Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>Low volatility investing has taken the mantle from Dividend yield as the top strategy during July</li>
<li><a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a> are rated BUYs as their businesses show improvement.  </li>
<li>
<a href="https://www.smartkarma.com/entities/kingdee-international-sftwr" target="_blank" data-smartkarma-citation="entities:37:1" rel="noopener">Kingdee International Software (268 HK)</a> is seeing a softening in its SME business, however there is  potential to gain market share from foreign ERP companies given the pledged government's policies.
</li>
</ul>


Low volatility investing has taken the mantle from Dividend yield as the top strategy during July
BYD Electronics (285 HK) and Alibaba Group Holding (9988 HK) are rated BUYs as their businesses show improvement.  

Kingdee International Software (268 HK) is seeing a softening in its SME business, however there is  potential to gain market share from foreign ERP companies given the pledged government's policies.



BUY/SELL/HOLD: Hong Kong Stock Updates (July 29)

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>We recently spoke to Tongda’s mgmt., and with Apple biz disposal and business reorganisation in 1H24E, mgmt. reiterated their positive view on Android demand recovery, major customers’ share gains (Xiaomi, Honor/Huawei), household &amp; sports goods demand and cooling modules for AI servers to drive growth in FY24-25E.</li><li>We lower FY24/25E EPS by 1-9% to reflect the business disposal, a lower GPM and debt repayment.</li><li>Our new TP of HK$0.14 is based on the same 6.0x FY24E P/E. Trading at 3.0x/2.5x FY24/25E P/E (lower than 1sd below 10-year hist. avg.), the stock offers attractive risk/reward in our view. Maintain BUY.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We recently spoke to Tongda’s mgmt., and with Apple biz disposal and business reorganisation in 1H24E, mgmt. reiterated their positive view on Android demand recovery, major customers’ share gains (Xiaomi, Honor/Huawei), household &amp; sports goods demand and cooling modules for AI servers to drive growth in FY24-25E.We lower FY24/25E EPS by 1-9% to reflect the business disposal, a lower GPM and debt repayment.Our new TP of HK$0.14 is based on the same 6.0x FY24E P/E. Trading at 3.0x/2.5x FY24/25E P/E (lower than 1sd below 10-year hist. avg.), the stock offers attractive risk/reward in our view. Maintain BUY.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda (698 HK) - Healthier Balance Sheet and Android Momentum to Drive Profitability Recovery

<ul><li>Tongda announced plans to dispose its Apple business and purchase back smart electrical appliances and motor businesses, in order to mitigate geopolitical risks and boost capital for future new business development.</li><li>After our discussion with mgmt., we expect Apple biz disposal will allow Tongda to focus more on non-Apple customers’ market share gains and boost capital for new businesses given the likely smartphone recovery in 2024, while business buyback should accelerate profitability improvement driven by order wins in FY24-25E.</li><li>We lower FY23/25E EPS estimates by 4-19% to reflect the business disposal and cut interest expense assumptions.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda announced plans to dispose its Apple business and purchase back smart electrical appliances and motor businesses, in order to mitigate geopolitical risks and boost capital for future new business development.After our discussion with mgmt., we expect Apple biz disposal will allow Tongda to focus more on non-Apple customers’ market share gains and boost capital for new businesses given the likely smartphone recovery in 2024, while business buyback should accelerate profitability improvement driven by order wins in FY24-25E.We lower FY23/25E EPS estimates by 4-19% to reflect the business disposal and cut interest expense assumptions.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda (698 HK) – Positive on Earnings Recovery in FY24-25E After Disposal of Apple Business

<ul><li>We spoke to mgmt. for business update post 1H23 results, and expect gradual recovery on track into 2H23/FY24E.</li><li>Despite 1H23 revenue miss on smartphone inventory correction, GPM improved 2.4ppts YoY due to rising Apple’s sales mix and improving operating efficiency.</li><li>Looking into 2H23E, we are positive on Android recovery, Apple’s casing material upgrade for better ASP/share gain and non-smartphone order wins. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We spoke to mgmt. for business update post 1H23 results, and expect gradual recovery on track into 2H23/FY24E.Despite 1H23 revenue miss on smartphone inventory correction, GPM improved 2.4ppts YoY due to rising Apple’s sales mix and improving operating efficiency.Looking into 2H23E, we are positive on Android recovery, Apple’s casing material upgrade for better ASP/share gain and non-smartphone order wins. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda (698 HK) – Positive on Android Recovery, Apple Share Gain and Non-Smartphone Biz Order Wins

