HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various figures for the Chinese New Year holidays suggested that the domestic tourism market is lukewarm in 2022. However, there are evidences that high-end consumption is better than low-end.</li>
<li>Weak cross-province tourism and low-end spending are likely negative to <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a>, <a href="https://www.smartkarma.com/entities/maoyan-entertainment" target="_blank" data-smartkarma-citation="entities:27451:1" rel="noopener">Maoyan Entertainment (1896 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-pictures-group-ltd" target="_blank" data-smartkarma-citation="entities:20724:1" rel="noopener">Alibaba Pictures (1060 HK)</a> and <a href="https://www.smartkarma.com/entities/imax-china-holding-inc" target="_blank" data-smartkarma-citation="entities:888:1" rel="noopener">IMAX China Holding (1970 HK)</a>.  </li>
<li>Good duty-free sales and high-end spending are beneficial to <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">CTG Duty Free Corp (601888 CH)</a>, <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a> and <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>. </li>
</ul>


Various figures for the Chinese New Year holidays suggested that the domestic tourism market is lukewarm in 2022. However, there are evidences that high-end consumption is better than low-end.
Weak cross-province tourism and low-end spending are likely negative to China Southern Airlines (1055 HK), Maoyan Entertainment (1896 HK), Alibaba Pictures (1060 HK) and IMAX China Holding (1970 HK).  
Good duty-free sales and high-end spending are beneficial to CTG Duty Free Corp (601888 CH), Fosun Tourism (1992 HK), Fosun International (656 HK) and Chow Tai Fook Jewellery (1929 HK). 


2022 Chinese New Year Holidays - Some Winners and Losers

<ul>
<li>State Council's announcement of China 14th 5-year Tourism Industry Development Plan recently should see positive policies and supportive measures to be rolled out over the medium term. </li>
<li>
<a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>, <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment (308 HK)</a> and <a href="https://www.smartkarma.com/entities/haichang-ocean-park-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11396:1" rel="noopener">Haichang Ocean Park (2255 HK)</a> are some key beneficiaries.</li>
<li>We believe <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> will benefit from the recovery of international air passenger as the Plan highlights the importance of promoting inbound/outbound tourism after the pandemic.</li>
</ul>


State Council's announcement of China 14th 5-year Tourism Industry Development Plan recently should see positive policies and supportive measures to be rolled out over the medium term. 

Fosun Tourism (1992 HK), China Tourism Group Duty Free Corp Ltd (601888 CH), China Travel International Investment (308 HK) and Haichang Ocean Park (2255 HK) are some key beneficiaries.
We believe Air China Ltd (H) (753 HK) will benefit from the recovery of international air passenger as the Plan highlights the importance of promoting inbound/outbound tourism after the pandemic.


Beneficiaries of China's 14th 5-Year Tourism Industry Development Plan

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On the 31sr July, Chinese property play <a href="https://www.smartkarma.com/entities/joy-city-property-ltd" target="_blank" data-smartkarma-citation="entities:10958:1" rel="noopener">Joy City (207 HK)</a> announced a Scheme buyback, @ $0.62/share (declared final), a 67.57% premium; but arguably a 158% premium to undisturbed.</li>
<li>Yes, this was a ~70% discount to NAV. However, Joy City had traded at P/B of 0.14x, on average, the past five years. Earnings have trended south in that timeframe.</li>
<li>
<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2025/1023/2025102300920.pdf" target="_blank" rel="noopener">The Scheme Document's now out</a>, with a Court Meeting on the 17th November and expected payment around the 4th December. The IFA (Somerley) says "fair &amp; reasonable". It probably is.</li>
</ul>


On the 31sr July, Chinese property play Joy City (207 HK) announced a Scheme buyback, @ $0.62/share (declared final), a 67.57% premium; but arguably a 158% premium to undisturbed.
Yes, this was a ~70% discount to NAV. However, Joy City had traded at P/B of 0.14x, on average, the past five years. Earnings have trended south in that timeframe.

The Scheme Document's now out, with a Court Meeting on the 17th November and expected payment around the 4th December. The IFA (Somerley) says "fair &amp; reasonable". It probably is.


