In today’s briefing:
- Belle Fashion IPO: The Investment Case
- Contemporary Amperex Technology (300750 CH) 1Q24 Better than Expected
- Cancelling CaiNiao’s IPO: What It Means for China’s Express Sector (+Comment on Implied Valuation)
- J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
- Lonking (3339 HK): Policy Tailwind
- [Blue Lotus Healthcare Sector Update]: Bottom-Fishing at the Bottom of the Business Cycle
- EQD | Hang Seng Down: Upcoming Bounce May Not Mean Rally Continuation
- Pre-IPO BenQ BM Holding – Profitability Will Be Disappointing Due To “Flaws” In Business Model
- Cloudchain Pre-IPO – The Positives – Turned Profitable Recently
Belle Fashion IPO: The Investment Case
- Belle Fashion Group (2007708D HK), the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO.
- Belle Fashion originated from Belle International Holdings (2129452D HK), which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as Topsports International Holdings (6110 HK).
- The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage.
Contemporary Amperex Technology (300750 CH) 1Q24 Better than Expected
- CATL announced its 1Q24 net profit of CNY9.2B (+19% YoY), which straight out blew past market expectations
- The fear of ever-declining battery prices is overstated, as CATL has clearly shown it can take lower margins and boost ROEs via higher inventory turnover and high utilisation rates
- Our fair value of CNY253 (+27% UPSIDE) is derived by 23x 2024 PE ratio, which is 1SD below its historical mean. CATL is currently trading at exceptionally low valuations
Cancelling CaiNiao’s IPO: What It Means for China’s Express Sector (+Comment on Implied Valuation)
- A few weeks ago, Alibaba announced it would not seek IPO for CaiNiao
- The change of plans could force BABA/CaiNiao to re-focus on profitability
- BABA will reportedly buy rest of CaiNiao at US$10.2 bn valuation — cheap!
J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
- J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
- As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
Lonking (3339 HK): Policy Tailwind
- Lonking Holdings (3339 HK)‘s demand should pick up in 2H24 supported by the government’s “Action plan to promote large-scale equipment renewals and consumer goods trade-ins”.
- Industry volume sales have already witnessed a narrower YoY decline in Mar, with solid exports of wheel loaders and domestic sales of excavators.
- After going ex- in late-May, its PER will drop to 7.0x and yield will rise to 6.6%. Net cash of HK$1.56/share is more than fully cover its share price.
[Blue Lotus Healthcare Sector Update]: Bottom-Fishing at the Bottom of the Business Cycle
- C1Q24 was marked by liquidity crises in innovative drug and medical device, and depressed margin in digital health. We believe this is a buying opportunity;
- PD-1 has recovered nicely in C2H23 and exceeded our expectation made for 2023.We forecast 20% YoY growth in 2024.Further,pipeline maturity has led to new drugs in autoimmune and metabolic drugs;
- Biosimilar has proven to be part of the solution to deal with low paying ability of Chinese healthcare and denial of access to the high paying US healthcare market.
EQD | Hang Seng Down: Upcoming Bounce May Not Mean Rally Continuation
- The HSI INDEX is currently down for the 2nd week in a row and it is quite oversold on a WEEKLY basis.
- A temporary reversal could come as soon as this week or next week, but we don’t think this will mark a restart of the previous rally.
- Look at the 16250-16050 area to go LONG, this is the area where the index most likely will print a temporary bottom.
Pre-IPO BenQ BM Holding – Profitability Will Be Disappointing Due To “Flaws” In Business Model
- The business model for general hospitals is not good (e.g. heavy assets, challenging operations, low profits, difficult to replicate and expand nationwide), which has never been a profitable business.
- BenQ’s profitability is not attractive if compared with for-profit specialized hospitals. The “benefit chain” of hospitals is actually very complicated, which makes it challenging to attract/retain good medical talents.
- BenQ’s overall revenue growth could slow down in the future. Its profit margin is also not attractive. It would be difficult for BenQ to achieve a high valuation after IPO.
Cloudchain Pre-IPO – The Positives – Turned Profitable Recently
- Cloudchain (CC CH) is looking to raise up to US$200m in its upcoming HK IPO.
- Cloudchain is an independent industry digital finance platform in China, serving anchor enterprises, chain-related enterprises, and financial institutions.
- In this note, we will talk about the positive aspects of the deal.
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