Retail Market Monitor - UOB-Kay Hian · 2018. 9. 27. · act as resistance upon a weak rebound. Further shorting opportunities exist when price stages a weak rebound, which could

R e t a i l M a r k e t M o n i t o r Thur sda y , 27 S ep t em ber 2018

w w w . u t r a d e . c o m . s g 1

S I N G A P O R E H O N G K O N G

WHAT HAPPENED LAST NIGHT

US stocks were lower after the close on Wednesday, as losses in the Basic Materials, Financials and Oil & Gas sectors led shares lower. At the close in NYSE, the DJIA lost 0.40%, while the S&P 500 index lost 0.33%, and the NASDAQ Composite index lost 0.21%. Falling stocks outnumbered advancing ones on the NYSE by 1,940 to 1,087 and 128 ended unchanged; on the Nasdaq Stock Exchange, 1,691 fell and 901 advanced, while 120 ended unchanged.

WHAT’S IN THE PACK

Sector: Telecommunications - Singapore iPhone XS and XS Max represent incremental upgrades and look similar to the previous iPhone X. iPhone XS Max, with the largest display ever for iPhones, would appeal to fans of larger smartphones. Otherwise, iPhone XR, which is cheaper than iPhone XS by S$420-730, offers the best value for money. We do not expect telcos to suffer from hefty handset subsidies in 4Q18 due to the launch of iPhone XS, XS Max and XR. BUY M1 (Target: S$1.88) and StarHub (Target: S$1.92). Maintain OVERWEIGHT.

Sector: Automobile - China September has seen a rebound from luxury cars, eg BMW Brilliance and Beijing Benz, but prices of mass-market cars continue to dip this month (except Geely), due to 6-10% price cuts by GWM. We prefer luxury players, eg BMW Brilliance, and OEMs with more new models, eg Geely, as their ASPs and margins will be bolstered by the ramp-up of new models. Others have generally been facing heavier margin pressure in 2H18. Maintain MARKET WEIGHT. Top picks: Geely and Brilliance. SELL: BAIC, BYD, DFM and GWM.

Hongkong Land (HKL SP) - Trading SELL In early August, there was a headfake seen on the weekly, followed by a break of rising trendline, a brief test back, and price decline resuming thereafter. In both daily and weekly timeframes, the thickening cloud suggests…

Sunningdale Tech (SUNN SP) - Trading BUY The carnage in the stock ceased in May, and thereafter a trading range (S$1.24-1.46) has formed. There was a price breakout during the last trading session and volume traded above its 10-period moving average…

Starhub (STH SP) - Trading BUY We followed up on the note on the stock as featured on 20 September. Accordingly, as the stock price has moved above S$1.75, and a trading buy has been triggered. Shallow retracements not dipping below S$1.74 could provide just another opportunity to long the stock…

Pacific Textiles (1382 HK) - Trading BUY The stock broke above a declining trendline (formed since Jan 18) and the cloud on Wednesday. As long as HK$6.30 holds, look for further upside towards HK$7.35 and HK$7.88…

Vtech Holdings (303 HK) - Trading BUY The prices broke above a bearish trendline and are holding on the upside. As long as HK$87.80 holds, look for a further upside towards HK$99.70 and HK$103.50…

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P R I C E C H A R T

KEY INDICES Prev

Close 1M % YTD %

DJIA 26385.3 1.3 6.7 S&P 500 2906.0 0.3 8.7 FTSE 100 7511.5 (0.9) (2.3) AS30 6307.8 (1.1) 2.3 CSI 300 3417.2 0.3 (15.2) FSSTI 3239.1 0.4 (4.8) HSCEI 10985.6 (0.6) (6.2) HSI 27816.9 (1.6) (7.0) JCI 5873.3 (2.5) (7.6) KLCI 1798.7 (0.7) 0.1 KOSPI 2339.2 2.0 (5.2) Nikkei 225 24033.8 5.4 5.6 SET 1749.9 1.9 (0.2) TWSE 10974.2 0.7 3.1

