In today’s briefing:
- Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True
- StubWorld: Swire Pac/Prop & Cathay FY22 Results
- JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.
- Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends
- Yashili (1230 HK): It’s Taken a While – Pre-Condition Satisfied
- Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months
- JF Wealth IPO Trading – Tepid Subscription Here Probably Won’t Buck Recent HK IPO Trends
- DPC Dash IPO: No Match For Pizza Hut
- Yashili (1230 HK): China Mengniu’s Scheme Triggered
- MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames
Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True
- Following Jehoshaphat’s allegations that profits are inflated dramatically over a decade with manipulative accounting, Techtronic Industries (669 HK) has issued a rebuttal clarifying that the accusations are without any merit.
- TTI’s beyond comparison performance is due to world class brands such as Milwaukee, Ryobi and Hoover which have helped top line grow at 13% CAGR over the past 13 years.
- Nevertheless, we have assessed some of the company’s clarifications here which seemed too good to be true.
StubWorld: Swire Pac/Prop & Cathay FY22 Results
- There were some positive takeaways from Swire stable’s set of FY22 accounts; however, the Hong Kong office segment faces increased vacancy rates, and new supply in 2023.
- 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%.
JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.
- JD’s revenue growth rate reached its historical low in 2022, but we believe it will recover in following two years.
- JD’s operating margin hit its historical high in 2022 and we believe the improvement will continue.
- We believe EPS will grow by more than 100% in 2022 and the stock has an upside of 42%.
Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends
- Shougang Fushan Resources (639 HK) trades at 4.5x/5.1x FY22e/23e with 50% of the market cap in cash and a 17.8%/15.8% FY23e/24e dividend yield (based on an 80% payout ratio).
- Since our call in FY21, close to 64 cents of the share price (25% of the current share price value) has been returned as dividends making it a dividend machine.
- We forecast at least another 70 cents of dividend for H2 FY22 and FY23, bringing the dividend in 3.5 years to more than half the current share price.
Yashili (1230 HK): It’s Taken a While – Pre-Condition Satisfied
- Yashili International Holdings (1230 HK) announced that the pre-condition is satisfied – around 10 months since the 6 May 2022 announcement of China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
- Yashili has received an extension for the despatch of the scheme document to a date no later than 31 August. We think the scheme document is despatched by early April.
- The scheme risk is low. At the current price and for a late May payment, the gross and annualised spread is 2.6% and 12.2%, respectively.
Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months
- Fangda Carbon New Material Co, Ltd. (600516 CH) is looking to raise around US$124m in its Swiss GDR listing. Huatai is the sole bookrunner in the deal.
- The firm is offering 13.91m GDRs (1 GDR to 10 A-shares) for sale at US$8.63-8.9/GDR, or at a 8.3-11.1% discount to last close on the A-share leg.
- As per the firm, it plans to use the net proceeds from the offering to support its business expansion, repay debt, supplement working capital and for general corporate purposes.
JF Wealth IPO Trading – Tepid Subscription Here Probably Won’t Buck Recent HK IPO Trends
- JF Wealth Holdings (9636 HK) raised around US$129m in its Hong Kong IPO.
- JF Wealth (JFW) is an online investment decision-making solution provider in China, focusing on the online investor content services market.
- We have covered various aspects of the deal in our previous notes. In this note we will talk about the demand and trading dynamics.
DPC Dash IPO: No Match For Pizza Hut
- After giving up the IPO plan late last year, DPC Dash (1405 HK) has restarted its IPO with hopes of capitalising on China’s reopening boom.
- DPC Dash is not positioned to benefit from the ending of lockdowns. It also didn’t outperform Pizza Hut when dine-in demand was absent.
- Therefore, DPC Dash is likely going to remain a minor player in a segment dominated by Pizza Hut.
Yashili (1230 HK): China Mengniu’s Scheme Triggered
- The 25% stake sale/acquisition in Yashili International (1230 HK) was expected five business days after the Dumex China Disposal – and that is what transpired. This satisfies the Scheme conditions.
- After ten months, Danone (BN FP) offloaded its chilled dairy business, acquired Yashili’s Dumex China baby formula ops, and offloaded its 25% stake in Yashili to China Mengniu (2319 HK).
- Now Yashili minority shareholders will get their chance to vote for China Mengniu’s Scheme, potentially in early May.
MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames
- What may appear duplicative asset segment in MGM actually spreads risk and improves overall margin of safety for both stocks.
- MGM China is a pure Macau play while MGM Resorts International is a strong bet on global reach of its gaming properties.
- Buying both is insurance against a possible recession downside because of the geographically and demographically diverse customer bases of both enities.
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