KGI DAILY TRADING IDEAS – 28 May 2021

IPO Performance Review: FIGS | Singapore Trading Ideas | Hong Kong Trading Ideas | Market Movers | Trading Dashboard

IPO Performance Review

FIGS (FIGS US): Up 36% on IPO day

FIGS commenced trading at US$28.30, reached a peak of US$32.11 before settling at US$30.02 on its first trading day, up 36% from its finalised IPO price of US$22.
At US$30.02, FIGS now trades at an initial(diluted) market cap of US$4.8bn(US$6.5bn), which is around 15.2x(20.6x) Price/TTM Sales.
FIGS now trades fairly close to Eargo’s multiples. We see US$24-32 as its likely trading range in the future.

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SINGAPORE

UMS Holdings (UMSH SP): Time to catch up

BUY Entry – 1.38 Target –1.51 Stop Loss – 1.31
Lagging behind peers. Shares of UMS have lagged that of its closest locally-listed peer in semiconductor-related manufacturing, with Frencken appreciating 23% over the last two weeks. UMS gained only 6% during the same period.
Selling pressure likely over. The underperformance comes amid heavy selling last week by Andy Luong, the CEO/Chairman and major shareholder. Last week, Andy sold 21.4mn shares in the open market, bringing his stake down from 20.4% before the sale to 16.4% after the sale. However, we note that the selling has stopped this week, which is a positive sign.
OUTPERFORM and TP of S$1.51. Given that fundamentals remain intact and that growth outlook is still positive, we maintain our Outperform rating and 12-month target price to S$1.51. Read our full report here.

UMS vs FRENCKEN (1-month price comparison)

China Sunsine (CSSC SP): Bigger is better

RE-ITERATE BUY Entry – 0.54 Target – 0.68 Stop Loss – 0.48
China Sunsine produces rubber chemicals. The company is the largest producer of rubber accelerators in the world and the largest producer of insoluble sulphur in China. It has three production plants in Shangxian, Weifang, and Dingtao in Shandong Province.
Rubber chemicals prices have turned around since October 2020. Most prices are approaching the levels of the peak in mid-2018. The current price of chemicals like anti-oxidant A has reached new highs.
Bigger and better performance in 2021. China Sunsine will commence commercial production of 30,000 tonnes insoluble sulphur and 30,000 tonnes antioxidant TMQ in 2H21. Theoretical production volume of insoluble sulphur is expected to increase by 100% YoY in 2H21 and 50% YoY in FY21; production volume of anti-oxidant is expected to increase by 66.7% YoY in 2H21 and 33% YoY in FY21. Meanwhile, we believe the ASP in 2H21 will be comparable to 1H21 on a conservative assumption.
We have an Outperform rating and 12-month target price of S$0.68 driven by the upswing in ASP and higher sales volume in FY21 and FY22. Read our full report here.

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HONG KONG

Nongfu Spring Co Ltd (9633 HK): The “Kweichow Moutai” in packaged drinking water business

Buy Entry – 42.8 Target – 48.85 Stop Loss – 39.8

Nongfu Spring Co Ltd is a company mainly engaged in manufacturing and sales of packaged drinking water. The company operates five segments. The Water Products segment is involved in production and sales of packaged drinking water, and its brand is Nongfu Spring. The Functional Drinks Product segment produces and sells functional beverages, and its brands include Scream and Victory Vitamin Water. The Ready-To-Drink Tea Product segment is engaged in the production and sale of ready-to-drink tea, whose brands include Oriental Leaf. The Juice Beverage Product segment is engaged in the production and sales of fruit juice beverages, and its brands include Farmer’s Orchard, Water Soluble C100 and Not-from-concentrate (NFC). The Other Products segment produces and sells agricultural products and other beverage products, such as apple, rice and plant yogurt products.
The company is the absolute market leader in China’s packaged drinking water. The key competitive moat is the multiple water resources owned by the company. Producing packaged drinking water does not require advanced technological know-how, but the source of water supply sets a relatively high entry barrier for the sector.
2H20 revenue slightly dropped by 3.2% YoY to RMB11.3bn. Gross profit margin edged up by 3.5 ppts YoY to 58.2%. 2H20 net profit grew by 18.9% YoY to RMB2.5bn. Net profit margin edged up by 4.5 ppts YoY to 21.7%.
Shares have been correcting since mid-February but have reversed the downturn since mid-May. The strong upward momentum was with an increase in volume.
Updated market consensus of the estimated growth of net profit in FY21 and FY22 are 14.9% and 17.1% respectively, which translates to 67.0x and 57.2x forward PE. The current PE is 76.4x. Bloomberg consensus average 12-month target price is HK$45.7.

China Southern Airlines Company Limited (1055 HK): The worst period is over

Re-iterate Buy Entry – 5.45 Target – 6.00 Stop Loss – 5.2

China Southern Airlines Company Limited is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services. The Company operates through two business segments, including Airline Transportation segment and Other segment. Airline Transportation segment consists of passenger and cargo and mail operations. Other segment includes hotel and tour operation, ground services, cargo handling and other miscellaneous services. The Company also provides services of general aviation and aircraft maintenance.
April operating data updates:

This is a perfect reopening play. Chinese domestic flights are a key pillar to sustain operations as the latest operating data shows ongoing recovery of passenger and cargo traffic. Although it is uncertain when regional and international passenger traffic will turn around, improving logistics segments and domestic flights provide limited downside for the stock.
Updated market consensus expects loss per share to narrow to RMB0.22 in FY21 from RMB0.77 in FY20, and eventually to turn profitable with an EPS of RMB0.363 in FY22. Bloomberg consensus average 12-month target price is HK$6.29.

