In today’s briefing:
- Ping An A/H Premium: Buy the A’s, Sell the H’s
- Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
- Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging
- Taste Gourmet: Growth <6x PE with 10% Div Yield and China Reopening Boost
- Meidong: Capital Raise, There’s Never a Right Time
- EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains
- CSRC Sanction Is Likely Darkness Before Dawn
- Ant Group’s Lending Unit Gets Approval for $1.5 Billion Capital Boost
- Hygeia Healthcare Placement (6078.HK)- The Prospect Is More Certain After the Policy Risk Is Removed
- Chinese Intel Alternative Makes Consumer Play With Retail Store
Ping An A/H Premium: Buy the A’s, Sell the H’s
- Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
- We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
- Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.
Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
- Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
- On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Tencent(700.HK) 4Q22 Preview:Turning Points Are Emerging
- Our Tencent 4Q22’s rev. is in line, while non-IFRS net income would beat cons. by 5.2%. We estimate that top and bottom line will grow 13%/14% YoY in 2023.
- We suggest major business lines see turning points in 4Q22, supported by rebound of Peacekeeper Elite’s gross billings, approval of new game codes, monetization of Wechat Video Account, etc.
- Tencent is one of our top picks. Video Account, global game publishing, and margin beat are three major catalysts. Our TP HK$ 407 implies 26.1X PE in 2023.
Taste Gourmet: Growth <6x PE with 10% Div Yield and China Reopening Boost
- Taste Gourmet Group (8371 HK) is an excellent play on China/HK reopening with a 5.7x/4.2x FY23/24 PE and 10+% dividend yield, with 25% of the mkt cap in net cash.
- Reopening of China and HK borders after Jan 8th will provide a boost to the revenue and margins. The company will also resume its expansions in China (3 restaurants).
- Channel checks suggest a solid Q3 2023, with the company expanding to 38 restaurants in HK (34 in Q2 2023), with a surge in revenue likely due to seasonality.
Meidong: Capital Raise, There’s Never a Right Time
- China MeiDong Auto (1268 HK) raised 800mn HKD in a top placement (px~15 HKD/share), resulting in a ~4% dilution, citing an opportunistic raise for M&A.
- While the company asserts there is a well-defined pipeline, it was not very specific on the size and scope of its targets which was not taken well by the market.
- We continue to like the company, trading at a 15x/9x PE FY22e/23e, with a 5.2%/8.8% dividend yield (assuming an 80% payout ratio), with the optionality of M&A potential.
EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains
- Stock is up over 80% from October lows and almost 10% in 2023 already
- Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
- We consider some option strategies to roll profits and reduce exposure
CSRC Sanction Is Likely Darkness Before Dawn
- CSRC’s rectification on FUTU to suspend new user registration from mainland China while allow service continuation to existing user is well expected. We believe the market over-reacted;
- FUTU caters to overseas Chinese and populations falling outside of major currency zones. This market supports a paying user growth of 12% and revenue growth of 19% CAGR to 2025.
- We maintain BUY and cut TP from US$58.5 to US$50 due to moderate decline in mainland China users.
Ant Group’s Lending Unit Gets Approval for $1.5 Billion Capital Boost
- Ant Group Co. Ltd.’s online lending subsidiary has been given the go-ahead from regulators to boost its registered capital by 10.5 billion yuan ($1.5 billion), marking a key step forward in the fintech giant’s government-driven, year-long revamp
- The approval was granted a month and a half after some of the unit’s shareholders disclosed the plan, underscoring the recent pledge by authorities to promote healthy development
- Ant Group, backed by billionaire Jack Ma’s e-commerce giant Alibaba Group Holding Ltd., has been conducting a rectification required by the government since a regulatory storm saw its planned blockbuster IPO suspended in November 2020
Hygeia Healthcare Placement (6078.HK)- The Prospect Is More Certain After the Policy Risk Is Removed
- The government has changed its tone and started to encourage social capital to run hospitals, indicating that the previous concerns about the policy risk on Hygeia has been relieved.
- At this stage, Hygeia has more investment value, greater expansion space and higher market demand than Aier Eye Hospital. Meanwhile, the Company performs better in trans provincial expansion than Topchoice.
- Due to large investment/“heavy asset” model, Hygeia would continue to face capital pressure. Its expansion pace may not be as fast as expected if it hopes to control expansion quality.
Chinese Intel Alternative Makes Consumer Play With Retail Store
- Loongson Technology Corp. Ltd., a Chinese chip architecture developer, took a major step into the consumer market by opening its first brick-and-mortar pop-up store
- Loongson is also exhibiting its development kits and solutions for printers, smart door locks, and treadmills in the store
- This is not the first time Loongson has attempted to enter the consumer market. The firm opened an online store on e-commerce platform JD.com in October 2021, selling laptops, desktops, and their components like motherboards and memory kits
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