Pan Asia Strategy 23 November 2017
Animal Spirits
Reconciling Nifty-style and Asian small cap equities
Continuing the Nifty-style theme, we suggest having some exposure to Asian small caps to hedge concentration risk as growth returns
Asian small caps are outgrowing the broader indices, and while size alone favours the mega caps, JASDAQ and KOSDAQ surprise Based on factor and thematic selection, we add Canvest Environment Paul M. Kitney, PhD Protection and Lee & Man Paper to our top picks (852) 2848 4947 [email protected]
Asian small caps and diversifying market concentration risk. While large cap and especially mega cap equities have made an outsized contribution to equity returns, our analysis demonstrates evidence that growth stocks are now generating alpha. Small cap names, particularly those with sustainable growth, provide diversification from Nifty-style market concentration.
Small cap growth is superior and the price for growth is reasonable. MSCI Asia ex-Japan small cap earnings growth is markedly outpacing the broader MSCI Asia ex-Japan index, and the PEG is meaningfully lower for 2018 and 2019. Animal Spirits top picks
Company Ticker JASDAQ and KOSDAQ outperform with concrete earnings drivers. New China Life Insurance 1336 HK While the JASDAQ has outperformed the TOPIX since January 2017, the PICC 1339 HK KOSDAQ has only started to outperform the KOSPI since October 2017 Hana Financial 086790 KS Yes Bank YES IN but is making up for lost time. Earnings growth for both over-the-counter SK Hynix 000660 KS (OTC) markets is more rapid than the broader indices, but we find the NCsoft 036570 KS JASDAQ is more attractively priced, relatively. Tencent 700 HK Brilliance China Auto 1114 HK Beijing Enterprises Water 371 HK Small cap focus and top picks. We add Canvest Environment Protection PTT Pcl PTT TB Group (1381 HK, HKD4.61, Buy [1]) and Lee & Man Paper Manufacturing SK Holdings 034730 KS (2314 HK, HKD9.1, Outperform [2]) to our top picks list. We focus on LG Corp 003550 KS Canvest Environment Protection 1381 HK quality and growth in the KOSDAQ, discussing relevant themes. We screen Lee & Man Paper 2314 HK
both the KOSDAQ and emerging Asia small caps, and discuss promising Source: Daiwa themes and stocks.
See important disclosures, including any required research certifications, beginning on page 16
Animal Spirits: 23 November 2017
Growth’s return to prominence encourages some small cap exposure in Asia Can small caps help hedge market concentration risk? Having some small cap Recently, Animal Spirits broached the subject of market concentration risk, concluding that exposure can help there is a Nifty-style to market leadership at present, predominantly led by the technology hedge market sector. We also found, in the particular case of Korea, that earnings growth and concentration risk comparative valuation were compelling outside of the narrow corridor of Nifty names and without sacrificing indeed well beyond information technology (IT). We argued a barbell approach, weighting earnings growth the exposure to the index heavyweights, ideally with the use of volatility (via call options in a cash extraction strategy), and then expanding into materials, financials, energy sectors, as well as non-heavyweight names in IT.
Now, the question posed here is whether Asian small cap equities can fit into this diversification strategy, in a market characterised by mega cap leadership, without sacrificing performance? We argue there is the case for some small cap exposure based on an earnings growth argument and recent trends indicating that shareholder returns are rewarding growth more than they have in some time. Yet first we need to address the immediate question of large cap dominance.
Large caps have driven market returns When we observe the broad indices for Japan and Asia ex-Japan (see below), the “size” factor has been trending down, which means that small cap stock selection, ceteris paribus, has induced a negative excess return. In other words, large caps have outperformed — surprise, surprise! So why would we consider small caps in these circumstances? The answer relates to the Latin phrase above. All things are not equal.
MSCI Asia ex-Japan: size factor excess returns MSCI Japan: size factor excess returns 120 115
115 110
110 105
105 100
100 95
95 90
Jul-16 Jul-17 Jul-16 Jul-17
Apr-16 Oct-16 Apr-17 Oct-17 Apr-16 Oct-16 Apr-17 Oct-17
Jan-16 Jun-16 Jan-17 Jun-17 Jan-16 Jun-16 Jan-17 Jun-17
Feb-16 Mar-16 Feb-17 Mar-17 Feb-16 Mar-16 Feb-17 Mar-17
Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17 Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17
May-17 May-16 May-17 May-16 Source: Factset, IBES, Reuters, MSCI and Daiwa Custom Product Group Source: Factset, IBES, Reuters, MSCI and Daiwa Custom Product Group
Yet growth has returned to favour What changed in Asia ex-Japan during 2017 was growth returned to favour and has been outperforming since March, as shown in the chart below. In the previous Animal Spirits report (Nifty-style, Korea and the other seventy percent, 15 November 2017), in the context of Korea, we demonstrated the bifurcation of the outperformance and underperformance of growth and value stocks, respectively. This trend clearly extends beyond Korea.
We argue that small caps are a way to gain diversified exposure to growth-style. The regional small cap team at Daiwa, led by John Choi, has a growth-oriented stock-picking methodology, expressed in their Discovery product (Asia small-cap weekly). Animal Spirits chose its top pick this week from Daiwa’s small cap Discovery research coverage.
2
Animal Spirits: 23 November 2017
MSCI Asia ex-Japan and Japan growth factor excess returns 130
120
110
100
90
80
Jul-16 Jul-17
Apr-16 Oct-16 Apr-17 Oct-17
Jan-16 Jun-16 Jan-17 Jun-17
Feb-16 Mar-16 Feb-17 Mar-17
Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17
May-16 May-17
MSCI Japan MSCI AxJ
Source: Factset, IBES, Reuters, MSCI and Daiwa Custom Product Group
Superior earnings growth and PEG appeal in small caps Asian small caps are So are Asian small caps more “growthy” than the broader indices? Absolutely. Consider the outgrowing the broader table below. For 3 consecutive years, including forecasts, earnings growth in the MSCI indices and growth is in Asia ex-Japan Small Cap index has outpaced the parent, larger cap index. Using 3-year vogue rolling compound average earnings growth rates (CAGR), PE to growth (PEG) ratios for the small cap index are meaningfully lower than those of the broader index, despite the slight small cap PE premium. In our opinion, this is mispriced growth. We think Asian small caps, particularly those with higher growth profiles, are worth some exposure, especially since growth-style is gaining traction in the current market environment.
MSCI Asia ex-Japan: small cap versus benchmark earnings and valuation comparison MSCI AC Asia ex-Japan MSCI AC Asia ex-Japan Small Cap EPS Growth CAGR 3Y PE Calendar Year PEG EPS Growth CAGR 3Y PE Calendar Year PEG (%) (%) (x) (x) (%) (%) (x) (x) 2017E 25.1 0.5 14.8 28.62 53.5 7.0 16.6 2.37 2018E 18.3 11.2 12.5 1.11 23.3 28.4 13.5 0.47 2019E 9.9 17.6 11.3 0.64 16.7 30.2 11.5 0.38
Source: MSCI, Bloomberg, Daiwa Customs Product Group Note: Calendar year PER used in this table
JASDAQ and KOSDAQ outperformance stand out While in broad Asia ex-Japan indices small caps have not kept up with their larger cap counterparts in recent history, the same cannot be said for the OTC markets in Japan and Korea. The JASDAQ has consistently outperformed the TOPIX over the past 2 years and more recently, there appears to be a sea-change in Korea, with the KOSDAQ undoing most of its 2017 underperformance over the past 2 months.
JASDAQ relative to TOPX and KOSDAQ relative to KOSPI return history
140 130 120 110 100 90 80 70 60 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017
KOSDAQ/KOSPI Rel Perf JASDAQ/TOPIX Rel Perf
Source: Factset, Daiwa Custom Product Group
The jury is out as to whether the strong outperformance of these small cap indices merely reflects isolated domestic or idiosyncratic drivers, or is this a harbinger of change more broadly for small cap returns in Asia?
