In today’s briefing:
- Over Capacity in Chinese Auto Market
- Consumer Tales & Trends #July 11-20: THBEV SP Swap Deal, Bad Debts in Thailand, AI in Beauty.
- (Mostly) Asia-Pac M&A: AIS/Thaicom, Capitol Health, Alumina, Ansarada, TCM, CPMC, Fancl, Hollysys
- Brilliance China Automotive (1114 HK, NEUTRAL, TP:HKD3.90): Go for the >15% Dividend Yields
- LiAuto (LI US, BUY, TP:USD25.0): High Growth + Deep Value Stock
- Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation
Over Capacity in Chinese Auto Market
- News show that European car makers such as BMW is moving out of China, leaving the Auto market to the local players
- Stocks like Brilliance China will suffer losses as they lose some of the most famous co-brand.
- Foreign firm exits may give relief to local auto makers as it resolves part of the over-capacity problems
Consumer Tales & Trends #July 11-20: THBEV SP Swap Deal, Bad Debts in Thailand, AI in Beauty.
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- Thai Beverage (THBEV SP)‘s proposed swap deal with promoter company raises several questions for shareholders. Start with the back story about how Fraser And Neave (FNN SP) joined the group.
- Bigger weddings could become a trend in India – Read why we like Kalyan Jewellers(KALYANKJ IN) . Also, household debt in Thailand as % of GDP is highest in ASEAN.
(Mostly) Asia-Pac M&A: AIS/Thaicom, Capitol Health, Alumina, Ansarada, TCM, CPMC, Fancl, Hollysys
- I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals discussed this week on Smartkarma: Samson Holding (531 HK)‘s Scheme, and VTOs for Advanced Info Service (ADVANC TB) and Thaicom Pcl (THCOM TB).
- Key updates took place on Capitol Health (CAJ AU), Alumina (AWC AU), Ansarada (AND AU), TCM (570 HK), CPMC (906 HK), Fancl (4921 JP),and Hollysys Automation Technologies (HOLI US).
Brilliance China Automotive (1114 HK, NEUTRAL, TP:HKD3.90): Go for the >15% Dividend Yields
- Business is struggling due to legacy luxury brands such as BMW losing its positioning in China. Local brands are eating into market share fast.
- Thankfully, the company is cash rich and its trading nature enables steady supply of dividends and have been known to pay special dividends.
- Share price has been under pressure, now trading at ~15% dividend yield based on 50% payout, appealing to yield seekers.
LiAuto (LI US, BUY, TP:USD25.0): High Growth + Deep Value Stock
- Share price under pressure due to industry challenges and transition of new product line-ups.
- 2024 is a blip, things will normalise 2025 and deliver strong topline and bottomline growth.
- LiAuto is trading at bargain levels for a company delivering 3-year earnings CAGR of 38%, net cash balance sheet and churns high free cash flow.
Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation
- Most brands under control (Mercedes, Lexus, Toyota) are undergoing popularity downtrend by consumers in China.
- There will remain a loyal niche supporter base, every legacy auto does, but it also means Zhongsheng will be a smaller and niche distributor going forward.
- Share price has plunged significantly YTD, trading at only ~5x, which we think is overdone. Yield hunters will like its ~8% DY.
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