Category

Hong Kong

Brief Hong Kong: China Tower: Onwards and Upwards (For Now). and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. China Tower: Onwards and Upwards (For Now).

1. China Tower: Onwards and Upwards (For Now).

China tower rally started in december as positive news began to flow china tower rhs volume m lhs  chartbuilder

China Tower (788 HK) recently reported strong 1Q19 results, boosted by the adoption of IFRS16 (big positive impact to EBITDA). Revenue growth has accelerated as the company laps price cuts in 1Q18.  With the higher EBITDA, we look for China Tower’s strong rally to continue as measured EV:EBITDA is lower and the company looks very cheap vs global peers. We remain buyers of the stock with a target price of HK$2.30, but recognize conditions may be ripe for prices to move even higher as the stock re-rates. It is a long way from their post IPO experience, when poor IPO disclosures pushed the stock to HK$1.00.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: China Tower: Onwards and Upwards (For Now). and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. China Tower: Onwards and Upwards (For Now).
  2. So-Young (新氧) IPO Review – Decent Upside from the Low-End

1. China Tower: Onwards and Upwards (For Now).

China tower rally started in december as positive news began to flow china tower rhs volume m lhs  chartbuilder

China Tower (788 HK) recently reported strong 1Q19 results, boosted by the adoption of IFRS16 (big positive impact to EBITDA). Revenue growth has accelerated as the company laps price cuts in 1Q18.  With the higher EBITDA, we look for China Tower’s strong rally to continue as measured EV:EBITDA is lower and the company looks very cheap vs global peers. We remain buyers of the stock with a target price of HK$2.30, but recognize conditions may be ripe for prices to move even higher as the stock re-rates. It is a long way from their post IPO experience, when poor IPO disclosures pushed the stock to HK$1.00.

2. So-Young (新氧) IPO Review – Decent Upside from the Low-End

Net%20margin%20declined%20too

So-Young (SY US) is raising up to US$179m in its upcoming IPO. We have covered most aspects of the IPO in So-Young (新氧) Pre-IPO Review – Au Naturel.

In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: China Tower: Onwards and Upwards (For Now). and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. China Tower: Onwards and Upwards (For Now).
  2. So-Young (新氧) IPO Review – Decent Upside from the Low-End
  3. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?

1. China Tower: Onwards and Upwards (For Now).

China tower rally started in december as positive news began to flow china tower rhs volume m lhs  chartbuilder

China Tower (788 HK) recently reported strong 1Q19 results, boosted by the adoption of IFRS16 (big positive impact to EBITDA). Revenue growth has accelerated as the company laps price cuts in 1Q18.  With the higher EBITDA, we look for China Tower’s strong rally to continue as measured EV:EBITDA is lower and the company looks very cheap vs global peers. We remain buyers of the stock with a target price of HK$2.30, but recognize conditions may be ripe for prices to move even higher as the stock re-rates. It is a long way from their post IPO experience, when poor IPO disclosures pushed the stock to HK$1.00.

2. So-Young (新氧) IPO Review – Decent Upside from the Low-End

Net%20margin%20declined%20too

So-Young (SY US) is raising up to US$179m in its upcoming IPO. We have covered most aspects of the IPO in So-Young (新氧) Pre-IPO Review – Au Naturel.

In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.

3. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?

  • MimbleWimble is a powerful, positive technological development in the crypto space. There is an increasing possibility that MimbleWimble protocol may become a sidechain to Bitcoin in the future. The launch of Beam and Grin cryptocurrencies in January 2019 is likely to be just the start of many more MimbleWimble protocol based cryptos that may gain greater market acceptance. From a fundamental perspective, as an increasing number of people realize the benefits of using MimbleWimble alongside Bitcoin, this could be one of the reasons helping to drive Bitcoin price higher this year. 
  • MimbleWimble is a privacy-oriented blockchain protocol which attempts to make transactions very anonymous, while still allowing for external verification on a highly scalable basis and maintaining quick verification.  

  • MimbleWimble has its share of weaknesses including potential government crackdown, slow adoption of MimbleWimble based cryptos by major exchanges, and lack of scripting language.
  • However, the clear superiority in anonymity, scalability, and fungibility of MimbleWimble may outweigh its negatives. All in all, MimbleWimble is one the key technological trends that will impact the cryptocurrencies/blockchain sector this year and it is worthwhile paying close attention on this technology. 

