near-term earnings.
  • Concerns over execution risk, competitive pressure, and dilution from new product lines.

BOC Hong Kong (2388)

• Sector: Banking
• Rating: SELL
• Target Price (TP): HKD19.60
• Consensus Target: HKD28.17
• Main Points:
  • Downgraded due to capital constraints and lower NIM projections.
  • CET1 CAR fell to 10.6% in Dec 2013, raising concerns about regulatory pressure.
  • Dividend payout ratio reduced from 60-70% to 40-60% to boost CET1 CAR.
  • Expected NIM to fall to 1.68% in 2014-15.
  • Lower long-term ROE assumption and TP adjusted to reflect P/B of 1.2x.

Bank of China (3988)

• Sector: Banking
• Rating: BUY
• Target Price (TP): HKD4.15
• Consensus Target: HKD4.09
• Main Points:
  • Maintained BUY rating with slight TP reduction.
  • Strong pre-provisional profit growth at 12.4% CAGR (2013-16).
  • Cost-income ratio expected to fall below 39%.
  • No urgent need to replenish equity capital; CET1 CAR to remain above 9.5%.
  • ROE dilution risk if preference shares are issued.

Dah Sing Financial (440)

• Sector: Banking
• Rating: BUY
• Target Price (TP): HKD53.80
• Consensus Target: HKD49.15
• Main Points:
  • Insurance business rebounding with net profit of HKD280m in 2014.
  • Expected net profit contribution from BOCQ to remain strong at 20-23%.
  • TP adjusted for rights issue dilution effect.

Dah Sing Banking (2356)

• Sector: Banking
• Rating: BUY
• Target Price (TP): HKD15.50
• Consensus Target: HKD14.36
• Main Points:
  • Healthy pre-provisional profit growth expected at 12% CAGR.
  • Credit costs expected to decline due to high collateral coverage.
  • Rights issue dilution effect estimated at 50bps on ROE.

Sinotrans (598)

• Sector: Transport
• Rating: BUY
• Target Price (TP): HKD4.55
• Consensus Target: HKD3.83
• Main Points:
  • Strong 3PL growth and improved freight forwarding margins.
  • Divestment of marine transportation expected to reduce earnings volatility.
  • TP raised to HKD4.55 based on forward SOTP valuation.
  • Positive outlook on earnings and recurring ROE of 9.1%.

Bolina Holding (1190 HK)

• Sector: Consumer
• Rating: HOLD
• Target Price (TP): HKD3.40
• Consensus Target: HKD3.4
• Main Points:
  • Downgraded from BUY to HOLD due to poor execution and inventory risk.
  • NPAT forecasts cut by 26% for FY14F and 35% for FY15F.
  • Management raised POS target for FY14F to 500-550.
  • Marketing and agent expenses expected to be non-recurring.

China LotSynergy (1371 HK)

• Sector: Internet
• Rating: BUY
• Target Price (TP): HKD1.00
• Consensus Target: HKD1.00
• Main Points:
  • Solid FY13 results with revenue and net profit beating estimates.
  • Management guided for 45,000 VLT terminals by end-2014, 15% above consensus.
  • Expected growth in non-VLT revenue to reach 50% of total revenue in three years.
  • Strong catalysts for re-rating include new VLT games, KENO rollout, and online lottery licensing.

Jiangxi Copper (358)

• Sector: Materials
• Rating: BUY
• Target Price (TP): HKD15.00
• Consensus Target: HKD14.02
• Main Points:
  • Copper prices down due to concerns over Chinese GDP and credit conditions.
  • Cut TP by 25% due to lower copper price peak forecast.
  • Continued belief in copper as oversold with potential for recovery.
  • Healthy balance sheet with cash at HKD7/sh.

China Gas Utilities

• Sector: Utilities & Renewable Energy
• Rating: OVERWEIGHT
• Main Points:
  • Initiate coverage at OVERWEIGHT due to strong structural growth potential.
  • Expected 20% CAGR in gas sales from 2012 to 2015.
  • Margins manageable due to ability to pass on cost increases to customers.
  • Potential catalysts: new infrastructure, M&A, and strategic co-operation.

Market Environment & Indices

• Market Capitalization (Mcap): USD4.2b
• Average Daily Trading Value (ADTV): USD10m
• Key Indices:
  • HSI: 21,888 (+0.72%)
  • HSCEI: 9,850 (+1.64%)
  • Light Crude: 106.62 (+0.03%)
  • BDI: 1,496 (-5.20%)

Research Team Contact Information

• Consumer: Jacqueline KO, CFA
• Banking & Financials: Steven ST CHAN
• Metals & Mining: Alexander LATZER
• Property & REITs: Karen KWAN
• Transport & Industrials: Philip TSE, CFA FRM
• Utilities & Renewable Energy: Ricky WK NG, CFA
• Technology: Warren LAU, William YANG
• Oil & Gas: Howard WONG, Head of Research
• Other Regions: Information on regional research heads and contacts is provided for Malaysia, Singapore, Indonesia, Philippines, Thailand, Vietnam.

Conclusion

The bulletin outlines a mix of SELL, BUY, and HOLD ratings for various companies across sectors. The key factors influencing these ratings include financial performance, strategic initiatives, regulatory pressures, and market dynamics. Investors are advised to consider the risk-to-reward profile, valuation multiples, and potential catalysts before making investment decisions.