In today’s briefing:
- Midea Group HK IPO Valuation Analysis
- PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
- [Rubber, China, Futures] Typhoon Triggered Defaults Nudged Rubber Spot Prices and SHFE Futures Up
- Midea HK Listing: Valuation Insights
- [NIO Inc. (NIO US, SELL, TP US$1) Target Price Change]: Who Is Going to Give in a Slowing EV Market?
- CTG Duty Free (1880 HK): Where Is the End of the Tunnel?
- Cosco Shipping Energy Transportation – Capitulation in Oil and Related Equities Almost Complete?
- Akeso Biopharma Inc (9926 HK) – Something Beautiful Is Happening
- Shougang Fushan Resources (639 HK): Cash 83% of Market Cap, 11% Trailing Dividend Yield
Midea Group HK IPO Valuation Analysis
- We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares.
- We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
- Pricing of this offering is expected to be completed on 13 September and listing on 17 September.
PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
- On the 18th June, personal computer parts and accessories play PC Partner (1263 HK) (PCP) announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
- PCP’s 30th August announcement provided clarity on a step-by-step approach for the HKEx withdrawal. I recently held zooms with the SFC and SGX for added clarification.
- PCP’s exchange relocation is predicated on PCP’s operational expansion into new markets, in particular, Southeast Asia. How and when the SGX becomes the preferred trading exchange remains an unanswered question.
[Rubber, China, Futures] Typhoon Triggered Defaults Nudged Rubber Spot Prices and SHFE Futures Up
- Physical rubber prices gained strength during the Asian trade day as a typhoon in Vietnam disrupted the supply chain, limiting supply in the market.
- In addition, increased inquiries from the Chinese tire makers for the prompt cargoes resulted in further support for the prices.
- Chinese state buying up to 100kt of rubber, prices to be announced on 13 Sep 2024. This would provide some short term support on the SHFE
Midea HK Listing: Valuation Insights
- Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
- The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
- As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.
[NIO Inc. (NIO US, SELL, TP US$1) Target Price Change]: Who Is Going to Give in a Slowing EV Market?
- NIO Motors (NIO) reported C2Q24 top line, non-GAAP operating loss and GAAP net loss in-line, narrower and narrower vs. our estimate, and in-line, narrower and in-line vs. consensus.
- The brightest spot of the result is gross margin due to both vehicle and service gross margin improvements.
- We keep rating at SELL and raise TP to US$1 to reflect better OPEX control.
CTG Duty Free (1880 HK): Where Is the End of the Tunnel?
- Market consensus is unrealistic as it expects China Tourism Group Duty Free (1880 HK) to record 32.1% YoY and 14.6% HoH earnings growth in 2H24. More downgrade risk ahead.
- Average per-customer duty-free sales in Hainan dropped by 19.2% YoY in Jul, indicating the negative wealth effect and deteriorating middle-class spending appetite.
- Overseas duty-free sales to Chinese residents surged by almost 50% YoY in Aug, implying a diversion effect which is also detrimental.
Cosco Shipping Energy Transportation – Capitulation in Oil and Related Equities Almost Complete?
- Speculative liquidation of crude oil positions opens up an opportunity
- A seasonally strong period for crude tanker rates coming up
- Company option scheme for senior management approved. Strike above current price
Akeso Biopharma Inc (9926 HK) – Something Beautiful Is Happening
- AK112’s HARMONi-2 results were impressive, but there’s still critical data gap before obtaining approval from FDA. The main concern is whether good PFS can be translated into significant OS benefits.
- Akeso will be eligible to receive low double-digit royalties on net sales from Summit. So, Summit is actually a better investment because it has complete global rights of AK112.
- Investors are betting Summit to be acquired by MNCs at a high price.Due to anti-monopoly issue, the narrowing pool of potential buyers would increase the difficulty of Summit being acquired.
Shougang Fushan Resources (639 HK): Cash 83% of Market Cap, 11% Trailing Dividend Yield
- Shougang Fushan Resources (639 HK) ended H1 FY24 with over 10.5 bn HKD of net cash and investments, compared to 12.7 bn HKD of market capitalization.
- At 1600 RMB/ton coking coal prices (current spot price), the business will be able to generate 1.1 bn HKD of profits, with an 80% payout implying a 7% dividend yield.
- The current spot prices are 16% below the average five-year price of 1900 RMB/ton ( yield 10%), and at these prices, the company still makes an EBITDA margin of 40-45%.
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