company name (hk$) (hk$m) per (x) (x) yield (%) turnover (hk$) … · 2018-03-05 · transsion,...

1

Yum Cha 飲茶 March 5, 2018

INDICES Closing DoD%

Hang Seng Index 30583.5 (1.5)

HSCEI 12203.9 (1.8)

Shanghai COMP 3254.5 (0.6)

Shenzhen COMP 1822.2 (0.6)

Gold 1322.8 0.4

BDIY 1207.0 0.9

Crude Oil, WTI(US$/BBL) 61.3 0.4

Crude Oil, BRENT(US$/BBL) 64.7 0.6

HIBOR, 3-M 1.1 (2.6)

SHIBOR, 3-M 4.7 0.1

RMB/USD 6.3 (0.2)

TALKING POINT - REVIEW RESULTS OF STOCK CONNECT STOCK LIST

Shanghai Stock Exchange released the updated stock list for the southbound stock connect last Friday. 14 stocks are added while 10 stocks are removed. As expected, new economy names such as China Literature (0772.HK) and Yixin (2858.HK) are included in the new addition list. The stock list will become effective today. Meanwhile, we expect Shenzhen Stock Exchange will also release the updated stock list for the southbound stock connect very soon.

Stocks to be added to the Stock Connect universe

TickerCompany name

Price

(HK$)

Market

cap

(HK$m)

2017E

PER (x)

2018E

PER (x)

PBR

(x)

2017E

dividend

yield (%)

3-month

average daily

turnover (HK$)

87 HK Equity SWIRE PACIFIC B 13.48 110,892 21.26 14.72 0.43 n.a. 48,566,620

1378 HK Equity CHINA HONGQIAO 8.62 75,670 8.06 5.28 1.10 3.18 178,283,300

772 HK Equity CHINA LIT 76.15 69,024 129.37 63.68 8.36 n.a. 192,259,500

582 HK Equity LANDING INTL 0.34 50,114 n.a. n.a. 3.26 n.a. 102,280,800

2858 HK Equity YIXIN 5.94 37,281 70.79 26.74 n.a. - 64,944,300

1030 HK Equity FUTURE LAND 6.19 36,677 11.00 6.95 3.05 2.79 216,239,300

1141 HK Equity CMBC CAPITAL 0.6 27,467 n.a. n.a. 22.16 n.a. 20,812,610

1638 HK Equity KAISA GROUP 4.11 24,922 16.25 7.32 1.22 - 109,415,500

127 HK Equity CHINESE EST H 12.32 23,502 n.a. n.a. 0.88 n.a. 21,443,360

2232 HK Equity CRYSTAL INTL 8.21 23,422 17.47 14.77 7.71 1.43 19,371,010

1628 HK Equity YUZHOU PPT 4.98 20,841 5.87 4.52 1.43 6.05 90,554,730

45 HK Equity HK&S HOTELS 12.1 19,227 31.03 28.47 0.52 1.65 11,542,970

754 HK Equity HOPSON DEV HOLD 7.46 16,603 12.64 11.84 0.29 2.41 8,731,286

1269 HK Equity FIRST CAP GP 3.32 16,175 n.a. n.a. 3.60 n.a. 11,929,840

Stocks to be removed from the Stock Connect universe

TickerCompany name

Price

(HK$)

Market

cap

(HK$m)

2017E

PER (x)

2018E

PER (x)

PBR

(x)

2017E

dividend

yield (%)

3-month

average daily

turnover (HK$)

2888 HK Equity STANCHART 85.55 282,040 14.80 12.37 0.70 2.54 154,641,700

1031 HK Equity KINGSTON FIN 4.7 63,988 n.a. n.a. 3.20 n.a. 60,792,200

3698 HK Equity HUISHANG BANK 4.09 45,194 4.96 4.47 0.67 3.44 3,148,188

41 HK Equity GREAT EAGLE H 39.45 27,166 14.47 13.81 0.46 1.98 6,649,595

3331 HK Equity VINDA INT'L 15.36 18,343 24.19 19.77 2.26 1.36 3,294,679

2329 HK Equity GUORUI PPT 2.18 9,687 n.a. n.a. 0.80 n.a. 2,014,372

2199 HK Equity REGINA MIRACLE 6.8 8,325 26.98 14.91 3.11 1.15 3,079,684

861 HK Equity DC HOLDINGS 4.41 7,397 n.a. 21.72 0.81 - 13,789,900

787 HK Equity GLOBAL BRANDS 0.55 4,704 10.03 5.85 0.23 n.a. 23,108,100

1315 HK Equity VISION FAME 0.375 2,250 n.a. n.a. 7.41 n.a. 6,066,714

Source: Bloomberg, CGIS Research

Analyst: Wong Chi-man, CFA

RESEARCH NOTES

CHINA SECURITIES SECTOR - The China securities sector was one of the most underperform-ing sectors in 2017 because of lacklustre trading volume, along with a more stringent regulatory environment. Since the deleveraging process in the economy is still ongoing and the regulatory environment is likely to remain stringent because of the potential restructuring of the regulators, the valuation of securities companies may be capped in the near term. However, as the valua-tion has already reached a multi-year low in terms of PBR, it reflects most of the negatives, in our view. Therefore, we have a BUY rating on GF Securities (1776.HK; GFS), Haitong Securities (6837.HK; HTS) and CITIC Securities (6030.HK; CITICS) on the back of the cheap valuations. Short-term catalysts include listing reforms and the official inclusion of A-shares in the MSCI Emerging Markets Index in mid-2018.

WEEKLY SHORT SELLING ANALYSIS - Last Friday, the HKSFC released the aggregate short positions data for February 23. We analyzed which companies may be vulnerable to short-selling activity, based on the following three criteria: (i) the net change in short positions between Febru-ary 15 and February 23; (ii) short positions as a percentage of free float; and (iii) the absolute amount of short positions. According to the results of our analysis, we believe China Coal (1898.HK) requires close monitoring, based on the latest short positions outstanding. On the other hand, we note that short positions in ENN Energy (2688.HK) and Pacific Basin (2343.HK) have dropped significantly.

DATA RELEASES DUE THIS WEEK

March 5 National People’s Congress

March 5 Caixin Composite PMI Feb

March 5 Caixin Services PMI Feb

March 7 Foreign Exchange Reserves Feb

March 8 Balance of Trade Feb

March 8 Exports YoY Feb

March 8 Imports YoY Feb

March 9 Inflation Rate YoY Feb

March 9 Inflation Rate MoM Feb

March 9 PPI YoY Feb

Source: Bloomberg

2

RESEARCH NOTES

CHINA CEMENT WEEKLY — The average cement price (nationwide) decreased 2% to RMB387/tonne compared with the price level before the Chinese New Year (CNY) holiday. The regions with a decline of RMB20-50/tonne were mainly east

China, south central China and southwest China. Cement demand remained at a low level during the week, as it takes time

for construction activity to resume after the CNY holiday. The decline in cement prices is not a surprise, as it is a common

practice to lower prices to stimulate downstream demand just after the CNY holiday. There is an increase in cement invento-

ry because of weak demand during CNY, but the inventory level is likely to come down once more construction activity re-

sumes in the next one to two weeks. Cement prices are expected to rebound in late March.

SNIPPETS

CHINA TMT HARDWARE: IPO OF FOXCONN INDUSTRIAL INTERNET — According to Chinese news flow, CSRC will

discuss Foxconn Industrial Internet’s (FII) IPO on 8 Mar 2018, which is line with our previous discussion that FII’s IPO is

likely to kick off soon, with the whole process expected to be completed by the end of Apr 2018 (based on the current infor-

mation, the IPO can be completed by end of Mar 2018 if the process goes smoothly). FII’s IPO process is very smooth, as:

a) Hon Hai hosted a shareholders meeting on 31 Jan 2018; b) FII posted the first draft of its prospectus on 9 Feb 2018 and

received the CSRC's enquiries, c) FII replied to all of the CSRC's enquiries and posted its updated draft prospectus on 22

Feb 2018; and d) FII received the CSRC’s discussion on its IPO on 8 Mar 2018. It took about a month from posting the

draft prospectus to seeking CSRC’s approval, which shows that the Chinese government is very supportive of FII’s listing.

FII reported turnover of RMB172.8bn, RMB272.7bn and RMB354.5bn in 2015, 2016 and 2017, respectively. FII also re-

ported a net profit of RMB14.4bn, RMB14.4bn and RMB15.9bn in 2015, 2016 and 2017, respectively. There is limited infor-

mation on the pricing and size of FII’s IPO. According to Chinese new flows, the proceeds from the IPO are estimated at

RMB27bn, and most of the proceeds will be used for investment in the Industrial Internet, high-performance computing

data center construction, 5G & IoT solutions, smart manufacturing (R&D and capacity expansion), and procurement of

networking equipment. Chinese news flow also suggests FII’s market cap will be in the range of RMB300bn to RMB500bn.

We expect more details on FII’s IPO to be circulated after its gets approval from the CSRC, and we expect the market to

search for proxies. Some investors may treat FII as an Apple-related name, so the IPO may boost sentiment on Apple

suppliers. However, we believe that FII is a symbolic name regarding the investment theme of the Industrial Internet, which

is an integration of several areas, including: a) cloud computing, b) high-end manufacturing, c) Big Data, and d) high-

precision equipment. We note that MIIT posted a notice on its website on 24 Feb 2018 regarding forming an “Industrial

Internet Task Force” to take charge of development of the industrial internet in China. We believe that FII’s IPO will be

used as a symbolic case for promoting the Chinese government’s policy on the Industrial Internet. We reiterate our view

that FII will be one of the largest IPOs in the A-share market and one of the largest listed companies after the completion of

the IPO. We maintain the view that Industrial Internet is one of the hottest topics in the A-share market and that it will be a

major investment theme in 2018. The potential beneficiaries are: a) machine makers such as Haitian [1882.HK], solution

providers such as O-Net [0877.HK] and PentaMaster [1665.HK], IT solutions and cloud computing such as Kingdee

[0268.HK], Kingsoft [3888.HK] and DC Holdings [0861.HK], and communications equipment such as O-Net [0877.HK] and

ZTE [0763.HK]. For details, please refer to our previous discussion.

3

SNIPPETS

CHINA TMT HARDWARE — Shimge Pump Industry Group (Shimge Pump) [002532.CH] announced that it is in discus-

sion with Transsion Holdings (Transsion) regarding an asset sale and swap transaction. According to its corporate website,

Transsion, which was established in 2006, is a global company dedicated to providing popular mobile communication prod-

ucts for local consumers in emerging markets. Transsion's sales network covers Nigeria, Kenya, Tanzania, Ethiopia, Egypt,

UAE(Dubai), Saudi Arabia, India, Pakistan, Indonesia, Vietnam, Bangladesh, etc. There are four brands under Transsion:

TECNO, iTel, Infinix and Spice. TENCO is the high-end brand, and iTel is the low-end brand; Infinix is sold only through

online channels. Transsion is now a leading player in the mobile industry in Africa, with a 38% market share in 2016, ac-

cording to IDC. China IC Fund and Unigroup are Transsion shareholders, but they had less than a 1% stake each as of 30

Jun 2017. Transsion’s business is classified into: a) hardware – handsets, tablets, home appliances and lighting, b) plat-

forms, and c) mobile business, especially searching, payment, social networking and mobile games in African markets.

Since the market is focusing mostly on smartphones and the China market, HOXV (Huawei, Oppo, Xiaomi and Vivo) is

really the focus of the market, so Transsion is not on investors’ radar. In terms of units, Transsion shipped 120m handsets

in 2017 according to IHS, up from about 80m units in 2016. Among the 210m units shipped in 2017, about 90m were fea-

ture phones and 30m units were smartphones. According to industry news flow, Transsion’s ASPs were about US$10-12

per feature phone and about US$60-70 per smartphone. The key to Transsion’s success is the customization of functions,

especially photo and sound quality for African markets. Shares of Shimge Pump will remain suspended until the details of

its transaction with Transsion are released. After completion of the transaction, Transsion will be one of the few listed

handset brands. We expect Transsion to provide a profit guarantee for 2018 and 2019, and the market is likely to search

for proxies to Transsion. Based on industry information, Transsion’s major suppliers are mostly A-share-listed names such

as Holitech Technology [002217.CH] – displays and camera modules; FPC and Huiding [603160.HK – finger print sensors;

OFilm [002456.CH] – dual camera modules; and MediaTek and Sreadtrum – processing units. We expect the market to

seek more information on Transsion and its supply chain after Shimge Pump releases the details of the transaction. We will

closely monitor the process and provide more information later.

