skyworth | 751 hkpg.jrj.com.cn/acc/res/hk_res/stock/2016/11/24/bfd...nov 24, 2016 · skyworth...

TECHNOLOGY | NOVEMBER 24, 2016

Analyst certifications and other important disclosures on last page 1

SKYWORTH | 751 HK China TV sales slow while overseas sales pick up

Soft 1H17 results

Internet revenue on track for HK$100m in 2017F

Maintain Outperform but cut target price to HK$6.42

Soft 1H17 results. Skyworth generated 1H17 revenue of HK$20.3b. This was

3.8% YoY higher than revenue earned in 1H16 and 1.1% below Bloomberg

consensus. China TV sales accounted for 46.2% of total revenue while

overseas TV sales accounted for 22.2%. As of 9M17, Skyworth’s

China/overseas TV sales volume had grown 17.2%/104.2% YoY to 5.2m/4.4m

units, achieving 47.5%/72.9% of the company’s FY17F sales target of

11m/6m. Gross margin remained flat YoY at 20.6%, in line with consensus. 4K

TVs made up 42% of TV sales volume out of the 5.2m units sold in China.

Blended China TV ASP for 1H17 was down 15.9% YoY to HK$2,123. Operating

margin contracted 0.3ppt to 6.5% due to higher marketing and

administrative expenses related to businesses acquired overseas.

Attributable profit was down 3.8% YoY to HK$836m. The company’s dividend

payout ratio remained a stable 33.8% after an interim dividend of 9.60 HK

cents per share was declared.

HK$100m internet revenue target for FY17F achievable. Skyworth booked

HK$50m in internet revenue in 1H17, of which 75% was from content revenue

sharing and 22% from advertising. We believe the company’s HK$100m

internet revenue target for 2017F is easily achievable and we expect

Skyworth to double that figure in 2018F. Skyworth’s DAU as of Oct 2016

reached 7m following the upgrade of its internet user data collection

system. We expect internet monetization to enter a rapid growth phase in

the next two-to-three years. We lower our DCF valuation for Skyworth’s

internet platform from HK$3.14 to HK$3.00 owing to the increased number of

shares.

Maintain Outperform but cut target price to HK$6.42. We cut our China TV

ASP assumption for 2017F/2018F by 8.6%/9.4% to reflect our cautious view on

the China TV market. However, we raise our overseas TV shipment

assumption for the same year by 80.0%/71.4% to reflect strong overseas

expansion. Our SOTP valuation assumes (1) DCF of Skyworth’s internet

revenue stream of HK$3.00, and (2) a HK$3.40 per share valuation for the TV

hardware segment. We cut our TV hardware target P/E multiple from 6x to

5x to reflect the more challenging China TV environment. Our new target

price of HK$6.42, down from HK$7.30, implies 30% potential upside and

translates to 9.3x/8.8x 2017F/2018F P/E.

Outperform (maintained)

Current price: Target:

HK$4.91 HK$6.42

(as at 23 Nov 2016) (down from HK$7.30)

Trading data

52-week range HK$3.81 – 6.45

Market capital (H-share)(m) HK$14,462/US$1,899

Shares outstanding (m) 2,994

3M average daily T/O (m share) 9

3M average daily T/O (US$ m) 6

Expected 12-month return (%) 31

Source: Bloomberg, CCBIS

Price vs HSCEI


Forecast and valuation

Year to 31 Mar 2014 2015 2016 2017F 2018F

Revenue (HK$ m) 39,480 40,135 42,695 44,942 49,055

YoY (%) 4.4 1.7 6.4 5.3 9.2

Net profit (HK$ m) 1,254 3,128 2,170 2,027 2,143

YoY (%) N/A 149.4 N/A N/A 5.7

Fully diluted EPS (HK$) 0.45 1.10 0.75 0.69 0.73

YoY (%) -18.0 147.7 -32.2 -7.9 5.7

P/E (x) 11.0 4.4 6.6 7.1 6.7

DPS (HK$) 0.15 0.21 0.24 0.23 0.24

Dividend yield (%) 3.1 4.2 4.9 4.7 5.0

P/B (x) 1.2 0.9 0.9 0.8 0.7

ROAE (%) 11.5 23.2 13.4 11.1 10.5

Net debt/equity (%) 23.6 Net cash 18.5 4.2 Net cash

Source: Company, CCBIS

Stock performance

Performance over 1M 3M 12M

Absolute -11.2 -14.0 -3.5

Relative (%) to HSCEI -11.0 -14.8 +2.0


Cheng Xing, CFA

(852) 3911 8265

[email protected]

