Here are my eight Hong Kong stock picks that look promising based on recent events and future potential. The list is decidedly "green," with half of the picks engaged in renewable energy of some sort, with one -- SGX-listed China Print Power -- moving toward "cleaner" hydrocarbons. The four solar plays are riding on strong policy support for photovoltaic power, despite two -- Comtec and Solargiga -- still working to deal with polysilicon oversupply/writedowns over the past few years.
In brackets are the percentages are share price rises (or falls) for full-year 2013 and quoted prices are as of market close, December 31, 2013. Happy New Year and good luck with these eight ideas! Look out for quarterly updates on the performance of these stocks.
China Print Power (SGX: B3C, HK: 6828; +198%; 2.75 hkd; latest earnings)
China Print Power (CPP), which is dual-listed in Singapore and Hong Kong, has seen the “writing on the wall” and has begun diversifying away from publishing in an increasingly paperless, e-books world towards a more lucrative sector -- energy.
The publisher recently acquired a natural gas asset for 55 million hkd whose principal assets are a compressed natural gas (CNG) main station and a CNG satellite station.
“The printing industry is undergoing a reshuffle as digital printing becomes a stronger player and e-books gain increasing popularity.
“While we are principally engaged in the printing business and sales of paper and leather products, we also consider seeking suitable investment opportunities from time to time to diversify our existing business portfolio and engage in new lines of business with growth potential,” said CEO and Executive Director Mr. Sze Chun Lee.
To help fund business diversification, CPP announced on December 17 it would place 41.8 million new shares, representing 16.66% of the enlarged share capital, targeting some 108 million hkd.
On the earnings front, CPP’s net loss shrank to 6.82 million hkd from 8.81 million a year earlier, thanks to higher selling prices.
Beijing has been promoting CNG – a cleaner form of energy than petrol, diesel and propane/LPG – which also stores more safely, and CNG filling stations are springing up across China with at least two natural gas pipelines in operation.
23 Dec: CHINA PRINT POWER Eyes HK$108 Million
27 Nov: CHINA PRINT POWER'S Gas Grab
Goldpoly New Energy (HK: 686; +19.7%; 1.52 hkd; latest earnings)
Goldpoly was the most aggressively expanding Hong Kong-listed solar play in 2013, having repeatedly added to its photovoltaic (PV) power plant capacity via acquisitions, aiming to become China’s top solar independent power producer (IPP), with 5 GW planned within five years.
With a downstream solar power sector focus, mainly the operation grid-connected plants, Goldpoly is more shielded from polysilicon oversupply issues that have burdened upstream sector plays for years.
On November 26, China Yinsheng rated Goldpoly a “Buy” with a target price of 2.0 hkd saying that as the PRC “vigorously supports” the PV sector, subsidy policy is shifting from construction to power generators, and that Goldpoly will continue to actively build solar power stations and the entire PV sector is significantly recovering recently, with the firm showing a proven track record in its downstream station investments.
30 Dec: GOLDPOLY Adds 23.8MW, Top Shareholder Boosts Stake
17 Dec: GOLDPOLY Eyeing Top Spot Among PRC PV Plant Plays
Ju Teng (HK: 3336; +43.7%; 5.13 hkd; latest earnings)
Ju Teng, the world’s largest maker of computer and handset casings, has been on a campaign to lessen its reliance on the slowing global PC sector and diversify further into mobile device casings, while also successfully graduating from “full metal jackets” to a broader product line of lighter composites.
To help meet growing demand for smartphone and tablet casings, Ju Teng recently added a new plot of land for a production facility in the southwestern city of Chongqing for 145 million hkd.
On October 17, Guoco gave Ju Teng a “Buy” recommendation with a target price of 5.48 hkd, saying share price rises at the time exhibited “exceptional turnover, indicating a bullish trend ahead.”
Meanwhile, UBS initiated coverage of Ju Teng a week earlier with a “Buy” rating and a 6.4 hkd target, saying Ju Teng’s market position can grasp growth opportunities in smartphones and tablets which along with a decoupling from PCs is expected to push 2013 and 2014 earnings up 22% and 30%, respectively.