1

Industry Note

March 5, 2018

Wong Chi Man—Head of Research

(852) 3698-6317

[email protected]

Mark Lau—Research Analyst

(852) 3698-6393

[email protected]

Short-term outlook remains unexciting but valuations

at multi-year lows; Listing reforms a potential catalyst The China securities sector was one of the most underperforming sectors in 2017 because

of lacklustre trading volume, along with a more stringent regulatory environment. Since the

deleveraging process in the economy is still ongoing and the regulatory environment is like-

ly to remain stringent because of the potential restructuring of the regulators, the valuation

of securities companies may be capped in the near term. However, as the valuation has

already reached a multi-year low in terms of PBR, it reflects most of the negatives, in our

view. Therefore, we have a BUY rating on GF Securities (1776.HK; GFS), Haitong Securi-

ties (6837.HK; HTS) and CITIC Securities (6030.HK; CITICS) on the back of the cheap

valuations. Short-term catalysts include listing reforms and the official inclusion of A-shares

in the MSCI Emerging Markets Index in mid-2018.

Trading volume remained subdued. Average daily turnover (ADT) in the A-share market

was only RMB461bn in 2017, down 11% year on year, which largely explained the poor

share price performance of securities companies last year. In 2M2018, ADT remained in

roughly the same range as in 2017 (Figure 2). A substantial rebound in ADT in the near

term seems unlikely because: (i) the authorities still emphasize the importance of the delev-

eraging process to reduce the risk to the overall financial system; and (ii) we are likely to

see a major overhaul in the regulatory regime (i.e. CSRC, CBRC and CIRC) after the Na-

tional People’s Congress meeting in March. This limits the room for financial innovation

before the reorganization is completed.

Listing reform a potential catalyst. To improve the mix of listed companies in the A-share

market, the authorities have become much more aggressive in the past few months in intro-

ducing more “new economy” companies in the A-share market. One of the most notable

examples is the very fast IPO-review process for Foxconn Industrial Internet, which is ex-

pected to have a market cap of about RMB500bn. In addition, there are news reports about

the potential introduction of CDR, which may allow Chinese ADRs and red chip companies

to return to the A-share market without unwinding the VIE/WVR (weighted voting rights)

structure.

CSC Financial and CICC to be major beneficiaries of listing reforms. In 1H2017, the

investment banking business accounted for 25.5% and 20.4% of the net revenue of CSC

Financial (6066.HK) and CICC (3908.HK), respectively (Figure 3). They are likely to benefit

from the listing reforms, if more “new economy” companies return to the A-share market. In

fact, CICC is the lead underwriter for Foxconn Industrial Internet. Meanwhile, in our cover-

age universe, investment banking business accounted for 13.2% and 12.7% of the net rev-

enue of GFS and HTS in 1H17, respectively.

Multi-year low valuation; waiting for catalysts. CITICS, HTS and GFS are trading at

1.11x, 0.86x and 1.03x 2018E PBR, near multi-year lows (Figure 6-11). Their share price

performance may remain unexciting in the near term because of the lacklustre ADT and the

stringent regulatory environment. However, further downside risk should be limited, as we

believe most of the negatives are reflected. More progress in listing reforms and the official

inclusion of A-shares in the MSCI Emerging Markets Index are near-term catalysts. Given

the very low valuation, currently we have a BUY rating on CITICS, HTS and GFS (Figure

5).

China Securities Sector

Company Ticker Rating

(HK$) (HK$)

CITICS 6030 HK 17.38 19.9 BUY

HTS 6837 HK 11.08 14.4 BUY

GFS 1776 HK 14.74 19.6 BUY

Company PER PBR ROAA ROAE

(x) (x) (%) (%)

CITICS 13.90 1.11 1.93 8.22

HTS 10.87 0.86 1.65 8.16

GFS 9.54 1.03 1.73 11.17

Last Price TP

FY2018E

Sources: Company, CGIS Research

Updated as of March 2, 2018

2

Figure 1: Peer valuations

Sources: Bloomberg, CGIS Research

Figure 2: ADT of A-share market (RMB bn)

Figure 3: Net revenue breakdown (1H17)

Sources: WIND Info, CGIS Research

Sources: Companies, CGIS Research

Company Ticker Rating

Price

(Local

currency)

Market

cap

(US$m)

2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E

China securities companies

CITIC 6030 HK Equity BUY 17.38 32,818 17.7 16.0 13.9 1.28 1.19 1.11 7.4 7.6 8.2 1.8 1.9 1.9

Haitong 6837 HK Equity BUY 11.08 20,213 13.8 12.6 10.9 1.01 0.93 0.86 7.4 7.6 8.2 1.4 1.5 1.6

China Galaxy 6881 HK Equity NR 5.41 12,836 8.7 11.3 9.7 0.77 0.72 0.67 9.0 6.7 7.1 1.9 1.6 1.7

Guangfa 1776 HK Equity BUY 14.74 18,605 12.2 11.0 9.5 1.24 1.13 1.03 10.3 10.6 11.2 2.1 2.4 2.6

HTSC 6886 HK Equity NR 15.62 18,215 17.8 12.6 11.5 1.08 1.03 0.95 7.9 8.3 8.9 1.7 1.8 1.9

CICC 3908 HK Equity NR 15.20 7,766 20.0 14.0 12.4 1.39 1.32 1.20 9.0 10.9 10.3 1.5 1.8 1.9

Everbright 6178 HK Equity NR 9.00 8,801 12.2 10.9 9.3 0.69 0.66 0.62 6.1 6.6 7.2 1.6 1.6 1.6

China Merchants 6099 HK Equity NR 11.68 16,807 12.8 12.0 10.5 0.83 1.03 0.96 9.2 9.0 10.1 2.3 2.3 2.6

China Securities 6066 HK Equity NR 6.69 6,215 7.9 8.5 7.5 0.93 0.87 0.79 12.4 12.0 11.9 2.3 2.5 2.7

Guotai Junan 2611 HK Equity NR 17.72 23,796 13.7 12.8 11.9 1.17 1.08 1.01 9.4 9.4 9.0 2.3 2.5 2.7

Simple average 14.4 12.5 11.0 1.04 1.00 0.93 8.3 8.4 8.9 1.8 1.9 2.0

PER (x) PBR (x) ROE (%) ROA (%)

446

501 509

404384

463

510546

466507

379

520

425

0

100

200

300

400

500

600

CITIC Securities Haitong Securities GF Securities Huatai Securities China Galaxy Securities CICC Everbright Securities CMS CSC Financial GTJA Securities

Ticker 6030 6837 1776 6886 6881 3908 6178 6099 6066 2611

Net revenue breakdown

Brokerage 21.4% 15.0% 20.1% 25.0% 36.5% 24.9% 31.4% 31.5% 27.9% 24.0%

Investment banking 9.9% 12.7% 13.2% 8.3% 2.5% 20.4% 7.9% 17.3% 25.5% 11.8%

Asset management 14.3% 7.1% 18.0% 14.0% 5.5% 5.3% 5.0% 9.8% 6.2% 8.0%

Others 2.9% 0.9% 0.8% 0.7% 4.0% 12.7% 8.4% 3.6% 3.6% 0.9%

Commission and fee income 48.4% 35.8% 52.1% 48.1% 48.5% 63.2% 52.7% 62.2% 63.1% 44.7%

Net interest income 6.9% 13.6% 3.8% 21.2% 27.0% 0.6% 17.4% 16.3% 15.0% 25.8%

Net investment gains 24.1% 36.0% 43.7% 29.7% 24.3% 37.4% 21.9% 22.4% 22.2% 28.5%

Others 20.5% 14.6% 0.3% 1.0% 0.2% -1.1% 8.0% -0.9% -0.4% 1.0%

3

Figure 4: ECM league table of the A-share market (2017)

Sources: WIND, CGIS Research

Name of Brokerage Firm Gross Total (RMB m)

CITIC Securities 700,010

CSC Financial 552,676

China Merchants Securities 405,790

Guotai Junan Securities 376,352

CICC 328,333

Tebon Securities Co. Ltd 281,129

Haitong Securities 250,872

Everbright Securities 209,979

Huatai Securities 204,312

GF Securities 190,619

BOC International 149,534

China Development Bank Securities 129,272

Guosen Securities 123,971

Ping An Securities 121,701

Industrial Securities 108,586

Figure 5: Valuation summary

Company HTS CITICS GFS

Ticker 6837.HK 6030.HK 1776.HK

Rating BUY BUY BUY

Beta 1.35 1.30 1.40

Cost of equity 9.7% 9.4% 9.9%

Medium-term ROE 10.0% 10.1% 11.0%

Growth rate 7% 7% 7%

PBR = (ROE-g)/(COE-g) 1.12 1.28 1.36

Target price (HK$) 14.4 19.9 19.6

Upside 29.8% 14.7% 32.6%

Source: CGIS Research

4

Figure 6: PBR range of CITICS


Figure 7: PER range of CITICS


Figure 8: PBR range of HTS


Figure 9: PER range of HTS


Figure 10: PBR range of GFS


Figure 11: PER range of GFS


0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9

Feb-

12M

ay-1

2

Aug

-12

Nov

-12

Feb-

13M

ay-1

3

Aug

-13

Nov

-13

Feb-

14M

ay-1

4

Aug

-14

Nov

-14

Feb-

15M

ay-1

5

Aug

-15

Nov

-15

Feb-

16M

ay-1

6A

ug-1

6

Nov

-16

Feb-

17M

ay-1

7

Aug

-17

Nov

-17

Feb-

18

Rolling forward PBR (x) Average

+1 Standard deviation -1 Standard deviation

8.0

13.0

18.0

23.0

28.0

33.0

38.0

43.0

48.0

Feb-

12M

ay-1

2

Aug

-12

Nov

-12

Feb-

13M

ay-1

3

Aug

-13

Nov

-13

Feb-

14M

ay-1

4

Aug

-14

Nov

-14

Feb-

15M

ay-1

5

Aug

-15

Nov

-15

Feb-

16M

ay-1

6

Aug

-16

Nov

-16

Feb-

17M

ay-1

7

Aug

-17

Nov

-17

Feb-

18

Rolling forward PER (x) Average


0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

Apr-

12Ju

l-12

Oct

-12

Jan-

13Ap

r-13

Jul-1

3O

ct-1

3Ja

n-14

Apr-

14Ju

l-14

Oct

-14

Jan-

15Ap

r-15

Jul-1

5O

ct-1

5Ja

n-16

Apr-

16Ju

l-16

Oct

-16

Jan-

17Ap

r-17

Jul-1

7O

ct-1

7Ja

n-18



5.0

10.0

15.0

20.0

25.0

30.0

35.0Ap

r-12

Jul-1

2O

ct-1

2Ja

n-13

Apr-

13Ju

l-13

Oct

-13

Jan-

14Ap

r-14

Jul-1

4O

ct-1

4Ja

n-15

Apr-

15Ju

l-15

Oct

-15

Jan-

16Ap

r-16

Jul-1

6O

ct-1

6Ja

n-17

Apr-

17Ju

l-17

Oct

-17

Jan-

18



1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

Apr

-15

Jun-

15

Aug

-15

Oct

-15

Dec

-15

Feb-

16

Apr

-16

Jun-

16

Aug

-16

Oct

-16

Dec

-16

Feb-

17

Apr

-17

Jun-

17

Aug

-17

Oct

-17

Dec

-17

Feb-

18



5.0

7.0

9.0

11.0

13.0

15.0

17.0

Apr

-15

Jun-

15

Aug

-15

Oct

-15

Dec

-15

Feb-

16

Apr

-16

Jun-

16

Aug

-16

Oct

-16

Dec

-16

Feb-

17

Apr

-17

Jun-

17

Aug

-17

Oct

-17

Dec

-17

Feb-

18



5

Key financials

GF Securities (01776.HK)

