China

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• In this insight, we take a look at the rankings of potential ADDs and potential DELs for the March 2025 index rebal event.
• We see two index changes based on the latest available data. However, the reference period is not complete which means our expectations can change over the next few weeks.

• Welcome back to our weekly editorial on everything commodity and energy-related!This week is all about China as the Politburo and PBoC have announced new (undefined) stimulus measures aimed at simultaneously countering tariffs from the Trump administration in 2025 and bolstering the economy, regaining confidence as China battles structural issues.
• This naturally raises the question of how this will impact commodities.
• As the world’s largest importer of commodities by a significant margin, China’s injection of capital into its economy could provide a substantial boost.

• If ORG cannot obtain the SAFE approval by the end of December, this indicates something is wrong in the process. Then the success rate of this transaction is greatly reduced.
• Acquiring CPMC is in line with Baosteel’s strategic goals and CPMC is important to Baosteel.So, the possibility of state-owned capital to agree to withdraw completely from CPMC is not high.
• It’s unclear whether Zhang Wei will continue to side with ORG, or whether he still want to exit. This actually depends on the renegotiations between Baosteel/China Foods/COFCO and Zhang Wei.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We provide updates on results for our HK-listed universe and highlights from our recent management visits to Hong Kong. 

• REPT BATTERO Energy raised around US$270m in its Hong Kong IPO in Dec 2023. Its pre-IPO investors holding around US$1.2bn worth of shares will be released from their lockup soon.
• REPT is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
• In this note, we will talk about the lockup dynamics and possible placement.

• Pou Sheng, the second-largest sporting goods retailer in China, is facing challenges like declining sales
• The company is trading at an undervalued price with a negative EV but remains profitable
• Despite concerns about China’s geopolitical situation and low cash returns, Pou Sheng offers a high dividend yield and has a strong balance sheet with significant net tangible asset value, indicating potential for upside if sales performance improves.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• The author presents an analysis of TAL Education Group, highlighting its low valuation and steady growth among Chinese ADRs
• TAL has a current market cap of $4.5B, net cash of $3.8B, and generated $200m in operating cash flow in the last quarter
• The company is projected to have $4.5B in net cash by the end of 2025, with revenue expected to grow at a 30% CAGR and reach over $2.5B with a 15% operating margin by 2026

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Back on the 29th August 2024, CPMC Holdings (906 HK) announced  ORG Technology Co., Ltd. A (002701 CH) had secured SAMR approval.  Mofcom and NDRC approvals subsequently followed. 
• The pre-condition long stop date is the 6th January. SAFE is the outstanding pre-condition. Separately, Zhang Wei’s 22.01% irrevocable expired on the 5th December – with no HKEx announcement.
• Quite a lot to pack in with 16 business days to the pre-con long stop. Sounding out people involved with the transaction would be ideal.  So that’s what I did. 

• Fosun Tourism (1992 HK) disclosed a share buyback of the company through a scheme of arrangement at HK$7.80, a 95.0% premium to the last close price of HK$4.00. 
• The key condition is the scheme be approved by at least 75% of disinterested shareholders (rejection by <10% of disinterested shareholders).
• The timing is arguably opportunistic, as the shares are down 31% YTD. Nevertheless, the high takeover premium and a potential scrip option lower the vote risk.    

• When Fosun Tourism (1992 HK), a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was Fosun International (656 HK)
• Not quite. We do have a Scheme, but it’s being enacted by way of a buyback. Fosun Int’l still abstains from voting, but will control 100% if the Scheme completes.
• The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question.  Clean deal.

• For the first time in 2024, Prosus NV (PRX NA) lodges a substantial shareholder notice,  as its stake in Tencent (700 HK) dips below 24%. 
• Preceding my comments on Prosus, Tencent and Naspers (NPN SJ), are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Consistent compounders, stocks with steady earnings growth and excess returns over a long period of time, are difficult to find. It’s even more difficult to find reasonably valued compounders.
• From the universe of large Asian companies, we screen those with steady profit growth (>10%) and excess returns in each of last 10 years and over next three forecast years.
• Our list of 20 inexpensive compounders comprises 10 from onshore China, 5 from HK, 3 from India and 1 each from Japan and the Philippines.

• Geely’s sales volume grew by 27% YoY in November 2024.
• BEV delivery growth rate accelerated to 173% YoY in November from 26% YoY in July.
• Geely’s forward financial ratios are lower than its major competitors.

