Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

USTR requested comments on potential exclusions of products of China subject to tariffs.
The largest exemption categories include Electrical equipment, electronic, mechanical equipment.
The household appliances have over 50% dependence on Chinese imports. 
This article combines the four tariff lists and identifies the goods most reliant on China, and consequently, potential beneficiaries of this Sino-US trade relaxation.

USTR requested comments on potential exclusions of products of China subject to tariffs.
The largest exemption categories include Electrical equipment, electronic, mechanical equipment.
The household appliances have over 50% dependence on Chinese imports. 
This article combines the four tariff lists and identifies the goods most reliant on China, and consequently, potential beneficiaries of this Sino-US trade relaxation.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

Post WH Group Tender Offer buyback, there is a fair bit of good news. <ul>
<li>A month ago, <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> was near its cheapest vs peers in years on a forward earnings basis.</li>
<li>Lean hog prices are finally making a rebound in China after a multi-month cull and NDRC intervention</li>
<li>Hog prices in the US remain strong-ish. </li>
<li>Forward earnings estimates are up. </li>
</ul>But since the strength in WH Group shares immediately post-tender, when people sold the overhang, the stock has fallen sharply. HK and China-listed peers are up an average of 15% in the past month while global-listed peers are down 4%. WH Group resembles a mix of those two baskets but is down 12% in the same period vs +5% for an equal-weighted basket.The shares are now scraping on 4-year lows despite recent 15% accretion, and on an accretion-adjusted basis have underperformed by 30% in bit over a month. That is probably overdone.

Post WH Group Tender Offer buyback, there is a fair bit of good news. 
A month ago, WH Group (288 HK) was near its cheapest vs peers in years on a forward earnings basis.
Lean hog prices are finally making a rebound in China after a multi-month cull and NDRC intervention
Hog prices in the US remain strong-ish. 
Forward earnings estimates are up. 
But since the strength in WH Group shares immediately post-tender, when people sold the overhang, the stock has fallen sharply. HK and China-listed peers are up an average of 15% in the past month while global-listed peers are down 4%. WH Group resembles a mix of those two baskets but is down 12% in the same period vs +5% for an equal-weighted basket.The shares are now scraping on 4-year lows despite recent 15% accretion, and on an accretion-adjusted basis have underperformed by 30% in bit over a month. That is probably overdone.

WH Group (288 HK) Now Cheapest Vs Peers in Yonks

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

Hong Kong SFC reported aggregate short position as of Sep 10. The aggregate short value for equities increased by $423m (+0.6%) WoW and increased by $741m (+1.1%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($3,720m, -3.3% WoW), China Merchants Bank Co., Ltd./3968 HK($2,745m, +1.9% WoW), Zhongsheng Group Holdings Limited/881 HK($1,960m, +0.1% WoW), Meituan/3690 HK($1,759m, +6.5% WoW), Anta Sports Products Limited/2020 HK($1,647m, +5.7% WoW).<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/549/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292021-09-18+12_47_11.png?1631948396" class="editor-image img-responsive" data-smartkarma-image-id="230549"></figure></section>

Hong Kong SFC reported aggregate short position as of Sep 10. The aggregate short value for equities increased by $423m (+0.6%) WoW and increased by $741m (+1.1%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($3,720m, -3.3% WoW), China Merchants Bank Co., Ltd./3968 HK($2,745m, +1.9% WoW), Zhongsheng Group Holdings Limited/881 HK($1,960m, +0.1% WoW), Meituan/3690 HK($1,759m, +6.5% WoW), Anta Sports Products Limited/2020 HK($1,647m, +5.7% WoW).

