In today’s briefing:
- CSI500 Index Rebalance Preview: High Turnover & Big Flow
- China Consumption Weekly: HSI, BYD, Trip.com, Kuaishou, Baidu
- Travelsky (696): Stay Away for Now
- Opportunities in the Hong Kong Market
- China: Sliding Market Leads to Passive Selling
- Weiqiao Textile (2698 HK): 8th March Vote. Payment Late March
- STO & Yunda May Report Operating Losses in Q423, Hampering Their Ability to Invest & Grow in ’24
- Guming Holdings (Goodme) Pre-IPO – The Positives – Benefited from Scaling Its Store Network
- Yum China (9987 HK/YUMC US): Earnings And Derating Risks Not Priced In
- Remegen (9995.HK/688331.CH) – The Real Reasons for the Stock Price Collapse and the Future Prospects
CSI500 Index Rebalance Preview: High Turnover & Big Flow
- With three-quarters of the review period nearly complete, we forecast 50 changes (the maximum permitted) for the CSI 500 Index at the close on 14 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.1% at the June rebalance resulting in a one-way trade of CNY 5.34bn.
- The potential adds and deletes and the CSI 500 Index have performed in line since August and the current setup appears attractive.
China Consumption Weekly: HSI, BYD, Trip.com, Kuaishou, Baidu
- We believe Hang Seng Index’s tumble was due to a comment in a governmental newspaper.
- BYD announced that it will sell three models of new energy vehicles in Indonesia.
- Trip.com began to sell tickets of scenic locations via the Kuaishou app.
Travelsky (696): Stay Away for Now
- Travelsky Technology Ltd H (696 HK) has been the predictable play for a rebound in domestic tourism in China.
- 1H23 result did not show anything that should alert investors to the changes in business practices.
- The recent profit warning disclosure has alerted investors that there is something else beyond the usual.
Opportunities in the Hong Kong Market
- A capitulation-type event for the Hong Kong market is ongoing.
- High-Dividend stocks will provide a safer return regardless of broader market moves.
- A false breakdown below Oct 2022 support will provide a signal for higher-beta exposure.
China: Sliding Market Leads to Passive Selling
- The China equity markets have continued to slide and the lower market caps and free float market caps will see a lot of stocks deleted from passive portfolios in February.
- We currently estimate selling of around US$1.66bn across 74 stocks listed on the mainland, in HK and the U.S., and that number could increase as markets continue to underperform.
- The potential deletes have dropped a lot over the last 4 months and there has been a marked underperformance versus the headline indices over the last month.
Weiqiao Textile (2698 HK): 8th March Vote. Payment Late March
- On the 17th January, Weiqiao Textile Co (2698 HK) announced the pre-conditions – regulatory approvals from NDRC, MoC and SAFE – had been fulfilled.
- The Composite Document was dispatched this morning (23 January), with an 8th March EGM, and expected payment on or before the 28 March, bang in line with my estimate.
- Prudence has upped its stake to 10.47%. IF they were intending to block, they’d stop at just over 10%. Buying any more shares >10% is simply a waste of money.
STO & Yunda May Report Operating Losses in Q423, Hampering Their Ability to Invest & Grow in ’24
- Plummeting ASPs likely pushed STO and Yunda OpInc margins below 0% in Q423
- The companies’ operating cash flow may be insufficient to fund needed capex
- Reduced investment could lead to slower growth, consolidation pressure in ’24
Guming Holdings (Goodme) Pre-IPO – The Positives – Benefited from Scaling Its Store Network
- Guming Holdings (GUM HK) (Guming) is looking to raise US$300m in its upcoming Hong Kong IPO.
- Guming Holdings (Guming) is a maker of freshly-made beverages in China.
- In this note, we will talk about the positive aspects of the deal.
Yum China (9987 HK/YUMC US): Earnings And Derating Risks Not Priced In
- China’s catering industry has changed compared to pre-COVID19, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options due to weaker consumer sentiment.
- Yum China’s same-store-sales growth could be under pressure if the company cannot raise ASP easily like in previous years.
- Yum China’s historical valuation should not be used as a benchmark, given that the growth profile has changed (new store openings reaching a plateau; sustained increased competition; lower ASP pressure).
Remegen (9995.HK/688331.CH) – The Real Reasons for the Stock Price Collapse and the Future Prospects
- One direct reason for the sharp drop in stock prices is that RemeGen’s performance in 23Q4 would miss expectation, thus leading to disappointing performance for the entire year of 2023.
- Due to low competitiveness of pipelines, product sales are hard to bring sufficient cashflow.Prospects for future license-out deals are still uncertain. RemeGen may find it difficult to turn the tide.
- Reasonable market value of Remegen should be above RMB12 billion. Investors can participate in the rebounds after stock price plunge, but we do not recommend holding for the long term.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
