Broker Recommendations and Target Prices for China Construction Bank (0939.HK) – November 2021

Broker Recommendations and Target Prices for China Construction Bank (0939.HK) - November 2021

Introduction

China Construction Bank (CCB) is one of the big four State-owned Banks and its H-shares, trading on the Hong Kong Stock Exchange, currently offer some of the best values in the market. An earlier article on CCB provided an estimate of the Intrinsic Value, Margin of Safety and Return on Investment for the H-shares based on the Dividend Discount Model. This article summarizes the latest Broker Recommendations and Target Prices for CCB, courtesy of AAstocks.com.

Summary Table of Broker Recommendations and Target Prices for CCB H-share (0939.HK)

BrokersRatingsTarget Prices (HK$)
CitigroupBuy9.13
HSBC Global ResearchBuy8.8
Morgan StanleyOverweight8.8
CICCOutperform8.52
JP MorganOverweight8.2
NomuraBuy7.74
Bank of America SecuritiesBuy7.7
UBSBuy6.7
Summary Table of Broker Recommendations and Target Prices for CCB H-share (0939.HK)

Average of the Broker target prices for the H-share of China Construction Bank and Potential Upside

The average of the target prices from all the different brokers = 8.199HK$ per share. On 8th November, the H-shares of CCB closed at 5.26HK$, offering a potential upside of 55.9%.

Disclaimer:

This article is a record of the thinking behind a personal investment decision. It does not represent any recommendation to purchase any stock mentioned in the article. As always, readers are strongly advised to do their own due diligence before making any investment decisions.

Broker Recommendations and Target Prices for the Industrial and Commercial Bank of China (1398.HK) – November 2021

Broker Recommendations and Target Prices for the Industrial and Commercial Bank of China (1398.HK) - November 2021

Introduction

The Industrial and Commercial Bank of China (ICBC) is one of the mainland China Bank stocks which I keep in my Dividend Income Portfolio. An earlier article on ICBC provided an estimate of the Intrinsic Value, Margin of Safety and Return on Investment for the H-shares based on the Dividend Discount Model. This article summarizes the latest Broker Recommendations and Target Prices for ICBC, courtesy of AAstocks.com.

Summary Table of Broker Recommendations and Target Prices for ICBC H-share (1398.HK)

BrokersRatingsTarget Prices (HK$)
Morgan StanleyOverweight7.2
HSBC Global ResearchBuy7.1
CitigroupBuy7
CICCOutperform6.9
NomuraBuy6.36
Bank of America SecuritiesBuy6
JP MorganNeutral5.2
UBSNeutral4.3
Summary Table of Broker Recommendations and Target Prices for ICBC H-share (1398.HK)

Average of the Broker target prices for ICBC H-share and Potential Upside

The average of the target prices from all the different brokers = 6.2575HK$ per share. On 8th November, the H-shares of ICBC closed at 4.23HK$, offering a potential upside of 47.9%.

Disclaimer:

This article is a record of the thinking behind a personal investment decision. It does not represent any recommendation to purchase any stock mentioned in the article. As always, readers are strongly advised to do their own due diligence before making any investment decisions.

Broker Recommendations and Target Prices for Alibaba (9988.HK) – November 2021

Broker Recommendations and Target Prices for Alibaba (9988.HK) - November 2021

Introduction

Alibaba is one of the few growth stocks in my portfolio, and I have previously written an article on the stock which provided an estimate of the Intrinsic Value, Margin of Safety and Return on Investment based on the Discounted Earning Model. The table below summarizes the latest Broker Recommendations and Target Prices for Alibaba (9988.HK) trading on the Hong Kong Stock Exchange, courtesy of AAStocks.com.

