In today’s briefing:
- Haitong Int’l Securities (665 HK): Possible Offer From Parent
- Cainiao Pre-IPO – The Postivies – Evolving into a Global Player, Decent Revenue Growth
- Cainiao Smart Logistics IPO: Lacks Viability as a Standalone Business
- Li Ning (2331 HK): No Positive Catalysts In Sight
- 4Paradigm IPO: Thoughts on First Day Trading
- HKEX (388 HK) – Exceptional Cost Controls, New Revenue Streams, Quarterly Profit Momentum
- 4Paradigm IPO Trading – Low Insti Subscription and Small Float
- MedSci Healthcare Holdings (2415.HK) – Lack of Control over Core Resources Is a Critical Pain Point
Haitong Int’l Securities (665 HK): Possible Offer From Parent
- Haitong International Securities Group (665 HK) (HITSEC) is suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
- The rumour doing the rounds is that Haitong Securities Co Ltd (A) (600837 CH) (HSC) may take private its 73.4%-held Hong Kong-listed investment banking unit.
- HITSEC’s share performance since 1Q18 has been tragic. Financials have been dire since 2H20. But expect a punchy premium if HTS does seek to take HITSEC private.
Cainiao Pre-IPO – The Postivies – Evolving into a Global Player, Decent Revenue Growth
- Cainiao Smart Logistics , Alibaba Group Holding (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
- Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
- In this note, we talk about the positive aspects of the deal.
Cainiao Smart Logistics IPO: Lacks Viability as a Standalone Business
- Alibaba (ADR) (BABA US)‘s logistics arm, Cainiao Smart Logistics (1437124D HK), filed for an IPO with HKEX yesterday, aiming to raise $1bn to $2bn.
- Although efficient, Cainiao may face business challenges, as the majority of logistics costs and revenues stem from services outsourced to logistics partners.
- Despite the proposed IPO, we believe that Cainiao will always operate in the shadow of Alibaba’s primary e-commerce business.
Li Ning (2331 HK): No Positive Catalysts In Sight
- Since my bearish insight on August 11 (Li Ning (2331 HK): Low Quality Earnings Beat), Li Ning’s share price has declined by 27% in less than 2 months.
- Anta’s share price on the other hand has been flat during the same time frame (Anta Sports (2020 HK): Most Resilient In Industry Down-Cycles).
- In this insight, we look at if there are now any positive catalysts on the name, given the steep share price decline.
4Paradigm IPO: Thoughts on First Day Trading
- 4Paradigm has priced its IPO at HK$55.60 per share, at the bottom end of the indicative IPO price range of HK$55.6-61.16 per share and raised net proceeds of HK$835.5m.
- The HK offering and the international offering of the company were oversubscribed by 11.4x and 1.57x respectively implying very moderate demand for the company’s shares.
- Though priced at the bottom of the indicative IPO price range, our analysis suggests that 4Paradigm’s IPO is still expensive.
HKEX (388 HK) – Exceptional Cost Controls, New Revenue Streams, Quarterly Profit Momentum
- HKEX (388 HK) announced strong results, defying some worsening trends in volume, new listings, with quarterly profit growth rising from 11% to 28% to 34% YoY from 4Q22 to 2Q23
- Cost controls have been key to 31% 1H23 profit growth, with 0% growth depreciation, amortization, financing costs, and taxation, which can continue to support profit delta
- Revenue growth of 18-19% YoY in each of the past 2 quarters is partly driven by new revenue streams, which can offset some weaknesses in traditional metrics
4Paradigm IPO Trading – Low Insti Subscription and Small Float
- 4Paradigm (6682 HK) raised around US$131m in its Hong Kong IPO.
- 4P is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC.
- We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.
MedSci Healthcare Holdings (2415.HK) – Lack of Control over Core Resources Is a Critical Pain Point
- MedSci’s all three businesses are targeting B-end customers (pharmaceutical and medical device companies) to generate revenue. In the context of VBP and anti-corruption campaign, B-end customers do have relevant needs.
- However, the binding between MedSci and hospitals isn’t deep, which would lead to MedSci being unable to grasp core medical resources, with weak bargaining power in front of B-end customers.
- Since the initiative is in the hands of the other parties not in MedSci, MedSci’s revenue growth/scale could be much lower-than-expected. This would suppress valuation and stock price performance.
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