In today’s briefing:
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety
- Alibaba (9988 HK): Buy JD Logistics as the Business Model Alibaba Begins to Follow
- HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- Great Wall Motor Eyes Expansion in Vietnam Amid Southeast Asia Push
- [Alibaba (BABA US, BUY, TP US$109) Company Update]: Racehorse Mechanism Benefits E-Commerce
- Pre-IPO Wuhan YZY Biopharma – Both R&D and Commercialization Capabilities Have yet to Be Proven
- Bank of Chongqing – One Of Worst NIM Contraction, But With High Loan Growth
- SF Holdings A/H Listing – Early Look – Front Running
- Qiniu Pre-IPO Tearsheet
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Post the interim results, we provide short updates on each company and links to our latest work on them.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
Alibaba (9988 HK): Buy JD Logistics as the Business Model Alibaba Begins to Follow
- Alibaba’s new chairman decides to provide logistics service to outside customers.
- We believe Alibaba is following JD Logistics, as both companies have large retailer bases.
- We suggest buying JD Logistics the role model instead of Alibaba the follower.
HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
- The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
- With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.
CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
- The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.
Great Wall Motor Eyes Expansion in Vietnam Amid Southeast Asia Push
- Great Wall Motor Co. Ltd. (601633.SH +2.50%) said on Wednesday that it will enter the Vietnamese market in August with its Haval H6 hybrid model, while a broader plan to build an assembly plant for new-energy vehicles in the country is set for 2025.
- The Haval H6s will initially be exported to Vietnam from its manufacturing facility in Rayong, Thailand, the Hebei-based carmaker said earlier.
- Vietnam is the fourth-largest auto market in the Association of Southeast Asian Nations (ASEAN) region after Indonesia, Thailand and Malaysia, according to 2022 passenger car sales figures released by the ASEAN Automotive Federation.
[Alibaba (BABA US, BUY, TP US$109) Company Update]: Racehorse Mechanism Benefits E-Commerce
- We recently discussed BABA’s management changes with more e-commerce practitioners, and our main conclusion is that this change will be more beneficial to BABA’s e-commerce business rather than other subsidiaries;
- BABA is expected to learn from Tencent and ByteDance by shifting from a centralized authority model to a racehorse mechanism. Some subsidiaries, especially AliCloud and Cainiao, undergo a painful transformation;
- This may be good news for BABA because its e-commerce is the largest of its valuation. We also remind investors to exercise caution regarding the upcoming IPOs of BABA subsidiaries.
Pre-IPO Wuhan YZY Biopharma – Both R&D and Commercialization Capabilities Have yet to Be Proven
- YZY is a company that is serious about drug development However, there is actually high R&D risk of its pipeline candidates. So, YZY’s R&D capability has yet to be proven.
- There are still many unanswered questions in the whole direction of bispecific antibody. If YZY’s candidates fail to prove better marginal clinical benefits, they won’t have good commercialization performance.
- YZY has a long way to go based on its pipeline situation. Considering Wuhan YZY Biopharma (YZY HK) has no product in commercialization stage, its valuation may not be high.
Bank of Chongqing – One Of Worst NIM Contraction, But With High Loan Growth
- Combination of high NIM contraction with high loan growth is not a good combination
- BOC has seen its NIM down 14% in the past year but against 12% loan growth
- PBOC pressure to cut rates and for banks to support ailing debtors, is a risk
SF Holdings A/H Listing – Early Look – Front Running
- S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
- In this note, we look at its past performance and other deal dynamics that might impact the listing.
Qiniu Pre-IPO Tearsheet
- Qiniu Limited (1045102D CH) is looking to raise about US$200m in its upcoming Hong Kong IPO.
- Qiniu Limited (Qiniu) is a one-stop scenario-based intelligent audiovisual service provider.
- According to iResearch, the firm is the third largest audiovisual platform as a service (PaaS) provider in China in terms of FY22 revenue, with a market share of 5.7%.
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