Summary Table of Broker Recommendations and Target Prices for Alibaba (9988.HK)

BrokersRatingsTarget Prices (HK$)
JefferiesBuy328
BOCOMIBuy296
DBSBuy293
CGIOverweight287
First ShanghaiBuy286.61
CMSIBuy273
DeutscheBuy262
Guotai JunanBuy260
GF SecuritiesBuy251.62
JP MorganOverweight250
Bank of America SecuritiesBuy248
Goldman SachsBuy (Conviction Buy List)246
SPDBIBuy245
CITIC SecuritiesBuy238
ICBCIBuy238
Citigroup Buy232
UBS Buy229
HSBC Global Research Buy221
Daiwa Buy220
Guosheng Securities Buy219
CCBIOutperform218.3
UOB Kay Hian Buy214
KGI SecuritiesHold205
BOCI Buy204
CICC Outperform203
Credit Suisse Outperform186
Summary Table of Broker Recommendations and Target Prices for Alibaba (9988.HK)

Average Target Price for Alibaba and potential upside

The average of the target prices from different Brokers works out to be 244.37HK$ per share. On 8th November, Alibaba shares trading on the Hong Kong Stock Exchange closed at 157.30HK$, presenting a potential upside of 55.3%.

Disclaimer:

This article is a record of the thinking behind a personal investment decision. It does not represent any recommendation to purchase any stock mentioned in the article. As always, readers are strongly advised to do their own due diligence before making any investment decisions.

BOC, ICBC, ABC, CCB and Citic Bank report double digit earnings growth for first three quarters of FY2021

BOC, ICBC, ABC, CCB and Citic Bank report double digit earnings growth for first three quarters of FY2021

I have previously published estimates of the intrinsic values of the H-shares of Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank and China Citic Bank. In their latest quarterly financial reports, all five banks reported double digit earnings growth for the first 3 quarters of FY 2021:

The encouraging reports indicate that these five banks are on their way to achieving very healthy earnings growth for FY2021. Investors can definitely look forward to increased dividends in the coming year.

Estimating the Intrinsic Value, Return on Investment and Margin of Safety of China Telecom using the Dividend Discount Model

Share Valuation of China Telecom H-share (00728.HK)

Summary

This article looks at the valuation of China Telecom shares trading on the Stock Exchange of Hong Kong (Ticker: 00728.HK). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Introduction

China Telecom is one of the 3 giant state-owned companies which dominate the telecommunications industry in China, the other two being China Mobile and China Unicom. On November 12, 2020, Trump issued Executive Order 13959 prohibiting US investors from owning securities of Chinese companies which have been tagged by the US as being Chinese military companies, including China Telecom. ADRs of China Telecom trading on the New York Stock Exchange were suspended on January 11, 2021 and were subsequently delisted.

Following the US action against its ADRs, China Telecom successfully applied for secondary listing on the Shanghai Stock Exchange and its A-shares began trading in August 2021, raising over 54 billion RMB for the company. The IPO was a resounding success, attracting 20 strategic investors, including Huawei Technologies and Bilibili.

As part of the requirement for its secondary listing on the Shanghai Stock Exchange, China Telecom made some important changes to its dividend policy:

China Telecom announces new Dividend Policy
China Telecom announces new Dividend Policy

Three important points to note here with regards to the new dividend policy.

  • China Telecom to its increase dividend payout ratio for FY2021 to not less than 60%.
  • China Telecom also committed “that within three years after the A Share Offering and Listing, the profit to be distributed by the Company in cash for each year will gradually increase to 70% or above of the profit attributable to equity holders of the Company for that year.” (Source: Company announcement 21 June 2021)
  • In contrast to the current policy of annual payouts, dividends shall be paid on an interim basis starting from FY 2022.

The new dividend policy is important in the sense that it increases the frequency of cash flow for investors, and it also serves to reduce the amount of surplus cash held on China Telecom’s books and will potentially boost the Return on Equity.

Dividend Discount Model is one of many methods for valuing stocks. The procedure is similar to the Discounted Cash Flow model, with the free cash flow being substituted dividends as the cash flowing to the investor. One advantage of using this method is that dividends data are easily available from the company’s financial reports. It is also my preferred valuation method for dividend-paying stocks. The reason being that dividends are tangible income to the investor and it represents the return of investment and return on investment. The cash from dividends allows the investor to reinvest the proceeds into the same stock or into other more attractive stocks to achieve the all important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of China Telecom (00728.HK) shares trading on the Stock Exchange of Hong Kong.

