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India Equity Research Reports, IPO and Stock News
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Adding Jiangxi Copper as a Buy and
China Unicom as a Sell; removing
Tencent from the Sell list
Changes to our Hong Kong list
We are adding Jiangxi Copper to the MarQuee Buy list and China Unicom to the
Sell list, and at the same time removing Tencent from the Sell list. Our analyst
Christina Lee believes Jiangxi Copper is the best Asia play on the rise in copper
prices and this week reiterated her Outperform rating on the stock.
Contrasting this, our China Unicom analyst Lisa Soh believes the stock to be
pricing in far too much optimism in light of 1Q11 earnings showing that earnings
have yet to bottom and subsequently the shares are overvalued.
Meanwhile, we are also removing Tencent from the Sell list despite Jiong Shao‟s
belief the company continues to be in a structural crossroads in which it will
struggle to find the next growth catalyst. The stock remains as an Underperform.
Jiangxi Copper – a play on higher copper forecasts
Our commodities team lead by Bonnie Liu in China has increased our 2012
copper price forecast from 500USc/lb to 525USc/lb as she believes Chinese
buying will start to increase given that demand remains strong and that inventory
levels have fallen to more reasonable levels. With a 90% correlation to
movements in the underlying copper price, analyst Christina Lee identifies
Jiangxi Copper as the best way to gain equity exposure to our bullish outlook for
copper. Christina estimates the company‟s earnings should increase by 1.3% for
every 1% hike in the copper price and that now is the time to buy the stock.
Jiangxi Copper (358 HK, HK$24.70, Outperform, TP: HK$37.00, Christina Lee)
China Unicom – losing a growth lustre
We are also adding China Unicom to the MarQuee Sell list. The stock is up more
than 40% YTD as the market prices in not only continued sharp improvement in
3G subscriber additions but also a strong revenue and earnings trajectory. With
the market now already factoring in continued momentum in 3G subscriber
additions and after the company posted a far weaker than expected 1Q result,
Lisa sees the balance of risk firmly to the downside. The shares are trading at a
36% and 78% EV/EBITDA premium to peers China Telecom and China Mobile.
China Unicom (762 HK, HK$15.20, Underperform, TP: HK$12.40, Lisa Soh)
Tencent – why we’re keeping it as an Underperform
Our final change among Hong Kong/China stocks is taking Tencent off the Sell
list although Jiong Shao keeps his Underperform rating. He believes the market
is not pricing in the maturity of Tencent's gaming business and the lack of growth
drivers while it is also investing in a variety of areas such as travel, tablet PCs,
social networking, video, etc, none of which he expects to be meaningful to
revenue in the near term. However, given the lack of a clear catalyst that would
lead to a sell off, we are removing it from the Sell list.
Tencent (700 HK, HK$218.40, Underperform, TP: HK$135.00, Jiong Shao)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adding Jiangxi Copper as a Buy and
China Unicom as a Sell; removing
Tencent from the Sell list
Changes to our Hong Kong list
We are adding Jiangxi Copper to the MarQuee Buy list and China Unicom to the
Sell list, and at the same time removing Tencent from the Sell list. Our analyst
Christina Lee believes Jiangxi Copper is the best Asia play on the rise in copper
prices and this week reiterated her Outperform rating on the stock.
Contrasting this, our China Unicom analyst Lisa Soh believes the stock to be
pricing in far too much optimism in light of 1Q11 earnings showing that earnings
have yet to bottom and subsequently the shares are overvalued.
Meanwhile, we are also removing Tencent from the Sell list despite Jiong Shao‟s
belief the company continues to be in a structural crossroads in which it will
struggle to find the next growth catalyst. The stock remains as an Underperform.
Jiangxi Copper – a play on higher copper forecasts
Our commodities team lead by Bonnie Liu in China has increased our 2012
copper price forecast from 500USc/lb to 525USc/lb as she believes Chinese
buying will start to increase given that demand remains strong and that inventory
levels have fallen to more reasonable levels. With a 90% correlation to
movements in the underlying copper price, analyst Christina Lee identifies
Jiangxi Copper as the best way to gain equity exposure to our bullish outlook for
copper. Christina estimates the company‟s earnings should increase by 1.3% for
every 1% hike in the copper price and that now is the time to buy the stock.
Jiangxi Copper (358 HK, HK$24.70, Outperform, TP: HK$37.00, Christina Lee)
China Unicom – losing a growth lustre
We are also adding China Unicom to the MarQuee Sell list. The stock is up more
than 40% YTD as the market prices in not only continued sharp improvement in
3G subscriber additions but also a strong revenue and earnings trajectory. With
the market now already factoring in continued momentum in 3G subscriber
additions and after the company posted a far weaker than expected 1Q result,
Lisa sees the balance of risk firmly to the downside. The shares are trading at a
36% and 78% EV/EBITDA premium to peers China Telecom and China Mobile.
China Unicom (762 HK, HK$15.20, Underperform, TP: HK$12.40, Lisa Soh)
Tencent – why we’re keeping it as an Underperform
Our final change among Hong Kong/China stocks is taking Tencent off the Sell
list although Jiong Shao keeps his Underperform rating. He believes the market
is not pricing in the maturity of Tencent's gaming business and the lack of growth
drivers while it is also investing in a variety of areas such as travel, tablet PCs,
social networking, video, etc, none of which he expects to be meaningful to
revenue in the near term. However, given the lack of a clear catalyst that would
lead to a sell off, we are removing it from the Sell list.
Tencent (700 HK, HK$218.40, Underperform, TP: HK$135.00, Jiong Shao)
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