Dim Sum Express
Banking: CBRC issues new liquidity regulation for commercial banks
The CBRC issued a consultation paper on a new set of liquidity regulations for commercial banks onDec 6, to strengthen liquidity risk management in the sector. The amendments aims to reduce theduration mismatch and improve liquidity supervision over small and medium-sized banks. Financialdeleveraging is continuing as regulation over liquidity management strengthens, and overall NIM inthe banking sector should improve steadily but with divergent sub-sector performance in 2018. Wemaintain our Positive rating on the Chinese banking sector and continue to recommend banks withgood fundamentals.
Property: Nov contract sales update
Country Garden’s 11M17contract sales rose 85% YoY and GFA sold increased by 66% YoY. COLI’sNov contract sales was up 73% YoY and GFA sold rose 33% YoY; its 11M17contract sales revenueincreased by 6% YoY. The results from both companies are solid, and in line with marketexpectations. We expect them to deliver solid sales figures in Dec. Despite Country Garden’s strongsales YTD, its focus on third and fourth-tier cities is a key concern in the current down-cycle; maintainBuy. COLI is relatively cheap, in our view, compared with other industry leaders.
COGO (81HK, Underperform): Nov contract sales up 30% YoY; focus on third/fourth-tier citiesa concern
Nov contract sales rose by 30% YoY, and GFA sold increased by 14% YoY. 11M17contract salesare up 57% YoY, and GFA sold is up 27% YoY. Given tightening monetary supply, a relatively highsales base in 2016and 1H17, and the lack of consistent owner-occupier housing demand, we believedemand in third and fourth-tier cities may not be sustainable. Given its proposed new share issueand the dilution effect, we forecast EPS will drop 42% in 2018, and with uncertainty in China’sthird/fourth-tier cities and EPS dilution, we think its current valuation is expensive
WuXi Biologics (2269HK, Buy): New facilities to drive earnings over the next five years
WuXi Biologics announced yesterday that its 30,000L disposable bioreactor-based biologicscommercial manufacturing facilities in Wuxi have commenced operation, expanding its currentcapacity five fold. The new capacity will be gradually taken up by the company’s integrated projects,which should support a revenue CAGR of 63% during 2017-19. With biologics commercialmanufacturing set to form a significant portion of the company’s overall business going forward, thenew facilities’ operational timeline is in line with expectations, but the high valuation burden of 66xFY18makes its shares highly volatile. The new capacity commencement should ease concernssurrounding its growth outlook.