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1 Jun, 2018 (Friday) |
 
WILLAS-ARRAY(854)
Analysis：
Willas-Array Electronics Holdings (854) is a distributor of electronic components for use in the industrial, telecommunications, home appliances, automotive, audio and video, lighting and other application segments. Additionally, the Group also provides engineering solutions to industrial and commercial users. Unlike other pure distributors, the Group also acts as an integrator of solution kits and engineering solution to provide a broad range of value-added services from integrating various electronic components for its customers` solution kits to the creation of engineering solutions that are complementary to its customers` product design needs, by utilizing its proprietary know-how and special features of the products it distributes. This enables the Group to sustain its profit margins despite the severe competition in the electronic components distribution industry. For the year ended 31 March 2018, the Group`s sales revenue from continuing operations increased by 17.3% year-on-year to HK$4.556 billion and net profit attributable to shareholders increased by 2 times to HK$111 million. Based on the EPS of HK$1.47, its share price is trading at less than 5 times historical P/E. (I do not hold the above stock)
Strategy：
Buy-in Price: $6.70, Target Price: $8.00, Cut Loss Price: $6.10
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LENOVO GROUP(992)
Analysis：
The Group mainly develops, manufactures and sells reliable, high-quality, secure and easy-to-use technology products and services. Its product lines include legendary Think-branded commercial personal computers and Idea-branded consumer personal computers, as well as servers, workstations, and a family of mobile internet devices, including tablets and smartphones. Thanks to continued commercial refresh and stabilizing consumer demand, the PC market continued to show signs of stabilization, recording revenue growth of 8 percent YoY after two years of decline. The data center business has also improved this year, seeing strong double-digit revenue growth in its Hyperscale business, with shrinking net loss. However, owing to the fierce competition, the Group`s worldwide smartphone shipments for the fiscal year has declined by 7 percent YoY. As its stock price had a significant drop, it is believed there will be a reasonable potential upside if the businesses are turning great.
Strategy：
Buy-in Price: $4.00, Target Price: $5.20, Cut Loss Price: $3.50
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Report Review of May. 2018
Sectors: Air, Automobiles (ZhangJing), Healthcare & Consuming (Eurus Zhou), TMT, Education and Financial (Terry Li) Automobile & Air (ZhangJing)This month I released 4 reports including 3 updated reports and 1 NDR takeaways: GreatWall Motor (2333. HK), BYD (1211. HK) , Geely (175. HK), FDG (729. HK). Among which , we prefer Geely.There are four models of Geely with a monthly sales volume of over 10,000 in 2017, two of which reported a sales volume of over 20,000. Since the beginning of 2018, the main models remain attractive and the newly launched models are gaining popularity step by step. It is expected that the number of models with a monthly sales volume of over 10,000 will increase to 5 or 6, and the number of models with a sales volume of over 20,000 will increase to 3. We believe that Geely will continue to be benefited from the dividends generated by successful strategies. The Company shows advantages in epitaxial leapfrog development and export market. Several times of increases in the management's holdings also demonstrate its considerable confidence.In terms of valuation, we increase the profit forecast, adjusting our target price to HK$36, equivalent to 18/13 P/E ratio in 2018/2019, and we shall give the rating of Buy. Healthcare & Consuming (Eurus Zhou)This month I released 3 equity reports, including SPH (2607HK), CSPC (1093HK) and Netdragon (777HK). We tend to highly recommend Netdragon 777HK) and SPH (2607HK). Netdragon, a leading online education firm, announced the acquisition of EDMODO (a global education online platform to K-12 schools) with a consideration of USD137.5mn. We are positive on the synergies among Netdragon's current products (education software and hardware) and EDOMODO's large user base, which is believed to form great monetization potential in future. For SPH, it announced FY17&18Q1 results, beat our expectation. We see that momentum of manufacturing maintains strong and growth of retail business steps up. We highlight that consistency evaluation provides future driver. China government published policies to facilitate the replacement of original imported drug with generic drug. It indicates that qualified generic drugs should be included into public purchase lists and be paid just as original drugs. We highlight that passing the evaluation will increase sales volume and ASP in future. Education (Terry Li)I released a report on China New Higher Education Group in this month. The group is a leading higher education operator in China, with six schools in Yunnan, Guizhou, Xinjiang, Heilongjiang, Hubei, Henan, and one under construction in Gansu. Thanks to the robust economic growth in China and the universal in higher education, we believe the demand on higher education will become higher. Although the number of candidate for Gaokao has peaked in 2008 due to the low birth rate, some provinces still record increasing candidates for Gaokao, where four out of seven schools for the group are located in such provinces. Thus, we are positive to the growth in student enrollment for the group in the next two or three years. 
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