Ronnie Ho

(852) 3911 8258

[email protected]

2

3

4

5

6

7

8

9

10

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

No

v-1

0

Fe

b-1

1

Ma

y-1

1

Se

p-1

1

De

c-1

1

Ma

r-1

2

Ju

l-1

2

Oc

t-1

2

Ja

n-1

3

Ma

y-1

3

Au

g-1

3

No

v-1

3

Ma

r-1

4

Ju

n-1

4

Oc

t-1

4

Ja

n-1

5

Ap

r-1

5

Au

g-1

5

No

v-1

5

Fe

b-1

6

Ju

n-1

6

Se

p-1

6

HK$

Skyworth HSCEI (rebased)

8955203/21311/20161125 08:39

SKYWORTH (751 HK) | November 24, 2016

CCBI SECURITIES 2

1H17 results review

Skyworth generated 1H17 revenue of HK$20.3b. This was 3.8% YoY higher than revenue

earned in 1H16 and 1.1% below Bloomberg consensus. China TV sales accounted for

46.2% of total revenue while overseas TV sales accounted for 22.2%. As of 9M17,

Skyworth’s China/overseas TV sales volume had grown 17.2%/104.2% YoY to 5.2m/4.4m

units, achieving 47.5%/72.9% of the company’s FY17F sales target of 11m/6m. Gross margin

remained flat YoY at 20.6%, in line with consensus. 4K TVs made up 42% of TV sales volume

out of the 5.2m units sold in China. Blended China TV ASP for 1H17 was down 15.9% YoY to

HK$2,123. Operating margin contracted 0.3ppt to 6.5% due to higher marketing and

administrative expenses related to businesses acquired overseas. Attributable profit was

down 3.8% YoY to HK$836m. The company’s dividend payout ratio remained a stable

33.8% after an interim dividend of 9.60 HK cents per share was declared.

Skyworth – 1H17 review

HK$ m 1H17 1H16 YoY (%) FY17F % of FY17F

1H17

consensus

vs. B’berg

consensus

Revenue 20,291 19,549 3.8 44,942 45 20,524 -1.1

COGS -16,121 -15,526 3.8 -35,686 45

Gross profit 4,170 4,023 3.7 9,256 45 4,224 -1.3

Gross margin (%) 20.6 20.6 0.0 20.6 20.6 0.0

Other income and gains 917 572 60.3 1,500 61

Selling and distribution costs -2,379 -2,236 6.4 -4,944 48

Administrative expenses -1,390 -1,040 33.7 -2,712 51

Operating expenses -3,769 -3,276 15.0 -7,655 49

Operating expenses (%) -18.6 -16.8 -1.8 -17.0

Operating profit 1,318 1,319 -0.1 3,100 43 837 57.5

Operating margin (%) 6.5 6.7 -0.3 6.9

Financing cost -174 -85 104.7 -324 54

Share of results of JCE -2 4 -150.0 4 -50

Share of results of associates 0 -2 -100.0 -3 0

Profit before tax 1,142 1,236 -7.6 2,777 41

Income tax -194 -251 -22.7 -550 35

Effective tax rate (%) -17.0 -20.3 3.3 -19.8

Profit after tax 948 985 -3.8 2,227 43

Minority interest -112 -116 -3.4 -200 56

Profit attributable to shareholders 836 869 -3.8 2,027 41

Net margin (%) 4.1 4.4 -0.3 4.5

Weighted number of shares (m) 2,940 2,877 2.2 2,940

EPS (diluted) (HK$) 0.28 0.30 -5.8 0.69 41

Recurring EPS diluted HK$ 0.28 0.30 -5.8 0.69 41

Dividend per share HK$ 0.096 0.097 -1.3 0.231 42


8955203/21311/20161125 08:39


CCBI SECURITIES 3

Skyworth – major forecast changes

Major changes FY16 FY17F FY18F

China TV sales ('000)

