Equity Analyst

Steve Zhou, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a>'s FY24 (fiscal year ending March) numbers were overall unimpressive, with sales down 13% yoy and net loss increasing to RMB1.6bn.</li>
<li>The new CEO's strategy is to refocus on SSSG of offline traffic and restore price competitiveness.  April and May SSSG improved.  </li>
<li>The stock is up 20% since my initial insight on the name in March, and I believe more upside remains.</li>
</ul>



Sun Art Retail (6808 HK)'s FY24 (fiscal year ending March) numbers were overall unimpressive, with sales down 13% yoy and net loss increasing to RMB1.6bn.
The new CEO's strategy is to refocus on SSSG of offline traffic and restore price competitiveness.  April and May SSSG improved.  
The stock is up 20% since my initial insight on the name in March, and I believe more upside remains.


Sun Art (6808 HK):  FY24 Unimpressive, But All Eyes On Potential Alibaba Sale

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<ul>
<li>It's time to revisit the network of Alibaba's ( <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a> ) affiliated listed companies for near term investment opportunities</li>
<li>After investing in an ecosystem of online and offline companies over the last 10 years, Alibaba is rapidly restructuring its businesses to refocus on its most profitable opportunities</li>
<li>
<a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a> will benefit from the synergies of Baba's restructuring</li>
</ul>


It's time to revisit the network of Alibaba's ( Alibaba Group Holding (9988 HK) ) affiliated listed companies for near term investment opportunities
After investing in an ecosystem of online and offline companies over the last 10 years, Alibaba is rapidly restructuring its businesses to refocus on its most profitable opportunities

Sun Art Retail (6808 HK) will benefit from the synergies of Baba's restructuring


BABA's Babies: They're All Grown Up Now! Sun Art Retail: A Restructuring Opportunity

<ul>
<li>According to public news two days ago, COFCO Group is rumored to be a potential suitor for Alibaba’s 78% stake in <a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a>. </li>
<li>Alibaba wants to eventually get rid of the Sun Art stake, especially after Alibaba’s management change in late 2023.  </li>
<li>Given limited downside, I believe it is worth a bet on the uncertain timeline but certain intention of the eventual divestiture of Sun Art by Alibaba.</li>
</ul>


According to public news two days ago, COFCO Group is rumored to be a potential suitor for Alibaba’s 78% stake in Sun Art Retail (6808 HK). 
Alibaba wants to eventually get rid of the Sun Art stake, especially after Alibaba’s management change in late 2023.  
Given limited downside, I believe it is worth a bet on the uncertain timeline but certain intention of the eventual divestiture of Sun Art by Alibaba.


Sun Art (6808 HK):  Potential Divestiture By Alibaba Worth A Bet

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Reuters this afternoon carried an <a href="https://www.reuters.com/markets/deals/exclusive-tencent-plans-divest-24-bln-meituan-stake-sources-2022-08-16/" target="_blank" rel="noopener">article</a> that <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> was seeking to divest "US$24bn" (17%) of $78bn market cap delivery company <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> by year-end to mollify domestic regulators.</li>
<li>Tencent would seek to launch a share sale within 2022 <em>"if market conditions are favourable." </em>Meituan shares tanked 9%, immediately.</li>
<li>The article suggests disposal via block sale (faster than negotiating with a private buyer), odd given Tencent's Q1 2022 experience with the JD.com unwind. But it leads to BIG flows.</li>
</ul>


Reuters this afternoon carried an article that Tencent (700 HK) was seeking to divest "US$24bn" (17%) of $78bn market cap delivery company Meituan (3690 HK) by year-end to mollify domestic regulators.
Tencent would seek to launch a share sale within 2022 "if market conditions are favourable." Meituan shares tanked 9%, immediately.
The article suggests disposal via block sale (faster than negotiating with a private buyer), odd given Tencent's Q1 2022 experience with the JD.com unwind. But it leads to BIG flows.


Tencent (700 HK) To Divest Meituan (3690 HK) - Impact and Index Implications

Cross Asset Strategy

<ul>
<li>First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins</li>
<li>Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap</li>
<li>Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror</li>
</ul>


First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins
Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap
Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror


Technically Speaking: Hong Kong Strategy in the Secular Bull Market

Hong Kong

Sun Art Retail Group Ltd. operates hypermarkets.  The Company retails food and offers amenities such as restaurants, automated teller machines, pharmacies and dry cleaners.

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Sun Art Retail (6808 HK)

Sun Art (6808 HK): FY24 Unimpressive, But All Eyes On Potential Alibaba Sale

The new CEO's strategy is to refocus on SSSG of offline traffic and restore price competitiveness. April and May SSSG improved.

Steve Zhou, CFA

BABA's Babies: They're All Grown Up Now! Sun Art Retail: A Restructuring Opportunity

Alibaba's subsidiary Sun Art Retail stands to benefit from its parent's restructuring initiative, unlocking value for shareholders

David Mudd

Sun Art (6808 HK): Potential Divestiture By Alibaba Worth A Bet

The company just announced a change in CEO - Mr. Lin Xiaohai has resigned as CEO and executive director of the company. He is replaced by Mr. Shen...

Steve Zhou, CFA

Tencent (700 HK) To Divest Meituan (3690 HK) - Impact and Index Implications

Tencent is said to be looking at a $20bn block sale of its stake in Meituan (3690 HK) by year end. That's a big block. Maybe a repeat of JD.com?...

Travis Lundy

Technically Speaking: Hong Kong Strategy in the Secular Bull Market

Hong Kong markets are now in a correction in a secular bull market. There are now opportunities to rotate into long term investments which will...

David Mudd

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