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: China Tower: Onwards and Upwards (For Now). and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. China Tower: Onwards and Upwards (For Now).
  2. So-Young (新氧) IPO Review – Decent Upside from the Low-End
  3. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?
  4. Using BORUC to Pick Asian Growth Stocks

1. China Tower: Onwards and Upwards (For Now).

China tower rally started in december as positive news began to flow china tower rhs volume m lhs  chartbuilder

China Tower (788 HK) recently reported strong 1Q19 results, boosted by the adoption of IFRS16 (big positive impact to EBITDA). Revenue growth has accelerated as the company laps price cuts in 1Q18.  With the higher EBITDA, we look for China Tower’s strong rally to continue as measured EV:EBITDA is lower and the company looks very cheap vs global peers. We remain buyers of the stock with a target price of HK$2.30, but recognize conditions may be ripe for prices to move even higher as the stock re-rates. It is a long way from their post IPO experience, when poor IPO disclosures pushed the stock to HK$1.00.

2. So-Young (新氧) IPO Review – Decent Upside from the Low-End

Net%20margin%20declined%20too

So-Young (SY US) is raising up to US$179m in its upcoming IPO. We have covered most aspects of the IPO in So-Young (新氧) Pre-IPO Review – Au Naturel.

In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.

3. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?

  • MimbleWimble is a powerful, positive technological development in the crypto space. There is an increasing possibility that MimbleWimble protocol may become a sidechain to Bitcoin in the future. The launch of Beam and Grin cryptocurrencies in January 2019 is likely to be just the start of many more MimbleWimble protocol based cryptos that may gain greater market acceptance. From a fundamental perspective, as an increasing number of people realize the benefits of using MimbleWimble alongside Bitcoin, this could be one of the reasons helping to drive Bitcoin price higher this year. 
  • MimbleWimble is a privacy-oriented blockchain protocol which attempts to make transactions very anonymous, while still allowing for external verification on a highly scalable basis and maintaining quick verification.  

  • MimbleWimble has its share of weaknesses including potential government crackdown, slow adoption of MimbleWimble based cryptos by major exchanges, and lack of scripting language.
  • However, the clear superiority in anonymity, scalability, and fungibility of MimbleWimble may outweigh its negatives. All in all, MimbleWimble is one the key technological trends that will impact the cryptocurrencies/blockchain sector this year and it is worthwhile paying close attention on this technology. 

4. Using BORUC to Pick Asian Growth Stocks

Introducing the Bucephalus Operating Return on Utilised Capital

We created BORUC, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing
  2. HK Connect Ideas: ICBC and Tencent (2019-05-17)
  3. ESR Cayman Pre-IPO – Peer Comparison Quick Take – Bigger than Some, Much Smaller than Others
  4. Trade-Fixated Markets Ignore Fundamentals, While Asian Currencies Suggest Tougher Times Ahead
  5. Tai Hing (太興) Pre-IPO Review – Potentially Appetizing

1. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

Haitongspinoff

A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

2. HK Connect Ideas: ICBC and Tencent (2019-05-17)

Industrial and commercial bank of china limited %281398 hk%29 daily southbound inflow2019 05 23 10 50 47

In our weekly HK Connect Ideas series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine, and highlight interesting trade ideas. 

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we will highlight that inflows into ICBC (H) (1398 HK) were particularly strong last week, and inflow into Tencent still sustained from the prior week, thanks to newsflows pertaining to the strong sales of its newly approved mobile game. 

3. ESR Cayman Pre-IPO – Peer Comparison Quick Take – Bigger than Some, Much Smaller than Others

Revenue%20split

ESR Cayman (ESR HK) aims to raise up to US$1.5bn in its planned Hong Kong listing, as per media reports. The company is backed by Warburg Pincus and counts APG as one of its main investors.

In my earlier insights:

In this insight, I’ll do quick comparison of ESR with Global Logistic Properties (GLP SP), China Logistics Property Holdings (1589 HK) and Goodman Group (GMG AU) .

4. Trade-Fixated Markets Ignore Fundamentals, While Asian Currencies Suggest Tougher Times Ahead

Inventory

Financial markets are currently fixated with US-China trade developments while ignoring signals emanating from the global economy. Meanwhile, US bond investors are discounting a cumulative 75 basis points reduction in the federal funds rate in 2019.