Old estimate 10,036 10,900 11,100

New estimate 10,036 10,300 10,400

Change (%) 0.0 -5.5 -6.3

Overseas TV sales

Old estimate 4,410 5,000 7,000

New estimate 4,410 9,000 12,000

Change (%) 0.0 80.0 71.4

Blended China TV ASP

Old estimate 2,404 2,408 2,393

New estimate 2,404 2,202 2,167

Change (%) 0.0 -8.6 -9.4

Overseas TV ASP

Old estimate 1,358 1,400 1,450

New estimate 1,358 1,050 1,100

Change (%) 0.0 -25.0 -24.1

Total revenue (HK$ m)

Old estimate 42,695 46,661 51,315

New estimate 42,695 44,942 49,055

Change (%) 0.0 -3.7 -4.4

Gross margin (%)

Old estimate 21.9 20.4 20.4

New estimate 21.9 20.6 20.6

Change (%) 0.0 0.2 0.2

Net profit (HK$ m)

Old estimate 2,170 2,029 2,152

New estimate 2,170 2,027 2,143

Change (%) 0.0 -0.1 -0.4

EPS (HK$)

Old estimate 0.75 0.70 0.74

New estimate 0.75 0.69 0.73

Change (%) 0.0 -1.5 -1.8

Source: CCBIS

8955203/21311/20161125 08:39


CCBI SECURITIES 4

HK$100m internet revenue target for FY17F is achievable

Skyworth booked HK$50m in internet revenue in 1H17, of which 75% was from content

revenue sharing and 22% from advertising. The company expects to achieve its 2017F full-

year target of HK$100m and double this target in 2018F. As of Oct 2016, Skyworth’s DAU

was 7m following the upgrade of its internet user data collection system. Management

expects internet monetization to enter a rapid growth phase in the next two-to-three years

and double by 2018F. We lower our DCF valuation for Skyworth’s internet platform from

HK$3.14 to HK$3.00 owing to the increased number of shares.

Skyworth – breakdown of Internet revenue in 2017F

Source: CCBIS

By end-Oct 2016, Skyworth’s cumulative/daily active users was only 5.0%/0.7% below that

of TCLM owing to a 17.6% QoQ jump in DAU growth in Oct 2016 that came about

because of an upgrade of Skyworth’s in-house internet user data collection system. The

upgrade has helped Skyworth close its DAU gap with TCLM (1070 HK, Neutral).

Skyworth – DAU growth


Start-up Ads

26%

Video Ads

5%

Paid movie

48%

Block Ads

5%

Gaming

4%

Education

4%

Shopping

4%Travel

4%

8.2 8.6 9.1 9.5 10.0 10.6 11.1 11.4 11.9 12.6 13.2 13.5 13.9 14.2 14.6 15.0 15.3 15.7 16.2

