In today’s briefing:
- KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company
- Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- Pre-IPO Midea Group H Share (PHIP Updates) – Some Points Worth the Attention
- HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data
- A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up
- Weekly Consumer Tales: India Festive Season: Hyundai Slows, Toyota Aces. First Cry Fails to Cheer
- HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market – Attractive Yield & Rapid Expansion Outside China – Sep 2024
- JNBY Design (3306 HK): A Cash Cow
- ECM Weekly (9th Sep 2024) – Midea, Bajaj Housing, Carote, Western Digital, Challenger, CICT, Premier
- Parent-Subsidiary Listing Issues Lead to Reasons Why ROE Is Not Increasing
KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company
- Hankook & Company is unexpectedly entering Autos, the only large-cap inclusion, likely getting a significant weight and facing a massive flow impact.
- Like BBIG, this single-day flow event driven by one or two ETFs means smaller front-running impact, but names like Hankook & Company could see early positioning due to massive flows.
- I’ll position in big impact names two days before the ETF rebalance trading. I’ll then go long on a basket of those with over 0.5x ADTV at Wednesday’s close.
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
- Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
- Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.
Pre-IPO Midea Group H Share (PHIP Updates) – Some Points Worth the Attention
- China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
- However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
- Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.
HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data
- SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
- ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small.
- This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).
A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up
- Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
- AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
- It is not clear what impetus there might be for better H performance.
Weekly Consumer Tales: India Festive Season: Hyundai Slows, Toyota Aces. First Cry Fails to Cheer
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- Hyundai Motor India’s August dispatch volumes were down 8% versus previous year – mostly due to sluggish demand for hatchback segment amd intense competition in the SUV segment.
- Toyota Motor (7203 JP) is on a fast track in India recording high double digit volume growth thanks mainly to successful launch of rebadged Suzuki models.
HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market – Attractive Yield & Rapid Expansion Outside China – Sep 2024
- We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
- We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
- Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out – they have had positive inflections in their earnings/dividend payouts and capital allocation.
JNBY Design (3306 HK): A Cash Cow
- JNBY Design Ltd (3306 HK) is successful in capturing China’s niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
- Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
- Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.
ECM Weekly (9th Sep 2024) – Midea, Bajaj Housing, Carote, Western Digital, Challenger, CICT, Premier
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, we looked at Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN), which are two relatively large listings coming up.
- Placement were flowing through again this week, across the region.
Parent-Subsidiary Listing Issues Lead to Reasons Why ROE Is Not Increasing
- The most significant reason for decreasing parent-subsidiary listings is the presence of overseas investors who have long pointed out the problems with this issue. This TSE’s request will support them.
- The issue of parent-subsidiary listing is whether the listed parent should incorporate the profitability of equity-method affiliate/listed subsidiary to enhance its profitability, or effectively use its assets by divesting them.
- If extending to equity-method affiliates, there are many companies that haven’t made progress in reviewing their business portfolios, and this is where the fundamental issue of ROE not increasing lies.
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