In today’s briefing:
- CIMC Vehicles (1839 HK): Possible H Share Buyback Offer
- Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)
- CIMC Vehicles (1839 HK): Parent Privatisation?
- CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!
- PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target
- Bosideng (3998 HK): Never Fail to Deliver
- Dong E E Jiao Co Ltd (000423.CH) – The Situation Is Getting Better and Better
- EQD | The Hang Seng Index May Go Higher 2
- [Blue Lotus Transportation Sector Update]: Huawei’s R&D & Marketing Alignment Makes It Stronger
CIMC Vehicles (1839 HK): Possible H Share Buyback Offer
- CIMC Vehicle Group Co Ltd (1839 HK) possible H Share buyback offer, excluding China International Marine Cntnrs Gp (2039 HK)’s shares, is HK$7.00, an 8.7% premium to the undisturbed price.
- The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
- The offer is light, but independent H shareholders holding blocking stakes will likely be supportive. The final offer will be made on “same or better terms”, suggesting a potential bump.
Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade
- The final datapoints for the December Hang Seng Indices rebalances were recorded today, slightly altering the initially expected weights and flows.
- The expected flows have slightly increased since the initial estimates on 15 then 17 November.
- Across all three indices, I see a net total of roughly HK$13.4bn a side to trade.
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)
- The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
- Li Auto (2015 HK) will have the largest inflows due to the HSI inclusion while Xiaomi (1810 HK) will have the largest outflow due to HSTECH capping.
- There will be passive selling in HSBC Holdings (5 HK) for yet another rebalance due to capping of the stock in the Hang Seng Index (HSI INDEX).
CIMC Vehicles (1839 HK): Parent Privatisation?
- CIMC Vehicles (1839 HK) is currently suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
- SOE-Backed CIMC Group controls ~74% of CMIC Vehicle’s H-shares. Presumably, if any Offer was to unfold, it would be from the parent.
- And what price for the H-shares? Around HK$9/share, a life-time high, would be in keeping with premiums seen in precedent PRC-incorporated privatisations.
CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!
- After CIMC Vehicle Group Co Ltd (1839 HK) was suspended yesterday pursuant to Hong Kong’s Takeover Code, the expectation was an H-share Offer from its parent, SOE-backed CIMC Group.
- CIMC subsequently announced an indicative Offer yesterday evening, from its parent, at a $7.00/share for each H-share, a pitiful 8.6% premium to last close. There is no concurrent A-share Offer.
- CIMC traded around $7.00 late September, and comfortably traded through the indicative terms for most of July.
PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target
- In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.
- Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.
- The stock price reached our last target, but we believe there is still an upside of 40% for 2024.
Bosideng (3998 HK): Never Fail to Deliver
- Even China’s consumption market is tough, Bosideng Intl Holdings (3998 HK) has still achieved a 25.1% profit growth. Revenue maintained a healthy trend while gross margin was stable.
- Sales trend stayed solid in 2H FY24, and it ranked first in major online channels in various categories of apparel sales during the “double-11” shopping festival.
- Store efficiency improved as revenue saw double-digit growth despite a 9.7% YoY fewer retail network. It is encouraging to see its 3-year target is to outperform the last 5 years.
Dong E E Jiao Co Ltd (000423.CH) – The Situation Is Getting Better and Better
- Some investors are disappointed with 23Q3 performance, but we think Dong-E-E-Jiao is getting back on track. The de-stocking has achieved great results and pressure on distribution channels has been alleviated.
- Since Dong-E-E-Jiao’s contract liabilities hit a record high, we are optimistic about the performance in 23Q4 and 24Q1. China Resources could further improve Dong-E-E-Jiao’s dividend rate, making it more attractive.
- Since Dong-E-E-Jiao’s performance is continuously improving, valuation still has room to grow. A significant increase in valuation in the short term depends on whether there would be M&A deal emerges.
EQD | The Hang Seng Index May Go Higher 2
- The Hang Seng Index is down 1 week and going towards Q2 support at 17098. Not yet OVERSOLD, but it could be soon, WEEKLY and MONTHLY.
- Once the OVERSOLD states begins, it’s time to go LONG: the index has been mildy downtrending for 3 months, it looks like it could be bottoming.
- If the index reaches below 17112.48 (October’s MONTHLY Close), it would be a good area to go LONG, the probability of a rally in December, from there, would be good.
[Blue Lotus Transportation Sector Update]: Huawei’s R&D & Marketing Alignment Makes It Stronger
- Huawei’s decision to accept investments to its Intelligent Automotive Solution (HI) has no impact on its Harmony Intelligent Mobility Alliance (HIMA). It might actually strengthen it, in our view;
- We also believe it concludes Huawei’s internal battle of visions.
- The newly integrated business has short term impacts on Li, Nio and XPeng and long-term impact on Baidu and Xiaomi.
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