HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Fu Shou Yuan International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a> has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.</li>
<li>Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.</li>
<li>A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&amp;As are added drivers to earnings prospects.</li>
</ul>



Fu Shou Yuan (1448 HK) has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.
Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.
A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&amp;As are added drivers to earnings prospects.


Fu Shou Yuan (1448 HK): More than Just a Recovery from Low Base

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)'</a>s 2022 results were below our expectations. Affected by the 22Q4 pandemic, the performance recovery in 22H2 was lower than expected. </li>
<li>The high demand due to soaring death rate since 22Q4 would be reflected in 23H1 results. Together with low base last year, strong performance rebound in 23H1 is worth expecting.</li>
<li>The reason behind short-term trade and long-term hold is different. But considering the Company has no obvious flaws in its long logic, every pullback can be a good buying opportunity.</li>
</ul>



Fu Shou Yuan (1448 HK)'s 2022 results were below our expectations. Affected by the 22Q4 pandemic, the performance recovery in 22H2 was lower than expected. 
The high demand due to soaring death rate since 22Q4 would be reflected in 23H1 results. Together with low base last year, strong performance rebound in 23H1 is worth expecting.
The reason behind short-term trade and long-term hold is different. But considering the Company has no obvious flaws in its long logic, every pullback can be a good buying opportunity.


Fu Shou Yuan (1448.HK) - 2022 Results Missed Expectations, but the Outlook Remains Positive

<ul>
<li>After a dip in earnings in FY22, <a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a> guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.</li>
<li>We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population. </li>
<li>Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%. </li>
</ul>


After a dip in earnings in FY22, Fu Shou Yuan (1448 HK) guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.
We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population. 
Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%. 


Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/invocare-ltd" target="_blank" data-smartkarma-citation="entities:9044:1" rel="noopener">Invocare Ltd (IVC AU)</a> has received an unsolicited, preliminary, non-binding indicative offer from TPG Global to acquire the company at A$12.65/share in cash.</li>
<li>TPG has also acquired 17.8% of the shares in <a href="https://www.smartkarma.com/entities/invocare-ltd" target="_blank" data-smartkarma-citation="entities:9044:1" rel="noopener">Invocare Ltd (IVC AU)</a> via a combination of stock and derivatives.</li>
<li>With the company now in play, there could be competing offers. Already owning 17.8% of the company, TPG is now invested in ensuring they gain control.</li>
</ul>



Invocare Ltd (IVC AU) has received an unsolicited, preliminary, non-binding indicative offer from TPG Global to acquire the company at A$12.65/share in cash.
TPG has also acquired 17.8% of the shares in Invocare Ltd (IVC AU) via a combination of stock and derivatives.
With the company now in play, there could be competing offers. Already owning 17.8% of the company, TPG is now invested in ensuring they gain control.


InvoCare (IVC AU): TPG's A$12.65/Share NBIO

<ul>
<li>The second wave of pandemic is important logic to drive up Fu Shou Yuan’s share price, but the peak value/lethality could be lower than first wave, leading to lower-than-expected demand.</li>
<li>Whether the second wave can "arrive as expected" may not depend on pandemic itself, but on "whether to let it happen",especially when China's making every effort to promote economic recovery.</li>
<li>Besides solid fundamentals/optimistic performance, hot market sentiment is very essential if <a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a>’s share price is to outperform. Policy changes are also a potential source of unease.</li>
</ul>


The second wave of pandemic is important logic to drive up Fu Shou Yuan’s share price, but the peak value/lethality could be lower than first wave, leading to lower-than-expected demand.
Whether the second wave can "arrive as expected" may not depend on pandemic itself, but on "whether to let it happen",especially when China's making every effort to promote economic recovery.
Besides solid fundamentals/optimistic performance, hot market sentiment is very essential if Fu Shou Yuan (1448 HK)’s share price is to outperform. Policy changes are also a potential source of unease.


Fu Shou Yuan (1448.HK) - Some Points Worth the Attention

China

Fu Shou Yuan International provides burial and funeral services, along with other related services, across the People's Republic of China. Its core activities include selling burial plots, offering cemetery maintenance, and planning and hosting funeral arrangements. The company also manufactures and sells cremation devices and provides education services. It was founded in 1994 and is headquartered in Shanghai, China.

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Fu Shou Yuan International (1448 HK)

Fu Shou Yuan (1448 HK): More than Just a Recovery from Low Base

We like Fu Shou Yuan for its sustained quality earnings stream and solid position in capturing the demand of China's aging population. The strong...

Osbert Tang, CFA

Fu Shou Yuan (1448.HK) - 2022 Results Missed Expectations, but the Outlook Remains Positive

As expected, the stock price fell as sentiment cooled after reaching its January high. We keep our views that Fu Shou Yuan's 2023 performance...

Xinyao (Criss) Wang

Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call

Guidances for at least 35% revenue and 30-35% net profit growth in FY23 look encouraging to us. Net cash amounted to 19% share price and valuations...

Osbert Tang, CFA

Fu Shou Yuan (1448.HK) - Some Points Worth the Attention

Although Fu Shou Yuan's fundamentals and performance is strong, there may be uncertainty about the second wave of pandemic, leading to uncertain...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fu Shou Yuan (1448 HK): More than Just a Recovery from Low Base

We like Fu Shou Yuan for its sustained quality earnings stream and solid position in capturing the demand of China's aging population. The strong...

Osbert Tang, CFA

Fu Shou Yuan (1448.HK) - 2022 Results Missed Expectations, but the Outlook Remains Positive

As expected, the stock price fell as sentiment cooled after reaching its January high. We keep our views that Fu Shou Yuan's 2023 performance...

Xinyao (Criss) Wang

Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call

Guidances for at least 35% revenue and 30-35% net profit growth in FY23 look encouraging to us. Net cash amounted to 19% share price and valuations...

Osbert Tang, CFA

InvoCare (IVC AU): TPG's A$12.65/Share NBIO

TPG has made an NBIO to acquire InvoCare at A$12.65/share for an equity value of A$1.8bn. TPG has also bought up 17.8% of the company. We'd buy...

Brian Freitas

Fu Shou Yuan (1448.HK) - Some Points Worth the Attention

Although Fu Shou Yuan's fundamentals and performance is strong, there may be uncertainty about the second wave of pandemic, leading to uncertain...

Xinyao (Criss) Wang