Joy City (207 HK): 17th November Vote On COFCO's Offer

<ul>
<li>With the pre-cons squared away as per the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0903/2025090302242.pdf" target="_blank" rel="noopener">3rd September announcement</a>, the key risk to <a href="https://www.smartkarma.com/entities/hangzhou-kangji-medical-instrument-co-ltd" target="_blank" data-smartkarma-citation="entities:28938:1" rel="noopener">Hangzhou Kangji Medical Instrument (9997 HK)</a>'s Offer is the Scheme vote. </li>
<li>The HK$9.25/share consideration price (declared final), was an uninspiring 9.9% premium to last close. But pitched around a four-year high. And peers are down 10% on average since the Offer.</li>
<li>A perusal of the s329 investigative reports provides a significantly clearer picture on who holds what.</li>
</ul>


With the pre-cons squared away as per the 3rd September announcement, the key risk to Hangzhou Kangji Medical Instrument (9997 HK)'s Offer is the Scheme vote. 
The HK$9.25/share consideration price (declared final), was an uninspiring 9.9% premium to last close. But pitched around a four-year high. And peers are down 10% on average since the Offer.
A perusal of the s329 investigative reports provides a significantly clearer picture on who holds what.


Kangji Medical (9997 HK): A Closer Look At The Shareholder Register

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hangzhou-kangji-medical-instrument-co-ltd" target="_blank" data-smartkarma-citation="entities:28938:1" rel="noopener">Kangji Medical Instrument (9997 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2025/0903/2025090302242.pdf" target="_blank" rel="noopener">announced</a> last night all pre-cons have been squared away. That must be some kind of record to secure SAMR approval for a Hong Kong-listed privatisation.</li>
<li>Back on the 12th August, Kangji Medical announced a less-than-ideal Offer, by way of a Scheme, from a consortium led by TPG and Qatar Investment Authority, together with the founders.</li>
<li>
What next? The Scheme Doc dispatch remains the 31st October, unless announced otherwise, as the Cayman Court is still on its six week "vacation".</li>
</ul>



Kangji Medical Instrument (9997 HK) announced last night all pre-cons have been squared away. That must be some kind of record to secure SAMR approval for a Hong Kong-listed privatisation.
Back on the 12th August, Kangji Medical announced a less-than-ideal Offer, by way of a Scheme, from a consortium led by TPG and Qatar Investment Authority, together with the founders.

What next? The Scheme Doc dispatch remains the 31st October, unless announced otherwise, as the Cayman Court is still on its six week "vacation".


Kangji Medical (9997 HK): Speedy Turnaround On Pre-Cons

China

Fosun Tourism Group is a world-leading family leisure and vacation group that provides tourism and leisure solutions across Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates resorts such as Club Med and Atlantis Sanya, and offers various tourism and leisure services. Fosun Tourism Group was founded in 2009 and is based in Central, Hong Kong.

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Fosun Tourism (6T8 GR)

2022 Chinese New Year Holidays - Some Winners and Losers

2022 Chinese New Year figures showed marginal decline domestic tourists, and pointed to better high-end consumption performance than low-end. We...

Osbert Tang, CFA

Beneficiaries of China's 14th 5-Year Tourism Industry Development Plan

China's 14th 5-year Tourism Development Plan are positive to many players in the tourism industry. We expect more favourable policies and...

Osbert Tang, CFA

Joy City (207 HK): 17th November Vote On COFCO's Offer

Trading wide at a 3.8%/111.4% gross/annualised spread. To be expected. If small-cap illiquid arbs are your bent, get involved here. Otherwise, this...

David Blennerhassett

Kangji Medical (9997 HK): A Closer Look At The Shareholder Register

I expect this Offer gets up. Assuming payment shortly before Xmas, I'd pay up to ~HK$8.95/share for a 15% annualised return. If you have the risk...

David Blennerhassett

Kangji Medical (9997 HK): Speedy Turnaround On Pre-Cons

I still expect this Offer to get up. Trading wide at 5.5%/20.3% gross/annual., assuming payment shortly before Xmas. Given terms are not, by any...

David Blennerhassett

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