Pls see attached the full PDF research report, below is a highlight:
Strategy & Macro
CICC Macroeconomy Weekly Page 3
Global Recession and 8% Chinese Economic Growth
Expected in 2009
Many “firsts” for the Chinese economy suggest an acceleration of the economic downturn and much tougher challenges ahead than those in 1998. Corporate profits face a hard landing. The Chinese government announced an Rmb4trn economic stimulus program on November 10. We think this is necessary and within expectations, but it should have been introduced earlier. Following further deterioration of domestic and international economic leading indicators, we lower our 2009 organic GDP growth forecast to 6%. Considering the fiscal stimulus program may boost growth by 2ppt, the Chinese economy will likely achieve 8% GDP growth in 2009.
CICC Strategy Weekly (A+H) Page 5
Policy Benefits Taking Shape
Volatility in the HK market remained high last week as China introduced a massive fiscal stimulus policy and unattractive economic data were published here and abroad. Domestic A-shares rallied on the stimulus policy. We suggest HK market investors remain defensive and A-share investors sell at highs. The stimulus measures came more aggressively and more frequently than previously expected, and more may come, including looser monetary policies. The market should get less responsive; the final effect will depend on how the investment will be funded and where the investment will be channeled.
Listco Updates
China Dongxiang (3818.HK): BUY Page 7
Flat SSS in Oct; 31% 2Q09 Order Growth
Dongxiang recorded flat SSS in October. We believe that in addition to the impact of economic downturn, weather was a big influence on October sales. 2Q09 order growth is 31%, a good number and second only to Li Ning among sports operators. Future earnings very likely to meet our expectation. BUY maintained on the company’s clear positioning, long-term prospects and low valuation, but in the short term, Dongxiang is less defensive than Li Ning as it focuses more on fashion goods and apparel. Pair trading suggestion for short-term: long Li Ning, short Dongxiang, Belle, Anta, Xtep or Ports.
Netease.com (NTES.US): ACCUMULATE Page 11
Waiting for New Hits as FWWJ Keeps Growing
Strong 3Q growth mainly driven by FWWJ. PCU and ACU of FWWJ reached 2.3m and 675k. Gross revenue grew by 12.7% QoQ and 41.2% YoY. Net profit declined 28.2% QoQ but grew by 20.8% YoY. The QoQ decline resulted from a biased 2Q net profit with a business tax refund of Rmb146.8mn. FWWJ momentum is strong, but the company needs a new hit to move to new heights. Looking at the existing portfolio and pipeline games, we do not expect revenue powerhouses like FWWJ. A Blizzard deal could be something big, but would not create meaningful contribution until 2010. Our target price is US$25.10, representing 12x 2009 forward-looking P/E.
PICC (2328.HK): HOLD Page 16
PICC Announced October Premium Income under
PRC GAAP
October premium income totaled Rmb6.496bn under PRC GAAP, up 10.2% YoY, slightly higher than the growth of 8.4% in September. Although the YoY growth rate rebounded a little, with a slight increase in auto sales, the trend of slowing premium growth is obvious and hard to stop. 2008 is a very tough year for PICC, in view of deteriorating investment returns and surging combined ratio caused by the rougher price war and frequent natural disasters. Slowing premium growth strengthens our worries about underwriting performance. PICC may suffer net losses on a full-year basis in 2008.
CIIH (966.HK): HOLD Page 18
Tai Ping Life’s October Premium Income Released
In October, Tai Ping Life kept its credit rate unchanged to alleviate the big cut’s negative impact on premium income growth. However, in view of shrinking bancassurance channel and relatively low credit rate among peers, we expect Tai Ping Life’s premium income growth to slow further or even turn negative in 4Q08 and 1H09. Considering the inevitable slowdown in premium income growth and probable further decline in investment returns, we maintain our HOLD rating.
Sector Updates
China Banking Weekly, Volume 8 Page 21
The PBoC issued five measures to ease credit controls currently in force. Industry allocation of bank loans may change. US to change bailout plan. Chinese banks are facing more risks in foreign-currency bond investment. Total assets of Chinese banking topped Rmb50trn. ICBC plans to acquire 60~70% of a Philippine bank; due diligence will start next week. BOC issued US$13.6bn loans for overseas M&A deals. SPDB may delay its 800mn share secondary offering plan.
Power: October Power Consumption Shrank 2.7% YoY Page 25
China Electricity Council (CEC) announced that national power consumption over January~October rose 8.3% YoY to 2.8969tn kWh in 2008, with a decline in October power consumption due largely to slower consumption growth by heavy industries. Power generation is expected to hold steady in the long term. Bottom line implications of slower power consumption growth for thermal power producers are more positive than negative. The A-share IPPs are now trading at 2.2x P/B on average, indicating little advantage. Some H-share IPPs are trading at as low as 0.5x P/B, offering value for long-term investment
Aviation: News Report: CSA & CEA to Receive Page 29
Rmb3bn Asset Injection [attach]9977[/attach]
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发表于 2008-11-19 10:28
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