In today’s briefing:
- WuXi XDC IPO: The Bull Case
- WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong
- JD.Com: Losing Its Appeal?
- Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results
- (Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power
- AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum
- Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention
- Midea Group (000333 CH): Not That Correlated To China Property
- Midea A/H Listing – Filing Updates – Growth and Margins Pick Up
- Introducing Monthly Tracking of Chinese X-Border Express Parcel Data | YTD Volume up +55%, ASPs -25%
WuXi XDC IPO: The Bull Case
- WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
- WuXi XDC ranked No. 2 globally and No. 1 in China among CRDMO for antibody-drug conjugates and other bioconjugates in terms of revenue in 2022, according to Frost & Sullivan.
- The bull case rests on large addressable markets, market share gains, fast-paced revenue growth, strong revenue visibility, a solid balance sheet and ambitious capacity expansion plans.
WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong
- WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
- WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In our previous notes we looked at the company’s past performance, peer comparison, and shared our thoughts on valuations. In this note, we discuss WXDC’s PHIP updates.
JD.Com: Losing Its Appeal?
- After a spike higher in fund ownership in 2021, active Asia Ex-Japan funds are beginning to close out positions.
- Funds including T.Rowe Price, LO Funds and Nikko AM have closed out exposure this year.
- JD.com remains a very well owned stock among institutional investors, at a time when performance is anything but stellar so far this year.
Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results
- We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
- We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
- We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.
(Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power
- For the month of October 2023, 7 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
- The average premium for the new deals announced (or first discussed) in October was 65%. The average YTD is 37% (85 deals).
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum
- The A-share subsidiaries of AviChina Industry & Technology (2357 HK) have mostly posted solid 3Q23 results – aggregate earnings growth has accelerated to 50.2%, from 26.8% in 1Q23.
- Their 9M23 result reached 64% of FY23 consensus forecast earnings for AviChina, vs. just 61% a year ago. This indicates the market is too conservative and suggests room for upgrade.
- Valuations are cheap at 8.7x and 7.0x PERs for FY23 and FY24. Its market capitalisation equals just 46% of the total attributable market capitalisation of these subsidiaries.
Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention
- We’ve seen increasing global cooperation for ADC pipelines. However, licensing deals alone cannot be used as the only basis for judgment. We still need to wait for solid clinical evidence.
- ADCs are far less “general and popularized” than PD-1. If compare ADC with GLP-1s, the difference is more obvious.How big the real market is for ADC is a question mark.
- WuXi XDC’s share price could perform well after IPO due to positive sentiments towards ADC, but whether its long-term valuation would be higher than peers remains to be seen.
Midea Group (000333 CH): Not That Correlated To China Property
- Midea Group Co Ltd A (000333 CH) has officially filed for Hong Kong listing last week.
- A common pushback against owning the stock is the perception of strong correlation to China property, which is not true in terms of business fundamentals.
- The stock is currently trading at 10x 2024E PE compared to an average of 13x over the last 10 years.
Midea A/H Listing – Filing Updates – Growth and Margins Pick Up
- Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
- Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
- We have covered the company and deal background in our previous note. In this note, we talk about the updates from the recent filing.
Introducing Monthly Tracking of Chinese X-Border Express Parcel Data | YTD Volume up +55%, ASPs -25%
- For certain companies now seeking IPOs, X-border volumes may serve as demand proxy
- In 2023, Chinese X-border volume growth has accelerated, up +55% Y/Y through September
- In developing X-border express market, lower ASPs are actually a good thing, in our view
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