• Long Beijing Capital International Airport (BCIA) (694 HK), and short Air China Ltd (H) (753 HK) strategy should bring in good sector-neutral returns over the next 12 months. 
• BCIA will return to profit next year, fuelling the rebound of its share price. Air China, however, may face uncertainties related to stronger USD and higher-than-expected US interest rates.
• Higher duty-free sales for BCIA should propel earnings outlook. BCIA’s P/B is well below the 5-year average, while Air China has already returned to the historical average level.

• Based on the new announcement released by CR Sanjiu, due diligence, auditing, evaluation, valuation and verification of material assets reorganization are in progress. Approvals by the SASAC/SAMR haven’t been obtained.
• Sanjiu is now facing performance headwinds due to VBP. So, Sanjiu needs new/stable performance increments to alleviate future performance pressure, and completing the acquisition of Tasly becomes even more urgent.
• China Resources excels in M&As and has strong internal business integration capabilities.We’re optimistic about the future synergies after the merger. Valuation for Tasly is expected to reach P/E of 30.

• TAL Education Group’s second quarter fiscal year 2025 results provide an insightful look into the company’s current trajectory, presenting both promising developments and areas to watch cautiously.
• On the positive side, TAL Education’s robust year-over-year growth in net revenues stands out, with reported figures of USD 619.4 million, marking an impressive increase of over 50%.
• This growth is largely backed by the company’s strategic expansion in its learning services, particularly the enrichment learning programs like Peiyou small classes.

• Viomi has undergone a radical transformation to shed unprofitable business lines and focus on the home water systems market which is poised to experience steady growth in China in coming years.
• The company is hoping to expand into fairly mature international markets including the US with new home water systems that offer advantages over current offerings.
• The company’s investment in a largely automated manufacturing facility should help the company achieve above average margins in the Chinese market as utilization rates improve.

• ORG Technology Co., Ltd. A (002701 CH)’s offer for CPMC Holdings (906 HK) has one remaining precondition: SAFE approval.
• Mr Wei’s irrevocable was terminated. Nevertheless, as a seller, he will accept the offer, as the shares trade below the offer price, and there is no competing offer. 
• The precondition long stop date is 6 January, sufficient time to satisfy the precondition. It would be highly unusual to secure MOFCOM and NDRC approval but not SAFE approval.

• BYD’s deliveries grew by 68% YoY in November 2024, which provides a positive signal for the whole NEV (New Energy Vehicle) industry.
• In November, Seres’ sales volume increased by 27% YoY with NEV up by 55% YoY.
• Arawana, the top cooking oil producer, finished acquiring 11% of Lihua’s stock.

• Mao Geping Cosmetics raised around US$345m in its Hong Kong IPO.
• Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
• We have looked at the company’s past performance in our previous notes. In this note, we will talk about the trading dynamics.

• China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, is offering to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
• CNBM’s parent – the CNBM Parent Concert Group – will not participate in the tender, therefore elevating its stake to 50.01% of total shares from 45.02% currently. 
• That % increase necessitates a whitewash waiver so as to not make a mandatory general Offer. 

• Fosun Pharma is just “a platform” and its performance mainly relies on the contributions of subsidiaries. However, such investment-driven business model has led to the current performance difficulties.
• Although the motivation/underlying logic for Fosun Pharma to privatize Henlius are solid, we don’t know how this privatization ranks in terms of strategic significance of capital operations within Fosun’s system.
• If, for example, Fosun Pharma finds more important acquisitions/capital expenditures, the priority of Henlius’ privatization could fall. So, we think if it takes too long, there may be more uncertainties.

• Strong price action across the market this week coupled with implied vols having caught down to historic vols has put a floor on implied vols.
• Tencent sees strong call buying in December 410 and 420 Calls with month end 400 strike Put buying for December and January.
• Cathay Pacific, +21% over past 3 weeks, HSBC, at 52-week high plus up 38% on the year and BABA, down 21% from Oct 02 high all active names.

• Although vols have stabilized this week both HSI and HSCEI are still trading about 3-4 vol above where they were pre-stimulus and are still not monetizing.
• Strong price action this wek helped keep a floor under implied vols. 
• Positions were added in both HSI and HSCEI with demand tilted towards up-strike Calls given the rally on the week.