BDI 1450 (14.6) 6.1 CPO (RM/mt) 2115 (3.0) (11.5) Brent Crude (US$/bbl)

81 7.3 21.6

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YESTERDAY IN SINGAPORE

The Straits Times Index (STI) ended 3.02pt higher at 3,239.1, taking the ytd performance to -4.81%. Among the top active stocks were Rex International (-4.46%), Genting Singapore (+0.95%), Kris Energy (-1.74%), Thomson Medical (+2.67%) and Noble Group (+1.52%). The FTSE ST Mid Cap Index fell 0.06%, while the FTSE ST Small Cap Index gained 0.19%. The broader market saw 203 gainers and 181 losers with total trading value of S$979.1m.

SINGAPORE

TOP VOLUME Company Price

(S$)Chg (%)

Volume ('000s)

Genting Singapore 1.06 1.0 40,209 Thomson Medical Group 0.08 2.7 25,653 Singapore Telecommunications

3.19 (0.3) 21,442

Keppel Infrastructure Trust

0.50 (1.0) 15,564

Thai Beverage 0.69 0.0 14,716 TOP GAINERS

Company Price (S$)

Chg (%)

Volume ('000s)

Silverlake Axis 0.44 4.8 1,343 Siic Environment Holdings

0.29 3.6 653

Thomson Medical Group 0.08 2.7 25,653 Venture Corp 17.80 2.2 993 United Engineers 2.65 1.9 795

TOP LOSERS Company Price

(S$) Chg (%)

Volume ('000s)

Olam International 2.01 (2.4) 761 Hutchison Port Hldgs Trust 0.24 (2.0) 5,693 First Resources 1.70 (1.7) 487 Yangzijiang Shipbuilding 1.17 (1.7) 13,006 Far East Hospitality Trust 0.63 (1.6) 640

HONG KONG

TOP VOLUME

Stock Price (HK$)

Chg (%)

Vol (‘000)

CCB-H 7.07 (0.7) 246,260 ICBC-H 5.79 (0.3) 194,713 BANK OF CHINA-H 3.68 0.0 176,583 COUNTRY GARDEN 11.36 (6.9) 105,438 PETROCHINA 5.87 (2.3) 101,420

TOP GAINERS

Stock Price (HK$)

Chg (%)

Vol (‘000)

BRILLIANCE CHINA 10.68 3.7 30,098 WH GROUP 6.47 2.5 36,560 SINOPHARM-H 33.85 1.8 4,721 GREAT WALL MOTOR 5.74 1.6 33,228 GUANGZHOU AUTO 7.48 1.5 36,329

TOP LOSERS

Stock Price (HK$)

Chg (%)

Vol (‘000)

COUNTRY GARDEN 11.36 (6.9) 105,438 CHINA RES LAND 27.60 (4.0) 16,315 HUANENG POWER-H 5.69 (3.6) 60,910 CHINA OVERSEAS 24.00 (3.2) 18,099 CHINA VANKE-H 24.30 (3.2) 10,375




SINGAPORE TRADERS’ CORNER

Source: Nextview

Source: Nextview

Hongkong Land (HKL SP) Trading SELL Last price: US$6.58

Target price: US$6.05-6.10

Protective stop: US$6.85

In early August, there was a headfake seen on the weekly, followed by a break of rising trendline, a brief test back, and price decline resuming thereafter. In both daily and weekly timeframes, the thickening cloud suggests the prevailing trend is strong as price continues to trade beneath the cloud. The Tenkan-Sen (conversion line) and Kijun-sen (base line) could act as resistance upon a weak rebound. Further shorting opportunities exist when price stages a weak rebound, which could be rejected at the conversion and base lines. Stops could be placed at US$6.85, while downside target of S$6.05-6.10 appears nearer to the 78.6%FR of the 2016-2017 price swing. Approximate timeframe on average: 1 month Sunningdale Tech (SUNN SP) Trading BUY

