China

In today’s briefing:

SF Holdings A/H Trading – Strong Demand but Is Probably Close to Fair Value
Xiaomi (1810 HK): Three Months Surge Overvalued Vehicle Business
Technically Speaking, Breakouts and Breakdowns: HONG KONG (NOVEMBER 25)
Demand Uncertainty To Influence Rubber Markets In Q1 2025
China Education Group (839 HK): What’s up After the Big Bath?
Taste Gourmet (8371 HK): Resilient H1 FY25: Cash Now 35% of Market Cap
Lucror Analytics – Morning Views Asia – November 26, 2024
Hansoh Pharmaceutical Group (3692.HK) – Successful Business Transformation Opens up Valuation Upside

SF Holdings A/H Trading – Strong Demand but Is Probably Close to Fair Value

By Sumeet Singh

S.F. Holding (002352 CH), China’s largest express delivery company, raised around US$860m in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
We have covered the company and deal background in our previous notes. In this note, we talk about the trading dynamics.

Xiaomi (1810 HK): Three Months Surge Overvalued Vehicle Business

Xiaomi’s stock price has risen 62% since our buy rating after 2Q24 results.
We believe vehicle production will bring Xiaomi a revenue of RMB90 billion maximum.
The sum-of-the-parts valuation suggests significant downside for the next twelve months.

Technically Speaking, Breakouts and Breakdowns: HONG KONG (NOVEMBER 25)

By David Mudd

Hong Kong continued a correction in its Bull market which has lifted the HSCEI to be the best performing Asian index this year. Southboune buying is strong.
AAC Technologies Holdings (2018 HK) share price had a breakout relative to the MSCI AC Asia Index. The company reported solid results benifitting from the smartphone and auto sectors.
CGN Power (1816 HK) share price relative to MSCI China broke down. The company reported a disappointing 3Q24 results even as power generation increased by 15% YoY for the period.

Demand Uncertainty To Influence Rubber Markets In Q1 2025

By Arusha Das

Short term supply shortage
US and EU demand uncertain
Shipping cost spike in short term ahead of Trump’s tariff drive

China Education Group (839 HK): What’s up After the Big Bath?

By Osbert Tang, CFA

Although the reported FY24 net profit plunged 69.7% due to intangible impairments, China Education Group (839 HK)‘s adjusted net profit grew by 3.3% and adjusted EBITDA by 12.3%.
Based on adjusted net profit, its payout ratio is flat at 40%, implying an 8% dividend yield. This suggests underlying operations are decent and demonstrate confidence in the outlook.
Both tuition and enrollment are expected to sustain growth in FY25, meaning that a consensus forecast of 9% net profit is achievable. Its 4.5x PER does not appear stretched.

Taste Gourmet (8371 HK): Resilient H1 FY25: Cash Now 35% of Market Cap

By Sameer Taneja

Taste Gourmet (8371 HK) reported H1 FY25 results of Revenues/Pat 19% YoY/-6%YoY. Profits disappointed slightly as the company was unable to achieve the desired restaurant table turns.
Cash continues to pile on the balance sheet, with 185 mn HKD of net cash representing 35% of market capitalization. The company paid a 6-cent semi-annual dividend.
The stock trades at a 5.2x PE for FY25, has a 10% dividend yield, and plans to grow at least 15% CAGR.

Lucror Analytics – Morning Views Asia – November 26, 2024

By Leonard Law, CFA

Treasuries surged yesterday, with yields falling 10-13 bps across the curve after a strong auction of 2Y notes and in the wake of US President-elect Donald Trump’s nomination of Scott Bessent as the next Treasury Secretary.
Mr Bessent is expected to implement Mr Trump’s tax cuts, while reducing the budget deficit and boosting GDP growth through deregulation and other pro-growth policies.
The yield on the 2Y UST fell 10 bps to 4.27%, while that on the 10Y UST declined 13 bps to 4.28%.

Hansoh Pharmaceutical Group (3692.HK) – Successful Business Transformation Opens up Valuation Upside

Hansoh’s 24H1 results beat the expectations. Product revenue (excluding BD cooperation revenue) would achieve double-digit growth in 2024 full year, among which revenue of Ameile would maintain 20%+ YoY growth.
Total product revenue would be about RMB14-14.5 billion in the future. Based on P/S of 5, market value is RMB70-72.5 billion, which is the lower end of market value range.
There is still certain gap in terms of R&D capability/globalization outlook between Hansoh and those leading biotech in China. So, we think valuation of Hansoh would be lower than them.

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Nov 26

Daily Brief China: Tencent, Hang Seng Index, JST Group, Ascentage Pharma Group Corp, Iron Ore, CRRC Corp Ltd H and more

In today’s briefing:

EQD | Hong Kong Single Stock Options Weekly
EQD | Hong Kong Index Options Weekly – HSI and HSCEI
JST Group Pre-IPO: Growing Rapidly but with Some Accounting Red Flags
Ascentage Pharma (6855.HK) – The Future Valuation Leap Is Worth Looking Forward To
IO Weekly Technicals Review [2024/47]: IO Uptrend to Continue
CRRC (1766): Still Far from the Highs

EQD | Hong Kong Single Stock Options Weekly

By John Ley

Implied vols were lower across all sectors on the week with option volumes peaking on Friday.
Post-Earnings vol crush helped push vols lower for key names.
Tencent stands out with low implied vols over the past year, high liquidity and is trading almost 17% below its 52 week high.

