HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Bosideng International Holdings / Equity Bottom-Up

<ul>
<li>While having a slow FY23, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a> is well-positioned to capture the rebound in down apparel sales growth as pent-up demand is released.  </li>
<li>We also expect a recovery in margin, further improvement in channel efficiency and operating leverage from cost control will add to earnings momentum. </li>
<li>Management expects revenue growth will at least sustain at the rate in the last 5 years. The stock's valuations are cheap when compared with growth outlook and global peers. </li>
</ul>


While having a slow FY23, Bosideng International Holdings (3998 HK) is well-positioned to capture the rebound in down apparel sales growth as pent-up demand is released.  
We also expect a recovery in margin, further improvement in channel efficiency and operating leverage from cost control will add to earnings momentum. 
Management expects revenue growth will at least sustain at the rate in the last 5 years. The stock's valuations are cheap when compared with growth outlook and global peers. 


Bosideng (3998 HK): Outlook Stays Promising

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/enm-holdings-ltd" target="_blank" data-smartkarma-citation="entities:16267:1" rel="noopener">Enm Holdings (128 HK)</a> announced a privatisation offer from Chime Corporation at HK$0.58 per scheme share, a 54.7% premium to the undisturbed price of HK$0.375 per share (24 May). </li>
<li>The key condition is the scheme be approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No shareholder holds a blocking stake. The offer price is final.</li>
<li>Detractors will argue the offer is low due to ENM’s net cash (75% of the market cap). However, the offer is reasonable compared to historical multiples and share prices. </li>
</ul>



Enm Holdings (128 HK) announced a privatisation offer from Chime Corporation at HK$0.58 per scheme share, a 54.7% premium to the undisturbed price of HK$0.375 per share (24 May). 
The key condition is the scheme be approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No shareholder holds a blocking stake. The offer price is final.
Detractors will argue the offer is low due to ENM’s net cash (75% of the market cap). However, the offer is reasonable compared to historical multiples and share prices. 


ENM Holdings (128 HK): Privatisation Bid at HK$0.58 Per Share

Thematic (Sector/Industry)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> will likely see its 4Q22 and 1Q23 businesses negatively affected by the increase in infections as China loosens its COVID combating measures.</li>
<li>The market environment faced by <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a> is more challenging as peak season demand is affected. However, the positive long-term growth story remains unchanged.</li>
<li>
<a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home Co Ltd (6690 HK)</a> will be less affected when compared with the other two. We see better margin in FY23 and share buyback is positive. </li>
</ul>



Anta Sports Products (2020 HK) will likely see its 4Q22 and 1Q23 businesses negatively affected by the increase in infections as China loosens its COVID combating measures.
The market environment faced by Bosideng International Holdings (3998 HK) is more challenging as peak season demand is affected. However, the positive long-term growth story remains unchanged.

Haier Smart Home Co Ltd (6690 HK) will be less affected when compared with the other two. We see better margin in FY23 and share buyback is positive. 


China Consumer Discretionary: Short-Term Tough Buying Long-Term Up

<ul>
<li>Amid the challenging market, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a>'s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.</li>
<li>It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.</li>
<li>With 32% increase in online branded apparel sales, the channel will be Bosideng's key growth impetus. For "double-11", sales have outperformed peers significantly, showcasing its product strengths.</li>
</ul>


Amid the challenging market, Bosideng International Holdings (3998 HK)'s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.
It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.
With 32% increase in online branded apparel sales, the channel will be Bosideng's key growth impetus. For "double-11", sales have outperformed peers significantly, showcasing its product strengths.


Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

<ul>
<li>Lower losses for investment business and sportswear retailing have contributed to a 48.4% reduction in losses for 1H FY23 at <a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang Group Co (3818 HK)</a>.</li>
<li>The resumption of interim special dividend is a welcoming sign. Inventory clearance, store optimisation, cost reduction and growth at the PHENIX ski wear brands are positive drivers.</li>
<li>Its market capitalisation of HK$1.88bn represents a steep discount of 79% to its cash and investment portfolio of Rmb8.46bn, and this also means sportswear business is free.</li>
</ul>


Lower losses for investment business and sportswear retailing have contributed to a 48.4% reduction in losses for 1H FY23 at China Dongxiang Group Co (3818 HK).
The resumption of interim special dividend is a welcoming sign. Inventory clearance, store optimisation, cost reduction and growth at the PHENIX ski wear brands are positive drivers.
Its market capitalisation of HK$1.88bn represents a steep discount of 79% to its cash and investment portfolio of Rmb8.46bn, and this also means sportswear business is free.


China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign

Hong Kong

Bosideng International Holdings Limited develops down apparel products in the Peoples Republic of China. The Company's products include down jackets, vests, and pants which it offers through retail outlets located in multiple cities.

Bosideng International Holdings (3998 HK)

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Bosideng International Holdings (3998 HK)

Bosideng (3998 HK): Outlook Stays Promising

The release of pent-up demand, recovery in gross margin, further improvement in channel efficiency and operating leverage from cost control will...

Osbert Tang, CFA

China Consumer Discretionary: Short-Term Tough Buying Long-Term Up

The increase in infections will drag on operating performance for China's consumer discretionary names in the near term. However, we should not...

Osbert Tang, CFA

Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

Bosideng actually has a decent 1H FY23 result and gross margin should expand for full-year FY23. Its efforts on store optimisation, new product...

Osbert Tang, CFA

China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign

Sharply lower losses and resumption of interim dividends should clear concerns on negative equity market and weak sportswear retailing. Share price...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Bosideng (3998 HK): Outlook Stays Promising

The release of pent-up demand, recovery in gross margin, further improvement in channel efficiency and operating leverage from cost control will...

Osbert Tang, CFA

ENM Holdings (128 HK): Privatisation Bid at HK$0.58 Per Share

Detractors will argue the offer is low due to ENM’s net cash (75% of the market cap). However, the offer is reasonable compared to historical...

Arun George

China Consumer Discretionary: Short-Term Tough Buying Long-Term Up

The increase in infections will drag on operating performance for China's consumer discretionary names in the near term. However, we should not...

Osbert Tang, CFA

Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

Bosideng actually has a decent 1H FY23 result and gross margin should expand for full-year FY23. Its efforts on store optimisation, new product...

Osbert Tang, CFA

China Dongxiang (3818 HK): Losses Narrowing Down, a Good Sign

Sharply lower losses and resumption of interim dividends should clear concerns on negative equity market and weak sportswear retailing. Share price...

Osbert Tang, CFA