• QuantumPharm (2228 HK) listed in Hong Kong after raising US$126m towards the bottom end of its IPO price range. Its six-month lockup will expire on 12th Dec 2024.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• In the US, the November nonfarm payrolls came in marginally above expectations at 227 k (220 k e), and were up significantly from the upwardly revised 36 k figure for October (which was impacted by two hurricanes and a strike at Boeing).
• Still, the three-month average payroll growth slowed from earlier in the year to 173 k.
• Meanwhile, the unemployment rate inched up to 4.2% (4.1% e / 4.1% p). Average hourly earnings growth remained steady at 0.4% m-o-m (0.3% e / 0.4% p) and 4.0% y-o-y (3.9% e / 4.0% p).

• We met with the management of Dream International (1126 HK) on our trip to Hong Kong and summarize our major takeaways. 
• The Plush Toy segment continues to experience growth driven by Disney revenues, but the Plastic Toys segment continues to be plagued by destocking. 
• Despite a 15% YoY earnings decline on our numbers, the stock trades at 5x FY24 PE with an 11.0% dividend yield and 40% of the market cap in net cash. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
• Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP). 

• Mainland share market volumes continue to be better than HK and SOUTHBOUND volumes, but SB volumes rebounded, tech saw limited net buying, BABA was bought but other major tech sold.
• The first leg of China’s retaliatory acts against US trade measures appeared with export bans on gallium, germanium, antimony, graphite products, etc. These will not be lifted soon.
• China is also retaliating against the Phils, Vietnam, Taiwan and changing tack in Europe. The next couple of years threatens to be “interesting times.

• SOUTHBOUND gross trading activity rebounded about 20% this week vs the previous week. Net buying was a little lower but still strong. Market volumes overall in HK remain weak.
• Alibaba Group Holding (9988 HK) was again the top buy and EV names XPeng (9868 HK) and BYD (1211 HK) were bought, but tech as a whole was sold.
• I continue to expect HK-listed tech to see ongoing buying. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. 

• China National Building Material (3323 HK) has launched a conditional share buyback to acquire a maximum of 841.7 million H Shares (18.47% of H Shares) at HK$4.03.
• The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts. 
• The buyback is unattractive and will leave minorities short-changed, weakening a stretched balance sheet. Nevertheless, while potentially tricky, the votes should pass. 

• We view China National Building Material (3323 HK)‘s proposal to buy back 9.98% of H-shares as a good opportunity for the shareholders to cash out in their position.
• Without further significant government stimulus, CNBM will find it difficult to return to the HK$4.03 offer price. Potential weak FY24 results also mean downside risks.
• Other companies with high gearing and low P/B may follow CNBM’s move. We single out the infrastructure construction companies as the likely candidates.

• After Lifestyle China (2136 HK) was suspended pursuant to then Takeovers Code, the takeaway was that Thomas Lau with 74.91% of shares out would table a Scheme.
• Which is exactly what unfolded. What was not expected was a stingy 21.7% premium to last close. 
• The Offer Price has not been declared final. Lifestyle China is trading at 0.11x P/B. This Offer deserves a bump. Otherwise minorities should vote this down.

• Innovent did a good job in 24Q3. The 2024 full-year revenue is estimated to reach above RMB8 billion. Peak sales to reach the level of RMB20 billion is entirely possible.
• It’s a mistake for Innovent to sell a minority stake in Fortvita to Lostrancos. Alhough the Subscription Agreement has been terminated, the confidence in long-term holding this stock has decreased.
• Innovent’s internationalization needs to be based on the parent company as the main body, which is the most suitable and in line with the interests of shareholders/investors/management/employees of the Company.

• Lifestyle China (2136 HK) disclosed a Cayman scheme privatisation offer from Mr Thomas Lau at HK$0.913 per share, a 21.7% premium to the last close price of HK$0.75. 
• The offer is unattractive compared to precedent transactions, peer multiples, and historical trading ranges. It has not been declared final. 
• While no shareholder holds a blocking stake, the high AGM minority participation rates and emerging retail opposition suggest a high chance of a deal break. Therefore, a bump is probable.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Kioxia Holdings (285A JP) IPO, Hulic Co Ltd (3003 JP) and Sanrio (8136 JP) placements.
• Event-Driven developments: ESR Group (1821 HK), HKBN Ltd (1310 HK), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), De Grey Mining (DEG AU), Sg Fleet (SGF AU). 

• The Medical Insurance Bureau of Hubei Province issued two documents on the VBP of TCM patent medicines.Shineway’s core product Qing Kai Ling is included, which would bring pressure on performance.
• It’s time to be cautious about the outlook for GLP-1s. We may need to be mentally prepared in advance that the actual market size of GLP-1s is only US$100 billion.
• Recent changes at the top of CNPGC have left some investors hopeful that China TCM will resolve horizontal competition as scheduled next year,but current bet on shares reversal isn’t wise.