3
Animal Spirits: 23 November 2017
In the case of Korea, thus far the move in KOSDAQ has been driven largely by domestic retail investors, but our sources on the ground inform Animal Spirits that institutional investors are getting involved and their interest extends beyond several healthcare and biotech names, that give yours truly vertigo. For example, CMG Pharmaceutical (058820 KQ), Sillajen (215600 KQ), and Celltrion Pharm (068760 KQ) equity prices have risen more than 100% over the past 2 months.
Chinese competition for An emerging KOSDAQ-related theme, more grounded in fundamentals, is the increased Samsung suppliers’ competition for the services of the Samsung group component suppliers from Chinese components implies technology companies. Historically, these companies have had little pricing power and better margins for were at times squeezed by Samsung during cost-cutting phases. However, that is likely to several KOSDAQ listed change with the need for Samsung to secure its supply chain, driving a new relationship companies with its suppliers, resulting in better pricing terms for the latter and ultimately higher margins. Beyond pricing power, several KOSDAQ-listed suppliers have already received cash injections from Samsung, including Dongjin Semichem (005290 KQ) and Soulbrain (036380 KQ), which supply key materials for Samsung’s 3D NAND production. Samsung’s stakes in these companies are now 4.9% and 4.8%, respectively.
Korean domestic investor KOSDAQ net purchases (KRWm) 500,000 400,000 300,000 200,000 100,000 0 (100,000) (200,000) (300,000) 31-Jan-2017 30-Apr-2017 31-Jul-2017 31-Oct-2017
Source: Korean Exchange, Daiwa
Domestic institutions This development has bound to have been noticed. Institutional interest (see the “hockey join retail in the stick” chart above), alongside retail purchases of KOSDAQ 150 ETFs, seem to suggest KOSDAQ rally there may be something more to the KOSDAQ outperformance than retail-driven biotech sector speculation. We now dissect the JASDAQ and the KOSDAQ to see what styles may be behind the price action.
JASDAQ and KOSDAQ factor drivers In the case of the JASDAQ, quality – which includes components such as the level and change in return on equity and asset quality – has been a driver for excess returns. Unlike much of the work we have done in Asia recently, value stocks are performing on the JASDAQ.
JASDAQ: selected factor excess returns KOSDAQ: selected factor excess returns 140 180
130 160 120 140 110 120 100 100 90 80
80
Jul-16 Jul-17
Apr-16 Oct-16 Apr-17 Oct-17
Jan-16 Jun-16 Jan-17 Jun-17
Feb-16 Mar-16 Feb-17 Mar-17
Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17
May-16 May-17
Jul-16 Jul-17
Apr-16 Oct-16 Apr-17 Oct-17
Jan-16 Jun-16 Jan-17 Jun-17
Feb-16 Mar-16 Feb-17 Mar-17
Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17
May-16 May-17 Value Quality Growth Volatility Value Quality Growth Sentiment
Source: Factset, IBES, Reuters, Daiwa Custom Product Group Source: Factset, IBES, Reuters, Daiwa Custom Product Group
4
Animal Spirits: 23 November 2017
To a less degree, growth in the JASDAQ is generating excess returns but volatility is prominent in the JASDAQ factor profile, which is an indication of “risk on” sentiment. In the case of the KOSDAQ, quality, growth and sentiment factors are having the largest impact on single stock returns in this index.
JASDAQ and KOSDAQ earnings and valuation JASDAQ and KOSDAQ KOSDAQ earnings growth looks set to meaningfully outpace KOSPI in 2018E and 2019E, earnings growth particularly next year where EPS growth (Factset estimates) is forecast to rise by 36.7% in impressive, while comparison with 15.4% for the KOSPI. However, there is a sizeable valuation premium in JASDAQ’s PEG appeals the KOSDAQ that raises some eyebrows. Even on the most flattering metric of 2019E PEG particularly ratio, the KOSDAQ trades at a premium to the KOSPI. One needs to be convinced that there is room for earnings growth that is not reflected in estimates and that there is a strong flow (domestic asset allocation shift) or thematic case for the KOSDAQ to justify such a premium. We will follow developments in Korea in the coming months but see some green shoots.
KOSDAQ: earnings and valuation comparison KOSPI Composite Index KOSDAQ Composite Index EPS Growth CAGR 3Y PE Calendar Year PEG EPS Growth CAGR 3Y PE Calendar Year PEG (%) (%) (x) (x) (%) (%) (x) (x) 2017E 32.9 18.3 10.5 0.57 14.6 -4.5 23.8 -5.24 2018E 10.8 15.4 9.5 0.62 36.7 13.0 17.4 1.34 2019E 6.4 16.1 8.9 0.55 16.5 22.2 15.0 0.67
Source: Factset, IBES, Reuters, Daiwa Custom Products
In contrast, the JASDAQ is coming off an exceptional year of earnings growth in 2017 and so, with a higher base, has a similar earnings growth outlook to the broader TOPIX index in Japan. Traditional valuation figures such as PER are showing a premium in the JASDAQ but normalising for earnings growth, the PEG ratios are somewhat more attractive than the broader market.
JASDAQ: earnings and valuation comparison TOPIX Index JASDAQ Index EPS Growth CAGR 3Y PE Calendar Year PEG EPS Growth CAGR 3Y PE Calendar Year PEG (%) (%) (x) (x) (%) (%) (x) (x) 2017 19.1 7.6 16.1 2.12 43.0 5.7 23.6 4.14 2018 10.1 7.8 14.6 1.88 7.0 29.8 22.1 0.74 2019 8.2 12.4 13.5 1.09 10.1 19.0 20.0 1.06
Source: Factset, IBES, Reuters, Daiwa Custom Products
5
Animal Spirits: 23 November 2017
KOSDAQ style screen Our KOSDAQ screen highlights 2 names, Wonik IPS (240810 KS) and RS Automation (140670 KS), which are of thematic interest to Animal Spirits.
KOSDAQ factor screen and market cap weightings Mkt Cap ADV Ticker Company USDm USDm Growth Quality Industry 240810 KS WONIK IPS CO LTD 1,482 9 1 1 Semiconductors & Semiconductor Equipment 060280 KS CUREXO INC 391 1 1 1 Health Care Equipment & Services 255440 KS YAS CO LTD 340 5 1 1 Semiconductors & Semiconductor Equipment 203690 KS PROSTEMICS CO LTD 251 6 1 1 Pharmaceuticals Biotechnology & Life Sciences 201490 KS ME2ON CO LTD 260 7 1 1 Software & Services 011370 KS SEO HAN 208 1 1 1 Capital Goods 089140 KS NEXTURN 192 1 1 1 Capital Goods 043610 KS GENIE MUSIC CORPOR 188 1 1 1 Media 171090 KS SUNIC SYSTEM LTD 170 5 1 1 Semiconductors & Semiconductor Equipment 041140 KS NEXON GT CO LTD 524 21 1 1 Software & Services 118990 KS MOTREX CO LTD 170 1 1 1 Automobiles & Components 060560 KS HOME CENTER HOLDIN 144 4 1 1 Materials 035620 KS BARUNSON ENTERTAIN 132 3 1 1 Software & Services 131030 KS DHP KOREA CO LTD 127 1 1 1 Health Care Equipment & Services 101330 KS MOBASE CO LTD 126 1 1 1 Technology Hardware & Equipment 205100 KS EXEM CO LTD 124 2 1 1 Software & Services 140670 KS RS AUTOMATION CO L 123 5 1 1 Capital Goods 042370 KS VITZRO TECH 103 1 1 1 Capital Goods 265560 KS YOUNGHWA TECH CO L 108 20 1 1 Automobiles & Components
Source: Factset, IBES, Reuters, Daiwa Custom Products Note: This list includes a top quintile ranking of quality and growth factors, further refined with a screening for liquidity and market capitalization
This particular screen use the 2 factors with the highest degree of efficacy in explaining stock returns in the recent past, which we have further refined using daily liquidity and market capitalisation thresholds.
