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1、Deutsche BankMarkets Research,AsiaChinaStrategy,PeriodicalMade in China,Date26 October 2012Lin Li,Ph.DJun Ma,Ph.D,CN banks:Can short-term sentimentoverride growing credit risks?KEY POINTSHK Property-Taking a look at supply/demand imbalance(Tony Tsang)THEME OF THE DAY,Chief Economist(+852)2203 Michae
2、l Tong,CFAResearch Analyst(+852)2203 Daily Market Statistics,Strategist(+852)2203 25/10/2012,Performance,Price,1D%chg,1M%chg,Chinese Banks-Sector update-Can short-term sentiment override growingcredit risks?(Tracy Yu)We raise our target prices for the H-share listed banks by 16%as we roll overour va
3、luation to end-2013E.Recent unusually large capital inflows into HKsuggest stocks might be supported in the near term,although fundamentalshave not changed.While the 41%yoy increase in new corporate financing(primarily short-dated)in 9M12 appears to be temporarily positive for Chinas,HSIH-shareA300V
4、olumeHSIH-shareA300,21,81010,6162,291Price1,6332,5174,435,0.2-0.2-0.71D%chg-4.824.015.4,5.18.23.51M%chg34.748.337.1,economy,the notable deterioration in corporate profitability as implied by the38%decline in profit return per unit of loan suggests growing hidden risks forbanks and the economy.Our to
5、p picks remain ICBC and BOC;we are stillcautious on mid-sized banks,as they are more vulnerable to asset quality risks.(Tracy Yu 852 2203 6191),IndexesHSIEPSgPERPBR,CY2011 CY2012 CY201310.3%6.4%7.8%12.0 11.3 10.51.5 1.4 1.3,19/10/2012,http:/pull.db-,HSCEI,CY2011,CY2012,CY2013,China IPPs-Diving into
6、datapoints amid industry up-cycle(Michael Tong)With IPPs entering an earnings up-cycle,we resume publication of a quarterly,EPSgPERPBR,16.6%8.91.5,0.8%8.81.3,8.6%8.11.2,update on sector datapoints,providing the latest trends in power consumption,coal prices,new capacity and utilisation.We believe in
7、vestors will be moreassured regarding a continued earnings rise in 2013E after getting abreast ofthe sequential data series through 2012.We retain our view that IPPs are in a,MSCI HKEPSgPERPBRMSCI China,CY2011 CY20124.5%-0.6%13.0 15.61.1 1.3CY2011 CY2012,CY20137.7%14.51.2CY2013,bright spot due to a
8、weak coal price outlook amid a potential utilisation pick-,EPSg,16.6%,0.1%,10.0%,up.Sector valuations remain attractive,in our opinion,at 0.6-1.2x P/B vs.FY13E ROE of 10-17%.FCF is turning positive for the first time in many years,aiding a decent dividend yield.Our top picks are CR Power and Huaneng
9、Power.(Michael Tong 852 2203 6167)http:/pull.db-,PER 10.2 10.2 9.3PBR 1.7 1.5 1.4Data for 2011 are calculated using members,weights and prices frothe 31st of December of that yearDB Economic forecasts,China Property-Update on Oct sales of Developers(Tony Tsang),Hong KongGDP(%),2012F1.5,2013F 2014F2.