Last price: S$1.49

Target price: S$1.65-1.68/1.80

Protective stop: S$1.36 The carnage in the stock ceased in May, and thereafter a trading range (S$1.24-1.46) has formed. There was a price breakout during the last trading session and volume traded above its 10-period moving average. There was also a TK crossover above the cloud. The MACD on the daily has once again, trading at above its centreline. In the near term, the immediate priority is for the stock to retest S$1.65-1.68 before deciding on the odds of a move towards S$1.80. Stops could be placed at S$1.36. Approximate timeframe on average: 1 month Our institutional research has a fundamental BUY target price of S$1.70. Jeffrey Tan, CMT, CFTe [email protected]




SINGAPORE TRADERS’ CORNER

Source: Nextview

StarHub (STH SP) Trading BUY Last price: S$1.77

Target price: S$1.95/c.2.30

Protective stop: S$1.71

We followed up on the note on the stock as featured on 20 September. Accordingly, as the stock price has moved above S$1.75, and a trading buy has been triggered. Indeed, the stock could be in the process of bottoming out and shallow retracements not dipping below S$1.74 could provide just another opportunity to long the stock. The stock has moved above the cloud and a kumo twist signalled a trend reversal, placing stops three pips below S$1.74. The upside target remains at S$1.95 in the near term, while the stock could go on to head towards the 50%FR (ie c.S$2.30) which also happens to be at the confluence of the congestion region formed during April this year. Approximate timeframe on average: 1 month Our institutional research has a fundamental BUY target price of S$1.92. Jeffrey Tan, CMT, CFTe [email protected]




HONG KONG TRADERS’ CORNER

Chart by Metastock

Chart by Metastock

Pacific Textiles (1382 HK) Trading Buy Range: HK$6.87-6.88

Last price: HK$6.88

Target price: HK$7.35 / HK$7.88

Protective stop: Breaks below HK$6.30

The stock broke above a declining trendline (formed since Jan 18) and the cloud on Wednesday. The rising 9-day (orange line) and 26-day (green line) moving averages are playing support roles and maintaining upside bias. The daily RSI broke above a bearish trendline and is heading upwards. The MACD is above its signal line and the 0-level.

As long as HK$6.30 holds, look for further upside towards HK$7.35 and HK$7.88. A breach below HK$6.30 would indicate that the upside breakout is false, and investors should close their positions to control risk.

Average time frame: 2 months (abort this trade idea if the stock cannot hit the entry price range within six trading days).

Vtech Holdings (303 HK) Trading Buy Range: HK$94.10-94.15

Last price: HK$92.05

Target price: HK$99.70 / HK$103.50

Protective stop: Breaks below HK$87.80

The prices broke above a bearish trendline and are holding on the upside. The 20-day (red line) moving average just crossed above the 50-day (green line) one, which is a bullish signal. The daily RSI broke above a triangle pattern, while the MACD is above its signal line and the 0-level.

As long as HK$87.80 holds, look for a further upside towards HK$99.70 and HK$103.50. A breach below HK$87.80 would indicate that the upside breakout is false, and investors should close their positions to control risk.

Average time frame: 2 months (abort this trade idea if the stock cannot hit the entry price range within six trading days).

ANALYST Joyce Chan CMT +852 2236 6716 [email protected]




FROM THE REGIONAL MORNING NOTES.. .

Telecommunications – Singapore iPhone XS, XS Max And XR – Not A Game Changer

iPhone XS and XS Max represent incremental upgrades and look similar to the previous iPhone X. iPhone XS Max, with the largest display ever for iPhones, would appeal to fans of larger smartphones. Otherwise, iPhone XR, which is cheaper than iPhone XS by S$420-730, offers the best value for money. We do not expect telcos to suffer from hefty handset subsidies in 4Q18 due to the launch of iPhone XS, XS Max and XR. BUY M1 (Target: S$1.88) and StarHub (Target: S$1.92). Maintain OVERWEIGHT.

