In today’s briefing:
- 2024 High Conviction Idea: More Downside for Meituan
- Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
- HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
- Could US Lawmakers Actually Stop SHEIN’s US IPO? No, But They Sure Could Make Things Difficult
- Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- Haier Smart Home (6690 HK): Further Expansion of Footprint
- REPT BATTERO Energy IPO Trading – Needs to Correct by 20-30%, at Least
- Liquid Universe of European Ordinary and Preferred Shares: December‘23 Report
2024 High Conviction Idea: More Downside for Meituan
- We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
- We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
- Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.
Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
- MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
- While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate.
- The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender.
HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- SOUTHBOUND flows showing reversion tendencies continues for a fourth week. Hs rebound vs their As on the week – especially the liquid ones.
- SOUTHBOUND saw HK$9.9bn of OUTflows on the week to 15 Dec, ALL of which was net sales of Tracker Fund of Hong Kong (2800 HK) and Tencent (700 HK).
- High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK) and China Telecom (728 HK) seeing net buying as a percentage of volume.
Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
- Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
- MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
- Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.
Could US Lawmakers Actually Stop SHEIN’s US IPO? No, But They Sure Could Make Things Difficult
- Since SEC operates in US executive branch, Congress lacks power to stop IPOs
- But by passing new laws, Congress could potentially undermine SHEIN’s IPO
- Given current political climate in the US, SHEIN IPO faces real political risks
Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- Water Oasis (1161 HK) reported 16%/65% YoY revenue/PAT growth for FY23. For H2 FY23 revenue/PAT decelerated to 7% YoY/31% YoY. The company guided a positive outlook for FY24.
- Net cash increased to 271 mn HKD, representing 28% of market capitalization (990 mn HKD), as the company benefitted from positive working capital cycle changes.
- Water Oasis (1161 HK) declared a 7-cent dividend for H2 FY23, bringing the overall dividend for FY23 to 14 cents (9.6% div yield).
Haier Smart Home (6690 HK): Further Expansion of Footprint
- Haier Smart Home (6690 HK)‘s acquisition of Carrier commercial refrigeration business is earnings accretive. It will also be strategically positive to its growth outlook.
- With net cash of Rmb17.3bn, HSH has no problem funding the deal internally. Instead of earning a single-digit return on cash, the business’ 9% earnings yield is attractive.
- The transaction will extend HSH’s application scenarios from household to commercial while elevating its competitiveness in Europe and allowing it to capture the B-end customers.
REPT BATTERO Energy IPO Trading – Needs to Correct by 20-30%, at Least
- REPT BATTERO Energy (REPT) raised around US$270m in its Hong Kong IPO.
- REPT is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
Liquid Universe of European Ordinary and Preferred Shares: December‘23 Report
- Since mid-November, spreads have generally widened across our European liquid universe of ordinary and preferred shares (9 have tightened, 10 widened).
- Recommended trades long preferred / short ordinary shares: Media-for-Europe, Sixt, Volkswagen (still the most interesting situation).
- Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal.
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