EQD | Hong Kong Index Options Weekly – HSI and HSCEI

By John Ley

Move away from short gamma levels and position covering help push HSI implied vols lower on the week.
Short dated Puts are still very active in HSCEI at the 6300 and 6800 strikes.
Both HSI and HSCEI implied vols are trading about 2 points above their pre-stimulus levels.

JST Group Pre-IPO: Growing Rapidly but with Some Accounting Red Flags

By Nicholas Tan

JST Group (1703609D CH) is looking to raise up to US$100m in its upcoming Hong Kong IPO.
It is China’s largest and most popular e-commerce SaaS ERP provider to facilitate the connection of merchants with over 400 e-commerce platforms in China and across the world.
In this note, we look at the firm’s past performance.

Ascentage Pharma (6855.HK) – The Future Valuation Leap Is Worth Looking Forward To

For full-year 2024, sales of olverembatinib is expected to reach about RMB240 million, and there is a possibility of exceeding expectations. RMB500 million sales of olverembatinib is expected in 2025.
Market value of US$1.25 – 1.9 billion is reasonable range for Ascentage if just considering olverembatinib alone. The peak sales of APG-2575 is expected to surpass olverembatinib in overseas markets.
The next big catalyst is the potential licensing cooperation with MNCs for APG-2575, if reaches, would push Ascentage’s market value to surpass HUTCHMED, as prospects of APG-2575 is basically guaranteed.

IO Weekly Technicals Review [2024/47]: IO Uptrend to Continue

By Suhas Reddy

SGX IO Futures closed USD 3.83/ton higher for the week ending on 22/Nov. It traded in a range of USD 6.90/ton, which was smaller than the prior week.
Chinese portside inventories increased by 350k tons WoW to 148.86 MT as of 22/Nov. Steel mill inventories rose 13.8% to 15.6 MT in mid-November compared to early November.
Iron ore prices remain well supported in the near term despite high stockpiles at Chinese ports due to strong consumption and robust steel production ahead of the Lunar New Year.

CRRC (1766): Still Far from the Highs

By Henry Soediarko

CRRC Corp Ltd H (1766 HK) recent innovation on carbon-fibre subway trains for commercial operation has displayed their capability to decarbonize transport.
Free cash flow improved from RMB -11 billion last year to now -1.4 billion and 28% of its market caps are in cash.
CRRC used to trade at as high as 40x PER and 67x price to cash flow and currently is trading at 10x PER and 4x price to cash flow.

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Nov 25

Daily Brief China: Shanghai Henlius Biotech , Midea Group, Kuaishou Technology, Alibaba Group Holding , Cssc Offshore & Marine Engg Group, Travelsky Technology Ltd H, China Resources Pharmaceutical, Xiaomi Corp and more

In today’s briefing:

Henlius (2696 HK): NDRC Approval Should Calm Nerves
HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
HK Connect SOUTHBOUND Flows (To 22 Nov 2024); Volumes Much Lower But Broad-Based Buying Continues
A/H Premium Tracker (To 22 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors
Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
Travelsky (696): Sleepy Giant
China Healthcare Weekly (Nov.24) – 10th VBP, Biotech Valuation Logic, China Resources Reorganization
China Consumption Weekly (25 Nov 2024): Xiaomi, Haier, Autohome, Xpeng, Full Truck, Tongcheng
[Kuaishou (1024 HK, BUY, TP HK$72) TP Change]: C3Q24 Review: Value Stocks Face Picky Investors

Henlius (2696 HK): NDRC Approval Should Calm Nerves

Due to several factors, the gross spread of Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) has widened to 21.5%.
The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote.
NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.

HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade

In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.

Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members

Kuaishou Technology (1024 HK) and New Oriental Education (9901 HK) will be added to the Hang Seng Index in December while New World Development (17 HK) will be deleted.
Estimated one-way turnover is 2.7% and the estimated round-trip trade is HK$10.89bn (US$1.4bn) with over 1 day of ADV to trade in the adds and the delete.
The index committee has net added 1 stock to the Hang Seng Index this year to go from 82 to 83 constituents. Reaching the 100-member target will drag into 2026.

HK Connect SOUTHBOUND Flows (To 22 Nov 2024); Volumes Much Lower But Broad-Based Buying Continues

By Travis Lundy

SOUTHBOUND gross trading activity dropped sharply but net SOUTHBOUND buying remains very strong and very broad-based.
The trend continues to be net buying of tech though Friday saw a lot of profits taken in Tech names by SOUTHBOUND holders.
I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. Still.

A/H Premium Tracker (To 22 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors

By Travis Lundy

Huge volumes continue to be traded on the mainland share markets. SOUTHBOUND volumes dropped sharply but net buying continued strongly.
Stocks in HK and mainland markets fell heavily with HK’s main indices down 6-7% and China’s blue chip indices down 3.3-3.6% (CSI 500 – 4.8%).
Within H/A Pairs, after outperforming the HK/mainland spread for weeks, spreads got shellacked. Worst week in a long time (-3.7%), perhaps on the back of “disappointing” lack of stimulus measures.

Henlius (2696 HK): The Spread Should Narrow After NDRC Approval

On the 24th June, Fosun Pharmaceutical (2196 HK) made a HK$24.60/share Offer, in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative was subsequently afforded.
This is a pre-conditional Offer, subject to NDRC, Mofcom and SAFE – followed by a Scheme-like vote for independent H-shareholders. Henlius has announced that NDRC approval has now been secured.
Trading at a massive gross spread of ~21.5% compared to ~10% just prior to China Traditional Chinese Medicine (570 HK)‘s capitulation. This is excessive.