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Broker Target Prices for Ping An (02318.HK) – October 2021

Broker Target Prices for Ping An (02318.HK)

Ping An Insurance is a Chinese insurance stock which I hold in my Dividend Income Portfolio. I have previously published an article on Ping An in which I gave an estimate of Ping An’s Intrinsic Value, Margin of Safety and Return on Investment. In this article I would like to share the recent price targets for Ping An from the major brokers, courtesy of AAStocks.com.

BrokersRatingsTarget Price HK$
Morgan StanleyOverweight118
Huatai SecuritiesBuy110
BNP ParibasBuy101
BOCOMIBuy98
NomuraBuy95.18
HSBC Global ResearchBuy94
Credit SuisseOutperform85
CCBIOutperform84
CLSABuy83
CMSIBuy79
CITIC SecuritiesOverweight77
DaiwaHold58
Summary Table of Broker Target Prices for Ping An Insurance (02318.HK)

The average of the above price targets from various Broker Research Departments works out to be 90.18HK$ per share. Ping An’s shares in Hong Kong closed at 58.35HK$ on 20th October 2021, representing a potential upside of over 54%.

News Update on Alibaba (9988.HK) – October 2021

News Update on Alibaba BABA-SW (9988.HK)

Readers of this blog are aware that Alibaba is one of the few growth stocks which I hold in my portfolio, and I have an article on the valuation of Alibaba stock, estimating the Intrinsic Value, Margin of Safety and Return on Investment. In this article I would like to share some recent news updates on Alibaba, courtesy of AAStocks.

Charlie Munger almost doubles down on Alibaba stocks.

It is reported that the Daily Journal, a media company owned by renowned investor Charlie Munger, has increased their holdings of Alibaba stocks by 82.7% in Q3 of 2021 at an average price of 182.3US$. Shares of Alibaba closed at 177.18US$ on 20th October 2021. This gives us an opportunity to buy into Alibaba at a discount to the recent price paid by the Daily Journal.

Alibaba develops their own custom server chips for Data Centers

Alibaba recently launched the “Yitian 710” processor for their Data Centers. The chip is a 5nm 128 core CPU based on ARM RISC Architecture. According to Jeff Zhang, President of Alibaba Cloud Intelligence, adoption of the Yitian 710 is expected to yield significant improvements in performance and energy efficiency of the Alibaba Cloud Data Centers.

Recent target prices for Alibaba by major US Brokers.

Morgan Stanley rates Baba overweight and places a price target of 220US$ for Baba shares trading in New York. This is equivalent to 213.80HK$ per share for Alibaba stocks (BABA-SW 9988.HK) trading in Hong Kong.

Goldman Sachs retains Alibaba on its Conviction Buy List and sets a revised price target of 246HK$ per share for Alibaba stocks (BABA-SW 9988.HK) trading in Hong Kong.

A Tale of Two Markets – Personal observations on the current state of the US and Hong Kong Equity Markets

A Tale of Two Equity Markets

Summary:

This article is a summarizes some personal observations that I have made regarding the current state of the US and Hong Kong Equity Markets. 2021 has been an eventful year for both US and Hong Kong equities.The S&P 500 has smashed multiple records in 2021, hitting record highs, one after another, culminating in the 52-Week High of 4545.85 on  2nd September 2021. 
In contrast to the superb performance of the S&P 500, the Hang Seng Index peaked early this year, hitting its 52-Week High of 31183.36 on 18th February 2021 and has been on a downward trajectory since then.
Given the stark contrast in the performance of the two stock indices over the past 52 weeks, an inquisitive investor would want to pose the following questions:

  • How does the current valuation of each index compare to historical data?
  • Given the current valuation levels, what will be the Implied Return on Investment for the S&P 500 and the Hang Seng Index?

Introduction

So far this year the US and Hong Kong equity markets have travelled along diverging paths. The US market has moved steadily upwards, drawing strength from the country’s economic reopening and recovery from the Covid-19 lockdowns. Consequently, the S&P 500 has climbed a wall of worries, moving from its 52-Week Low of 3233.94 (30th October 2020) to the recent 52-Week High of 4545.85 achieved last month on 2nd September 2021. The S&P 500 closed at 4391.34 on 8th October 2021.
On the other side of the Pacific Ocean, the Hong Kong equity market’s performance has been disappointing, to say the least, for the better part of the year. Earlier this year, the Hang Seng Index (HSI) hit its 52-Week High of 31183.36 on 18th February 2021. Since then, the index has followed a declining path to reach a 52-Week  Low of 23681.44 on 5th October 2021.  The Hang Seng Index (HSI) closed at 4391.34 on 8th October 2021.

