In today’s briefing:
- Weiqiao Textile (2698 HK): Vote on 8 March
- SSE50 Index Rebalance Preview: Financials Staging a Comeback as Expected Trade Tops US$2bn
- New Horizon Health: Positive Alert, Upgrades ’23 Revenue Guidance
- [Kuaishou (1024 HK, BUY, TP HK$79) TP Change]: Robust Organic Traffic Supports Robust Growth
- Texwinca (321 HK): Even Cheaper Than Pacific Textiles (1382 HK)
- Pre-IPO Shouhui Tech – The Business Outlook and Stock Price Performance Are Not Optimistic
- Guming Holdings (Goodme) Pre-IPO – The Negatives – Growth Sustainability Remains a Question Mark
Weiqiao Textile (2698 HK): Vote on 8 March
- Weiqiao Textile Co (2698 HK)’s IFA opines that Weiqiao Chuangye’s privatisation offer of HK$3.50 per H Share, a 104.7% premium to the undisturbed price, is fair and reasonable.
- Despite amassing a blocking stake, Prudence’s ongoing buying supports the view that it intends to play the spread rather than block the deal.
- Despite the offer being below net cash, this is a done deal. At the last close and for the 28 March payment, the gross/annualised spread is 1.7%/10.2%.
SSE50 Index Rebalance Preview: Financials Staging a Comeback as Expected Trade Tops US$2bn
- Completing three-quarters of the review period, 6 stocks are in inclusion zone and 9 in deletion zone. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 6.8% at the June rebalance leading to a one-way trade of CNY 7.35bn (US$1.02bn). Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes and the SSE50 Index (SSE50 INDEX) over the last few months and could continue to do so as positioning builds up.
New Horizon Health: Positive Alert, Upgrades ’23 Revenue Guidance
- New Horizon Health announced a positive profit alert yesterday after market close and held a conference call.
- We participated in the call and spoke with the management to understand the recent developments.
- The company upgraded ’23 revenue guidance and provided revenue guidance for ’24.
[Kuaishou (1024 HK, BUY, TP HK$79) TP Change]: Robust Organic Traffic Supports Robust Growth
- We expect Kuaishou to report C4Q23 revenue, IFRS op. profit and IFRS net income in-line, 34% and 29% vs. consensus, thanks to margin improvements;
- Playlet continued to generate significant organic traffic, leading to decreasing sales marketing cost and growth in advertising inventories. We further expect AI to drive playlet market expansions;
- E-Commerce GMV growth was robust. Kuaishou will likely increase take rate in the future. We maintain BUY and raise TP to HK$79, implying an 17x PE.
Texwinca (321 HK): Even Cheaper Than Pacific Textiles (1382 HK)
- Following the recent Offer for Weiqiao Textile Co (2698 HK), I flagged Pacific Textiles (1382 HK) in Pacific Textiles (1382 HK): Material Benefits as a potential M&A play.
- Also in this space is Texwinca Holdings (321 HK) which is trading down towards its Covid-affected lows.
- Both Pacific Textiles and Texwinca are pursuing a Vietnamese expansion. Texwinca is trading cheaper to Pacific Textiles, is net cash, and has a superior yield..
Pre-IPO Shouhui Tech – The Business Outlook and Stock Price Performance Are Not Optimistic
- The essence of Shouhui’s business model is to “sell insurance” rather than provide services with technological attributes. So, Shouhui has relatively single business composition and lacks diversified sources of revenue.
- The trend of “disintermediation” is becoming increasingly evident, which may lead to customers deciding to purchase insurance directly from insurance companies not from Shouhui, resulting declining demand for Shouhui’s services/products.
- The business nature of insurance is incompatible with the Internet’s pursuit of rapid expansion. Cooling “Internet +insurance” investment in recent years proves the decline of market’s enthusiasm for this business.
Guming Holdings (Goodme) Pre-IPO – The Negatives – Growth Sustainability Remains a Question Mark
- Guming Holdings (GUM HK) (Guming) is looking to raise US$300m in its upcoming Hong Kong IPO.
- Guming Holdings (Guming) is a maker of freshly-made beverages in China.
- In this note, we will talk about the not so positive aspects of the deal.
💡 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