Travelsky (696): Sleepy Giant

By Henry Soediarko

Despite being a key beneficiary in travel and tourism in China, the rather muted growth in the first half does not bode well for Travelsky Technology Ltd H (696 HK) .
YTD share price performance has reflected the above, but the deep discount valuation to Trip.com (TCOM US) might be temporary.
In the near term, the company’s share price will not rebound as the company has less upside participation compared to Airlines and OTA.

China Healthcare Weekly (Nov.24) – 10th VBP, Biotech Valuation Logic, China Resources Reorganization

The 10th national VBP officially begins. Enterprises involved in this VBP include Shanghai Fosun Pharmaceutical (2196 HK)Shanghai Pharmaceuticals (2607 HK), Sichuan Kelun Pharmaceutical (002422 CH), CSPC (1093 HK), etc..
We analyzed Chinese Biotech companies’ P/S range based on different product revenue growth. Due to low profitability, there is “a valuation discount” if they are included in global valuation system.
KPC has agreed to acquire 51% interest in CR Shenghuo from CR Sanjiu. Due to good performance, we are full of expectations for the future acquisition/integration within China Resources.

China Consumption Weekly (25 Nov 2024): Xiaomi, Haier, Autohome, Xpeng, Full Truck, Tongcheng

Haier plans to acquire all shares of Autohome and dismiss 30% of Autohome’s employees.
In 3Q24, Xiaomi’s revenue grew by 30% YoY or 17% YoY without electric vehicle.
In 3Q24, Tongcheng Travel’s revenue increased by 51% YoY with gross profit up by 29% YoY.

[Kuaishou (1024 HK, BUY, TP HK$72) TP Change]: C3Q24 Review: Value Stocks Face Picky Investors

Kuaishou reported C3Q24 revenue, IFRS operating profit,and IFRS net income in-line with our estimates and consensus.The only negative was that C4Q24 guidance for operating margin missed consensus and our estimate;
Within mid-sized Internet platforms, Kuaishou lacks fresh secular driver, putting its stock under pressure. Advertising and GMV growth still outpace the industry and some peers. The stock is undervalued;
We maintain our BUY rating and slightly revised down TP to HK$72 to make up for the higher-than-expected OPEX guidance.

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Nov 24

Daily Brief China: PICC Property & Casualty H, PDD Holdings, Midea Group, S.F. Holding, Tuya Inc, KE Holdings , ZIM Integrated Shipping Services and more

In today’s briefing:

HSCEI Index Rebalance: PICC P&C (2328 HK) Replaces Longfor (960 HK)
[PDD Holdings (PDD US, BUY, TP US$146) TP Change]: C3Q24: Painful Reversal of Its Merchant Squeeze
HSCI Index Rebalance: Midea (300 HK) And Black Sesame (2533 HK) Added
Weekly Deals Digest (24 Nov) – SF Holding, FineToday, KEPCO, Seven & I, Kadokawa, HKBN, Arcadium
Tuya Inc – Growth Trajectory to Accelerate Following 13% Stake Purchase by 65 Equity Partners
[KE Holdings Inc. (BEKE US, BUY, TP US$25) TP Change]: C3Q24 Review: C4Q24 Rebound but What’s Next?
Monthly Container Shipping Tracker: Price Momentum Softens | CMP-ZIM L/S Pair Idea (November 2024)

HSCEI Index Rebalance: PICC P&C (2328 HK) Replaces Longfor (960 HK)

PICC Property & Casualty H (2328 HK) will replace Longfor Properties (960 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 6 December.
Estimated one-way turnover is 2.68% resulting in a round-trip trade of HK$2.84bn (US$365m). The final capping will use the close of trading on 3 December.
There could be a move higher in PICC Property & Casualty over the next few days while any selling in Longfor Properties will be a covering opportunity for the shorts.

[PDD Holdings (PDD US, BUY, TP US$146) TP Change]: C3Q24: Painful Reversal of Its Merchant Squeeze

PDD reported C3Q24 top line, non-GAAP EBIT and non-GAAP net income (2.6%), (12.4%) and (6.3%) vs. cons., and (3.4%)
PDD is easing its appeasement of China-platform merchants, positive for profitability,but its transition to the semi-consignment model will likely continue as it tries to improve merchandise selection and logistics quality
We reiterate BUY as PDD is undervalued at 8.1x CY2025 P/E, but we cut its TP to US$ 146 to reflect slower growth amid increasing overseas investment.

HSCI Index Rebalance: Midea (300 HK) And Black Sesame (2533 HK) Added

Midea Group (300 HK) and Black Sesame International Holding (2533 HK) will be added to the Hang Seng Composite Index (HSCI) after the close on 6 December.
Midea Group (300 HK) is already in Southbound Stock Connect while Black Sesame International Holding (2533 HK) will be added from the open on 9 December.
There is a huge lock-up expiry for Black Sesame International Holding (2533 HK) in February while the lock-up for Midea Group (300 HK) cornerstone investors ends in March.

Weekly Deals Digest (24 Nov) – SF Holding, FineToday, KEPCO, Seven & I, Kadokawa, HKBN, Arcadium

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: S.F. Holding (6936 HK) H Share listing,FineToday Holdings Co Ltd (289A JP) IPO, Kansai Electric Power (9503 JP)‘s US$3.5 billion placement.
Event-Driven developments: Seven & I Holdings (3382 JP), Kadokawa Dwango (9468 JP), Integrated Design & Engineering Holdings (9161 JP), HKBN Ltd (1310 HK), Arcadium Lithium (LTM AU).