10、5 4.5,We surveyed 18 key listed developers on their contracted sales in Oct MTDand found that 8 of them expect stronger contracted sales in Oct vs Sep,2,Merch.Exp.(%)CPI(%),1.54.0,4.12.1,8.01.5,expect at least stable sales MoM,while 6 expect a stable MoM trend.Thelisted developers sales momentum loo
11、ks better than overall market sales,suggesting they outperformed smaller players as MTD 40-city weekly sales wemonitor were down by 15%MoM.With developers already achieving a highpercentage of their full-year sales targets,we believe property sales in Nov/Dec2012 are unlikely to show a significant p
12、ickup vs.Sep/Oct.(Tony Tsang 8522203 6256),China 2012FGDP(%)7.7Merch.Exp.(%)7.0CPI(%)2.8FX rate(eop)CNY/USD 6.33Source:Deutsche Bank AG estimates,2013F 2014F8.2 8.012.0 10.03.2 3.06.20 6.10,http:/pull.db-Bank AG/Hong KongAll prices are those current at the end of the previous trading session unless
13、otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have
14、a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,26 October 2012Made in ChinaDB EQUITY RESEARCH
15、HK Property-Taking a look at supply/demand imbalance(Tony Tsang)While we express concern about the Hong Kong residential market in the medium termon weakening fundamentals,as we expect supply/demand imbalance and ampleliquidity to overshadow in the near term,we expect upward momentum in Hong Kongres
16、idential prices in the near term.However,we still expect a 15-20%decline within thenext 24 months on the basis of normalization in supply/demand dynamics from mid-13.Meanwhile,policy risk is increasing on the back of surging property prices in recentmonths.(Tony Tsang 852 2203 6256)http:/pull.db-Sol
17、ar Energy-Turning point looks remote rather than close(Eric Cheng)There has been a rebound in the share prices of HK-listed solar names,with GCL-Polysshares up 18%since the start of October(vs.8%for HSCEI).True,the sector seems tobe close to its trough with the polysilicon ASP approaching the cash p
18、roduction cost oftier-one manufacturers.However,we see limited room for profitability to improve asfundamentals remain weak and industry oversupply is unlikely to ease in the near term.The recent rebound does not look warranted,in our view.We maintain a cautiousstance on the sector.(Eric Cheng 852 2
19、203 6202)http:/pull.db-Garden Holdings-Stronger-than-expected catch-up in Oct contracted sales;reiterating Buy(2007.HK,Buy,Target Price:HKD 3.85,Closing Price:HKD 3.18,JasonChing)Based on our channel checks,we estimate that Country Garden will be able to achievenearly Rmb6bn in contracted sales in O
20、ct,stronger than we expected.Sales lock-in isexpected to rise to 91%by end-Oct,in line with market leaders.A month ago,CountryGardens lock-in was markedly behind peers at 69%(vs.82%industry average).Hence,we believe there is significant scope for the stock to catch up from the current levels onthe b
21、ack of its strong sales momentum.Country Garden has underperformed the sectorby c.30%YTD.(Jason Ching 852 2203 6205)http:/pull.db-Pacific Technology-Weaker-than-expected earnings momentum(0522.HK,Sell,Target Price:HKD 72.00,Closing Price:HKD 68.65,Michael Chou)We revise down our 2012/13/14 EPS estim
22、ates by 35%/31%/24%,respectively to factorin lower-than-expected margins.We trim our target price from HK$75 to HK$72.Webelieve the stock will face more headwinds in the near term due to the overly highvaluation,a material decline in booking,and a slower-than-expected recovery in theLED business.We
23、maintain our Sell rating.(Michael Chou 886 2 2192 2836)http:/pull.db-Approaching bottom but recovery still looks remote(3800.HK,Hold,TargetPrice:HKD 1.20,Closing Price:HKD 1.43,Eric Cheng)We cut our 2012-14E earnings by 64-351%as spot polysilicon price has started anotherround of decline and the nea
24、r-term outlook is likely to deteriorate further.Though wesee factory utilisation for tier-one polysilicon players declining,we expect furtherweakness in polysilicon price,as the de-stocking process is likely to continue through4Q12.Sector recovery still looks remote with risks skewed to the downside
