In today’s briefing:
- CPMC (906 HK): Why This Is Still A Buy
- Fosun Tourism (1992 HK): Scheme Buyback at HK$7.80 (95% Premium)
- Fosun Tourism (1992 HK): Fosun Int’l’s Indirect Takeover
- StubWorld: Business As Usual As Prosus Sells, & Tencent Buys Back
- Asian Equities: Twenty Inexpensive Consistent Compounders
- Geely (175 HK): Turning from PHEV to BEV
- China Pair Trade: Long BCIA (694 HK), Short Air China (753 HK)
- CR Sanjiu (000999CH) To Acquire Tasly (600535CH) Update- The Deal Is Proceeding in an Orderly Manner
- TAL Education: Here Are The 6 Most Crucial Factors Impacting Its Performance In 2025 & Beyond! – Major Drivers
- VIOT: Initiating coverage of a leading water purification company in China
CPMC (906 HK): Why This Is Still A Buy
- Back on the 29th August 2024, CPMC Holdings (906 HK) announced ORG Technology Co., Ltd. A (002701 CH) had secured SAMR approval. Mofcom and NDRC approvals subsequently followed.
- The pre-condition long stop date is the 6th January. SAFE is the outstanding pre-condition. Separately, Zhang Wei’s 22.01% irrevocable expired on the 5th December – with no HKEx announcement.
- Quite a lot to pack in with 16 business days to the pre-con long stop. Sounding out people involved with the transaction would be ideal. So that’s what I did.
Fosun Tourism (1992 HK): Scheme Buyback at HK$7.80 (95% Premium)
- Fosun Tourism (1992 HK) disclosed a share buyback of the company through a scheme of arrangement at HK$7.80, a 95.0% premium to the last close price of HK$4.00.
- The key condition is the scheme be approved by at least 75% of disinterested shareholders (rejection by <10% of disinterested shareholders).
- The timing is arguably opportunistic, as the shares are down 31% YTD. Nevertheless, the high takeover premium and a potential scrip option lower the vote risk.
Fosun Tourism (1992 HK): Fosun Int’l’s Indirect Takeover
- When Fosun Tourism (1992 HK), a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was Fosun International (656 HK)
- Not quite. We do have a Scheme, but it’s being enacted by way of a buyback. Fosun Int’l still abstains from voting, but will control 100% if the Scheme completes.
- The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question. Clean deal.
StubWorld: Business As Usual As Prosus Sells, & Tencent Buys Back
- For the first time in 2024, Prosus NV (PRX NA) lodges a substantial shareholder notice, as its stake in Tencent (700 HK) dips below 24%.
- Preceding my comments on Prosus, Tencent and Naspers (NPN SJ), are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Asian Equities: Twenty Inexpensive Consistent Compounders
- Consistent compounders, stocks with steady earnings growth and excess returns over a long period of time, are difficult to find. It’s even more difficult to find reasonably valued compounders.
- From the universe of large Asian companies, we screen those with steady profit growth (>10%) and excess returns in each of last 10 years and over next three forecast years.
- Our list of 20 inexpensive compounders comprises 10 from onshore China, 5 from HK, 3 from India and 1 each from Japan and the Philippines.
Geely (175 HK): Turning from PHEV to BEV
- Geely’s sales volume grew by 27% YoY in November 2024.
- BEV delivery growth rate accelerated to 173% YoY in November from 26% YoY in July.
- Geely’s forward financial ratios are lower than its major competitors.
China Pair Trade: Long BCIA (694 HK), Short Air China (753 HK)
- Long Beijing Capital International Airport (BCIA) (694 HK), and short Air China Ltd (H) (753 HK) strategy should bring in good sector-neutral returns over the next 12 months.
- BCIA will return to profit next year, fuelling the rebound of its share price. Air China, however, may face uncertainties related to stronger USD and higher-than-expected US interest rates.
- Higher duty-free sales for BCIA should propel earnings outlook. BCIA’s P/B is well below the 5-year average, while Air China has already returned to the historical average level.
CR Sanjiu (000999CH) To Acquire Tasly (600535CH) Update- The Deal Is Proceeding in an Orderly Manner
- Based on the new announcement released by CR Sanjiu, due diligence, auditing, evaluation, valuation and verification of material assets reorganization are in progress. Approvals by the SASAC/SAMR haven’t been obtained.
- Sanjiu is now facing performance headwinds due to VBP. So, Sanjiu needs new/stable performance increments to alleviate future performance pressure, and completing the acquisition of Tasly becomes even more urgent.
- China Resources excels in M&As and has strong internal business integration capabilities.We’re optimistic about the future synergies after the merger. Valuation for Tasly is expected to reach P/E of 30.
TAL Education: Here Are The 6 Most Crucial Factors Impacting Its Performance In 2025 & Beyond! – Major Drivers
- TAL Education Group’s second quarter fiscal year 2025 results provide an insightful look into the company’s current trajectory, presenting both promising developments and areas to watch cautiously.
- On the positive side, TAL Education’s robust year-over-year growth in net revenues stands out, with reported figures of USD 619.4 million, marking an impressive increase of over 50%.
- This growth is largely backed by the company’s strategic expansion in its learning services, particularly the enrichment learning programs like Peiyou small classes.
VIOT: Initiating coverage of a leading water purification company in China
- Viomi has undergone a radical transformation to shed unprofitable business lines and focus on the home water systems market which is poised to experience steady growth in China in coming years.
- The company is hoping to expand into fairly mature international markets including the US with new home water systems that offer advantages over current offerings.
- The company’s investment in a largely automated manufacturing facility should help the company achieve above average margins in the Chinese market as utilization rates improve.
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