China Archives | Page 24 of 153 | Smartkarma

• Oriental Watch (398 HK)  went ex-dividend on the 4th of January and has settled at an appetizing valuation of 6.8x PE with 60% of the market cap in cash.
• The market post-golden week and into the new year has been tepid.
• We expect the company to continue paying out 100% of its profits as dividends, based on which the dividend yield is close to 14% at the current share price.

• In this note, we will take a look at broker performance for HK IPOs and placements in 2023. 
• The following dataset includes all HK IPOs and placements above US$100m, which amounted to a total of 27 deals.
• The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.

• PDD diversified into ‘local life’ businesses in December 2023, but stopped these businesses within two weeks.
• We believe PDD’s low price advantage does not work in Meituan-like ‘local life’ and the top performer Meituan is hard to fight.
• We believe the stock price has an upside of 88% for year end 2024.

• MIXUE Group (1860056D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are Bank of America, Goldman Sachs, and UBS.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• The firm is the largest domestically freshly-made drinks company in terms of number of stores as of Sept 23, and number of cups sold during 9M23, according to CIC.

• Kerry Logistics Network will pay a special dividend in the form of KEX shares
• This will trigger a general offer by SF Holding for all KEX shares at THB 5.50
• Why is SF Holding doing this, & how could its int’l express business change?

• 2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022  while placements showed upward momentum.
• We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.
• For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

• IVF Hospital’s profitability and growth momentum look good at this stage, but the Company is still in early stage of development, with obvious gap with leading players in the industry.
• IVF penetration rate in China is not high and the rate of improvement is slow. With public hospitals accounting for over 90% market share, IVF Hospital’s growth space is limited.
• Licensing is a big barrier for development, slowing down the pace of nationwide expansion. The “good story” should be based on internationalization, which is actually the weakness of IVF Hospital.

In our inaugural Asian Monthly for 2024, we discuss the regional credit outlook for the year, with a focus on China, India, Indonesia as well as our favoured bonds. We also provide a review of 2023, including new Asian USD corporate bond issuances and defaults last year.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Green Energy
• Adani Ports & Special Economic Zone
• ENN Natural Gas
• Greentown China
• Innergex Renewable Energy
• SK Hynix
• Tata Motors ADR

• Alibaba is transforming into a leaner, more efficient and more profitable technology company with sharpened focus on core business and shareholder return.
• While we don’t expect growth to define the company in the near future, high single-digit P/E more than compensates for the lack of it.
• This worst-performing and cheapest technology stock among global peers stands a big chance of staging a comeback in 2024 in our view.

• The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
• STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.

• With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
• China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
• There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.

• Anta Sports Products (2020 HK) announced a set of in-line 4Q23 operating data. 
• In addition, the company has filed a registration statement with the U.S. SEC on January 4 for a proposed listing of Amer Sports on the New York Stock Exchange. 
• Anta currently trades at a forward PE of 17x based on estimated 2024 earnings, compared to a historical forward PE of 24x since 2017.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Adbri (ABC AU).
• Lowest spreads – Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), A2B Australia (A2B AU), Tietto Minerals Ltd (TIE AU), IJTT Co., Ltd. (7315 JP). 

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. Hs gave up some ground vs As in Week One.
• SOUTHBOUND saw HK$14.4bn of net IN-flows in the 4-day week to 5 Jan 2024. Total flows were HK$96bn.
• SOUTHBOUND start the year by buying ETFs, high-div SOEs like China Mobile and CNOOC, coal names, and sports/consumer names.

• Amer Sports, 52.7% owned by Anta Sports Products (2020 HK), has finally filed a US IPO registration. This is positive for Anta Sports as it can realise Amer’s value.
• Reported losses at Amer have increased YoY for 9M23 due to higher finance cost. But, its gross, operating, and adjusted EBITDA margins have all recorded solid improvements. 
• Assuming Amer is listed at the sector’s average FY23 P/S of 1.6x, Anta Sports may book deemed disposal gain of HK$13.5bn, or about 6.8% of its market capitalisation.