<ul><li>Tongda will announce its 1H23 results in late Aug. We expect 1H23 revenue decline of 26.4% YoY and flattish net profit due to smartphone weakness and inventory correction, but GPM will improve 3.5ppts QoQ on share gain of highermargin Apple business.</li><li>Looking into 2H23E, we are positive on smartphone recovery and Apple share gain to drive revenue growth and GPM improvement.</li><li>We revised down our FY23-24E EPS to reflect 1H23 weakness and higher opex, partly offset by improved GPM on better product mix. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda will announce its 1H23 results in late Aug. We expect 1H23 revenue decline of 26.4% YoY and flattish net profit due to smartphone weakness and inventory correction, but GPM will improve 3.5ppts QoQ on share gain of highermargin Apple business.Looking into 2H23E, we are positive on smartphone recovery and Apple share gain to drive revenue growth and GPM improvement.We revised down our FY23-24E EPS to reflect 1H23 weakness and higher opex, partly offset by improved GPM on better product mix. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongda (698 HK) – 1H23 Preview: Weak Revenue Amid Industry Headwinds

Hong Kong

Tongda Group provides high-precision structural components for smart mobile communications and consumer electronic products. The company manufactures components for handset casings, panels for smart electrical appliances, network communications facilities, and household and sports goods. It was founded in 1978 and is headquartered in Wan Chai, Hong Kong.

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Tongda Group (698 HK)

BUY/SELL/HOLD: Hong Kong Stock Updates (July 29)

Low volatility investing is performing well in July. BYD Electronics has seen better Apple related and NEV sales and Alibaba is increasing some...

David Mudd

Tongda (698 HK) - Healthier Balance Sheet and Android Momentum to Drive Profitability Recovery

Our new TP of HK$0.14 is based on the same 6.0x FY24E P/E. Trading at 3.0x/2.5x FY24/25E P/E (lower than 1sd below 10-year hist. avg.), the stock...

CMB International

Tongda (698 HK) – Positive on Earnings Recovery in FY24-25E After Disposal of Apple Business

Tongda announced plans to dispose its Apple business and purchase back smart electrical appliances and motor businesses, in order to mitigate...

CMB International

Tongda (698 HK) – 1H23 Preview: Weak Revenue Amid Industry Headwinds

Tongda will announce its 1H23 results in late Aug. We expect 1H23 revenue decline of 26.4% YoY and flattish net profit due to smartphone weakness...

CMB International

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

BUY/SELL/HOLD: Hong Kong Stock Updates (July 29)

Low volatility investing is performing well in July. BYD Electronics has seen better Apple related and NEV sales and Alibaba is increasing some...

David Mudd

Tongda (698 HK) - Healthier Balance Sheet and Android Momentum to Drive Profitability Recovery

Our new TP of HK$0.14 is based on the same 6.0x FY24E P/E. Trading at 3.0x/2.5x FY24/25E P/E (lower than 1sd below 10-year hist. avg.), the stock...

CMB International

Tongda (698 HK) – Positive on Earnings Recovery in FY24-25E After Disposal of Apple Business

Tongda announced plans to dispose its Apple business and purchase back smart electrical appliances and motor businesses, in order to mitigate...

CMB International

Tongda (698 HK) – Positive on Android Recovery, Apple Share Gain and Non-Smartphone Biz Order Wins

Despite 1H23 revenue miss on smartphone inventory correction, GPM improved 2.4ppts YoY due to rising Apple’s sales mix and improving operating...

CMB International

Tongda (698 HK) – 1H23 Preview: Weak Revenue Amid Industry Headwinds

Tongda will announce its 1H23 results in late Aug. We expect 1H23 revenue decline of 26.4% YoY and flattish net profit due to smartphone weakness...

CMB International