China’s manufacturing PMI at 49.4 in July

The National Bureau of Statistics announced that the manufacturing PMI in July was 49.4, 0.1 points down from June’s 49.5, in contraction for three consecutive months. In terms of size of enterprises, the PMI for large corporates was 50.5, an increase of 0.4 points compared to the previous month. The PMI of small and medium-sized enterprises was 49.4 and 46.7 respectively, down 0.4 and 0.7 points. Production, demand and expectations weakened in July. The production index in July was 50.1, compared to the previous value of 50.6. The new orders index dropped to 49.5 from 49.3 in June. The production and business activities expectation index was down to 53.1 from 54.4 in June. While the export and import components improved. The new export orders and import index were 48.5 and 47.0 respectively.

The non-manufacturing PMI for July was 50.2, a decrease of 0.3 points from the previous month. In terms of industries, the business activity index for the construction sector was 51.2, 1.1 point decrease from the previous month, while the business activity index for the service industry was 50.0. For the respective businesses, railway transport, air transport, postal services, telecommunications, radio, television and satellite transmission services, culture, sports and entertainment were in the high expansion range of more than 55. However, the business activity indices for retail, capital market services and real estate were below the threshold. In terms of the Hong Kong stock market, the Hang Seng Index may lack upward momentum in the near term. It is expected to fluctuate between 16,400 – 17,500 points.

In terms of industry, HK telecom’s ARPU is expected to enter a more stable growth cycle, and price competition in the mobile telecom business is also stabilizing.

HKT(6823.HK) reported 1H24 revenue of HK$16.7bn, up 2.9% YoY. EBITDA amounted to HK$6.2bn, up 2.6% YoY, and net profit was HK$2.0bn, up 1.9% YoY. Its total revenue and EBITDA were largely in line with consensus, while net profit was 5% lower, likely due to higher-than-expected interest expense.

HKT reported 5% YoY growth in 1H24 mobile service revenue, thanks to continued 5G migration and roaming recovery. Number of 5G users reached 1.57mn by H124, representing 46% of its post-paid customer base (vs. 41% by 2023). Roaming revenue grew 55% YoY in 1H24, recovering to 98% of pre-Covid level. It has won more than HK$2.5bn new contracts in 1H24, up 27% YoY despite macro headwinds. Management indicates such project pipelines will be implemented over next 18-24 months, to support HKT’s enterprise revenue growth over H224 and 2025. It is recommended to buy at HK$9.7, target at HK$11.3, and stop loss at HK$9.3.

PCCW Limited (0008.HK) reported 1H24 revenue of HK$17.7bn, up 5% YoY, thanks to revenue increase
from both HKT and media business (OTT + Free TV). EBITDA amounted to HK$5.7bn, up 1% YoY.

OTT revenue grew 12% YoY, mainly driven by solid growth of Viu’s paid subscribers at 11% YoY. OTT EBITDA grew 39% YoY in 1H24. Viu OTT remains a top-ranked online streaming platform in SE Asia. The Mgt expects to achieve cashflow breakeven by optimizing content portfolio towards Korean/Chinese/Thai titles and local Viu originals. Viu TV achieved robust revenue in 1H24. Revenue growth accelerated from 5% YoY in 2023 to 23% in 1H24, on the back of a strong artist & event management business in 1H. EBITDA margin remained steady at 19%. Viu TV sees a strong pipeline in 2H with a range of original dramas and variety shows etc, and it will expand the reach of its artists & content to overseas markets. It is recommended to buy at HK$4.05, target at HK$4.7, and stop loss at HK$3.85.