Research Reports and Commentaries

Daily Commentary




23 May 2018

Market Outlook
HSI might fluctuate at around 31,000 and 31,400 points today.

The Hang Seng Index opened higher by 184 points on Monday to touch its intra-day low of 31,232 points. Afterwards, the market extended its gains and grew 416 points at most to reach its intra-day high of 31,464 points. During the afternoon session, HK stocks narrowed its gains. The HSI finally closed at 31,234.35 points, up 186.44 points or 0.60%. Market turnover amounted to HKD95.945 billion. The ADR proportional HSI index closed overnight at 31,289 points with 54 points higher than closing price on Monday. Trump claimed that the US-DPRK Summit may be postponed. Dow was down by 178 points to 24,834 points. HSI may fluctuate at around 31,000 to 31,400 points today.

Today’s A-share Snapshot

Company’s Profile:Tianqi Lithium (002466.SZ)’s major businesses include lithium resource development and exploitation, downstream production processing and trade for lithium products.

Brief Comments:

Business catalysts:The Company proposed to acquire 23.77% equity interests in SQM (SQM.US) with the consideration of approximately USD4.066 billion. SQM is a world-leading lithium product supplier, having the high-quality resource of Salar de Atacama and strong profitability in lithium products. Such strategic move is expected to be beneficial for the Company to improve its core business, which might enhance its comprehensive competitiveness. For 1Q2018, the Company’s revenue rose 56.92% YoY to RMB1.669 billion while its net profit added 62.70% YoY to RMB660 million. The Company predicted to record a net profit ranging from RMB1.3 billion to RMB1.45 billion for 1H2018, up 40.69% to 56.93% YoY.

Risk factors:The volatilities of lithium product price and foreign exchange rate might bring negative impacts to the Company’s gross profit margin.

Stock Pick

Sands (01928) reasonable valuation, continues to benefit from industry growth

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.

Sands China generated adjusted EBITDA of a USD789 million, an increase of 26% over the prior year, representing the highest EBITDA margin since the third quarter of 2006. The VIP business which recorded a significant improvement also explains the turnaround story. The Venetian Macao, which generated the highest proportion of the GGR, performed satisfactorily. Its EBITDA rose 20% YoY in 1Q18. With more renovations and the Londoner Macao to be launched, it is expected that Sands can attract more overnight tourist to support its gaming business growth. The prospect of the Group remains positive.

In addition, expecting the improvement of FCF, Sands has chance to raise dividend payout.

Investors are advised to buy the share at HKD47 or below. Target price and stop-loss price are at HKD55 and HKD42 respectively.