In today’s briefing:
- AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
- Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.
- [Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick
- Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning
- CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- Horizon Construction Development IPO: The Bull Case
- Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- MSCI Emerging Markets Index (MXEF): Weekly Close Confirms Bearish Multi-Week Risk
- CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient
- UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market
AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
- We’re down to the pointy end of AAG Energy Holdings (2686 HK)‘s Scheme. And at a gross/annualised spread of 15.6%/318%, all is not well.
- The uncertainty is not without substance. A derisory Offer, one that is rejected by a proxy advisor; together with a silent, large shareholder no one seems to know.
- Shareholders go to the vote this Thursday, the 27th April. Currently trading 5% below the undisturbed price.
Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.
- This insight is a short note that aims to ride on short term momentum for the stock
- Since April, southbound trade contributes to 72% of China Mobile H-share turnover. So, southbound trade is the major share driver
- For entire market, A-share is trading at 40% premium to H-share. For China mobile, the A/H premium is currently at 80%. Strong upside for H-share if premium is to narrow
[Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick
- We estimate that Tencent 1Q23’s rev./non-IFRS net income beat cons. by 3.6%/4.5%. We forecast that VAS/ads/others will have 6.5%/15.3% /17.6% YoY growth in 1Q23.
- We maintain BUY rating for Tencent because of 1) video account, especially the rapid growth of Wechat Beans (微信豆); and 2) recovery of ads revenue from Ecommerce and gaming.
- We remove Tencent from our top buy ideas because: 1) current consensus has been high; 2) lack of hit title in upcoming pipeline; and 3) launch of DNF casts shadow
Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning
- Lalatech Holdings Co Ltd (LALA HK) is a technology driven logistics transportation platform with a global footprint. The company has filed for an IPO and plans to raise about US$1bn.
- The company’s financials have shown significant improvement over the last 2 years with the company turning profitable at the operating profit line in 2022.
- Huge drop in selling and marketing costs have helped cut down losses which seems too realistic and the company hasn’t provided sufficient explanation on these cost cuts.
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
- The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.
Horizon Construction Development IPO: The Bull Case
- Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
- HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost & Sullivan.
- The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.
Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- The census and statistics department data for watches and jewelry showed a sharp rebound for HK in Jan-Feb 2023 (up 63% YoY). China sales, we estimate, continue to be resilient.
- Over the last month, secondhand watch pricing has also shown an uptrend of 3-4%. This leads us to believe that demand is having a decent uptick in April.
- The stock trades at 7.2x PE FY23e, with >50% of the market capitalization in cash and a 15% dividend yield (assuming a 100% payout ratio).
MSCI Emerging Markets Index (MXEF): Weekly Close Confirms Bearish Multi-Week Risk
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. 1) Response to key levels. 2) Price action. 3) Momentum confirmation.
- Throughout Q4 2022 / Q1 2023 each material turning point has been confirmed by a definitive weekly reversal pattern. Last week produced a definitive bearish weekly reversal pattern.
- Long-Term charts imply that MXEF has entered a sustainable multi- quarter uptrend. Last week’s bearish weekly confirmation however, confirms risk of a further counter-trend correction in the coming weeks.
CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient
- We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well.
- New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%.
- Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.
UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market
- UMP Healthcare (“UMP”) is Hong Kong’s leading private medical service network. Its network spans 1100+ service providers, 1mm+ scheme members, 2000+ contract customers, and over 1.13mm+ annual clinic visits.
- Despite the consistent track record, UMP trades at a 61% discount to its IPO price, 6x PE, and 8% yield with 45% of its market cap in net cash.
- We see ingredients in place for a multi-year re-rate, backed by HK’s new Healthcare Policy and the company’s strategic tilt towards higher margin service lines supporting future profit growth.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