• I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Five new deals this week: De Grey Mining (DEG AU)‘s scrip merger; and cash Offers for ESR (1821 HK), HKBN (1310 HK), Lifestyle China (2136 HK), and Suntec (SUN SP).
• Key updates/news took place on: Latin Resources (LRS AU), Hotel Property Investments (HPI AU), Sg Fleet (SGF AU), Malaysia Airports (MAHB MK), Greatview Aseptic Packaging (468 HK), and MPHB (MPHB MK).

• Last week, the Hang Seng Index (HSI INDEX) gained 2.3% an increase while volatility slightly declined by 0.2%. The volatility surface provides the context for last week’s most popular strategies, 
• Low implied volatility and a flat term structure support long volatility strategies and Calendar Spreads. In a bullish sentiment shift, almost half the strategies reflect a bullish view.
• The largest volume trade, an Iron Condor, is a rare example of a strategy generating premium income. This insight provides both aggregate data analysis and drill-down into individual trade parameters.

• BYD’ deliveries continued to grow strongly by 68% in November.
• BYD required its suppliers to reduce prices by 10% for 2025.
• We believe BYD will continue the price war in 2025.

• Two hours before China Mobile’s pre-conditional voluntary Offer announcement on the 2 December, HKBN Ltd (1310 HK)  flagged a possible separate Offer from I Squared Asia-backed HGC Global Communication (HGC). 
• No price was mentioned, although HKBN and I Squared “are in discussions on the terms of the proposal (including the price).” The media is reporting a HK$5-HK$6/share price range.
• Apart from anti-competition concerns via a HKBN/HGC tie-in; would HGC even get approval from the powers that be to proceed with a merger?

• In Greatview Aseptic Packaging (468 HK) (GAPack)’s monthly update, there is no update.
• No further progress on the management Offer. Four months and counting. In the meantime, Shandong Xinjufeng Technology (301296 CH) (XJF) secured SAMR approval; and the appointment of two friendly directors.
• IF (and when) XJF’s Offer becomes open to acceptance and the IFA is supportive, management should back the Offer if their own Offer is unlikely to materialise. 

• NIO (NIO US) is a Chinese premium electric vehicle manufacturer listed across three exchanges. 
• NIO will likely struggle to reignite its growth with its three-brand strategy in a fiercely competitive market. Its promise to reach breakeven in 2026 is likely to be broken.  
• NIO’s valuation is stretched as it trades at a material premium to median Chinese EV peers’ EV/Sales and growth-adjusted EV/Sales multiples. 

• ESR Group (1821 HK)’s preconditional scheme offer from the consortium is either cash (HK$13.00), scrip or a combination of cash/scrip. The offer is final.
• The precondition relates to several regulatory approvals. The precondition satisfaction does not carry the same risk as the China Traditional Chinese Medicine (570 HK) deal break.   
• The irrevocable (31.03% of outstanding shares) ensure that shareholders with blocking or close to blocking stakes are supportive. This is a done deal, with timing the key risk. 

• HK$13.00/Share (deemed final). That’s the key takeaway here as the Starwood/Warburg Pincus Consortium (finally) tables a firm offer, by way of a pre-conditional Scheme.
• Pre-Conditions are extensive, with a long stop date of the 4th September 2025.
• HK$13.00 is below prior expectations of a HK$14+ handle. But with irrevocables of 30.79% of the register (and 51.24% of Scheme shares), this is done. A scrip option is afforded.

• Robosense Technology (2498 HK) has seen its sales of LiDAR solution systems grow substantially as it achieved the ability to mass produce for its customers.
• The company integrates proprietary hardware and software, creating a barrier to entry for most LiDAR competitors, who produce only the hardware system.
• Robosense announced a strong set of results for 3Q24 and expects to be profitable at some time in 2025.  The company has been actively buying back shares.
  

• Freetech Intelligent Systems (1901036D CH)  is planning to raise about US$200m through its upcoming Hong Kong IPO. The lead bookrunners for the deal are CITIC Securities, CICC, Huatai International, HSBC.
• Freetech Intelligent Technology Ltd (FITL) is a provider of intelligent driving solutions, focusing on advanced driver assistance systems (ADAS) and autonomous driving systems (ADS) technologies.
• It ranks third among domestic suppliers of Level 2 and Level 2+/2++ intelligent driving solutions in China, with a 2023 market share of 14.6%, according to CIC.

