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Chinese to English: Stock market research report General field: Bus/Financial Detailed field: Investment / Securities
Source text - Chinese • 剥离煤化工聚焦主业，资金压力有望明显减轻。近几年公司投资开发了煤化工产业，但经营效益不甚理想，对公司历史业绩产生了一定的拖累。随着公司已公告重组事项的顺利开展，煤化工板块有望剥离，有利于优化公司业务结构，推进战略调整，进一步聚焦发电主业。重组后，公司资产负债率有望下降（克旗及阜新煤制气后续投资或逾300亿元），有利于未来新建电力项目的投资。值得指出的是，由于多伦煤化工目前持续亏损，14Q1亏损近5亿元，出售煤化工资产价格可能低于账面值，产生一次性减值损失，对公司2014年业绩形成影响。
Translation - English
• With the coal chemical unit to be spun off, the pressure on capital is expected to ease.
During the past several years, the company has invested and tapped into the coal chemical industry, which, due to its unsatisfactory performance, historically has to some extent been a drag on earnings of the company.
As the restructuring announced in its statement has been going forward in smooth progress, the coal chemical segment is set to be divested, helping to streamline business operational structure, push ahead with strategic adjustment and better focus on its core business of electricity generation.
The debt ratio is on track to drop after the restructuring (the coal gasification operations in Ke banner, which is at the administrative division of the Inner Mongolia Autonomous Region in the People's Republic of China, and Fuxin needs a follow-on funding that may exceed RMB 30 billion ), and it bodes well for investing in electric power projects to be built in the future.
It's worthwhile to note that coal chemical operations at Duolun have been in the red with losses of almost RMB 500m in 14Q1, the coal chemical assets is, therefore, likely to be sold at a lower price than its book value, leading to a one-time write-down and weighing on the company's full-year revenue.
• A mid-term inorganic growth is on the horizon.
The China Datang Corporation has promised to make the company a platform for integration of all the thermal power operations in the Group. And the group will inject its Hebei province-located thermal power operational assets into the company no later than October 2015 when their profitability improves to meet the relevant criteria. While the group's other unlisted thermal power assets (assets of the thermal power unit in Hebei province excluded) will be injected into the company no later than October 2018 when these assets boost their profitability to meet the relevant criteria.
As we estimate that the potential assets to be injected are equal to 117.1% of the company's current total installed capacity.
• Earnings forecast & valuation
Factoring the impact of restructuring out, and based on the latest coal prices and an assumption that thermal power tariffs will see a cut by RMB 0.15/kwh in October 2014, we maintain our forecast its EPS at RMB0.35/0.39/0.51 in 2014E/2015E/2016E, respectively. The current share price implies PE of 10.1X /9.2X /7.0X in 2014E/2015E/2016E, respectively. We project its EPS at RMB0.38/0.43 in 2015E/2016E following the restructuring.
The restructuring of coal chemical operations will reduce the uncertainty of the company's profitability and make its future earnings less flexible as well. Hence we think the impact of the restructuring will be neutral to positive and assign a PE ratio of 11X in 2014E, corresponding to a target price of RMB3.90. We maintain our "OVERWEIGHT" rating.
English to Chinese: Investment note General field: Bus/Financial Detailed field: Investment / Securities
Source text - English Market Environment
• Global equities declined in June, as uncertainty due to tense negotiations between Greece and international creditors tempered investors’ enthusiasm.
• U.S. stocks sank over the month despite generally favorable U.S. economic data, driven by worries over the possibility of a Greek debt default. The May nonfarm payrolls report showed a better-than-expected gain as the economy added 280,000 jobs; the unemployment rate ticked up to 5.5% due to greater labor force participation. The Commerce Department’s report that retail sales rose 1.2% in May and data showing that both new and existing home sales rose strongly were also encouraging. The Fed’s decision at its June policy meeting to leave interest rates unchanged was widely expected.
• With the exception of Ireland, developed European markets declined and underperformed U.S. shares. Although concerns about Greece weighed on European markets, the eurozone economy showed improvement at the end of the second quarter, according to Markit’s composite purchasing managers’ index. The gauge of manufacturing and service sector health rose to 54.1—the highest level in over four years—in June from 53.6 the previous month.
• Developed Asian markets held up slightly better than their peers in Europe. Data showed that Japan’s economy performed better in the first quarter than initially thought as gross domestic product advanced at an annualized rate of 3.9%, marking the second consecutive quarter of expansion. Business investment grew at an annualized rate of 11% during the three-month period and provided the biggest boost to the economy.
