While 2018 has already started, some investors have yet to prepare our portfolio to ride on the opportunities ahead. To help investors better position our portfolio for 2018, we highlight four Chinese stocks that UOB-Kay Hian (UOBKH) has highlighted as potential alpha picks for the year.
Investors Takeaway: 4 Chinese Stocks To Have In Your Portfolio
- Ctrip.com International (Ctrip)
China has been on a megatrend of tourist influx from both domestic and international visitors. China’s largest three airlines showed strong growth where total passengers grew by over ten percent. The strong growth was boosted by domestic travel demand and the recovery in Hong Kong’s tourism market. Ctrip’s two subsidiaries (eLong and LV.com) recently announced a merger, which Ctrip stands to be the biggest beneficiary.
UOBKH notes that Ctrip is currently trading at an undemanding valuation of 0.8 times price-to-earnings growth.
BUY, TP US$57.0
- Universal Medical Financials
Universal Medical Financials is an integrated hospital solutions provider. The group’s management has guided that the Handan hospital deal is likely to close soon. In addition, the on-line system of the Xian hospital’s supply chain has just been launched in January 2018.
Universal Medical Financials is currently trading at 7.7 times FY18-forecasted price-to-earnings, which UOBKH believes is still undervalued. The market often overlooks that and price Universal Medical Financials as a pure leasing company. As such, it is being valued as a financial lessor rather than a healthcare services player. UOBKH expect a re-rating after the company closes the Handan deal and the Xian hospital projects.
BUY, TP HK$9.30
- Wisdom Education International Holdings
Wisdom Education is one of the best share price performers among Hong Kong-listed education stocks. According to UOBKH’s analysis, Wisdom Education’s share price was likely driven by merger and acquisitions related newsflow and its potential inclusion into the HK Stock Connect in the February review.
Wisdom Education announced in early-December 2017 that it would be building a new school in Chaozhou, Guangdong. Wisdom Education’s management continues to show commitment to have a visible pipeline in terms of upcoming new schools and enrolment growth. As such, Wisdom Education is UOBKH’s top pick in China’s education sector with its current valuation of 0.9 times price-to-earnings growth.
BUY, TP HK$5.60
- CSPC Pharmaceutical Group
Following better-than-expected 3Q17 results, UOBKH expects CSPC to continue to outperform in 4Q17.
After CSPC’s inclusion into the latest National Reimbursement Drug List (NRDL), UOBKH believes that monthly sales growth of Jinyouli and NBP will be robust. CSPC also raised some capital late last year through share placement. UOBKH foresees that this could be used for potential acquisitions in the near future. With sustained Vitamin C prices in December 2017, CSPC should be able to deliver on top of market consensus in 4Q17. In addition, CSPC has submitted four drugs for the bioequivalence (BE) test and expects to obtain the BE qualification in 1Q18.
BUY, TP HK$20.10