In today’s briefing:
- HSCEI Dividend Futures: Stay Short the 2022/23 Steepener
- Alibaba (BABA): 3Q22, Transforming Missions Going Under Slow Quarter
- Pacific Basin Shipping (2343 HK): Strongest Ever Year
- Yunkang Group Pre-IPO – Would Need to Prove Itself Post-COVID
- NetEase (NTES): 4Q21, Better than Expectation
- Shanghai Pulse Medical (博动医疗) Pre-IPO: Leading Image-Based FFR Player
- Zhenro Plans Asset Sale of up to $644mn
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
HSCEI Dividend Futures: Stay Short the 2022/23 Steepener
- The HSCEI 2022 dividend futures are trading around our fair value. Larger than expected special dividends from oil and telecom companies could provide some upside.
- The HSCEI 2022/23 div steepener has dropped from -5 to -15 since our last Insight. We see further downside here and would look to add to shorts in the spread.
- With rising interest rates, higher inflation, higher oil prices, a slowdown could lead to a rapid repricing of dividends and there will be opportunities to buy back the spread lower.
Alibaba (BABA): 3Q22, Transforming Missions Going Under Slow Quarter
- BABA’s app, SDTao, has been taking active users from Pinduoduo.
- We believe BABA’s physical store chain, Freshippo, will go public.
- We believe BABA will stop investing in unprofitable Ele.me as it underperforms Meituan.
Pacific Basin Shipping (2343 HK): Strongest Ever Year
- Impressive result with underlying net profit reached US$698m in FY21, up sharply from loss of US$19.4m a year ago. Net gearing dropped to 7% with record-high ROE of 58%.
- With 48-64% of Handysize and Supramax days covered at TCE slightly below FY21 level, it has well secured FY22 profitability, with upside from higher rate in rest of this year.
- We expect ROE to be over 30% for FY22, making its 1.3x P/B not expensive, especially with an improved balance sheet. Dividend yield of 14% for FY22 is another attraction.
Yunkang Group Pre-IPO – Would Need to Prove Itself Post-COVID
- Yunkang Group (YK HK) is looking to raise about US$200m in its upcoming Hong Kong IPO.
- Yunkang Group is a medical operation service provider in China and as per F&S, had a market share of 3.7% in China’s medical operation service market as per 2020 revenue.
- While it has managed to grow its on-site diagnostics centers, the firm has to prove that it can still thrive post-COVID.
NetEase (NTES): 4Q21, Better than Expectation
- Revenue grew strongly due to the new game, Harry Potter.
- We believe NTES has confidence in the growth of cloud music.
- We believe the stock has an upside of 32% for the year end 2022.
Shanghai Pulse Medical (博动医疗) Pre-IPO: Leading Image-Based FFR Player
- Shanghai Pulse is a leading player in the FFR assessment in China. The company is looking to raise up to USD 200 m via a Hong Kong listing.
- We look at the company’s key products QFR, OFR and UFR. We also provide our thoughts on the investment thesis.
- We think the company has a decent investor backing and meanwhile we also highlight concerns on its management.
Zhenro Plans Asset Sale of up to $644mn
Zhenro Properties plans to sell assets worth up to RMB 4bn ($632.7mn) in H2 2021 and extend maturity of other onshore and offshore debt, including debt bank loans and asset-backed securities (Term of the Day, explained below) , as per three sources. The developer is already asking holders of its $200mn 14.724% Perp callable on March 5 to waive claims against the company if it does not redeem the bond. It is also seeking to extend the maturity of five bonds due 2022 that have a total amount outstanding of $1.05bn to be exchanged for new 8% bonds due March 6, 2023. Zhenro is said to be in talks with state-owned firms to sell the assets.
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
US equity markets dropped again on Wednesday with the S&P and Nasdaq down 1.8% and 2.6% with sectoral losses led by Consumer Discretionary and IT down over 2.5-3.5%. The US 10Y Treasury yields are down 10bp this morning to 1.89% on the back of Russia’s “military operation” in Ukraine (scroll below for details) this morning . European markets were relatively steady yesterday – DAX was down 0.4%, CAC was down 0.1% and FTSE was up 0.1%. Brazil’s Bovespa closed 0.8% lower. In the Middle East, UAE’s ADX was flat and Saudi TASI was down 0.3%. Asian markets have dropped sharply – Shanghai, HSI, STI and Nikkei are down 0.9%, 2.8% 2.7% and 2.3% respectively. US IG CDS spreads widened 1.2bp and HY spreads were 5.7bp wider. EU Main CDS spreads were 0.7bp tighter and Crossover CDS spreads were 1.6bp wider. Asia ex-Japan CDS spreads were 2.8bp tighter.
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