China Shipping Development (Hong Kong Stock Code 1138) said it expects the Group to record a considerable decline by more than 50% to CNY 0 to CY 50 million in its profits attributable to the equity holders for the financial year ended 31 December 2012 as compared to that in the previous financial year. The decline in profits was mainly due to the sluggish demand and over supply of shipping capacity in the international and domestic shipping market in 2012, and which in turn resulted in the continuous downturn in the freight rates. Its final results will be announced on or before 31 March. The stock is down 3.82% to HK$4.28, up from earlier low of HK$4.23.
Category Archive: January
China Unicom (ADR: CHU, Hong Kong Stock Code 0762) rises 1.6% to HK$12.46, on news that it expects its FY12 net profit likely rose more than 50% on year thanks to more users of its higher-end services. This implies a FY12 net profit of at least CNY6.35 billion, given FY11 earnings of CNY4.23 billion, against an FY12 net profit of CNY7.01 billion currently pegged in a Thomson Reuters survey of 29 analysts–so it’s likely that Unicom’s earnings may actually fall short of expectations. The stock rose 1.0% to HK$12.26 Wednesday.
Barclays keeps Unicom at Equal Weight with an unchanged target price of HK$13. “We await signs of sustainable margin expansion to turn more positive. Against a more aggressive China Telecom (0728) and China Mobile (0941) into 2013 on smartphone adoption, we believe both top line growth and margins are likely to be more challenged than not.”
Bank of America – Merrill Lynch rates Singamas Container (Hong Kong stock code 0716), the world’s second largest container-box maker, at Buy with a price target of HK$2.94, implying P/E of 11.7X and P/B of 1.4X for 2013. “It is a pure play for the expected sequential demand improvement in the container manufacturing industry.” The house expects the Singamas to deliver 37%/49% earnings growth in FY13/14 on its high operating leverage. “We believe Singamas will benefit from a steadily improving container manufacturing industry, thanks to disciplined capacity growth, high industry entry barriers, and volume increases on low 2012 base.” Singamas ended the session 2.8% higher at HK$2.20.
ICBC (Hong Kong stock code 1398) drops 2.7% to HK$5.79 on news Goldman Sachs is raising around US$1 billion via placing shares in China’s biggest lender at HK$5.77 each, representing a 3.0% discount to ICBC’s close of HK$5.95 (+0.7%) Monday. The share sale is Goldman’s fifth since its first ICBC sale in 2009, and based on a Dow Jones calculation, Goldman would need to sell 1.344 billion ICBC shares in Monday’s block trade to raise $1 billion. After the share sale, the U.S. firm would hold around three billion shares, representing 3.4% of ICBC’s H-shares. The stake cut takes advantage of ICBC’s rally from a recent trough of HK$5.08 on Dec. 4; any knee-jerk reaction may not be exaggerated though given Goldman’s selling price values ICBC at 8.1X FY13 P/E with a decent dividend yield of 6.3%, based on Thomson Reuters consensus.
Li Ning (Hong Kong Stock Code 2331) fell 2.83% at HK$5.28 on the top of its 14.7% slump Friday which came on news it planned to raise up to HK$1.87 billion through the sale of convertible securities, causing dilution concerns as the fund-raising amount represents 33% of the sportswear firm’s market cap. JPMorgan says the open offer for convertible securities “essentially equates to a two-for-one rights issue at HK$3.50 per share,” and estimates its FY14 EPS forecasts would be diluted by about 41%. The house remains cautious on Li Ning, as it believes execution risks remain with respect to the company’s transformation plan, including ongoing execution risk at the distributor level, risk of higher-than-expected capex and opex, and risk that high levels of industry competition negatively impact the company’s transformation plans.
Deutsche Bank cut target price for Li Ning from HK$4.7 to HK$4.4, without yet factoring in the share dilution from the convertible securities. It maintained its “hold” call. The research house expects the issuance of convertible securities to weigh on its share price in the short term, but to enhance its profitability and competitiveness in the long term and optimize its capital structure.
Barclays Research thinks the timing of Li Ning’s convertible securities issuance is a surprise since it is only one year after the last round of convertible bonds issuance. During the conference call, there was limited quantitative information disclosure about the latest inventory clearance and sales trend, it noted. Barclays believes the “Channel Revival Plan” could be a prolonged battle, which is unlikely to take effect in the near term. That may also explain the urgency of convertible securities issuance. Overall, the house maintained its “underweight” rating and price target of HK$2.70.
HSBC Research downgraded Singamas Container (Hong Kong stock code 0716) to “neutral” from “overweight”, and maintained its target price of HK$2.5 unchanged. It cited management admitting that slowdown in business in late summer (till at least until November) was much worse than their initial estimates due to absence of peak season (impact dry box volumes), Maersk’s announcement of not ordering reefer boxes (to boost the freight rate) and continued European crisis (tank segment). To reflect the above, HSBC reduced its 2012 profit forecast by 35% and also cut its 2013-14 forecasts by 34-41% to reflect lower margin and volumes, particularly of specialised containers. HSBC forecast FY2013 net profit will grow 45% y-o-y and at a 29% CAGR in 2012-14.
Singamas is down 4.54% to HK$2.10.