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30 Dec, 2015 (Wednesday) |
 
KUNLUN ENERGY(135)
Analysis：
Kunlun Energy (135) announced that it had entered into agreement with its controlling shareholder to acquire the entire equity interest in Kunlun Gas at a consideration of RMB14.82 billion. The acquisition will help rationalize the management of the natural gas distribution and comprehensive utilization business, which will effectively resolve the existing horizontal competition between Kunlun Energy and PetroChina due to historical reasons. Addtionally, the acquisition will increase Kunlun Energy's geographical coverage in the natural gas distribution and comprehensive utilization business, boosting the number of users and natural gas sales volume, further optimising its natural gas and LPG sales value chain, enabling it to to expand into natural gas power generation business. (I do not hold the above stock)
Strategy：
Buy-in Price: $6.70, Target Price: $7.40, Cut Loss Price: $6.30
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BANK OF CHINA(3988)
Analysis：
Bank of China's (BOC) performance declined. As at the end of Sep 2015, the bank's net profit was RMB131.545 billion, up only 0.31% y-y. On the other hand, the NPL ratio was 1.43%, rhe asset quality continued to go down. However, recently, BOC gained the pilot quota of the ABS of NPLs, and would be implemented next year, which is helpful for improving the asset quality. Meanwhile, we believe BOC will play an important role in the construction of both One Belt One Road and AIIB in future, and therefore we still have the confidence in its development. Considering the current price and valuation are low, we maintain Buy rating.
Strategy：
Buy-in Price: $3.50, Target Price: $4.50, Cut Loss Price: $3.00
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China Everbright Int (257.HK) - Here comes the opportunities of Buy
The Company's share price slumped in recent days and it is mainly due to the deferral of some construction projects, which would adversely impact the 2015 results to a certain extent. We consider the slump of share price is larger than expected and thus opportunities of buying emerge. 2015 Interim report already revealed deferral of projectsIn 2015H1, the Company reported revenue from construction services of RMB 1.683 billion, which grew by 15.5% yoy and was lower than market expectation. It is mainly due to the deferral of the construction of some projects and thus the 2015 interim report has already revealed the delay of construction progress of those projects. Valuation of biomass projects should be higherThere are a number of biomass projects among the current new projects of the Company and we think the P/E ratios of the biomass projects should be higher than the valuation of the operation of wind power and photovoltaic energy. The reasons include: 1. Biomass projects have exclusivity; the “notice regarding construction management of biomass power generation projects” released by NDRC pointed out that biomass power plants should be located in major grain producing areas of straw-rich regions and there should be only one single biomass power plant in each county or within 100 kilometer radius. A biomass power plant is generally equipped with two sets of power generating units, with installed capacity not exceeding 30,000 kW. 2. Unlike wind power and photovoltaic energy projects, biomass projects would not be easily affected by the conditions of natural environment, and thus the level of power generation is relatively stable. 3. The on-grid tariffs of wind power and photovoltaic energy projects have started to move down, while the current on-grid tariff of biomass projects still maintain at a stable level. Valuation The operation of the Company keeps stable and the internal rate of return of the Company's new projects is maintained at 10% or above. The recent slump of the share price may exceed a reasonable range. We maintain the target price at HKD 12.5 and recommend a rating of “Buy”. (Closing price as at 28 Dec 2015) Financials
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| Recommendation on 30-12-2015 | | Recommendation | Buy | | Price on Recommendation Date | $ 9.770 | | Suggested purchase price | N/A | | Target Price | $ 12.500 |
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| Phillip Research - Hong Kong 輝立研究部 – 香港及中國 |
| Company |
Stock Code |
Last Update |
Suggestion |
Target Price |
Price on Recom |
| | ICBC | 1398 | 18/12/2015 | Buy | 6 | 4.58 | | Central China Securities | 1375 | 07/12/2015 | Buy | 6.5 | 4.4 | | | Yutong | 600066 | 29/12/2015 | Buy | 27 | 22.49 | | Air China | 753 | 17/12/2015 | Accumulate | 7.09 | 5.93 | | | Evergrande | 3333 | 28/12/2015 | Neutral | 6.6 | 6.5 | | Shenzhen Investment | 604 | 21/12/2015 | Accumulate | 3.8 | 3.48 | | | | LESSO | 2128 | 23/09/2015 | Buy | 7.9 | 6.02 | | FORTUNE REIT | 778 | 14/10/2014 | Accumulate | 7.32 | 6.92 | | | HSBC | 5 | 09/08/2013 | Accumulate | 100.4 | 84.25 | | HSBC Holdings PLC | 0005 | 09/05/2013 | Accumulate | 95 | 87.7 | | | China Maple Leaf Educational Systems | 1317 | 24/12/2015 | No Rating | | 3.79 | | Zhongxin Pharmaceuticals | 600329 | 15/12/2015 | Accumulate | 24.24 | 21.26 | | | Galaxy Entertainment | 27 | 29/10/2015 | Buy | 35 | 26.8 | | Galaxy Entertainment | 27 | 08/07/2015 | Buy | 42 | 33.55 | | | China Everbright Int | 257 | 30/12/2015 | Buy | 12.50 | 0.000 | | Wasion Group | 3393 | 23/12/2015 | No Rating | | 8.13 | | Food, Beverage and Retail | | | |
| | China Tianyi Holdings | 756 | 11/12/2015 | Buy | 2 | 1.32 | | Inner Mongolia Yili Industrial Group | 600887 | 08/12/2015 | BUY | 20 | 15.08 | | | Ourgame | 6899 | 27/11/2015 | Buy | 8.2 | 5.47 | | China Communications Services | 552 | 26/11/2015 | Buy | 4.18 | 3.12 | | | TSC GROUP | 206 | 28/07/2015 | Buy | 2.8 | 2.11 | | SPT Energy | 1251 | 24/02/2015 | Reduce | 1.5 | 1.74 | | | Goldpac Group | 3315 | 18/02/2015 | N/A | | 4.77 | | KINGDEE INT`L | 268 | 02/12/2014 | Accumulate | 2.75 | 2.45 |
Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited and/or its affiliates ( the “Group”) believe to be accurate. The Group does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The Group (or its employees) may have interests in relevant investment products. For details of different products’ risks, please view the Risk Disclosures Statement on http://www.phillip.com.hk.
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