Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Thematic (Sector/Industry)

This is the 11th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong Kong and Taiwan. This is a collaborative report compiled by <a href="https://www.smartkarma.com/profiles/820" target="_blank">Scott Laprise/ 乐天虎</a>, <a href="https://www.smartkarma.com/profiles/803" target="_blank">Valerie Law, CFA</a>, <a href="https://www.smartkarma.com/profiles/9" target="_blank">Ke Yan, CFA, FRM</a>, and <a href="https://www.smartkarma.com/profiles/605" target="_blank" data-smartkarma-citation="accounts:605">Daniel Hellberg</a> on a rotating basis. Please let us know if you would like to be included in this collaborative effort.<h2>Sector, Company, and Thematic Notes</h2>In <a href="https://www.smartkarma.com/insights/jd-com-rich-valuations-on-razor-thin-margins-negative-roic" target="_blank" data-smartkarma-citation="insights:12359">JD.com: Rich Valuations on Razor-Thin Margins &amp; Negative ROIC</a>, Insight…

This is the 11th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong Kong and Taiwan. This is a collaborative report compiled by Scott Laprise/ 乐天虎, Valerie Law, CFA, Ke Yan, CFA, FRM, and Daniel Hellberg on a rotating basis. Please let us know if you would like to be included in this collaborative effort.Sector, Company, and Thematic NotesIn JD.com: Rich Valuations on Razor-Thin Margins &amp; Negative ROIC, Insight…

The Week that Was in Greater China @Smartkarma: JD.com Doubts, One Belt One Road, Fishy Wanda

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Kidswant Children Products / Equity Capital Markets

<ul>
<li>Kidswant's growth has come to a standstill. The core driver of Kidswant's net profit growth came from the refined control of expenses, not the result of improvements in core business</li>
<li>Kidswant is facing the fading of the demographic dividend, intensified industry competition, and risk of business diversification. HK IPO might relieve short-term liquidity pressure but not a long-term solution</li>
<li>Kidswant, with its leading scale, member ecosystem, growth story, may enjoy a certain valuation premium. However, due to lower profit margin and growth rate, valuation could be lower than peer.</li>
</ul>


Kidswant's growth has come to a standstill. The core driver of Kidswant's net profit growth came from the refined control of expenses, not the result of improvements in core business
Kidswant is facing the fading of the demographic dividend, intensified industry competition, and risk of business diversification. HK IPO might relieve short-term liquidity pressure but not a long-term solution
Kidswant, with its leading scale, member ecosystem, growth story, may enjoy a certain valuation premium. However, due to lower profit margin and growth rate, valuation could be lower than peer.


Pre-IPO Kidswant Children Products (A/H Listing)- About the Business Model and Thoughts on Valuation

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>Hong Kong continues its secular bull market and has now reached its first significant resistance in the 24k to 25k.  Growth factor investing is leading in long-only investing.</li>
<li>Mainland buyers continue buying Hong Kong stocks at a historic rate with buying focused in the tech sector and specifically in AI-related companies.</li>
<li>
<a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry H (1157 HK)</a> has broken its double-top formation and is at a new high.  <a href="https://www.smartkarma.com/entities/vtech-holdings-ltd" target="_blank" data-smartkarma-citation="entities:18812:1" rel="noopener">Vtech Holdings (303 HK)</a> broke out to a new high with improving momentum.
</li>
</ul>


Hong Kong continues its secular bull market and has now reached its first significant resistance in the 24k to 25k.  Growth factor investing is leading in long-only investing.
Mainland buyers continue buying Hong Kong stocks at a historic rate with buying focused in the tech sector and specifically in AI-related companies.

Zoomlion Heavy Industry H (1157 HK) has broken its double-top formation and is at a new high.  Vtech Holdings (303 HK) broke out to a new high with improving momentum.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (March 6)

<ul>
<li>BUTONG’s growth momentum remained high, but customers are more focused on cost-effectiveness rather than premium products. We are unsure whether BUTONG’s  current high growth is sustainable in this low-growth industry. </li>
<li>The more revenue proportion from baby care products, the lower overall gross margin would be.BUTONG's strategy of emphasizing sales over R&amp;D isn’t conducive to establishing core competitiveness in fierce competition.</li>
<li>After Series B financing, the post-investment valuation reached about RMB2 billion. However, the market value of peers is not high. BUTONG’s post-IPO valuation performance may be lower than expected.</li>
</ul>


BUTONG’s growth momentum remained high, but customers are more focused on cost-effectiveness rather than premium products. We are unsure whether BUTONG’s  current high growth is sustainable in this low-growth industry. 
The more revenue proportion from baby care products, the lower overall gross margin would be.BUTONG's strategy of emphasizing sales over R&amp;D isn’t conducive to establishing core competitiveness in fierce competition.
After Series B financing, the post-investment valuation reached about RMB2 billion. However, the market value of peers is not high. BUTONG’s post-IPO valuation performance may be lower than expected.