Tuya Inc – Growth Trajectory to Accelerate Following 13% Stake Purchase by 65 Equity Partners

By Garvit Bhandari

Temasek-Backed 65 Equity Partners bought 13% stake in Tuya, implying a total investment of US$100 million (or S$134M).
The fund’s mandate is to support high-growth, mid-cap companies seeking a listing on the Singapore Exchange (SGX).
The listing will benefit Tuya by providing easy access to capital. Tuya will be able to use stock as a currency to fund its expansion plans in Southeast Asia.

[KE Holdings Inc. (BEKE US, BUY, TP US$25) TP Change]: C3Q24 Review: C4Q24 Rebound but What’s Next?

Beike (BEKE) reported C3Q24 revenue in-line with our estimate and consensus but non-GAAP operating profit 26%/25% below, mainly due to higher commission rebate and agent salaries;
Strong rebound in home transaction volumes in October and November, led to our C4Q24 revenue 16% above consensus. But the rebound needs more stimulus to sustain;
We maintain the stock as BUY and raise TP to US$25 to reflect the near term rebound and steady market share gains.

Monthly Container Shipping Tracker: Price Momentum Softens | CMP-ZIM L/S Pair Idea (November 2024)

By Daniel Hellberg

Price momentum softened dramatically in October, mirroring steep declines in H221, FY22
We believe price momentum, rather than earnings, drives medium-term share performance
Reaction to ZIM’s stellar Q324 results & guidance raise suggests more downside ahead

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Nov 23

Daily Brief China: Atour Lifestyle Holdings and more

In today’s briefing:

[Atour (ATAT US, BUY, TP US$37) Review]: Small Differences Here & There but Overall Case Intact

[Atour (ATAT US, BUY, TP US$37) Review]: Small Differences Here & There but Overall Case Intact

Atour (ATAT) reported C3Q24 revenue 2.3% lower than our estimate but 4.8% higher than consensus. The net income beat our estimate/consensus by 6.6%/9.5%, thanks to disciplined cost controls.
Although RevPAR weakened in C3Q24 as expected, turnaround is coming already in C4Q24. We also expect moderate RevPAR growth in 2025.
We keep the TP at US$37/ADS and maintain a TOP BUY on Atour.

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Nov 22

Daily Brief China: S.F. Holding, Kingsoft Corp, Tuya Inc, PDD Holdings, Xiaomi Corp, Trip.com, Saint Bella, Hang Seng Index, China Vanke and more

By Shifara Samsudeen, ACMA, CGMA

In today’s briefing:

SF Holding HKEx Listing: Peer Comparison and Valuation
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 21)
Tuya: Improving Sales Growth and Profit Margins Help to Clench Investment by 65 Equity Partners
PDD (PDD US): 3Q24, Focuses on Growth, But Not Profit Margin
[Xiaomi Inc. (1810 HK, BUY, TP HK$33) Target Price Change]: Good Result, and It Will Only Get Better
[Trip.com (TCOM US, BUY, TP US$74) Target Price Change]: C3Q24 Review: Domestic Story Back in Focus
Saint Bella Pre-IPO: Rapid Growth but Facing Birth-Rate Headwinds
Pinduoduo: Behind Its Efficiency Edge
EQD | Hang Seng (HSI) – Analysis of Option Strategies Recently Traded on HKEX
Lucror Analytics – Morning Views Asia

SF Holding HKEx Listing: Peer Comparison and Valuation

Chinese logistics service provider SF Holding has filed for a listing on HKEx and seeks to raise HK$6.2bn (US$795m) through the issuance of 170m shares (3.4% of outstanding shares).
The listing is priced at HK$32.3-36.3 per share, as expected at a 20-29% discount to the last closed price of SF Holding’s A-Shares on 18th November.
Our valuation analysis suggests that SF Holding’s HK offering is attractive at the lower end of the indicative IPO price range.

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 21)

By David Mudd

Hong Kong is again trading well below its historical multiple valuation levels after the October/November correction. Mainland investors bought a record amount the day after Trump’s win.
Kingsoft Corp (3888 HK) reported consensus beating results with its online game segment surging. The company is benefiting from AI upgrades in its office SAAS business.
Precision Tsugami China (1651 HK) posted blockbuster earnings for its 1H25 as the machine tool sector rebounds on the back of factories upgrading to intelligent manufacturing.

Tuya: Improving Sales Growth and Profit Margins Help to Clench Investment by 65 Equity Partners

By Douglas Kim

On 18 November, it was announced that 65 Equity Partners (backed by Temasek) will invest US$100 million (S$134 million) for a 13% stake in Tuya Inc (TUYA US).
Net cash as a percentage of market cap is currently at 92%. Tuya’s sales growth and improvement in operating margin in 1Q-3Q 2024 have also been impressive this year.
Comps are trading at average EV/EBITDA of 13.7x in 2025 versus 2.3x for for Tuya. If Tuya continues its turnaround, its valuation gap versus its peers could decrease further.

PDD (PDD US): 3Q24, Focuses on Growth, But Not Profit Margin

In 3Q24, PDD released strong revenue growth, but a flat margin.
We believe, in 2025, PDD will continue to focus on growth rather than profit.
We conclude an upside of 43% and a price target of US$167 for 2025. Buy.

[Xiaomi Inc. (1810 HK, BUY, TP HK$33) Target Price Change]: Good Result, and It Will Only Get Better

Xiaomi reported CY3Q24 revenue, non-IFRS EBIT and non-IFRS net income 4.7%, 7.8%, and 16.6% vs. consensus.
C4Q should be even stronger, as (1) appliance subsidy drive IoT revenue and margin improvement, (2) SU7 production output ~doubles
We reiterate Xiaomi as our TOP BUY idea and raise Xiaomi’s TP to HK$ 33 to reflect the improved profit outlook. Our TP implies 26.6x CY25 P/E.