25、 in the nearterm.Hold on balanced risk/reward.(Eric Cheng 852 2203 6202)http:/pull.db-of China-Strong 3Q12 results-beating by 6%on robust non-interest incomegrowth(3988.HK,Buy,Target Price:HKD 3.22,Closing Price:HKD 3.12,Tracy Yu)BOCs 3Q12 net profit of Rmb34.8bn was flat qoq and up by 16.6%yoy.This
26、 is beatingconsensus estimates by 6.2%,primarily due to stronger than expected non-interestincome,which rose by 14.1%qoq and 10.3%yoy.Net fee income recovered from thetighter regulations on banks for charging fees,up 19.7%qoq and down 1.1%yoy.Other operating income also increased by 22.3%qoq and 23%
27、yoy as a result of,Page2,Deutsche Bank AG/Hong Kong,26 October 2012Made in Chinacontinued strong revenue from the sales of precious metals products and otherinnovation services.(Tracy Yu 852 2203 6191)http:/pull.db-Unicom-3Q12 results-mild miss(0762.HK,Buy,Target Price:HKD 19.30,Closing Price:HKD 13
28、.52,Alan Hellawell III)China Unicom released basic 3Q12 financial results after market close.Amongst keyhighlights the company reported 3Q operating revenue of RMB63.5b and EBITDA ofRMB18.7b.Net profit of RMB2.0b(-16.5%QoQ,+25.6%YoY)beat DBe of RMB1.8b.NP also beat consensus as presented by Bloomber
29、g last week,but missed its recentlyupdated estimate(RMB2.1b)by 5%.EPS rose to RMB0.085 in 3Q.(Alan Hellawell III 852 2203 6240)http:/pull.db-Hong Kong Holdings BOC(HK)3Q12 result in-line but lower NIM could be a dragnear-term(2388.HK,Buy,Target Price:HKD 28.50,Closing Price:HKD 24.35,SophiaLee)BOC(H
30、K)s 3Q12 pre-provision profit was in-line,registering positive QoQ growth of0.8%,compared to 11.1%QoQ decline in 2Q12.As in the past,the disclosures werelimited,but BOC(HK)mentioned lower NIM QoQ,which could be a drag near-term.Lower net interest income was offset by higher trading income and better
31、 insuranceperformance,resulting in net operating income growth of 1.6%QoQ.Expense growthof 3.4%was more moderate than expected,with cost/income ratio stable at 32%QoQ,compared to our forecast of 34%.(Sophia Lee 852 2203 6226)http:/pull.db-Conf call highlights&post-call thoughts(0027.HK,Buy,Target Pr
32、ice:HKD29.40,Closing Price:HKD 25.05,Karen Tang)Galaxy Macau EBITDA margin expanded by an impressive 320bps from 17.9%in 2Q to21.1%in 3Q.On a luck-adjusted basis,we calculate that Galaxy Macau EBITDA marginis at 22.1%in 3Q.We think 3 factors contributed to the margin expansion:(1)Businessmix-We esti
33、mate that the shift towards higher-margin mass&slot businessescontributed 130bps in margin expansion.(2)Efficiency gains-As the property enters its2nd year,mgmt has better customer traffic flow data to adjust table minimums toimprove yields.Focus on premium mass,which lifts average bet sizes,also he
34、lps.Thisis evidenced by rising mass market hold(3Q 29.9%vs.2Q 28.4%).(3)Lower junketcommissions-As VIP rolling declined 7%qoq,we suspect that some junkets may nothave reached the maximum rolling threshold for the top commission rate of 47-48%.(Karen Tang 852 2203 6141)http:/pull.db-3Q beat as premiu
35、m mass lift margin(0027.HK,Buy,Target Price:HKD 29.40,Closing Price:HKD 25.05,Karen Tang)Galaxy reported 3Q headline EBITDA of HK$2.6bn,+2%qoq(+46%yoy).This is betterthan expected as consensus was expecting EBITDA down 5-7%qoq.The surprise camefrom margin expansion at Galaxy Macau(HK GAAP EBITDA mar
36、gin+300bps to 21%)which offset a 9%qoq decline in VIP rolling.Since Galaxy Macau has only startedfocusing on premium mass in 2Q12,we expect further margin expansion over the next12 months.Reiterate Buy with TP HKD29.4.(Karen Tang 852 2203 6141)http:/pull.db-Mining-Temporary suspension of Zuoan gold
37、mine construction(2899.HK,Buy,Target Price:HKD 3.76,Closing Price:HKD 3.18,Laura Zhai)Zijin announced temporary suspension of its construction at its 60%owned Zuoan goldmine in Kyrgyzstan due to conflict between the mines contracting construction unitand the local residents.As a result,construction
38、of the mine is under suspension.TheKyrgyzstan government is currently working to resolve the issues.(Laura Zhai 8522203 5929)http:/pull.db-,Deutsche Bank AG/Hong Kong,Page3,26 October 2012Made in ChinaMelco Crown-Expanding into the Philippines(MPEL.OQ,Buy,Target Price:HKD 15.80,Closing Price:HKD 13.
