KGI DAILY TRADING IDEAS – 9 April 2021
TRIP.COM (TCOM US / 9961 HK) Secondary listing in Hong Kong
- TCOM is launching its Hong Kong public offering of 2.21mn shares at HK$333/share (US$42.95/share) and 29.4mn shares for the international offering.
- Offer period opens on Thursday, 8 April and closes on Tuesday, 13 April 2021. Allotment will be on Friday, 16 April and trading starts on Monday, 19 April.
- The company is a leading one-stop travel platform globally, integrating a comprehensive suite of travel products and services and differentiated travel content. It is the go-to destination for travelers in China, and increasingly for travelers around the world, to explore travel and get inspired, to make informed and cost-effective travel bookings, and to enjoy hassle-free, on-the-go support and share travel experience.
- While it reported net loss in 1Q and 2Q 2020 due to the negative impact of travel restrictions, earnings have recovered in 3Q and 4Q 2020. Looking into 2021, under the backdrop of supportive government policy towards opening inbound and outbound travel in 2H21, China Tourism Academy expects outbound travel to reach 30% of 2019 level, and 100% by 2022, assuming normal progress of Covid-19 vaccination.
- Valuations are currently attractive at 91x/24x/18x FY2021/22/23F and the company is forecasted to report earnings per share growth (EPS) of 85%/280%/33% in FY2021/22/23F, according to consensus estimates.
Market share by gross merchandise volume as of 2019:
|Global market||Chinese Domestic market|
|Players||Market share||Players||Market share|
The key risk is that global prolonged COVD-19 lockdowns will slow down the recovery of tourism. According to market consensus, the company’s performance will normalise in FY22.
However, if quarantine measures or travel restrictions remain tight due to slow vaccination, full normalization will be delayed.
Crowdstrike (CRWD US): Cybersecurity leader is coming back
- BUY Entry – 192 Target – 223 Stop Loss – 181
- Despite strong 4Q20 results which saw CRWD achieve its first quarterly net profit, CRWD fell around 30% from its peak during the March tech sell-off.
- CRWD trades at a staggering 50x Price/Sales, but has a strong operating leverage and has reached profitability unlike its other peer leader Zscaler (ZS US). Consensus target price for CRWD is at US$250.
- We observe positive price momentum in high valuation stocks that have solid fundamental stories in the past week, such as Pinterest (PINS US), and we think the cybersecurity thematic could be in play again. We see Thursday’s move above US$200 as a positive sign for CRWD, and recommend buying the pullback.
United States Steel (X US): This steel coaster can still pick up passengers
- RE-ITERATE BUY Entry – 22.5 Target – 29.4 Stop Loss – 19
- Share price of X has rallied past the US$25 resistance on strong volume, but has now pulled back after a 5-day 35% gain.
- We expect additional momentum into US steelmakers, as iron ore prices stay near the all-time high, while X still trades some way off its 2018 average share price.
- We recommend buying slightly above the 20 EMA. Catalysts include further upwards guidance on their earnings during the 1Q21 earnings call later in the month.
Jiutian Chemical (JIUC SP): High prices amid strong demand
- BUY Entry – 0.086 Target – 0.105 Stop Loss – 0.078
- Jiutian is the second largest Dimethylformamide (DMF) producer in China, with a total annual capacity of 150,000 tons of DMF and methylamine (MA). Both these chemicals are important ingredients in industries as diverse as consumer goods, petrochemicals, electronics, pharmaceutical and fertilisers. In addition, it now produces chemicals for fast growing sectors such as electric vehicles batteries .
- China’s economy has benefited from supply disruptions in the rest of the world, and we see this trend continuing this year. DMF prices have been rising since the start of the year and have surged almost 40% year-to-date amid favourable supply-demand dynamics.
- Seeing how robust selling prices in 1Q21 have been, its upcoming results could be a catalyst for the company. Jiutian will report its first quarter earnings in the last week of April.
DMF Prices in China
Riverstone (RSTON SP): Potential for share price to recover ahead of dividend payout
- RE-ITERATE BUY Entry – 1.32 Target – 1.50 Stop Loss – 1.24
- Shares of RSTON have declined 15% from the 2021 highs of S$1.59. We expect its shares to recover 10-15% ahead of its dividend payout.
- The company has declared a final and special dividend of RM 16 sen and RM 4 sen, respectively, which is equivalent to around 6.5 SG cents. This is an implied 4.8% dividend yield based on its last closing price of S$1.36.
- The dividend payout date has not been set but will likely be in June based on historical precedence.
- Yesterday, shares of glove makers listed in Singapore and Malaysia rallied on a combination of bargain hunting and short-covering. Glove makers are among the most heavily shorted stocks in Malaysia. In trading yesterday, Top Glove (TOPG MK) +10%, Supermax (SUCB MK) +21% and Hartalega (HART MK) +10%.
CNOOC Limited (883 HK): Buying opportunity below $8 since February
- Buy Entry – 7.3 Target – 9 Stop Loss – 6.4
- CNOOC Limited is a Hong Kong-based investment holding company principally engaged in the exploration, production and trading of oil and gas. Its businesses include conventional oil and gas businesses, shale oil and gas businesses, oil sands businesses and other unconventional oil and gas businesses. The Company mainly operates businesses through three segments. The Exploration and Production segment is engaged in the exploration, development and production of crude oil, natural gas and other petroleum products. The Trading segment is engaged in the trading of crude oil, natural gas and other petroleum products. The Corporate segment is engaged in corporate-related businesses. The Company mainly operates businesses in China, Canada, the United Kingdom, Nigeria, Indonesia and Brazil, among others.
