In today’s briefing:
- WisdomTree Indexes Special Rebalance: ESG Considerations Dropped
- A/H Premium Tracker (To 8 Mar 2024): Liquid AH Premia Still Wide
- HK Connect SOUTHBOUND Flows (To 8 Mar 2024); Big Net Buys of SOEs, Finally Tencent a Net Buy
- Uni-President China (220 HK): 8% Dividend Yield Looks Sustainable
- PegBio IPO Preview: A Founder-Led Biopharma Player Fighting T2DM and Obesity in China
- Tencent (700 HK) 4Q23 Earnings Preview: Stable Growth and Margin Improvement Will Continue
- China Consumption Weekly (11 Mar 2024): JD.com, JD Logisitics, BYD, Alibaba, NIO
- Pinduoduo (PDD US): Pricing in an Imminent Slowdown
- China Healthcare Week (Mar.8) – GLP-1s, “Crowding Out Effect” in Healthcare, Microport’s Trouble
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – March 2024
WisdomTree Indexes Special Rebalance: ESG Considerations Dropped
- WisdomTree has dropped ESG considerations while selecting stocks for the EMXSOE, CHXSOE and WTEMXC indices.
- That results in a lot of inclusions and fewer deletions across indices that will be implemented at the close on 15 March.
- The round-trip trade across the indices will exceed US$500m with Tencent (700 HK) as the largest buy.
A/H Premium Tracker (To 8 Mar 2024): Liquid AH Premia Still Wide
- The New/Better 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 a net buyer every day since the end of Chinese New Year. NORTHBOUND a net seller this week for the first week in 6. AH premia slightly down.
- Wide spreads continue to narrow and narrow spreads continue to widen.
HK Connect SOUTHBOUND Flows (To 8 Mar 2024); Big Net Buys of SOEs, Finally Tencent a Net Buy
- A shares were up small on the week. HK stock indices were down.
- Net SOUTHBOUND buying was HK$17.1bn in the third post-holiday week. SOUTHBOUND has net bought every day since the end of Chinese New Year.
- SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.
Uni-President China (220 HK): 8% Dividend Yield Looks Sustainable
- Uni President China (220 HK), a F&B company in China, has an impressive track record of paying near 100% or over 100% of net profit in dividends since 2018.
- The company has two segments, food (mainly instant noodle), and beverage. Overall sales grew 1% yoy in 2023 while net profit jumped 36% yoy.
- Given the reasonable valuation (13x forward PE), a near 40% net cash position, and most importantly a stable 8% dividend yield, the stock looks attractive.
PegBio IPO Preview: A Founder-Led Biopharma Player Fighting T2DM and Obesity in China
- PegBio, a VC-backed biotech company, plans to tap capital markets in Hong Kong. CICC is leading the offering, and an IPO date has yet to be announced.
- The company’s pipeline features promising drug candidates designed for the treatment of type 2 diabetes mellitus (T2DM), obesity, NASH, OIC and congenital hyperinsulinemia.
- PegBio employs a proprietary technology platform, called HECTOR, and has six drug candidates in the pipeline portfolio. PB-119 is their core product with the purpose to treat T2DM and obesity.
Tencent (700 HK) 4Q23 Earnings Preview: Stable Growth and Margin Improvement Will Continue
- We believe total revenue will grow by 11% in 4Q23 and 2024.
- We also believe the operating margin will improve slightly in 4Q23 and the following two years.
- Tencent sold weak business to China Literature in December 2024.
China Consumption Weekly (11 Mar 2024): JD.com, JD Logisitics, BYD, Alibaba, NIO
- JD.com stock price surged after its 4Q23 results and repurchase decision.
- It is not big issue that BYD sales decreased in the weak season.
- Alibaba began to close unprofitable Freshippo stores in February, but the company said it has expansion plan.
Pinduoduo (PDD US): Pricing in an Imminent Slowdown
- We see further upside to our previous above-consensus 4Q23 results estimates on low base, enhanced monetization, and faster TEMU expansion.
- That said, we believe market focus already shifted to outlook for 2024, in particular an imminent slowdown in 1Q24 and renewed concern around US curb on TEMU.
- 30% share price correction is pricing in the above scenario and valuation should gradually improve as PDD delivers back-loaded bottom line growth in 2024.
China Healthcare Week (Mar.8) – GLP-1s, “Crowding Out Effect” in Healthcare, Microport’s Trouble
- Since the domestic revenue scale of PD-1 has been much lower-than-expected, the market seems no longer willing to offer GLP-1 weight loss drug high expectations. However, that’s not right.
- For China healthcare, the emergence of negative domestic policies is a time for reassessment and seeking opportunities, rather than a time of blind pessimism.
- Issuing convertible bonds is clearly a bad decision for Microport, which chose to sacrifice the interests of minority shareholders. Together with weak fundamentals/cashflow pressure, the management needs to take responsibility.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – March 2024
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
- We also provide updates on released earnings for Uchi Technologies (UCHI MK), Plover Bay Technologies (1523 HK), UMP Healthcare (722 HK), and Sitoy Group Holdings (1023 HK).
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
