In today’s briefing:
- Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
- Asian Dividend Gems: Tingyi Holding
- Hong Kong CEO & Director Dealings (27 Oct): Kwoks Still Buying SHK; Chairman Selling Golden Solar
- Vinda International (3331 HK): Business Recovering As Expected
Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
- While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
- Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.
Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
- Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK).
- Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV.
- Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.
Asian Dividend Gems: Tingyi Holding
- Shares of Tingyi Holding are oversold. It has high dividend yield and attractive valuations. Its core instant noodles and beverage businesses are turning around this year.
- The consensus expects DPS of HKD 0.62 for Tingyi in 2023 which would suggest a dividend yield of 6.1%. Tingyi Holding’s dividend yield averaged 5% annually from 2018 to 2022.
- Tingyi’s “Master Kong” instant noodle is one of the best known brands in China. The company is also one of the largest producers and distributors of beverages in China.
Hong Kong CEO & Director Dealings (27 Oct): Kwoks Still Buying SHK; Chairman Selling Golden Solar
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Golden Solar New Energy Technology Holdings (1121 HK).
Vinda International (3331 HK): Business Recovering As Expected
- Vinda International (3331 HK) announced 3Q23 results, with net profit up 37% yoy as margins started to recover.
- Reported sales growth picked up speed, growing at 8% yoy (vs. 4% growth in 1H23), and 12% at constant exchange rates (vs. 10% growth in 1H23).
- More importantly, gross margin recovered quarter-on-quarter from a 0.2ppt decline in 2Q23 to a 2.3ppt increase in 3Q23.
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