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Investor Notes - Phillip Securities (HK) Ltd
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18 Dec, 2019 (Wednesday)

Aoyuan Healthy Life Group (3662) is a property management service and commercial operational service provider in China. The Group is actively expanding its service offerings to commercial operation and healthcare areas, focusing on the development of general health and wellness industry such as medical beauty and Chinese healthcare. The Group recently won the bid for a land plot in Fengxian District, Shanghai City. The Land Plot has a total area of approximately 30,369.2 square meters and will be developed into a healthcare and medical beauty industrial complex. (I do not hold the above stock)
Buy-in Price: $5.50, Target Price: $6.20, Cut Loss Price: $5.10

In 1H2019, the medical device business recorded a turnover of approximately RMB2,077,096,000 an overall increase of 10.5% in revenue over the corresponding period due to rich product mix; the pharma packaging business recorded a turnover of approximately RMB626,326,000 representing an increase of 32.3% over the same period last year and maintaining strong growth momentum.The orthopedics business recorded a turnover of approximately RMB682,065,000 representing an increase of 30.3%.The interventional business recorded a turnover of approximately RMB813,626,000 representing an increase of 19.6% over the same period last year over the same period last year. The turnover from the Group`s high value-added products (products with gross profit margins over 60%) accounted for 61.8% of total turnover (same period last year: 61.7%). The company obtained 66 new patents and 111 patents are under application in the PRC, for overseas, 19 new patents are under application. In the future the company will accelerate the launch of new products, drive rapid growth of key new products and increase market share and coverage of products from different business segments to promote performance.
Buy-in Price: $8.80, Target Price: $9.30, Cut Loss Price: $8.50

Raccoon Holdings¡]3031¡^
Founded in 1993. Creates and provides new infrastructure in B2B transactions. Expands a cloud based ordering system which performs the integrated management of placing and receiving orders for B2B transactions and the operation of B2B transaction sites involving apparel / miscellaneous goods, agency work for the payment and collection of payments that incur in B2B transactions, as well as accounts receivable / commercial rent guarantee services, etc.For 1H (May-Oct) results of FY2020/4 announced on 5/12, net sales increased by 23.4% to 1.667 billion yen compared to the same period the previous year, operating income increased by 34.8% to 365 million yen and net income increased by 30.1% to 236 million yen. There was significant growth in the distribution amount of business operators other than retail in the wholesale / supply site, ¡§Super Delivery¡¨. The start of product supply to Amazon Fashion has also contributed.For its full year plan, net sales is expected to increase by 15.8% to 3.45 billion yen compared to the previous year and net income to increase by 12.0% to 425 million yen. The content announced on 13/6 remains unchanged. In Super Delivery, they have begun dealing with tools such as DIY supplies and carpenter's tools from October. Furthermore, the launch of advertisements geared at companies exhibiting their products have also contributed, and their product listing has exceeded 1 million.Target Price : 840 yenBuy Price : 775 yenCut-Loss : 725 yen

CH ENERGY ENG (3996.HK) - Newly signed contracts keep growing

Company update

Since November 2019, the company and its subsidiaries have signed or awarded a number of new projects, including four domestic projects involving an investment of approximately RMB17.2 billion; eight overseas projects mainly focus on power station projects. Major projects include: 1) China Energy Engineering Group Guangdong Power Engineering Co., Ltd., a subsidiary of China Energy Engineering Group Southern Construction & Investment Co., Ltd. has entered into an EPC contract for the Baltic Sea 324.8MW Wind Farm Project in Poland. The project is located in Słupsk, Poland near the Baltic Sea, and includes 5 specific projects, Its main work comprises power station EPC construction, which includes designing services, manufacturing, supervising, testing, equipment supplying, whole factory constructing, installing, debugging, training, spare parts within the warranty period, consumables and services, etc. The contract amount of the project is approximately EUR568 million. 2) The project is located in Umm Al Quwain, United Arab Emirates. Its main work comprises the construction of a seawater desalination plant with a daily production capacity of 150MIG (approximately 682,000 tonnes/day), including the design, procurement, construction, debugging and testing of seawater intake and drainage ancillary facilities and water storage tanks. The total contract amount of the project is approximately USD625 million, of which the contract amount of Gezhouba International Co. is approximately USD369.5 million. The contract term is 33 months, commencing from the date of construction. 3) The project company is jointly established by the government-funded representative and the social investor, and is responsible for the unified operation. The total investment of the project is approximately RMB5.732 billion, and the term of cooperation is 30 years, including 4 years of construction period and 26 years of operation period. 4) a subsidiary and cooperating parties has entered into an EPC contract for the 1000MW Oil and Gas Combined Cycle Power Station Project in Maysan, Iraq.The project is situated in Maysan Governorate, Iraq. Its main works comprise the design, procurement, and construction of the 1000MW Oil and Gas Power Station. The contract amount of the Project is approximately USD1,200 million. The contract term is 36 months. According to the National Bureau of Statistics, the cumulative annual growth rate of China's fixed asset investment was 5.2% in October 2019, maintaining moderate growth. However, the current downward pressure on the economy is increasing, government is expected to continue introducing relevant policies to increase the infrastructure investment to drag the bottom of the economy. In addition, the monetary policy remains stable and loose, which will benefit the development of the infrastructure sector. We expect that the new contract value of the company will continue to grow steadily.

Signed strategic cooperation agreements with SHIG and Sansha city's government to promote business transformation and development

On November 19, 2019, the signing ceremony of the strategic cooperation framework agreement between China Energy Construction Group Co., Ltd. and Sansha City Government was held in Sansha. According to the agreement, the two sides will carry out comprehensive cooperation in the areas of infrastructure construction and ecological protection in Sansha City, and jointly advance the implementation of relevant major projects. On July 26, 2019, the company has entered into a strategic cooperation framework agreement with Shandong Heavy Industry Group Co., Ltd. (SHIG). Both parties unanimously agreed to establish a comprehensive strategic co-operative partnership in various aspects such as engineering construction and equipment procurement, international business, high-end equipment and industrial park construction, new energy, capital cooperation, technological services as well as talent cooperation. The two parties would fully utilize their respective advantages in various aspects such as their technology, capital, talents, management, market and resources, achieving a win-win situation with mutual benefits and joint development. It is understood that SHIG is a Shandong Provincial state-owned enterprise, and is a Chinese leading and internationally renowned automobile and equipment manufacturing group. The company actively explores cooperation opportunities, seeks business transformation and development, and lays the foundation for new performance growth points in the future.

Adjust TP to HKD 1.05, degrade to "ACCUMULATE" rating

We adjusted target price to HKD 1.05, corresponding to FY19/FY20/FY21 6.34x/5.94x/5.62x PE, which was +17.98% higher than the current price (HKD 0.89 as of December 13, 2019), degrading to ¡§ACCUMULATE¡¨ rating.


International business fails expectations;

China infrastructure investment fails expectations;

China electricity investment fails expectations;

Policy risk.


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Recommendation on 18-12-2019
Price on Recommendation Date$ 0.890
Suggested purchase priceN/A
Target Price$ 1.050
Writer Info
Leon Duan
(Research Analyst)
Tel: +852 2277 6515

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