US bond investors believe that protectionism will force the Fed to ease policy due to its impact on the real economy, as well as raising the risks of systemic financial stress.

Recent softening in US economic activity probably reflects an inventory correction, capturing efforts by companies to bring stock levels into better alignment with sales. This backdrop does not justify a 75 basis points reduction in the federal funds rate.

Currency movements in Asia will become more pronounced if there is no trade agreement reached between the US and China, as Asian countries seek to preserve the market share of their exports in the US.

Meanwhile, China’s equity market movements in 2019 have imparted downward pressure on the Hong Kong dollar versus yuan, while the continued weakness versus the US dollar has raised questions about the viability of the currency board system.

Hong Kong’s currency peg has been attacked in the past, notably during the Asian financial crisis, but the likely path of Fed policy should ease concerns of another speculative assault for the time being.

5. Tai Hing (太興) Pre-IPO Review – Potentially Appetizing

Operating margins getting squeezed 2016 2017 2018 chartbuilder

Tai Hing (1719303D HK) is looking to raise about US$100m in its upcoming IPO. According to media reports, the company will open its books next week.

Tai Hing is a multi-brand casual dining restaurant with presence in Hong Kong, Mainland China, Macau and Taiwan. Revenue and profit grew at a decent 11.5% and 14% CAGR from FY2016 to FY2018 while margins have been fairly stable.

However, Tai Hing’s operating margin has been on a decline for the past three years, dragged by higher staff costs and rent related expenses. The company had also paid out about HK$1bn of dividends over the past three years which is almost the entire amount that the company is supposed to raise in its IPO.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: The Global Recovery Narrative Crumbles and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. The Global Recovery Narrative Crumbles
  2. Bitcoin, Revisited
  3. China East Education (中国东方教育) IPO -Preliminary Valuation
  4. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power
  5. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

1. The Global Recovery Narrative Crumbles

4%20 %20copy

The US equity market was running with an optimistic assessment that there is a Trump and Fed put, that a trade deal and Chinese policy stimulus would generate a recovery in the global economy and the US economy was largely immune to a slowdown in activity abroad. However, the tariffs have been increased, trade talks have stalled, and the US has rolled out bans on Chinese tech companies.  The evidence grows that there is a structural rift in US-China trade relations. The rebound in Chinese economic activity in March was not backed up by data in other Asian exporter nations or Europe through April.  Chinese activity data slumped again in April, and the latest PMI data in the Eurozone, Japan and the USA for May are weak. Oil and copper prices have turned lower, suggesting that industrial activity remains weak.  We continue to see downside risk for still elevated US equities.  The strength in the USD to date is contributing to downward pressure on US equities.  The gains in the USD may have become over-extended.  China may pursue a more stable CNY for a period and lower US yields should support safe haven currencies, JPY, CHF and gold.

2. Bitcoin, Revisited

Bitcoin volatility ratio of bitcoin volatility to stocks volatility chartbuilder 3

Bitcoin and the block chain were created just over ten years ago, as a means to create peer to peer transactions without the need to use financial institutions to process the payments. 

However, frequent hacks of Bitcoin exchanges, in addition to the significant past fluctuations of Bitcoin prices, have put mainstream usage off and slowed the adoption of the cryptocurrency.

Is this about to change now?

3. China East Education (中国东方教育) IPO -Preliminary Valuation

Vocational%20education%20system

China East Education (CEE HK) was reported to be pre-marketing for its IPO and the company was previously expected to raise US$400m. We have covered the company in:

In this insight, we will compare the company against Hong Kong-listed education peers and provide our preliminary thoughts on valuation.

4. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power

Legend Holdings Corp H (3396 HK), Kerry Logistics Network (636 HK) and Tianneng Power Intl (819 HK) have made announcements they intend to spin-off certain divisions.

These spin-offs remain subject to Exchange approvals and market conditions.

While they are not yet “live” as situations, they deserve a look because spin-offs create new parent/subsidiary relationships, leading to Relative Value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

5. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

Xinyi%20stub

XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: So-Young (新氧) IPO Review – Decent Upside from the Low-End and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. So-Young (新氧) IPO Review – Decent Upside from the Low-End
  2. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?
  3. Using BORUC to Pick Asian Growth Stocks
  4. Semiconductor Revenues Collapsing, As Anticipated

1. So-Young (新氧) IPO Review – Decent Upside from the Low-End

Net%20margin%20declined%20too

So-Young (SY US) is raising up to US$179m in its upcoming IPO. We have covered most aspects of the IPO in So-Young (新氧) Pre-IPO Review – Au Naturel.

