In today’s briefing:
- WH Group (288 HK)’s US/Mexican Spin-Off
- SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide
- HKBN (1310 HK): China Mobile Resurfaces as a Rumoured Suitor
- 2025 High Conviction: Tencent Music Entertainment (TME) – Music as Promising Future
- Hong Kong Index Options Weekly – HSI and HSCEI
- SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated
- BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 18)
- Lucror Analytics – Convertibles Brief: Lenovo (992 HK)
- Pre-IPO Hangzhou Jiuyuan Gene Engineering (PHIP Updates) – The Future Prospects Are Not Optimistic
WH Group (288 HK)’s US/Mexican Spin-Off
- Back on 14 July 2024, WH Group (288 HK) (WHG) announced it had submitted a plan to spin-off its Smithfield US and Mexican ops on the NYSE or NASDAQ
- WHG the world’s largest pork producer, has now confirmed it will sell up to 20% of Smithfield’s shares on a fully diluted basis, in an initial public offering.
- WHG has also proposed an assured entitlement for existing shareholders by way of a distribution in specie of existing shares of Smithfield, or a cash alternative.
SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide
- The S.F. Holding (002352 CH) H-shares are being offered at a price range of HK$32.3-36.3/share, a discount of 20.2%-29% to the A-shares. The max raise (including oversubscription) is US$912m.
- Unlike Midea Group (300 HK), the S.F. Holding (002352 CH) H-shares will not get Fast Entry to any indices. Southbound Stock Connect inclusion will take place on 23 December.
- With no index inclusion in the short-term, the H-shares discount to the A-shares should remain wide. The H-shares could become short sell eligible in February.
HKBN (1310 HK): China Mobile Resurfaces as a Rumoured Suitor
- Bloomberg reports that China Mobile (941 HK) is exploring a buyout of HKBN Ltd (1310 HK) and is willing to pay at least HK$5.00, a 16.0% premium to last close.
- HKBN has been the subject of numerous bid rumours, which seemingly came to nothing due to the challenge of meeting the largest shareholders’ (TPG and MBK) price expectations.
- The rumoured offer price will struggle to gain TPG/MBK’s backing. The current valuation is unappealing, as HKBN trades at a premium multiple compared to peers at the last close.
2025 High Conviction: Tencent Music Entertainment (TME) – Music as Promising Future
- Our 2024 High Conviction, the stock of Meituan has risen by 87% in one year.
- We believe the market ignores TME because of its flat revenue.
- However, we expect TME will significantly benefit from its dominant position in the Chinese music market.
Hong Kong Index Options Weekly – HSI and HSCEI
- Vols have stabilized as market has moved away from peak short gamma levels just above the recent market highs.
- HSI Put positions appear to have been rolled down to the 19,000 strike.
- HSCEI saw significant put volume at the 6300 strike with ~15,000 contracts per day trading at that level.
SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated
- SF Holding’s HKEX listing launched on Tuesday, November 19th; deal to be priced by 26th
- SF hopes to raise about US$800 mn, less than originally anticipated in financial media
- About one quarter of the offering will be taken up by ten cornerstone investors
BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 18)
- Hong Kong market sectors outperforming since the stimulus in September are Consumer Discretionary and Healthcare as Utilities, Telecom and Energy lag.
- CRRC Corp Ltd H (1766 HK) gets BUY recommendations as its results point to continued strength in the rail equipment sector with passenger volume surging.
- Tencent Music Entertainment Group (1698 HK) reported solid results as it shifts to a pay-to-stream subscription model. Xiaomi Corp (1810 HK) had a blowout quarter with EV sales surging.
Lucror Analytics – Convertibles Brief: Lenovo (992 HK)
- In today’s Convertibles Brief publication we comment on developments of the following high yield issuers: Lenovo
- Credit markets widened on Friday, with the iTraxx X-Over increasing 8 bps to 304 bps.
- European bourses declined 0.1-1.3%, except for the IBEX 35 (+1.0%). In the US, the S&P 500 and Nasdaq fell 1.3% and 2.2%, respectively.
Pre-IPO Hangzhou Jiuyuan Gene Engineering (PHIP Updates) – The Future Prospects Are Not Optimistic
- Based on current performance, Jiuyuan has lost growth momentum, showing signs of stagnant growth. The main reason is VBP. So far, Jiouting, Yinuojia, Jifuwei have been included in VBP.
- Guyoudao is facing competitive pressure from both domestic and international competitors and could be finally included in VBP. JY29-2 is the next blockbuster product, but the prospects are not clear.
- Jiuyuan’s market value is expected to be higher than Qyuns. Future valuation performance will depend on the progress of JY29-2 and the overall market situation of GLP-1s at that time
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