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Market Movers

United States

Short squeeze stocks continued the uptrend with AMC Entertainment (AMC US) up 36% on Thursday, while Beyond Meat (BYND US) received positive spillover sentiment after Jim Cramer mentioned the alternative meat company as a potential target for Reddit traders during CNBC’s Mad Money program on Wednesday.
General Electric (GE US) closed at a 3-year high behind demand optimism for air travel and jets in the US. Other aerospace related suppliers such as Boeing also rallied in response to news that Airbus is preparing to increase A320 jet production above pre-COVID levels within 2 years.
Cameco Corp (CCJ US) closed at a multi-year high behind a return in sentiment for uranium-related stocks.
Vista Outdoors Inc (VSTO US) jumped to a new high after hosting a Virtual Investor Day on Thursday where the company unveiled its Value Creation Framework and discussed their acquisition of e-Bike brand QuietKat and female apparel brand Venor.

Singapore

PropNex (PROP SP); APAC Realty (APAC SP) Shares of the real estate agencies surged 7-9% yesterday as they continue to ride on the positive momentum in Singapore’s property market. Earlier this month, both companies reported an almost doubling of first quarter profits. In addition, local property developer Bukit Sembawang yesterday also reported that full-year FY2021 earnings more than doubled to S$189mn from the prior year period.
Sembcorp Marine (SMM SP) jumped 6% to close at S$0.205 on higher-than-average trading volumes. While there is no company-specific news, the counter is among Singapore’s top 30 traded stock by value traded, and likely benefited from the positive spillover from fellow peer Yangzijiang (YZJSGD SP) which gained 4% yesterday.
Nanofilm Technologies (NANO SP) Shares gained on broad-based buying among technology stocks. Nano was added to the MSCI Global Small Cap Indexes yesterday. Nano’s shares have essentially recouped all the losses sustained in the sell-off in the first half of May, gaining around 15% from trough (S$4.70 on 11 May) to the current price of S$5.41. Consensus remains optimistic on the company with 7 BUYS / 0 HOLD / 0 SELL and a 12-month average target price of S$5.90 (implied 9% upside).
UMS Holdings (UMSH SP) Shares of UMS is finally catching up to the blistering rally of its peers like Frencken (FRKN SP). The recovery of its shares this week comes after significant selling last week by Andy Luong, the CEO and major shareholder. Last week, Andy sold 21.4mn shares in the open market. Given that fundamentals remain intact and that growth outlook is still positive, we maintain our Outperform rating and 12-month target price to S$1.51. Read our full-report here.
SIA (SIA SP) The company’s shares went ex-rights yesterday (27 May). It will be offering 209 Mandatory Convertible Bonds (MCB) for every 100 existing shares. SIA shareholders will be able to trade the MCB rights from Wed, 2 June to Thurs, 10 June.
MSCI Singapore Index (with effect from 27 May 2021): SEA limited was added to the MSCI Singapore Index while Suntec REIT was removed. Suntec REIT will instead join the MSCI Global Small Cap Indexes along with Haw Par Corporation, iFAST, Nanofilm Technologies, Olam International, Razer and Riverstone Holdings.

Hong Kong

Simcere Pharmaceutical Group Ltd (2096 HK) Expectations are high ahead of the American Society of Clinical Oncology annual meeting which will be held in early June. Four clinical studies related to Endostar® (Recombinant Human Endostatin), an innovative antitumor drug of the company, have been included into the ASCO Conference Abstract. These are namely in the areas of metastatic non-small cell lung cancer, melanoma, and nasopharyngeal carcinoma. Key research data will be published during the conference.
China Grand Pharmaceutical and Healthcare Holdings Ltd (512 HK) The company announced that the Group will invest RMB22.6 million and obtain 100% equity interest in Shenming Medical to obtain all rights of the development and commercialization of the thermosensitive embolic agents for the treatment of liver cancer and the subsequent development of gel products developed by Shenming Medical. The thermosensitive embolic agent product of Shenming Medical is the only tumor product that has been granted innovative medical devices by the National Medical Products Administration of China.
Huabao International Holdings Ltd (336 HK) E-cigarette sector had some technical rebound as the whole sector plunged on Wednesday. The World Health Organization China Office and the Planning and Information Department of the National Health Commission jointly held a press conference to publish the China Report on the Health Hazards of Smoking 2020. Specifically, the report mentions the health hazards of using e-cigarettes. The sell-off in the previous day was also due to the entrance of BYD Electronic into the e-cigarette market, which could threaten Smoore’s leading position.
Hua Hong Semiconductor Ltd (1347 HK) Semiconductor sector jumped as rising COVID-19 cases in Malaysia and Taiwan raised concerns of the slow-down in recovery of production amid chip shortages.
New Oriental Education & Technology Group Inc (9901 HK) Shares continued to fall and closed at a near 52-week low. Tougher regulations on after-school education and tutoring institutions are causing an overhang on all related companies listed in both Hong Kong and the US.
Trading Dashboard: Take profit on KWG Living Group (3913 HK) at HK$8.20 and Hua Hong Semiconductor (1347 HK) at HK$43.95

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