7.3 7.6 7.9 8.2 8.6 9.1 9.6 10.1 10.8

11.6 12.2 12.7 13.0 13.4 13.7 14.0 14.5 14.9 15.4

3.2 3.3 3.4 3.6 3.8 4.0 4.4 4.6 4.8 5.2 5.8 5.8 5.9 6.1 6.2 6.4 6.5 6.7 7.1

3.1 3.0 3.1 3.4 3.5 3.9 4.1 4.4 4.7 5.0 5.2 5.5 5.6 5.7 5.8 5.8 5.9 6.0 7.0

2

4

6

8

10

12

14

16

18

TCLM accumulated total active users Skyworth accumulated total active users

TCLM DAU Skyworth DAU

m

8955203/21311/20161125 08:39


CCBI SECURITIES 5

DCF valuation of Skyworth internet revenue

Internet revenue DCF 2015 2016 2017F 2018F 2019F 2020F

Accumulated activated TV users (m) 7.0 12.7 21.2 29.9 38.9 48.6

Year-end daily active users (DAU) (m) 3.2 5.5 9.5 14.2 21.0 28.0

Average DAU m -- 4.3 7.5 11.9 17.6 24.5

Start-up ads

Number of daily start ups -- 1.00 1.00 1.00 1.00 1.00

Annual start-up views (m) -- 1,580 2,730 4,325 6,424 8,943

Ad charge per 1,000 views (RMB) -- 10.0 10.0 10.0 10.0 12.0

Revenue (RMB m) -- 16 27 43 64 107

Skyworth’s revenue share -- 100 100 100 100 100

Skyworth’s revenue (RMB m) -- 15.8 27.3 43.3 64.2 107.3

% of internet revenue -- 40 26 34 41 50

Video ads

Daily number of video plays -- 0.90 0.90 0.91 0.92 0.93

Annual video ads views (m) -- 1,422 2,457 3,936 5,910 8,317

Ad charge per 1,000 views (RMB) -- 20 20 20 20 20

Revenue (RMB m) -- 28 49 79 118 166




Paid movie revenue

Paying user penetration rate (%) -- 10 12 14 16 18

Yearly active paying users (m) -- 0.4 0.9 1.7 2.8 4.4

Viewing frequency per year -- 1.0 1.0 1.0 1.0 1.1

Yearly views (m) -- 0.4 0.9 1.7 2.8 4.9

Cost per view (RMB) -- 10.0 10.0 10.0 10.0 10.0

Revenue (RMB m) -- 4 9 17 28 49




Incentives from content providers -- -- 50.0 51.0 52.0 53.1

As % of internet revenue -- -- 48 41 34 25

Front page block ads -- 4.8 5.0 5.3 5.6 5.8

As % of internet revenue -- 12 5 4 4 3

Other internet-related revenue -- 16.0 16.8 17.6 18.5 19.4

Gaming -- 4.0 4.2 4.4 4.6 4.9

Education -- 4.0 4.2 4.4 4.6 4.9

Shopping -- 4.0 4.2 4.4 4.6 4.9

Travel -- 4.0 4.2 4.4 4.6 4.9

As % of internet revenue -- 40 16 14 12 9

Skyworth's service revenue --

Skyworth's total service revenue (RMB m) -- 40 105 126 155 215

Labor and other costs -- -39 -60 -65 -75 -90

Gross margin (%) -- 1 32 36 39 44

Operating cash flow after tax -- 0 33 46 60 94

Year -- -- -- 1 2 3

Discount factor (WACC = 9.4%) -- -- 1.00 0.92 0.85 0.79

Discounted cash flows -- -- 33.4 42.2 51.2 74.3

PV of FCF (RMB m) -- -- 3,599 -- -- --

NPV of terminal value (RMB m) -- -- 3,498 -- -- --

Enterprise value (RMB m) -- -- 7,098 -- -- --

Enterprise value (HK$ m) -- -- 8,872 -- -- --

Fully diluted shares m -- -- 2,940 -- -- --

Equity value per share (HK$) -- -- 3.02 -- -- --


8955203/21311/20161125 08:39


CCBI SECURITIES 6

Valuation

We cut our China TV ASP assumption for 2017F/2018F by 8.6%/9.4% to reflect our cautious

view on the China TV market. However, we raise our overseas TV shipment assumption for

the same year by 80.0%/71.4% to reflect strong overseas expansion. Our SOTP valuation

assumes (1) DCF of Skyworth’s internet revenue stream of HK$3.00, and (2) a HK$3.40 per

share valuation for the TV hardware segment. We cut our TV hardware target P/E multiple

from 6x to 5x to reflect the more challenging China TV environment. Our new target price

of HK$6.42, down from HK$7.30, implies 30% potential upside and translates to 9.3x/8.8x

2017F/2018F P/E.

