KGI DAILY TRADING IDEAS – 19 July 2021

Singapore Trading Ideas | Hong Kong Trading Ideas | Market Movers | Trading Dashboard

SINGAPORE

UMS Holdings (UMSH SP): Potential new customers a key catalyst

BUY Entry – 1.60 Target –1.80 Stop Loss – 1.55
UMS engages in manufacturing of high precision components, complex assembly and final testing for semiconductor equipment manufacturers. Its key customer is US-listed Applied Materials (AMAT US). UMS Is headquartered in Singapore and has production facilities in Singapore, Malaysia and China, as well as offices in the US.
Potential new client is a key catalyst. While not yet a client of UMS, the expansion of Lam Research (LRCX SP) in Malaysia could have a positive spillover effect for UMS. Lam, a global supplier of wafer fabrication equipment, is expanding its presence in Asia with a new high-tech facility at the Batu Kawan Industrial Park in Malaysia. The facility which is currently under construction, will serve as the Asia hub for Lam’s manufacturing operations. It will target to start operations within the next six months.
Semiconductor equipment supercycle. In the first quarter of calendar year 2021, both AMAT and LRCX reported a 55% YoY surge in revenue. AMAT and LRCX, who are among the top three largest semi capital companies by sales, are riding on the strong growth in spending by customers like TSMC, Samsung and Intel. With the current momentum, 2021 is shaping up to record unprecedented growth performance, and is expected to continue in 2022, based on street estimates.

Aztech Global (AZTECH SP): Playing the earnings once again

RE-ITERATE BUY Entry – 1.26 Target – 1.50 Stop Loss – 1.20
Aztech provides Original Equipment Manufacturer (OEM), Original Design Manufacturer (ODM), Joint Development Manufacturing (JDM) or Contract Manufacturing Services (CMS) services to brand owners sold under the label of the respective customers. The company distributes a wide range of IoT devices and Data-communication products sold under its proprietary “Aztech” and “Kyla” brands through channel partners and e-commerce platforms. In addition, the company manufactures a wide range of LED lighting products used in residential, commercial and industrial applications.
Robust orderbook. Aztech’s orderbook stood at S$489mn as at end-1Q21, with the majority of it to be completed by this year. The company has secured new customers from South Korea, Sweden, Australia and the US. This is in addition to its main customer who is a major e-commerce company (Amazon based on analysts reports) in the US.
Positive sentiments. Analysts are overall positive on Aztech, with 4 BUYS / 0 HOLD / 0 SELL and a 12-month average target price of S$1.87, implying a 47% upside potential based on the last close price of S$1.27. Forecasted dividend yield is 3-4% over the next three years, which is decent for a tech and high growth stock. Meanwhile, our short-term trading target price of S$1.50 implies 11x FY2022F EPS of 13.5 Sing cents.
1H 2021 earnings coming right up. Aztech will be releasing its first half FY2021 financial results on Friday, 30 July 2021, after the close of trading. This will likely be a key catalyst for the stock price after a lacklustre range trading season since May 2021.

^ Back To T op

HONG KONG

Yadea Group Holdings Ltd (1585 HK): Two-wheeled is as good as four-wheeled

Reiterate Buy Entry – 16 Target – 19 Stop Loss – 14.5
Yadea Group Holdings Ltd. is an investment holding company principally engaged in the development, manufacture and sales of electric two-wheeled vehicles and related accessories. The company’s main products include electric scooters, batteries and chargers, electric bicycles and electric two-wheeled vehicle parts.
The company just announced a positive profit alert where 1H21 net profit growth will be no less than 40% YoY, attributable to the increase in the sales of electric two-wheeled vehicles.
Electric vehicles have been the main investment theme. The company’s main product is a subsegment of the theme. As the market leader of the electric two-wheeled vehicles, the company dominates around 25% of the domestic market in terms of sales volumes. The company has a target to achieve 35% market share in the next couple of years. The revenue and net profit CAGR over the past five years was 23.8% and 17.3% respectively. Hence, the company is still in an expansionary mode.
Range bound trading. Shares have been trading range bound between HK$15 and $20 since March this year. Technically, the stock has formed a support at HK$15.
Consensus estimates. Market consensus of net profit growth in FY21 and FY22 are 69.6% YoY and 39.3% YoY, which implies forward PERs of 28.3x and 20.3x. Bloomberg consensus average 12-month target price is HK$31.1.

Hua Hong Semiconductor Ltd (1347 HK): Trade the range bound between HK$38 and HK$44

Reiterate Buy Entry – 39.5 Target – 44 Stop Loss – 37.5
Hua Hong Semiconductor Ltd is an investment holding company engaged in production and sales of semiconductor wafers. The company produces 200mm and 300mm-wafers. Its products are applied in general microcontroller (MCU), Type-C interface chips, image stabilization chips, touch control chips, and smart meter controller chips. The products also serve the Internet of Things (IoT), new energy vehicles, artificial intelligence and other markets.
Recently, Malaysia reinstated the national lockdown due to deteriorating COVID-19 pandemic conditions. Integrated device manufacturers such as Intel, Infineon, and NXP Semiconductors have factories for package and packaging testing processing in Malaysia. Those plants were forced to shut. Some orders may be allocated to Hua Hong.
The PHLX Semiconductor Sector ETF (SOXX US) has bottomed out since mid-May, implying that the market has factored in the headwinds and started to look forward to improvements in 2H21. The positive sentiment is expected to eventually make its way to Hong Kong related counters.
Consensus estimates peg the 12-month target price at HK$48.94, implying a 26% upside potential. EPS is forecasted to grow at 51.5%/24.3%/19.4% for FY2021/22/23F, which would bring forward P/Es down to 46x/37x/31x FY2021/22/23F.

