In today’s briefing:
- Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac
- BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)
- China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception
- HK Connect SOUTHBOUND Flows (To 27 Sep 2024); Everything Changed This Week
- CR Beverage IPO: Less Diversification, Falling Growth Rates and Inferior Margins Compared to Peers
- Weekly Consumer Tales: Pop Mart’s Unique Appeal-Miniso’s Yonghui Buy-China Stimulus-MTR’s Spicy IPO
- China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui
- Silergy (6415.TT): Positive Optimistic Future Outlook
- Tencent Music (TME): All Cheerful Data in Music, To Grow in Q3 After 3 Flat Years
- ECM Weekly (30th Sep 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, Mr DIY, Smartworks, IREDA
Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), China Traditional Chinese Medicine (570 HK).
- Lowest spreads: Dyna Mac Holdings (DMHL SP), Seven & I Holdings (3382 JP), Trancom Co Ltd (9058 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP).
BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)
- Hong Kong is showing strong market momentum as consumer staples, consumer discretionary, healthcare and tech surge on increased momentum.
- Xtep International (1368 HK) had a good 1H24 and benefited from better consumer sentiment. Analysts are upgrading Tongcheng Travel Holdings (780 HK) on an improved outlook.
- Goldman Sachs upgraded their rating on Bilibili (9626 HK) , Bilibili (BILI US) to a BUY with improving user MAU/DAU measures and the success of its newly launched game.
China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception
- The medical insurance statistics reflected that medical insurance funds are facing increasing pressure. If income/expenditure maintain average growth rates in recent years, there would be a deficit state in 2024.
- Due to increasing pressure on medical insurance fund, the entire process of innovative drug evaluation/NRDL negotiation this year will be more strictly enforced, but Hansoh (3692 HK) is an exception.
- For Henlius’ privatization, completing Pre-Conditions in 24Q4 looks tight. Considering Chinese New Year holiday, the privatization may not be completed until at least mid-to-late February 2025.The deal will get up.
HK Connect SOUTHBOUND Flows (To 27 Sep 2024); Everything Changed This Week
- SOUTHBOUND was a net buyer this week. But who cares. They actually net sold US$2bn of everything which was not Alibaba Group Holding (9988 HK).
- Bigger news, of course, was China’s “Bazooka” which LOOKS exciting. Stocks are up 15-20% in four days. Lots of BIG numbers are being thrown around. Not everything is “real money.”
- It takes a little sleuthing to figure out where the real money is. For that, I suggest reading China’s [Maybe] Biggish [Quasi?] Bazooka and more below.
CR Beverage IPO: Less Diversification, Falling Growth Rates and Inferior Margins Compared to Peers
- The Chinese drinking water and beverage maker, China Resources Beverage (CRB HK) has filed for an IPO on the HKEx to raise around US$1.0bn.
- The company’s operations are heavily concentrated towards drinking water products where the market competition is intensifying leading into a price war.
- CR Beverage’s margins are inferior compared to peer Nongfu Spring (9633 HK) who has diversified into other beverage products from drinking water to grow its financials.
Weekly Consumer Tales: Pop Mart’s Unique Appeal-Miniso’s Yonghui Buy-China Stimulus-MTR’s Spicy IPO
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- Despite weak consumer spending in China, there are a few bright spots—an example is Pop Mart International Group (9992 HK)’s strong sales growth partly driven by the “red lipstick effect.”
- Miniso (MNSO US)’s stock plunged early last week but quickly recovered, reinforcing our view that its deal with Yonghui Superstores Co., (601933 CH) has some promise.
China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui
- Temu as a subsidiary of PDD becomes the second largest global e-commerce website.
- Meituan merges departments into fewer business units to cut expenses further.
- Mercedes-Benz left the joint venture with BYD, as its high end products are not as popular as Tesla models.
Silergy (6415.TT): Positive Optimistic Future Outlook
- China’s central bank cuts rates and unveils new measures to combat economic slowdown, creating a more relaxed monetary policy environment to stimulate consumption and investment.
- Silergy’s Automotive segment remains a driving force, especially with the addition of the Electric Vehicle ( EV) market.
- While Silergy faced demand insufficiency previously, it has indicated that the end demand is expected to revive by the end of 2024 from the 4th quarter.
Tencent Music (TME): All Cheerful Data in Music, To Grow in Q3 After 3 Flat Years
- The weak business, social entertainment, become insignificant in recent quarters.
- All operating data in music is promising, including paying user base, ARPPU, and sublicensing revenue.
- We set an upside of 20% and a price target of US$14.80 for the end of 2025.
ECM Weekly (30th Sep 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, Mr DIY, Smartworks, IREDA
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, it hasn’t been this busy for a while, with deals live in Japan and Korea, and possible launches in Hong Kong and India as well.
- On the placements front, there were a few China ADR blocks and other placements across the region.
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