HK Short Interest: Short Cover for Dongyue, WH Group

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Wh Group Limited (288 HK), Kuaishou Technology (1024 HK), as well as outflows from Hong Kong Exchanges And Clearing Limited (388 HK), Semiconductor Manufacturing International Corporation (981 HK), Anta Sports Products Limited (2020 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In 2020, Southbound trading accounted for 22% of the equity market ADT. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Tencent Holdings Limited (700 HK), Wh Group Limited (288 HK), Kuaishou Technology (1024 HK), as well as outflows from Hong Kong Exchanges And Clearing Limited (388 HK), Semiconductor Manufacturing International Corporation (981 HK), Anta Sports Products Limited (2020 HK).

Hong Kong Connect Flows: Tencent, WH Group, Kuaishou

Event-Driven

The shares of <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> to be returned to shareholders after the Buyback Offer have been returned to shareholders as of this morning. Some appeared to have sold yesterday, some today, and some may not "get notice" of the return until tonight, which means they would sell tomorrow or later. Now we look ahead. Based on a pure price-vs-peers basis, the price today is about 3% below where it was compared to a mix of Chinese and global peers as of the day before the announcement. However, that does not include the 15% accretion to EPS from the buyback. That puts the stock a fair bit cheaper than its peer basket since the announcement 3+ months ago. And it has ALWAYS traded cheap on governance concerns (and one reason why showed up last month in a public spat between the spurned first son and the chairman, discussed in <a href="https://www.smartkarma.com/insights/wh-group-stock-plummets-as-ousted-son-drags-pigs-into-the-mud" target="_blank" data-smartkarma-citation="insights:56282" rel="noopener">WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud</a>. The question investors should ask themselves is.... if the family were ousted, would that be good for the share price? If the answer is yes, then the exposure here probably has some convexity given the shares trade at a multi-year low to Peers on an accretion-adjusted basis.

The shares of WH Group (288 HK) to be returned to shareholders after the Buyback Offer have been returned to shareholders as of this morning. Some appeared to have sold yesterday, some today, and some may not "get notice" of the return until tonight, which means they would sell tomorrow or later. Now we look ahead. Based on a pure price-vs-peers basis, the price today is about 3% below where it was compared to a mix of Chinese and global peers as of the day before the announcement. However, that does not include the 15% accretion to EPS from the buyback. That puts the stock a fair bit cheaper than its peer basket since the announcement 3+ months ago. And it has ALWAYS traded cheap on governance concerns (and one reason why showed up last month in a public spat between the spurned first son and the chairman, discussed in WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud. The question investors should ask themselves is.... if the family were ousted, would that be good for the share price? If the answer is yes, then the exposure here probably has some convexity given the shares trade at a multi-year low to Peers on an accretion-adjusted basis.

Hong Kong

China Foods Limited, through its subsidiaries, operates food processing businesses.  The Company processes and refines edible oil and fats, produces confectionery products, wine and beverage as well as flour including wheat and other grain products.  In addition, China Foods Limited trades food products.

Vitasoy International Holdings Limited, through its subsidiaries, manufactures and distributes food and beverages.

Nissin Foods Co., Ltd. operates as an instant food manufacturing company. The Company produces fried, cup, and buck wheat noodles. Nissin Foods markets its products worldwide.

Lam Soon (Hong Kong) Limited, through its subsidiaries, manufactures and distributes a range of food products, including flour, edible oils and vegetable fats. The Company also manufactures and distributes household cleaning products, including dishwashing detergent, laundry powder, fabric softener, and floor cleanser.

China Starch Holdings Limited manufactures cornstarch. The Company also manufactures L-lysine hydrochloride salt and other ancillary corn-refined and corn-base products such as corn slurry, corn germ, corn fiber, corn glutten meal, and agricultural fertilizers.

Four Seas Mercantile Holdings Limited, through its subsidiaries, manufactures and trades snack foods, confectionery, beverages, and frozen food products. The Company also manufactures and sells ham and ham related products.

Vedan International (Holdings) Limited manufactures and sells fermentation-based food additive and biochemical products, cassava starch-based industrial products, specialty chemical products, and beverages.

China Resources Beer (Holdings) Company Limited is an alcoholic beverage retailer.