• The HSI INDEX index closed December (barely) up, no rally, nullifying completely the MONTHLY time bar count pattern suggesting a LONG MONTHLY trade (the 1-bar reversal has already happened).
• The index is approaching the Q3 support at 16449. A WEEKLY bounce is possible from that level, but we don’t know if the bounce can last more than 1 week.
• If the index keeps going down this week, it could find support between 16500 and 16000. A longer correction could end in the 15800-15600 price area. Use tight stops.

• A recent report shows apparent gains by Temu against US “dollar” store chains
• In this insight we introduce the “dollar” store concept and share our experiences
• We conclude that Temu & SHEIN don’t likely view some categories as priorities

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 5.5bn of A-shares on lighter average activity. BIG net selling flows on the first day of the year for HK going north.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

• Mixue Group (MIX HK), a world-leading freshly made drinks company, filed for an HKEx IPO to raise US$0.5-1.0 billion. 
• Mixue is China’s largest and the world’s second-largest freshly made drinks company, in terms of both the number of stores and cups sold in 9M23, according to CIC.
• The investment case rests on a strong brand, leading market share, high revenue growth, robust cost control, stable profitability and cash generation. 

• WuXi XDC remains our top pick in China healthcare. We’re optimistic about its share price performance. Cansino is stronger than imagined, and we recommend investors to be patient with it.
• The future competitive landscape of GLP-1s would present very different situation from traditional drugs. Innovent’s Mazdutide could be a “dark horse” if the head-to-head trial against Semaglutide is successful.
• For GLP-1s, it will be difficult to shake the first-mover position of the first two giants (Semaglutide and Tirzepatide) unless latecomers are able to show higher marginal benefits.

• Last week Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB) (KET).
• As S.F. Holding (002352 CH) holds a controlling 51.5% stake in KLN after the 2021 partial Offer, it will hold 26.8% in KET post-in-specie. That triggers an unconditional MTO.  
• The MTO price will be THB5.50/share. The key regulatory approval is Thai SFC. That won’t be an issue. 

• Anhui Conch Cement (914 HK) is trading at a historical low forward P/B of 0.5x, compared to an average of 1.2x for the last decade. 
• In the long term, China cement will likely see much lower volume and lower cement prices in the short term, but eventually rising cement prices due to better supply picture. 
• As the lowest cost producer, Anhui Conch stands a very good chance to win out in the long term and potentially more than double its current market share. 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Agile Property Holdings
2. China Vanke
3. Indika Energy
4. SK Hynix
5. Vedanta Resources

and more…

• New China Life Insurance Co. Ltd. will partner with a unit of China International Capital Corp. (CICC) to set up a $1.4 billion fund to invest in companies with real estate assets, as the state-owned insurer taps the property sector for long-term returns despite a market downturn.
• New China Life said it has reached an agreement with China Capital Investment Group (CCIG) to forge the private fund, in which the insurance company will provide 9.999 billion yuan ($1.4 billion) as the limited partner. CICG will be the general partner with 1-million-yuan investment and will manage the fund.
• The fund, with a term of eight years, will focus on direct and indirect investment in companies holding property projects in their long-term portfolios, according to New China Life.

• We expect Q3 FY24 revenues/profits to be >40%/>70% YoY for Taste Gourmet (8371 HK) for their results in early February. 
• Another catalyst we look forward to in CY24 is the main board listing on HKex. The timeline, we believe, should be in the second half of the year.
• Trading at 6x PE with an 8.5% dividend yield and cash of 130 mn HKD, or about 21% of the market cap, is one of our top dividend gems.