Income Statement

(RMB'000, except for per share amount)

Year ended 31 Dec 2013 2014 2015 2016 2017E 2018E

Equities 3,439,400 4,949,900 13,803,088 5,338,243 4,211,754 4,120,423

Investment banking 308,100 1,552,300 1,441,856 2,169,565 2,247,125 2,562,741

Futures and options 279,300 230,500 320,170 341,544 360,000 380,000

Asset management 205,100 1,124,500 3,597,426 4,159,583 3,427,742 3,552,485

Others 167,500 360,100 883,900 1,381,853 964,496 1,034,416

Commission and fee income 4,399,400 8,217,300 20,046,440 13,390,788 11,211,117 11,650,065

Interest income 2,349,217 4,324,638 12,336,200 7,830,720 7,605,721 8,085,239

Net investment gains 2,525,131 3,604,956 10,396,215 6,510,790 8,361,200 10,182,206

Total revenue 9,273,748 16,146,894 42,778,855 27,732,298 27,178,038 29,917,509

Other income and gains 58,114 16,581 (46,040) (244,375) 160,000 100,000

Total revenue and other income 9,331,862 16,163,475 42,732,815 27,487,923 27,338,038 30,017,509

Staff costs (2,947,619) (4,345,926) (10,913,683) (6,586,871) (6,590,102) (6,966,248)

Commission and fee expenses (105,542) (240,813) (461,441) (375,942) (313,911) (326,202)

Interest expenses (1,378,567) (2,757,676) (8,942,914) (6,542,655) (6,475,610) (6,934,110)

Others (1,815,828) (2,507,650) (4,898,877) (3,680,259) (2,734,149) (3,028,840)

Operating expenses (6,247,556) (9,852,065) (25,216,915) (17,185,727) (16,113,772) (17,255,400)

Operating profit 3,084,291 6,311,430 17,515,900 10,302,196 11,224,265 12,762,109

Non-recurrent items - - - - - -

Income before tax 3,477,313 6,648,595 17,805,712 10,705,060 11,605,043 13,191,192

Income tax expense (664,747) (1,503,082) (4,193,359) (2,295,738) (2,611,135) (2,968,018)

Minority interests (65) (122,945) (411,339) (379,215) (359,756) (408,927)

Net income 2,812,501 5,022,568 13,201,014 8,030,107 8,634,152 9,814,247

Recurring net income 2,812,501 5,022,568 13,201,014 8,030,107 8,634,152 9,814,247

EPS (RMB) 0.475 0.849 1.732 1.054 1.133 1.288

Recurring EPS (RMB) 0.475 0.849 1.732 1.054 1.133 1.288

DPS (RMB) 0.200 0.200 0.800 0.350 0.397 0.451

A-share average daily turnover 196,668,908 303,014,286 1,045,302,582 519,090,730 460,911,926 500,000,000

Brokerage market share of GFS (%) 4.0 4.3 4.7 4.3 4.3 4.3

Net commission rate of GFS (%) 0.086 0.070 0.051 0.041 0.037 0.033

Margin f inancing balance 19,945,100 64,356,200 66,951,690 54,085,000 56,002,610 63,877,161

Staff cost-to-income (%) 37.6 33.0 32.7 32.0 32.1 30.6

Cost-to-income (%) 60.7 52.1 47.4 49.9 45.4 43.9

Cost-to-income (ex-impairment) 59.2 50.9 46.6 47.9 44.9 43.3

Growth Rates:

Commission and fee income 10% 87% 144% -33% -16% 4%

Interest income 52% 84% 185% -37% -3% 6%

Net investment gains 50% 43% 188% -37% 28% 22%

Total revenue and other income 28% 73% 164% -36% -1% 10%

Operating profit 33% 105% 178% -41% 9% 14%

Recurring net income 28% 79% 163% -39% 8% 14%

Recurring EPS 28% 79% 104% -39% 8% 14%

Margins and Ratios:

Adjusted operating margin 38.8% 47.9% 52.6% 50.7% 54.3% 55.9%

Adjusted net margin 36.1% 39.1% 40.8% 40.4% 44.1% 45.1%

Effective tax rate 19% 23% 24% 21% 23% 23%

Sources: Company data, CGIS Research estimates

6

Key financials

GF Securities (01776.HK)

Balance Sheet Finance Ratios

(RMB'000 , except for per share amount)

As at 31 Dec 2013 2014 2015 2016 2017E 2018E 2013 2014 2015 2016 2017E 2018E

Financial assets 46,783,207 71,531,551 174,926,020 154,742,292 177,636,088 210,334,697 PER(x) 24.6 13.7 7.0 12.2 11.0 9.5

Advances to customers 20,490,654 64,695,844 68,969,706 58,186,338 58,002,610 65,877,161 EPS grow th (%) 28 79 104 39- 8 14

Others 10,652,117 30,234,496 42,709,314 32,711,110 17,594,754 19,163,307 Yield (%) 1.7 1.7 6.6 2.7 3.2 3.7

Cash held on behalf of customers 25,227,415 48,995,919 88,640,516 67,251,310 61,895,203 67,226,441 Payout ratio (%) 42 24 46 33 35 35

Bank balances and cash 6,146,696 18,203,433 17,609,937 13,046,174 11,488,586 9,675,279 PBR(x) 2.00 1.73 1.20 1.24 1.13 1.03

Total current assets 109,300,089 233,661,243 392,855,493 325,937,224 326,617,241 372,276,886 Total asset/equity (x) 3.4 5.8 5.3 4.4 4.1 4.3

Non-client asset/net asset (x) 2.5 4.1 3.8 3.4 3.3 3.5

PPE, net 1,043,274 1,287,461 1,579,745 1,761,438 1,482,957 1,535,105 ROAA (%) 2.72 2.81 4.01 2.06 2.40 2.55

Financial assets 3,634,831 2,747,766 20,184,887 24,114,878 25,701,015 29,401,015 ROAE (%) 8.3 13.5 22.5 10.3 10.6 11.2

Others 3,313,977 2,403,306 4,476,890 7,987,814 5,641,961 6,106,044

Total non-current assets 7,992,082 6,438,533 26,241,522 33,864,130 32,825,932 37,042,164 Revenue breakdown (%)

Equities 37.1 30.7 32.3 19.2 15.5 13.8

Total assets 117,292,171 240,099,776 419,097,015 359,801,354 359,443,173 409,319,050 Investment banking 3.3 9.6 3.4 7.8 8.3 8.6

Futures and options 3.0 1.4 0.7 1.2 1.3 1.3

Accounts payable to brokerage clinets 31,609,231 71,465,563 118,137,085 85,726,525 74,385,915 80,620,753 Asset management 2.2 7.0 8.4 15.0 12.6 11.9

Financial assets sold under repo 19,399,797 50,717,726 85,395,761 50,549,266 70,000,000 80,000,000 Others 1.8 2.2 2.1 5.0 3.5 3.5

Due to banks and other f inancial institutions 5,300,000 1,123,000 1,750,000 10,606,395 - - Commission and fee income 47.4 50.9 46.9 48.3 41.3 38.9

Others 14,202,625 42,223,828 57,975,624 69,690,417 53,246,114 61,685,932 Interest income 25.3 26.8 28.8 28.2 28.0 27.0

Total current liabilities 70,511,653 165,530,117 263,258,470 216,572,603 197,632,029 222,306,685 Net investment gains 27.2 22.3 24.3 23.5 30.8 34.0

Bank and other borrow ings 11,979,740 26,030,664 72,270,186 58,274,033 72,000,000 90,000,000

Others 57,802 7,161,539 3,747,530 3,601,382 2,131,280 2,131,280

Total non-current liabilities 12,037,542 33,192,203 76,017,716 61,875,415 74,131,280 92,131,280

Total liabilities 82,549,195 198,722,320 339,276,186 278,448,018 271,763,309 314,437,965

Shareholders' equity 34,604,666 39,610,880 77,519,274 78,530,210 84,496,982 91,289,276

Minority interests 138,310 1,766,576 2,301,555 2,823,126 3,182,882 3,591,809

Book value per share (HK$) 7.37 8.50 12.31 11.85 13.08 14.37

Dupont analysis (as % of average total assets)

Equities 3.3% 2.8% 4.2% 1.4% 1.2% 1.1%

Investment banking 0.3% 0.9% 0.4% 0.6% 0.6% 0.7%

Futures and options 0.3% 0.1% 0.1% 0.1% 0.1% 0.1%

Asset management 0.2% 0.6% 1.1% 1.1% 1.0% 0.9%

Others 0.2% 0.2% 0.3% 0.4% 0.3% 0.3%

Commission and fee income 4.2% 4.6% 6.1% 3.4% 3.1% 3.0%

Interest income 2.3% 2.4% 3.7% 2.0% 2.1% 2.1%

Net investment gains 2.4% 2.0% 3.2% 1.7% 2.3% 2.6%

Other income and gains 0.1% 0.0% 0.0% -0.1% 0.0% 0.0%

Total revenue and other income 9.0% 9.0% 13.0% 7.1% 7.6% 7.8%

Operating expenses -6.0% -5.5% -7.7% -4.4% -4.5% -4.5%

Operating profit 3.0% 3.5% 5.3% 2.6% 3.1% 3.3%

Income tax expense -0.6% -0.8% -1.3% -0.6% -0.7% -0.8%

Recurring net income (ROAA) 2.7% 2.9% 4.1% 2.2% 2.5% 2.7%

Leverage (x) 3.1 4.8 5.6 5.0 4.4 4.4


ROAE 8.3% 13.5% 22.5% 10.3% 10.6% 11.2%


7

Key financials

Haitong Securities (6837.HK)

Income Statement


Year ended 31 Dec 2013 2014 2015 2016 2017E 2018E

Equities 4,228,623 5,939,819 15,852,454 6,406,529 5,106,714 5,078,576

Investment banking 736,777 1,309,095 1,644,980 2,619,300 2,577,527 2,906,351

Asset management 731,324 1,202,203 2,465,127 1,641,855 1,917,244 2,052,123

Futures/derivatives 461,784 404,187 479,974 551,135 1,227,625 1,573,036

Others 592,680 660,866 1,370,081 1,492,474 1,387,455 1,461,761


Interest income 3,670,965 7,699,971 18,322,037 16,180,548 15,625,645 17,310,641


Total revenue 12,572,191 22,924,803 51,191,786 34,999,764 36,057,263 39,736,429

Other income and gains 230,543 742,063 4,093,767 7,492,492 5,000,000 5,500,000


Staff costs (2,621,465) (4,131,308) (7,829,712) (6,168,040) (6,760,629) (7,450,110)

Commission and fee expenses (848,704) (1,295,519) (3,842,160) (1,746,284) (2,343,601) (2,644,096)


Others (2,510,387) (3,646,790) (9,409,814) (11,275,703) (8,661,994) (9,458,306)



Share of profits of associates 116,940 167,334 481,445 200,435 345,502 371,004

Non-recurrent items - - - - - -


Income tax expense (1,173,754) (2,301,371) (4,277,553) (2,231,209) (2,513,103) (2,655,645)

Minority interests (245,970) (408,400) (1,022,465) (887,184) (850,865) (849,806)

Net income 4,035,024 7,710,623 15,818,851 8,043,334 8,603,190 9,772,774


EPS (RMB) 0.421 0.804 1.375 0.699 0.748 0.850


DPS (RMB) 0.120 0.250 0.450 0.220 0.224 0.255


Brokerage market share of Haitong (%) 4.8 4.8 5.0 4.7 4.7 4.7

Net commission rate of Haitong (%) 0.072 0.061 0.044 0.035 0.029 0.025


Staff cost-to-income (%) 25.0 22.9 20.7 21.7 25.0 25.0

Cost-to-income (%) 49.0 43.1 45.5 61.4 57.0 56.7

Cost-to-income (ex-impairment) 49.0 43.1 45.5 61.4 57.0 56.7

Growth Rates:

