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CMS (HK) Research Highlights Summary

Core Content

This document provides a comprehensive summary of research highlights from CMS (HK) covering various sectors, including property, auto, and technology, as well as macroeconomic and currency outlooks.

Key Sectors and Companies

Property Sector

• China Overseas Grand Oceans (81 HK)

  • Rating: BUY
  • Target Price (TP): HK$3.3
  • Key Points:
    • 1Q16 results showed recovery with revenue up 86% YoY to HK$3.4bn.
    • Operating margin improved to 8.9% from 6.8% in 4Q15.
    • Estimated earnings growth of 55% / 60% for FY16/17E.
    • Attractive valuation with 2.8x FY17E P/E (bull-case: 1.1x P/E).
    • Positive FCF and fast asset turnover strategies.
    • Catalysts include policy support for Tier-3 cities and active M&A activity.

• Xinyi Solar (968 HK)

  • Rating: BUY
  • TP: HK$4.3
  • Key Points:
    • Strong growth in solar processed glass ASP.
    • Double glass modules improve efficiency without significantly raising costs.
    • Expected revenue growth from wider adoption of double glass modules.
    • Forecasted net profit CAGR of 39% for FY15-FY18E.
    • Trading at 16x FY16E P/E, below the sector average.

• IMAX China (1970 HK)

  • Rating: BUY
  • TP: HK$55.30
  • Key Points:
    • Strong 1Q16 earnings growth with net profit of US$8.6mn.
    • Net margin improved to 34%.
    • Per screen average (PSA) remained resilient despite expansion.
    • Potential catalysts: faster expansion and recovery in box office growth.
    • Trading at 33x FY16E P/E, lower than global peers but higher than China peers.

• Other Property Companies:

  • China Resources Land (1109 HK): BUY, TP HK$23.8
  • Yuzhou Property (1628 HK): BUY, TP HK$2.6
  • Country Garden (2007 HK): NEUTRAL
  • Agile Property (3383 HK): BUY, TP HK$5.0
  • Greentown China (3900 HK): NEUTRAL
  • China Overseas Land (688 HK): NEUTRAL
  • CH OVS G OCEANS (81 HK): BUY, TP HK$3.3
  • Shimao Property (813 HK): BUY, TP HK$14.0
  • CIFI Holdings (884 HK): BUY, TP HK$2.0
  • China Merchants Land (978 HK): BUY, TP HK$1.5

Auto & Auto Parts Sector

• Brilliance China (1114 HK): BUY
• China ZhengTong Auto (1728 HK): BUY
• Geely Automobile (175 HK): BUY
• BAIC Motor (1958 HK): NEUTRAL
• Great Wall Motor (2333 HK): NEUTRAL
• Fuyao Glass (3606 HK): BUY
• China Harmony Auto (3836 HK): BUY
• Zhongsheng Group (881 HK): NEUTRAL

Oil and Gas Sector

• Sinopec Oilfield Service (1033 HK): NEUTRAL
• China Oilfield Services (2883 HK): SELL
• CNOOC (883 HK): BUY

Technology, Media & Telecom Sector

• China Telecom (728 HK): NEUTRAL
• China Unicom (762 HK): BUY
• China Mobile (941 HK): BUY
• Wisdom (1661 HK): BUY
• C CHUANGLIAN ED (2371 HK): BUY
• Kingdee (268 HK): NEUTRAL
• Chinasoft (354 HK): BUY
• Kingsoft (3888 HK): BUY
• Boyaa Interactive (434 HK): NEUTRAL
• Car Inc (699 HK): BUY
• Tencent (700 HK): BUY
• NetDragon (777 HK): BUY
• Linekong Interactive (8267 HK): NEUTRAL

Key Market Insights

• Stock Market Indices:

  • Hang Seng Index: 21467.04, -0.78%
  • Hang Seng Finance Index: 28167.73, -0.58%
  • Hang Seng Utilities Index: 53148.24, -0.97%
  • Hang Seng Property Index: 29942.52, -0.8%
  • Hang Seng Industrial Index: 12977.87, -0.81%
  • HSCEI: 9120.91, -1.38%
  • CSI 300: 3174.9, +0.45%
  • Shanghai Composite Index: 2959.24, +0.22%
  • TWSE: 8535.75, -0.38%

• Global Markets:

  • Brent Oil: +1.41%
  • COMEX Gold: -1.33%
  • COMEX Copper: +0.62%
  • LME Aluminum: +1.07%
  • LME Copper: +0.67%
  • BDI: +2.69%

• Exchange Rates:

  • USD/RMB: +0.41%
  • USD/HKD: -0.0%
  • EUR/USD: -0.58%
  • 1Y RMB NDF: +0.07%
  • 3M Libor: +0.47%
  • 3M Shibor: +0.24%
  • 10Y US T-Note Yield: +0.53%

Currency Outlook

• USD Weakness: The DXY index has weakened from 100 to 94.5, with JPY appreciation seen as transitory.
• RMB Deprecation: If USD rebounds, RMB depreciation expectations may return, but macroprudential measures limit downside risk.
• Monetary Policy Divergence: Continued divergence between US and European monetary policies is expected, with USD likely to strengthen over the medium term.

What to Watch

• Economic Data:
  • US - New Home Sales: Forecasted at 0.53mn, up from 0.51mn.
  • Germany - Import Prices: -0.60%
  • Germany - Retail Sales: -0.40%
  • US - Durable Goods: Forecasted at 1.70%, up from -2.80%
  • US - GDP Advance: Forecasted at 0.80%, up from 0.70%
  • China - Non-Mfg PMI: Expected on May 1, 2016.

Analyst Comments

• Lynn Song: Notes that ECB's stance on negative interest rates is strong, and while USD weakness is expected to persist, it is not a long-term trend. The RMB may face pressure if USD rebounds, but macroprudential measures limit the downside.
• John SO: Recommends BUY for COGO due to attractive valuation and potential earnings growth.
• Nelson LEE: Recommends BUY for XYS due to strong fundamentals and potential growth from double glass modules.
• Angela HAN LEE: Recommends BUY for IMAX China due to strong earnings and network expansion.
• Wang Zhen and Zhang Xia: Highlights the influence of institutional investors in the A-share market and the implications for market trends.

Summary of Key Points

• COGO: Strong earnings recovery, positive FCF, and attractive valuation.
• XYS: Wider adoption of double glass modules is a growth catalyst.
• IMAX China: Strong 1Q16 results and solid network expansion.
• USD/RMB: RMB depreciation may return if USD strengthens, but macroprudential measures limit risks.
• Institutional Investors: Hold about 30% of A-share free float, with limited room for further accumulation.
• Market Outlook: Short-term weakness in USD may be transitory, with medium-term strength expected.