• Back in October, I wrote in PICC’s (1339 HK) Lifetime Low Implied Stub that People’s Insurance (1339 HK) was trading at an all-time low implied stub. It’s widened further since. 
• Over the past 12-months, excluding PICC’s 68.98% stake in PICC Property & Casualty (2328 HK), the market has assigned HK$42.6bn less for PICC’s steady and profitable life/health insurance stub ops.
• What gives? Falling interest rates is one. EV insurance in another. Yet this bifurcation is extreme.

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in March 2024.
• The index changes for the March 2024 index rebal will be announced on 16th February 2024.
• While the Hang Seng Index selection process is highly subjective, we continue to believe that identifying eligible names and grouping them by conviction level could be a valuable exercise.

• Cloudbreak Pharma, a China-based clinical-stage biotechnology company, plans to raise up to US$200m via a Hong Kong listing.
• In this note, we examine the company’s core products, namely CBT-001 and CBT-009, for pterygium and juvenile myopia respectively.
• We are seeing a lack of convincing sustainable innovation from the company. Pre-IPO investors and management are mediocre.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Vanke
• SJM Holdings

• BYD’s sales volume grew by 45% YoY in December, higher than 31% YoY in November.
• For the whole year 2023, BYD’s total sales volume rose by 62%.
• We conclude the stock has an upside of 74% for 2024.

• HKEX (388 HK) outlook has been withering for some time, and new data on property transactions, shows that this remains weak.
• SGX (SGX SP) in a less volatile geopolitical financial center, has a much lower market capitalization while its earnings outlook is far stronger.
• Two major differences between these two entities is their ROE and ROA, although the former may be more relevant. SGX (SGX SP) has an ROE that is nearly 50% higher.

• Kweichow Moutai (600519 CH) announced the preliminary result for FY23, with sales and net profit both up 17% yoy. 
• The overall weak consumer sentiment in China has not spared the Chinese liquor sector, as overall Chinese liquor demand has been lukewarm. 
• The current valuation for Moutai has become very attractive, and even if no rerating, the return is likely to be around 15% through earnings growth plus 2% from dividend yield.

• First of all, happy new year to all my readers! May 2024 bring market beating returns for everyone.
• Again I managed to underperform my blog stock picks by concentrating in the wrong stocks.
• Although I still ended up over 20% for the year, it was disappointing considering I was getting close to 30% in July.

• The essential difference between QuantumPharm and InSilico in terms of business models is that InSilico is an end-to-end generative AI-driven biotech but QuantumPharm is more of a platform-based service provider.
• It’s difficult for QuantumPharm to achieve significant increase in revenue scale in short time,because the service fee amount is usually not large, and it takes time to accumulate order volume.
• If there is no substantial performance contribution, these good stories would not bring about a sustained leap in valuation. QuantumPharm’s valuation in last funding round before IPO is too expensive. 

• We doubt if PetroChina (857 HK) can sustain good performance in 2024. On historical patterns, it has never sustained as one of HSI’s best-performing stocks for two consecutive years. 
• Consensus growth forecasts of 4.4% and 4.3% for FY24-25 are likely wrong as this means FY25 will be the 5th straight year of growth. PetroChina does not behave like that. 
• Crude oil price has got back to the end-2022 level, but PetroChina’s share price is still 50% higher. A return to their high correlation before 2023 will lead to underperformance. 

• Yichang HEC Changjiang Pharma (1558 HK) is set to benefit from the recent upsurge in respiratory illness in China. The company commands ~90% share of anti-flu drug market in China.
• In 1H23, HEC Pharma’s revenue jumped 148% YoY to RMB3.2B, mainly due to spiking flu cases in China. A strong flu season in 4Q23, should boost H2 performance.
• Despite a 43% rally in HEC Pharma share price over the last six months, the shares are trading at forward P/E of just 4.8x.