Pre-IPO Butong Group - The Current High Growth May Not Be Sustainable

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

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

<a href="https://www.smartkarma.com/entities/bestway-global-holding-inc" target="_blank" data-smartkarma-citation="entities:26012:1" rel="noopener">Bestway Global Holding (3358 HK)</a> has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. <div class="content-highlight">
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 
</div>

Bestway Global Holding (3358 HK) has despatched the scheme document in relation to a privatisation offer from Great Success Enterprises Holdings. The offeror is owned 92.0% by Mr Zhu (Founder, Chairman &amp; CEO) and 8.0% by Mr Zhu Jiachen, the son of Mr Zhu. The offeror will offer HK$4.38 per scheme share. Unsurprisingly, the IFA considers the offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. 
The key condition precedents are the headcount test along with the scheme approved by at least 75% disinterested shareholders and &lt;10% rejection by all disinterested shareholders. Fidelity holds a blocking stake of 2.45% of shares outstanding (source: CapitalIQ) but will likely support the privatisation offer due to the substantial premium of the offer price to long-term average share prices and P/E multiples.  
The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share, the gross spread to the offer price is 4.8%. 


Bestway Global’s Scheme Document, IFA Opinion

China

Goodbaby International Holdings Ltd. is a world-leading company specializing in the design, research, development, manufacturing, marketing, and sales of durable juvenile products. Its key offerings include children's car safety seats, strollers, cribs, and other baby products. The company was founded in 1989 and is headquartered in Kunshan, China.

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Goodbaby International (1086 HK)

The Week that Was in Greater China @Smartkarma: JD.com Doubts, One Belt One Road, Fishy Wanda

This is the 11th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong...

Daniel Hellberg

Pre-IPO Kidswant Children Products (A/H Listing)- About the Business Model and Thoughts on Valuation

Kidswant's growth has stalled, facing competition/diversification risk. IPO may offer short-term relief but not long-term solution. Despite its...

Xinyao (Criss) Wang

Technically Speaking, Breakouts and Breakdowns: HONG KONG (March 6)

Hong Kong continues its secular bull market outperforming global markets over the last year. After advancing more than 20% this year, the market...

David Mudd

Pre-IPO Butong Group - The Current High Growth May Not Be Sustainable

BUTONG's high growth may not be sustainable as customers prioritize cost-effectiveness over premium products and the number of births in China...

Xinyao (Criss) Wang

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

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The Week that Was in Greater China @Smartkarma: JD.com Doubts, One Belt One Road, Fishy Wanda

This is the 11th issue of 'The Week that Was in Greater China@Smartkarma' which features a selection of last week's insights on China, Macau, Hong...

Daniel Hellberg

Pre-IPO Kidswant Children Products (A/H Listing)- About the Business Model and Thoughts on Valuation

​Kidswant's growth has stalled, facing competition/diversification risk. IPO may offer short-term relief but not long-term solution. Despite its...

Xinyao (Criss) Wang

Technically Speaking, Breakouts and Breakdowns: HONG KONG (March 6)

Hong Kong continues its secular bull market outperforming global markets over the last year. After advancing more than 20% this year, the market...

David Mudd

Pre-IPO Butong Group - The Current High Growth May Not Be Sustainable

​BUTONG's high growth may not be sustainable as customers prioritize cost-effectiveness over premium products and the number of births in China...

Xinyao (Criss) Wang

Bestway Global’s Scheme Document, IFA Opinion

Bestway has despatched the scheme document. The court meeting is scheduled for 10 am on 15 September. At the last close price of HK$4.18 per share,...

Arun George

Kidswant's growth has stalled, facing competition/diversification risk. IPO may offer short-term relief but not long-term solution. Despite its...

BUTONG's high growth may not be sustainable as customers prioritize cost-effectiveness over premium products and the number of births in China...