In today’s briefing:
- Midea Group H Share Listing (300 HK): Valuation Insights
- Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player
- Midea A/H Listing – Bigger Deal, Better Pricing
- Midea Group: Quick Overview of HK Offer, Post-Issue Valuations. Attractive.
- The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 7)
- Nongfu Spring (9633 HK): Trading At Below 20x Forward PE With 15% NP 3-Year CAGR
- Shanghai Henlius Biotech (2696.HK) Privatization Update – Some New Information Worth the Attention
- Lonking (3339 HK): Small and Beautiful, Net Cash Equal 81% of Share Price
- Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
- Hozon New Energy Automobile Pre-IPO – The Positives – Has Been Ramping Up
Midea Group H Share Listing (300 HK): Valuation Insights
- Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
- We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.
- Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.
Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player
- Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK), two of China’s leading state-backed brokerages, intend to merger via a share swap, subject to regulatory approvals.
- Via a Merger by Absorption. GJS will issue new A and H shares to Haitong shareholders. The ratio hasn’t been firmed. Upon completion, the MergeCo creates China’s largest securities entity.
- A merger is welcome – possibly mandated – amid challenging capital markets and a tightening regulatory backdrop.
Midea A/H Listing – Bigger Deal, Better Pricing
- Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
- Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
- We have covered the deal background in our previous notes. In this note, we talk about valuations.
Midea Group: Quick Overview of HK Offer, Post-Issue Valuations. Attractive.
- Midea Group Co Ltd A (000333 CH) is offering 492.1 million shares in Hong Kong, priced between HKD52 and HKD54.8 per share.The valuation looks attractive.
- Nearly one-third of the Hong Kong share offering has already been subscribed by cornerstone investors.
- Midea’s strong market share in home appliances, consistent revenue growth, margin expansion, and appealing return ratios make a compelling investment case.
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 7)
- ETF flows showed subdued activity during the week although the Southbound Connect platform had a minor outflow.
- Great Wall Motor (2333 HK) and China Feihe (6186 HK) both had positive news sentiment helping their share prices rally on better earnings announcements.
- New World Development (17 HK) announced a major asset impairment write-down sending its stock to historic lows. China Tourism Group Duty Free (1880 HK) disappointed on 2Q24 sales and profits.
Nongfu Spring (9633 HK): Trading At Below 20x Forward PE With 15% NP 3-Year CAGR
- Nongfu Spring (9633 HK)‘s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.
- The derating is largely due to the negative media portrayal of the company’s Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24.
- Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy.
Shanghai Henlius Biotech (2696.HK) Privatization Update – Some New Information Worth the Attention
- Fosun Pharma will make every effort to promote the success of this privatization. The management has disclosed the afterwards arrangements- Henlius and Fosun Pharma will further expand/integrate in the future.
- Henlius’ revenue is expected to reach RMB6 billion in 2024 and RMB8-9 billion in next 2-3 years. Even if the privatization fails, things are still manageable due to strong fundamentals.
- Fosun Pharma will not stop its capital operation against Henlius, but the plans of re-listing could be based on a new entity. So, the Cash Alternative is a better choice.
Lonking (3339 HK): Small and Beautiful, Net Cash Equal 81% of Share Price
- Industry wheel loader sales rose 15.2% in Aug, continuing the healthy momentum. A low base in 2H24 will be another favourable factor, and Lonking Holdings (3339 HK) is well placed.
- Forklift outlook will stay strong and serve as a growth engine. There is also a significant pick-up in demand for industry excavator sales in Jul and Aug.
- Net cash amounted to 81% of the share price. Including investments, it will increase to 118%. Conservative FY24 consensus earnings forecast means potential upside surprise.
Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
- Back on the 23 June 2024, property developer Midea Real Estate Holding (3990 HK) announced the in-specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
- The in-specie involved distributing 97.8% of Midea’s assets (involved in property development and sales); accounting for 95% of revenue and ~91% of profit. All figures as at FY23.
- Midea went ex yesterday, closing down just HK$4.87/share. Midea, ex-in-specie, is currently trading at a trailing 0.6x P/B, and 2.3x PER. Pricing looks full.
Hozon New Energy Automobile Pre-IPO – The Positives – Has Been Ramping Up
- Hozon New Energy Automobile is looking to raise up to US$1bn in its upcoming HK IPO.
- Hozon New Energy Automobile (HNEA) is a NEV technology company which sells cars under the Neta brand. The prices of its vehicles generally range between US$15,000 to US$45,000.
- In this note, we talk about the positive aspects of the deal.
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