In today’s briefing:
- Tianneng (819 HK): EV Battery Play Seeks Swiss Listing
- Fast Retailing (9983) | Q1 Miss
- Perfect Medical: Reopening in China to Provide a Boost, Rally to Sustain
- Alibaba Signs Cooperation Agreement With Hangzhou Government
- China Education Group (839 HK): Solidifying Investment Thesis After Placement
- What Is Tesla’s Outlook After It Drops Out Of Top 10 Largest U.S. Public Companies?
- National Vision Holdings, Inc. (EYE) Recommendation: Sell Short
Tianneng (819 HK): EV Battery Play Seeks Swiss Listing
- In January 2021, Tianneng Power (819 HK)‘s (TPI) battery unit Tianneng Battery (688819 CH) (TBG) was listed on China’s Star Market, as discussed in Tianneng: Star Market Battery Spin-Off Priced.
- TBG is now proposing the issuance of GDRs, accounting for 10% of existing shares out, to be listed on the SIX Swiss Exchange.
- A circular has been issued and TPI shareholders go to the vote on the 31 January. TPI currently holds 86.53% in TBG worth >300% of its market cap.
Fast Retailing (9983) | Q1 Miss
- We remain bearish on Fast Retailing given its valuation premium versus global peers
- Q1 sales were resilient despite global cost of living issues. Profits missed on rising costs and China’s Covid hangover
- Cost pressures on the wage bill could be a multi-year issue as Uniqlo seeks to align with global pay standards
Perfect Medical: Reopening in China to Provide a Boost, Rally to Sustain
- China ( >20% of revenue ) changing its stance on COVID provides Perfect Medical Health (1830 HK) with an opportunity to crystallize its expansion plans there.
- The border reopening between HK/China will provide a boost to its HK operations (>70% of revenue). The second half of H1 2023 results reflect an improving revenue trend for HK.
- The stock trades at 16x/11x FY23e/24e with ~15% of the market cap in cash and a dividend yield of 6.5%/9.5% FY23e/24e (based on ~100% payout ratio).
Alibaba Signs Cooperation Agreement With Hangzhou Government
- Chinese e-commerce giant Alibaba Group Holding Ltd. signed a strategic cooperation agreement with the government of Hangzhou, the eastern China city where the company is headquartered
- Alibaba and its finance affiliate Ant Group Co. Ltd. have been at the center of the Chinese government’s multi-year crackdown on the internet sector since October 2020.
- In 2021, Alibaba was fined a record 18.2 billion yuan ($2.6 billion) for monopolistic behavior.
China Education Group (839 HK): Solidifying Investment Thesis After Placement
- Positive response of China Education Group (839 HK)‘s placement indicated a good return of investor appetite to the sector. Its premium multiples stay well justified even after recent rally.
- The HK$1.6bn proceeds will reduce gearing to 29.2% (including contract liabilities) from 41.7% with minimal dilution. Narrowing in valuation gap against asking price of targets means more M&A potential.
- More funding for expansion of existing campuses, increase in accommodation and the set up of COVID-19 related curriculum will allow CEG to realise higher revenue per student.
What Is Tesla’s Outlook After It Drops Out Of Top 10 Largest U.S. Public Companies?
- Tesla’s disastrous performance has resulted in the company no longer being among the Top 10 largest U.S. public companies.
- Market commentators remain laser-focused on business fundamentals, while outside factors are still in the driver’s seat.
- Back in April of last year (less than a year ago) the optimism on Wall Street was running high.
National Vision Holdings, Inc. (EYE) Recommendation: Sell Short
- Sales have fallen for four quarters. Comp store sales growth fell -8% last quarter due to customer weakness, the declining macro environment and constraints on exam capacity (optometrists).
- Optometrists are supply constrained, which pressure margins from rising compensation. Investor-owned optometry service providers are at a disadvantage competing with professional practices that don’t share fees with investors.
- National Vision is neither large and vertically integrated like Essilor Luxottica, nor niche focused like Warby Parker is on ecommerce. Their low-price strategy is easily replicable by competitors.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
