14-04-2015, 05:14 PM
CIMB just made a recommendation on their local S chip picks:
Smallcap-pedia |PDF
Dare to dream
Author(s): William TNG, CFA +65 6210 8676, Roy CHEN
▊ Our China strategist recently highlighted media reports speculating that after the Shenzhen-HK Stock Connect, the Chinese government may consider a China-Singapore Stock Connect programme. If a connect materialises, the liquidity effect will be a boon to SGX-listed China enterprises as well as the wider spectrum of big- and small-cap offerings. One should, however, be aware that a connect requires inter-government involvement. Among SGX-listed China enterprises, two catch our attention and appear to differ from the many S-chips that eventually run into trouble: toll road operator China Merchants and Tianjin Zhongxin, a popular pharmacy company in China. Under a stock connect scenario, Tianjin will re-rate higher just based on price arbitrage alone. Its listed S-shares are at a 60% discount to the A-shares. Only a crash in the A-share market can negate this.
Tianjin Zhongxin Pharma
Tianjin Zhongxin’s S-shares trade at over 60% discount to the A-shares. The company’s flagship product, Su Xiao Jiu Xin Wan, is a household name for the treatment of cardiovascular ailments in China. The company has a track record of paying dividends and the balance sheet will turn net cash after the completion of a proposed A-share placement at Rmb12.83/share (US$2.06/share), a 94% premium over the then S-share price. Given that core EPS growth is in the low teens range, the stock is trading at 15.3x CY16 P/E, a 41% discount to the CN/HK-listed peer average of 26.0x. We have an Add and US$1.45 target price on the company and are the only broker to cover this name.
China Merchants Holdings
China Merchants sports a proven track record of acquisitive growth. We believe the company has the capacity to take on acquisition(s) worth HK$1.5bn-2.5bn, funded by internal cash and debt. China Merchants is also a good dividend play and prospective yields are currently 5.9%. We have an Add call and target price of S$1.16 on the company.
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Previous [ Smallcap-pedia ] reports:
19/3/15 MAL Smallcap-pedia There is still value here
12/3/15 CHN/HKG Smallcap-pedia Through the looking glass #8
6/3/15 CHN/HKG Smallcap-pedia Through the looking glass #7
Smallcap-pedia |PDF
Dare to dream
Author(s): William TNG, CFA +65 6210 8676, Roy CHEN
▊ Our China strategist recently highlighted media reports speculating that after the Shenzhen-HK Stock Connect, the Chinese government may consider a China-Singapore Stock Connect programme. If a connect materialises, the liquidity effect will be a boon to SGX-listed China enterprises as well as the wider spectrum of big- and small-cap offerings. One should, however, be aware that a connect requires inter-government involvement. Among SGX-listed China enterprises, two catch our attention and appear to differ from the many S-chips that eventually run into trouble: toll road operator China Merchants and Tianjin Zhongxin, a popular pharmacy company in China. Under a stock connect scenario, Tianjin will re-rate higher just based on price arbitrage alone. Its listed S-shares are at a 60% discount to the A-shares. Only a crash in the A-share market can negate this.
Tianjin Zhongxin Pharma
Tianjin Zhongxin’s S-shares trade at over 60% discount to the A-shares. The company’s flagship product, Su Xiao Jiu Xin Wan, is a household name for the treatment of cardiovascular ailments in China. The company has a track record of paying dividends and the balance sheet will turn net cash after the completion of a proposed A-share placement at Rmb12.83/share (US$2.06/share), a 94% premium over the then S-share price. Given that core EPS growth is in the low teens range, the stock is trading at 15.3x CY16 P/E, a 41% discount to the CN/HK-listed peer average of 26.0x. We have an Add and US$1.45 target price on the company and are the only broker to cover this name.
China Merchants Holdings
China Merchants sports a proven track record of acquisitive growth. We believe the company has the capacity to take on acquisition(s) worth HK$1.5bn-2.5bn, funded by internal cash and debt. China Merchants is also a good dividend play and prospective yields are currently 5.9%. We have an Add call and target price of S$1.16 on the company.
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Previous [ Smallcap-pedia ] reports:
19/3/15 MAL Smallcap-pedia There is still value here
12/3/15 CHN/HKG Smallcap-pedia Through the looking glass #8
6/3/15 CHN/HKG Smallcap-pedia Through the looking glass #7