Commission and fee income 30% 41% 129% -42% -4% 7%

Interest income 28% 110% 138% -12% -3% 11%

Net investment gains -11% 166% 94% -45% 34% 14%

Total revenue and other income 19% 85% 134% -23% -3% 10%

Operating profit 31% 92% 101% -47% 6% 11%

Recurring net income 33% 91% 105% -49% 7% 14%

Recurring EPS 33% 91% 71% -49% 7% 14%

Margins and Ratios:





8

Key financials

Haitong Securities (6837.HK)



As at 31 Dec 2013 2014 2015 2016 2017E 2018E 2013 2014 2015 2016 2017E 2018E



Others 20,019,422 41,889,579 71,333,111 102,922,381 96,386,934 112,268,033 Yield (%) 1.4 2.9 4.9 2.3 2.4 2.8

Cash held on behalf of customers 33,777,588 62,592,458 112,066,661 87,496,620 73,409,774 86,010,000 Payout ratio (%) 29 31 33 31 30 30




PPE, net 1,171,604 1,210,145 1,317,178 1,615,839 1,620,125 1,585,992 ROAA (%) 2.73 2.96 3.41 1.41 1.53 1.65


Others 6,831,580 38,761,337 67,842,816 72,595,616 77,166,222 85,242,455


Equities 33.6 25.9 31.0 18.3 14.2 12.8

Total assets 169,123,603 352,622,149 576,448,892 560,865,846 566,358,124 620,188,505 Investment banking 5.9 5.7 3.2 7.5 7.1 7.3

Asset management 5.8 5.2 4.8 4.7 5.3 5.2

Accounts payable to brokerage clients 40,429,567 80,766,843 129,026,336 104,059,287 89,197,744 103,478,000 Futures/derivatives 3.7 1.8 0.9 1.6 3.4 4.0


Due to banks and other f inancial institutions 6,916,395 34,077,574 32,799,527 49,884,220 43,500,000 39,000,000 Commission and fee income 53.7 41.5 42.6 36.3 33.9 32.9



Bank and other borrow ings - 4,537,684 9,330,007 14,489,442 15,000,000 14,000,000

Others 18,360,543 54,696,006 114,168,665 128,712,616 139,581,728 152,641,980




Minority interests 2,598,167 3,899,772 9,233,126 11,828,274 12,679,139 13,528,945



Equities 2.9% 2.3% 3.4% 1.1% 0.9% 0.9%



Futures/derivatives 0.3% 0.2% 0.1% 0.1% 0.2% 0.3%

Others 0.4% 0.3% 0.3% 0.3% 0.2% 0.2%


Interest income 2.5% 3.0% 3.9% 2.8% 2.8% 2.9%


Other income and gains 0.2% 0.3% 0.9% 1.3% 0.9% 0.9%





Recurring net income (ROAA) 2.9% 3.1% 3.6% 1.6% 1.7% 1.8%

Leverage (x) 2.5 4.0 5.3 5.2 5.0 5.0


ROAE 6.7% 11.9% 18.0% 7.4% 7.6% 8.2%


9

Key financials CITIC Securities (6030.HK)

Income Statement


Year ended 31 Dec 2013 2014 2015 2016 2017E 2018E

Investment banking 2,217,436 3,516,440 4,563,090 5,470,917 4,184,978 5,087,194

Brokerage 6,493,275 10,365,206 22,713,891 12,574,497 10,922,175 11,219,580

Trading 398,525 230,864 287,057 407,164 447,880 492,668

Asset management 1,489,344 4,503,850 6,449,325 6,860,180 6,295,208 6,565,116

Others 100,255 298,998 239,160 462,014 550,000 650,000


Interest income 4,089,746 7,850,808 15,621,547 11,232,779 13,184,583 16,006,825


Total revenue 20,048,080 36,970,502 69,384,084 45,272,619 46,044,603 51,729,168

Other income and gains 230,657 375,356 3,537,585 4,792,153 8,000,000 9,000,000


Staff cost (5,076,588) (9,463,242) (14,797,624) (11,507,497) (11,012,746) (11,402,569)

Commission and fee expenses (1,060,676) (1,798,997) (4,621,076) (3,331,110) (3,567,762) (3,823,468)


Others (4,246,060) (6,569,743) (14,033,038) (12,430,139) (14,195,354) (15,903,000)



Share of profits of associates 166,360 638,022 664,352 349,849 500,000 600,000

Share of profits of JCEs 44,654 (8,616) (18,821) (438) (2,265) -

Exceptional items - 2,179,457 2,226 1,748 2,311 -


Income tax expense (1,538,044) (3,560,448) (6,926,800) (3,281,419) (3,883,552) (4,408,061)

Minority interests (64,130) (524,305) (560,551) (615,971) (524,280) (595,088)

Net income 5,243,917 11,337,194 19,799,793 10,365,169 11,126,377 12,629,094


EPS (RMB) 0.476 1.029 1.634 0.855 0.918 1.042


DPS (RMB) 0.150 0.310 0.500 0.350 0.367 0.417


Brokerage market share CITICS 6.2% 6.5% 6.3% 5.8% 5.6% 5.6%


Staff cost-to-income 31.8% 33.0% 26.7% 30.4% 27.4% 25.7%

Cost-to-income 58.4% 56.0% 52.0% 63.2% 62.6% 61.6%

Cost-to-income (ex-impairment) 56.2% 53.9% 47.5% 58.1% 61.1% 60.0%

Growth Rates:

Commission and fee income 50.9% 76.8% 81.1% -24.8% -13.1% 7.2%

Interest income 88.3% 92.0% 99.0% -28.1% 17.4% 21.4%

Net investment gains 44.2% 94.0% 91.2% -57.6% 26.6% 11.9%

Total revenue and other income 55.1% 84.2% 95.3% -31.3% 7.9% 12.4%

Recurring EPS 23.8% 85.0% 85.5% -47.7% 7.3% 13.5%

Margins and Ratios:





10

Key financials

CITIC Securities (6030.HK)



As at 31 Dec 2013 2014 2015 2016 2017E 2018E 2013 2014 2015 2016 2017E 2018E



Others 12,181,898 22,007,589 17,930,312 28,051,520 31,450,000 36,550,000 Yield (%) 1.1 2.3 3.5 2.3 2.5 2.9

Cash held on behalf of customers 40,125,321 96,840,688 143,553,897 129,876,778 108,878,345 118,712,832 Payout ratio (%) 31.5 30.1 30.6 40.9 40.0 40.0




PPE, net 3,637,404 1,222,324 3,856,121 3,923,261 8,307,257 7,883,157 ROAA (%) 2.41 2.72 3.72 1.81 1.87 1.93


Others 19,237,208 22,287,586 29,044,797 26,400,155 26,960,618 27,731,955


Investment banking 11.1 9.5 6.6 12.1 9.1 9.8

Total assets 271,354,249 479,626,450 616,108,242 597,438,839 648,577,773 721,831,725 Brokerage 32.4 28.0 32.7 27.8 23.7 21.7

Trading 2.0 0.6 0.4 0.9 1.0 1.0

Accounts payable 45,196,159 101,845,838 150,456,676 134,397,672 113,878,345 123,712,832 Asset management 7.4 12.2 9.3 15.2 13.7 12.7


Due to banks and other f inancial institutions 4,710,000 11,751,000 18,033,000 19,550,000 13,500,000 15,500,000 Commission and fee income 53.4 51.2 49.4 56.9 48.6 46.4



Bonds payable 26,177,108 43,167,363 67,835,803 69,752,175 90,000,000 68,000,000

Others 3,067,448 7,762,611 6,322,274 9,954,544 5,700,000 6,400,000




Minority interests 1,713,610 2,032,815 2,599,311 3,092,724 3,617,004 4,212,092




Brokerage 3.0% 2.8% 4.1% 2.1% 1.8% 1.6%

Trading 0.2% 0.1% 0.1% 0.1% 0.1% 0.1%


Others 0.0% 0.1% 0.0% 0.1% 0.1% 0.1%


Interest income 1.1% 2.1% 2.9% 1.9% 2.1% 2.3%


Other income and gains 0.1% 0.1% 0.6% 0.8% 1.3% 1.3%





Recurring net profit (ROAA) 2.4% 2.7% 3.7% 1.8% 1.9% 1.9%

Leverage (x) 2.5 4.0 4.6 4.3 4.3 4.5


ROAE 6.0% 10.4% 16.6% 7.4% 7.6% 8.2%


1

Strategy

March 5, 2018


(852) 3698-6317

[email protected]


(852) 3698-6393

[email protected]

Short Selling Analysis for February 23 The weekly selling analysis has resumed, as the data release schedule returned to normal.

Last Friday, the HKSFC released the aggregate short positions data for February 23. We

analyzed which companies may be vulnerable to short-selling activity, based on the follow-

ing three criteria: (i) the net change in short positions between February 15 and February

23; (ii) short positions as a percentage of free float; and (iii) the absolute amount of short

positions. We must emphasize this is only an objective quantitative analysis based on

official data; the analysis does NOT imply that we feel uncomfortable with the corpo-

rate governance or fundamentals of some companies. According to the results of our

analysis, we believe China Coal (1898.HK) requires close monitoring, based on the

latest short positions outstanding. On the other hand, we note that short positions in

ENN Energy (2688.HK) and Pacific Basin (2343.HK) have dropped significantly.

Short positions in China Coal increased significantly. As Figure 1 shows, short positions

in China Coal rose 26.3% during the week ended February 23. The outstanding short posi-

tions were equivalent to 4% of its free float. Some investors may be expecting weakness in

coal prices post-CNY, in our view, as heating demand for coal is likely to weaken as the

weather gets warmer. Meanwhile, short positions in China Literature rose 18.8% during the

same period; the outstanding short positions were equivalent to 5.4% of its free float. How-

ever, as the stock was just included in the Stock Connect universe after market close last

Friday, we believe it may not be good timing to short the stock in the near term.

Significant decline in short positions in ENN Energy and Pacific Basin. Outstanding

short positions in ENN Energy and Pacific Basin dropped 18.3% and 15.7%, respectively,

during the week ended February 23 (Figure 2). We believe some investors began to cut

their short positions, as the share price performance of ENN Energy was quite resilient amid

the volatile market in February. Meanwhile, the rebound in freight rates (BDI, BSI and BHSI)

since mid-February may be the reason investors cut their short positions in Pacific Basin.

Recap: Source of data. The HKSFC releases the aggregate short positions in all eligible

stocks every Friday with a delay of one week. The HKEx releases the data on short-selling

activity on a daily basis (without a one-week delay), but investors do not know whether the

short positions are covered or not later. Therefore, the usefulness of the HKSFC data is that

it provides the outstanding short positions in each stock, and investors can trace the net

change on a weekly basis. However, there are still some limitations, as this data set cannot

cover short-selling activity using OTC derivative products.