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Purchasing H-shares of China CITIC Bank (0998.HK) for my Dividend Income Portfolio

China CITIC Bank - Share Valuation

Summary

In this article, I examine the valuation of the H-share of China CITIC Bank (0998.HK) from the view point of a Dividend Investor. The Dividend Discount Model (DDM) is used to determine its Intrinsic Value, Expected Return on Investment, and its Margin of Safety. DDM is a form of Discounted Cash Flow Analysis in which the type of cash flow used in the analysis is the Company’s regular dividend payments, discounted at the appropriate rate of return to determine the Intrinsic Value of the stock.

Introduction

The recent Evergrande debt crisis has resulted in a substantial sell down in the Hong Kong equities market, with the bulk of the price decline hitting China H-shares. A few companies on my watch list experienced price corrections which brought them into value stock territory, at least that is my humble opinion. I have recently published articles on 2 of them, namely Ping-An Insurance, Agricultural Bank of China. In this article, I would like to share my thoughts on another recent addition to my Dividend Income Portfolio, China Citic Bank (0998.HK).

As my investment philosophy evolves over time, I find myself favoring stocks which provide attractive dividends at inexpensive valuations. I used the following set of questions to help determine the Bank’s investment worthiness:

  • Does the Bank have a good long-term dividend track record?
  • Does the Bank currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?
  • Is the current payout ratio safe and sustainable?
  • What is the expected return on investment of the share over a 10-year period? Majority of recommendations by financial analysts have a 12 month time horizon. I find the 10-year period to be more suitable for a dividend income stock, especially one which is part of a retirement dividend income portfolio.
  • Does the stock price offer a sufficient margin of safety to its intrinsic value?
  • Are the shares considered attractive when measured against the traditional value investing yardsticks? A good dividend stock with inexpensive valuation will minimize the risk of capital impairment and increase the probability of capital gains.
  • Does the stock have a history of consistent earnings growth?

With the above questions in mind, let us delve into the analysis of the company to find the answers.

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Estimating the Intrinsic Value, Return on Investment and Margin of Safety of Ping An using the Dividend Discount Model

Ping An - Share Valuation

Summary

This article looks at the valuation of Ping An shares trading on the Stock Exchange of Hong Kong (Ticker: 2318.HK). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Continue reading to learn more.

Introduction

Ping An - 3rd Largest Insurance Company in the world
Ping An – 3rd Largest Insurance Company in the world by market capitalization

Ping An is the 3rd largest insurance company in the world by market capitalization and by the same measure, is the largest insurance company in Mainland China. Ping An has its humble beginning in Shenzhen when it was founded in 1988 at China’s first joint-stock company. Since then, its business has grown by leaps and bounds and it has diversified into other profitable business ventures, including fin-tech and banking. The company was successfully listed on the Stock Exchange of Hong Kong on 24th June 2004.

Ping An shares hit its 52-week high on the Hong Kong Stock Exchange in January this year. Since that price top, the share has undergone a prolonged correction, culminating in its recent 52-week low 49.00HK$ per share on 21st September 2021. All in all, the share price has declined more than 50% from its year high.
Such a massive correction in one of the largest insurance companies in the world has certainly attracted the attention of many in the investment community. The time is right to have a closer look at the current valuation of Ping An (2318.HK) shares trading on the Stock Exchange of Hong Kong.

Dividend Discount Model is one of many methods for valuing stocks. The procedure is similar to the Discounted Cash Flow model, with the free cash flow being substituted dividends as the cash flowing to the investor. One advantage of using this method is that dividends data are easily available from the company’s financial reports. It is also my preferred valuation method for dividend-paying stocks. The reason being that dividends are tangible income to the investor and it represents the return of investment and return on investment. The cash from dividends allows the investor to reinvest the proceeds into the same stock or into other more attractive stocks to achieve the all important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of Ping An (2318.HK) shares trading on the Stock Exchange of Hong Kong.

Read more