WHAT’S NEW • Apple has released three new iPhone models. The iPhone XS with a 5.8-inch display

and iPhone XS Max with a 6.5-inch display has been available since 21 Sep 18. The iPhone XR with a 6.1-inch display will be available on 26 Oct 18.

• The same immaculate look. Like its predecessor iPhone X, the iPhone XS and XS Max come in a surgical-grade stainless steel body covered on the front and back with scratch-resistant glass. Consumers can choose from three finishings, namely gold, space grey and silver. It has IP68 water resistance to withstand immersion in 2 meters of water for 30 mins, compared with 1 meter of water for iPhone X.

• iPhone XS and XS Max use the new A12 Bionic processor (7nm), which is 15% faster and 50% more power efficient than the previous A11 processor (10nm). It has an embedded 8-core neural engine for machine learning. It can perform 5t operations per second, compared with the previous 600b. Augmented Reality (AR) and artificial intelligence (AI) apps will run more smoothly. Face ID is also processed more speedily.

• Choose iPhone XS Max if size does matter. iPhone XS is of the same size and retains the same 5.8-inch Super Retina display of iPhone X. iPhone XS Max is 13.9mm taller and 6.5mm wider than iPhone XS. Its 6.5-inch Super Retina display is the largest ever for an iPhone. It displays vivid colours and great contrast, ideal for watching High Dynamic Range (HDR) movies. The audio from front-facing and bottom speakers has wider stereo effect.

• Better camera system. The iPhone XS’ and XS Max’s dual camera system provides improved image fidelity and better low-light sensitivity. It has dual 12-megapixel rear camera with portrait mode and depth control. It has a 7-megapixel TrueDepth front camera. iPhone XS and XS Max could adjust the depth of portrait photos after you have taken them. It records 4K video at up to 60 frames per second.

• iPhone XR to be available in October. iPhone XR comes in an all-glass and aluminium body with a 6.1-inch Liquid Retina display. It has six finishings, namely black, white, blue, coral, yellow and red. It has a 12-megapixel single-lens wide-angle rear camera. It has IP67 water resistance to withstand immersion in 1 meter of water for 30 minutes.

• iPhone XR is better value for money. The iPhone XS and XS Max look similar to iPhone X and it is difficult to distinguish between the minor upgrades. iPhone XS Max would appeal to fans of larger smartphones and is ideal for watching movies, playing games, writing reports and emails and editing photos. Otherwise, it is preferable to wait for iPhone XR, which is better value for money and cheaper than iPhone XS by S$420-730.

PEER COMPARISON Price @ Target Market -------- PE -------- --- EV/EBITDA --- ---- Div Yield ---- ---- FCF Yield ---- Company Ticker Rec 26 Sep 18 Price Cap FY 2018F 2019F 2018F 2019F 2018F 2019F 2018F 2019F (S$) (S$) (US$m) (x) (x) (x) (x) (%) (%) (%) (%) Singtel ST SP BUY 3.19 3.94 38,158 03/2018 17.4 16.4 9.2 8.8 5.5 5.5 7.3 5.4 StarHub STH SP BUY 1.77 1.92 2,244 12/2017 13.2 14.0 6.3 6.7 9.0 6.8 11.1 10.4 M1 M1 SP BUY 1.63 1.88 1,105 12/2017 10.4 11.5 6.1 6.3 7.7 7.0 10.3 8.5 NetLink NBN Trust NETLINK SP BUY 0.78 0.95 2,227 03/2018 47.3 39.3 15.2 14.3 5.7 6.0 2.8 6.3