Wonik IPS and RS As previously discussed, an important subtheme in the technology space at present is the Automation fit our necessity for Samsung to be a lot more friendly to suppliers, due to the threats coming designation thematic from Chinese technology companies, which are now competing with Samsung for parts focus and feature in our supply. Of particular importance to Samsung are suppliers of smartphones, LCD, OLED, KOSDAQ factor screen semiconductor, electronic vehicle parts and components. Wonik IPS (240810 KS) is a key supplier in the semiconductor and display segments of the Samsung supply chain. RS Automation (140670 KS) is a niche player in factory automation technology and has only recently listed on KOSDAQ in August 2017. In the table below, we can see that both valuation and earnings growth outlooks are appealing in comparison with the broader KOSDAQ index (see table above).
Wonik IPS (240810 KS) and RS Automation (140670 KS): PER and EPS growth comparison Company Ticker PER (x) EPS growth (%) 2016 2017E 2018E 2019E 2016 2017E 2018E 2019E Wonik IPS 240810 KS 48 17.8 12.9 12.1 NA 128.9 37.2 6.9 RS Automation 140670 KS NA 23.7 18.1 14.5 88.4 17.2 31.3 24.8
Source: Reuters, Factset, IBES, Daiwa Custom Products
We have not included either company in our top picks at this time, as Daiwa does not cover these companies and Animal Spirits has not yet done sufficient due diligence, but they are worth further investigation, in our opinion.
What’s behind emerging Asia small cap returns? Broadening out our analysis to emerging markets in Asia, we find that growth (very recently), quality and sentiment are driving performance. While value did work until mid- year, it has been a drag on alpha since, which brings it in line with the results we have seen in the larger indices. See the chart on the next page.
6
Animal Spirits: 23 November 2017
MSCI EM Asia ex-Japan small cap index: selected factor excess returns 150
140
130
120
110
100
90
80
70
Jul-16 Jul-16 Jul-17
Apr-16 Apr-16 Oct-16 Apr-17 Oct-17 Oct-17
Jan-16 Jun-16 Jan-17 Jan-17 Jun-17 Jun-17
Feb-16 Feb-16 Mar-16 Feb-17 Mar-17 Mar-17
Dec-15 Nov-16 Nov-16 Dec-16 Nov-17
Aug-16 Sep-16 Sep-16 Aug-17 Aug-17 Sep-17
May-16 May-17
Value Quality Growth Sentiment DY
Source: MSCI, Reuters, IBES, Factset, Daiwa Custom Products Note: Factor excess returns based on Daiwa factor definitions
Filtering MSCI Asia EM ex-Japan small caps In the following table we screen the emerging Asia small cap universe on quality and sentiment as primary filters and growth as a secondary one, based on the respective efficacy of factor returns. Again, we refine the search with liquidity and market cap thresholds.
There are 2 names in this group rated Outperform (2) or Buy (1) by Daiwa and our alliance partner Thanachart Securities, which are CH Karnchang (CK TB, THB27, BUY) and Lee & Man Paper Manufacturing (2314 HK, HKD9.10, Outperform [2]). Again, we refine the search with liquidity and market cap thresholds. We will now turn to the new top picks.
MSCI Asia EM ex-Japan small cap screen Daily Vol Ticker Company Country Mkt Cap USDm USDm Growth Quality Sentiment Industry 2344 TT WINBOND ELECTRONIC TAIWAN 3,372 64 2 1 1 Semiconductors & Semiconductor Equipment 2314 HK LEE & MAN PAPER MA HONG KONG 5,270 17 3 1 1 Materials 884 HK CIFI HLDGS GROUP C HONG KONG 4,052 15 3 1 1 Real Estate 1813 HK KWG PROPERTY HLDGS HONG KONG 3,138 17 3 1 1 Real Estate 3380 HK LOGAN PROPERTY HLD HONG KONG 5,004 16 2 1 1 Real Estate 1628 HK YUZHOU PROPERTIES HONG KONG 2,121 13 3 1 1 Real Estate 056190 KS SFA ENGINEERING CO SOUTH KOREA 1,476 10 2 1 1 Technology Hardware & Equipment 1966 HK CHINA SCE PROPERTY HONG KONG 1,654 12 3 1 1 Real Estate 548 HK SHN EXPRESSWAY HONG KONG 2,789 2 3 1 1 Transportation 2128 HK CHINA LESSO GROUP HONG KONG 1,998 3 3 1 1 Capital Goods 200596 CH ANHUI GUJING DISTL CHINA 4,513 1 1 1 1 Food Beverage & Tobacco 200488 CH SHANDONG CHENMING CHINA 4,237 4 1 1 1 Materials PTBA IJ TAMBANG BATUBARA B INDONESIA 1,886 4 2 1 1 Energy YRD US YIRENDAI LTD UNITED STATES 2,554 24 2 1 1 Software & Services 3005 TT GETAC TECHNOLOGY C TAIWAN 795 3 3 1 1 Technology Hardware & Equipment 200418 CH WUXI LITTLE SWAN CHINA 5,153 1 1 1 1 Consumer Durables & Apparel IBVE IN INDIABULLS VENTURE INDIA 1,684 16 1 1 1 Diversified Financials 921 HK HISENSE KELON ELEC HONG KONG 2,596 4 3 1 1 Consumer Durables & Apparel 000640 KS DONG-A SOCIO HOLDI SOUTH KOREA 742 3 1 1 1 Pharmaceuticals Biotechnology & Life Sciences 1589 HK CHINA LOGISTICS PR HONG KONG 897 1 1 1 1 Real Estate 1610 HK COFCO MEAT HLDGS L HONG KONG 799 1 1 1 1 Food Beverage & Tobacco 3006 TT ELITE SEMICONDUCTO TAIWAN 435 18 3 1 1 Semiconductors & Semiconductor Equipment CK TB CH KARNCHANG THAILAND 1,398 8 3 1 1 Capital Goods 818 HK HI SUN TECHNOLOGY HONG KONG 547 1 1 1 1 Software & Services 2669 HK CHINA OVERSEAS PRO HONG KONG 875 5 2 1 1 Real Estate 900936 CH I/M EERDUOSI RESOU CHINA 1,677 1 1 1 1 Materials 200429 CH GUANGDONG PROV EXP CHINA 2,383 1 1 1 1 Transportation KECI IN KEC INTERNATIONAL INDIA 1,208 2 3 1 1 Capital Goods 5306 TT KMC (KUEI MENG) TAIWAN 519 1 1 1 1 Consumer Durables & Apparel 192530 KS KWANGJU BANK SOUTH KOREA 559 1 3 1 1 Banks 6238 TT KINGPAK TECHNOLOG. TAIWAN 403 13 2 1 1 Technology Hardware & Equipment
Source: MSCI, Reuters, IBES, Factset, Daiwa Custom Products Note: The numerals in the columns for growth, quality and sentiment represent quintile rankings
7
Animal Spirits: 23 November 2017
New Animal Spirits top picks – Canvest Environment Protection Group and Lee & Man Paper Manufacturing We add Canvest Animal Spirits adds 2 names to our top picks list. Both names have solid growth, which is Environment and Lee & not fully reflected in their valuation, in our opinion. Canvest Environment Protection Group Man Paper to our top (1381 HK, HKD4.61, Buy [1]) is selected as a play on our China environmental technology picks theme, while Lee & Man Paper Manufacturing (2314 HK, HKD9.10, Outperform [2]) fits our factor screening profile, as shown in the above table. We include 2 short notes on both companies written by Dennis Ip and Carlton Lai, respectively. Dennis and Carlton are members of our Asia small cap research team and regular contributors to the Daiwa Discovery product.
