In this briefing:
- Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
- New Century Hotel (浙江開元酒店) Pre-IPO – Improved Profitability Not Driven by Underlying Operations
- Ab InBev Asia Pre-IPO – Quick Note – More like CR Beer Rather than Tsingtao
- Tencent (700 HK): In Fact Benefited from License Suspension
- Petrochina Breakout and Laggard Play
1. Uzbekistan Is a Promising Latecomer, but Investors Need to Watch Out and Stay on Top of Data
Last week, Uzbekistan placed a debut Eurobond, which attracted high interest from investors. Following a change of leadership in 2016, the country embarked on a path or rapid development. So far, its reform record has been quite impressive. However, new challenges often arise during periods of rapid transition. We expect both demand and supply-related pressures to lead to a rise in headline inflation towards the 20% mark in the next 12 months. We think that given the evidence of a rapid deterioration in the trade and current accounts in 2018, further depreciation of the local currency should be expected in the short term. Investors who have bought the Eurobond, or consider participation in further placements by Uzbek corporate issuers in the coming months, should watch out for signs of the build-up of persistent imbalances in Uzbekistan’s economy.
2. New Century Hotel (浙江開元酒店) Pre-IPO – Improved Profitability Not Driven by Underlying Operations
Zhejiang New Century Hotel Management Group (ZHEKAIH HK) (ZNCH) is looking to raise US$220m in its upcoming IPO.
ZNCH is a hotel operator and manager with presence across China. The company grew its revenue by a modest 5% from 2015 to 2017 but made significant improvements in profitability. Gross profit, EBITDA and PATMI grew by 33%, 61%, and 132% CAGR over the same period.
However, the improved profitability has not been driven by underlying operations. The company seemed a tad too ambitious to be expanding via leasing hotel when it already has a large hotel management pipeline.
In this insight, we will look at the company’s financial and operational performance, the drivers of its strong margin expansion, and include some questions for management.
3. Ab InBev Asia Pre-IPO – Quick Note – More like CR Beer Rather than Tsingtao
Anheuser Busch Inbev Sa/Nv (ABI BB) is looking to list its Asian operations in order to lighten its debt burden. The listing will probably be in Hong Kong and the company could raise around US$5bn at a valuation of around US$70bn.
In my earlier insight, Ab InBev Asia Pre-IPO – A Brief History of the Asia Pacific Operations – Eeking Out Growth in China, I looked at how the Asian operations of ABI have shaped up over the past few years.
In this insight, I’ll do a quick comparison of the past financial performance of China Resources Beer Holdin (291 HK) and Tsingtao Brewery Co Ltd H (168 HK).
4. Tencent (700 HK): In Fact Benefited from License Suspension
- Tencent’s market share as measured by the number of active users increased during the the period license suspension.
- We believe that Tencent’s market share as measured by active users will bring increased market share as measured by revenues.
- We also believe that during the hard times small companies always die.
5. Petrochina Breakout and Laggard Play
Petrochina Co Ltd H (857 HK) has remains suppressed but with oil perking up there is a laggard upside play taking shape as we begin to see distribution in HK upside leaders. On weakness we like positioning on the long side and can be used as a pair with an index short or one of the steel counters.
Given stock leaders are showing deteriorating upside momentum, we expect laggards to attract more attention.
RSI and MACD breakout patterns outlined as well as the price breakout at 5.10.
A bigger descending wedge also shows promise as a secondary breakout trigger.
MACD pattern resistance will help define the trending capability post breakout.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
