Early Bird

Early Bird 20-January-2017

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2017-01-20 13:34

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[Today's Guide]
○ Three "national team" funds maintain stable positions and increase investment in infrastructure and power stocks
○ Collective reform in land-reclamation areas to further deepen, companies engaged in land-reclamation to benefit
○ Equity of Jasic Technology transferred at premium, Actual controller of Wanfeng Auto Wheel proposes to buy Changchun Jingkai
○ Cangzhou Dahua expected to turn loss into profit in annual report, Phichem Material proposes share conversion and dividends 

[SSN Focus]
○ Three "national team" funds maintain stable positions and increase investment in infrastructure and power stocks

Based on the fourth quarterly reports of three "national team" funds, they maintained stable positions in the fourth quarter of 2016 and held high positions in banking, infrastructure, consumption and pharmaceutical industries. Compared with the end of the third quarter, they increased their positions in infrastructure sector. In terms of stocks with high positions, China Southern Consumption Dynamic Mixed Fund bought China State Construction Engineering Corporation Limited (601668.SH). China New Economy bought China State Construction Engineering and GD Power Development Co., Ltd. (600795.SH). Harvest New Opportunities bough GD Power Development.

As for the subsequent investment, China Southern Consumption Dynamic Mixed Fund will focus on individual blue-chip stocks with low valuation. It will also seek companies with higher EPS growth and reasonable PEG under the environment of economic recovery and the profit recovery of enterprises. Harvest New Opportunities highlights the safety margin and liquidity of individual stocks. China New Economy believes that the market will see short-term performance in the first quarter.

[SSN Selection]
○ The State Council released the 13th Five-year Plan on the development of the national education career, proposing to promote the development of modern vocational education and the IT application in education.
○ Up to 100 million mu of land were under trusteeship under the national supply and marketing system last year. Supply and marketing cooperatives across China will strengthen promotion efforts this year.
○ State Grid Zhejiang Electric Power Company will build public charging service circles with an average radius of 2 kilometers in 11 cities of the province, trying to boost the promotion and application of pure electric vehicles. 
○ The disposal scheme for the recent bond scandal of Sealand Securities Co., Ltd. (000750.SZ) has been nodded, and the company will resume trading on Jan. 20. The bonds undertaken by the company sees a face value of 16.78 billion yuan.
[Industry Information]
○ Collective reform in land-reclamation areas to further deepen, companies engaged in land-reclamation to benefit

The Ministry of Agriculture (MOA) recently released the 13th five-year plan for national land-reclamation economy and social development. It is proposed that by 2020, the strength of land-reclamation economy grows remarkably, and the management and operation systems improve. Focus will be laid on grain, natural rubber, diary and seed industries, and a batch of national large-scale quality production bases for agricultural products will be built. The collective reform in land-reclamation areas will be further deepened. For land-reclamation areas that have already established provincial-level land-reclamation groups, they should move faster in integrating and reorganizing directly-managed enterprises and advance the corporatization reform of state-owned farm companies.

Comment: Institutional research reports believe that land-reclamation reform will bring two substantial benefits to companies engaged in land-reclamation. Firstly, the market-oriented reform, based on enterprization and diversification, will improve the operation efficiency of companies and then drive performance growth; secondly, collective reform will guide land resources in land-reclamation areas to integrate with superior resources, intensify overall strength and improve profitability. China Hainan Rubber Industry Group Co., Ltd. (601118.SH) and Gansu Yasheng Industrial (Group) Co., Ltd. (600108.SH) are two companies under land-reclamation groups.

○ Refrigerant prices continue to rise on increasing material prices and higher demands
SSN learnt that driven by an increase in hydrofluoric acid prices as well as demands for air-conditioning, refrigerant prices continue to rise. Data from www.baiinfo.com shows that on Jan. 18, refrigerant R22 prices rose more than 3 percent, marking a cumulative increase of nearly 11 percent in the recent month. Refrigerant R410a rose 2.9 percent, or 9 percent over the same period last year. Relevant manufacturers said that that as the inventory remains low and some manufacturers shut down due to a stricter environmental control, market supply is now tension.

Comment: According to downstream data, air-conditioning sales hit expectations again in December 2016 with an increase of 43 percent year on year. Vehicles sales rose 13.65 percent, a record high in recent years. Driven by expanding demands from downstream and the supply side reform, the refrigerant industry has seen its profitability improving. In addition, the Montreal Protocol's article on the reduction hydrofluorocarbons use also brings an opportunity for industry leaders to gain more market shares.

○ 13th Five-Year Plan for oil and gas detail target, to strengthen exploration and development
The National Development and Reform Commission (NDRC) released the 13th Five-Year Plan for petroleum development and the 13th Five-Year Plan for the natural gas development. It proposes to add an average of about one billion tonnes of proved petroleum-in-place each year. It also sets targets for new reserves of conventional natural gas, shale gas and coalbed methane. The target average annual growth rate of natural gas production has lifted to 8.9 percent from 7.2 percent during the 12th Five-Year Plan period. "To strengthen exploration and development and increase the supply of domestic resources" is prioritized among all key tasks mentioned in the two plans.