Three angles to analyzing the data. (i) The net change in short positions between Febru-

ary 15 and February 26; (ii) short positions as a percentage of free float; and (iii) the abso-

lute amount of the short positions

2

Sources: HKSFC, Bloomberg, CGIS Research

Figure 1: Top 50 short selling stocks (ranked by net change between February 15 and February 23, descending order)

Ticker Company name

Aggregated

reportable

short positions

on Feb 23

(shares)

Aggregated

reportable short

positions on Feb

23 (HK$)

% of free

float

Change in short

positions

compared with

Feb 15

Price on

Feb 23

(HK$)

Price on

Mar 02

(HK$)

Price

change

during

the

period

Market cap

(HK$m)

2017E

PER (x)

2018E

PER (x) PBR (x)

2017E

Dividend

yield (%)

Aggregated

reportable

short

positions on

Feb 23/ 3-

month

average

daily

turnover

161 AVIC IHL 68,000 418,880 0.0% Increase from nill 5.98 6.29 5.2% 7,335 n.a. n.a. 0.63 n.a. 0.02

530 GOLDIN FIN HOLD 1,522,000 5,859,700 0.1% Increase from nill 3.81 3.76 -1.3% 26,285 n.a. n.a. 2.19 n.a. 0.36

878 SOUNDWILL HOLD 63,500 957,580 0.1% Increase from nill 14.32 15.32 7.0% 4,340 n.a. n.a. 0.23 n.a. 0.52

1137 HKTV 170,000 559,300 0.0% Increase from nill 3.27 3.14 -4.0% 2,541 n.a. n.a. 1.32 n.a. 0.07

1686 SUNEVISION 584,005 3,229,548 0.1% Increase from nill 5.15 5.31 3.1% 12,334 29.50 31.24 3.50 3.01 0.34

2303 HENGXING GOLD 200,000 2,068,000 0.1% Increase from nill 10.1 10.4 3.0% 9,620 n.a. n.a. 11.67 n.a. 0.15

3306 JNBY 144,500 1,898,730 0.1% Increase from nill 11.64 15.4 32.3% 7,989 14.92 12.36 5.15 4.33 0.12

887 EMPEROR WATCH&J 9,099,488 3,457,805 0.3% 265.5% 0.36 0.365 1.4% 2,512 n.a. n.a. 0.59 1.37 1.96

3636 POLY CULTURE 387,800 5,824,756 0.5% 158.7% 15.34 14.78 -3.7% 3,641 n.a. n.a. 0.75 n.a. 1.97

885 RENTIAN TECH 10,350,000 3,829,500 0.3% 109.9% 0.38 0.385 1.3% 4,292 n.a. n.a. 1.14 n.a. 0.87

345 VITASOY INT'L 1,054,000 21,923,200 0.1% 94.5% 19.2 20.5 6.8% 21,700 38.83 33.33 8.23 1.61 0.93

1097 I-CABLE COMM 6,405,577 1,281,115 0.1% 89.9% 0.196 0.191 -2.6% 1,185 n.a. n.a. 1.69 n.a. 0.70

1573 CH UNIENERGY 354,000 4,127,640 0.1% 80.6% 12.6 12.5 -0.8% 8,975 n.a. n.a. 9.66 n.a. 0.45

970 SPARKLE ROLL 5,336,000 3,735,200 0.3% 76.5% 0.7 0.67 -4.3% 3,311 n.a. n.a. 1.48 n.a. 0.12

636 KERRY LOG NET 1,053,750 11,506,950 0.2% 66.9% 10.5 10.68 1.7% 18,121 15.68 12.30 1.03 2.02 1.18

81 CH OVS G OCEANS 11,883,159 48,245,626 0.8% 53.4% 4.02 3.93 -2.2% 13,454 5.70 5.61 0.76 0.99 0.71

6088 FIT HON TENG 19,343,000 78,919,440 1.3% 49.7% 4.32 4.19 -3.0% 28,215 15.74 12.45 n.a. 2.80 0.82

3948 YITAI COAL 348,670 4,086,412 0.2% 48.6% 11.36 10.62 -6.5% 35,518 6.73 8.20 1.09 n.a. 0.83

708 EVERG HEALTH 11,845,000 33,639,800 0.5% 42.2% 2.88 3.08 6.9% 26,611 n.a. n.a. 35.95 n.a. 2.06

1347 HUA HONG SEMI 3,360,000 48,787,200 0.9% 41.5% 14.4 14.5 0.7% 15,072 12.68 11.16 1.13 2.32 0.71

950 LEE'S PHARM 4,157,045 49,219,413 1.1% 40.9% 11.28 11.96 6.0% 7,075 26.00 23.45 4.20 0.88 2.06

884 CIFI HOLD GP 33,126,030 230,557,169 1.4% 40.1% 6.7 6.41 -4.3% 48,714 9.86 7.79 2.16 3.69 1.02

2008 PHOENIX TV 7,628,000 7,780,560 0.5% 38.5% 0.98 0.97 -1.0% 4,844 n.a. n.a. 0.96 n.a. 9.02

207 JOY CITY PPT 11,314,000 14,821,340 0.3% 35.8% 1.26 1.3 3.2% 18,500 20.27 14.84 0.57 1.99 0.74

6068 WISDOM EDU INTL 7,794,000 46,530,180 1.4% 34.1% 5.75 6.16 7.1% 12,578 31.41 23.56 5.83 1.26 2.02

921 HISENSE KELON 7,455,600 76,792,680 2.2% 33.7% 9.98 9.59 -3.9% 19,257 6.22 6.37 2.18 6.43 3.62

721 C FIN INT INV 27,548,628 8,126,845 0.4% 31.3% 0.33 0.31 -6.1% 3,401 n.a. n.a. 2.15 n.a. 3.67

3908 CICC 29,185,372 461,712,585 2.6% 30.8% 15.2 15.2 0.0% 60,574 13.99 12.37 1.39 1.43 2.68

2313 SHENZHOU INTL 2,262,999 180,926,770 0.3% 29.8% 77.6 75.8 -2.3% 113,944 24.59 20.53 4.78 2.26 1.16

718 TAI UNITED HOLD 3,795,000 4,022,700 0.3% 29.1% 0.96 1.03 7.3% 5,408 n.a. n.a. 0.99 n.a. 0.52

6178 EB SECURITIES 1,361,000 12,602,860 0.2% 28.3% 9.15 9 -1.6% 68,644 10.86 9.29 0.69 2.77 0.99

1628 YUZHOU PPT 17,594,240 89,554,682 1.1% 27.6% 5.37 4.98 -7.3% 20,841 5.87 4.52 1.43 6.04 1.00

3329 BOCOM INTL 1,779,000 4,020,540 0.4% 26.6% 2.29 2.24 -2.2% 6,125 14.00 11.20 1.13 1.79 0.37

2006 JINJIANG HOTELS 21,152,000 71,070,720 1.6% 26.4% 3.2 3.52 10.0% 19,592 24.82 21.95 1.69 2.80 3.51

1898 CHINA COAL 78,629,558 293,288,251 4.0% 26.3% 3.64 3.53 -3.0% 77,375 8.73 9.45 0.43 3.39 3.21

709 GIORDANO INT'L 23,148,970 88,429,065 2.0% 26.2% 3.82 3.85 0.8% 6,046 12.15 11.10 2.13 8.23 9.96

5 HSBC HOLDINGS 90,639,333 7,219,422,873 0.5% 26.0% 83.55 77.2 -7.6% 1,544,856 13.95 13.27 1.05 5.24 2.50

1165 SFCE 37,780,205 13,600,874 1.3% 25.0% 0.36 0.36 0.0% 1,553 0.79 n.a. 0.28 n.a. 4.48

815 CHI SILVER GP 19,663,967 39,721,213 1.8% 22.8% 2.1 1.91 -9.0% 3,102 n.a. n.a. 1.00 n.a. 3.32

2868 BJ CAPITAL LAND 9,928,000 45,172,400 1.1% 22.3% 4.48 4.95 10.5% 14,988 5.14 n.a. 0.73 7.23 1.85

102 SUMMIT ASCENT 39,943,540 35,150,315 2.8% 22.0% 0.9 0.9 0.0% 1,340 15.00 8.41 1.12 0.00 3.75

1972 SWIREPROPERTIES 18,291,568 483,811,974 1.7% 21.6% 26.5 26.85 1.3% 157,073 20.26 19.83 0.66 2.81 5.76

2356 DAHSING BANKING 2,001,718 35,390,374 0.6% 21.6% 17.26 17.2 -0.3% 24,151 9.91 9.42 1.00 2.49 3.19

1513 LIVZON PHARMA 696,715 42,708,630 0.8% 21.4% 60.85 59.45 -2.3% 42,813 11.54 23.95 2.50 1.88 1.05

1589 CNLP 11,555,025 27,500,960 1.5% 21.4% 2.38 2.36 -0.8% 6,895 n.a. 57.98 0.66 n.a. 6.94

3883 CHINA AOYUAN 28,520,876 181,392,771 2.4% 21.4% 6.01 6.4 6.5% 17,146 8.58 5.73 1.50 4.57 1.83

251 SEA HOLDINGS 1,111,337 17,736,939 0.6% 20.6% 16.34 15.94 -2.4% 10,767 n.a. n.a. 1.74 n.a. 2.22

1253 GREENLAND BROAD 10,884,000 12,407,760 0.9% 18.9% 1.14 1.19 4.4% 3,978 n.a. n.a. 4.15 n.a. 6.30

772 CHINA LIT 11,046,956 884,861,176 5.4% 18.8% 73.6 76.15 3.5% 69,024 120.81 63.71 8.36 n.a. 4.53

659 NWS HOLDINGS 2,141,268 32,547,274 0.2% 18.8% 14.48 14.92 3.0% 58,109 12.43 11.36 1.19 4.22 1.27

3

Figure 3: Top 50 short selling stocks (ranked by net change between February 15 and February 23, ascending order)


Ticker Company name

Aggregated

reportable

short positions

on Feb 23

(shares)

Aggregated

reportable short

positions on Feb

23 (HK$)

% of free

float

Change in short

positions

compared with

Feb 15

Price on

Feb 23

(HK$)

Price on

Mar 02

(HK$)

Price

change

during

the

period

Market cap

(HK$m)

2017E

PER (x)

2018E

PER (x) PBR (x)

2017E

Dividend

yield (%)