Preceding the top picks notes, we include our Animal Spirits country evaluation matrix and provide a summary of our complete top picks list.
Animal Spirits: Asia ex-Japan equity market outlook Animal MSCI Spirits Animal Valuation Earnings Policy Macro Comments ASIA XJ Weight Spirits View China-H valuations, earnings growth, and revisions are constructive. China A-share earnings revisions CHINA are recovering and may also see significant fund flow resulting from policy designed to inhibit property 34.12% 38.00% speculation. PMIs are supportive. A gradual approach to Fed policy normalization is positive for HK, given its property sector leverage. HONG KONG Inbound tourism and retail sales are recovering. Earnings growth and revisions are solid and outpacing 11.25% 13.00% nearest Asian peer, Singapore. Export growth remains strong but the weak domestic economy and near deflationary producer prices is a TAIWAN drag on growth. Earnings are driven by export growth, primarily in semiconductors, valuation fair and little 13.58% 10.00% room for policy. The Korean sluggish domestic economy contrasts with the recent 35% growth in exports. However, the Moon government has signalled fiscal stimulus is coming but there is some speculation that the Bank of KOREA 17.72% 22.50% Korea may be considering a minor rate hike, following the upgrade in GDP growth forecasts from 3 to 3.2% recently. Valuations compelling. Earnings momentum strong. Robust business sentiment contrasts with very weak consumer sentiment. Capital injections into the state INDIA run banks should stimulate loan growth. We expect the RBI to cut rates in the coming quarter. Earnings 10.10% 8.00% remain weak and valuation fair. Earnings growth underperforming developed market peers and ASEAN. Valuation is in line with nearest SINGAPORE regional comp, Hong Kong. Positive trade cycle is supportive of Singapore export earnings but domestic 4.26% 3.00% economy is sluggish. No policy drivers. Malaysian valuation is reasonable within emerging ASEAN. However, earnings remain very weak and MALAYSIA recent momentum in revisions show no sign of reversal. Fiscal position improving and China financed 2.53% 1.50% infrastructure spending a plus. Domestic economy is sluggish but while inflation remains below 1% there is plenty of scope for monetary THAILAND 2.54% 3.00% easing. Thailand offers the best value within emerging ASEAN, while earnings growth is in line with peers Infrastructure spending will likely reaccelerate the Philippines economy but inflation will potentially be a PHILIPPINES problem as new stimulus on top of (real estate) asset price reflation may be a concern for central 1.26% 0.00% bankers. Valuations rich. Given its high ROE and reasonable valuation relative to emerging ASEAN, the premium to EM is not a INDONESIA concern. Earnings growth is outpacing ASEAN peers but revisions subdued. Little scope for fiscal 2.55% 1.00% stimulus. Plantation pricing weak.
Source: MSCI, Daiwa Legend: the input (valuation, earnings, policy, macro) is supportive of country evaluation; very supportive; unsupportive; very unsupportive; neutral The arrows on the output side or final column represent the strength and direction of country view, based on the inputs: overweight; heavy overweight; underweight; heavy underweight; market weight
8
Animal Spirits: 23 November 2017
Animal Spirits top picks Company Ticker Share price Country Industry Analyst Target Price Rating Theme New China Life Insurance 1336 HK HKD56.15 China Insurance Leon Qi HKD62 Buy (1) Yield Curve Shifts PICC 1339 HK HKD4.11 China Insurance Leon Qi HKD4.90 Buy (1) Yield Curve Shifts Hana Financial 086790 KS KRW46,550 Korea Banks Mike Oh KRW53,000 Outperform (2) Yield Curve Shifts Yes Bank YES IN INR309.85 India Banks Punit Srivastava INR380 Buy (1) Yield Curve Shifts SK Hynix 000660 KS KRW86,800 Korea Semiconductor & Semiconductor SK Kim KRW100,000 Buy (1) Technology and IT Services Equipment Overweight NCsoft 036570 KS KRW457,500 Korea Software & Services Thomas Y. Kwon KRW550,000 Buy (1) Technology and IT Services Overweight Tencent 700 HK HKD426.8 China Software & Services John Choi, Alex Liu HKD480 Buy (1) Technology and IT Services and China Consumer Brilliance China Auto 1114 HK HKD22.55 China Automobiles & Components Kelvin Lau HKD23 Outperform (2) China Consumer Discretionary Beijing Enterprises Water 371 HK HKD6.24 China Utilities Dennis Ip HKD8.35 Buy (1) China Environmental PTT Pcl PTT TB THB414 Thailand Energy Chak Reungsinpinya THB450 BUY Energy Sector Overweight (Thanachart) SK Holdings 034730 KS KRW295,500 Korea Conglomerate - - - Korean Technology and IT Services, Energy and Materials LG Corp 003550 KS KRW89,600 Korea Conglomerate - - - Korean Technology and IT Services and Materials Overweight Canvest Environment 1381 HK HKD4.61 China Utilities Dennis Ip HKD5.90 Buy (1) China Environmental Lee & Man Paper 2314 HK HKD9.10 China Materials Carlton Lai HKD10.20 Outperform (2) Small cap factor screen Source: Bloomberg, Daiwa Note: share prices as of 22 November 2017
On the following pages, we include 1-page summaries of the new additions to our Animal Spirits top picks: Canvest Environment and Lee & Man Paper.
Click the links below for the full reports.
Canvest Environment Protection Group To see the full version of this Flash Note, please click here
Lee & Man Paper Manufacturing To see the full version of this Flash Note, please click here
When a report covers six or more subject companies please access important disclosures for Daiwa Capital Markets Hong Kong Limited at http://www.daiwacm.com/hk/research_disclaimer.html or contact your investment representative or Daiwa Capital Markets Hong Kong Limited at Level 26, One Pacific Place, 88 Queensway, Hong Kong.