Comment: The proved rate of China's natural gas resources is only 19 percent, still staying at early stage of exploitation. Industrial experts think that relatively high price of natural gas is the major contradiction in the market currently, so the key is to implement oil and gas system and mechanism reform. Once market-based reform is put in place and natural gas enjoys reasonable pricing, its consumption volume and supply will see improvement or may even outpace target.
[Announcement Interpretation] 
○ Equity of Jasic Technology transferred at premium 

Xu Aiping and Pan Lei, the two biggest shareholders of Shenzhen Jasic Technology Co., Ltd. (300193.SZ), plan to transfer their 24.96 million shares and 19.99 million shares to Shenzhen Qianxinheng Investment Development Co., Ltd. through negotiation. The total shares amount to 44.95 million shares, accounting for 8.85 percent of total share capital of the listed company. They cost 584 million yuan with the price of 13 yuan per share, which see a premium of 37 percent when compared with the company's latest stock price of 9.46 yuan. There's no actual controller before and after the equity change. Qianxinheng Investment Development will become the company's third biggest shareholder in the future and indicated that it may continue to buy more shares of the company as it is rosy about its long-term development prospect.

○ Actual controller of Wanfeng Auto Wheel proposes to buy Changchun Jingkai
Changchun Jingkai Venture Capital Holdings, controlling shareholder of Changchun Jingkai (group) Co., Ltd. (600215.SH) proposes to seek for transferee in the open market to transfer 102 million shares (21.88 percent of the total share captial) of the listed company held by it through agreement. At present, it has determined that Wanfeng Jinyuan (Holdings) Group will be the transferee of the share transfer. Wanfeng Jinyuan was established in 2008, primarily engaged in investment and asset management. As of the end of 2015, its total assets were 2,743 million yuan, and its profit in 2015 was 132 million yuan. Chen Ailian, CEO of the company, is also the actual controller of Zhejiang Wanfeng Auto Wheel Co., Ltd. (002085.SZ), a listed company. 

○ Actual controller of Wiscom System Co., Ltd. (002090.SZ) plans to increase holding no less than 1 million shares and no more than 4.22 million shares of the company. Spouse of the actual controller of Everyday Network Co., Ltd. (300295.SZ) from Jan. 16 to Jan.18 increased holding 1.29million shares of the company.
[Financial Reports Express]
○ Cangzhou Dahua expected to turn loss into profit in annual report

Cangzhou Dahua Co., Ltd. (600230.SH) forecasts net profit of 370 million yuan and turns loss into profit, primarily due to its main product TDI saw continuous price hike. Foshan Electrical and Lighting Co., Ltd. (000541.SZ) reported 1,917 percent net profit increase in its annual report, primarily due to the significant increase of investment return. Shenyang Commercial City Co., Ltd. (600360.SH) forecasts net profit of 110 million yuan in the annual report and turns loss into profit, primarily due to increase of investment return. Tianjin Guangyu Development Co., Ltd. (000537.SZ) forecasts 128 to 158 percent growth in its annual report, primarily due to its subsidiary confirmed revenue growth. Dare Power Dekor Home Co., Ltd. (000910.SZ) forecasts 60 percent to 90 percent growth in the annual report, primarily due to increase of gross margin. Holitech Technology Co., Ltd. (002217.SZ) revises upwardly its growth to 292 to 322 percent, primarily due to increase of non-operating income.

○ The actual controller of Shanghai Phichem Material Co., Ltd. (300398.SZ) proposes a 25-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares according to its annual report. Guangxi Fenglin Wood Industry Group Co., Ltd. (601996.SH) announces a growth forecast of 55 to 75 percent in annual report, and its controlling shareholder proposes a 10-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares. 

[Trading Trends]
○ PBOC continues massive reverse repos, capital factor still tight 

People's Bank of China, also known as the central bank, on Jan. 19 carried out reverse repos of 250 billion yuan, with a net input of 190 billion yuan. During four trading days this week, a net input over 1 trillion yuan has accumulatively been injected into the open market, likely to set a new historic high regarding to single-week net input scale. But this has not fully released the tightness of capital factor, the DR001 rate increased to 2.56 percent in the interbank market, a nearly-21-month high, and GC001 rate of Shanghai Stock Exchange touched 16.5 percent at the highest. 

Comment: This round of reverse repos is huge scaled, but they are all short-term funds, which have not eased the cautious sentiment before the Spring Festival. Whether the central will continue to carry out medium-term lending facility (MLF) to input long-term funds attracts much attention. 

[Trading Alarms]
○ IPOs of Kangtai Biological Products, Petrochemical Engineering and Hengfeng Information Technology on Jan. 20

Shenzhen Kangtai Biological Products Co., Ltd. (300601.SZ) mainly engaged in human vaccines will issue new shares at 3.29 yuan per share, with an upper subscription limit of 12,500 shares; an offering price of 13.86 yuan per share and upper subscription limit of 10,000 shares for Zhenhai Petrochemical Engineering Co., Ltd. (732637.SH) mainly engaged in petrochemical engineering; an offering price of 9.4 yuan per share and upper subscription limit of 8,000 shares for Hengfeng Information Technology Co., Ltd. (300605.SZ) mainly engaged in building intelligent system.
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