HKEX 0388

[winston]

not vested

HONG KONG EXCHANGES & CLEARING LIMITED (388 HK)

Recommendation : BUY
Fair Value : HKD 440.0

STRUCTURAL GROWTH OPPORTUNITIES WITH ATTRACTIVE VALUATION .

Good cost discipline offset year-on-year (YoY) decline in revenue
MSCI A50 Index Futures gathering momentum
Positive structural trends intact

The latest quarterly results highlighted HKEX’s good cost discipline which help mitigate challenging market conditions and resulted an in-line EBITDA and net profit.

Trading volume experienced healthy growth since the launch in 4Q21. We expect MSCI A50 Connect Futures will be a revenue contributor from 2H this year onwards, as the fee waiver expires in end-June 2022.

Share price has pulled back 15% year-to-date, underperforming Hang Seng Index by 10ppt. The underperformance has been mainly owing to a contraction in the HK equity market activity. Having said that, we believe catalysts for re-rating are still intact.

With more registry shifting to HK and more HK listings, the ADRs homecoming should further drive ADT in the next 1-2 years.

Revenue contribution (in terms of percentage share) from Stock Connect has risen to around mid-teens level. We estimate revenue contribution will grow at more than 20% CAGR in the next few years driven by more ADRs being eligible for the Connect universe as they have the dual-primary listing status and higher trading volume from the Southbound Connect.

The stock is trading at around mid-cycle valuation of 35x forward P/E. While near-term share price performance is likely to be weighed by lower ADT and weaker investor sentiment towards HK and Chinese equities, we believe the long-term prospects of HKEX being a key offshore listing venue for mainland Chinese companies remain intact.

We lower our Fair Value estimate to HKD440 with a lower valuation multiple of 37x forward P/E and an unchanged ADT assumption of HKD185b.

Source: OCBC

[winston]

not vested

HKEX 1Q NP Drops 31% YoY to $2.668B, In Line

HKEX (00388.HK) announced that for 1Q22, the net profit was $2.668 billion, in line with the earlier forecast as compiled by our reporters ($2.566-2.955 billion), down 31% yearly.

The revenue and other income of $4.69 billion was 21% lower than record 1Q21. Basic earnings per share were $2.11.

Dividend History
Announce Date Event Particular
2022/02/24 Final D:HKD 4.1800
2021/10/27 Quarter 3 No Dividend
2021/08/11 Interim D:HKD 4.6900
2021/04/28 Quarter 1 No Dividend

IPO pipeline remains strong with over 150 active applications, including 10 SPAC applications, as at 31 March 2022.

Source: AAStocks Financial News

[winston]

not vested

HK Exchanges & Clearing (388 HK): Weak market sentiment to persist in near term [HOLD, TP HK$361.00]

1QFY22 earnings below market expectation, with 31% drop in net profit y-o-y

Expect weak market sentiment to persist but a better 2H is anticipated where overhangs show easing sign

Revised down FY22/23F earnings by 14/10% to reflect the lower ADT and net investment income expectation

Maintain HOLD with a lower TP of HK$361

Source: DBS

[winston]

not vested

HK Exchanges & Clearing (388 HK): Risk appetite improves amid policy supports and easing overhangs [BUY, Upgrade from HOLD, TP HK$449.00]

Upgrade to BUY with higher TP of HK$449 amid improved risk appetite, with policy supports and market overhangs priced in

ETF Connect cemented HK’s position as China’s financial gateway and will allow mainland investors to buy secondary listing companies

Most of the current key risks in the market are being addressed and ADT is likely to rebound in 2H onward

Revised up FY23F earnings by 8% to reflect earnings from rising HIBOR expectation and launch of ETF Connect

Source: DBS

[winston]

not vested

Hong Kong Exchanges and Clearing (388 HK)
Sequential Improvement From 2H22 Onwards

We expect China ADRs' listing pace to accelerate regardless of the negotiations
between China and US authorities.

Multiple tailwinds in 2H22 include:-
a) the expansion of the Stock Connect scheme,
b) reduced uncertainty on the regulatory front, and
c) rising HIBOR.

Although the outlook seems bullish, we are adjusting down the earnings in 2022 to factor in weak ADT, lackluster NII and sluggish IPO in 1H22.

Maintain BUY with a lower target price of HK$435.43.