In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.

2. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?

  • MimbleWimble is a powerful, positive technological development in the crypto space. There is an increasing possibility that MimbleWimble protocol may become a sidechain to Bitcoin in the future. The launch of Beam and Grin cryptocurrencies in January 2019 is likely to be just the start of many more MimbleWimble protocol based cryptos that may gain greater market acceptance. From a fundamental perspective, as an increasing number of people realize the benefits of using MimbleWimble alongside Bitcoin, this could be one of the reasons helping to drive Bitcoin price higher this year. 
  • MimbleWimble is a privacy-oriented blockchain protocol which attempts to make transactions very anonymous, while still allowing for external verification on a highly scalable basis and maintaining quick verification.  

  • MimbleWimble has its share of weaknesses including potential government crackdown, slow adoption of MimbleWimble based cryptos by major exchanges, and lack of scripting language.
  • However, the clear superiority in anonymity, scalability, and fungibility of MimbleWimble may outweigh its negatives. All in all, MimbleWimble is one the key technological trends that will impact the cryptocurrencies/blockchain sector this year and it is worthwhile paying close attention on this technology. 

3. Using BORUC to Pick Asian Growth Stocks

Introducing the Bucephalus Operating Return on Utilised Capital

We created BORUC, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.

4. Semiconductor Revenues Collapsing, As Anticipated

2019 04 01%20wsts%20monthly%20revenues

On April 1 the World Semiconductor Trade Statistics were released illustrating, as we anticipated, that a full-blown collapse is underway.  This Insight shows how consistently the current situation follows past trends.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: Bitcoin, Revisited and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. Bitcoin, Revisited
  2. China East Education (中国东方教育) IPO -Preliminary Valuation
  3. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power
  4. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy
  5. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

1. Bitcoin, Revisited

Screenshot%202019 05 23%20at%2020.26.51

Bitcoin and the block chain were created just over ten years ago, as a means to create peer to peer transactions without the need to use financial institutions to process the payments. 

However, frequent hacks of Bitcoin exchanges, in addition to the significant past fluctuations of Bitcoin prices, have put mainstream usage off and slowed the adoption of the cryptocurrency.

Is this about to change now?

2. China East Education (中国东方教育) IPO -Preliminary Valuation

Vocational%20education%20system

China East Education (CEE HK) was reported to be pre-marketing for its IPO and the company was previously expected to raise US$400m. We have covered the company in:

In this insight, we will compare the company against Hong Kong-listed education peers and provide our preliminary thoughts on valuation.

3. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power

Legend Holdings Corp H (3396 HK), Kerry Logistics Network (636 HK) and Tianneng Power Intl (819 HK) have made announcements they intend to spin-off certain divisions.

These spin-offs remain subject to Exchange approvals and market conditions.

While they are not yet “live” as situations, they deserve a look because spin-offs create new parent/subsidiary relationships, leading to Relative Value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

4. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

Xinyi%20stub

XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

5. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

Haitongspinoff

A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin? and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?
  2. Using BORUC to Pick Asian Growth Stocks
  3. Semiconductor Revenues Collapsing, As Anticipated
  4. Bitcoin Is Back on Its Feet

1. This Week in Blockchain & Cryptos: MimbleWimble – A Friend or Foe to Bitcoin?

  • MimbleWimble is a powerful, positive technological development in the crypto space. There is an increasing possibility that MimbleWimble protocol may become a sidechain to Bitcoin in the future. The launch of Beam and Grin cryptocurrencies in January 2019 is likely to be just the start of many more MimbleWimble protocol based cryptos that may gain greater market acceptance. From a fundamental perspective, as an increasing number of people realize the benefits of using MimbleWimble alongside Bitcoin, this could be one of the reasons helping to drive Bitcoin price higher this year. 
  • MimbleWimble is a privacy-oriented blockchain protocol which attempts to make transactions very anonymous, while still allowing for external verification on a highly scalable basis and maintaining quick verification.  

