Wave International (Wave) held its 2019 interim results conference yesterday. The contribution of an associated company declined sharply year-on-year during the period, which surprised the market. However, the growth rate of the software business, which is the core business, is higher than that of its peers.

We believe that Wave is one of the companies benefiting from the localization trend and is expected to support the company's future operating performance.

An affiliate's contribution declined year over year, but a gradual recovery is expected to begin in the second half of 2019. We think the negative factors have been reflected.

Maintaining the “increase in holdings” rating, the target price dropped from HK$5.84 to HK$4.59 (based on 21x 2019 price-earnings ratio), mainly due to a lower net profit forecast.