Skyworth – sum-of-the-parts valuation

2017F HK$ per share

1. Hardware valuation (HK$ m) 9,968 3.4

Attributable profit 2,027 --

Profit from internet revenue 33 --

Recurring profit exclude internet revenue 1,994 --

Hardware valuation multiple (x) 5 --

2. Internet revenue valuation (HK$ m) 8,914 3.0

Equity value (HK$ m) 18,881 6.4

Number of shares (m) 2,940 2,940

Value per share (HK$) 6.42 6.42

Implied 2017F P/E (x) 9.3

Source: CCBIS

8955203/21311/20161125 08:39


CCBI SECURITIES 7

China TV sector valuation matrix

Stock code

CCBIS

Share

price*

Market

cap EPS growth (%) P/E

Company rating (LC) (US$ m) CY15 CY16F CY17F CY15 CY16F CY17F

China TV brands

Haier 1169 HK Not Rated 12.60 4,521 2.5 -3.9 -1.9 10.9 11.3 11.5

Hisense 600060 CH Not Rated 17.60 3,335 0.4 18.7 58.3 16.2 13.6 8.6

Changhong 600839 CH Not Rated 4.50 2,985 N/A N/A N/A N/A N/A N/A

TCL Multimedia 1070 HK Neutral 3.90 862 22.2 31.8 31.0 17.5 13.3 10.1

Konka 000016 CH Not Rated 30.20 1,463 N/A N/A N/A

Skyworth 751 HK Outperform 4.91 1,899 -32.2 -7.9 5.7 6.6 7.1 6.7

Average 12.8 11.3 9.2

Global TV brands

Samsung 005930 KS Not Rated 1,650,000 196,488 -3.1 14.3 10.6 12.3 10.8 9.7

Panasonic 6752 JP Not Rated 1,065 23,044 56.7 -3.1 -14.1 13.2 13.6 15.8

Sony 6758 JP Not Rated 3,334 37,148 24.7 -196.1 -39.3 -26.3 27.3 45.0

Toshiba 6502 JP Not Rated 406 15,183 -111.4 3786.2 -128.8 -139.0 -3.6 12.4

LG Electronics 066570 KS Not Rated 46,000 6,372 -51.4 89.1 22.5 19.3 10.2 8.3

Sharp 6753 JP Not Rated 189 8,307 -410.8 284.5 -83.7 -9.9 -2.6 -15.8

Average -21.7 9.3 12.6

* Closing price as at 23 Nov 2016

Source: Bloomberg, CCBIS estimates

Skyworth forward P/E


0

5

10

15

20

25

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Fwd PE Mean -sd +sd

7x

3x

11x

Unit

8955203/21311/20161125 08:39


CCBI SECURITIES 8

SKYWORTH | 751 HK – FINANCIAL SUMMARY

Profit and loss

FYE 31 Mar (HK$ m) 2014 2015 2016 2017F 2018F

TVs 29,484 30,141 30,112 32,130 35,740

Digital set-top-boxes 4,162 4,376 5,913 6,031 6,212

White appliances 2,532 2,358 2,366 2,484 2,609

Internet revenue 0 0 0 123 148

Other 3,302 3,260 4,304 4,174 4,347

Revenue 39,480 40,135 42,695 44,942 49,055

COGS (31,851) (32,112) (33,332) (35,686) (38,936)

Gross profit 7,629 8,023 9,363 9,256 10,119

Other income 748 1,128 1,356 1,500 1,200

Operating expenses (6,570) (6,571) (7,337) (7,655) (8,060)

EBIT 1,807 2,580 3,382 3,100 3,259

Net financial inc. (exp.) (87) (161) (239) (324) (324)

JVs and associates (20) 2 7 1 1

Other – 1,755 – – –

Profit before tax 1,700 4,176 3,150 2,777 2,936

Tax (267) (826) (623) (550) (581)

Total profit 1,433 3,350 2,527 2,227 2,354

Minority interest (179) (222) (357) (200) (212)