Aggregated

reportable

short

positions on

Feb 23/ 3-

month

average

daily

turnover

1462 GOLD-FIN HLDG 2,082,000 6,079,440 0.2% -41.9% 2.74 3.22 17.5% 12,880 n.a. n.a. 43.38 n.a. 0.06

3918 NAGACORP 6,976,071 52,181,011 0.2% -36.3% 7.49 7.27 -2.9% 31,559 12.90 11.61 1.65 4.63 1.53

127 CHINESE EST H 923,500 11,451,400 0.2% -30.8% 12.88 12.32 -4.3% 23,502 n.a. n.a. 0.65 n.a. 0.53

3301 RONSHINECHINA 1,701,500 20,009,640 0.4% -30.0% 12.2 11.3 -7.4% 16,891 n.a. n.a. 1.51 n.a. 0.34

551 YUE YUEN IND 1,751,748 55,968,349 0.2% -28.1% 33.45 33.4 -0.1% 55,060 12.70 12.08 1.46 11.63 0.68

3969 CHINA CRSC 10,240,000 61,235,200 0.8% -25.4% 6 6.05 0.8% 53,202 11.93 10.03 1.91 2.39 2.51

1980 TIANGE 3,195,000 22,077,450 0.7% -20.8% 6.76 7.1 5.0% 9,050 n.a. n.a. 2.78 n.a. 0.67

2268 YOUYUAN HLDGS 8,862,074 30,219,672 2.6% -19.8% 3.43 3.42 -0.3% 4,254 6.93 5.44 1.11 n.a. 0.98

2198 CHINA SANJIANG 1,385,000 4,279,650 0.2% -19.4% 3 3.22 7.3% 3,832 4.94 4.12 0.98 6.40 0.33

581 CHINA ORIENTAL 6,414,000 41,113,740 0.7% -18.9% 6.19 6.09 -1.6% 22,670 4.08 5.00 1.49 7.70 0.46

2588 BOC AVIATION 234,900 10,241,640 0.1% -18.4% 43 42.75 -0.6% 29,669 7.39 6.57 1.07 4.82 0.30

2688 ENN ENERGY 39,571,487 2,425,732,153 5.3% -18.3% 63.7 60.8 -4.6% 65,936 15.61 13.63 3.36 1.80 8.01

2662 CAMSING INTL 2,826,000 16,362,540 0.7% -17.3% 5.55 5.84 5.2% 6,290 n.a. n.a. 16.33 n.a. 2.02

152 SHENZHEN INT'L 2,270,297 36,597,188 0.3% -16.1% 15.56 15.84 1.8% 32,189 10.98 10.92 1.58 4.75 0.74

2343 PACIFIC BASIN 224,294,928 457,561,653 4.8% -15.7% 1.93 2.27 17.6% 10,084 16.11 8.28 1.09 2.76 10.60

2768 JIAYUAN INTL 2,544,000 19,970,400 0.2% -14.8% 7.58 8.79 16.0% 21,553 16.85 18.27 3.28 n.a. 0.48

270 GUANGDONG INV 21,931,467 258,791,311 0.8% -14.7% 11.12 11.84 6.5% 77,408 14.78 15.56 2.03 4.10 2.70

1113 CK ASSET 6,113,077 412,938,351 0.2% -14.1% 67.25 68 1.1% 251,430 12.67 11.39 0.91 2.53 1.01

6858 HONMAGOLF 347,500 2,995,450 0.3% -13.9% 8.25 8.81 6.8% 5,366 14.38 12.36 2.81 2.75 0.12

3988 BANK OF CHINA 545,054,561 2,414,591,705 0.8% -12.9% 4.4 4.2 -4.5% 1,435,308 5.82 5.43 0.73 5.14 1.11

64 GET NICE 8,194,000 2,499,170 0.1% -12.8% 0.27 0.31 14.8% 2,995 n.a. n.a. 0.56 n.a. 0.24

1585 YADEA 8,828,000 23,835,600 0.9% -12.4% 2.68 2.63 -1.9% 7,890 14.21 12.54 2.83 2.11 3.22

2202 CHINA VANKE 20,938,019 766,331,495 1.7% -11.8% 36.75 34.7 -5.6% 432,814 11.35 9.14 2.76 3.62 1.95

6823 HKT-SS 48,196,947 481,005,531 1.4% -11.6% 9.78 10 2.2% 75,717 14.66 14.37 1.94 6.56 5.54

860 O LUXE HOLD 25,145,765 47,776,954 0.7% -11.4% 1.86 1.91 2.7% 11,294 n.a. n.a. 3.19 n.a. 1.54

3360 FE HORIZON 31,376,120 247,871,348 1.7% -11.0% 7.87 7.87 0.0% 31,102 7.71 6.63 1.07 3.87 6.84

308 CHINA TRAVEL HK 7,494,072 21,283,164 0.3% -11.0% 2.75 2.82 2.5% 15,369 24.31 21.04 1.01 2.45 0.68

2331 LI NING 49,463,176 326,951,593 2.7% -11.0% 6.3 6.88 9.2% 14,991 26.31 18.47 2.54 0.43 6.50

451 GCL NEWENERGY 142,383,956 71,191,978 2.3% -10.8% 0.465 0.485 4.3% 9,251 8.98 7.46 1.17 0.00 3.19

2877 SHINEWAY PHARM 3,309,000 35,737,200 1.1% -10.7% 11.2 11.34 1.3% 9,378 18.84 15.37 1.35 4.57 2.21

754 HOPSON DEV HOLD 4,071,061 31,265,748 0.7% -10.2% 7.7 7.46 -3.1% 16,603 12.64 11.84 0.29 2.41 3.59

956 CHINA SUNTIEN 19,592,000 38,008,480 1.3% -9.9% 1.88 1.85 -1.6% 6,873 6.17 5.45 0.67 5.93 2.36

914 CONCH CEMENT 49,792,099 2,116,164,208 4.4% -9.7% 41.95 40.9 -2.5% 212,359 12.12 10.91 2.19 2.91 5.12

363 SHANGHAI IND H 2,186,000 47,873,400 0.5% -9.0% 21.7 21.35 -1.6% 23,212 7.41 6.83 0.60 4.72 1.78

1766 CRRC 229,761,410 1,693,341,592 5.3% -8.8% 7.3 7.25 -0.7% 339,270 14.30 12.27 1.47 3.15 4.86

1308 SITC 11,175,944 94,660,246 0.9% -8.8% 8.16 8.6 5.4% 22,847 15.92 13.08 3.16 4.28 9.29

230 MINMETALS LAND 2,256,000 3,271,200 0.2% -8.7% 1.43 1.46 2.1% 4,884 n.a. n.a. 0.66 n.a. 0.51

2628 CHINA LIFE 104,275,096 2,476,533,530 1.5% -8.4% 23.15 22.95 -0.9% 858,372 16.34 13.21 1.70 2.21 1.50

548 SHENZHENEXPRESS 3,203,225 25,305,478 0.5% -8.4% 7.75 7.9 1.9% 21,162 9.56 9.10 1.08 4.25 2.39

598 SINOTRANS 17,641,541 76,917,119 0.8% -8.0% 4.31 4.61 7.0% 27,887 10.38 9.46 1.03 2.92 1.20

1883 CITIC TELECOM 3,579,784 8,197,705 0.2% -7.8% 2.2 2.36 7.3% 8,364 8.97 8.43 1.04 6.48 0.77

538 AJISEN (CHINA) 664,000 2,456,800 0.1% -7.6% 3.85 3.78 -1.8% 4,126 18.35 15.96 1.00 n.a. 1.52

242 SHUN TAK HOLD 3,411,213 11,325,227 0.3% -7.4% 3.32 3.18 -4.2% 9,639 7.76 5.21 0.37 3.24 0.86

1618 MCC 40,068,522 97,767,194 1.5% -7.2% 2.38 2.34 -1.7% 97,884 6.70 5.42 0.64 3.53 3.34

717 EMPEROR CAPITAL 15,684,974 9,567,834 0.5% -7.1% 0.6 0.62 3.3% 4,179 n.a. n.a. 0.81 n.a. 0.98

1829 CMEC 10,987,392 51,970,364 1.3% -6.9% 4.75 4.69 -1.3% 19,350 8.04 6.81 1.04 4.81 2.37

728 CHINA TELECOM 193,266,867 672,568,697 1.4% -6.8% 3.46 3.42 -1.2% 276,789 11.85 10.54 0.70 3.61 2.67

753 AIR CHINA 45,819,940 540,675,292 2.7% -6.6% 10.9 11.62 6.6% 214,115 14.77 13.75 1.69 1.43 2.13

995 ANHUIEXPRESSWAY 885,000 5,487,000 0.2% -6.5% 6.21 6.04 -2.7% 18,247 7.42 7.31 0.91 5.51 0.84

123 YUEXIU PROPERTY 16,285,952 26,220,383 0.3% -6.5% 1.59 1.68 5.7% 20,834 7.09 5.77 0.54 5.80 0.49

4

Figure 4: Top 50 short selling stocks (ranked by percentage of free float)


Ticker Company name

Aggregated

reportable short

positions on Feb

23 (shares)

Aggregated

reportable short

positions on Feb 23

(HK$)

% of

free

float

Change in short

positions

compared with

Feb 15

Price on

Feb 23

(HK$)

Price on

Mar 02

(HK$)

Price

change

during

the

period

Market cap

(HK$m)

2017E

PER (x)

2018E

PER (x) PBR (x)

2017E

Dividend

yield (%)

