In today’s briefing:
- Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
- Tencent Distribution of Meituan Shares Official – Impact and Index Implications
- Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
- Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- Tencent 3Q: Shows Signs of Improvement
- Tencent (700 HK): Rev Down by 1.6% in 3Q22, But Game Sees Positive Comment from Gov for First Time
- TME: Online Music Biz Resumes Growth but Social Entertainment Further Drops
- Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation
Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
- Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK).
- Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
- First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.
Tencent Distribution of Meituan Shares Official – Impact and Index Implications
- In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
- The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue”
- With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.
Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
- On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
- The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
- In this note, we talk about the implications of the deal.
Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program.
- The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
- B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.
Tencent 3Q: Shows Signs of Improvement
- Tencent (700 HK) reported 3Q2022 results yesterday. Revenue decreased 1.6% YoY to RMB140.1bn (vs consensus RMB140.0bn) while adjusted OP declined 0.2% YoY to RMB28.4bn.
- Revenue from both Internet VAS and Online Advertising declined YoY during the quarter. Social networks revenue declined YoY for the first time by 1.9%.
- Tencent also announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends similar to the special dividend of its stake in JD.com.
Tencent (700 HK): Rev Down by 1.6% in 3Q22, But Game Sees Positive Comment from Gov for First Time
- Revenue decreased by 1.6% YoY in 3Q22, less than a decrease of 3.1% YoY in 2Q22.
- A governmental media gave positive comment to game industry for first time.
- We believe the stock has an upside of 52% for year end 2023.
TME: Online Music Biz Resumes Growth but Social Entertainment Further Drops
- Tencent Music (TME US) reported 3Q2022 results yesterday. Revenue declined 5.6% YoY to RMB7.4bn (vs consensus RMB7.0bn) while adjusted OP for the quarter increased 14.0% YoY to RMB765m.
- Revenue from social entertainment services decreased 20% YoY which was partially helped offset by 18.8% YoY increase in online music services revenues.
- GPM and OPM improved due to huge spending cuts on content, revenue sharing and S&M and we are yet to see if TME can sustain this without compromising user growth.
Beijing SinoHytec A/H Listing – Initial Thoughts on Valuation
- Beijing Sinohytec Co Ltd (688339 CH) (BSH) is looking to raise up to US$400m via its H-shares listing.
- BSH provides fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks mainly for commercial vehicles, such as buses and trucks.
- We looked at the company’s past performance in our previous note. In this note, we’ll talk about valuations.
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