Market Musings: Henderson, IBA, Esprit, PCCW and Legend; Market Drops Nearly 2%
Feb 07, 2002 - 16:33:29 HKT
QuamResearch
With just a few days left before a welcome 3-day mid-week holiday, which effectively shuts down Monday and Friday activity too except for those poor souls who must come into the office on those most quiet of days (tiny violins playing for yours truly), punters took delight in selling the index down, perhaps needing to make that last minute run to the bank to get crisp new twenties and fifties to hand out in red packets.
The HSI dropped 182.71 points, or 1.73%, to 10,409.68 on turnover of HK$8.07 billion, up from yesterday's $5.96 billion and last week's $7.62 billion average turnover.
The big Bank, HK's favorite conglomerate, and HK's favorite China cellular player were the primary reasons for the fall, but other high profile losers included a Chinese computer outfit and a certain local telecom with a silly Internet owner.
Property:
On the property front, HENDERSON LAND (12) said it will launch 19 property developments in 2002 and plans to sell 11,000 flats, or 8.13 million square feet, for $20.23 billion. That works out to roughly $2,430 per square foot which would indicate the pricing is on the medium to low side, which might be about right since the figures indicate an average flat size of about 740 square feet, though we would need more details to make those determinations.
Nevertheless, at first glance it does not appear to be a terribly ringing endorsement of the expected state of the residential property market for the upcoming year.
Investors are thus getting a mixed reading from the property sector, as our most recent property update showed, though that perhaps is more a reflection of shorter term expectations. Longer term, we still figure the market is looking up, and property stocks, though they will experience fluctuations and possible weakness near term, are likely to be attractive. Our top picks remain Henderson and Hang Lung (10), the latter for its NAV discount and lagging of its peers.
CHEUNG KONG (1) fell $1.75 to $70.5
HANG LUNG GROUP (10) fell $0.05 to $6.85
HENDERSON LAND (12) fell $0.4 to $32.2
HYSAN DEV (14) fell $0.15 to $7.8
SHK PPT (16) fell $0.75 to $62
WHEELOCK (20) fell $0.05 to $6
SINO LAND (83) fell $0.05 to $2.95
HENDERSON INV (97) fell $0.1 to $5.85
HANG LUNG PPT (101) fell $0.2 to $7.95
Banks:
In the banking sector, International Bank of Asia (636) posted a 21% increase in profit to $295.34 million for 2001 despite a 14% decline in total revenue to $1.71 billion. The key driver was an 11% rise in net interest income to $758 million, offsetting a 12% fall in non-interest income and increases in provisions. We can't comment on this yet as there will be a more in-depth analysis tomorrow, but the figures are in stark contrast to those of BEA (23) which disappointed banking investors and dragged down the sector two days ago. Well done, IBA.
INTL BK OF ASIA (636) rose $0.04 to $1.92
HSBC HOLDINGS (5) fell $1.25 to $84.75
HANG SENG BANK (11) fell $1 to $83.5
BANK OF E ASIA (23) fell $0.15 to $15.1
MANULIFE (945) rose $2 to $208
WING LUNG BANK (96) rose $0.25 to $28.4
WING HANG BANK (302) fell $0.05 to $23.8
CITIC KA WAH BK (183) fell $0.025 to $2.1
ICBC (ASIA) (349) rose $0.05 to $7.05
DAH SING (440) fell $0.7 to $34
Retailers:
Esprit (330) also didn't disappoint as its interim profit rose 41% to $385.2 million for the six months through December on a 16% increase in revenue to $4.65 billion. The company declared an increase in its interim dividend to 6 cents a share compared to 4.8 cents per share last year.
Once again, we can't really comment until we have closer look tomorrow. However, since the euro did not strengthen against the dollar over that period but actually weakened slightly, we might be looking at operational improvements despite a sluggish environment.
On the other hand, from what we know from its last results announcement, the company said the main driver in the immediate future would be a tax cut in Germany, which was cutting corporate tax rates from 40% to 25%. Esprit's top 3 markets are Germany, Hong Kong, and Benelux, but Germany accounts for about half of total sales.
For the last financial year ending June 2001, Esprit reported profit of $575 million on $8.1 billion in turnover. Esprit has now reported at least 5 consecutive periods of half year growth:
Dec '99: $211 million
June '00: $249 million
Dec '00: $273 million
June '01: $302 million
Dec '01: $385 million
Tomorrow's analysis will discuss these figures and their implications, but our immediate reaction would be to reiterate our buy recommendation on the stock even though the price appears a little high on a TTM PE basis of 18.5x.
Esprit closed today up 40 cents at $11.15, a 3.7% gain.
Others:
What happened today with the PRC's favorite computer maker?
LEGEND HOLD (992) dropped $0.35, 10.22%, to $3.075
Actually, we need to check on that since our data doesn't quite match with that of others, who have the stock closing at $3.10, still nearly 10% down.
We didn't notice any major news, so perhaps it was our critical article several days ago on its results that did the damage as the world of punters and fund managers finally came to realize our brilliance? Perhaps not. Something happened, and from the look of it perhaps a fund decided to exit hastily, though with the conflicting data, I'm personally wondering if there was a system glitch somewhere. We'll find out tomorrow.
HUTCHISON (13) dropped $2.25, 3.24%, to $67.25. The reason also is not clear, but the FBI is supposedly getting involved in GLOBAL CROSSING, investigating for fraud or something along that line.
PCCW (8) dropped $0.06, 3.17%, to $1.83. Again, no specific news, but we consider this possibly to be a gambling opportunity. We still cannot bring ourselves to use the word "investment" for anything related to this company, and gambling still pretty much sums it up.
CHINA MOBILE (941) fell $0.55 to $21.5.
CHINA UNICOM (762) fell $0.1 to $7.4
Main Board Results Announcements
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-----Today's Additions
7/2/02 ASM PACIFIC (522) FIN Y.E.31/12/01
7/2/02 ESPRIT HOLDINGS(330) INT 6-MTH-ENDED31/12/01
7/2/02 INTL BK OF ASIA(636) FIN Y.E.31/12/01
8/2/02 CHINA MOTOR BUS(26) INT 6-MTH-ENDED31/12/01
8/2/02 MAN SANG INT'L (938) QUA 9-MTH-ENDED31/12/01
9/2/02 LUEN CHEONG TAI(1190) FIN Y.E.31/05/01
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----- Previously Mentioned
4/3/02 FIRST PACIFIC (142) FIN Y.E.31/12/01
4/3/02 HANG SENG BANK (11) FIN Y.E.31/12/01
4/3/02 HSBC HOLDINGS (5) FIN Y.E.31/12/01
5/3/02 DAH SING (440) FIN Y.E.31/12/01
5/3/02 HAECO (44) FIN Y.E.31/12/01
6/3/02 CATHAY PAC AIR (293) FIN Y.E.31/12/01
8/3/02 SWIRE PACIFIC A(19) FIN Y.E.31/12/01
8/3/02 SWIRE PACIFIC B(87) FIN Y.E.31/12/01
5/8/02 HSBC HOLDINGS (5) INT 6-MTH-ENDED30/06/02
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