^ Back To Top

Market Movers

United States

Moderna Inc. (MRNA US) shares rallied on news that the stock would be included in the S&P500 Index prior to market opening on Wednesday, 21 July 2021. Moderna has seen its stock surge 250% over the past year, sending its market cap above US$100bn for the first time last week. Moderna has plans to use the mRNA technology to treat everything from heart diseases, cancer to rare genetic conditions, as well as developing vaccines for emerging viruses such as Nipah and Zika. However, shares have likely run ahead of fundamentals as its current share price has surged 50% above the 12-month street target of US$187.7.
DiDi Global (DIDI US) stocks dropped more than 3% on Friday after officials from seven Chinese government departments conducted an on-site cybersecurity review on the company. This comes two weeks after China’s top cyberspace regulator announced a cybersecurity review of DiDi. Shares are trading 15% below its IPO price of US$14 when it listed on 30 June 2021.
Cruise lines Carnival Corp (CCL US) and Norwegian Cruise Lines (NCLH US) dropped on Friday despite positive news of Canada allowing cruise ships to resume operations in its waters starting 1 November 2021, which was sooner than planned. The Canadian government previously extended its ban until February 2022.
Tencent Music Entertainment (TME US). Shares dropped after Morgan Stanley downgraded the stock, citing rising regulatory issues in China potentially keeping the Chinese music streaming company from bouncing back. However, street estimates are still overall bullish on the stock with 24 BUYS / 7 HOLDS / 0 SELL and a 12-month average target price of US$21.94, implying an 88% potential upside from its last closing price. While EPS is forecasted to drop by 11% YoY in FY2021, EPS is expected to grow by 22-37% per annum from FY2022-24.

Singapore

Sanli Environment Limited (SANLI SP) Shares surged by 129.6% after Sanli announced on 15 July that it had won a S$72.67mn PUB Contract for new disinfection systems at Johor River Waterworks. With the award of the contract, the group now has an order book of S$329.8mn which is expected to be completed by early 2026. Barring any unforeseen circumstances, the contract is expected to have a positive impact on the net tangible assets and earnings per share of the group for the financial year ending 31 March 22.
Golden Energy & Resources Limited (GER SP) There was no company specific news on Friday, however, shares rose by 9%. This could be due to the cumulation of positive news on the company, with the most recent news on 13 July where Golden Energy’s subsidiary, Stanmore Resources Limited announced that the JV with M Resources has completed the acquisition of the Millennium and Mavis Downs Mine from Peabody Energy Australia. In addition, on 11 July, it was announced that Golden Energy’s subsidiary, PT Golden Energy Mines Tbk has received an approval for coal output production quota of 39.6mn tonnes for FY2021, representing a 18% targeted increase from its production volume of 33.5 mn tonnes for FY2020. Coupled with the rally in coal prices this year which surged to its highest level in a decade, investors could be buying ahead of Golden Energy’s 2Q21 earnings due next month.
Southern Alliance Mining Limited (SAML SP) Shares rose almost by 9% last Friday ahead of the company’s announcement of a proposed JV to explore for gold and other minerals at the Tenggaroh mine, Johor. The JV partner is the sovereign ruler of the State of Johor, Malaysia.
Nanofilm Technologies International Limited (NANO SP) Shares rose by 4.3% and closed at an all-time high, even though there was no company specific news on Friday. Most recent news was on 8 July where the company announced that it was awarded with the 2021 APAC Technology Innovation Leadership Award by Frost & Sullivan in the nanocoating deposition technology market. Investors could be buying ahead of Nanofilm’s upcoming 2Q21 earnings. Analysts have been upgrading their TP on the company, with the latest upgrades from Credit Suisse (TP S$6.90) and Jeferries (TP S$6.50).
Mercurius Capital Investment Limited (MCI SP) There was no company specific news on Friday, however, shares continued to dip from large sell offs after it was announced on 14 July that Mr Chang Wei Lu, Executive Chairman and CEO disposed a total of 20,954,200 shares amounting to S$1,959,384.87. While shares declined 31% for the week, it is still up 103% over the past year, driven mainly by earlier news that it was diversifying into groceries business. The company aims to grow into a network of more than 500 stores across the region over the next 3 years.

Hong Kong

Kintor Pharmaceutical Ltd (9939 HK) The company announced that the Ministry of Public Health and Social Welfare (MSPBS) of Paraguay recently granted emergency use authorisation (EUA) for proxalutamide for the treatment of hospitalised patients with COVID-19 at the MSPBS hospitals. This is the first EUA obtained for proxalutamide globally. The first hospital to use proxalutamide under the EUA, Hospital Barrio Obrero, part of Paraguay’s MSPBS network, has reported promising initial results. Proxalutamide is a new-generation androgen receptor (AR) antagonist that is currently under development for the potential treatment of COVID-19 (including outpatients and inpatients), prostate cancer, and breast cancer.
China Evergrande Group (3333 HK) The company announced that it will discuss the special dividend plan at the upcoming board meeting on 27th July.
Fuyao Glass Industry Group Co Ltd (3606 HK) There was no company specific news. Glass sector jumped as China launched the carbon emissions trading scheme last Friday. Industrial companies are set to participate in the scheme.
Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (2196 HK) A Chinese advisory panel has given the green light to the Covid-19 vaccine developed by BioNTech, meaning it will become the first vaccine developed overseas to be used on the mainland once it receives approval from the drug regulator. Fosun has started preparing a Shanghai plant to start providing vaccines for the mainland.
AviChina Industry & Technology Co Ltd (2357 HK) The military defense sector jumped as Citic Securities maintained a positive outlook due to policy support during the period of the 14th-Five-Year Plan. There was no company specific news. Shares have been consolidating between HK$4.5 and HK$5.5 since February.

^ Back To Top