2 December 2022: Banyan Tree Holdings Ltd (BTH SP), Ping An Insurance (Group) Company of China, Ltd (2318 HK)
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Banyan Tree Holdings Ltd (BTH SP): Strong traveling demand
- BUY Entry – 0.275 Target – 0.305 Stop Loss – 0.260
- Banyan Tree Holdings Ltd is a global hospitality group that has grown in its roots in Southeast Asia and is currently operating in 23 countries. The group’s headquarters is in Singapore, allowing it to have easy access to the majority of its properties located in Southeast Asia. BTH currently manages over 60 hotels and plans to continue expanding, with this number being forecasted to increase to 109 hotels in 2025. Among its holdings, Thailand and Maldives are the most prominent.
- Pent-up demand. As the pandemic measures begin to ease globally, we expect tourism rates to return to the pre-covid numbers or even higher. The global hotel industry continues to navigate challenges stemming from the pandemic as well as more recent headwinds from labour shortages, inflation, and geopolitical concerns. The hotel business has been recovering smoothly as more countries gradually open their borders for cross-border travel.
- Focus on wellness. With wellness being an important brand value for BTH since its inception, BTH differentiates itself from its competitors by focusing on well-being of its associates and guests. Last year, the company launched Wellbeing Sanctuaries, combining club floors or resort wings, dedicated dining options, spas, and multifunctional practice spaces into an exclusive journey. All the executive club floors have been converted into well-being sanctuaries.
- Expansion. Instead of conforming to the norm of expanding the ecosystem by going upscale, most of Banyan Tree’s new brands are in the mid-tier segments of the market. In response to the emerging markets of Asia exploding post-covid, BTH now is focusing on regional and midscale tourism; it unveils new concept hotels that will diversify its portfolio of guests, appealing more to current travellers, millennials. Most of the new moderately priced sub-brands will initially focus on Asia, taking advantage of the undersupply in the region.
- 1H22 results. Banyan Tree’s revenue more than doubled to S$119 million. Operating Profit achieved S$26 million vs previous loss of S$16 million.
- Technical TP of S$0.305; fundamental TP of S$0.400. While we have a technical TP of S$0.305 based on short-term technical factors, we initiated a coverage with a fundamentals-based TP of S$0.400. Our fundamental TP is based on 1.24x FY23F P/S as we expect FY22 earnings to improve due to the slow recovery and reopening of the industry. Read the full fundamentals-based report here.
(Source: Bloomberg)
Raffles Medical Group Ltd (RFMD SP): Travellers are back
- RE-ITERATE BUY Entry – 1.31 Target – 1.40 Stop Loss – 1.27
- Raffles Medical Group is a leading integrated private healthcare provider in the region, operating medical facilities in thirteen cities in Singapore, China, Japan, Vietnam and Cambodia. The Group is the first Asian member of the Mayo Clinic Care Network. RafflesMedical clinics form one of the largest networks of private family medicine centres in Singapore. RafflesHospital, the flagship of Raffles Medical Group, is a private tertiary hospital located in the heart of Singapore offering a wide range of specialist medical and diagnostic services for both inpatients and outpatients.
- Covid-19. Raffles Medical is still benefitting from being the largest Covid-19 service provider in Singapore. Even though the Covid-19 initiatives in the community have been reduced, they may still benefit from their partnership with the Ministry of Health on the Emergency Care Collaboration programme, with the recent bed crunch in public hospitals due to the Omicron XBB wave. Additionally, when China reopens, it will be able to serve more people in its medical facilities located in China.
- Pent-up demand. Singapore’s international visitor arrivals have been rising since the start of the pandemic, some of these tourists come to Singapore to receive treatment at Raffles Medical. The group will benefit from the recovery of elective procedures and the return of medical tourism, which will offset some tapering of Covid-19-related services. Furthermore, outpatient volumes at its general practitioner clinics have already surpassed pre-pandemic levels amid the ongoing wave of Covid-19 infections driven by the Omicron XBB sub-variant.
- 3Q22 results. Raffles Medical reported strong 3Q results ended in September, with a net profit growth of S$98.2 million, up 57.3% YoY. For the period, revenue grew 6.5% YoY to S$199.5 million while net profit surged by 62.1% YoY to S$38.3 million.
- Updated market consensus of the EPS growth in FY22/23 is 29.4%/-8.0% YoY respectively, which translates to 22.9x/25.1x forward PE. Current PER is 23.8x. Bloomberg consensus average 12-month target price is S$1.61.
