20150127-工银国际-VIEWPOINTS_EXPRESS_14页_376kb_376kb

TMT Tour Key Takeaways II Summary

Core Content

• TMT Tour in Beijing: A tour of TMT companies was conducted, providing insights into the industry's performance and future outlook.
• Gome Electrical Appliances (493.HK): The company reported a 40% YoY earnings growth for FY14, driven by store optimization, improved supply chain management, and integration between online and offline operations. The stock is recommended as a BUY with a target price of HK$1.83.
• Market Performance: Equity indices and other financial indicators show mixed performance across regions, with some showing positive growth and others experiencing declines.
• Crowdfunding Growth: China's crowdfunding market saw significant growth in 2014, raising RMB915 million.
• Industry Developments: Several key developments were noted, including Alibaba's ban on toy sales to American buyers, Letv's new super TV launch, and Panasonic's plans to move digital camera production to China.
• Key Financials and Valuation: Financial statements and ratios for Gome show stable growth and improving margins, with the stock currently trading at attractive valuations.

Main Points

Gome Electrical Appliances (493.HK)

• 2014 Results: Positive profit alert with 40% YoY earnings growth.
• Performance Drivers:
  • Offline stores' same store sales growth of 4.5%–5.0%.
  • Online GMV growth of 80% YoY.
  • Stable gross margin at >18% and net margin at >2%.
• Valuation: The stock is currently trading at 9.8x FY15F P/E and 0.26x FY15F P/S, which is more attractive than peers like Suning (7.2x FY15F P/S) and JD.com (1.0x FY15F P/S).
• Recovery Story: Despite recent share price pressure due to slowing SSSG, the recovery story remains intact, supported by strong supplier relationships, logistics efficiency, and consumer understanding.

Market Performance

• HK Equities:
  • Hang Seng Index: Price 24,910, up 0.2%.
  • H-share Index: Price 12,228, down 0.3%.
  • Turnover: HK$83.8 billion, down 21.0% from HSI.
• China Equities:
  • CSI 300 Index: Price 3,608, up 1.0%.
  • Sh Composite Index: Price 11,687, up 2.2%.
  • Sz Composite Index: Price 1,548, up 2.2%.
• Asian Equities:
  • Nikkei 225: Price 17,469, down 0.2%.
  • Korea KOSPI: Price 1,936, flat.
  • Taiwan TWSE: Price 9,478, up 0.1%.
  • India Sensex 30: Price 29,279, flat.
• US/European Equities:
  • DJIA: Price 17,679, up 0.0%.
  • S&P 500: Price 2,057, up 0.3%.
  • NASDAQ: Price 4,772, up 0.3%.
  • UK FTSE 100: Price 6,852, up 0.3%.
  • Germany DAX: Price 10,798, up 1.4%.
  • France CAC40: Price 4,675, up 0.7%.

Other Indicators

• WTI Oil: $45.2 per barrel, down 1.0%.
• Gold: $1,281.1 per troy oz, down 0.7%.
• Copper Futures: $5,519.5 per metric ton, flat.
• Aluminum Futures: $1,831.0 per metric ton, flat.
• Reuters/Jefferies CRB Futures: 216.0, down 0.3%.
• Baltic Dry Index: 703.0, down 2.4%.
• UST Yield:
  • 3m: 0.01%, down 0.01%.
  • 10y: 1.82%, up 0.027%.
• HIBOR 3m: 0.39%, up 0.002%.
• USD LIBOR 3m: 0.26%, flat.

Key Information

TMT Highlights

• Alibaba will ban the sale of certain children's products to American buyers.
• Letv is set to launch a new super TV model, the X55 Air, with a 55-inch display and 4K resolution.
• Crowdfunding raised RMB915 million in 2014, with 116 platforms in China.
• Instagram is accessible in China, though with some service issues.
• Panasonic plans to move digital camera production to China in early 2015.

Maple Education (1317.HK)

• Growth & Margin: Expected top-line growth of 15%–17% in 2015, gross margin at 40%, net margin stable at 20%–25%.
• Expansion: Plans to open 12 new schools in lower-tier cities over the next three years.
• Student Growth: Average student enrollment growth of 15% YoY in the past three years, expected to remain stable in 2015.
• Tuition Fees: Annual increase of 10%–15% in tuition fees over the past three years, expected to remain stable.
• Revenue Share: 49%–50% revenue share for schools partnered with local governments.

TEDU (TEDU.US)

• Growth: Expected top-line growth of 35%–40% YoY in 2015.
• Expansion: Plans to open 35 new centers in 4–6 cities, with 20 in the first half of 2015.
• Courses: 12 courses currently in operation, with plans to add 2 IT-related courses.
• Accounting Course: 3 new classes opened in Beijing, each priced at RMB16,800, with 260 students in the first trial.
• Margin: Expect stable or slightly higher margins in 2015.
• Student Enrollment: Anticipated 5,000–6,000 students in 2015.
• Classroom Utilization: Expected to reach 70%–75% in 2015.
• Sales Team: New incentive policy improved marketing initiatives.
• Student Acquisition Cost: RMB1,200 per student.
• Teaching Capacity: Less than 40% increase with new centers.

Valuation and Financials

Gome Financials

• Revenue: Expected to grow steadily, reaching RMB77,343 million in 2016.
• Net Income: Projected to increase from RMB892 million in 2014 to RMB1,802 million in 2016.
• Gross Margin: Stable at 18.4%–18.9% over the period.
• SG&A/Sales: Declining slightly from 15.5% to 15.1%.
• Net Margin: Expected to rise from 1.6% in 2013 to 2.3% in 2016.
• ROE: Expected to increase from 5.6% in 2013 to 9.3% in 2016.
• Payout Ratio: Expected to remain at 20%.
• Debt/Equity: Net debt/equity is negative, indicating strong financial position.

Gome Valuation

• Forward PER: 9.8x for FY15 and expected to decline to 8.2x in FY16.
• Forward P/S: 0.26x for FY15 and expected to decline to 0.19x in FY16.
• Stock Price: HK$1.08 on 26 January 2015, with an upside of +69% to the target price.
• Market Cap: RMB18.31 billion, with a free float of 57.6%.
• Shareholders: Shinning Crown (27.24%), Bain Capital (9.97%), Huang & Du (5.19%).

Peer Comparison

Financial Ratios (Gome)