In today’s briefing:
- StubWorld: Swire’s NAV Discount Further Narrows As Buyback Kicks Off
- CTG Duty-Free H-Share Listing: Thoughts on First Day Trading
- JD.com (9618 HK): 2Q22, Growth Tumbled, But Lockdown Eased, 20% Upside or More
- CTG Duty Free H Share Listing: Trading Debut
- JD Logistics (2618 HK): Surged After 2Q22 Result, Still an Upside of 39%
- JD Health: Slowdown in User Growth Is No Big Concern
- Hong Kong CEO & Director Dealings – 25th August 2022
- Leapmotor IPO: The Bear Case
- CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
- Pinduoduo: A Beat Likely in 2Q22, But Medium-Term Consensus Is Still Hung Up On Old Assumptions
StubWorld: Swire’s NAV Discount Further Narrows As Buyback Kicks Off
- Swire Pacific (19 HK) has bought back B/A shares in ratios of 63/37 and 72/28 over two days. Listing Rules suggest the ratio has to be higher than 76.71/23.29.
- Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
CTG Duty-Free H-Share Listing: Thoughts on First Day Trading
- CTG Duty-Free Group has priced its IPO at HK$158 per share, at a slight premium to the midpoint of the indicative IPO price range of HK$143.5-165.5 per share.
- At HK$158 per share, the company raised net proceeds of HK$15,892.3 (approx. US$2.0bn) and the IPO is priced at an almost 30% discount to CTG’s A-share last close price.
- Cornerstone investors subscribed for approx. 38.4% of the H-share offering (or 1.9% of the total issued share capital of the company post-offering) with some existing shareholders subscribing under placing guidelines.
JD.com (9618 HK): 2Q22, Growth Tumbled, But Lockdown Eased, 20% Upside or More
- The revenue growth rate fell to 5% in 2Q22 due to the lockdown in Shanghai and Yangtze delta.
- However, freezers became popular in June and July because of the experience during the lockdown.
- We believe the stock has an upside of 21% based on EBITDA, but the upside can be significant if based on sales-related ratios.
CTG Duty Free H Share Listing: Trading Debut
- China Tourism Group Duty Free Corp Ltd (1880 HK)/CTGDF priced its H Share at HK$158.00 per share to raise net proceeds of US$2.0 billion. The H Share starts trading tomorrow.
- The H Share listing price implies an AH discount of 27.2% at A Share price of RMB189.80. This compares to an average AH discount of 46.6% of listed AH shares.
- The China Tourism Group Duty Free Corp Ltd (601888 CH) A Shares are trading close to fair value. The H Shares valuation is unattractive compared to peers.
JD Logistics (2618 HK): Surged After 2Q22 Result, Still an Upside of 39%
- Revenue grew by 20% YoY in 2Q22 with supply chain revenue up by 11% YoY and other revenue up by 42% YoY.
- The company was not impacted by lockdown, because the main business is to provide solution to delivery companies.
- We still believe the stock will has an upside of 39% after the surge on the day next to the result day.
JD Health: Slowdown in User Growth Is No Big Concern
- JD Health reported 1H2022 results. Revenue increased 48.3% YoY to RMB20.2bn (vs consensus RMB19.4bn) while managed to report a small OP of RMB60m (0.3% of revenue) for the period.
- Excluding share-based payment expenses, JD Health reported an OP of RMB1.0bn vs RMB564m in the same period a year ago, resulting in an OPM of 5.1% vs 4.1% in 1H2021.
- The growth in annual active user account growth has declined during 1H2022, however, it was mainly due to decrease in marketing spend.
Hong Kong CEO & Director Dealings – 25th August 2022
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- These insights also flag those companies where shares have been pledged, both recently and ongoing.
Leapmotor IPO: The Bear Case
- Leapmotor (2007699D HK), a Chinese EV manufacturer, will start its listing hearing for a US$1.5 billion HKEx IPO this week, according to press reports.
- In Leapmotor IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The key elements of the bear case rest on a slow ramp-up, lower revenue, high EBIT and FCF loss margin compared to peers at a similar stage of development.
CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
- Our earnings projections for China Tourism Group Duty Free Corp Ltd (1880 HK) are 14% and 18% below market consensus respectively. We think these are more realistic expectations.
- At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x – the average for top consumer discretionary names.
- Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.
Pinduoduo: A Beat Likely in 2Q22, But Medium-Term Consensus Is Still Hung Up On Old Assumptions
- Based on the correlation between revenue and China’s online retail sales, we estimate Pinduoduo (PDD US)’s Q2 revenue to beat consensus by around RMB 2.4bn.
- Our cost estimates translate the above revenue to an OP of RMB 4.0bn in 2Q22 compared to RMB 3.6bn for consensus.
- Even though consensus seems to have over-corrected its 2Q22 assumptions, it is still hung up on old assumptions for the medium term.
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