Equity Analyst

Steve Zhou, CFA

Equity Bottom-Up

<ul>
<li>Since my previous insight on <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> in October 2023, the stock is up 17%, massively outperforming the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a>. </li>
<li>The company is still trading at 6x forward PE, compared to an average forward PE of 11x since 2016. </li>
<li>With the US business recovering as well as its potential IPO, and a stable China business, the stock remains a buy with limited downside. </li>
</ul>


Since my previous insight on WH Group (288 HK) in October 2023, the stock is up 17%, massively outperforming the Hang Seng Index (HSI INDEX). 
The company is still trading at 6x forward PE, compared to an average forward PE of 11x since 2016. 
With the US business recovering as well as its potential IPO, and a stable China business, the stock remains a buy with limited downside. 


WH Group (288 HK):  Update On The Bull Case

<ul>
<li>According to public news yesterday, <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again. </li>
<li>WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E.  Since 2016, the company has had an average PE of 11x. </li>
<li>The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited. </li>
</ul>


According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again. 
WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E.  Since 2016, the company has had an average PE of 11x. 
The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited. 


WH Group (288 HK):  Potential US Listing Of Smithfield Foods Could Be A Catalyst

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On 6 June, <a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> announced a proposal for a Voluntary Buyback Offer. The shares popped, then fell. Then kept on falling. </p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/993/original/Screenshot+2021-06-19+at+5.37.52+PM.png?1624095490" class="editor-image img-responsive" data-smartkarma-image-id="213993"></figure><p></p></section></section><p>When the announcement was made, I wrote in <a href="https://www.smartkarma.com/insights/wh-group-buyback-offer-announced-strong-accretion-creates-accretion-risk" target="_blank" data-smartkarma-citation="insights:52613" rel="noopener">WH Group Buyback Offer Announced - Strong Accretion Creates Accretion Risk</a> that the shares would not be considered expensive at a price which was higher than the previous close. </p><p>Since then, the shares have fallen to the low HK$7.00s and then, on Friday morning, below that level. </p><p>WHAT IS GOING ON???</p><p>That's easy. And it is part and parcel of this kind of situation. </p><p>But there is another element. Too many piggies going to market. </p>

On 6 June, WH Group (288 HK) announced a proposal for a Voluntary Buyback Offer. The shares popped, then fell. Then kept on falling. When the announcement was made, I wrote in WH Group Buyback Offer Announced - Strong Accretion Creates Accretion Risk that the shares would not be considered expensive at a price which was higher than the previous close. Since then, the shares have fallen to the low HK$7.00s and then, on Friday morning, below that level. WHAT IS GOING ON???That's easy. And it is part and parcel of this kind of situation. But there is another element. Too many piggies going to market. 

WH Group Vs Peers - Too Many Piggies Going to Market?

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<ul>
<li>Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November. </li>
<li>The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn. </li>
<li>Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play. </li>
</ul>


Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November. 
The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn. 
Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play. 


Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With US inflation figures higher than expectations, there is an increase in risk that the Fed's next move may be a hike.  Some HSI constituents are set to benefit.</li>
<li>
<a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International (316 HK)</a>, <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing APAC (1876 HK),</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> have significant USD net cash position and will be gainers.</li>
<li>
<a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home (6690 HK)</a> have large China operations but they are net long on USD balance and this will make them beneficiaries.</li>
</ul>


With US inflation figures higher than expectations, there is an increase in risk that the Fed's next move may be a hike.  Some HSI constituents are set to benefit.

Orient Overseas International (316 HK), Budweiser Brewing APAC (1876 HK), and Galaxy Entertainment Group (27 HK) have significant USD net cash position and will be gainers.

Sunny Optical Technology Group (2382 HK) and Haier Smart Home (6690 HK) have large China operations but they are net long on USD balance and this will make them beneficiaries.


HK Strategy: What Are the Winners if US Hike Rates Instead of Cut?

Hong Kong

WH Group Limited operates as a holdings company. The Company, through its subsidiaries, provides meat processing services, supplies chilled meat, meat products, and other related products.

WH Group (288 HK)

WH Group (288 HK): Update On The Bull Case

With the US business recovering as well as its potential IPO, and a stable China business, the stock remains a buy with limited downside.

Steve Zhou, CFA

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

WH Group (288 HK) plans to list its US pork business Smithfield Foods back in the US, offering a potential catalyst for the stock which trades at...

Steve Zhou, CFA

WH Group Vs Peers - Too Many Piggies Going to Market?

WH Group is the subject of a possible partial offer buyback to buy 20% or more of your shares at a premium. A look at progress and inputs.

Travis Lundy

Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.

Taste Gourmet trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK...

Sameer Taneja

HK Strategy: What Are the Winners if US Hike Rates Instead of Cut?

HSI constituents like Orient Overseas, Budweiser Brewing, Galaxy Entertainment, Sunny Optical, and Haier Smart Home are set to gain in case the...

Osbert Tang, CFA

WH Group (288 HK): Update On The Bull Case

With the US business recovering as well as its potential IPO, and a stable China business, the stock remains a buy with limited downside.

Steve Zhou, CFA

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

​WH Group (288 HK) plans to list its US pork business Smithfield Foods back in the US, offering a potential catalyst for the stock which trades at...

Steve Zhou, CFA

WH Group Vs Peers - Too Many Piggies Going to Market?

WH Group is the subject of a possible partial offer buyback to buy 20% or more of your shares at a premium. A look at progress and inputs.

Travis Lundy

Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.

Taste Gourmet trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK...

Sameer Taneja

HK Strategy: What Are the Winners if US Hike Rates Instead of Cut?

​HSI constituents like Orient Overseas, Budweiser Brewing, Galaxy Entertainment, Sunny Optical, and Haier Smart Home are set to gain in case the...

Osbert Tang, CFA

WH Group (288 HK) plans to list its US pork business Smithfield Foods back in the US, offering a potential catalyst for the stock which trades at...

HSI constituents like Orient Overseas, Budweiser Brewing, Galaxy Entertainment, Sunny Optical, and Haier Smart Home are set to gain in case the...