“Ju Teng is undervalued with its comprehensive product mix and improving profitability,” UBS added.
26 Oct: JU TENG Buys HK$145 Million Plot
11 Oct: JU TENG Initiated 'Buy'
China WindPower (HK: 182; +121%; 0.62 hkd; latest earnings)
China WindPower (CWP) saw its share price more than double last year as it continues to diversify into solar power while retaining its wind assets, with current combined capacity of 3.5 GW.
Downstream power producer Huadian recently took a 10% in CWP, auguring well for favorable future grid connectivity terms, with Bocom saying in December that new PV rules will help boost solar energy usage in the PRC and boost the industry’s overall quality and efficiency.
20 Dec: CHINA WINDPOWER'S Solar Tieup
16 Dec: CHINA WINDPOWER To Raise HK$258 Mln
Summit Ascent (HK: 102; +590%; 12.38 hkd; latest earnings)
Summit’s shares surged 561% in 2013 -- enough to scare off some newcomers.
But if all goes well with its planned launch of a major casino complex in Russia’s Vladivostok – a convenient flight from Northern China, South Korea and Japan – there could be more upside for the gaming play whose top shareholder is Macau tycoon Lawrence Ho.
On October 21, Merrill Lynch hiked Summit’s target to 14.9 hkd with a “Buy” call after a 518 mln hkd fundraising exercise targeting the Russian casino.
22 Oct: SUMMIT ASCENT Approves Russian Casino
18 Jul: SUMMIT ASCENT Wagering On Russia's Wild East
Comtec Solar (HK: 712; +19.7%; 1.46 hkd; latest earnings)
In August, Comtec Solar’s share peaked at 2.53 hkd, but at year-end was 42% off that level on lingering raw material oversupply and economic concerns though it recently locked in a 3-year, 500 MW supply order.
China’s November polysilicon imports saw the second largest month-on-month jump so far this year, suggesting long-term raw material oversupply issues are abating.
China’s leadership transition earlier this year has produced a series of supportive policy statements for the country’s photovoltaic firms, with the National Energy Administration saying last month it aims to lift China’s PV power installed capacity by 20% to 12GW in 2014.
On September 11, Oriental Patron initated coverage of Comtec with a "Buy" and a target price of 2.05 hkd, saying that as a leading mono wafer manufacturer in the world, Comtec was able to benefit from the rising demand of N-type mono wafers in the US and Japan as demand for high efficiency modules soars in this market.
2 Dec: COMTEC SOLAR Wins Official Approval
31 Aug: COMTEC SOLAR Sees Sunnier Prospects With Near Breakeven Half
PAX Global (HK: 327; +98.7%; 3.12 hkd; latest earnings)
PAX Global, the world’s No. 4 Electronic Funds Transfer Point of Sale (EFT-POS) terminal solutions provider, is tops in its home market of China.
The penetration rate of EFT-POS systems is very low in the PRC and in several overseas emerging markets where PAX is gaining a foothold, the rate is under 10%, which points to a very high growth potential for the sector.
On December 23, Oriental Patron initiated PAX with a “Buy” call and a 4.00 hkd target.
31 Dec: PAX GLOBAL Initiated With 'Buy'
29 Oct: PAX GLOBAL, HISENSE Ink Strategic Tieup, Major Order
Solargiga (HK: 757; - 24.5%; 0.385 hkd; latest earnings)
Solargiga had one of the weakest share performances among HK-listed solar plays, down some 25% in 2013 on a series of inventory writedown provisions.
This month Solargiga landed a landmark 200 MW deal in Ghana, its first major foray onto the African continent.
The “one-stop solar shop” play with a wide presence up and down the solar chain should see upside in 2014 on: 1) a depressed share price; 2) solid contracts with major Japan clients; 3) strong sector support from Beijing, and 4) apparent easing of polysilicon oversupply burden.
Addressing record high pollution levels in cities like Beijing and Shanghai, China’s top economic planning body said last month it planned 10 measures to combat an “overreliance” on fossil fuels within five years, thus providing more upside policy support for Solargiga and peers.
13 Dec: SOLARGIGA Adds 200MW In Ghana
1 Nov: SOLARGIGA Eyes 500MW Project
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