In today’s briefing:
- CPMC (906 HK): SASAC Usurper?
- CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer
- HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
- Tencent/Netease: Game Approval Skewed Towards Netease in ’23
- CPMC Holdings (906 HK): Another Potential Contender
- REPT BATTERO IPO Preview and Valuation Analysis: Burning Cash and Rising Debt Ahead of the IPO
- China Shineway Pharmaceutical (2877.HK) – Performance Pressure Is About to Emerge
- HK CEO & Director Dealings (13 Dec 2023): Meitu’s NED Selling; China HK Power’s Short Call
CPMC (906 HK): SASAC Usurper?
- In what I viewed as one of the cleaner deals, CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
- A decent premium to undisturbed, a low tendering threshold, and a large shareholder giving an irrevocable – this looked done.
- Now ORG Development Limited/ORG Technology Co., Ltd. A (002701 CH), holding 24.4% of shares out, is mulling a competing conditional general cash Offer. One of these Offers will get up.
CPMC Holdings (906 HK): Possible Scenarios as ORG Mulls a Competing Offer
- CPMC Holdings (906 HK) disclosed that ORG Technology Co., Ltd. A (002701 CH), the second-largest shareholder, is considering a competing voluntary conditional general cash offer.
- It is rare to bid against an SOE bidder. ORG likely has implicit SOE support to launch a competing offer due to the need for Chinese regulatory approvals.
- The possible scenarios suggest Mr Zhang Wei is the winning bid’s kingmaker. Mr Wei sold down 260K shares at HK$6.35 on 8 December, indicating a willingness to exit.
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
- Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
- Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
- Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).
Tencent/Netease: Game Approval Skewed Towards Netease in ’23
- China announced game approval for November batch. The number of games approved is in-line with the pace of approval in recent months.
- The Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
- Netease scored one approval while Tencent has been zeroed for five rounds.
CPMC Holdings (906 HK): Another Potential Contender
- CPMC Holdings (906 HK) may potentially receive another takeover proposal from ORG Technology Co., Ltd. A (002701 CH) which has a 22% market share in the industry.
- ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.
- CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player Sunrise Group (002752 CH) will now become interesting.
REPT BATTERO IPO Preview and Valuation Analysis: Burning Cash and Rising Debt Ahead of the IPO
- REPT BATTERO, a Chinese Li-ion battery manufacturer, announced terms for its IPO in Hong Kong. The initial public offering price is expected to be between HK$18.20 and HK$20.60 per share.
- The company plans to raise ~HK$2.1B of net proceeds at HK$19.40/share. REPT BATTERO will begin trading on the Hong Kong Stock Exchange under the stock code 0666 on December 18.
- I have a negative view of the upcoming REPT BATTERO IPO and expect the stock will underperform during the first trading day as a publicly listed company.
China Shineway Pharmaceutical (2877.HK) – Performance Pressure Is About to Emerge
- Shineway’s performance growth in 23Q1-Q3 slowed obviously. The big decrease in sales growth of injection products and TCM formula granule products would drag down the overall revenue growth in 23H2.
- Due to TCM formula granules VBP, the 60%-75% gross profit margin level is hard to sustain. TCM formula granules business would enter an era of low profits but high sales.
- Shineway’s cash balance is RMB5.4 billion, but market value is about RMB5.39 billion. So, Shineway is undervalued. The Company’s two dividends next year could reach RMB50 cents per share.
HK CEO & Director Dealings (13 Dec 2023): Meitu’s NED Selling; China HK Power’s Short Call
- 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 China HK Power (931 HK)and Meitu Inc (1357 HK)
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