[Trip.com (TCOM US, BUY, TP US$74) Target Price Change]: C3Q24 Review: Domestic Story Back in Focus

TCOM reported C3Q24 revenue 1.4%/1.6% higher than our est./cons., non-GAAP operating income is 12.5%/5.4% higher than our est./cons., mainly due to strong domestic sales and efficient cost control.
We expect revenue growth to accelerate in 4Q24 and 2025,backed by domestic travel recovery and steady overseas expansion.AI powered cost saving bringing extra leverage in margin is an additional positive.
We keep the stock as BUY rating and raise TP to US$74/ADS.

Saint Bella Pre-IPO: Rapid Growth but Facing Birth-Rate Headwinds

By Nicholas Tan

Saint Bella (SAINT HK) is looking to raise up to US$200m in its upcoming Hong Kong IPO.
It operates the second largest and fastest growing postpartum care and recovery service in China, as per Frost & Sullivan. It operates an extensive network of 59 premium postpartum centers.
In this note, we look at the firm’s past performance.

Pinduoduo: Behind Its Efficiency Edge

By Eric Chen

We compared similar growth stage of Alibaba to Pinduoduo, when GMV of both platforms increase from RMB1 trillion to RMB4 trillion, to facilitate better understanding of efficiency edge of Pinduoduo.
Contrary to consensus, Pinduoduo didn’t do better than Alibaba on OPEX (advertising expenditure in particular), but it did extract much greater value from the ecosystem via significantly higher take-rate.
The findings highlight how Pinduoduo aggregate user traffic at surprisingly high cost to beef up merchant competition in terms of cost optimization and user acquisition, with Pinduoduo reaping greatest value.

EQD | Hang Seng (HSI) – Analysis of Option Strategies Recently Traded on HKEX

By Gaudenz Schneider

Hang Seng Index (HSI INDEX) implied volatility fell across the term structure and skew. The skew displays a smile favoring specific option strategies.
The most traded HKEX traded tailor-made combinations are Call and Put Spreads. Straddles, Strangles and Butterflies have become less popular most recently.
While three quarters of all strategies take a long volatility position, there is a balance in bullish, bearish, and market-neutral strategies.

Lucror Analytics – Morning Views Asia

By Leonard Law, CFA

In today’s Morning Views publication we comment on developments of the following high yield issuers: China Vanke, Gajah Tunggal, ReNew Energy, Adani Green Energy, Bharti Airtel, UPL Limited
Treasuries fell yesterday, with yields up 1-3 bps across the curve following a soft auction of 20Y notes.
The yield on the 2Y UST rose 3 bps to 4.32%, while that on the 10Y UST was up 1 bp at 4.41%.

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Nov 21

Daily Brief China: Alibaba Group Holding , Tencent, Innovent Biologics Inc, CM Hi-Tech Cleanroom, Kuaishou Technology, NetEase Inc, Xiaomi Corp, CiDi Inc, Mokingran Jewellery Group Ltd, ATRenew and more

In today’s briefing:

[Alibaba (BABA US, BUY, TP US$120) Earnings Review]: Progress Made, Better Times Ahead
Quiddity Leaderboard HSIII: ~US$160mn One-Way Flows in Dec 24; 3 ADDs/DELs in Mar 25 Likely
Quiddity Leaderboard Hang Seng Biotech Dec 24: Positive Flows for Beigene and Innovent Biologics
CM Hi-Tech (2115 HK): 12th December Shareholder Vote
KS / Kuaishou (1024 HK): 3Q24, Ad and E-Commerce Strong, Margins Improved
[NetEase, Inc. (NTES US, BUY, TP US$118) TP Change]: Growth Rebounds Ahead from Both PC and Mobile
Lucror Analytics – Morning Views Asia
CiDi IPO Valuation Analysis: High Valuation Is Warranted Due To Unicorn Status/Hyper Growth Profile
Pre-IPO Mokingran Jewellery Group (PHIP Updates) – Some Points Worth the Attention
RERE: 3Q24 Earnings – Adjusted Operating Income Beat on Higher Revenues/Margins Investing for Growth

[Alibaba (BABA US, BUY, TP US$120) Earnings Review]: Progress Made, Better Times Ahead

BABA reported CY3Q24 top line, adjusted EBITA and non-GAAP net profit (1.0%), (1.6%) and in-line vs. consensus.
CMR improved amid monetization changes that narrowed the growth gap with GMV, but also eliminated some low-single profit sellers from its GMV.
Cloud and overseas e-commerce revenue also saw good growth and improved profitability. All of BABA’s key businesses are sputtering to life while macro tailwinds are also favorable.

Quiddity Leaderboard HSIII: ~US$160mn One-Way Flows in Dec 24; 3 ADDs/DELs in Mar 25 Likely

The Hang Seng Internet & IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).
The indicative weights for the December 2024 index rebal event will be announced later this week on Friday 22nd November 2024.
In this insight, we take a look at our updated flow estimates for December 2024. Separately, we have also presented our latest March 2025 index review predictions.

Quiddity Leaderboard Hang Seng Biotech Dec 24: Positive Flows for Beigene and Innovent Biologics

The HS HK-Listed Biotech Index (“Hang Seng Biotech Index”) represents the 50 largest biotech companies listed in Hong Kong (HKEX).
The official index changes and indicative weights for the December 2024 index rebal event will be announced on Friday 22nd November 2024.
In this insight, we take a look at our updated flow expectations.

