In today’s briefing:
- Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
- 2024 High Conviction Idea – High Beta and Low Risk Recommendations
- StubWorld: Swire’s Latest Buyback
- CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
- China: Consolidated Flows at the Close Tomorrow
- BYD (1211 HK): Largest Producer in Dramatically Expanding Market
- Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues
- Rept Battero IPO: The Bull Case
- Robosense Technology Pre-IPO – PHIP Updates – ADAS Sales Strong but Profitability Remains Distant
- CPMC (906 HK): SASAC Takeover
Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
- Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
- That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
- Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.
2024 High Conviction Idea – High Beta and Low Risk Recommendations
- We prepared high beta and low risk recommendations for 2024:
- With 2024 YE as horizon, we recommend JD.com, JD Logistics, JDHealth, Tencent and Luckin.
- With 1H24 as horizon, we recommend KE Holdings, NetEase and Kuaishou.
StubWorld: Swire’s Latest Buyback
- Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
- The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
- I still like the idea of buying Swire A and Swire B outright here.
CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
- CPMC Holdings (906 HK) has announced a pre-conditional voluntary offer from Changping Industrial at HK$6.87 per share, a 32.1% premium to the undisturbed price (16 August).
- The pre-condition mainly relates to Chinese approvals. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
- The 50% minimum acceptance condition should be met due to COFCO’s irrevocable and the second-largest shareholders’ past dealings with COFCO. At the last close, the gross spread was 6.0%.
China: Consolidated Flows at the Close Tomorrow
- Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
- There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
- We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.
BYD (1211 HK): Largest Producer in Dramatically Expanding Market
- China NEV market grew by 35% YoY in first ten months and by 39% YoY in October 2023.
- BYD’s production is significantly larger than other NEV producers in China.
- We believe the stock has an upside of 80% and a price target of HKD387. Buy.
Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues
- SenseTime Group Inc. shares plummeted nearly 5% Tuesday after U.S.-based short-seller Grizzly Research released a report accusing the Chinese AI software developer of inflating its revenues.
- Grizzly’s report, citing court documents and social media posts, alleged that SenseTime engaged in what it called round-tripping, where it provided funds to customers who in turn used the money to purchase products from SenseTime that might never have been delivered.
- Its Hong Kong-listed stock tumbled as much as 9.7% before closing 4.86% lower to HK$1.37 ($0.18), down 64% from its IPO price of HK$3.85.
Rept Battero IPO: The Bull Case
- REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, is premarketing a US$300 million HKEx IPO, according to press reports.
- According to Frost & Sullivan, in 1H23, Rept was the tenth-largest lithium-ion battery manufacturer globally for annual installations for new energy applications.
- The bull case rests on rapid ESS revenue growth, reducing customer concentration risks, ambitious capacity expansion plans, promising margin trajectory and improving cash collection cycle.
Robosense Technology Pre-IPO – PHIP Updates – ADAS Sales Strong but Profitability Remains Distant
- Robosense Technology (ROBO HK) (RT) is now looking to raise up to US$150m in its upcoming Hong Kong IPO, down from US$300-400m earlier.
- As of Mar 23, it had earned design wins for mass production of LiDAR for 52 vehicles with 21OEMs and Tier 1 suppliers, ranking No. 1 globally, according to CIC.
- We looked at its past performance in our earlier notes. In this note, we talk about its PHIP updates.
CPMC (906 HK): SASAC Takeover
- Packaging play CPMC Holdings (906 HK) has announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
- The joint offerors have offered $6.87/share, an okay 32.1% premium to last close. Pre-cons involve the standard PRC regulators. The Offer itself is contingent on a 50% acceptance hurdle.
- China Foods (506 HK) has given an irrevocable for its 29.7% stake. This will turn unconditional. The timing of the Offer is interesting as a VP is under graft investigation.
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