In today’s briefing:
- Tencent Holdings – Bad News On The Doorstep
- China Evergrande Group – Be A Hero, Take It To Zero
- Huitongda IPO – First Day Trading
- Modern Dental Group (3600.HK) – More Suitable for Short Term Trading than Long Term Holding
- COSCO Shipping Energy (1138 HK): US Crude Export and China Import the Wild Cards?
Tencent Holdings – Bad News On The Doorstep
- The US Trade Representative (“USTR”) office added Tencent and Alibaba Group to the US government’s latest “notorious markets” list;
- Similar to being implicated in running afoul of regulators in mainland China, Tencent “strongly disagrees” with the USTR label; and
- *We look forward to Tencent’s 4Q21 results announcement on March 23, 2021 where management will continue to refuse to discuss anything meaningful.
China Evergrande Group – Be A Hero, Take It To Zero
- The shares of Evergrande aren’t worth the paper their printed on;
- Shanghai Construction receives a positive court outcome at expense of Evergrande; and
- The likelihood that Evergrande has enough liquidity and will not have a fire sale of assets is nil – we can add Evergrande to the list of the walking dead.
Huitongda IPO – First Day Trading
- Huitongda (9878 HK) had a subdued stock market debut with shares opening marginally above the IPO price.
- Its subdued first-day performance suggests that investors are no longer misled by artificially low valuation multiples of “1P” EC players.
- Based on EV/ (GMV + Retail Revenue), there’s a 38% downside to Huitongda’s valuation. However, it may be best to wait for signs of weakness before arranging a short position.
Modern Dental Group (3600.HK) – More Suitable for Short Term Trading than Long Term Holding
- The impact of dental implants centralized procurement on Modern Dental Group (3600 HK) (MDG) could be limited, and the strategic partnership with Meitu Inc (1357 HK) on “QJ Smile” also brings more possibilities.
- The concerns include doubts on R&D/innovation capability, complex international relations, foreign policy disturbances, unsettling macro environment and immature invisible orthodontic business, bringing uncertainties in terms of future development outlook.
- Although the 2021 full-year performance is worth looking forward to, which could be the short-term catalyst, MDG is more suitable for short term trading than long term holding.
COSCO Shipping Energy (1138 HK): US Crude Export and China Import the Wild Cards?
- US crude export growth is the positive driver while China import contraction is the negative for tanker ton-mile demand in last year which contraction 5.3% YoY.
- Significant room exists for a rebound in US oil export as oil majors announced plans to increase output. China’s import growth will recover in the next 12-18 months as well.
- US oil export to China needs 2x more VLCC than from Arabian Gulf. This bodes well for tanker rate, benefiting Cosco Shipping Energy (1138 HK) in the medium term.
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