CM Hi-Tech (2115 HK): 12th December Shareholder Vote

Back on the 14th October, cleanroom play CM Hi-Tech (2115 HK) announced a pre-conditional Offer by way of a Scheme from MayAir Technology (688376 CH) and CM Hi-Tech’s senior management.
The pre-conditional long stop for NDRC, Mofcom and SAFE was 60 days, which appeared highly optimistic. I was wrong, and the pre-cons were secured in a legendary 18 days.
The Scheme Doc is now out, with a Court Meeting to be held on the 12 December. Expected payment on the 15 January. The IFA says fair & reasonable.

KS / Kuaishou (1024 HK): 3Q24, Ad and E-Commerce Strong, Margins Improved

Both online marketing and “other revenues” grew strongly in 3Q24.
Both the gross margin and the operating margin improved over the same period last year.
We believe total revenue will accelerate when live streaming is not significant and margins will rise when e-commerce makes profit.

[NetEase, Inc. (NTES US, BUY, TP US$118) TP Change]: Growth Rebounds Ahead from Both PC and Mobile

NetEase reported C3Q24 revenue, GAAP operating profit and GAAP net income in line, (3.6%) and (5.3%) vs. our estimates, and in line, (4.4%) and (5.0%) vs. consensus.
Mobile game revenue decline is less a concern due to imminent pipeline launches, but PC game’s significantly beat is a positive surprise.
We raised the TP to US$118 for the better outlook of new game launches.

Lucror Analytics – Morning Views Asia

By Leonard Law, CFA

In today’s Morning Views publication we comment on developments of the following high yield issuers: Health and Happiness (H&H), Yinson Production, Xiaomi Corp, ReNew Energy
In the US, October housing starts declined 3.1% m-o-m to an annualised 1.31 mn units (-1.5% e / -1.9% revised p), the slowest pace in three months as builders put off projects in the wake of hurricanes Helene and Milton.
Meanwhile, October building permits (a proxy for future construction) eased 0.6% m-o-m to an annualised 1.42 mn units.

CiDi IPO Valuation Analysis: High Valuation Is Warranted Due To Unicorn Status/Hyper Growth Profile

By Andrei Zakharov

Changsha Intelligent Driving Institute, more commonly known as CiDi, filed for an IPO in Hong Kong. The company was valued at ~RMB9B in its last private funding round.
CiDi was backed by HongShan Capital, Xinding Capital, Founder Hesheng Investment, Legend Holdings, Baidu Venture, and Lens Technology, among others.
The terms of the IPO were not disclosed. CiDi is a category winner that is addressing a large TAM (~$10B by 2030) with room for hyper growth for years.

Pre-IPO Mokingran Jewellery Group (PHIP Updates) – Some Points Worth the Attention

The skyrocketing gold prices have driven up the prices of gold jewelry, but actually dampen the enthusiasm of many people to buy gold jewelry, which will directly affect MOKINGRAN’s performance.
MOKINGRAN’s prediction of gold price is incorrect. For an industry veteran, MOKINGRAN shouldn’t make such mistakes. The error in the judgment of important raw material trends is worth investors’ vigilance.
We think that valuation of MOKINGRAN should be lower than that of Lao Feng Xiang (600612 CH)/Chow Tai Seng Jewellery (002867 CH)/Chow Tai Fook Jewellery (1929 HK) and industry average.

RERE: 3Q24 Earnings – Adjusted Operating Income Beat on Higher Revenues/Margins Investing for Growth

By Zacks Small Cap Research

Key 3Q24 takeaways include: 1) steady revenue growth reflecting government initiatives to promote consumer spending and trade-in activity, increasingly leveraging the company’s strategic partnership with JD.com, and rising brand awareness/visibility 2) we expect multi-category contribution to continue to build, as management leverages the company’s pricing and customer service competitive advantages to increasingly tap into massive/growing gold and luxury goods recycling markets 3) management remains focused on growing the number of new store openings over the next several years to meet rising demand trends and further expand the footprint and 4) senior officials seem intent on increasingly reinvesting in the business to accelerate customer acquisition growth, while remaining focused on managing expenses to support profitability.

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Nov 20

Daily Brief China: HKBN Ltd, S.F. Holding, Kuaishou Technology, PICC Property & Casualty H, XPeng , Trip.com Group , ZTO Express Cayman , Iron Ore and more

In today’s briefing:

HKBN (1310 HK): China Mobile Comes Knocking. Again.
SF Holdings A/H Listing – Lower End Looks Digestable
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December
Quiddity Leaderboard HSCEI Dec 24: Time for a LONG-SHORT Trade
Quiddity Leaderboard HSTECH Dec 24: Large Flow Expectations Although No Index Changes Expected
Trip.com (9961.HK, TCOM): 3Q24, Still Healthy, But Stock Price Exceeded Our Last Target
SF Holding H Share Listing (6936 HK): Valuation Insights
Pre-IPO S.F. Holding (6936 HK) – Thoughts on Valuation and the Outlook
ZTO Express Q324 Results: Shift in Strategy Leads to Lower Core Margins & FY24 Guidance Cut | AVOID
IO Weekly Technicals Review [2024/46]: IO to Rise on Seasonality

HKBN (1310 HK): China Mobile Comes Knocking. Again.

HKBN Ltd (1310 HK), a Hong Kong broadband play, is never short on privatisation rumours. China Mobile (941 HK) is reportedly (again) holding talks with HKBN’s major shareholders.
China Mobile is a logical suitor. I highly doubt a non-PRC (government-affiliated) corporation would be permitted to take HKBN private.
Previous takeover rumours over the years came to nought. It may be different this time. HKBN was suspended this morning pursuant to the Takeovers Code.