• Emerging markets equities also retreated in June. In Latin America, Brazilian stocks posted solid returns in dollar terms, as the real appreciated versus the dollar. Brazil’s central bank announced plans to lower its inflation target range, indicating that policymakers anticipate taking stronger measures to fight inflation. In Turkey, the lira fell to a new low versus the dollar and equities declined amid political uncertainty after the ruling party failed to win a majority in elections. Among Asian markets, China and Indonesia recorded significant losses. The sell-off in Chinese stocks was partly due to the central bank’s efforts to curb margin trading, which has helped to fuel the equity rally over the last year. When the central bank reduced the funds in the banking system available for margin loans, many investors who had purchased stocks with borrowed money had to sell their holdings to cover amounts owed to brokers, intensifying the market downturn.
• Sector performance within the MSCI All Country World Index was negative. Utilities, materials, and information technology produced the greatest losses, while telecommunication services held up best.
Portfolio Highlights
• Your portfolio outperformed the MSCI All Country World Index for the month ended 30 June 2015. At the sector level, stock selection drove relative outperformance.
• Holdings in the information technology sector contributed the most to relative returns. Shares of social media platform Facebook spiked as the firm’s successful monetization efforts excited investors. We believe Facebook will continue to deliver impressive growth, as the firm has multiple revenue drivers that span both near and long term.
• Names in financials also aided relative results. Despite facing persistently low interest rates, J.P. Morgan Chase & Co. benefited from increased trading revenue due to higher volatility, particularly in the foreign exchange market. We continue to hold a favorable view of the company as regulatory headwinds appear to be fading and management has demonstrated excellent cost discipline and improved efficiencies across its businesses.
• Conversely, stock selection in energy dragged down relative performance. Columbia Pipeline Group owns and operates a series of natural gas pipelines integrated with underground storage systems, most notably in the Marcellus and Utica shale formations. Shares sank with the broader energy sector as investors continued to worry about muted global energy demand; prices for natural gas, to which the firm has considerable exposure, have been particularly weak. We believe Columbia Pipeline Group is a high-quality company that offers more growth potential and lower asset-level risk than other midstream oil and gas companies.
• At the regional level, holdings in the U.S. boosted results, while stock selection in Europe ex-UK proved detrimental.
Outlook
• From a global perspective, little has changed over the second quarter, with economic improvement in the U.S. and Europe leading global equities modestly higher.
• The U.S. economy continues to improve, with economic activity expanding moderately in the second quarter after having changed little during the first three months of the year. The pace of job gains has gathered momentum while the unemployment rate has remained steady, and we expect that wages will eventually improve. A number of large M&A deals were announced during the quarter as companies continue to benefit from cheap money and are putting more of their significant cash balances to use to both reduce capacity and improve their competitive positioning. With the economy improving, we still anticipate that the Federal Reserve will raise short-term interest rates sometime later this year or early next year, which should add to financial market volatility and create additional investment opportunities.
• The economic backdrop in Europe is also improving, but remains one or two years behind the U.S. as labor reform, taxes, regulation, and, more importantly, an aging population, have created structural headwinds for the continent. While global financial markets have reacted negatively to recent developments in Greece, the declines have been relatively contained, and we think it is unlikely to have a long-term effect. With European stocks rallying more than 40% from October 2014 through March of this year with the help of quantitative easing, the recent market disruptions have allowed us to expand our exposure to the region at more reasonable valuations.
• Emerging markets in general are more attractive than they have been in quite some time, but remain extremely heterogeneous. While valuations vary widely by country, this is an appropriate reflection of fundamentals and currency concerns in developing nations. As such, we continue to be selective with our emerging markets investments.
• While it has become more difficult to find attractive opportunities as equity markets have largely been picked over, we continue to focus on building our portfolio from the bottom up while maintaining a disciplined view toward risk. We seek stocks where return on capital is poised to improve—fueled by improving industry structures, secular demand growth, and company-specific drivers. Given our robust research platform and collective experience, we are confident in our ability to find unique growth stories before their potential for substantial prosperity becomes obvious to other investors.
Translation - Chinese 市场环境
由于希腊和国际债权人之间的紧张谈判引发的不确定性导致投资者信心下降，6 月全球股市纷纷下跌。
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