In today’s briefing:
- L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
- Tencent (700 HK): 1Q24 Preview, EPS Up by 40%, But Upside Narrowed by Significant Price Rise
- Alibaba (BABA US) 4Q24 Preview: Many Moves Under One-Digit Growth, 46% Upside
- SSE50 Index Rebalance Preview: Financials Continue to Outperform
- L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer
- Lalatech IPO: New Filing Shows March From Losses To Profits Between 2021 and 2023
- China After-School Tutoring: Still In The Early Innings; Prefer China Beststudy Over EDU
- Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months
- STAR50 Index Rebalance Preview: Adds Steamroll Deletes
L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
- Concurrent with its HK$34/share VGO, L’Occitane (973 HK)‘s disinterested shareholders may be entitled to a share scrip alternative. IF afforded, up to 5% of shares out can participate.
- The big unknown is whether you receive shares of the levered-up Bidco, at some as yet undetermined scrip ratio; or keep shares of L’Occitane as-is.
- To trigger the rollover option, 10% of disinterested shareholders need to express interest by the 15th May (a Hong Kong holiday btw). A deadline without details.
Tencent (700 HK): 1Q24 Preview, EPS Up by 40%, But Upside Narrowed by Significant Price Rise
- We believe total revenue will grow by 7% YoY in 1Q24 and faster in the remaining three quarters of 2024.
- We believe EPS will grow by 41% to HK$3.80, which is higher than the market consensus.
- The stock has risen by 26% since our last Buy rating, but there is still an upside of 9% till the end of 2024.
Alibaba (BABA US) 4Q24 Preview: Many Moves Under One-Digit Growth, 46% Upside
- We believe revenue will grow by 6% YoY in 4Q24, but by 11% for FY2026 (roughly 2025 calendar year).
- We believe Alibaba has been actively raising its revenue growth, but this the effect cannot be seen in the short run.
- We conclude the stock has an upside of 46% and a price target of US$120.
SSE50 Index Rebalance Preview: Financials Continue to Outperform
- With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
- The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.
L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
- Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
- For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.
CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer
- CPMC Holdings (906 HK) has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from ORG Technology Co., Ltd. A (002701 CH).
- Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission.
- An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.
Lalatech IPO: New Filing Shows March From Losses To Profits Between 2021 and 2023
- In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
- We also evaluate which drivers are likely to generate future improvements
- Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view
China After-School Tutoring: Still In The Early Innings; Prefer China Beststudy Over EDU
- China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame.
- Even though New Oriental Education & Techn (EDU US) had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.
- My sector top pick is China Beststudy Education Group (3978 HK), as valuation is lower and growth is higher, though it has a much smaller market cap..
Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months
- SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
- The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
- In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.
STAR50 Index Rebalance Preview: Adds Steamroll Deletes
- With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) in June. All changes are migrations from/to the STAR 100 Index.
- One way turnover is estimated at 3.4% resulting in a one-way trade of CNY 4.5bn (US$630m). There is a lot to trade from passive trackers, especially on the inclusions.
- The potential adds have outperformed the potential deletions by ~18% over the last month with Hangzhou EZVIZ Network (688475 CH) and APT Medical (688617 CH) moving higher.
💡 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