Global Bio-chem Technology Group Company Limited manufactures corn refined and corn based biochemical products in China.  The Company also researches and develops corn based biochemical products.  The products mainly comprise cornstarch, corn gluten, corn oil, feed, modified starch, corn sweeteners, and amino acids.

Global Bio-Chem Technology Group (809 HK)

DaChan Food Asia Ltd. produces chicken feed and hatches, slaughters, and processes chicken.

China Mengniu Dairy Company Limited, through its subsidiaries, manufactures and distributes quality dairy products in China. The principal products are liquid milk products, ice cream, and other dairy products, such as milk powder. The Company markets its products under its primary MENGNIU core brand.

Want Want China Holdings Limited manufactures and trades rice crackers, snack food, beverages, and packing materials.  The Company also manufactures wheat, flour, and raw materials for the manufacture of snack foods.  Most of the company's production facilities are located in China and Taiwan.

Dali Foods Group Company Ltd. is a snack food and beverage company. The Company is actively expanding its products offering and distributes its products through retailers.

Ingredion Incorporated refines corn and produces sweeteners and starches.  The Company has customers in a wide range of industries, including the food, soft drink, brewing, pharmaceutical, corrugating, paper, and textile industries.  Ingredion has Company-owned operations, joint ventures, alliances, and technical licenses in countries around the world.

Pilgrim's Pride Corporation produces prepared and fresh chicken products in the United States and Mexico.  Through vertical integration, the Company controls the breeding, hatching, and growing of chickens and the processing, preparation, and packaging of its product lines.  Pilgrim's Pride exports its products to Canada, Eastern Europe, the Far East, and other world markets.

Nestle (Malaysia) Berhad is an investment holding company.  The Company, through its subsidiaries, markets and sells powdered milk and drinks, liquid milk and juices, instant coffee, and instant noodles. Nestle also manufactures and provides packaging for culinary and chocolate-based food products and trades flavoring ingredients.

NISSIN FOODS HOLDINGS CO.,LTD. produces instant noodle and processed food products.  The Company also develops pharmaceuticals.  NISSIN FOODS operates production facilities in overseas countries including Hong Kong, India, U.S., Singapore, and other countries.

Ruchi Soya Industries Limited manufactures soybean oil, vanaspati vegetable fat, texturized soya protein, soya flour and other soya products.  The Group has also developed Palm stearin and Palm olein cooking oils.

Tingyi (Cayman Islands) Holding Corporation, through its subsidiaries, manufactures and sells instant noodles, baked goods, and beverages in China.

Post Holdings Inc. is a food company. The Company manufactures, distributes, and markets a wide range of ready-to-eat cereal products.

WH Group Limited operates as a holdings company. The Company, through its subsidiaries, provides meat processing services, supplies chilled meat, meat products, and other related products.

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WH Group (288 HK)

A Truce in Trade War?

USTR requested comments on potential exclusions of products of China subject to tariffs. We analyze the potential beneficiaries of this Sino-US...

Evelyn Zhang

WH Group (288 HK) Now Cheapest Vs Peers in Yonks

WH Group has not fared well after the end of the 15% accretive buyback offer. Shares are down 30% since the day before the announcement and 40% on...

Travis Lundy

HK Short Interest: Short Cover for Dongyue, WH Group

We highlight week-on-week short covers for Dongyue (189 HK) and WH Group (288 HK) based on the latest HK SFC short aggregate position report.

Ke Yan, CFA, FRM

Hong Kong Connect Flows: Tencent, WH Group, Kuaishou

We highlight Hong Kong Connect Southbound inflows into Tencent (700 HK), WH Group (288 HK), Kuaishou (1024 HK), and outflows from HKEx (388 HK),...

Ke Yan, CFA, FRM

WH Group Post-Tender Outlook

Buyback Offer shares are returned. Now we look forward. Of course, we did before in assuming participation rates. The stock is cheap on accretion...

Travis Lundy

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