9
Hong Kong Utilities 16 November 2017
(1381 HK) Canvest Environment Protection Group
Target price: HKD5.90 (from HKD5.50) Share price (16 Nov): HKD4.42 | Up/downside: +33.5%
New 2,250tpd WTE project in Guangdong province Dennis Ip, CFA (852) 2848 4068 Long-awaited new project with a treatment fee of CNY89.5 per tonne [email protected] On track to achieve a 30% CAGR in terms of total project capacity Anna Lu (852) 2848 4465 Reiterating Buy (1); raising TP to HKD5.90 after factoring in the project [email protected]
What's new: On 16 November, Canvest announced that it has been Forecast revisions (%) awarded a WTE plant PPP project in the Dianbai district of Maoming city in Year to 31 Dec 17E 18E 19E the Guangdong province. The award was long awaited given Canvest’s last Revenue change - - 16.8 Net profit change - - 4.8 new project was announced back in March 2017. The project’s daily Core EPS (FD) change - - 4.8 processing capacity stands at 2,250 tonnes (Phase I: 1,500 tonnes; Phase Source: Daiwa forecasts II: 750 tonnes), with a concession period of 30 years (including construction period). Share price performance
(HKD) (%) What's the impact: Treatment fee of Dianbai project to be set at a 4.8 125 satisfactory level. According to management, the treatment fee of the 4.5 116 Dianbai WTE plant will be CNY89.5 per tonne. We see the treatment fee 4.1 108 level as satisfactory for a project in Guangdong province. The company 3.8 99 3.4 90 expects the construction cost to be CNY500-600k per tonne, while the Nov-16 Feb-17 May-17 Aug-17 Nov-17 project is expected to complete construction by end-2020. Canvest En (LHS) Relative to HSI (RHS)
Further 2,000tpd of new projects likely to be announced by end-2017E 12-month range 3.45-4.79 to achieve full-year capacity target. Canvest has guided for an attractive Market cap (USDbn) 1.39 30% CAGR for its total project capacity over 2017-19E, from 18.3k tonnes 3m avg daily turnover (USDm) 1.05 per day (tpd) for 2016. Therefore, we expect the company to sign new Shares outstanding (m) 2,455 capacity of 5.5ktpd in total for 2017. This year, with the capacity increase of Major shareholder Mr. KM Lai (53.9%) 150tpd for the Guizhou Xingyi project, 750tpd for the Guangdong Xinyi project which was confirmed in 1H17 and 2,250tpd from the newly signed Financial summary (HKD) Dianbai project, Canvest’s capacity addition YTD amounts to 3,150tpd. Year to 31 Dec 17E 18E 19E Revenue (m) 2,307 2,219 3,130 Hence, we expect Canvest to further announce c.2ktpd of new WTE Operating profit (m) 726 911 1,133 capacity in Nov-Dec 2017 to achieve its target. According to a local news Net profit (m) 541 679 869 reports (CN-HW.net) on 27 October, it has likely won the 3ktpd capacity Core EPS (fully-diluted) 0.231 0.277 0.354 EPS change (%) 16.5 20.0 27.9 project in Chengdu, Sichuan, which will very likely lead Canvest to achieve Daiwa vs Cons. EPS (%) (5.5) (8.4) (2.8) its 2017 capacity target, assuming the contract is signed before end-2017. PER (x) 19.2 16.0 12.5 Dividend yield (%) 1.0 1.3 1.6 Expect Canvest to achieve 40ktpd of total contracted capacity by DPS 0.046 0.055 0.071 PBR (x) 2.3 2.1 1.8 2019E. With a target of 30% CAGR for new project capacity over 2017- EV/EBITDA (x) 12.7 10.6 9.2 19E, we expect the company to sign 5.5ktpd/7.0ktpd/9.5ktptd of capacities ROE (%) 14.6 13.7 15.6 to achieve 40ktpd of total contracted WTE capacity by 2019E. This would Source: FactSet, Daiwa forecasts represent 70% of the 55.5ktpd total capacity of its peer, China Everbright International (257 HK, HKD10.80, Hold [3]), as of end-1H17.
What we recommend: We reiterate our Buy (1) call and raise our DCF- based TP to HKD5.90 (from HKD5.50), with our 2019E EPS raised by 5% as we factor in the Dianbai project’s contribution to revenue from 2019. Key risk: an unexpected slowdown in securing new WTE projects by Canvest.
How we differ: Our 2017-19E EPS are 3-8% below the consensus likely as we have only factored in already-announced projects in our model.
See important disclosures, including any required research certifications, beginning on page 16
Hong Kong Materials 23 November 2017
(2314 HK) Lee & Man Paper Manufacturing
Target price: HKD10.20 (from HKD9.50) Share price (22 Nov): HKD9.10 | Up/downside: +12.1%
Tissue paper business may provide a softer landing Carlton Lai, CFA (852) 2532 4349 Market will likely view the tissue paper business more positively [email protected] Tactical preference for Lee & Man over Nine Dragons in the near term John Choi (852) 2773 8730 Reiterating Outperform (2); raising TP to HKD10.20 [email protected]
What's new: As we expected, prices of containerboard have started to Forecast revisions (%) come off from record levels since late October 2017, as a result of a Year to 31 Dec 17E 18E 19E reduction in China’s OCC prices. Despite this, we believe Lee & Man can Revenue change 1.9 0.8 2.6 Net profit change 8.0 5.0 12.6 sustain a healthy net dollar margin of c.HKD700 per tonne over 2018-19E. Core EPS (FD) change 8.0 5.0 12.6 Tactically, we prefer Lee & Man over its peer, Nine Dragons Paper (NDP, Source: Daiwa forecasts 2689 HK, HKD13.0, Buy [1]) in the near term, as its growing and more profitable tissue paper business provides a hedge to the heightened Share price performance uncertainty in the containerboard sector. It has also recently signalled (HKD) (%) confidence in its outlook by spending HKD66m on share buybacks. 11 145 10 129 8 113 What's the impact: Over the last 12 months, we believe Lee & Man’s 7 96 tissue paper ambitions have been a key source of the underperformance 5 80 relative to NDP. The company’s decision to aggressively expand its tissue Nov-16 Feb-17 May-17 Aug-17 Nov-17 paper capacity in 2015 has been rather untimely, since the containerboard L&M Paper (LHS) Relative to HSI (RHS) industry had just begun to turn around, and as the new tissue paper business created substantial uncertainty. However, now that 12-month range 5.68-10.52 containerboard prices are normalising, we believe the market would start to Market cap (USDbn) 5.27 view its tissue paper business more positively. 3m avg daily turnover (USDm) 16.60 Shares outstanding (m) 4,520
Major shareholder Lee family (68.0%) We are still cautious on whether the c.HKD1,000 per tonne profitability target level (vs. HKD964 in 1H17) is sustainable for L&M, given that: 1) it Financial summary (HKD) would need to buy an increasing amount of processed pulp from third Year to 31 Dec 17E 18E 19E parties as its own pulping machine is fully utilised, and 2) the company has Revenue (m) 26,156 29,660 32,553 recently expanded out of the more favourable Chongqing market. However, Operating profit (m) 5,596 5,739 5,987 Net profit (m) 4,531 4,593 4,775 we have turned incrementally more positive on its tissue paper business Core EPS (fully-diluted) 1.002 1.016 1.056 due to a potential easing in competitive pressure from its major EPS change (%) 61.2 1.4 4.0 competitors. We note that Hengan (1044 HK, HKD76.5, Hold [3]) and Vinda Daiwa vs Cons. EPS (%) (5.8) (11.3) (10.2) PER (x) 9.1 9.0 8.6 (3331 HK, HKD15.8, Outperform [2]) have both recently mentioned that Dividend yield (%) 3.8 3.9 4.1 they would raise ASPs either by reducing promotions or direct ASP hikes. DPS 0.349 0.356 0.370 PBR (x) 2.1 1.8 1.6 We raise our 2017-19E EPS by 5-13% to reflect the containerboard price EV/EBITDA (x) 8.4 7.9 7.3 ROE (%) 24.8 21.6 19.7 hikes since August and a more profitable tissue paper business. We also Source: FactSet, Daiwa forecasts note that the 1-2% CNY:USD appreciation in 2H17 should have a positive translation effect on its P&L given that the company reports in HKD.
What we recommend: We reiterate our Outperform (2) rating and raise our 12-month target price to HKD10.20 (from HKD9.50), based on an unchanged 10x PER (roughly 10% below our target multiple for NDP) applied to our revised 2018E EPS (previously the average of our 2017-18E EPS). Key risk: a sustained rise in raw-material prices.
How we differ: We take a longer term view on the paper sector and see positive structural changes in the industry over a multi-year horizon.
