HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Our list of HK-listed industrial companies indicated that the US generated an average of 22.9% of sales. With diversified production bases, higher tariffs may only affect ~10% of revenue.</li>
<li>
<a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>, <a href="https://www.smartkarma.com/entities/chervon-holdings-limited" target="_blank" data-smartkarma-citation="entities:35309:1" rel="noopener">Chervon Holdings (2285 HK)</a>, and <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings (2018 HK)</a> are more exposed given their significant US sales yet most production is still in China. </li>
<li>While the US generated over 50% of the revenue of <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a> and <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a>, they are less exposed given their worldwide manufacturing presence. </li>
</ul>


Our list of HK-listed industrial companies indicated that the US generated an average of 22.9% of sales. With diversified production bases, higher tariffs may only affect ~10% of revenue.

Vesync (2148 HK), Chervon Holdings (2285 HK), and AAC Technologies Holdings (2018 HK) are more exposed given their significant US sales yet most production is still in China. 
While the US generated over 50% of the revenue of Techtronic Industries (669 HK) and Nexteer Automotive (1316 HK), they are less exposed given their worldwide manufacturing presence. 


China & HK Strategy: Stocks Exposed to the US and Higher Tariffs

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

<ul>
<li>On 27 March, <a href="https://www.smartkarma.com/entities/skyworth-group-limited" target="_blank" data-smartkarma-citation="entities:10941:1" rel="noopener">Skyworth Group Limited (751 HK)</a> launched a conditional buyback to acquire a maximum of 350.0m shares (15.67% of outstanding) at HK$3.11, a 15.2% premium to undisturbed price.</li>
<li>Unlike the previous buybacks, the controlling shareholder can vote. Therefore, while the buyback offer is unattractive, the shareholder vote will pass. </li>
<li>Based on the irrevocables, a 100% share minority participation rate implies a minimum proration of 37.84%. The actual proration was around twice the minimum proration for the previous two. </li>
</ul>


On 27 March, Skyworth Group Limited (751 HK) launched a conditional buyback to acquire a maximum of 350.0m shares (15.67% of outstanding) at HK$3.11, a 15.2% premium to undisturbed price.
Unlike the previous buybacks, the controlling shareholder can vote. Therefore, while the buyback offer is unattractive, the shareholder vote will pass. 
Based on the irrevocables, a 100% share minority participation rate implies a minimum proration of 37.84%. The actual proration was around twice the minimum proration for the previous two. 


Equity Bottom-Up

<ul>
<li>While <a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>'s net profit grew 20.1% in FY24, there is a marked slowdown in 2H24 (+7.4%) vs. 1H24 (+37.5%), suggesting increased operating pressure. </li>
<li>North American sales slowed to 10.7% growth in 2H24, from 13% in 1H24. The deteriorating financial and operating performance affirmed that privatisation is an exit opportunity.</li>
<li>Its PER discount (on privatiation price) to peers has widened to 35-38%, compared with 25-30% in Dec. Its US exposure makes it unable to reap benefits from China market stimulus.</li>
</ul>


While Vesync (2148 HK)'s net profit grew 20.1% in FY24, there is a marked slowdown in 2H24 (+7.4%) vs. 1H24 (+37.5%), suggesting increased operating pressure. 
North American sales slowed to 10.7% growth in 2H24, from 13% in 1H24. The deteriorating financial and operating performance affirmed that privatisation is an exit opportunity.
Its PER discount (on privatiation price) to peers has widened to 35-38%, compared with 25-30% in Dec. Its US exposure makes it unable to reap benefits from China market stimulus.


Vesync (2148 HK): What Did the FY24 Results Tell?

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

<ul>
<li>China-made home appliance exports have exceeded $100 billion for four straight years as manufacturers in the country have pushed into the high-end market as part of their global expansion efforts.</li>
<li>Home appliance shipments from China rose 14.8% last year to $128.6 billion, according to an annual report released last month by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME).</li>
<li>Zhou Nan, secretary-general of the CCCME’s home appliance branch, called the pace “incredible.</li>
</ul>


China-made home appliance exports have exceeded $100 billion for four straight years as manufacturers in the country have pushed into the high-end market as part of their global expansion efforts.
Home appliance shipments from China rose 14.8% last year to $128.6 billion, according to an annual report released last month by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME).
Zhou Nan, secretary-general of the CCCME’s home appliance branch, called the pace “incredible.


China’s Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets 

Cross Asset Strategy

<ul><li>Home appliance / China’s home appliance exports grow as makers eye emerging, high-end markets</li><li>Stocks /: China’s Two Sessions report boosts investor confidence, as stocks upgraded to ‘overweight’</li><li>Power /In Depth: Chemical plant with its own power grid proves viability of disruptive model</li></ul>

Home appliance / China’s home appliance exports grow as makers eye emerging, high-end marketsStocks /: China’s Two Sessions report boosts investor confidence, as stocks upgraded to ‘overweight’Power /In Depth: Chemical plant with its own power grid proves viability of disruptive model

CX Daily: Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets 

China

Hisense Home Appliances Group Co., Ltd. manufactures and sells household appliances. The Company produces refrigerators, air conditioners, freezers, and other equipment. Hisense Home Appliances Group markets its products worldwide.

Hisense Home Appliances Group (000921 CH)

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Hisense Home Appliances Group (000921 CH)

China & HK Strategy: Stocks Exposed to the US and Higher Tariffs

With the Trump administration announcing global reciprocal tariffs, even companies with manufacturing presence in other countries will suffer...

Osbert Tang, CFA

Skyworth (751 HK): Another Buyback

The buyback is likely a precursor to an eventual privatisation offer. Although the offer is unattractive, the vote will pass. The minimum proration...

Arun George

Vesync (2148 HK): What Did the FY24 Results Tell?

Vesync's profit growth slows in 2H24, indicating increased operating pressure and affirming privatisation as an exit opportunity. Its non-China...

Osbert Tang, CFA

China’s Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets

China-made home appliance exports have exceeded $100 billion for four straight years as manufacturers in the country have pushed into the high-end...

Caixin Global

CX Daily: Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets

Home appliance / China’s home appliance exports grow as makers eye emerging, high-end markets China-made home appliance exports have exceeded $100...

Caixin Global

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China & HK Strategy: Stocks Exposed to the US and Higher Tariffs

With the Trump administration announcing global reciprocal tariffs, even companies with manufacturing presence in other countries will suffer...

Osbert Tang, CFA

Skyworth (751 HK): Another Buyback

The buyback is likely a precursor to an eventual privatisation offer. Although the offer is unattractive, the vote will pass. The minimum proration...

Arun George

Vesync (2148 HK): What Did the FY24 Results Tell?

​Vesync's profit growth slows in 2H24, indicating increased operating pressure and affirming privatisation as an exit opportunity. Its non-China...

Osbert Tang, CFA

China’s Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets

China-made home appliance exports have exceeded $100 billion for four straight years as manufacturers in the country have pushed into the high-end...

Caixin Global

CX Daily: Home Appliance Exports Grow as Makers Eye Emerging, High-End Markets

Home appliance / China’s home appliance exports grow as makers eye emerging, high-end markets China-made home appliance exports have exceeded $100...

Caixin Global

Vesync's profit growth slows in 2H24, indicating increased operating pressure and affirming privatisation as an exit opportunity. Its non-China...