Source: Bloomberg, UOB Kay Hian




ACTION • Neutral impact on the telco sector. It has been 11 years since the first iPhone was

released on 29 Jun 07. We believe the novelty of iPhone has faded (urgency to upgrade immediately has diminished). We do not expect telcos to suffer from hefty handset subsidies in 4Q18:

a) High prices could be a barrier. Consumers would find the iPhone XS and XS Max expensive as Apple has introduced new 512GB variants, which are sold at S$2,199 and S$2,349 at Apple shops. The retail pricing for iPhone XS is actually similar to iPhone X for the 64GB and 256GB variants. The continued steep pricing could accelerate the shift towards SIM-only mobile service plans.

b) No disruption from TPG. TPG is a budget and no-frills player and will likely focus on SIM-only mobile service plans. It is unlikely to compete with the incumbent telcos on offering higher handset subsidies.

c) No negative impact from higher handset subsidies in 4Q18. Under SFRS (I) 15, revenue recognised for the sale of handsets are based on market prices observed in the retail market, such as Apple Store, rather than the subsidised prices of handsets. Accounting wise, we should not see a spike in handset subsidies causing a trough in EBITDA margin during 4Q18.

• Maintain OVERWEIGHT. We had upgraded the Singapore telecommunications sector from MARKET WEIGHT to OVERWEIGHT on 7 Sep 18:

a) Delay brings reprieve. Our channel checks suggest that TPG would launch trial for its 4G mobile network by 4Q18. We expect mobile services on a commercial basis to commence in 2Q19. This represents a delay of 4-6 months compared to our original expectations. The delay encountered by TPG Singapore affords incumbents more time to further saturate the market.

To recap, TPG secured 20MHz of 900MHz spectrum and 40MHz of 2300MHz spectrum for provision of 4G services at S$105m. The spectrum rights commence on 1 Apr 17 and last for 16 years.

b) Strong defensive qualities. Telcos recorded positive net additions and post-paid mobile subscribers increased on a yoy basis during the Global Financial Crisis. Our previous study on share price performance indicates that telcos in Singapore have a 73% chance of outperforming the MSCI Singapore Index during recessions. Telcos provide a shelter against the risk of contagion spreading across emerging markets.

Singtel (BUY/S$3.19/Target: S$3.94) • Maintain BUY. Singtel provides a defensive shelter due to its geographical

diversification. Mobile business in Singapore accounts for only 7% of group revenue if we include its proportionate share of its associates’ revenue. We have lowered our target price to S$3.94 (COE: 6.25% and terminal growth: 1.5%) after factoring in recent depreciation of Indonesian rupiah (3Q18: -3.7%) and Indian rupee (3Q18: -6.1%) against the Singapore dollar.

StarHub (BUY/S$1.77/Target: S$1.92) • New CEO injects new vigour. Execution has improved since Peter Kaliaropoulos took

over as CEO with effect from 9 Jul 18. Within two months of his appointment, StarHub has scaled up in cyber security with the merger of Accel Systems & Technologies with Temasek’s Quann World to form Ensign InfoSecurity.

• Maintain BUY. Our target price of S$1.92 is based on DCF (COE: 9.0% and terminal growth: 1.0%).

M1 (BUY/S$1.63/Target: S$1.88) • Upgrade to BUY. Interest from potential acquirer would inject upward momentum for the

stock. We have lowered beta from previous 1.1x to a more normalised 0.95x. Our target price of S$1.88 is based on DCF (COE: 7.5% (previous: 8.25%), terminal growth: 1.0%).




NetLink NBN Trust (BUY/S$0.78/Target: S$0.95) • NetLink has dominant market share of 90% for residential and 35% for non-residential

fibre connections, where growth is projected at a three-year CAGR of 6.2% and 8.5% respectively in FY18-21.

• Maintain BUY. Our target price of S$0.95 is based on DCF methodology (cost of equity: 7.0%, terminal growth: 2.0%).

SECTOR CATALYSTS • M1 and StarHub collaborating on network sharing.

