As trade war between US and China intensifies, volatility has been increasing in the global stock market. Over in Hong Kong, the Hang Seng Index has lost over sixteen percent since the beginning of the year. On the bright side, value is also emerging gradually. Here are five HK-listed stocks touted to be at a bargain for investors looking to invest in the Chinese market.
ANTA Sports (2020:HK) is a designer, manufacturer and retailer of sportswear and owns the popular Fila brand in China. Its 1H2018 results came in strong as sales grew 44 percent year-on-year (YoY) driven by high growth in its Fila stores. Currently, Fila’s sales account for an approximate 30 percent of the group’s revenue.
The street is confident on ANTA’s shift from a wholesale-focused business to a retail-centric business and Fila’s 50 percent monthly same-store sales growth. On its projection for the next half of the year, ANTA’s management expects the company to maintain its growth momentum of 44 percent.
Analysts from UOB Kay Hian Research reiterated their “Buy” call for ANTA Sports with a target price of HK$49.00. ANTA Sports is currently trading at HK$30.50.
China Oriental Group
China Oriental Group (581:HK) engages in trading and manufacturing of metal products such as billets and strips through its subsidiaries. Profit for China Oriental Group surged by 58 percent in 1H18 to Rmb3 billion. This was largely contributed by a strong sales volume growth and margin improvement in H-section steel and rebar segments.
Potentially, China Oriental Group will be a beneficiary if there is an acceleration in fiscal spending in 2H18. However, they might be the target of the tightening environmental regulations in China. In addition, there are some concerns on the market about the company’s corporate governance.
China Oriental Group is in a net cash position and is trading with a dividend yield of 6.9 percent. Analysts from UOB Kay Hian Research reiterated their “Buy” call for China Oriental Group with a target price of HK$8.79. Currently, China Oriental Group is trading at $6.01.
China Resources Cement
China Resources Cement (1313:HK) is a producer, distributor and seller of cement, clinker and concrete. Its 1H18 came in strong as profit surged 145.5 percent YoY to HK$4 billion. This was mainly contributed by cement average selling price hikes and a production ramp-up along with a higher gross margin of 39.4 percent.
The balance sheet of the company is stronger with its gearing ratio standing at 15.7 percent as a result of a private placement and strong cash flow. Going forward, cement prices are expected to remain strong driven by a healthy supply-demand and potential fixed asset investments in infrastructures.
Analysts from UOB Kay Hian Research gave China Resources Cement a “Buy” call with a target price of HK$10.83. The stock is currently trading at an attractive valuation of HK$8.40
Fu Shou Yuan
Fu Shou Yuan International Group (1448:HK) is a funeral service provider that operates cemetery and funeral facilities. The recent intervention by the Chinese government in the industry does not apply and hence would not affect the company. Based on the new pricing regulation in the cemetery industry, most of the recently introduced regulations are limited to not-for-profit companies. For for-profit companies, the new regulations only cover on land use and maintenance fees.
Given that Fu Shou Yuan does not receive land-use fees while maintenance fees account for less than 1 percent of its average selling price, financial impact of the new regulations should be insignificant. Analysts from UOB Kay Hian Research felt that this is a good buying window for Fu Shou Yuan and gave them a “Buy” call with a target price of HK$9.40, implying an upside of 61.5 percent from the current share price of HK$5.82.
Link REIT (823:HK) is one of UOB Kay Hian Research’s top defensive pick as 70 to 80 percent of its portfolio is exposed to Hong Kong’s non-discretionary retail segment. Given its fixed interest debt ratio of 76 percent, the REIT will be resilient against interest rate hikes. Currently, it is trading at an attractive forward yield of 3.5 percent to 4 percent.
In addition, Link REIT has an ongoing share buyback exercise of 80 million unit. Analysts from UOB Kay Hian Research gave Link REIT a “Buy” call with a target price of HK$82.13. The stock is trading at HK$72.20.
3 Investment Strategies To Find Gems In China Despite Trade War