See important disclosures, including any required research certifications, beginning on page 16
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Daiwa’s Asia Pacific Research Directory
HONG KONG SOUTH KOREA Takashi FUJIKURA (852) 2848 4051 [email protected] Sung Yop CHUNG (82) 2 787 9157 [email protected] Regional Research Head Pan-Asia Co-head/Regional Head of Automobiles and Components; Automobiles; Jiro IOKIBE (852) 2773 8702 [email protected] Shipbuilding; Steel Co-head of Asia Pacific Research Mike OH (82) 2 787 9179 [email protected] John HETHERINGTON (852) 2773 8787 [email protected] Banking; Capital Goods (Construction and Machinery) Co-head of Asia Pacific Research Iris PARK (82) 2 787 9165 [email protected] Craig CORK (852) 2848 4463 [email protected] Consumer/Retail Regional Head of Asia Pacific Product Management SK KIM (82) 2 787 9173 [email protected] Paul M. KITNEY (852) 2848 4947 [email protected] IT/Electronics – Semiconductor/Display and Tech Hardware Chief Strategist for Asia Pacific; Strategy (Regional) Thomas Y KWON (82) 2 787 9181 [email protected] Kevin LAI (852) 2848 4926 [email protected] Pan-Asia Head of Internet & Telecommunications; Software – Internet/On-line Games Chief Economist for Asia ex-Japan; Macro Economics (Regional) Olivia XIA (852) 2773 8736 [email protected] TAIWAN Macro Economics (Hong Kong/China) Rick HSU (886) 2 8758 6261 [email protected] Kelvin LAU (852) 2848 4467 [email protected] Head of Regional Technology; Head of Taiwan Research; Semiconductor/IC Design Head of Automobiles; Transportation and Industrial (Hong Kong/China) (Regional) Leon QI (852) 2532 4381 [email protected] Nora HOU (886) 2 8758 6249 [email protected] Regional Head of Financials; Banking; Diversified financials; Insurance Banking; Diversified financials; Insurance (Hong Kong/China) Steven TSENG (886) 2 8758 6252 [email protected] Yan LI (852) 2773 8822 [email protected] IT/Technology Hardware (PC Hardware) Banking (China) Kylie HUANG (886) 2 8758 6248 [email protected] Anson CHAN (852) 2532 4350 [email protected] IT/Technology Hardware (Handsets and Components) Consumer (Hong Kong/China) Helen CHIEN (886) 2 8758 6254 [email protected] Adrian CHAN (852) 2848 4427 [email protected] Small/Mid Cap Consumer (Hong Kong/China) Jamie SOO (852) 2773 8529 [email protected] INDIA Gaming and Leisure (Hong Kong/China) Punit SRIVASTAVA (91) 22 6622 1013 [email protected] John CHOI (852) 2773 8730 [email protected] Head of India Research; Strategy; Banking/Finance Head of Hong Kong and China Internet; Regional Head of Small/Mid Cap Saurabh MEHTA (91) 22 6622 1009 [email protected] Alex LIU (852) 2848 4976 [email protected] Capital Goods; Utilities Internet (Hong Kong/China) Carlton LAI (852) 2532 4349 [email protected] SINGAPORE Small/Mid Cap (Hong Kong/China) Ramakrishna MARUVADA (65) 6499 6543 [email protected] Dennis IP (852) 2848 4068 [email protected] Head of Singapore Research; Telecommunications (China/ASEAN/India) Regional Head of Power, Utilities, Renewable and Environment (PURE); PURE (Hong David LUM (65) 6329 2102 [email protected] Kong/China) Banking; Property and REITs Jonas KAN (852) 2848 4439 [email protected] Royston TAN (65) 6321 3086 [email protected] Head of Hong Kong and China Property Oil and Gas; Capital Goods Cynthia CHAN (852) 2773 8243 [email protected] Jame OSMAN (65) 6321 3092 [email protected] Property (China) Transportation – Road and Rail; Pharmaceuticals and Healthcare; Consumer (Singapore) Thomas HO (852) 2773 8716 [email protected]
Custom Products Group JAPAN
Yukino YAMADA (81) 3 5555 7295 [email protected] PHILIPPINES Strategy (Regional) Micaela ABAQUITA (63) 2 737 3021 [email protected] Property Gregg Ilag (63) 2 737 3023 [email protected] Utilities; Energy
12
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Daiwa’s Offices Office / Branch / Affiliate Address Tel Fax DAIWA SECURITIES GROUP INC HEAD OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6753 (81) 3 5555 3111 (81) 3 5555 0661 Daiwa Securities Trust Company One Evertrust Plaza, Jersey City, NJ 07302, U.S.A. (1) 201 333 7300 (1) 201 333 7726 Daiwa Securities Trust and Banking (Europe) PLC (Head Office) 5 King William Street, London EC4N 7JB, United Kingdom (44) 207 320 8000 (44) 207 410 0129 Daiwa Europe Trustees (Ireland) Ltd Level 3, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland (353) 1 603 9900 (353) 1 478 3469
Daiwa Capital Markets America Inc. New York Head Office Financial Square, 32 Old Slip, New York, NY10005, U.S.A. (1) 212 612 7000 (1) 212 612 7100 Daiwa Capital Markets America Inc. San Francisco Branch 555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A. (1) 415 955 8100 (1) 415 956 1935 Daiwa Capital Markets Europe Limited, London Head Office 5 King William Street, London EC4N 7AX, United Kingdom (44) 20 7597 8000 (44) 20 7597 8600 Daiwa Capital Markets Europe Limited, Frankfurt Branch Neue Mainzer Str. 1, 60311 Frankfurt/Main, Germany (49) 69 717 080 (49) 69 723 340 Daiwa Capital Markets Europe Limited, Paris Representative Office 17, rue de Surène 75008 Paris, France (33) 1 56 262 200 (33) 1 47 550 808 Daiwa Capital Markets Europe Limited, Geneva Branch 50 rue du Rhône, P.O.Box 3198, 1211 Geneva 3, Switzerland (41) 22 818 7400 (41) 22 818 7441 Daiwa Capital Markets Europe Limited, Midland Plaza 7th Floor, 10 Arbat Street, Moscow 119002, (7) 495 641 3416 (7) 495 775 6238 Moscow Representative Office Russian Federation Daiwa Capital Markets Europe Limited, Bahrain Branch 7th Floor, The Tower, Bahrain Commercial Complex, P.O. Box 30069, (973) 17 534 452 (973) 17 535 113 Manama, Bahrain Daiwa Capital Markets Hong Kong Limited Level 28, One Pacific Place, 88 Queensway, Hong Kong (852) 2525 0121 (852) 2845 1621 Daiwa Capital Markets Singapore Limited 6 Shenton Way #26-08, OUE Downtown 2, Singapore 068809, (65) 6220 3666 (65) 6223 6198 Republic of Singapore Daiwa Capital Markets Australia Limited Level 34, Rialto North Tower, 525 Collins Street, Melbourne, (61) 3 9916 1300 (61) 3 9916 1330 Victoria 3000, Australia DBP-Daiwa Capital Markets Philippines, Inc 18th Floor, Citibank Tower, 8741 Paseo de Roxas, Salcedo Village, (632) 813 7344 (632) 848 0105 Makati City, Republic of the Philippines Daiwa-Cathay Capital Markets Co Ltd 14/F, 200, Keelung Road, Sec 1, Taipei, Taiwan, R.O.C. (886) 2 2723 9698 (886) 2 2345 3638 Daiwa Securities Capital Markets Korea Co., Ltd. 20 Fl.& 21Fl. One IFC, 10 Gukjegeumyung-Ro, Yeongdeungpo-gu, (82) 2 787 9100 (82) 2 787 9191 Seoul, Korea Daiwa Securities Co. Ltd., Beijing Representative Office Room 301/302，Kerry Center，1 Guanghua Road，Chaoyang District， (86) 10 6500 6688 (86) 10 6500 3594 Beijing 100020, People’s Republic of China Daiwa (Shanghai) Corporate Strategic Advisory Co. Ltd. 44/F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong, (86) 21 3858 2000 (86) 21 3858 2111 Shanghai China 200120 , People’s Republic of China Daiwa Securities Co. Ltd., Bangkok Representative Office 18th Floor, M Thai Tower, All Seasons Place, 87 Wireless Road, (66) 2 252 5650 (66) 2 252 5665 Lumpini, Pathumwan, Bangkok 10330, Thailand Daiwa Capital Markets India Private Ltd 10th Floor, 3 North Avenue, Maker Maxity, Bandra Kurla Complex, (91) 22 6622 1000 (91) 22 6622 1019 Bandra East, Mumbai – 400051, India Daiwa Securities Co. Ltd., Hanoi Representative Office Suite 405, Pacific Palace Building, 83B, Ly Thuong Kiet Street, (84) 4 3946 0460 (84) 4 3946 0461 Hoan Kiem Dist. Hanoi, Vietnam