• Impending entry of TPG Telecom as the 4th mobile operator in 4Q18.

ASSUMPTION CHANGES • We maintain our existing earnings forecast.

RISKS • Competition and pricing erosion worsen more than anticipated post entry of TPG.

• M1 and StarHub did not close the deal or achieve the desired cost savings from network sharing.

*For a more detailed corporate note, please contact your trading representative.




FROM THE REGIONAL MORNING NOTES.. .

Automobile - China Luxury Car Prices Rebound In September September has seen a rebound from luxury cars, eg BMW Brilliance and Beijing Benz, but prices of mass-market cars continue to dip this month (except Geely), due to 6-10% price cuts by GWM. We prefer luxury players, eg BMW Brilliance, and OEMs with more new models, eg Geely, as their ASPs and margins will be bolstered by the ramp-up of new models. Others have generally been facing heavier margin pressure in 2H18. Maintain MARKET WEIGHT. Top picks: Geely and Brilliance. SELL: BAIC, BYD, DFM and GWM. WHAT’S NEW • September retail discounts for PVs widened slightly to 17.7% from 17.6% in

August. All segments saw expansion of retail discounts except mid-sized luxury sedans, mid-sized luxury SUVs and small SUVs.

• Luxury car prices rebounded in September. Retail discounts on mid-sized luxury sedans and mid-sized luxury SUVs narrowed by 0.1ppt mom this month. Both BMW Brilliance and Beijing Benz saw product prices rebound. a) BMW Brilliance. The average prices of the 5-series and 3-series edged up by

around 1% mom to Rmb420,000 and Rmb281,000 respectively in Sep 18, still 13.5% and 4.8% lower from the same period last year. The new X3 launched in May 18 is still being sold at a zero discount to its MSRP of Rmb399,800-585,000 (average: Rmb460,000). This bolstered the overall ASP of BMW Brilliance.

b) Beijing Benz. The average prices of the E-class, C-class and GLC rebounded by less than 1% mom to Rmb443,000/Rmb329,000/Rmb429,000 respectively in Sep 18, still 6.7%/2.5%/7.6% down from the same period last year.

• Mass market continued to see price declines in September, especially Great Wall Motor (GWM). But Geely’s and Trumpchi’s product prices are holding up well. a) GWM. The company on 1 Sep 18 announced a 6-10ppt in additional retail discounts

for most of its Haval branded SUVs, including its flagship models – H6 and H2. As such, average prices of H6 and H2 plummeted by 13% and 9% mom and 16% and 12% yoy in Sep 18.

b) Geely. Boyue and Emgrand GS – Geely’s best-selling SUV models – remained steady terms of pricing in Sep 18. Vision SUV’s prices even rebounded 4% mom in Sep 18. In fact, the prices of Geely’s SUV models rebounded by 4-7% from the trough in Jun 18. This, along with the ramp-up of new models like Borui GE and Binrui, underpinned the overall ASP of Geely.

c) GAC Trumpchi. The prices of GS8 and GS4 rose by 2% and 1% to Rmb185,000 and Rmb105,000 respectively in Sep 18, still 6% and 2% down from the same period last year. The facelifted GS4 which was launched in Jun 18 is still being sold at a zero discount to the MSRPs.

• Mid-range segment prices also weakened with Beijing Hyundai being the underperformer and GAC Toyota the top performer. a) Beijing Hyundai. Sanata, ix35 and ix25 faced price drops in Sep 18. In particular,

the price of ix35 plunged by nearly 20% yoy in Aug-Sep 18, as the 2018 version of ix35 has MSRPs that are >20% lower than that of the old ones.

b) GAC Toyota. The prices of new Camry and Highlander remained steady in Sep 18. Dealers have started to offer 1-2% discounts on Camry since Jul 18, half a year after the debut of the model. On the other hand, new Highlander is still selling at a 1-2% premium to MSRPs.

