In today’s briefing:
- Onewo Space-Tech Pre-IPO – Thoughts on Valuation
- People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued
- Binjiang H1 2022: Management Soundbites
- Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment
- YSB Inc Pre-IPO – The Negatives – However, It Comes at a Cost to Profitability
- Dongfang Electric (1072 HK): At Full Throttle
- Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense
- Cummins Inc: The Meritor Acquisition & Other Drivers
Onewo Space-Tech Pre-IPO – Thoughts on Valuation
- Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK).
- As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
- In this note, we provide our earnings estimates and thoughts on valuation.
People’s Insurance (PICC) (1339.HK) – The Rally (If Any) May Not Last Despite Undervalued
- People’s Insurance (PICC) (1339 HK)’s 2022H1 performance outpaced the industry peers, mainly driven by the improved performance of motor vehicle insurance business and non-vehicle insurance business.
- While non-life insurance business is the foundation/main driver of growth,life insurance business is the drag on performance, the successful transformation of which is an important factor to drive up valuation.
- PICC’s is undervalued. The major catalyst could be the upcoming 20th National Congress, expecting some rally during this period. Due to unfriendly macro, the rally may not last long.
Binjiang H1 2022: Management Soundbites
- Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).
- The company has >35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.
- If the company is willing to continue paying >60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.
Onewo Space-Tech IPO: A Deep Dive into the Largest Business Segment
- Onewo Space-Tech (ONEWO HK) is a leading property management service provider in China focused on offering basic property management services.
- Backed by China Vanke Co Ltd (H) (2202 HK) , the company has filed for an IPO on the HKEx and plans to raise proceeds of around US$2bn.
- In this insight, we discuss the company’s business model and deep dive into the largest business segment Community Space Living Consumption Services.
YSB Inc Pre-IPO – The Negatives – However, It Comes at a Cost to Profitability
- YSB Inc (YSB HK) is looking to raise about US$500m in its upcoming Hong Kong IPO.
- YSB Inc. (YSB) operates a pharmaceutical platform, digitizing the pharmaceutical transaction and service segment.
- However, gross margins have fluctuated owing to a changing sales mix. Growth has also come at the cost of profitability and YSB has consistently burned cash over its track period.
Dongfang Electric (1072 HK): At Full Throttle
- Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
- Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging.
- We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.
Bilibili (9626 HK): 2Q22, Game Fell, But to Reduce Expense
- In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
- We believe the May layoff will reduce operating expenses in following quarters.
- We set an upside of 8.3% and a price target of HK$197.
Cummins Inc: The Meritor Acquisition & Other Drivers
- Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
- The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
- It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.
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