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Investor Notes - Phillip Securities (HK) Ltd
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2 Jan, 2020 (Thursday)



UM HEALTHCARE(2138)
Analysis¡G
The company is the largest non-hospital medical service provider and the largest medical aesthetic service provider in Hong Kong. In 2019H the company`s sales volume and total revenue were HK$1,065.1 million and HK$1,118.5 million respectively, representing an increase of 18.3% and 28.1%, respectively. The net profit attributable to equity shareholders of the Company increased by 1.7% to HK$197.5 million. Basic earnings per Share amounted to 20.1 HK cents as compared to 19.7 HK cents for the previous period. On 31 October 2019, the company has entered into a non-binding memorandum of understanding with EuroEyes International Eye Clinic Limited (HKEx stock code: 1846) to establish a joint venture in Hong Kong to develop ophthalmological services and related businesses. The aggregate number of clients across each discipline continues to increase at a faster pace than the number of total active clients, indicating the effectiveness of integrated multi-discipline strategy. The total number of clients who made at least one purchase of services or products was 71,207 (for the six months ended 30 September 2018: 45,179) for the six months ended 30 September 2019.
Strategy¡G
Buy-in Price: $5.18, Target Price: $5.80, Cut Loss Price: $4.84


TerraSky Corporation (3915)
Established in 2006. Is comprised of the solutions business in the AWS (Amazon Web Service) cloud system and salesforce, as well as the products business which offers domestic and international cloud services as an SaaS vendor.For 1H (Mar-Aug) results of FY2020/2 announced on 11/10, net sales increased by 46.7% to 4.449 billion yen compared to the same period the previous year and operating income was 345 million yen, which saw a return to profit from (116.7) billion yen. Number of purchases of their cloud service in the solutions business have exceeded a total of 4,000 orders. Due to an increase in contract price and large project orders received, operating income in their products business has increased by 4.3 times.Company revised their full year plan upwards on 11/10. Net sales is expected to increase by 36.6% to 8.96 billion yen compared to the previous year (original plan: 8.634 billion yen) and operating income to increase by 4.0 times to 498 million yen (original plan: 246 million yen). In addition to an increase in sales of the company's products with a high profit margin due to a growing demand for data linkage via the incorporation of cloud systems focusing on salesforce, as a result of the promotion of a work style reform, we can expect a continued increase in sales of continuous regular billings of the cloud-based platform, ¡§mitoco¡¨.Target Price : 2,640 yenBuy Price : 2,300 yenCut-Loss : 2,090 yen



FLAT GLASS (6865.HK) - Continuous Capacity Expansion and Continuous Prosperity of Photovoltaic Industry Expected

Investment Summary

75% Large Increase in Net Profit in the First Three Quarters

Flat Glass recorded revenue of RMB3,381 million, up 49.71% yoy; net profit attributable to the parent company of RMB508 million, up 75% yoy, equivalent to EPS of RMB0.26, exceeding market expectation. The net profit attributable to the parent company in the first three quarters was RMB109 million, RMB152 million and RMB246 million, respectively; the growth was 11%, 33% and 220% yoy, respectively.

Capacity Expansion upon Industry Recovery

Since Q1 2019, driven by gradual recovery of domestic photovoltaic market, the price of photovoltaic glass increased from bottom. The market price of 3.2mm photovoltaic glass increased by RMB1.5 to RMB2 to RMB28 per square meter, up 8% approximately. Gradual production of capacity expanded by Flat Glass: Two new production lines of 1,000 tons of daily melting volume were put into production in 2017 and 2018, respectively; new production line of 1,000 tons of daily melting volume were put into production in 2019. High cost efficiency upon new production capacity will help the Company to offset the price downward pressure during industry adjust period, and to fully enjoy the price upward benefit upon industry recovery. The Company recorded gross margin of 27.87%, 27.57% and 32.84% in the first three quarters of 2019, respectively, up by -1.45, +1.69 and +10.57 ppts yoy.

The sales expenses in the first three quarters were RMB170 million, up 97% yoy; the administration expenses were RMB81 million, down 5.5% yoy; the financial expenses were RMB38 million, up 681.4% yoy; the R&D expenses were RMB142 million, up 75.68% yoy. The overall period cost rate increased by 1.85 ppts, mainly due to the large increase in sales volume, the overall increase in transportation costs, and the increase in R&D projects.

Continuous Capacity Expansion and Continuous Prosperity of Photovoltaic Industry Expected

The Company will put into production new capacity of photovoltaic grass in the future two years, including two production lines of 1,000 tons per day of Vietnam (expected to be put into production in June 2020 and September 2020), and fourth-tier and fifth-tier production lines of 1,000 tons per day of Anhui Fengyang (expected to be put into production in 2021). The capacity of photovoltaic grass of the Company will achieve 9800 tons per day by the end of 2021, double that of the end of 2018. In terms of industry prosperity, with the implementation of domestic photovoltaic subsidy project, the sustainable and rapid development of overseas photovoltaic market, and gradual increase of proportion of double-glass modules, the high prosperity of photovoltaic glass market is expected to continue. We always believe that the profitability of leading companies with economies of scale and technical capital will be future improved.

Investment Thesis

Given the better-than-expected data in report of the first three quarters, we decide to increase profit forecast and target price to HK$5.65 for the Company, equivalent to 2019/2020E 13/9x P/E, Accumulate rating. (Closing price as at 30 Dec 2019)

Financials

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Recommendation on 2-1-2020
RecommendationAccumulate
Price on Recommendation Date$ 4.840
Suggested purchase priceN/A
Target Price$ 5.650
Writer Info
Zhang Jing
(Research Analyst)
Tel: (+86 21 51699400-103)
Email:
zhangjing@phillip.com.cn

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