Net profit attributable to

shareholders

1,254 3,128 2,170 2,027 2,143

Core profit 1,254 1,766 2,170 2,027 2,143

Reported EPS (HK$) 0.45 1.10 0.75 0.69 0.73

Diluted EPS (HK$) 0.45 1.10 0.75 0.69 0.73

Core EPS (HK$) 0.45 0.62 0.75 0.69 0.73

Dividend (HK$ m) 421 583 594 669 707

Dividend per share (HK$) 0.15 0.21 0.24 0.23 0.24

Balance sheet

FYE 31 Mar (HK$ m) 2014 2015 2016 2017F 2018F

Cash and equivalents 3,023 3,317 5,023 7,292 8,795

Pledge dep., restrict. cash 1,572 423 493 493 493

Receivables 15,973 14,597 16,263 16,183 17,933

Inventory 4,188 4,342 5,494 5,182 5,760

Other current assets 1,424 2,382 4,703 4,703 4,703

Total current assets 26,180 25,061 31,976 33,853 37,684

Property, plant & equip. 4,436 5,223 5,818 6,354 6,033

JVs and associates 73 72 60 64 68

Other non-current assets 1,455 2,966 4,206 4,206 4,206

Total non-current assets 5,964 8,261 10,084 10,624 10,307

Total assets 32,144 33,322 42,060 44,478 47,992

Short-term borrowings 5,156 1,274 4,950 4,950 4,950

Trade and bills payable 13,335 13,989 15,614 15,551 16,969

Other current liabilities 1,010 806 737 737 737

Total current liabilities 19,501 16,069 21,301 21,238 22,656

Long-term borrowings 547 1,312 3,155 3,155 3,155

Other non-current liabilities 748 738 904 904 904

Total non-current liabilities 1,295 2,050 4,059 4,059 4,059

Total liabilities 20,796 18,119 25,360 25,297 26,715

Share capital 283 285 295 295 295

Reserves & retained profits 11,244 15,140 16,762 19,087 21,193

Shareholders' equity 11,527 15,425 17,057 19,382 21,488

Minority interest (179) (222) (357) (200) (212)

Total equity 11,348 15,203 16,700 19,181 21,276

Total equity and liabilities 32,144 33,322 42,060 44,478 47,992

Cash flow

FYE 31 Mar (HK$ m) 2014 2015 2016 2017F 2018F

Profit before tax 1,700 4,176 3,150 2,777 2,936

Amortization & depr. 396 443 675 848 1,021

Net financial charge adj. 87 (82) 239 324 324

Non-cash items adjusted 231 (1,813) 499 506 507

Chg in working capital 2,511 1,528 (1,109) 329 (910)

Tax paid (455) (453) (623) (550) (581)

Operating cash flow 4,470 3,799 2,831 4,235 3,297

Disposal of fixed assets 24 1,913 – – –

Capex (1,915) (1,116) (1,900) (1,000) (700)

Investment (626) (1,916) 189 (3) (3)

Net int. received (paid) 63 199 – – –

Other (1,122) 1,261 (385) 10 10

Investment cash flow (3,576) 341 (2,096) (993) (693)

Change in borrowings 170 (3,112) 5,519 – –

Equity issues – 2 10 – –

Dividend paid (489) (503) (594) (548) (682)

Other 29 (222) (239) (424) (419)

Financing cash flow (290) (3,835) 4,696 (972) (1,101)

Change in cash flow 604 305 5,431 2,269 1,502

Cash & equivalents, begin 2,285 2,918 3,317 5,023 7,292

Forex 29 (6) – – –

Cash & equivalents, end 3,023 3,317 5,023 7,292 8,795

Free cash flow 2,555 4,596 931 3,235 2,597

Ratios

FYE 31 Mar 2014 2015 2016 2017F 2018F

Growth (%)

Revenue 4.4 1.7 6.4 5.3 9.2

EBITDA (4.1) 37.2 34.2 (2.7) 8.4

EBIT (9.5) 42.8 31.1 (8.3) 5.1

Net profit (16.5) 149.4 (30.6) (6.6) 5.7

Core net profit (16.5) 40.8 22.9 (6.6) 5.7

Profitability (%)

Gross margin 19.3 20.0 21.9 20.6 20.6

EBITDA margin 5.6 7.5 9.5 8.8 8.7

EBIT margin 4.6 6.4 7.9 6.9 6.6

Net margin 3.2 7.8 5.1 4.5 4.4

Core net margin 3.2 4.4 5.1 4.5 4.4

Tax rate 15.7 19.8 19.8 19.8 19.8

Efficiency (days)

Inventory turnover 53 48 54 55 51

Trades receivable 130 123 116 119 114

Trades payable 93 101 105 103 97

Returns & leverage (%)

ROAA 4.1 9.6 5.8 4.7 4.6

ROAE 11.5 23.2 13.4 11.1 10.5

Net debt (cash)/equity 23.6 (4.8) 18.5 4.2 (3.2)

Liquidity (x)

Current ratio 1.3 1.6 1.5 1.6 1.7

Quick ratio 1.1 1.3 1.2 1.4 1.4


8955203/21311/20161125 08:39


CCBI SECURITIES 9

Rating definitions:

Outperform (O) – expected return > 10% over the next twelve months Neutral (N) – expected return between -10% and 10% over the next twelve months Underperform (U) – expected return < -10% over the next twelve months

Analyst certification:

The author(s) of this document, hereby declare that: (i) all of the views expressed in this document accurately reflect his personal views about any and all of the subject securities or issuers and were prepared in an independent manner; and (ii) no part of any of his compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this document; and (iii) he receives no insider information/non-public price-sensitive information in relation to the subject securities or issuers which may influence the recommendations made by him. The author(s) of this document further confirm that (i) neither he nor his respective associate(s) (as defined in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission issued by the Hong Kong Securities and Futures Commission) has dealt in or traded in the securities covered in this document within 30 calendar days prior to the date of issue of this document or will so deal in or trade such securities within 3 business days (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) after the date of issue of this document; (ii) neither he nor his respective associate(s) serves as an officer of any of the companies covered in this document; and (iii) neither he nor his respective associate(s) has any financial interests in the securities covered in this document.