DAIWA INSTITUTE OF RESEARCH LTD HEAD OFFICE 15-6, Fuyuki, Koto-ku, Tokyo, 135-8460, Japan (81) 3 5620 5100 (81) 3 5620 5603 MARUNOUCHI OFFICE Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6756 (81) 3 5555 7011 (81) 3 5202 2021
New York Research Center 11th Floor, Financial Square, 32 Old Slip, NY, NY 10005-3504, U.S.A. (1) 212 612 6100 (1) 212 612 8417 London Research Centre 3/F, 5 King William Street, London, EC4N 7AX, United Kingdom (44) 207 597 8000 (44) 207 597 8550
13
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Hana Financial Group: share price and Daiwa recommendation trend Date Target Price Rating Date Target price Rating Date Target price Rating 23/01/15 38,000 Outperform 23/02/16 23,000 Hold 23/06/17 49,000 Outperform 09/03/15 33,000 Outperform 05/10/16 30,000 Hold 18/10/17 53,000 Outperform
02/09/15 31,000 Outperform 16/02/17 41,000 Outperform 55,000 53,000 50,000 49,000 45,000
40,000 41,000 38,000 35,000 33,000 30,000 31,000 30,000
25,000 23,000 20,000
15,000
Jul-15 Jul-16 Jul-17
Oct-16 Apr-15 Oct-15 Apr-16 Apr-17 Oct-17
Jun-15 Jan-15 Jan-16 Jun-16 Jan-17 Jun-17
Feb-15 Mar-15 Feb-16 Mar-16 Feb-17 Mar-17
Nov-14 Dec-14 Aug-15 Sep-15 Nov-15 Dec-15 Aug-16 Sep-16 Nov-16 Dec-16 Aug-17 Sep-17 Nov-17
May-15 May-16 May-17
Target price (KRW) Closing Price (KRW)
Source: Daiwa Note: where appropriate, historical target prices have been adjusted to reflect the current share count
SK Hynix: share price and Daiwa recommendation trend Date Target Price Rating Date Target price Rating Date Target price Rating 16/10/15 43,000 Buy 10/10/16 50,000 Buy 04/07/17 77,000 Buy 18/01/16 40,000 Buy 03/01/17 54,000 Buy 25/07/17 87,000 Buy 06/04/16 39,000 Buy 31/01/17 64,000 Buy 09/10/17 100,000 Buy
05/09/16 46,000 Buy 25/04/17 68,000 Buy 100,000 100,000
90,000 87,000 80,000 77,000 70,000 68,000 64,000 60,000 54,000 50,000 50,000 46,000 46,000 43,000 40,000 40,000 39,000
30,000
20,000
Jul-15 Jul-16 Jul-17
Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17
Jun-15 Jan-15 Jan-16 Jun-16 Jan-17 Jun-17
Feb-15 Mar-15 Feb-16 Mar-16 Feb-17 Mar-17
Nov-16 Nov-14 Dec-14 Aug-15 Sep-15 Nov-15 Dec-15 Aug-16 Sep-16 Dec-16 Aug-17 Sep-17 Nov-17
May-17 May-15 May-16
Target price (KRW) Closing Price (KRW)
Source: Daiwa Note: where appropriate, historical target prices have been adjusted to reflect the current share count
14
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
NCsoft: share price and Daiwa recommendation trend Date Target Price Rating Date Target price Rating Date Target price Rating 11/02/15 232,000 Outperform 11/02/16 278,000 Buy 07/02/17 350,000 Buy 09/04/15 236,000 Buy 13/05/16 285,000 Buy 20/07/17 430,000 Buy 13/05/15 245,000 Buy 11/08/16 295,000 Buy 07/08/17 450,000 Buy
04/11/15 243,000 Buy 10/11/16 317,000 Buy 550,000 550,000
500,000
450,000 450,000 430,000 400,000
350,000 350,000 317,000 300,000 295,000 278,000 285,000 250,000 245,000 243,000 232,000 236,000 200,000 202,000 180,000
150,000
Jul-15 Jul-16 Jul-17
Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17
Jun-15 Jan-15 Jan-16 Jun-16 Jan-17 Jun-17
Feb-15 Mar-15 Feb-16 Mar-16 Feb-17 Mar-17
Nov-16 Nov-14 Dec-14 Aug-15 Sep-15 Nov-15 Dec-15 Aug-16 Sep-16 Dec-16 Aug-17 Sep-17 Nov-17
May-17 May-15 May-16
Target price (KRW) Closing Price (KRW)
Source: Daiwa Note: where appropriate, historical target prices have been adjusted to reflect the current share count
15
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Important Disclosures and Disclaimer
The MSCI sourced information is the exclusive property of MSCI Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create any financial products, including any indices. This information is provided on an “as is” basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI and the MSCI indexes are services marks of MSCI and its affiliates. This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Group Inc., and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.
Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including market making activities, derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. Daiwa Securities Group Inc., its subsidiaries or affiliates do and seek to do business with the company(s) covered in this research report. Therefore, investors should be aware that a conflict of interest may exist. The following are additional disclosures.
Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationship For “Investment Banking Relationship”, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Japan Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc. Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc. Investment Banking Relationship Within the preceding 12 months, the subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Neo Solar Power Corp (3576 TT), Acushnet Holdings Corp (GOLF US), No Va Land Investment Group Corporation (NVL VN), PT Totalindo Eka Persada Tbk (TOPS IJ), PT Integra Indocabinet Tbk (WOOD IJ) and PT Buyung Putera Sembada (HOKI IJ). *Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司), Daiwa Capital Markets Singapore Limited, Daiwa Capital Markets Australia Limited, Daiwa Capital Markets India Private Limited, Daiwa-Cathay Capital Markets Co., Ltd., Daiwa Securities Capital Markets Korea Co., Ltd.
Disclosure of Interest of Thanachart Securities Investment Banking Relationship Within the preceding 12 months, Thanachart Securities has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Banpu Power Pcl (BPP TB), Ratchaphruek Hospital (RPH TB)
Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research.
Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.
Korea The developing analyst of this research and analysis material hereby states and confirms that the contents of this material correctly reflect the analyst’s views and opinions and that the analyst has not been placed under inappropriate pressure or interruption by an external party.
Name of Analyst : Thomas Y. Kwon / SK Kim / Mike Oh
Disclosure of Analysts’ Interests If an analyst engaging in or a person who exercises influences on the preparation or publication of a Research Report containing recommendations for general investors to trade financial investment instruments with regard to which the analyst or the influential person has personal interests and if the recommendations contained in the Report may have impacts on the personal interests, Daiwa Securities Capital Markets Korea Co., Ltd.(“Daiwa Securities Korea”)shall ensure that the Analyst or the influential person notifies that he/she has personal interests with regard to:
1. The equity, the equity-linked bonds and the instruments with the subscription right to the equity issued by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); 2. The stock option granted by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); or 3. The equity futures, the equity options and the equity-linked warrants backed by the equity prescribed in the preceding Paragraph 1 as the underlying assets.
