In today’s briefing:
- China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
- Tencent/Netease: One Game Approval for Tencent in June
- Midea Real Estate (3990 HK): Ex-In-Specie, The Rump Is Rich
- Pre-IPO Bayzed Health Group – Here Are the Concerns and Potential Risks
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
- On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
- The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
- There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).
Tencent/Netease: One Game Approval for Tencent in June
- China announced game approval for the June batch. The number of games approved remained at a higher level than 2023.
- The pace of China game approval appears to have accelerated to the same level as pre-tightening, though the number of approvals appears to be slower than March.
- Of companies that we are monitoring, Tencent and iDreamSky clinched one approval each.
Midea Real Estate (3990 HK): Ex-In-Specie, The Rump Is Rich
- In an unusual move, property developer Midea Real Estate Holding (3990 HK) announced the In-Specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
- As this is considered a “very substantial disposal“, a Scheme-like vote from independent shareholders is required at an EGM. And controlling shareholders – with 81.13% – are required to abstain.
- The EGM will be held on the 2 September, with the cash payment expected on (or before) the 18 October. The question is: what is the Rump worth?
Pre-IPO Bayzed Health Group – Here Are the Concerns and Potential Risks
- Bayzed’s business model is similar to that of Hygeia and Inkon Life Technology. However, Bayzed’s profit margin is largely lagging behind peers. This makes us concerned about its future profitability.
- The nationwide expansion of oncology hospitals is very challenging. Bayzed’s expansion pace may not be as fast as expected if it hopes to control the quality of expansion.
- Due to “heavy asset” model, Bayzed would continue to face capital pressure.The latest valuation of Bayzed in 2023 is RMB2.625 billion. We think Bayzed’s valuation should be lower than peers.
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