Disclaimers:

This document is prepared by CCB International Securities Limited. CCB International Securities Limited is a wholly-owned subsidiary of CCB International (Holdings) Limited (“CCBIH”) and China Construction Bank Corporation (“CCB”). Information herein has been obtained from sources believed to be reliable but CCB International Securities Limited, its affiliates and/or subsidiaries (collectively “CCBIS”) do not guarantee, represent and warrant (either express or implied) its completeness or accuracy or appropriateness for any purpose or any person whatsoever. Opinions and estimates constitute our judgment as of the date of this document and are subject to change without notice. CCBIS seeks to update its research as appropriate, but various regulations may prevent it from doing so. Besides certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate according to the analyst's judgment. Forecasts, projections and valuations are inherently speculative in nature and may be based on a number of contingencies. Readers should not regard the inclusion of any forecasts, projections and valuations in this document as a representation or warranty by or on behalf of CCBIS that these forecasts, projections or valuations or their underlying assumptions will be achieved. Investment involves risk and past performance is not indicative of future results. Information in this document is not intended to constitute or be construed as legal, financial, accounting, business, investment, tax or any professional advice for any prospective investors and should not be relied upon in that regard. This document is for informational purposes only and should not be treated as an offer or solicitation for the purchase or sale of any products, investments, securities, trading strategies or financial instruments of any kind in any jurisdiction. CCBIS makes no representations on the availability of the securities covered in this document (or related investment) to the recipients. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Neither CCBIS nor any other persons accept any liability whatsoever for any loss or damages (whether direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential) arising from any use of this document or its contents or otherwise arising in connection therewith. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The opinions and recommendations herein do not take into account prospective investors’ financial circumstances, investment objectives, or particular needs and are not intended as recommendations of particular securities, financial instruments or strategies to any prospective investors. The recipients of this document should consider this document as only a single factor in marking their investment decision and shall be solely responsible for making their own independent investigation of the business, financial condition and prospects of companies referred to in this document. Readers are cautioned that (i) the price and value of securities referred to in this document and the income derived from them may fluctuate; (ii) past performance is not a guide to future performance; (iii) any analysis, ratings and recommendations made in this document are intended for long-term (at least for 12 months) and is not linked to a near-term assessment of the likely performance of the securities or companies in question. In any event, future actual results may differ materially from those set forth in any forward-looking statements herein; (iv) future returns are not guaranteed, and a loss of original capital may occur; and (v) fluctuations in exchange rates may adversely affect the value, price or income of any security or related instrument referred to in this document. It should be noted that this document covers only those securities or companies as specified herein and does not extend to any derivative instruments thereof, the value of which may be affected by many factors and may not correspond with the value of the underlying securities. Trading in these instruments is considered risky and are not suitable for all investors. While all reasonable care has been taken to ensure that the facts stated herein are accurate and that the forward-looking statements, opinions and expectations contained herein are based on fair and reasonable assumptions, CCBIS has not been able to verify independently such facts or assumptions and CCBIS shall not be liable for the accuracy, completeness or correctness thereof and no representation or warranty is made, express or implied, in this regard. All pricing referred to in this document is as of the close of local market for the securities discussed, unless otherwise stated and for information purposes only. There is no representation that any transaction can or could have been effected at those prices, and any prices do not necessarily reflect CCBIS’ internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions could result in substantially different results. Any statements which may be contained herein attributed to a third- party represent CCBIS’ interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed or endorsed by the third party. Reproduction and distribution of these third party contents in any form is prohibited except with the prior written consent of such third party. The recipients must make their own assessments of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigation as they may consider necessary or appropriate for such

8955203/21311/20161125 08:39


CCBI SECURITIES 10

purpose.

