Hutchison Whampoa (OTC: HUWHY, Hong Kong Stock Code 0013) is up HK$0.05 at HK$80.55 versus the HSI’s 0.86% decline, forty minutes after the afternoon session began.
Bank of America Merrill Lynch reiterated Buy on Hutchison,with a target price of HK$98, as the group’s business is mainly concentrated in mature economy and its Hong Kong investment properties account only for 10% of total assets, which are not wary of rising interest rate in Hong Kong. A projected double-digit profit growth until the financial year 2016 will offset higher interest rate concerns, the broker said.Bank of America Merrill Lynch kept the earnings forecast on Hutchison with an estimated net profit growth of 9% for 2013 on the back of infrastructure, 3G business and retail business.
Nomura raised its target price for Hutchison Whampoa (OTC: HUWHY, Hong Kong Stock Code 0013) to HK$100 from HK$96.4, and maintained its “buy” call.
The research house said its positive investment thesis on Hutch is based on the “unwinding of the Europe fear factor” and growth momentum of its recurring earnings. Nomura said Europe is incrementally less of a concern for investors, based on its marketing trips around Asia and Europe over the last two months. It noted that trough discounts for Hutch have been moving up since 3Q 2011, suggesting that Europe could be incrementally “less bad”.
On the other hand, Hutch has relatively small exposure to HK properties (11% of NAV) and China generally (19% of EBIT), both of which have become more of a concern for investors. The house raised its FY2013-14 EPS by 4%-6% following an analysis of Hutch’s 2012 annual report, and factoring in higher earnings from property and telecom. It projected 14% EPS CAGR for Hutch during 2012-15.
Zoomlion Heavy Industry Science and Technology (Hong Kong Stock Code 01157) hit all-time intraday low at HK$6.51 this early morning and dropped 4.8% to HK$6.571 at midday, despite it announced the management has increased stake in the share.
Last week the company publishes a denial to allegations from a Chinese website that its sales data included false numbers. Zoomlion notes that it recorded an aggregate CNY567 million worth of products returned to the company from the Central China region between August and November last year, and that’s against revenue of CNY908 million for the region in the same period.
The company clarified that in the course of operation, exchange or replacement of products does occur but it is also the normal practice of other industries and companies. All incidents relating to exchange and replacement of products were recognized strictly in accordance with the applicable accounting standards. The aggregate sales amount in the period from August 2012 to November 2012 was comparatively less than that of the whole year of 2012 and the aggregate amount of products returned in the same period was higher than that of the whole year of 2012 due to the following reasons, including the continual market decline which was beyond expectation, stringent commercial terms of contracts and the overall strengthened risk control.
Zoomlion said three of its customers have respectively issued formal statements confirming the true existence of their transactions with the company. Besides, Zoomlion took the initiative to readjust the operation strategies, strengthen control on recovery of trade receivables and improve commercial terms of the contracts for the purpose of strengthening risk control and upgrading quality of operation in the fourth quarter of 2012. As a result, the sales revenue in the fourth quarter of 2012 fell 31.7% and net profit by 82.4% compared to the same period in the previous year, which was lower than the average decrease of the aforesaid six listed companies by 8.2 percentage points. Zoomlion has applied for the resumption of trading in shares this morning.
China National Building Material (Hong Kong Stock Code 3323) drops 3.5% to intraday low of HK$7.80 on news that it has withdrawn its A-share IPO application. Deutsche Bank says China has tightened IPO requirements, making it hard for CNBM to meet them as the company’s 1Q profit dropped 48% while the debt ratio increased by 313%. The bank says CNBM may raise funds in Hong Kong and downgrades it to Sell rating, with a target price of HK$7.42
Credit Suisse cut its target price for Lee & Man Paper (Hong Kong stock code 23149) to HK$5.2 from HK$6.6, and maintained its “neutral” call. The research house said the selling price of Chinese containerboard has been reduced by RMB50-100/t after the Chinese New Year in February. It believes the lowered material prices are a result of soft end demand in China. The containerboard selling price may go down by another Rmb50-80/t in the coming month. Credit Suisse estimated Lee & Man’s net margin to stand at HK$432/t should the demand remain stable. However, if the containerboard selling price fails to increase on soft demand in the upcoming production season, the company is likely to see further margin pressure. In view of the softer paper price, the house reduced its 2013-15 forecasts by 1-2%. It added that Nine Dragons (02689) is subject to more earnings downside risk should the paper price weakness be persistent, with a higher operating and financial leverage.
Lee & Man Paper, dropped 4.7% to HK$4.89 while Nine Dragon Paper slid 8.4% to HK$5.23.
JP Morgan Chase sold 14.8 million shares of China National Building Material (Hong Kong Stock Code 3323) at HK$8.60 apiece last Tuesday, May 28, in less than a week after it sold 26.9 million shares at HK$8.84 apiece on May 24. The house has now futher reduced its stake by 0.51% to 12.89%. The stock plunged 3.7% to HK$7.80 at midday.