HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The spin-off of the value-added business (VAS) of <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> may add HK$0.22-0.83/share to the stock price, or 3.4-12.8%, based on our initial assessment.</li>
<li>VAS generated an operating profit of HK$1.58bn in FY24, up by 5.7% YoY. It is significant to China Gas as this accounted for 23.5% of its total segment profit.</li>
<li>The share price has not reacted much to the news because weak Chinese equity market and uncertainties on the upcoming 1H FY25 result. Once cleared, we see good upside.</li>
</ul>


The spin-off of the value-added business (VAS) of China Gas Holdings (384 HK) may add HK$0.22-0.83/share to the stock price, or 3.4-12.8%, based on our initial assessment.
VAS generated an operating profit of HK$1.58bn in FY24, up by 5.7% YoY. It is significant to China Gas as this accounted for 23.5% of its total segment profit.
The share price has not reacted much to the news because weak Chinese equity market and uncertainties on the upcoming 1H FY25 result. Once cleared, we see good upside.


China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>NIO US/XPEV US/1810 HK/LI US: Electric vehicle sales were strong during the two weeks of the National Day holiday, with NIO, Leap, Zeekr, Xiaomi and Tesla performing better(///////)</li>
<li>Consumer sector: Steady Growth in Catering and Retail Consumption During the National Day Holiday(+)</li>
<li>Consumer sector: WeChat reports 20% YoY increase in transaction volume during National Day Holiday (+)</li>
</ul>


NIO US/XPEV US/1810 HK/LI US: Electric vehicle sales were strong during the two weeks of the National Day holiday, with NIO, Leap, Zeekr, Xiaomi and Tesla performing better(///////)
Consumer sector: Steady Growth in Catering and Retail Consumption During the National Day Holiday(+)
Consumer sector: WeChat reports 20% YoY increase in transaction volume during National Day Holiday (+)


[Blue Lotus Daily]:NIO US/XPEV US/1810 HK/LI US/000333 CH/600690 CH/000651 CH/1585 HK/NIUUS/603529CH

<ul>
<li>300750 CH/1211 HK:A fire broke out at CATL's Fujian factory, negatively affecting its safety image (-)</li>
<li>1211 HK:BYD recalls close to 100,000 vehicles, mainly produced in 2022-23 (/)</li>
<li>1519 HK/ZTO US: Parcel volume collection +40% yoy in prior week (+)</li>
</ul>


300750 CH/1211 HK:A fire broke out at CATL's Fujian factory, negatively affecting its safety image (-)
1211 HK:BYD recalls close to 100,000 vehicles, mainly produced in 2022-23 (/)
1519 HK/ZTO US: Parcel volume collection +40% yoy in prior week (+)


[Blue Lotus Daily]:300750 CH/1211 HK/1519 HK/ZTO US/1810 HK/600690 CH/000333 CH/000651 CH

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Capital Markets

Midea Group Co Ltd A / Equity Capital Markets

<ul>
<li>We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares. </li>
<li>We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.</li>
<li>Pricing of this offering is expected to be completed on 13 September and listing on 17 September. </li>
</ul>


We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares. 
We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
Pricing of this offering is expected to be completed on 13 September and listing on 17 September. 


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>Media reports indicate that <a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group (000333 CH)</a> has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.</li>
<li>Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.</li>
<li>The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.</li>
</ul>


Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.


Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

China

Gree Electric Appliances, Inc. of Zhuhai manufactures and sells a series of air conditioners.  The different series of air conditioners include window type, split type, floor type, mobile type, mobile split type and ceiling type.  The Company also produces air purifier.

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Gree Electric Appliances (000651 CH)

China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Osbert Tang, CFA

[Blue Lotus Daily]:NIO US/XPEV US/1810 HK/LI US/000333 CH/600690 CH/000651 CH/1585 HK/NIUUS/603529CH

Electric vehicle sales, catering, and retail consumption saw strong growth during the National Day holiday, with companies like NIO, Leap, Zeekr,...

Blue Lotus Research Institute

[Blue Lotus Daily]:300750 CH/1211 HK/1519 HK/ZTO US/1810 HK/600690 CH/000333 CH/000651 CH

CATL's safety image takes a hit after fire at Fujian factory, BYD recalls 100,000 vehicles, ZTO sees 40% increase in parcel volume collection.

Blue Lotus Research Institute

Midea Group HK IPO Valuation Analysis

Midea Group's shares closed up 7.8% at HK$59.10 on Tuesday. This strong IPO performance in HK by the Midea Group is likely to set in motion a...

Douglas Kim

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

Midea Group (300 HK) lists today. There could be investors switching from the A-shares to the H-shares. Index Fast Entry for the H-shares will...

Brian Freitas

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52-week Range

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China Gas Holdings (384 HK): Assessing the Spin-Off of Value-Added Business

​China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Osbert Tang, CFA

[Blue Lotus Daily]:NIO US/XPEV US/1810 HK/LI US/000333 CH/600690 CH/000651 CH/1585 HK/NIUUS/603529CH

​Electric vehicle sales, catering, and retail consumption saw strong growth during the National Day holiday, with companies like NIO, Leap, Zeekr,...

Blue Lotus Research Institute

[Blue Lotus Daily]:300750 CH/1211 HK/1519 HK/ZTO US/1810 HK/600690 CH/000333 CH/000651 CH

​CATL's safety image takes a hit after fire at Fujian factory, BYD recalls 100,000 vehicles, ZTO sees 40% increase in parcel volume collection.

Blue Lotus Research Institute

Midea Group HK IPO Valuation Analysis

Midea Group's shares closed up 7.8% at HK$59.10 on Tuesday. This strong IPO performance in HK by the Midea Group is likely to set in motion a...

Douglas Kim

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

Midea Group (300 HK) lists today. There could be investors switching from the A-shares to the H-shares. Index Fast Entry for the H-shares will...

Brian Freitas

China Gas' spin-off of value-added services could boost the stock by 3.4-12.8%, with VAS contributing 23.5% of total segment profit. Weak market...

Electric vehicle sales, catering, and retail consumption saw strong growth during the National Day holiday, with companies like NIO, Leap, Zeekr,...

CATL's safety image takes a hit after fire at Fujian factory, BYD recalls 100,000 vehicles, ZTO sees 40% increase in parcel volume collection.