39、90,Karen Tang)MPEL announced today that it entered into a cooperation agreement with SM Group,Belle Corp and Premium Leisure to jointly develop a Philippines casino project.The fourparties signed the initial memorandum of agreement in July.Under the cooperationagreement,MPEL would be the sole operat
40、or of the project while Belle Corp would ownthe land.Philippines Amusement and Gaming Corporation(PAGCOR)requires a totalinvestment in the project of US$1bn.The project is currently in development stage.Wecurrently ascribe no Philippines value to our MPEL target price of US$15.8.ReiterateBuy.(Karen
41、Tang 852 2203 6141)http:/pull.db-Pacific-A solid 3Q,valuation looks compelling,Buy(1199.HK,Buy,Target Price:HKD 13.20,Closing Price:HKD 11.58,Sky Hong)Cosco Pacific(CP)reported 3Q net profit of US$98.2m,up 3.9%YoY.The earningsgrowth was mainly driven by its terminal operations and container leasing.
42、Itsconsolidated ports registered a 10.9%YoY throughput growth in 3Q.This along withstrong performance of its leasing business(i.e.rising container fleets:+5.7%YoY,solidutilization of 95.7%in 3Q,and more disposal of returned boxes)has led to 19.5%YoYincrease in operating profit in 3Q,outpacing revenu
43、e growth of 14.3%YoY.(Sky Hong(852 2203 6131)http:/pull.db-Strong 3Q operationally but missed on one-off items(2009.HK,Buy,TargetPrice:HKD 7.44,Closing Price:HKD 6.59,Johnson Wan)BBMG reported its 3Q12 results after market close on Oct 25.3Q12 NPAT came in atRMB421m or EPS of RMB0.1/sh,down 41%YoY b
44、ut up 3%YoY after stripping out theRMB361m one-off investment gain(property JV with Vanke)in 3Q11.Overall,9M12EPS including fair valuation gains from its investment property accumulated toRMB0.42/sh or 51%of DBe and 56%of consensus FY12 EPS,which is slightlydisappointing in our view.(Johnson Wan 852
45、 2203 6163)http:/pull.db-Limited-Company guidance revision,and TP adjustment(1208.HK,Buy,TargetPrice:HKD 4.27,Closing Price:HKD 3.20,Laura Zhai)Along with MMGs 3Q production report released today the company revised guidanceon production and costs for the year.We revised our forecasts accordingly,le
46、ading to a6.7%increase in our target price to HKD4.27.We reiterate our Buy rating on the stock.(Laura Zhai 852 2203 5929)http:/pull.db-C Land-Operational turnaround continues(1224.HK,Buy,Target Price:HKD 4.59,Closing Price:HKD 1.92,Tony Tsang)For Sep 2012,C C Land achieved contracted sales of RMB957
47、mn and GFA sold of129ksqm,representing 48%and 63%MoM growth respectively,as well as 40%and36%YoY growth respectively.For the first 9 months,C C Land achieved accumulatedcontract sales amount of RMB4,990mn,up 11%YoY.In addition,at end-Sep,it hadabout RMB1.2bn of subscription sales which would become
48、contracted sales inOct/Nov.Including these subscription sales,C C Land has already achieved 91%of itsfull-year 2012 sales target.(Tony Tsang 852 2203 6256)http:/pull.db-Land Limited-Sales momentum saw a marked acceleration in October(0230.HK,Buy,Target Price:HKD 2.00,Closing Price:HKD 1.08,Tony Tsan
49、g)In the first 9 months of 2012,Minmetals lagged behind peers in terms of contractedsales by locking in 68%of its full-year target(vs industry average of 80%).However,with contracted sales of Rmb300mn in the first half of Oct which we believe Minmetalsis likely to achieve Rmb600mn for the month,we s
50、aw an apparent pick-up in salesmomentum in 4Q.Moreover,by taking into account subscription sales of anotherRmb1bn pending final contract-signing,Minmetals is well on track to achieve its full-year sales target.We expect the share price to react positively.(Tony Tsang 852 22036256),Page4,Deutsche Ban
