In today’s briefing:
- Wuxi Biologics Placement – Lesser Discount than Recent Deals but Still Looks Good
- Quiddity Primer for HSCEI Rebalance Events
- Alibaba: Buoyed By The Ending Crackdowns, Yet Expensive With No Turnaround in Sight For Cash Cows
- China Internet Weekly (16Jan2023): Alibaba, Tencent, JD.com, ByteDance
- EQD | Alibaba (BABA US): Leverage up Longs Using Call Ratios
- Aier Eye Hospital Group (300015.CH) – The Truth Behind the Mirage
- WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement
- AInnovation Technology Lock-Up – US$670m Worth of Pre-IPO Investment Is Still Well in the Money
- Kuaishou (1024 HK): Expanding Market, Will See Higher Growth and Profit
- Tencent Reach for Sell Zone
Wuxi Biologics Placement – Lesser Discount than Recent Deals but Still Looks Good
- Wuxi Biologics Holdings is looking to raise up to US$513m by selling about 1.3% of Wuxi Biologics (2269 HK).
- This is the company’s 16th placement since it listed in June 2017.
- In this note, we will discuss deal dynamics, past deal performance, and share the scores on our ECM framework.
Quiddity Primer for HSCEI Rebalance Events
- The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
- The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
- In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.
Alibaba: Buoyed By The Ending Crackdowns, Yet Expensive With No Turnaround in Sight For Cash Cows
- Alibaba (ADR) (BABA US), along with several other Chinese tech names have rallied more than 100% over the past 2.5 months with the Chinese government indicating regulatory crackdowns are over.
- However, we think this could just be a temporary respite for tech names as there’s a lot more to be done in terms of a data security and privacy standpoint.
- Nevertheless, Alibaba Group (9988 HK) is still quite expensive, given that government interventions have pretty much curtailed Alibaba’s avenues for growth in the domestic market.
China Internet Weekly (16Jan2023): Alibaba, Tencent, JD.com, ByteDance
- The Chinese government may possibly buy minor shares in Alibaba and Tencent.
- JD.com’s long-term competitor, Dangdang, opened a bookstore in JD.com’s app.
- In 2022, both Tencent Video Account’s active user base and time on site reached 80% of We Chat.
EQD | Alibaba (BABA US): Leverage up Longs Using Call Ratios
- BABA US is up 85% from October lows and continues to trade well in 2023 up 32% in January
- Stock has benefitted from not only improved economic sentiment but also an end to the 2-year crack down on the Internet Sector
- We suggest using call ratios to increase upside leverage prior to earnings release
Aier Eye Hospital Group (300015.CH) – The Truth Behind the Mirage
- Aier launched new hospital acquisition plan. Obviously, Aier hopes to maintain high growth through M&A funds. However, considering its national market layout,Aier is in the final stages of aggressive M&As.
- Based on our data, Aier’s endogenous growth is actually very weak. Once external M&As fail to drive high growth, Aier’s overall performance growth would decline significantly. Aier is grossly overvalued.
- We expect decreasing birth rate after COVID-19. Due to the fundamental changes in the population structure, the valuation system of all assets would be destroyed – The long logic doesn’t exist.
WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement
- On 11th Jan 2023, WM Motor Technology Co Ltd announced its intention to merge with Apollo Future Mobility (860 HK) .
- WM Motor failed to list in Hong Kong last year and this is essentially its attempt to undertake a reverse merger at a valuation well below its previous funding rounds.
- In this note, we will talk about the deal dynamics and take an early look at its implications.
AInnovation Technology Lock-Up – US$670m Worth of Pre-IPO Investment Is Still Well in the Money
- Qingdao Ainnovation Technology Group (2121 HK) was listed on 27th Jan 2022, with its one-year lockup expiring on 27th January 2023.
- Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions.
- Coming up for one-year lockup expiry are the pre-IPO shareholders. Bulk of them are in the money as some have invested as early as 2018.
Kuaishou (1024 HK): Expanding Market, Will See Higher Growth and Profit
- Short video continued to accumulate active users in China and the company’s light-version grew the most rapidly.
- We believe the revenue growth rate will rise from 2Q23 and the company will have positive operating profit from 2024.
- We set the price target at HK$103, which is 44% over the market price.
Tencent Reach for Sell Zone
- Tencent faces formidable resistance at 385 that may not be seen for a while. 385 is where old lows and old highs coincide.
- RSI is extended (ST sell and bounce). Buy volumes are descent but have been drifting since late 2022.
- 385 a good zone to sell cash positions or short to challenge pivot supports outlined. 320 is an intermediate level to hold to keep things glued together.
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