Source: UOBKH

https://research.uobkayhian.com/content ... 4e38e37d16

[winston]

not vested

HKEX profit tumbles 27pc to $4.8b amid slowdown

by Caroline Zheng

Interim profit plunged 27 percent from a year ago, more than estimated, amid investment losses, slower trading and fewer initial public offerings.

Interim dividend of HK$3.45, down 26 percent from a year ago.

Revenue and other income fell 18 percent to HK$8.94 billion over the same period, with core business revenue down 11 percent.

Source: The Standard

https://www.thestandard.com.hk/section- ... d-slowdown

[winston]

not vested

Hong Kong Exchanges & Clearing Limited (388 HK) - Near-term headwinds

HKEX’s 2Q22 results came in below market expectations with net profit 12% below consensus estimates at HKD2.2b.

Core revenue was 2% lower than consensus forecasts.

Cash trading revenue declined 16% QoQ, more or less in-line with the decline in quarterly average daily turnover (ADT) but was affected by weaker-than-expected investment income.

The sluggish trading volume & the drop in primary market activities is likely to persist in 3Q22.

Having said that, some of the long-term growth potential remains intact. For instance, the diversification into derivatives, expansion of the Connect program to ETF Connect & Swap Connect, the ongoing conversion of ADRs to HK listing, & the potential relaxation of listing rule.

In our view, the long-term prospects of HKEX being a key offshore listing venue for mainland Chinese companies remain intact.

Share price has risen 4.6% since 1Q22 results announcement, outperforming Hang Seng Index by 5.1 percentage points (ppt). The softer-than-expected 2Q22 result with the negative surprise in operating cost may weigh on near-term share price performance.

The stock is trading at 31x forward price-to-earnings (P/E), which is around historical average level.

For further re-rating, ADT will have to pick up from the current subdued level. Going into 3Q22, investment income is likely to improve on the back of higher interest rates.

For IPO activities, management expects more listings with a strong pipeline of more than 180 companies, & more Secondary to Primary switches from Chinese ADR.

We believe an improvement in market sentiment will be critical in setting the stage for catalysts to play out in supporting valuation re-rating.

We lower our Fair Value estimate to HKD400 with a lower valuation multiple of 36x forward P/E and a lowered ADT assumption of HKD135b. BUY.

Source: OCBC

[winston]

not vested

G Sachs: HKEX (00388.HK) 2Q EPS In Line; Rev. Misses

Goldman Sachs noted in a research report that HKEX (00388.HK)'s 2Q EPS rose nearly 34% YoY to $2.29, in line with broker expectations but below the market forecast of $2.4 to $2.5.

Quarterly revenue hit a record high for the period, rising 18% to more than $5 billion, but still missed the broker's estimate by about 2%, and is 3% lower than expected if excluding investment income.

The broked noted that HKEX 's operating costs were also 4% below expectations and grew by only 3% during the period, ending four consecutive quarters of double-digit percentage gains.

The broker expected the market to focus on future IPO trends, the possibility of a reduction in stamp duty, and how the exchange will enhance stock market liquidity.

Goldman maintained its Buy rating and inclusion into its Conviction Buy List, with a target price of $400, representing an upside of more than 30% from the current price level.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/analy ... stock-news

[winston]

Hong Kong Exchanges and Clearing (388 HK)
1H23: Historically High NII And Derivative ADV Boost Earnings

HKEX reported its second-best interim results with an 18.1% and 33.9% yoy growth in
revenue and net profit respectively due to the strong performance from net investment
income and derivative trading, partly offset by sluggish headline ADT in 1H23.

The IPO market looks set to recover and the expansion of Stock Connect is on track.

Looking ahead, the NII is expected to decline in the coming quarters as we approach the end of
the US rate hike cycle.

Maintain BUY with an unchanged target price of HK$380.00.

Source: UOBKH

https://research.uobkayhian.com/content ... 25f9e74b7d

[winston]

not vested

Hong Kong Exchanges and Clearing (388 HK)
August Headline ADT Sluggish

The headline ADT in Aug 23 was on a downward trajectory with a 0.5% mom decline, due to the pessimistic sentiment on China’s economic outlook.

The potential stamp duty cut may boost market turnover in the short term but a significant improvement on China’s economic fundamentals is necessary to encourage a more substantial ADT recovery.

As such, we continue to expect HKEX’s earnings to be supported by a robust NII.

Maintain BUY. Target price: HK$380.00.

Source: UOBKH

https://research.uobkayhian.com/content ... 402e6c519f