Comprehensive Investment Insights

By OCBC Investment Research – 16 Dec 2024

MTR Corp (66 HK) – Entering a New CAPEX Cycle

MTR Corp is strategically poised to enter a new capital expenditure cycle, bolstered by a steady recovery in domestic patronage, which rose by 3% year-on-year in October, returning to 2018 levels. Cross-boundary patronage also saw a significant surge of 22% year-on-year, despite overall weaker visitation and departures from Hong Kong. The company is expected to witness a rail profit recovery in the second half of 2024, supported by stable domestic traffic and a fare hike of 3.09%.

In the face of negative rental revisions, MTR Corp has managed to mitigate these challenges through contributions from new assets. The opening of The Southside shopping mall, with an occupancy rate exceeding 90%, has begun to offset the impact of negative rental reversion experienced during the first half of 2024. The company is also expected to book ample property development profits in the latter half of the year, with several projects, including The Southside Package 4 and 5, Ho Man Tin Station Package 1 and 2, and LOHAS Park Package 11, slated for completion.

Despite concerns about the sizeable CAPEX potentially affecting dividends, MTR Corp’s financial position remains healthy, with a net gearing of 27.5% as of the first half of 2024. The management has reiterated a commitment to maintaining a steady and progressive dividend policy. The company’s fair value is set at HKD 33, which reflects an 11% discount to the estimated net asset value.

China Strategy – Supportive Policy Tone at the Central Economic Work Conference

The Central Economic Work Conference (CEWC) has concluded with a more supportive policy tone, expected to bolster market sentiment in the near term. The conference, chaired by President Xi, set out economic policy stances for the upcoming year, highlighting a pro-growth approach amidst domestic demand weaknesses and external challenges. A significant focus is placed on boosting domestic consumption, particularly household consumption.

Potential policy easings include an increase in the headline fiscal deficit ratio and expanded local government special bonds. The People’s Bank of China may cut policy rates and reserve requirement ratios before the Chinese New Year, with an emphasis on maintaining a stable RMB exchange rate. The real estate sector will see continued efforts to stabilize the market, although specific new guidance was not provided at the CEWC.

The shifting policy tone is likely to support market sentiment, with expectations of more policy easing aligned with the September Politburo meeting. However, further policy catalysts are anticipated at the National People’s Congress in March 2025. The strategy favors onshore A-share equity markets due to supportive national and monetary policies, with a focus on defensive yield stocks, internet and platform companies, and policy beneficiaries.

Amazon.com Inc – Positive Momentum into 2025

Amazon.com Inc is poised to maintain its positive momentum into 2025, driven by strategic initiatives and robust market positioning. The company’s growth trajectory is supported by its extensive e-commerce platform, cloud computing services, and continuous innovation in technology.

Agricultural Bank of China – Growth Leading Peers

The Agricultural Bank of China is demonstrating growth that leads its peers, underpinned by strong financial performance and strategic positioning within the Chinese banking sector. The bank’s focus on rural banking and comprehensive financial services continues to drive its market leadership.

Bumitama Agri Ltd – Ending the Year on a High Note

Bumitama Agri Ltd is ending the year on a high note, buoyed by favorable market conditions and strategic operational efficiencies. The company’s focus on sustainable agricultural practices and expansion in its palm oil business has bolstered its growth prospects.

Riverstone Holdings Ltd – Wearing Success

Riverstone Holdings Ltd is experiencing significant success, driven by its specialization in cleanroom and healthcare gloves. The company’s operational excellence and strategic market expansions have positioned it well for continued growth.

China Longyuan Power – Balancing Solar Growth and Wind Efficiency

China Longyuan Power is adeptly balancing solar growth with wind efficiency, leveraging its position as a leading renewable energy provider. The company continues to expand its renewable energy capacity, aligning with China’s sustainability goals.

Bank of China (Hong Kong) – Solid Earnings Growth

Bank of China (Hong Kong) is showcasing solid earnings growth, supported by its strategic initiatives in expanding financial services and digital banking. The bank’s focus on efficiency and customer engagement drives its robust financial performance.

Singapore Post – Proposed Divestment of Australia Business

Singapore Post is strategically proposing the divestment of its Australia business to streamline operations and focus on core competencies. The move is anticipated to optimize the company’s resources and enhance shareholder value.

Nanofilm Technologies International Ltd – A Thawing Winter

Nanofilm Technologies International Ltd is experiencing a thawing winter, with recovery signs in its advanced materials business. The company’s focus on innovation and strategic partnerships continues to drive its market competitiveness.

Shanghai Pharmaceuticals Co. Ltd – Distribution Business Outperformed

Shanghai Pharmaceuticals Co. Ltd’s distribution business has outperformed, driven by its expansive network and strategic partnerships. The company continues to focus on enhancing supply chain efficiencies and expanding its product portfolio.

CNOOC Ltd – Steadfast Commitment to Growth and Efficiency

CNOOC Ltd is steadfast in its commitment to growth and efficiency, leveraging its position as a leading oil and gas producer. The company’s strategic initiatives in exploration and production continue to enhance its market standing.

KE Holdings Inc – Expecting Strong Sequential Improvement

KE Holdings Inc is expecting strong sequential improvement following subdued third-quarter results. The company’s strategic focus on digital real estate services and platform expansion positions it well for future growth.

Thai Beverage – Signs of Improvement for a Better FY25

Thai Beverage is showing signs of improvement, with expectations for a better fiscal year 2025. The company’s strategic initiatives in expanding its beverage portfolio and market reach are driving its growth prospects.

Alphabet Inc – Remedy Proposals by DOJ

Alphabet Inc is navigating remedy proposals by the Department of Justice, which are expected to be more aggressive than anticipated. The company is preparing to respond, with a focus on maintaining its competitive edge in the tech industry.

CapitaLand Investment Ltd – Showcase of Building Blocks for Future Growth

CapitaLand Investment Ltd’s Investor Day highlighted its strategic building blocks for future growth, focusing on core real estate competencies and market expansion. The company’s innovative approaches in property management continue to drive its market leadership.

PropNex Ltd – A Stronger 2H24

PropNex Ltd has experienced a stronger second half of 2024, driven by its strategic initiatives in real estate services and market expansion. The company’s focus on customer engagement and operational efficiency supports its robust growth.

First Solar Inc – Mixed Prospects Under New Administration

First Solar Inc faces mixed prospects under the new administration, yet structural drivers remain strong. The company’s focus on renewable energy solutions and strategic market positioning continues to support its growth trajectory.

Xiaomi Corp – Strong 3Q24; EV Margin Another Beat

Xiaomi Corp delivered a strong third quarter in 2024, with its electric vehicle margin exceeding expectations. The company’s strategic focus on technology innovation and market expansion continues to drive its competitive edge.