In this briefing:
- China Consumables in a Sluggish Economy
- Asia Gaming Preview 2019: Part Two Picks: Galaxy, MGM China and Nagacorp
- China Tobacco International IPO: Heavy Regulation, Declining Margins – A Bit Late to IPO Party
- China Tobacco International (IPO): The Monopolist Will Not Recover
- RRR Rate Cut in China
1. China Consumables in a Sluggish Economy
The PBOC’s desire to loosen up China’s economy is relying on consumers to keep spending. However, as seen in the data below, consumers just are not spending. From cars, to cameras and retail, consumers are increasingly avoiding big ticket items, as China’s consumers look for breathing space.
2. Asia Gaming Preview 2019: Part Two Picks: Galaxy, MGM China and Nagacorp
- Global and Asia headwinds still rattle the gaming sector, but these three companies remain undervalued despite market sentiment.
- Macau’s solid year end performance continues to defy projections, producing a 14% y/y GGR increase.
- Galaxy will benefit disproportionately from the HKMB bridge traffic growth, MGM’s single digit market share will ramp up to double digits and Nagacorp may be the single most siloed gaming operator in all of Asia.
3. China Tobacco International IPO: Heavy Regulation, Declining Margins – A Bit Late to IPO Party
China Tobacco International (GHALPZ CH) is a subsidiary and offshore unit of China National Tobacco Corp., a state-owned enterprise (SOE). The company procures tobacco leaves from regions around the world and exports tobacco leaf products and branded cigarettes to the duty-free outlets outside China’s customs area and in Southeast Asia.
The IPO is expected to raise US$100M and the company expects to use the proceeds to expand market share, acquire new cigarette brands, working capital, and other corporate purposes.
4. China Tobacco International (IPO): The Monopolist Will Not Recover
- China Tobacco International (HK) Co. Ltd. plans to go public on the Hong Kong Stock Exchange.
- The state-owned company holds monopolistic positions in tobacco leaf export, tobacco leaf import, and cigarette export.
- Both revenue growth and margins declined year-over-year in the first three quarters of 2018.
- We believe the China cigarette market will not recover, as all signals suggest weak demand.
5. RRR Rate Cut in China
The big news in Chinese finance was the PBOC announcing Friday that it was cutting the RRR rate. Rather than what you can read in the press, we want to focus on a variety of factors which may not be as widely recognized.
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