• Headline profit numbers for FY24 indicate a 38-40% decline from 110 mn HKD in FY23 to 65-69 mn HKD, including non-cash impairment/property revaluation losses amounting to 44.2 mn HKD. 
• The implication is that core profits would have been 109-113 mn HKD for FY24; a slight earnings growth at the upper end is admirable in a weak HK demand environment.
• Based on core earnings, the stock trades at 6x PE, >67% of the market capitalization in cash, and a 10% dividend yield. The company will release earnings on December 16th.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Studio City, Yuexiu Property, Rakuten Group
• In the US, the October JOLTS job openings came in above estimates at 7.74 mn (7.52 mn e / 7.37 mn p).
• Long-end USTs fell yesterday, while the front end outperformed on expectations that a December rate cut remains on the table.

• Shenzhen Yuejiang Technology, more commonly known as just Dobot, updated its PHIP and plans to raise fresh capital for technology development for intelligent cobots.
• The company did not disclose the proposed size and price range for the offering. Guotai Junan international and ABC International are leading the IPO.
• I believe cobot industry can grow faster than third-party forecasts while the integration of AI into cobots will drive the development of smart cobots.

• Behind MAO GEPING’s high profitability, there are hidden risks. One is the potential quality issues from ODM/OEM model, and the other is excessive reliance on Mr. Mao Geping’s personal IP.
• Without strong R&D capabilities, high-end positioning isn’t firm.With increasing downward pressure in the industry, MAO GEPING would become passive in fierce competition and the industry trend of customers pursuing cost-effectiveness.
• MAO GEPING’s valuation could be lower than Giant Biogene due to concerns on future sustainable growth prospects and profitability, but higher than industry average due to the strong short-term financial performance.  

• The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
• The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
• Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

• Respectively in 2013 and 2016, Lifestyle International Holdings (1212 HK) spun-off and separately listed Lifestyle Properties Development (2183 HK) and PRC-department store play Lifestyle China (2136 HK).
• Lifestyle Props’ listing was cancelled in 2023; and Thomas Yau privatized Lifestyle International late-2023: see Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov.
• Lifestyle China is now suspended pursuant to then Takeovers Code. Thomas Yau holds 74.9%. No prizes for guessing what comes next. 

• Lifestyle China (2136 HK) is on a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• Mr Thomas Lau (Chairman and CEO) is likely following up on the privatisation of Lifestyle International Holdings (1212 HK) with the privatisation of Lifestyle China.  
• We use three methods to triangulate the likely offer price, suggesting a range of HK$1.00-1.45 per share, with an average of HK$1.23 (a 63.3% premium to the last close).

• Hong Kong market breadth stays strong despite market pullback in November.  Mainland investors continue to increase exposure to HK market through Southbound Connect platform.
• Baidu (9888 HK) , Baidu (BIDU US) , the global leader in Robotaxis, was granted a license to start operating its autonomous cars in Hong Kong.
• Vitasoy Intl Holdings (345 HK) shares surged on takeover rumours after Yeo Hiap Seng (YHS SP) increased its stake to more than 12% allowing them to call a Board meeting.

• Newjf’s Yuan Xunjun and Guo Xiaohong are both lawyers. They should be more familiar with the Pre-Condition requirements. Newjf has obtained SAMR clearance and we think Newjf will fulfill Pre-Conditions.
• Bi Hua and Hong Gang’s “new initiative” based on Nov.28 announcement may not necessarily succeed, since Newjf has a lot of room for rebuttal here and its Offer is attractive.
• Greatview’s chairman and Cloudview are in discussions with financial advisers to make a counterbid.Considering that this may be a “noise”,we recommend prioritizing Newjf’s Offer before any higher Offer from Greatview.

• Baidu’s third-quarter 2024 financial performance presents a complex picture, showcasing both opportunities and challenges that shape the company’s investment thesis.
• The company reported total revenues of RMB 33.6 billion, reflecting a 3% decline year-over-year.
• However, Baidu Core’s revenue remained stable at RMB 26.5 billion.

• In a previous insight we presented a forecast where the Hang Seng Index could bounce after a 2-3 weeks pullback. The index started to rally from there.
• Currently the index is up for 2 consecutive weeks and from the charts and models that we will present here, you can see that it has room to go higher.
• Right now the index has not even reach the 25% (price) resistance level, and this confirms the bullish view.