- The company has been underperforming the global oil majors due to the inclusion in the US blacklist of military-related enterprises. The company is out of favour for foreign investors. But we note that only 6% of its business is exposed to North America.
- The sell-down yesterday could be due to the accident of V29 oil well on the 19-3WHPV platform. There are three staff members still missing.
- Updated market consensus of the estimated growth of net profit in FY21 and FY22 are 148.8% and 8.9% respectively, which translates to 5.2x and 4.8x forward PE. The current PE is 11.8x. The estimated respective dividend yield in FY21 and FY22 is around 9.3% to 10%. Bloomberg consensus average 12-month target price is HK$11.98.
Weichai Power Co., Ltd. (2338 HK): Exposure to infrastructure spending ramp up
- RE-iterate Buy Entry – 18.5 Target – 24 Stop Loss – 16.5
- Weichai Power Co., Ltd. is engaged in the manufacturing of transportation equipment. The company’s main business includes the research, development, manufacture, distribution of vehicles and key components, non-automotive engines and other components, as well as the production of forklift and the provision of warehouse technical services. The Company is also involved in the research, development, design, sales and maintenance of air purification products, transfer and consulting business of air purification technology, as well as import and export trade business.
- The company announced the FY20 full-year results. Revenue grew by 13.3% YoY to RMB197.5bn. Net profit edged up by 1.1% YoY to RMB9.2bn. There is no final dividend proposed compared to RMB0.136 in FY19
- The ongoing growth driver is the heavy-duty truck (HDT) replacement and upgrading cycle driven by the new domestic VI emission standard. All HDTs need to apply the China-VI (a) emission standard after July 2021. The scrappage of the old China-III vehicles that are unqualified for the new standard will continue. Another catalyst is carbon neutrality. Early this year, the company had plans to raise RMB13bn to develop fuel cell batteries and other high-end engines projects. Recently, the company announced a partnership with FISCHER Spindle Group Ltd in Switzerland, which includes the investment in its fuel cell compressor business in Switzerland and future joint venture in China, aiming to become the world’s leading manufacturer in fuel cell compressors.
- Market consensus of net profit growth in FY21 and FY22 are 19.0% YoY and 8.3% YoY, which implies forward PERs of 11.9x and 11.0x. Current PER is 14.2x. Bloomberg consensus average 12-month target price is HK$25.86.
- GrowGeneration Corp (GRWG US) surged 1 day after their investor presentation for Roth Virtual Golden Cannabis Day on 7 April. Share price momentum has continued diverging in recent weeks between cannabis equipment providers such as Scotts Miracle-Gro (SMG US) and GRWG, versus cannabis producers such as CGC, TLRY, APHA and SNDL.
- Etsy Inc (ETSY US) and various other tech stocks saw a strong rally as fund flows into tech stocks continued, with the NASDAQ 100 closing just shy of its all-time high.
- Futu Holdings (FUTU US) and Up Fintech (TIGR US) climbed, with both high-growth chinese brokerage platforms now up at least 35% from their March lows. While historic P/E is over 100, FY22 P/E for both stocks are now in the mid 30s, indicating continued high growth expectations beyond the COVID-19 retail boom.
- Rice Acquisition Corp (RICE US) spiked to a new high after announcing the business combination of two renewable energy companies, Aria Energy and Archaea Energy. The combined companies will have a leading position in the Renewable Natural Gas (RNG) space in the US.
- Trading Dashboard: Include United States Steel (X US) at US$22.5. Take profit on Warner Music Group (WMG US) at US$37.33, a 13.8% return since inception.
Earnings Watch: Jinko Solar, Jiayin Group (Friday)
- Shares of Singapore-listed glovemakers outperformed the broader Singapore market after their Bursa-listed counterparts jumped by as much as 21%. SGX-listed shares of Top Glove, UG Healthcare and Riverstone gained 5-11% while Bursa-listed glovemakers surged 10-21%: Supermax +21%, Top Glove +10% and Hartalega +10%. Yesterday’s rally could be a combination of bargain hunting after their shares dropped by double digits in 1Q21, as well as possible short covering given the high short interest on their shares.
- Jiutian Chemical fell after the company’s independent auditor, Baker Tilly, issued an emphasis of matter on amount due from an associated company in their audit report for FY2020. The carrying value of the non-trade receivable from an associated company amounted to RMB145mn, or 10% of the group’s total assets as at end December 2020. However, management believes that the amount due from the associated company is recoverable and that no further credit loss allowance is required.
- Kingboard Holdings Limited (148 HK). Share closed at an all-time high. The company announced a positive profit alert. Net profit in 1Q21 is expected to grow by more than 100% due mainly to the growth in the unit selling price of the products of various divisions, namely laminates division, printed circuit boards division and chemical division.
- Shenzhou International Group Holdings Limited (2313 HK). Shares climbed back to the pre-crisis level prior to the boycott of Xinjiang cotton. After two weeks of international outfitting brands boycotting Xinjiang cotton, the initial selling pressure has gradually tapered. Investors have refocused on the fundamentals of the company, which remains intact.
- Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (2196 HK) China announced measures supporting the pharmaceutical sector in Hainan province to further develop the free trade port. Both healthcare and pharmaceutical sectors jumped.
- COSCO SHIPPING Holdings Co., Ltd., (1919 HK) Share price corrected as investors took profits after the big jump of 29.1% yesterday.
- GOME Retail Holdings Limited (493 HK) Share pulled back after the global investor conference call, wiping out yesterday’s gain. Investors remain doubtful of its new strategy to compete with online e-commerce giants such as JD and Alibaba.