Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

Equity Bottom-Up

Impro Precision Industries / Equity Bottom-Up

Impro Precision Industries, Ltd. manufacturers and markets precision component parts. The Company offers investment casting, precision machining, and sand casting services. Impro Precision Industries serves and markets machinery products to the horsepower engine, automotive, hydraulic equipment, marine, aerospace, and healthcare markets.

<ul>
<li>Since Commercial Aircraft Corporation of China (COMAC) started delivering the first “Made in China” commercial jetliner C919 and now with over 1,000 orders on hand, we have reached out to Impro Precision (“Impro”) and learnt about the market opportunities of the aerospace industry.</li>
<li>Impro is a high-precision metal parts maker with aerospace one of its fastest growing segments (+67% y/y and 8% of rev in 1H23).</li>
<li>Recovery of the global aerospace industry and new opportunities from C919 are expected to sustain segment revenue growth of 30-50% in the coming years. </li>
</ul>


Since Commercial Aircraft Corporation of China (COMAC) started delivering the first “Made in China” commercial jetliner C919 and now with over 1,000 orders on hand, we have reached out to Impro Precision (“Impro”) and learnt about the market opportunities of the aerospace industry.
Impro is a high-precision metal parts maker with aerospace one of its fastest growing segments (+67% y/y and 8% of rev in 1H23).
Recovery of the global aerospace industry and new opportunities from C919 are expected to sustain segment revenue growth of 30-50% in the coming years. 


Impro Precision - QR Decode – Welcome Onboard the C919

Ping An Healthcare and Technology / Equity Bottom-Up

Ping An Healthcare and Technology Company Limited provides health care software solutions. The Company offers mobile platform for online consultation, hospital referral and appointment, health management, and wellness interaction services, as well as connects consumers and patients with health care resources. Ping An Healthcare and Technology serves customers in China.

Ping An Healthcare and Technology (1833 HK)

<ul><li>Ping An Good Doctor ("PAGD") has almost finished the adjustments to businesses with low strategic synergies, implying revenue will no longer be negatively affected by the transformation.</li><li>GPM improvement showed that the differentiation strategy is working. Due to the lowered-than-expected revenue in 1H23, we have reduced our FY23/FY24 revenue forecasts by 30.9%/30.8% and our TP by 30% to HK$14.13.</li><li>As our new TP implies a potential downside of 20%, we downgrade PAGD to SELL.</li></ul>

Ping An Good Doctor ("PAGD") has almost finished the adjustments to businesses with low strategic synergies, implying revenue will no longer be negatively affected by the transformation.GPM improvement showed that the differentiation strategy is working. Due to the lowered-than-expected revenue in 1H23, we have reduced our FY23/FY24 revenue forecasts by 30.9%/30.8% and our TP by 30% to HK$14.13.As our new TP implies a potential downside of 20%, we downgrade PAGD to SELL.

Ping An Good Doctor (1833 HK) - Strategic Changes Done but Valuation Is High

Tai Hing Group Holdings Limited operates as a restaurant group. The Company provides various prepared specialties, meals, and, drinks, as well as offers banquet arrangement, restaurant management, and other related services. Tai Hing Group Holdings serves customers in Hong Kong, China, Macau, and Taiwan.

<ul><li>With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment of the catering industry began to recover.</li><li>As a result, Tai Hing Group (“THG”) delivered a satisfactory recovery in 1H23 with revenue surging by 28.8% y/y to HK$1.6bn, while the bottom line turned to a profit of HK$45.3mn, from a loss of HK$52.5mn in 1H22.</li><li>An interim DPS of 3.40 HK cents was declared, translating into a payout ratio of 75%. </li></ul>

With the easing of the COVID-19 pandemic, most of the anti-pandemic measures in Hong Kong were lifted at the end of 2022, and the market sentiment of the catering industry began to recover.As a result, Tai Hing Group (“THG”) delivered a satisfactory recovery in 1H23 with revenue surging by 28.8% y/y to HK$1.6bn, while the bottom line turned to a profit of HK$45.3mn, from a loss of HK$52.5mn in 1H22.An interim DPS of 3.40 HK cents was declared, translating into a payout ratio of 75%. 

Tai Hing Group - Satisfactory Recovery After 3-Yr Pandemic

Crystal International Group Limited manufactures apparels. The Company produces casual clothes, jeans, personal under wears, sweaters, sports garments, and other products. Crystal International Group markets its products in Hong Kong.

<ul><li>Although the apparel industry struggles in 1H23 due to high interest rates and high Inventory levels, Crystal’s results were largely in line with our forecast with revenue decreased by 18.7% y/y to US$1.0bn and attributable net profit slightly dropped by 2.3% y/y to US$73.6mn.</li><li>All business segments, except for sweater, recorded a y/y decrease in revenue during 1H23.</li><li>However, with the improved production efficiency and strict control in operating expenses, GPM / NPM improved by 0.6ppt / 1.2ppt y/y. </li></ul>

Although the apparel industry struggles in 1H23 due to high interest rates and high Inventory levels, Crystal’s results were largely in line with our forecast with revenue decreased by 18.7% y/y to US$1.0bn and attributable net profit slightly dropped by 2.3% y/y to US$73.6mn.All business segments, except for sweater, recorded a y/y decrease in revenue during 1H23.However, with the improved production efficiency and strict control in operating expenses, GPM / NPM improved by 0.6ppt / 1.2ppt y/y. 

Crystal Int. - Margin Expansion with Sales Rebound in 2H23

PAX Global Technology Ltd. is an electronic fund transfer point-of-sale (EFT-POS) terminal solutions provider. The Company principally engaged in the development and sale of EFT-POS products and provision of related services. PAX develop and sells countertop and mobile EFT-POS terminals which are able to process a wide range of electronic payment types.

<div><div><div><div><ul><li>PAX Global (“PAX”) posted a reasonable set of 1H23 results with net profit decreased by 7.0% y/y to HK$650.6mn, in-line with our forecast.</li><li>Its revenue decreased by 14.7% y/y to HK$3.6bn, as the slowing global economic growth and high interest rates have resulted in more conservative terminal deployment plans among customers.</li><li>An interim DPS of 21 HK cents was declared (1H22: 17 HK cents), translating into a payout ratio of 34.8% (1H22: 26.3%). </li></ul></div></div></div></div>

PAX Global (“PAX”) posted a reasonable set of 1H23 results with net profit decreased by 7.0% y/y to HK$650.6mn, in-line with our forecast.Its revenue decreased by 14.7% y/y to HK$3.6bn, as the slowing global economic growth and high interest rates have resulted in more conservative terminal deployment plans among customers.An interim DPS of 21 HK cents was declared (1H22: 17 HK cents), translating into a payout ratio of 34.8% (1H22: 26.3%). 

PAX Global (327 HK) - 1H23 Payout Ratio Increased to 35%