In today’s briefing:
- Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM
- Rohm (6963 JP): Gearing Up in the Downturn
- UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
- China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023
- Recruit (6098 JP) | A Soft-Landing?
- Recruit: HRTech Margins Falling Back to Pre-Covid
- Xinjiang Goldwind Science & Technology (2208 HK) – 2021/2023 Downtrend – Target LT Trend – 6.92/6.94
Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
- Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
- Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.
Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM
- Oasis proposals to restructure the Fujitec Co Ltd (6406 JP) Board which will be voted on at the 24 February EGM have got independent proxy advisor, ISS, support.
- An Oasis win would renew enthusiasm that Fujitec can close the performance gap with peers, resulting in a catalyst for the rerating of the shares.
- An Oasis loss is not disastrous as Oasis could come back or Fujitec would likely offer a premium to buyout Oasis. Fujitec is also cheap on a cash-adjusted P/E basis.
Rohm (6963 JP): Gearing Up in the Downturn
- Rohm is increasingly an automotive semiconductor maker. Its business should hold up reasonably well in the downturn and grow significantly in the long term.
- Capital spending risks excess capacity in the coming year, but sets the stage for long term growth. Possible investment in Toshiba a positive.
- Weak quarters ahead. Buy on weakness for the long term.
UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
- UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors.
- UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation.
- Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today.
China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
- New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue.
- Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.
Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- The 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
- Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).
Recruit (6098 JP) | A Soft-Landing?
- Recruit’s Q3 results are unlikely to move the market. Full year guidance slightly above consensus estimates
- Much of the bad news on the labour market and interest rates is now discounted in current valuations
- We remain bullish. At 23x PE the stock is trading at a deep discount to its historical 30x
Recruit: HRTech Margins Falling Back to Pre-Covid
- Recruit Holdings (6098 JP) reported 3QFY03/2023 results today. Revenue increased 18% YoY to JPY880.1bn (vs consensus JPY862.0bn) while operating profit for the quarter decreased 12.4% YoY to JPY96.8bn (consensus JPY107.2bn).
- Though HR Tech top line grew 24.2% YoY, it declined sequentially while adjusted EBITDA margin of the segment also declined during the quarter.
- Recruit’s share price has fallen 24% over the last 12-months and with further weakening of labour markets, there is more room for shares to fall.
Xinjiang Goldwind Science & Technology (2208 HK) – 2021/2023 Downtrend – Target LT Trend – 6.92/6.94
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- The 2021/2023 downtrend is accompanied by comprehensive LT momentum confirmation. The 2012/2023 uptrend support at 6.92/6.94 remains at risk of being retested in the coming 1-2 months,
- A monthly close below 6.92/6.94 would confirm a far more significant multi-month downtrend. For now we target 6.92/6.94 (-10%). The response to 6.92/6.94 is critical to the MT outlook.
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