(Source: Bloomberg)
Ping An Insurance (Group) Company of China, Ltd (2318 HK): Some relieves for property developers
- Buy Entry – 45.0 Target – 52.0 Stop Loss – 41.5
- Ping An Insurance (Group) Company of China, Ltd. is a personal financial services provider. The Company provides insurance, banking, investment, and Internet finance products and services. The Company operates its businesses through four segments. The Insurance segment provides life insurance and property insurance, including term, whole-life, endowment, annuity, automobile and health insurance. The Banking segment is engaged in loan and intermediary businesses with corporate customers and retail business. The Assets management segment is engaged in security, trust and other assets management businesses, including investment, brokerage, trading and asset management services. The Internet Financing segment is engaged in the provision of Internet finance products and services.
- Reopen gateways for developers to finance. On November 28th, China’s securities regulator lifted a ban on equity refinancing for listed firms, allowing eligible listed developers to issue shares to buy property-related assets, replenish working capital or repay debts. Meanwhile, the authority will promote developer financing through the listing of qualified projects via real estate investment trusts (Reits), and will encourage the setting up of property-focused private equity funds. The measures will give some room for developers to solve the near-term liquidity crunch and reduce defaults on borrowings.
- Another 25bps of RRR cut. Last week, The People’s Bank of China announced that it will cut the reserve requirement ratio for most banks by 25bps, effective on December 5th. There will be RMB500bn injected into the economy. This was the second time of RRR cut this year. The general year-end liquidity crunch is expected to be mitigated to some extent.
- 9M22 earnings review. Total revenue declined by 3.2% YoY to RMB952.7bn in 9M22. Operating profit attributable to shareholders of the parent company rose 3.8% YoY to RMB123.3bn. Profit attributable to the parent declined by 6.34% YoY to RMB76.5bn. Total premium income rose by 3.6% YoY to RMB587.5bn.
- The updated market consensus of the EPS growth in FY22/23/24 is -0.3%/29.5%/14.2% YoY respectively, translating to 7.5×/5.8x/5.1x forward PE. The current PER is 7.8x. Bloomberg consensus average 12-month target price is HK$64.79.
(Source: Bloomberg)
Dongfang Electric Corp Ltd. (1072 HK): Fuel cell and hydrogen energy themes in play
- Buy Entry – 13.0 Target –15.0 Stop Loss – 12.0
- Dongfang Electric Corp Ltd is a China-based company mainly engaged in the manufacturing and sales of power generation equipment. The Company operates five major reporting segments: Clean and High-Efficiency Energy Equipment segment, Renewable Energy Equipment segment, Engineering and Trade segment, Modern Manufacturing Service Industry segment, and Emerging Growth Industry segment. The Company’s main products include water turbine generator sets, steam turbine generators, wind turbine generator sets, power station steam turbines and power station boilers as well as gas turbines. he Company distributes its products within the domestic market and to overseas market.
- China to accelerate fuel cell vehicle deployments. By 2025, China will have about 50,000 hydrogen fuel-cell vehicles and its annual hydrogen production from renewable energy will reach 100,000 to 200,000 tonnes, according to the plan jointly released by the National Development and Reform Commission, and the National Energy Administration. Following the release of a national plan in March aimed at promoting the development of the hydrogen energy industry, local governments have made policies to strategize corresponding deployments.
- 3Q22 earnings review. Operating income grew by 18.4% YoY to RMB12.3bn. Net profit attributable to shareholders of the company jumped by 40.2% YoY to RMB725.9mn. In 9M22, the company manufactured power generation equipment with a capacity of 25,631.8MW, including hydro-electric turbine generating units (2,695.0MW), steam turbine generators (19,831.0MW), wind power generating units (3,105.8MW), power station steam turbines (19,318.0MW) and power station boilers (17,044.0MW). In 9M22, the company’s new effective orders amounted to RMB53.822 billion, among which 32.45% was attributable to high-efficiency clean energy equipment, 27.67% to renewable energy equipment, 12.98% to engineering and trade, 13.10% to modern manufacturing service business, and 13.81% to an emerging growth industry.
- The updated market consensus of the EPS growth in FY22/23 is 24.9%/28.3% YoY respectively, which translates to 13.4x/10.5x forward PE. The current PER is 13.0x. Bloomberg consensus average 12-month target price is HK$15.4.
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