Legal Entities subject to Research Report Coverage Restrictions Daiwa Securities Korea hereby states and confirms that Daiwa Securities Korea has no conflicts of interests with the legal entity covered in this Research Report:
1. In that Daiwa Securities Korea does NOT offer direct or indirect payment guarantee for the legal entity by means of, for instance, guarantee, endorsement, provision of collaterals or the acquisition of debts; 2. In that Daiwa Securities Korea does NOT own one-hundredth (or 1/100) or more of the total number of outstanding equities issued by the legal entity; 3. In that The legal entity is NOT an affiliated company of Daiwa Securities Korea pursuant to Sub-paragraph 3, Article 2 of the Monopoly Regulation and Fair Trade Act of Korea; 4. In that, although Daiwa Securities Korea offers advisory services for the legal entity with regard to an M&A deal, the size of the M&A deal does NOT exceed five-hundredths (or 5/100) of the total asset size or the total number of equities issued and outstanding of the legal entity; 5. In that, although Daiwa Securities Korea acted in the capacity of a Lead Underwriter for the initial public offering of the legal entity, more than one-year has passed since the IPO date; 6. In that Daiwa Securities Korea is NOT designated by the legal entity as the ‘tender offer agent’ pursuant to the Paragraph 2, Article 133 of the Financial Services and Capital Market Act or the legal entity is NOT the issuer of the equity subject to the proposed tender offer; this requirement, however applies until the maturity of the tender offer period; or 7. In that Daiwa Securities Korea does NOT have significant or material interests with regard to the legal entity.
Disclosure of Prior Distribution to Third Party This report has not been distributed to the third party in advance prior to public release.
The following explains the rating system in the report as compared to KOSPI, based on the beliefs of the author(s) of this report.
"1": the security could outperform the KOSPI by more than 15% over the next 12 months, unless otherwise stated. "2": the security is expected to outperform the KOSPI by 5-15% over the next 12 months, unless otherwise stated. "3": the security is expected to perform within 5% of the KOSPI (better or worse) over the next 12 months, unless otherwise stated. "4": the security is expected to underperform the KOSPI by 5-15% over the next 12 months, unless otherwise stated. "5": the security could underperform the KOSPI by more than 15% over the next 12 months, unless otherwise stated.
“Positive” means that the analyst expects the sector to outperform the KOSPI over the next 12 months, unless otherwise stated. “Neutral” means that the analyst expects the sector to be in-line with the KOSPI over the next 12 months, unless otherwise stated. “Negative” means that the analyst expects the sector to underperform the KOSPI over the next 12 months, unless otherwise stated.
Additional information may be available upon request.
16
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.
Australia This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.
India This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates, may have received compensation for any products other than Investment Banking (as disclosed)or brokerage services from the subject company in this report or from any third party during the past 12 months. Daiwa India and its associates may have debt holdings in the subject company. For information on ownership of equity, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report. Associates of Daiwa India, registered with Indian regulators, include Daiwa Capital Markets Singapore Limited and Daiwa Portfolio Advisory (India) Private Limited.
Taiwan This research is solely for reference and not intended to provide tailored investment recommendations. This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd. and it may only be distributed in Taiwan to specific customers who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd. and non-customers including (i) professional institutional investors, (ii) TWSE or TPEx listed companies, upstream and downstream vendors, and specialists that offer or seek advice, and (iii) potential customers with an actual need for business development in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research including non-customer recipients of this research shall not provide it to others or engage in any activities in connection with this research which may involve conflicts of interests. Neither Daiwa-Cathay Capital Markets Co., Ltd. nor its personnel who writes or reviews the research report has any conflict of interest in this research. Since Daiwa-Cathay Capital Markets Co., Ltd. does not operate brokerage trading business in foreign markets, this research is prepared on a “without recommendation” to any foreign securities basis and Daiwa-Cathay Capital Markets Co., Ltd. does not accept orders from customers to trade in such foreign securities that are without recommendation. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd. in respect of any matter arising from or in connection with the research.
Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE links at http://www.sec.gov.ph and http://www.pse.com.ph/ respectively.
Thailand This research is distributed to only institutional investors in Thailand primarily by Thanachart Securities Public Company Limited (“TNS”). This report is prepared by analysts who are employed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither TNS, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees accept any liability whatsoever for any direct or consequential loss arising from any use of this research or its contents. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable. However, TNS, Daiwa Securities Group Inc. nor any of their respective parent, holding, subsidiaries or affiliates, nor any of their respective directors, officers, servants and employees make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user. TNS, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates, their respective directors, officers, servants and employees may have positions and financial interest in securities mentioned in this research. Thanachart Securities Public Company Limited, Daiwa Securities Group Inc., their respective parent, holding, subsidiaries or affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this research. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this research.
United Kingdom This research report is produced by Daiwa Securities Co. Ltd. and/or its affiliates and is distributed in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange and Eurex. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.
Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.
Germany This document is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.
Bahrain This research material is distributed in Bahrain by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113
United States This research is distributed into the United States directly by Daiwa Capital Markets Hong Kong Limited and indirectly by Daiwa Capital Markets America Inc. (DCMA), a U.S. Securities and Exchange Commission registered broker-dealer and FINRA member firm, exclusively to “major U.S. institutional investors”, as defined under Rule 15a-6 promulgated under the U.S. Securities Exchange Act of 1934, as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission (SEC). This report is not an offer to sell or the solicitation of any offer to buy securities. U.S. customers wishing to effect transactions in any designated investment discussed in this report should do so through a qualified salesperson of DCMA. Non-U.S. customers wishing to effect transactions in any designated investment discussed in this report should contact a Daiwa entity in their local jurisdiction. The securities or other investment products discussed in this report may not be eligible for sale in some jurisdictions.
Analysts employed outside the U.S., as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA. These analysts may not be associated persons of DCMA, and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
ADDITIONAL IMPORTANT DISCLOSURES CAN BE FOUND AT: https://daiwa3.bluematrix.com/sellside/Disclosures.action
Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions.
17
Animal Spirits: 23 November 2017 Lee & Man Paper Manufacturing (2314 HK): 23 November 2017
Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analyst is named on the report); and no part of the compensation of such analyst (or no part of the compensation of the firm if no individual analyst is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.
The following explains the rating system in the report as compared to relevant local indices, unless otherwise stated, based on the beliefs of the author of the report. "1": the security could outperform the local index by more than 15% over the next 12 months. "2": the security is expected to outperform the local index by 5-15% over the next 12 months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next 12 months. "4": the security is expected to underperform the local index by 5-15% over the next 12 months. "5": the security could underperform the local index by more than 15% over the next 12 months.
isclosure of investment ratings Rating Percentage of total Buy* 65.9% Hold** 20.1% Sell*** 14.0% Source: Daiwa Notes: data is for single-branded Daiwa research in Asia (ex Japan) and correct as of 30 September 2017. * comprised of Daiwa’s Buy and Outperform ratings. ** comprised of Daiwa’s Hold ratings. *** comprised of Daiwa’s Underperform and Sell ratings.
For stocks in Thailand covered by Thanachart Securities, the following rating system is in effect: Ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the rating is BUY. If the downside is 10% or more, the rating is SELL. For stocks where the upside or downside is less than 10%, the rating is HOLD. Unless otherwise specified, these ratings are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating.
For the sector, Thanachart looks at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word “Positive”, is used when Thanachart sees the industry trend improving. An arrow pointing down, or the word “Negative”, is used when Thanachart sees the industry trend deteriorating. A double-tipped horizontal arrow, or the word “Unchanged”, is used when the industry trend does not look as if it will alter. The industry trend view is Thanachart’s top-down perspective on the industry rather than a bottom-up interpretation from the stocks that Thanachart covers. An “Overweight” sector weighting is used when Thanachart has BUYs on majority of the stocks under its coverage by market cap. “Underweight” is used when Thanachart has SELLs on majority of the stocks it covers by market cap. “Neutral” is used when there are relatively equal weightings of BUYs and SELLs].
Conflict of Interest Disclosure: Thanachart Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationships (TNS) TNS may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. TNS market making TNS may from time to time make a market in securities covered by this research.
Additional information may be available upon request.
Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)
If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items. In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction. In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan. For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements. There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements. There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us. Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.
When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us.
Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association
18