SF Holdings A/H Listing – Lower End Looks Digestable

By Sumeet Singh

S.F. Holding (002352 CH), China’s largest express delivery company, is now looking to raise around US$800m in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
We have covered the company and deal background in our previous notes. In this note, we talk about the IPO pricing.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December

Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 December.
With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.

Quiddity Leaderboard HSCEI Dec 24: Time for a LONG-SHORT Trade

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
The official index changes will be confirmed later this week on Friday 22nd November 2024.
In this insight, we take a look at our final index change expectations and updated flow estimates for the upcoming index rebal event.

Quiddity Leaderboard HSTECH Dec 24: Large Flow Expectations Although No Index Changes Expected

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
The official index changes and indicative weights for the December 2024 index rebal event will be announced later this week on Friday 22nd November 2024.
In this insight, we take a look at our updated flow expectations.

Trip.com (9961.HK, TCOM): 3Q24, Still Healthy, But Stock Price Exceeded Our Last Target

The stock has risen by 38% since our last buy rate.
The 3Q24 results are still healthy – both growth rate and operating margin.
We set a downside of 19% for the end of 2025.

SF Holding H Share Listing (6936 HK): Valuation Insights

S.F. Holding (002352 CH) has launched its H Share listing at HK$32.30-36.30 per share. Pricing will be on 25 November, and the listing on 27 November.
We previously discussed the listing in SF Holding H Share Listing: Updates Point to Improving Fundamentals and SF Holding H Share Listing: AH Discount Views.
Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

Pre-IPO S.F. Holding (6936 HK) – Thoughts on Valuation and the Outlook

One important reason S.F. chose to go public on Hong Kong stock market is due to financial pressure, which mainly comes from its heavy asset development model and internationalization strategy.
Considering the discount of the H-share price versus the A-share price, if the IPO pricing is at the lower limit of the range, then the safety margin would be higher.
In the short term, S.F. is better than JD Logistics, so its valuation should be higher than JD Logistics and industry average. Future valuation expansion depends on international business performance.

ZTO Express Q324 Results: Shift in Strategy Leads to Lower Core Margins & FY24 Guidance Cut | AVOID

By Daniel Hellberg

Going into FY24, ZTO aimed to focus on price, cede volume share in support of margins
It hasn’t worked: in Q324, adj EBITDA margin fell -290 bps Y/Y despite higher ASPs
Q324 results reveal weak earnngs growth, & reduced FY24 volume target; AVOID

IO Weekly Technicals Review [2024/46]: IO to Rise on Seasonality

By Suhas Reddy

SGX Iron Ore Futures dropped to USD 96.71/ton, down USD 5.49/ton, hitting a low of USD 96.30/ton amid pressure from declining housing prices and industrial output in China.
Chinese portside inventories increased by 120k tons WoW to 148.51m tons last week, while average daily port discharge volumes rose by 131k tons WoW to 3.18m tons.
Despite weak economic data from China, SGX Iron Ore Futures may rebound in November-December as pre-Lunar New Year restocking boosts steel demand.

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Nov 19

Daily Brief China: WH Group, S.F. Holding, HKBN Ltd, Tencent Music, Hang Seng Index, Tencent Music Entertainment Group, Lenovo, Hangzhou Jiuyuan Gene Engineering and more

In today’s briefing:

WH Group (288 HK)’s US/Mexican Spin-Off
SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide
HKBN (1310 HK): China Mobile Resurfaces as a Rumoured Suitor
2025 High Conviction: Tencent Music Entertainment (TME) – Music as Promising Future
Hong Kong Index Options Weekly – HSI and HSCEI
SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated
BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 18)
Lucror Analytics – Convertibles Brief: Lenovo (992 HK)
Pre-IPO Hangzhou Jiuyuan Gene Engineering (PHIP Updates) – The Future Prospects Are Not Optimistic

WH Group (288 HK)’s US/Mexican Spin-Off

Back on 14 July 2024, WH Group (288 HK) (WHG) announced it had submitted a plan to spin-off its Smithfield US and Mexican ops on the NYSE or NASDAQ
WHG the world’s largest pork producer, has now confirmed it will sell up to 20% of Smithfield’s shares on a fully diluted basis, in an initial public offering.
WHG has also proposed an assured entitlement for existing shareholders by way of a distribution in specie of existing shares of Smithfield, or a cash alternative.

SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide

The S.F. Holding (002352 CH) H-shares are being offered at a price range of HK$32.3-36.3/share, a discount of 20.2%-29% to the A-shares. The max raise (including oversubscription) is US$912m.
Unlike Midea Group (300 HK), the S.F. Holding (002352 CH) H-shares will not get Fast Entry to any indices. Southbound Stock Connect inclusion will take place on 23 December.
With no index inclusion in the short-term, the H-shares discount to the A-shares should remain wide. The H-shares could become short sell eligible in February.

HKBN (1310 HK): China Mobile Resurfaces as a Rumoured Suitor

Bloomberg reports that China Mobile (941 HK) is exploring a buyout of HKBN Ltd (1310 HK) and is willing to pay at least HK$5.00, a 16.0% premium to last close.
HKBN has been the subject of numerous bid rumours, which seemingly came to nothing due to the challenge of meeting the largest shareholders’ (TPG and MBK) price expectations.
The rumoured offer price will struggle to gain TPG/MBK’s backing. The current valuation is unappealing, as HKBN trades at a premium multiple compared to peers at the last close.