Recipients should seek independent legal, financial, accounting, business, investment and/or tax advice if they have any doubt about the contents of this document and satisfy themselves prior to making any investment decision that such investment is in line with their own investment objectives and horizons.

Use of hyperlinks to other internet sites or resources (if any) as referred to in this document is at users’ own risk. They are provided solely for the purpose of convenience and information and the content of these internet sites or resources does not in any way form part of this document. The contents, accuracy, opinion expressed, and other links provided at these sites are not investigated, verified, monitored, or endorsed by CCBIS. CCBIS expressly disclaims any responsibility for and does not guarantee, represent and warrant (either express or implied) the completeness, accuracy, appropriateness, availability or security of information found on these websites. Users of these websites are solely responsible for making all enquiries, investigation and risk assessment before proceeding with any online or offline access or transaction with any of these third parties. All activities conducted by users via or at these websites are at their own risk. CCBIS does not guarantee the security of any information users may forward or be requested to provide to any third parties via these websites. Users are deemed to have irrevocably waived any claims against CCBIS for any loss or damage suffered as a result of any access to or interaction with any of these websites.

Upon request CCBIS may provide specialized research products or services to certain customers focusing on the prospects for specific securities as compared with other covered securities over varying time horizons or under differing market conditions. While the views expressed in these situations may not always be directionally consistent with the long-term views expressed in the analyst's published research, CCBIS has procedures in place to prevent selective disclosure and will update the relevant readers when our views has changed. CCBIS also has procedures in place to identify and manage potential conflicts of interest that may arise in connection with its research business and services. Chinese Wall procedures are also in place to ensure that any confidential and/or price sensitive information is properly handled. CCBIS will use its best endeavors to comply with the relevant laws and regulations in this respect. Nevertheless, the recipients should be aware that CCB, CCBIS, their affiliates and/or their officers, directors and employees may do business with the issuer(s) of the securities covered in this document, including investment banking business or direct investment business or may hold interest in (and/or later add or dispose) such securities (or in any related investment) for themselves and/or on behalf of their clients from time to time. As a result, investors should be aware that CCBIS may have a conflict of interest that could affect the objectivity of this document and CCBIS will not assume any responsibility in respect thereof. Further, the information contained herein may differ or be contrary to opinions expressed by other associates of CCBIS or other members of the CCB or CCBIH group of companies.

This document is for the information of the institutional and professional customers of CCBIS only and should not be distributed to retail customers. This document is not directed at you if CCBIS is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that CCBIS is permitted to provide research material concerning investments to you and that you are permitted and entitled to receive and read the document under relevant legislation and regulations. In particular, this document is only distributed to certain US Persons to whom CCBIS is permitted to distribute according to US securities laws, but cannot otherwise be distributed or transmitted, whether directly or indirectly, into the US or to any other US person. This document also cannot be distributed or transmitted, whether directly or indirectly, into Japan and Canada and not to the general public in the People’s Republic of China (for the purpose of this document, excluding Hong Kong, Macau and Taiwan) unless under applicable laws.

Any unauthorized reproduction or redistribution by any means to any persons, in whole or in part of this document is strictly prohibited and CCBIS accepts no liability whatsoever for the actions of third parties in distributing this research report.

If this document has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. CCBIS therefore does not accept liability for any errors or omissions in the contents of this document, which may arise as a result of electronic transmission.

The disclosures contained in this document prepared by CCBIS shall be governed by and construed in accordance with the laws of Hong Kong.

Copyright 2016 CCBIS. The signs, logos and insignia used in this research report and the company name “CCB International Securities Limited” are the registered and unregistered trademarks of CCB, CCBIH and/or CCBIS. All rights are hereby reserved. All material presented in this document, unless indicated otherwise, is under copyright to CCBIS. This document or any portion hereof may not be reproduced, sold or redistributed without the written consent of CCBIS.

CCB International Securities Limited 12/F, CCB Tower, 3 Connaught Road, Central, Hong Kong Tel: (852) 3911 8000 / Fax: (852) 2537 0097

8955203/21311/20161125 08:39

skyworth | 751 hkpg.jrj.com.cn/acc/res/hk_res/stock/2016/11/24/bfd...nov 24, 2016 · skyworth...

Documents