Morning Express
14 May 2010
Indices
Close HSI
H Shares
Today's Focus
Tencent (700.HK) - 1Q top line beat market by 5% on game growth: Revenue grew 69% YoY and 15% QoQ, EPS went up 69% YoY and 17% QoQ. Online game grew 30.1% qoq due to seasonality: MVAS went up 12.4% qoq due to monthly user growth. Online ad decreased by 26.8% QoQ due to weak seasonality. Growth is still strong in 2010 on game and online ad contribution. Trading at 32X/24X 2010/2011 PE, Tencent is attractive. Raise TP to HK$185 and upgrade to "Buy". Alibaba (1688.HK) - Alibaba 1Q results beat on member growth and VAS penetration--Revenue grew by 49% YoY and 10% QoQ due to member growth and consolidation of HiChina. Diluted EPS went up 17% QoQ and 34% YoY. Current valuation fairly reflects the prospects of export recovery/membership growth/VAS penetration. Maintain TP of HK$14.9 and "Neutral".
1d % 1.04 1.91 2.06 2.91 2.57 2.42 -1.05 -1.21 -1.26 0.93 -0.06 1.11
Ytd % -6.63 -8.32 -17.32 -11.58 -13.64 -9.40 3.40 3.80 5.52 0.39 -5.20 4.94
SH A SH B SZ A SZ B DJIA S&P 500 Nasdaq FTSE CAC DAX
20,422 11,730 2,842 223 1,089 567 10,783 1,157 2,394 5,434 3,732 6,252
Indicators
Close 76.0 1,200.7 18.4 6,945 91.89 1.48 1.29 3m % 0.25 12.00 21.28 10.59 -2.12 -5.00 -6.34 Ytd % -6.83 9.46 9.27 -5.83 1.23 -8.37 -10.16
Crude Gold Silver Copper JPY GBP EURO bps change HIBOR US 10 yield
Market View – Perhaps the rebound in HSI is over and the Hong Kong
market will continue be heavily influenced by outside factors. Boosted by the strong performances of the US and Mainland stock markets on Wednesday, HSI opened 200pts higher yesterday and stayed strong, jumping to the 20500pt level in the afternoon. The surge was narrowed in the last trading hour, with the local benchmark closing at 20422pts, up 210pts. HSCEI gained 219pts to 11730. Turnover expanded to HK$62.4bn. May Index Futures closed at 20200pts, 222pts lower than the spot market. Tencent (700.HK) and Chinese banking stocks were the key drivers of the HSI yesterday. The State Council has reportedly approved the refinancing plans of the 4 major banks, namely ICBC, CCB, BOC and BoComm, which target to raise a total capital of RMB287bn. The banks were required to reassess their financing schemes, by taking five factors into consideration, including their volume of lending this year, cash dividend ratio, status of the state-owned controlling shareholders, capital adequacy ratio and the pressures on the capital market. The news boosted Chinese banking stocks to go up 1%-2%. Tencent's earnings in 1Q soared 72%, beating market expectation. We uplift its rating to "Buy" with TP raised to HK$186. Share price surged 5%. PRC cement prices slightly went up in April, showing signs of stepping away from low season. Together with the falling coal prices, we expect GM of cement companies will see another QoQ growth in 2Q10, thus maintaining "Outperform" rating for the sector. Stock prices of the sector gained 3%-6% yesterday. On a macro view, despite a stable global market observed over the past two days, we believe the confidence crisis brought by the European debt crisis is not over yet and will bring further damage to the global financial market in the foreseeable future. Stock market may see a downward pressure in the short term. However, if investors are bullish on China's long-term economic development, all corrections are lucrative investment opportunities.

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