PEER COMPARISON Company Ticker Rec Price @ Target Upside/ Market --------- PE -------- -------- P/B ------- ROE Net 26 Sep 18 Price (Downside) to TP Cap 2018F 2019F 2018F 2019F Gearing (HK$) (HK$) (%) (US$m) (x) (x) (x) (x) (%) (%) BAIC Motor-H 1958 HK SELL 6.31 4.00 (36.6) 6,135 9.5 10.2 1.2 1.1 6.1 (66.2) Brilliance China 1114 HK BUY 12.52 15.00 19.8 8,086 8.1 6.7 1.6 1.3 23.3 2.6 BYD Co Ltd-H 1211 HK SELL 55.45 30.00 (45.9) 6,495 38.6 45.9 2.7 1.4 7.8 86.5 Dongfeng Motor-H 489 HK SELL 7.90 7.50 (5.1) 8,714 4.9 5.2 0.5 0.5 0.0 15.0 Geely Automobile 175 HK BUY 15.92 30.00 88.4 18,282 9.0 6.4 3.6 2.5 35.3 (35.2) Great Wall Mot-H 2333 HK SELL 5.08 3.40 (33.1) 2,016 7.3 9.1 0.9 0.9 10.9 17.6 Guangzhou Auto-H 2238 HK BUY 8.35 10.00 19.8 10,915 6.5 5.4 0.9 0.8 16.2 (66.6) China Meidong Auto 1268 HK BUY 3.65 4.50 23.3 514 11.2 8.4 2.6 2.1 28.3 0.7 China Yongda Auto 3669 HK BUY 7.04 10.50 49.1 1,653 6.4 5.4 1.3 1.1 19.9 123.3 China Zhengtong 1728 HK BUY 5.04 6.50 29.0 1,462 6.6 5.1 1.3 1.1 14.4 102.9 Zhongsheng Group 881 HK HOLD 19.32 17.50 (9.4) 5,607 10.4 9.4 4.1 2.7 21.3 90.6 Nexteer 1316 HK SELL 12.06 11.00 (8.8) 3,867 11.6 10.6 0.6 0.8 21.1 (17.3) Source: Bloomberg, UOB Kay Hian


w w w . u t r a d e . c o m . s g 10


ACTIONS • Geely and Brilliance remain our top picks given their stronger product pipelines.

Brilliance is also riding on the fast-growing entry-luxury car segment and the localisation trend. Maintain target prices at HK$30.00 for Geely and HK$15.00 for Brilliance, pegged to 11x 2019F PE (on a par with historical mean) and 8x 2019F PE (1SD below mean).

• SELL BAIC, BYD, DFM and GWM on mounting margin pressure. Keep target prices at HK$4.00 for BAIC (6x 2019F PE, 1SD below mean), HK$30.00 for BYD (SOTP or 25x 2019F PE, on par with mean), HK$7.50 for DFM (5x 2019F PE, 1SD below mean) and HK$3.40 for GWM (6x 2019F PE, 1SD below mean).

• Maintain BUY on Meidong (1268 HK), Zhengtong (1728 HK) and Yongda (3669 HK) with target prices of HK$4.50, HK$6.50 and HK$10.50 based on target 2019F PE multiples of 10x (on par with mean), 8x (1SD below mean) and 6x (1SD below mean) respectively.

ESSENTIALS • Product pipelines do matter. We prefer luxury players, eg BMW Brilliance, and OEMs

with more new models, eg Geely, as their ASPs and margins would be bolstered by the ramp-up of new models.

RISKS • Macro risks. a) A hard-landing scenario and severe credit tightening would hurt China

automobile sales across the board, and b) The US-China trade war intensifies.