Aggregated

reportable

short

positions on

Feb 23/ 3-

month

average

daily

turnover

3933 UNITED LAB 187,075,348 1,438,609,426 30.6% 4.1% 7 7.89 12.7% 12,836 33.43 22.54 2.04 0.00 36.64

2318 PING AN 1,438,582,869 123,358,481,017 29.3% -1.0% 86.85 82.7 -4.8% 1,520,245 16.18 13.17 2.73 1.62 22.39

2600 CHALCO 609,896,763 3,061,681,750 17.8% 1.6% 4.94 4.59 -7.1% 90,293 24.97 12.66 1.57 0.00 10.16

992 LENOVO GROUP 1,208,202,506 4,869,056,099 17.3% -0.1% 3.94 4.08 3.6% 49,020 57.90 9.14 1.88 4.22 19.93

1211 BYD COMPANY 115,580,461 8,460,489,745 17.3% -0.5% 72.1 70.9 -1.7% 205,481 36.89 24.43 3.12 0.52 17.39

3808 SINOTRUK 105,048,500 1,010,566,570 16.2% -0.5% 9.5 9.43 -0.7% 26,036 8.13 8.16 1.00 4.22 18.32

951 CHAOWEI POWER 76,638,264 381,658,555 15.8% 1.3% 5.67 4.76 -16.0% 5,274 6.77 5.79 1.22 2.98 12.17

493 GOME RETAIL 1,634,967,437 1,504,170,042 15.7% 1.7% 0.91 0.91 0.0% 19,617 43.40 25.44 0.77 1.08 23.10

2333 GREATWALL MOTOR 480,984,109 4,275,948,729 15.2% -0.1% 8.69 9.09 4.6% 121,931 13.09 8.61 1.45 2.44 10.73

327 PAX GLOBAL 107,761,378 426,735,057 15.0% 3.6% 3.61 3.95 9.4% 4,346 11.29 8.21 1.17 1.52 36.06

215 HUTCHTEL HK 151,492,129 518,103,081 14.5% -0.1% 3.33 2.81 -15.6% 13,541 31.93 31.22 1.18 2.31 8.30

2638 HKELECTRIC-SS 324,344,586 2,370,958,924 14.3% -0.4% 7.21 7.33 1.7% 64,769 18.75 18.79 1.34 5.38 61.06

3323 CNBM 387,850,823 3,087,292,551 14.2% 1.6% 7.39 7.55 2.2% 40,763 10.45 8.33 0.78 2.04 8.42

151 WANT WANT CHINA 654,004,681 4,368,751,269 13.8% -0.6% 6.19 6.38 3.1% 79,508 20.28 19.09 4.97 2.65 39.58

3333 EVERGRANDE 269,329,933 6,531,250,875 13.8% -1.9% 24.15 22.7 -6.0% 299,034 7.74 6.22 2.38 3.03 11.53

981 SMIC 550,846,411 5,607,616,464 13.0% 0.0% 9.36 10.46 11.8% 51,442 74.22 41.75 1.26 0.00 9.26

268 KINGDEE INT'L 268,071,187 1,426,138,715 12.0% 7.0% 5 5.61 12.2% 16,314 56.85 42.91 3.79 0.07 12.34

2282 MGM CHINA 97,146,251 2,253,793,023 11.8% 1.5% 22.45 23.35 4.0% 88,743 31.51 20.41 10.42 1.52 9.29

285 BYD ELECTRONIC 70,304,512 1,295,009,111 11.5% -1.0% 18.24 18.38 0.8% 41,414 12.86 10.92 2.60 1.28 7.30

2338 WEICHAI POWER 202,451,398 1,882,798,001 11.3% 3.7% 8.9 8.6 -3.4% 78,916 8.94 9.71 0.85 5.38 18.24

799 IGG 93,113,720 906,927,633 11.2% -2.4% 8.48 10.5 23.8% 14,001 10.90 8.71 7.50 4.70 7.15

347 ANGANG STEEL 110,602,272 988,784,312 11.0% 1.8% 8.87 8.3 -6.4% 61,498 9.14 8.69 1.05 2.94 6.32

1816 CGN POWER 1,047,586,881 2,210,408,319 10.3% 1.6% 2.06 2.11 2.4% 95,897 8.64 8.73 1.29 3.74 15.93

763 ZTE 75,608,063 2,079,221,733 10.3% -5.8% 27.2 27.1 -0.4% 154,005 17.83 15.20 3.18 1.44 4.83

698 TONGDA GROUP 363,151,530 653,672,754 10.3% -3.6% 1.82 1.82 0.0% 11,014 10.46 8.09 2.21 2.86 19.00

1060 ALI PICTURES 1,149,265,366 1,241,206,595 10.3% -0.3% 1.02 1.03 1.0% 26,234 n.a. n.a. 1.28 n.a. 31.05

877 O-NET TECH GP 39,426,069 205,804,080 9.8% 0.6% 4.99 5.45 9.2% 4,352 20.04 14.49 2.45 0.42 10.03

2186 LUYE PHARMA 169,750,157 1,169,578,582 9.7% -0.8% 6.65 6.67 0.3% 22,152 18.91 16.85 2.76 0.92 9.22

607 FULLSHARE 744,052,640 2,842,281,085 9.7% 1.2% 3.76 4.17 10.9% 82,270 n.a. n.a. 3.10 n.a. 18.89

3900 GREENTOWN CHINA 62,141,386 776,767,325 9.6% 6.8% 12.46 11.68 -6.3% 25,318 10.80 9.77 0.80 1.63 7.43

1157 ZOOMLION 129,046,000 423,270,880 9.6% 1.7% 3.27 3.17 -3.1% 37,982 16.69 15.58 0.53 6.23 10.98

2009 BBMG 216,021,393 853,284,502 9.5% 4.5% 3.45 3.83 11.0% 62,959 10.05 7.54 0.73 1.58 8.06

750 SINGYES SOLAR 38,920,884 123,768,411 9.5% 5.9% 3.19 3.11 -2.5% 2,594 5.68 4.79 0.50 1.39 7.76

315 SMARTONE TELE 29,823,130 267,215,245 9.5% -3.2% 8.68 8.45 -2.6% 9,474 15.14 15.59 2.01 5.42 25.46

1970 IMAX CHINA 10,888,765 255,885,978 9.3% -4.3% 22 24 9.1% 8,595 22.88 20.57 4.49 0.85 12.04

2727 SH ELECTRIC 241,603,883 712,731,455 9.2% 2.9% 2.89 2.9 0.3% 94,584 14.51 13.83 0.68 1.83 16.86

330 ESPRIT HOLDINGS 140,813,649 447,787,404 9.1% 0.4% 3.14 3.02 -3.8% 5,699 29.32 19.74 0.54 1.92 19.97

241 ALI HEALTH 379,017,320 1,478,167,548 9.1% -1.2% 3.84 3.85 0.3% 37,843 n.a. n.a. 27.32 n.a. 38.84

1918 SUNAC 184,816,265 5,867,916,414 9.1% 2.3% 31.25 28.5 -8.8% 125,390 15.96 6.78 3.86 1.82 4.82

3993 CMOC 308,275,961 1,979,131,670 8.8% -5.2% 5.79 6.22 7.4% 206,633 36.28 23.67 2.92 1.09 4.90

1363 CTEG 226,332,399 321,392,007 8.5% 5.4% 1.41 1.41 0.0% 8,907 13.29 11.21 2.06 1.66 9.46

6808 SUNART RETAIL 138,184,315 1,431,589,503 8.4% -0.4% 10.16 10.76 5.9% 102,647 30.08 27.01 3.88 2.25 12.65

880 SJM HOLDINGS 146,358,910 1,112,327,716 8.3% 1.9% 7.53 7.24 -3.9% 40,965 21.81 23.82 1.61 2.57 7.72

751 SKYWORTHDIGITAL 144,290,436 522,331,378 8.2% 6.4% 3.34 3.43 2.7% 10,499 28.82 7.94 0.65 1.34 14.71

1515 CRPHOENIXHEALTH 45,704,538 493,609,010 8.1% -0.3% 10.54 9.88 -6.3% 12,811 23.91 22.07 1.93 0.75 5.16

293 CATHAY PAC AIR 48,679,800 634,784,592 8.1% -3.8% 12.78 13.24 3.6% 52,084 n.a. 69.32 0.98 0.17 9.77

1818 ZHAOJIN MINING 78,555,347 485,472,044 8.0% 4.4% 6.34 6.05 -4.6% 19,485 23.47 21.23 1.46 1.28 12.65

2208 GOLDWIND 48,994,906 588,918,770 7.9% -0.1% 11.94 12.2 2.2% 70,340 11.32 10.77 1.71 2.18 5.65

522 ASM PACIFIC 24,184,450 2,778,793,305 7.8% -0.8% 108.3 117.9 8.9% 47,901 17.06 15.81 4.24 2.48 11.95

2357 AVICHINA 167,420,916 703,167,847 7.7% -1.1% 4.04 4.4 8.9% 26,251 17.32 14.80 1.54 0.70 15.11

5

Figure 5: Top 50 short selling stocks (ranked by absolute amount)


Ticker Company name

Aggregated

reportable short

positions on Feb

23 (shares)

Aggregated

reportable short

positions on Feb 23

(HK$)

% of

free

float

Change in short

positions

compared with

Feb 15

Price on

Feb 23

(HK$)

Price on

Mar 02

(HK$)

Price

change

during

the

period

Market cap

(HK$m)

2017E

PER (x)

2018E

PER (x) PBR (x)

2017E

Dividend

yield (%)

Aggregated

reportable

short

positions on

Feb 23/ 3-

month

average

daily

turnover

2318 PING AN 1,438,582,869 123,358,481,017 29.3% -1.0% 86.85 82.7 -4.8% 1,520,245 16.18 13.17 2.73 1.62 22.39

700 TENCENT 106,537,069 48,303,907,085 2.0% -1.7% 447 436 -2.5% 4,141,728 51.24 39.01 14.41 0.21 4.09

939 CCB 1,602,754,953 13,527,251,803 1.8% 4.5% 8.48 8 -5.7% 2,020,492 6.73 6.22 0.97 4.43 3.56

1211 BYD COMPANY 115,580,461 8,460,489,745 17.3% -0.5% 72.1 70.9 -1.7% 205,481 36.89 24.43 3.12 0.52 17.39

388 HKEX 27,755,317 7,932,469,599 2.4% 4.1% 280 285.8 2.1% 354,338 37.46 33.24 9.51 2.44 2.50

5 HSBC HOLDINGS 90,639,333 7,219,422,873 0.5% 26.0% 83.55 77.2 -7.6% 1,544,856 13.95 13.27 1.05 5.24 2.50

3333 EVERGRANDE 269,329,933 6,531,250,875 13.8% -1.9% 24.15 22.7 -6.0% 299,034 7.74 6.22 2.38 3.03 11.53

2382 SUNNY OPTICAL 46,923,938 5,912,416,188 6.9% -5.1% 128 128.7 0.5% 141,184 42.14 29.51 20.03 0.55 4.41

1918 SUNAC 184,816,265 5,867,916,414 9.1% 2.3% 31.25 28.5 -8.8% 125,390 15.96 6.78 3.86 1.82 4.82

981 SMIC 550,846,411 5,607,616,464 13.0% 0.0% 9.36 10.46 11.8% 51,442 74.22 41.75 1.26 0.00 9.26

992 LENOVO GROUP 1,208,202,506 4,869,056,099 17.3% -0.1% 3.94 4.08 3.6% 49,020 57.90 9.14 1.88 4.22 19.93

2601 CPIC 123,515,378 4,823,275,511 4.5% 2.1% 37.8 38.2 1.1% 407,667 18.04 14.15 2.13 2.73 6.17

2007 COUNTRY GARDEN 314,716,067 4,733,329,648 4.1% 0.5% 13.86 13.94 0.6% 303,054 12.50 8.67 3.08 2.64 3.78

151 WANT WANT CHINA 654,004,681 4,368,751,269 13.8% -0.6% 6.19 6.38 3.1% 79,508 20.28 19.09 4.97 2.65 39.58

3 HK & CHINA GAS 283,517,379 4,343,486,246 3.5% -0.6% 14.8 15.44 4.3% 215,969 27.28 26.08 3.82 2.23 22.77

2333 GREATWALL MOTOR 480,984,109 4,275,948,729 15.2% -0.1% 8.69 9.09 4.6% 121,931 13.09 8.61 1.45 2.44 10.73

3968 CM BANK 118,274,233 4,110,029,597 3.1% 1.5% 34.4 32.45 -5.7% 913,099 9.47 8.30 1.51 3.10 4.65

1299 AIA 64,135,690 4,082,236,669 0.5% 1.7% 63.3 64.4 1.7% 777,600 17.61 15.79 2.36 1.86 2.66

1658 PSBC 756,915,400 3,716,454,614 6.1% 0.6% 4.75 4.86 2.3% 393,809 6.94 6.13 0.92 2.31 10.02

175 GEELY AUTO 143,318,820 3,425,319,798 2.8% 4.4% 22.7 24.85 9.5% 222,976 18.17 13.31 6.42 1.25 2.26

1044 HENGAN INT'L 44,496,211 3,403,960,142 6.6% -0.3% 75 76.6 2.1% 92,393 20.04 18.18 4.90 3.25 10.87

1398 ICBC 482,748,377 3,393,721,090 0.7% -2.8% 6.99 6.67 -4.6% 2,800,423 6.83 6.34 0.96 4.40 1.26

941 CHINA MOBILE 43,910,814 3,282,333,347 0.8% 0.8% 74.2 72.6 -2.2% 1,486,520 10.60 10.05 1.18 9.56 2.42

2018 AAC TECH 21,069,131 3,234,111,609 2.9% -3.5% 153 151.8 -0.8% 185,500 28.03 20.86 10.08 1.33 3.31

3323 CNBM 387,850,823 3,087,292,551 14.2% 1.6% 7.39 7.55 2.2% 40,763 10.45 8.33 0.78 2.04 8.42

2600 CHALCO 609,896,763 3,061,681,750 17.8% 1.6% 4.94 4.59 -7.1% 90,293 24.97 12.66 1.57 0.00 10.16

1928 SANDS CHINA LTD 68,721,179 3,023,731,876 2.9% 0.4% 44.6 43 -3.6% 347,201 22.42 19.68 9.77 4.81 4.30

1114 BRILLIANCE CHI 143,741,658 2,953,891,072 5.1% -0.6% 20.7 19.98 -3.5% 100,804 16.55 10.80 3.03 0.70 9.01

607 FULLSHARE 744,052,640 2,842,281,085 9.7% 1.2% 3.76 4.17 10.9% 82,270 n.a. n.a. 3.10 n.a. 18.89

384 CHINA GAS HOLD 113,682,964 2,842,074,100 6.7% -0.1% 24.25 24.25 0.0% 120,487 20.02 16.61 5.04 1.47 17.02

522 ASM PACIFIC 24,184,450 2,778,793,305 7.8% -0.8% 108.3 117.9 8.9% 47,901 17.06 15.81 4.24 2.48 11.95

2 CLP HOLDINGS 35,606,939 2,757,757,426 1.9% 0.5% 76 79.1 4.1% 199,842 14.44 16.03 1.84 3.82 11.77

762 CHINA UNICOM 266,336,200 2,743,262,860 4.7% 4.2% 10.2 9.95 -2.5% 304,451 48.89 24.01 0.84 0.83 6.01

1038 CKI HOLDINGS 40,498,638 2,666,835,312 6.7% -1.1% 65.35 65.9 0.8% 174,680 15.85 14.14 1.76 3.66 18.74

66 MTR CORPORATION 60,884,616 2,544,976,949 3.9% -2.7% 40.9 41.15 0.6% 247,229 24.97 25.17 1.59 8.02 13.16

2628 CHINA LIFE 104,275,096 2,476,533,530 1.5% -8.4% 23.15 22.95 -0.9% 858,372 16.34 13.21 1.70 2.21 1.50

2688 ENN ENERGY 39,571,487 2,425,732,153 5.3% -18.3% 63.7 60.8 -4.6% 65,936 15.61 13.63 3.36 1.80 8.01

3988 BANK OF CHINA 545,054,561 2,414,591,705 0.8% -12.9% 4.4 4.2 -4.5% 1,435,308 5.82 5.43 0.73 5.14 1.11

1109 CHINA RES LAND 80,194,248 2,393,798,303 3.3% -5.8% 30.2 27.45 -9.1% 190,254 10.12 8.46 1.56 2.89 4.49

2638 HKELECTRIC-SS 324,344,586 2,370,958,924 14.3% -0.4% 7.21 7.33 1.7% 64,769 18.75 18.79 1.34 5.38 61.06

2282 MGM CHINA 97,146,251 2,253,793,023 11.8% 1.5% 22.45 23.35 4.0% 88,743 31.51 20.41 10.42 1.52 9.29

1816 CGN POWER 1,047,586,881 2,210,408,319 10.3% 1.6% 2.06 2.11 2.4% 95,897 8.64 8.73 1.29 3.74 15.93

914 CONCH CEMENT 49,792,099 2,116,164,208 4.4% -9.7% 41.95 40.9 -2.5% 212,359 12.12 10.91 2.19 2.91 5.12

257 CHINA EB INT'L 178,095,091 2,105,083,976 7.1% 3.0% 11.4 12.22 7.2% 54,779 15.31 12.39 2.72 2.17 20.18

763 ZTE 75,608,063 2,079,221,733 10.3% -5.8% 27.2 27.1 -0.4% 154,005 17.83 15.20 3.18 1.44 4.83

322 TINGYI 130,613,875 2,071,536,058 6.9% 3.2% 15.3 16.04 4.8% 90,091 42.22 33.26 4.68 1.24 15.59

27 GALAXY ENT 30,467,284 2,053,494,942 1.3% -4.3% 66.7 68 1.9% 293,331 24.76 22.22 5.29 1.21 2.23

2238 GAC GROUP 109,205,971 1,983,180,433 5.8% -1.7% 16.9 16.94 0.2% 169,873 8.81 7.23 1.80 3.21 4.16

3993 CMOC 308,275,961 1,979,131,670 8.8% -5.2% 5.79 6.22 7.4% 206,633 36.28 23.67 2.92 1.09 4.90

823 LINK REIT 28,950,417 1,887,567,188 1.3% -4.7% 64.7 68.8 6.3% 149,271 27.78 26.07 1.03 3.62 5.01

1

China Cement Weekly

March 05, 2018


(852) 3698-6317

[email protected]