2025 High Conviction: Tencent Music Entertainment (TME) – Music as Promising Future

Our 2024 High Conviction, the stock of Meituan has risen by 87% in one year.
We believe the market ignores TME because of its flat revenue.
However, we expect TME will significantly benefit from its dominant position in the Chinese music market.

Hong Kong Index Options Weekly – HSI and HSCEI

By John Ley

Vols have stabilized as market has moved away from peak short gamma levels just above the recent market highs.
HSI Put positions appear to have been rolled down to the 19,000 strike.
HSCEI saw significant put volume at the 6300 strike with ~15,000 contracts per day trading at that level.

SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated

By Daniel Hellberg

SF Holding’s HKEX listing launched on Tuesday, November 19th; deal to be priced by 26th
SF hopes to raise about US$800 mn, less than originally anticipated in financial media
About one quarter of the offering will be taken up by ten cornerstone investors

BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 18)

By David Mudd

Hong Kong market sectors outperforming since the stimulus in September are Consumer Discretionary and Healthcare as Utilities, Telecom and Energy lag.
CRRC Corp Ltd H (1766 HK) gets BUY recommendations as its results point to continued strength in the rail equipment sector with passenger volume surging.
Tencent Music Entertainment Group (1698 HK) reported solid results as it shifts to a pay-to-stream subscription model. Xiaomi Corp (1810 HK) had a blowout quarter with EV sales surging.

Lucror Analytics – Convertibles Brief: Lenovo (992 HK)

By Trung Nguyen

In today’s Convertibles Brief publication we comment on developments of the following high yield issuers: Lenovo
Credit markets widened on Friday, with the iTraxx X-Over increasing 8 bps to 304 bps.
European bourses declined 0.1-1.3%, except for the IBEX 35 (+1.0%). In the US, the S&P 500 and Nasdaq fell 1.3% and 2.2%, respectively.

Pre-IPO Hangzhou Jiuyuan Gene Engineering (PHIP Updates) – The Future Prospects Are Not Optimistic

Based on current performance, Jiuyuan has lost growth momentum, showing signs of stagnant growth. The main reason is VBP. So far, Jiouting, Yinuojia, Jifuwei have been included in VBP.
Guyoudao is facing competitive pressure from both domestic and international competitors and could be finally included in VBP. JY29-2 is the next blockbuster product, but the prospects are not clear.
Jiuyuan’s market value is expected to be higher than Qyuns. Future valuation performance will depend on the progress of JY29-2 and the overall market situation of GLP-1s at that time

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Nov 18

Daily Brief China: S.F. Holding, Xingda International, Shanghai Henlius Biotech , Ping An Healthcare and Technology, Pony AI, Oriental Watch, CiDi Inc and more

In today’s briefing:

SF Holding H Share Listing: AH Discount Views
Xingda (1899 HK): A Surprising Result as Offer Declared Unconditional
Merger Arb Mondays (18 Nov) – Henlius, GAPack, Xingda, Seven & I, Fuji Soft, NEC Networks, Macromill
Ping An Healthcare and Technology (1833 HK) – Privatization Ahead?
Xingda (1899 HK): Go Figure As Offer Turns Unconditional
Pony AI IPO – Autonomous Valuation
Oriental Watch (398 HK) H1 FY25 and Mgmt Meeting: Resilient 14% Yield Despite Tough Environment
CiDi IPO Preview: Uniquely Positioned For Growth In Autonomous Mining and Logistics Trucks

SF Holding H Share Listing: AH Discount Views

S.F. Holding (002352 CH), the largest Asian integrated logistics service provider, is premarketing an H Share listing to raise US$1.0-1.5 billion, according to press reports.
In SF Holding H Share Listing: Updates Point to Improving Fundamentals, we noted that SF is in good health, with a return to growth, rising margins, and strong cash generation.
In this note, we examine the likely discount SF Holding will offer its H Shares compared to the A Shares.

Xingda (1899 HK): A Surprising Result as Offer Declared Unconditional

On its first closing date on 15 November, Xingda International (1899 HK) declared the Chairman’s offer unconditional as the offeror and concert parties represented 60.76% of outstanding shares.
The result was surprising. The IFA opined that the offer was not fair or reasonable, and the independent Board recommended that the shareholder not accept it.
The CCASS movements suggest that the offer was declared unconditional mainly because friends and family supported the Chairman’s offer. The gross/annualised spread is 1.6%/92.6%.

Merger Arb Mondays (18 Nov) – Henlius, GAPack, Xingda, Seven & I, Fuji Soft, NEC Networks, Macromill

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Renewable Japan (9522 JP), Shanghai Henlius Biotech (2696 HK), Macromill, Inc (3978 JP), Seven & I Holdings (3382 JP), Canvest Environmental Protection Group (1381 HK).
Lowest spreads: Nec Networks & System Integr (1973 JP), Net One Systems (7518 JP), Avarga Ltd (AVARGA SP), T Gaia Corp (3738 JP), Nishimoto (9260 JP), Elematec Corp (2715 JP).

Ping An Healthcare and Technology (1833 HK) – Privatization Ahead?

PAGD’s business model is problematic, leading to continuous shrinking revenue scale. As PAGD will entirely lose competitiveness in the future, the management wants to find a suitable way to “exit”.
Privatizing PAGD at low price and integrating it into the Ping An Group’s system is a good choice. In other words, Ping An hopes other shareholders to choose cash dividends.
Due to high tax, Hong Kong Stock Connect investors would prefer to sell in advance. Arbitrageurs can wait until stock price drops then make decisions based on new conversion price.

Xingda (1899 HK): Go Figure As Offer Turns Unconditional