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Daily Commentary

25 May 2018

Market Outlook

HSI might fluctuate at around 30,400 and 30,800 points today.

The Hang Seng Index opened higher by 53 points yesterday and once dropped 76 points at most to touch its intra-day low of 30,589 points. Afterwards, the market turned to a positive territory and grew 123 points at most to reach its intra-day high of 30,788 points. However, the index narrowed its gains and increased 21 points in the morning. During the afternoon session, HK stocks turned to a downward trend, but increased over 100 points again at the last trading hour. The HSI finally closed at 30,760.41 points, up 94.77 points or 0.31%, regaining its 20-day MA at approximately 30,685 points and 50-day MA at approximately 30,708 points. Market turnover decreased to HKD89.877 billion. The ADR proportional HSI index closed overnight at 30,588 points with 172 points lower than the closing price of HSI last trading day. Dow was down 75 points to 24,811 points. HSI may fluctuate at around 30,400 to 30,800 points today.

Today’s A-share Snapshot

Company’s Profile:ANHUI ZHONGDING (000887.SZ) is mainly engaged in R&D, manufacture, sales and service of sealing element and special rubber products.

Brief Comments:

Business catalysts:The Company released the plan for the public issuance of convertible bonds, intending to raise funds with approximately RMB1.5 billion, which was planned to be used in the relocation & expansion project of the rubber anti-vibration product R&D and production base, the temperature-control fluid pipeline system project for power battery of new energy vehicles and the replenishment of working capital. The completion of the above projects is expected to be beneficial for the Company to further expand its production capacity and improve its product structure, which might enhance its profitability.

For 1Q2018, the Company’s revenue rose 25.24% YoY to RMB3.041 billion while its net profit added 20.24% YoY to RMB377 million. Thus, the Company’s operational performance is expected to record a stable growth in this fiscal year.

Risk factors:The Company’s cost of raw material accounted for approximately 60% in the total costs, which is mainly affected by the price volatility of international oil and natural rubber. This is expected to put a drag on the Company’s gross profit margin.

Stock Pick

MGM (02282) will benefit from the VIP business growth of MGM Cotai in 2H18

The June GGR may be affected by the upcoming World Cup, meanwhile the full year industry growth rate remain bullish. Investors are advised to find a good entry point to accumulate the gaming stock.

MGM China reported revenue of HKD4.7billion, up 26% in 1Q18. Adjusted EBITDA amounted to HKD1.276, up 4.2%. After the opening of MGM Cotai, the market share of MGM increased. Meanwhile, the cannibalization effect is insignificant, given that the average daily gross win per main floor gaming table recorded as HKD96.3k, up 9% YoY.

The junket rooms of MGM will be opened in Cotai earliest by Aug, expected to capture the industry growth during the October Golden Week. According to industry information, Macau’s 5 top junkets will open junket room in MGM Cotai and will therefore encourage more VIP table games turnover. At the same time, the premium mass business will also be benefited.

Investors are advised to buy the share at HKD22 or below. Target price and stop-loss price are at HKD28 and HKD20 respectively.


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