• Meituan reported C3Q24 revenue/non-IFRS operating profit 2%/12% above consensus, thanks to rising monetization and cost reduction. C4Q24 guidance, however, missed expectation due to low ASP mix and expansion;
• We see the following as positive catalysts: (1) consumption stimulus in 2025 that will likely include service coupons, (2) market share gains, (3) overseas expansion in Mid-East bearing quick fruits.
• We therefore opt to keep Meituan on our TOP BUY list and maintain TP at HK$165.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: New World Development, Indofood CBP, Azure Power, Adani Green Energy, Meituan
• In the US, treasuries climbed in a holiday-shortened session on Friday, with yields falling 8-10 bps across the curve. The yield on the 2Y UST dropped 8 bps to 4.15%, while that on the 10Y UST declined 10 bps to 4.17%.
• Equities rallied, with the S&P 500 rising 0.6% to a new record high of 6,032.

• Mao Geping Cosmetics is looking to raise up to US$270m in its upcoming Hong Kong IPO.
• Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
• We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

• HKBN Ltd (1310 HK)‘s preconditional voluntary conditional offer from China Mobile (941 HK) is HK$5.23. Including the HK$0.165 dividend, the total offer is HK$5.395, an 11.0% premium to last close.
• The offer seems rushed and a reaction to a potential competing offer from I Squared. The lack of privatisation through a scheme and MBK’s irrevocable suggest the offer is light.   
• An unattractive offer, a lengthy precondition long-stop date and the irrevocable competing offer clause invite I Squared to enter the fray. 

• There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the December rebalance.
• We correctly forecast 4/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
• Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 12.24bn (US$1.69bn).

• There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 December.
• Passive trackers are estimated to buy 0.9x ADV in Hwatsing Technology (688120 CH) and sell 0.5x ADV in StarPower Semiconductor (603290 CH). 
• The add has outperformed the delete, but not by a lot. There could be more outperformance over the next couple of weeks.

• The December 2024 index review results for the CSI National Defense Industry Index were announced after market close on Friday 29th November 2024.
• There will be seven changes  for the CSI National Defense Industry Index. 
• In this insight, we take a look at our flow expectations for the ADDs/DELs involved in the rebalance.

• The December 2024 index review results for the ChiNext and ChiNext 50 indices were announced yesterday.
• There will be seven changes for the ChiNext index and five changes for the ChiNext 50 index. Some of these names surprised us.
• In this insight, we take a look at our final flow expectations for the confirmed index changes.

• China Mobile (941 HK) was a logical suitor for HKBN Ltd (1310 HK). A non-PRC (or government-affiliated) corporation taking over a media/broadband/telco in Hong Kong is probably a non-starter.
• China Mobile has a made a pre-conditional voluntary Offer at HK$5.23/share, a 40.97% premium to undisturbed. The price is final. 
• Pre-Cons are the usual suspects (NDRC, Mofcom & SASAC). The Offer itself conditional on a 50% acceptance hurdle, with 24.96% in the bag. The intention is to maintain HKBN’s listing. 

• PAGD’s Special Dividend announcement made investors “unhappy”. PAGD’s operation after IPO is a big failure, which is why there were large amounts of funds left that were not used.
• Being a “vassal” of Ping An Group won’t bring high valuation due to limited growth potential. There’s still room for stock price/valuation to decline. Investors need not rush to buy.
• The Special Dividend will be approved. Ping An’s idea is to increase shareholding ratio by distributing dividends, which can also lower PAGD’s stock price, providing opportunity for a low-price privatization.

• Put trading was heavy in the Financial sector this week. ICBC and Bank of China were the main contributors to that with 73% and 63% of their volume in Puts.
• ANTA Sports Products had a notable pick up in Call activity this past week as the stock bounces around 3 year lows vs the Hang Seng index (graph at bottom)
• Energy and Real Estate sectors might be the best area to look for low vol opportunities.

• Price jump on Wednesday led implied vol higher but vols were otherwise soft with passing of key events in November.
• Large jump in option activity on Wednesday was likely due to positions being closed out as open interest declined for both Puts and Calls on the week.
• HSCEI has more support for implied vols at these levels with short term historic vols trading above 1M implied vol. 

• The HK market is moving, and the share prices of high-yield companies are increasing. Despite the average YTD returns of 38%, stocks are trading at 5-15% dividend yields.
• We update investors with results from Nameson Holdings (1982 HK) H1 FY25: 16-17% Dividend Yield Intact and Pacific Textiles (1382 HK), which guided down earnings due to interruptions in Vietnam.
• We also flag Yue Yuen Industrial Holdings (551 HK) results, buybacks, and some updates from our conference call with Nameson Holdings (1982 HK) management.