• We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
• We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) announced last week a new supplementary contract for its duty-free airport businesses in Beijing and Shanghai airports
• The new deal aims to promote collaborations between the airports and CTG, acting like true partners. However, we think it is more positive for airports and slight detriment to CTG
• Maintain our Bullish call with an unchanged target price of CNY106 (+27% UPSIDE), based on the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24

• Dada Nexus Limited (DADA.OQ) (“Dada”), with a market cap of USD 869.9 million, is one of China’s leading on-demand retail platforms holding around 20% market share behind Meituan (42%, 3690.HK) and Ele.me (24%, Alibaba-owned).
• Dada, a 54% subsidiary of JD.com (JD.OQ; 9618.HK) and 9% owned by Walmart Inc. (WMT.N) operates two core businesses, namely:

• JD Daojia (JDDJ), which is a local non-restaurant online to offline (“O2O”) retail marketplace

• WuXi XDC looks like “an outlier” among domestic CXOs – Its share price has performed well so far. As a niche player, WuXi XDC’s short-term performance growth is relatively guaranteed.
• We analyzed the valuation of WuXi XDC Cayman (2268 HK) under different scenarios. How much upside WuXi XDC’s valuation would have depends on the future real market size of ADCs.
• We’re conservative about whether we could have a US$50 billion ADC market. The “lucky” part for WuXi XDC is the current ADC market brings “a safe window period” for investors.

• In this insight we preview J&T’s maiden earnings report as a listed company
• We focus on revenue growth & margin trends in the China & SE Asia businesses
• We fear slowing organic growth & margin deterioration could spook investors

• Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
• With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
• Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

• CIMC Enric Holdings (3899 HK) has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.
• The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE’s IPOs have historically performed very well.
• Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.

• China’s outbound tourism recovery started much later than others in the region
• In particular, Taiwan & Korea began ramping outbound travel earlier (in Q222)
• As destinations, Thailand & Vietnam recovered early, but now lag HK’s growth

• The authorities granted licenses to 105 new domestic games and promised to review the game law draft.
• Alibaba is restructuring its main business unit, Taobao-Tmall, to reach flexibility.
• Both Alibaba and JD.com changed their refund policies to follow PDD.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU). 
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU). 

• For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
• The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• Alibaba Group Holding Limited delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
• For Taobao and Tmall Group, the emphasis lies on user-centric strategies, universal market coverage, multi-tiered consumer engagement, and maintaining price competitiveness.
• The Local Services Group concentrates on location-based technology services, with Amap focusing on mobility and Ele.me on-demand services.

• Baidu managed to exceed analyst expectations in terms of revenue as well as earnings in the most recent quarter sustaining solid revenue, profit, and cash flow.
• The strategic reinvention of the product portfolio with ERNIE and ERNIE bot played a pivotal role in achieving these results.
• Baidu successfully launched EB4 ahead of expectations, attributing it to a unique end-to-end 4-layer AI infrastructure and valuable user feedback.

• NetEase, Inc. delivered a positive result and managed an all-around beat last quarter.
• NetEase’s classic legacy titles and newly launched games played a pivotal role in expanding its global footprint.
• Looking ahead, NetEase anticipates the launch of Where Winds Meet, a highly anticipated AAA martial arts-themed action-adventure game.

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis. Hs up vs As quite strongly. Liquid Hs even better.
• SOUTHBOUND saw HK$1.2bn of net IN-flows in the 3-day week to 29 Dec. Total flows were HK$88bn.
• Bullish end to year for SOUTHBOUND owners but they did not mark the close. They were, however, big buyers of high-div SOEs.

• The BIG Risk is that Fujitsu Ltd (6702 JP) sells its stake in Fujitsu General (6755 JP) to someone in a below-market tender offer.
• Swire Pacific (A) (19 HK) may still see more outperformance from its  latest buyback. But it’s up ~29% since the company announced it was buying both the As and Bs. 
• Li Ning (2331 HK)‘s shares continue to edge up after its founder recently increased its stake. 

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 18.7bn of A-shares on stronger average activity. BIG net buying flows on Weds and Thursday.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

• The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp. 
• STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.