HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>While China's U-turn on COVID policy is expected to bring consumption rebound in 2023, the near-term surge in infections will weigh negatively on retail sales in Dec and Jan.</li>
<li>Residents are spending more time at home in the first wave, with subways and shopping malls empty. We think this will cast negativity on 4Q22 and 1Q23 consumer discretionary profit.</li>
<li>It is prudent to take some monies off the table, particularly F&amp;B stocks like <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/xiabuxiabu-catering-mgt-chn-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:76:1" rel="noopener">Xiabuxiabu (520 HK)</a> and <a href="https://www.smartkarma.com/entities/helen-s-international-holdings" target="_blank" data-smartkarma-citation="entities:34113:1" rel="noopener">Helen's (9869 HK)</a> which have almost doubled from trough.</li>
</ul>


While China's U-turn on COVID policy is expected to bring consumption rebound in 2023, the near-term surge in infections will weigh negatively on retail sales in Dec and Jan.
Residents are spending more time at home in the first wave, with subways and shopping malls empty. We think this will cast negativity on 4Q22 and 1Q23 consumer discretionary profit.
It is prudent to take some monies off the table, particularly F&amp;B stocks like Haidilao (6862 HK), Xiabuxiabu (520 HK) and Helen's (9869 HK) which have almost doubled from trough.


China COVID Policy: Near-Term Pains for Consumer Discretionary

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of December 9th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight inflows into HKEx, Ping An H&amp;T, and outflows from Tencent, Xiaomi, Li Ning, Meituan, Country Garden Service.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of December 9th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight inflows into HKEx, Ping An H&amp;T, and outflows from Tencent, Xiaomi, Li Ning, Meituan, Country Garden Service.


Hong Kong Connect Flows (Dec 9th): HKEx, Ping An H&T, Tencent, Xiaomi, Li Ning, Meituan

Equity Bottom-Up

<ul>
<li>The potential IPO of <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>'s 52.7% owned Amer Sports is positive in unlocking the latter's underlying value, though the impact is quite limited.</li>
<li>Assuming a P/S of 1.8x (30% discount to peers) and 25% enlargement in share capital, we estimate the exercise may bring ~HK$6n of potential pre-tax deemed disposal gain.</li>
<li>Although Anta Sports may not receive any cash, it can still pay out special dividends given its Rmb12bn net cash, and this will raise FY23 dividend yield to 3.1%.  </li>
</ul>


The potential IPO of Anta Sports Products (2020 HK)'s 52.7% owned Amer Sports is positive in unlocking the latter's underlying value, though the impact is quite limited.
Assuming a P/S of 1.8x (30% discount to peers) and 25% enlargement in share capital, we estimate the exercise may bring ~HK$6n of potential pre-tax deemed disposal gain.
Although Anta Sports may not receive any cash, it can still pay out special dividends given its Rmb12bn net cash, and this will raise FY23 dividend yield to 3.1%.  


Anta Sports (2020 HK): Assessing the Impact of a Potential Amer Sports IPO

China Tourism Group Duty Free / Equity Bottom-Up

<ul>
<li>In the near-term, China's relaxation of COVID-combating measures will boost consumption and demand for cross-province travel. <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corporation-limited" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (1880 HK)</a> is a beneficiary.</li>
<li>Hotel bookings in Sanya have surged over the last two days, reflecting positive demand reaction. However, China's full border opening likely in 2023 is a challenge to CDFC.  </li>
<li>Low base in FY22 will drive 45% earnings growth for FY23. However, valuations are not cheap at 33.8x PER for FY23, a significant premium to consumption sector and international peers.</li>
</ul>


In the near-term, China's relaxation of COVID-combating measures will boost consumption and demand for cross-province travel. China Tourism Group Duty Free Corp Ltd (1880 HK) is a beneficiary.
Hotel bookings in Sanya have surged over the last two days, reflecting positive demand reaction. However, China's full border opening likely in 2023 is a challenge to CDFC.  
Low base in FY22 will drive 45% earnings growth for FY23. However, valuations are not cheap at 33.8x PER for FY23, a significant premium to consumption sector and international peers.


CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Equity Capital Markets

Weilong Delicious Global Holdi / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/weilong-delicious-global-holdings-ltd" target="_blank" data-smartkarma-citation="entities:33378:1" rel="noopener">Weilong Delicious Global (WDG HK)</a>  a spicy snack food company in China, aims to raise around US$140m in its Hong Kong IPO.</li>
<li>According to F&amp;S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.</li>
<li>We have covered various aspects of the deal in our previous notes, in this note, we will talk about  the final valuations.</li>
</ul>



Weilong Delicious Global (WDG HK)  a spicy snack food company in China, aims to raise around US$140m in its Hong Kong IPO.
According to F&amp;S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
We have covered various aspects of the deal in our previous notes, in this note, we will talk about  the final valuations.


Weilong Delicious Global IPO - Tepid Recent Performance Still Makes It Look Expensive

China

ANTA Sports Products Limited designs, develops, manufactures, and markets sportswear, including sports footwear and apparel for professionals and the general public.

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Anta Sports Products (2020 HK)

China COVID Policy: Near-Term Pains for Consumer Discretionary

Near-term negative impact of China's U-turn in COVID policy on consumer discretionary has been underestimated by the market. It is prudent to take...

Osbert Tang, CFA

Hong Kong Connect Flows (Dec 9th): HKEx, Ping An H&T, Tencent, Xiaomi, Li Ning, Meituan

We analyzed southbound Hong Kong connect flows in the past week and highlight flows for HKEx, Ping An H&T, Tencent, Xiaomi, Li Ning, Meituan,...

Ke Yan, CFA, FRM

Anta Sports (2020 HK): Assessing the Impact of a Potential Amer Sports IPO

A potential IPO of Anta Sports' 52.7%-owned Amer Sports may generate ~HK$6n of deemed disposal gain, based on P/S of 1.8x and 25% capital...

Osbert Tang, CFA

CTG Duty Free (1880 HK): Near-Term Positive but It Is Not Cheap at All

China's relaxation of COVID control will bring better near-term outlook, as reflected by surge in Sanya's hotel bookings. There are still...

Osbert Tang, CFA

Weilong Delicious Global IPO - Tepid Recent Performance Still Makes It Look Expensive

Weilong Delicious Global, a spicy snack food company in China, aims to raise around US$140m in its Hong Kong IPO. In this note, we talk about the...

Sumeet Singh

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