In today’s briefing:
- A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- 2024 High Conviction Idea: More Downside for Meituan
- HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- Could US Lawmakers Actually Stop SHEIN’s US IPO? No, But They Sure Could Make Things Difficult
- Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- REPT BATTERO Energy IPO Trading – Needs to Correct by 20-30%, at Least
- Haier Smart Home (6690 HK): Further Expansion of Footprint
- Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- Octillion Energy Holdings Pre-IPO Tearsheet
- WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
- Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week.
2024 High Conviction Idea: More Downside for Meituan
- We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
- We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
- Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.
HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- SOUTHBOUND flows showing reversion tendencies continues for a fourth week. Hs rebound vs their As on the week – especially the liquid ones.
- SOUTHBOUND saw HK$9.9bn of OUTflows on the week to 15 Dec, ALL of which was net sales of Tracker Fund of Hong Kong (2800 HK) and Tencent (700 HK).
- High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK) and China Telecom (728 HK) seeing net buying as a percentage of volume.
Could US Lawmakers Actually Stop SHEIN’s US IPO? No, But They Sure Could Make Things Difficult
- Since SEC operates in US executive branch, Congress lacks power to stop IPOs
- But by passing new laws, Congress could potentially undermine SHEIN’s IPO
- Given current political climate in the US, SHEIN IPO faces real political risks
Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- Water Oasis (1161 HK) reported 16%/65% YoY revenue/PAT growth for FY23. For H2 FY23 revenue/PAT decelerated to 7% YoY/31% YoY. The company guided a positive outlook for FY24.
- Net cash increased to 271 mn HKD, representing 28% of market capitalization (990 mn HKD), as the company benefitted from positive working capital cycle changes.
- Water Oasis (1161 HK) declared a 7-cent dividend for H2 FY23, bringing the overall dividend for FY23 to 14 cents (9.6% div yield).
REPT BATTERO Energy IPO Trading – Needs to Correct by 20-30%, at Least
- REPT BATTERO Energy (REPT) raised around US$270m in its Hong Kong IPO.
- REPT is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
Haier Smart Home (6690 HK): Further Expansion of Footprint
- Haier Smart Home (6690 HK)‘s acquisition of Carrier commercial refrigeration business is earnings accretive. It will also be strategically positive to its growth outlook.
- With net cash of Rmb17.3bn, HSH has no problem funding the deal internally. Instead of earning a single-digit return on cash, the business’ 9% earnings yield is attractive.
- The transaction will extend HSH’s application scenarios from household to commercial while elevating its competitiveness in Europe and allowing it to capture the B-end customers.
Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts to play with.
- Last week saw NORTHBOUND net sell RMB 18.6bn of A-shares on slightly lighter activity. Friday saw large NORTHBOUND net buys early in the day but ended a net sell.
- Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.
Octillion Energy Holdings Pre-IPO Tearsheet
- Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
- Octillion Energy Holdings (OE) primarily designs, manufactures and markets tailor-made battery systems for electric vehicles (EVs), and to a lesser extent, electric storage systems (ESS) and battery management systems (BMS).
- As per F&S, OE had a 9.6% market share and was ranked the third largest EV battery system provider for passenger battery EVs (BEVs) in China by FY22 shipment units.
WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
- Recent business updates of WuXi Bio led to a decline in WuXi AppTec’s share price and changed investors’ expectations for CXO. Now is the time to adjust forecasts.
- We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management’s guidance.Reversal in 2025 is uncertain.
- If WuXi AppTec “unexpectedly” receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.
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