AVERAGE TRANSACTION PRICES BY MODEL yoy chg qoq chg mom chg (Rmb’000) Sep 17 Dec 17 Mar 18 Jun 18 Jul 18 Aug 18 Sep 18 (%) (%) (%) BMW Brilliance 5-series 485 473 455 424 417 416 420 (13.5) (1.1) 0.9 3-series 295 309 302 284 277 278 281 (4.8) (0.9) 1.0 X3 n.a. n.a. n.a. 460 460 460 460 n.a. - - BJ Benz E-class 475 474 460 430 438 441 443 (6.7) 3.0 0.4 C-class 338 351 338 323 324 327 329 (2.5) 1.8 0.6 GLC 464 467 446 423 417 426 429 (7.6) 1.3 0.7 BJ Hyundai Sanata (mid-sized sedan) 178 176 176 171 170 170 168 (5.5) (1.8) (0.9) Ix35 (compact SUV) 159 141 140 137 134 128 128 (19.5) (6.8) (0.3) Ix25 (small SUV) 114 123 123 114 111 109 109 (4.7) (4.2) (0.2) DF Nissan Teana (mid-sized sedan) 191 191 190 191 190 190 190 (0.6) (0.4) - X-Trail (compact SUV) 195 194 192 190 189 188 188 (3.5) (1.1) (0.3) Qashaqai (compact SUV) 140 140 139 138 137 135 135 (3.9) (2.5) (0.4) DF Honda UR-V (mid-sized SUV) 285 281 274 267 265 264 264 (7.4) (1.0) (0.1) CR-V (compact SUV) 206 206 n.a. 196 193 190 191 (7.3) (2.5) 0.5 XR-V (small SUV) 135 134 133 131 130 130 131 (3.1) 0.2 0.4 GQ Honda Accord (mid-sized sedan) 182 181 179 196 192 187 186 2.1 (5.2) (0.7) Advancier (mid-sized SUV) 277 277 276 266 261 259 259 (6.6) (2.7) - Vezel (small SUV) 144 145 144 138 136 136 137 (4.7) (0.4) 0.7 GAC Toyota Camry (mid-sized sedan) 203 212 212 212 210 209 209 2.9 (1.6) - Highlander (mid-sized SUV) 288 289 289 289 289 289 289 0.3 - - CH-R (small SUV) n.a. n.a. n.a. 160 160 160 160 n.a. - - GAC Trumpchi GS8 197 195 191 186 183 181 185 (6.1) (0.6) 2.2 GS4 107 107 105 96 105 104 105 (1.6) 9.5 1.0 Geely Boyue (compact SUV) 127 126 121 117 123 125 125 (1.7) 6.5 0.2 Borui GE (mid-sized sedan) n.a. n.a. n.a. n.a. 154 154 154 n.a. n.a. - Binrui (compact sedan) n.a. n.a. n.a. n.a. n.a. n.a. 93 n.a. n.a. n.a. Emgrand (compact sedan) 72.0 72.1 73.3 69.5 68.9 68.3 66.5 (7.7) (4.4) (2.7) Emgrand GL (compact sedan) 91.4 92.2 91.8 88.9 90.1 89.7 88.5 (3.1) (0.4) (1.3) Emgrand GS (compact SUV) 93.7 92.5 87.6 87.9 87.6 87.4 87.4 (6.7) (0.6) - Vision (compact sedan) 54.4 56.9 56.9 54.9 55.9 55.9 55.9 2.8 1.8 - Vision SUV (compact SUV) 85.2 84.1 82.2 83.6 83.7 83.1 86.6 1.6 3.6 4.2 GWM Haval H6 111 112 114 120 120 116 101 (8.4) (15.6) (12.8) Haval H2 91.1 91.6 93.8 89.4 87.6 86.5 78.5 (13.8) (12.1) (9.2) Source: Industry sources, UOB Kay Hian *For a more detailed corporate note, please contact your trading representative.


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Retail Market Monitor - UOB-Kay Hian · 2018. 9. 27. · act as resistance upon a weak rebound. Further shorting opportunities exist when price stages a weak rebound, which could