(852) 3698-6393

[email protected]

China Cement Sector

Sources: Company, Bloomberg, CGIS Research estimates

Relatively Weak Cement Price Just After CNY; Still Need Some Time to Stimulate Demand

National average cement prices dropped 2% last week. The average cement price

(nationwide) decreased 2% to RMB387/tonne compared with the price level before the

Chinese New Year (CNY) holiday. The regions with a decline of RMB20-50/tonne were

mainly east China, south central China and southwest China. Cement demand remained

at a low level during the week, as it takes time for construction activity to resume after the

CNY holiday. The decline in cement prices is not a surprise, as it is a common practice to

lower prices to stimulate downstream demand just after the CNY holiday. There is an

increase in cement inventory because of weak demand during CNY, but the inventory

level is likely to come down once more construction activity resumes in the next one to

two weeks. Cement prices are expected to rebound in late March. The average

inventory level (nationwide) rebounded to 61.44%.

Coal prices fell slightly last week. The comprehensive average price index for Bohai-

Rim Steam Coal (Q5500K) dropped by RMB1/tonne to RMB574/tonne last week

compared to that before CNY. The index was down 3% on a year-on-year basis.

Coal costs should not be a major concern in the near term. The thermal coal futures

closing price in China dropped from RMB666/tonne in early February to RMB632/tonne

last Friday. Weaker demand during the CNY holiday is one of the major reasons for the

decline in thermal coal prices. As the temperature in north China is likely to get warmer

soon, coal demand for heating will also drop soon. Therefore, coal costs should not be a

concern for cement companies in the near term, although it usually accounts for about

one-third of the production cost.

Cement stocks under coverage fell 3.9% on average last week. The share price

performance of the sector was weak last week, following the overall market. Best

performer BBMG [2009.HK; BUY] fell 3% week on week. CNBM [3323.HK; BUY], the

weakest among our coverage stocks, fell 5.2% week on week.

Valuation Table

2016 -2018E PEG(x)

Company Ticker 2017E 2018E CAGR (%) 2017E 2016 2017E 2018E 2016 2017E 2018E

Conch Cement 914 HK Equity 66.3 21.5 42.2 0.3 11.48 16.92 17.92 1.4 2.9 3.2

CNBM 3323 HK Equity 243.8 35.7 116.0 0.1 2.22 7.36 9.27 0.7 1.9 2.4

CR Cement 1313 HK Equity 98.9 7.8 46.4 0.3 7.14 13.67 13.55 1.5 4.6 4.8

BBMG 2009 HK Equity 27.2 23.7 25.5 0.4 5.64 6.48 7.54 1.6 1.6 1.8

Simple average 109.1 22.2 57.5 0.3 6.62 11.11 12.07 1.3 2.8 3.0

Weighted average 83.3 22.1 48.2 0.3 8.91 13.61 14.61 1.4 2.8 3.0

EPS Growth (%) ROE (%) Dividend yield (%)

Net debt/equity (%)

Company Ticker Rating Price (HK$) Market cap (US$m) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2017E

Conch Cement 914 HK Equity BUY 40.90 27,226 22.4 13.1 11.1 2.47 2.06 1.87 11.8 8.1 6.9 Net cash

CNBM 3323 HK Equity BUY 7.55 5,226 38.1 10.8 8.2 0.85 0.77 0.73 11.1 8.6 7.7 210

BBMG 2009 HK Equity BUY 3.83 8,072 15.3 11.7 9.7 0.80 0.77 0.71 15.3 10.1 8.6 84

CR Cement 1313 HK Equity BUY 5.87 4,916 20.4 10.3 9.5 1.47 1.34 1.24 10.8 7.4 7.0 42

Simple average 24.1 11.5 9.6 1.40 1.24 1.14 12.2 8.5 7.5 112

Weighted average 22.7 12.3 10.3 1.88 1.61 1.47 12.2 8.4 7.3 44

PER (x) PBR (x) EV/EBITDA(x)

2

1-Year Relative Performance


Peer Comparison


Market cap

Company Ticker Rating Price (LC) (US$m) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E

Conch Cement 914 HK Equity BUY 40.90 27,226 22.4 13.1 11.1 2.47 2.06 1.87 11.8 8.1 6.9

CNBM 3323 HK Equity BUY 7.55 5,226 38.1 10.8 8.2 0.85 0.77 0.73 11.1 8.6 7.7

BBMG 2009 HK Equity BUY 3.83 8,072 15.3 11.7 9.7 0.80 0.77 0.71 15.3 10.1 8.6

CR Cement 1313 HK Equity BUY 5.87 4,916 20.4 10.3 9.5 1.47 1.34 1.24 10.8 7.4 7.0

China National Materials 1893 HK Equity NR 6.38 2,921 21.1 12.0 9.1 1.03 1.07 0.86 9.4 5.6 4.9

Asia Cement 743 HK Equity NR 3.01 605 10.6 12.8 9.8 0.40 n.a. n.a. 5.9 6.0 6.2

West China Cement 2233 HK Equity NR 1.34 933 17.3 9.4 7.4 0.97 0.77 0.72 6.4 4.7 4.2

Tianrui Cement 1252 HK Equity NR 5.01 1,887 18.5 n.a. n.a. 1.32 n.a. n.a. 11.5 n.a. n.a.

Simple average 16.9 11.5 9.2 0.93 1.13 1.02 8.3 7.2 6.5

Weighted average 22.3 11.8 9.8 1.78 1.48 1.35 11.9 7.9 6.8

PER (x) PBR (x) EV/EBITDA(x)

3

Figure 1: Regional Cement Price

Sources: Digital Cement, CGIS Research

220

270

320

370

420

470

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

National Average (P.O. 42.5)

2013 2014 2015 2016 2017 2018

200

250

300

350

400


North China

2013 2014 2015 2016 2017 2018

250

300

350

400

450

500


Northeast China

2013 2014 2015 2016 2017 2018

200

250

300

350

400

450

500

550


East China

2013 2014 2015 2016 2017 2018

200

240

280

320

360

400

440

480


South Central China

2013 2014 2015 2016 2017 2018

200

240

280

320

360

400

440


Southwest China

2013 2014 2015 2016 2017 2018

200

220

240

260

280

300

320

340

360

380


Northwest China

2013 2014 2015 2016 2017 2018

4

Figure 2: Cement Prices in Major Cities (1)

Sources: Digital Cement, CGIS Research

200

240

280

320

360

400

440


Tianjin

2013 2014 2015 2016 2017 2018

150

200

250

300

350

400

450

500


Shijiazhuang, Hebei

2013 2014 2015 2016 2017 2018

240

290

340

390

440

490


Beijing

2013 2014 2015 2016 2017 2018

150

200

250

300

350

400


Taiyuan, Shanxi

2013 2014 2015 2016 2017 2018

200

240

280

320

360


Hohhot, Inner Mongolia

2013 2014 2015 2016 2017 2018

200

250

300

350

400

450


Shenyang, Liaoning

2013 2014 2015 2016 2017 2018

250

300

350

400

450

500


Changchun, Jilin

2013 2014 2015 2016 2017 2018

280

330

380

430

480


Harbin, Heilongjiang

2013 2014 2015 2016 2017 2018

6

Disclaimer

This research report is not directed at, or intended for distribution to or used by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject China Galaxy International Securities (Hong Kong) Co., Limited (“Galaxy International Securities”) and/or its group companies to any registration or licensing requirement within such jurisdiction.

This report (including any information attached) is issued by Galaxy International Securities, one of the subsidiaries of the China Galaxy International Financial Holdings Limited, to the institutional clients from the information sources believed to be reliable, but no representation or warranty (expressly or implied) is made as to their accuracy, correctness and/or completeness.

This report shall not be construed as an offer, invitation or solicitation to buy or sell any securities of the company(ies) referred to herein. Past perfor-mance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regard-ing future performance. The recipient of this report should understand and comprehend the investment objectives and its related risks, and where necessary consult their own independent financial advisers prior to any investment decision.

Where any part of the information, opinions or estimates contained herein reflects the personal views and opinions of the analyst who prepared this report, such views and opinions may not correspond to the published views or investment decisions of China Galaxy International Financial Holdings Limited and any of its subsidiaries (“China Galaxy International”), directors, officers, agents and employees (“the Relevant Parties”).

All opinions and estimates reflect the judgment of the analyst on the date of this report and are subject to change without notice. China Galaxy Interna-tional and/or the Relevant Parties hereby disclaim any of their liabilities arising from the inaccuracy, incorrectness and incompleteness of this report and its attachment/s and/or any action or omission made in reliance thereof. Accordingly, this report must be read in conjunction with this disclaimer.

Disclosure of Interests

China Galaxy Securities Co., Ltd. (6881.HK; 601881.CH) is the direct and/or indirect holding company of the group of companies under China Galaxy International.

China Galaxy International may have financial interests in relation to the subjected company(ies) the securities in respect of which are reviewed in this report, and such interests aggregate to an amount may equal to or more than 1 % of the subjected company(ies)’ market capitalization.

One or more directors, officers and/or employees of China Galaxy International may be a director or officer of the securities of the company(ies) men-tioned in this report.

China Galaxy International and the Relevant Parties may, to the extent permitted by law, from time to time participate or invest in financing transac-tions with the securities of the company(ies) mentioned in this report, perform services for or solicit business from such company(ies), and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto.

China Galaxy International may have served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the last 12 months, significant advice or invest-ment services in relation to the investment concerned or a related investment or investment banking services to the company(ies) mentioned in this report.

Furthermore, China Galaxy International may have received compensation for investment banking services from the company(ies) mentioned in this report within the preceding 12 months and may currently seeking investment banking mandate from the subject company(ies).

Analyst Certification

The analyst who is primarily responsible for the content of this report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report.

Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the securities covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the securities covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong-listed companies covered in this report; and (4) have any financial interests in the Hong Kong-listed companies cov-ered in this report.

Explanation on Equity Ratings

Copyright Reserved

No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited.

China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459

20/F, Wing On Centre, 111 Connaught Road Central, Sheung Wan, Hong Kong. General line: 3698-6888.

BUY share price will increase by >20% within 12 months in absolute terms :

SELL share price will decrease by >20% within 12 months in absolute terms :

HOLD no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL :

company name (hk$) (hk$m) per (x) (x) yield (%) turnover (hk$) … · 2018-03-05 · transsion,...

Documents