  • MimbleWimble has its share of weaknesses including potential government crackdown, slow adoption of MimbleWimble based cryptos by major exchanges, and lack of scripting language.
  • However, the clear superiority in anonymity, scalability, and fungibility of MimbleWimble may outweigh its negatives. All in all, MimbleWimble is one the key technological trends that will impact the cryptocurrencies/blockchain sector this year and it is worthwhile paying close attention on this technology. 

2. Using BORUC to Pick Asian Growth Stocks

Introducing the Bucephalus Operating Return on Utilised Capital

We created BORUC, to reveal the true operating performance of businesses because ‘traditional’ measures (ROE, ROCE etc.) are easy to manipulate. Struggling companies often resort to creative accounting to obscure their problems and hide their decline. This alters the numerator in ROE, ROCE etc. and disguises their investment and capex cycles.

3. Semiconductor Revenues Collapsing, As Anticipated

2019 04 01%20wsts%20monthly%20revenues

On April 1 the World Semiconductor Trade Statistics were released illustrating, as we anticipated, that a full-blown collapse is underway.  This Insight shows how consistently the current situation follows past trends.

4. Bitcoin Is Back on Its Feet

Picture%201

Bitcoin has been getting back on its feet since March, after a year-long bear market that saw the currency going from an almost $20,000 peak in December 2017 to a bottom of $3,200 in December of 2018.

Yet since March, the Fed has performed a complete U-turn in monetary policy, going from signalling three more rate hikes this year back in December, to none expected now.

Is this just a coincidence?

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.



Brief Hong Kong: China East Education (中国东方教育) IPO -Preliminary Valuation and more

By | Daily Briefs, Hong Kong

In this briefing:

  1. China East Education (中国东方教育) IPO -Preliminary Valuation
  2. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power
  3. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy
  4. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing
  5. HK Connect Ideas: ICBC and Tencent (2019-05-17)

1. China East Education (中国东方教育) IPO -Preliminary Valuation

Vocational%20education%20system

China East Education (CEE HK) was reported to be pre-marketing for its IPO and the company was previously expected to raise US$400m. We have covered the company in:

In this insight, we will compare the company against Hong Kong-listed education peers and provide our preliminary thoughts on valuation.

2. SPINOFF: Three Announced but Unconfirmed HK Spinoffs: Legend, Kerry Logistics, Tianneng Power

Legend Holdings Corp H (3396 HK), Kerry Logistics Network (636 HK) and Tianneng Power Intl (819 HK) have made announcements they intend to spin-off certain divisions.

These spin-offs remain subject to Exchange approvals and market conditions.

While they are not yet “live” as situations, they deserve a look because spin-offs create new parent/subsidiary relationships, leading to Relative Value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

3. SPINOFF:  Xinyi Solar Spinoff of Xinyi Energy

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XSH is spinning off its subsidiary Xinyi Energy Holdings Ltd (3868 HK).

According to the prospectus, XEH will issue 1.88bn – or up to 2.165bn (inclusive of the over-allotment) new shares, at an issue price between HK$1.89-$2.35/share, raising US$456mn-US$652mn. After the listing, XSH will hold ~53.7%. 

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

At between 35-45% of Xinyi Solar market cap, this will be a new Holdco/subsidiary relationship to follow, depending on XEH’s volume.

Discussion of the spinoff and stub valuations continues below.

4. SPINOFF: Haitong Securities Spinoff of Haitong UniTrust Int’l Leasing

Haitongspinoff

A number of Hong Kong spin-offs, including  Haitong UniTrust International Leasing Co Ltd (1905 HK) and Xinyi Energy Holdings Ltd (3868 HK), have been announced recently. Clicking on the company names will take you to a home page providing a list of recent insights by various Smartkarma contributors.

There are other situations where they have been announced but conditions (approvals, market conditions) are unmet and they may never arrive.

My interest is whether these spin-offs create new parent/subsidiary relationships leading to relative value trade ideas going forward, which will be dependent on the spin-off’s liquidity and the % market cap held by the parent.

Using available information from the prospectus/red herrings and various HKEx announcements, it is also possible to back out a rudimentary implied stub value of the unlisted parent’s operations ahead of these spin-offs.

The first to be addressed is Haitong Securities’ spin-off of Haitong UniTrust International Leasing.

5. HK Connect Ideas: ICBC and Tencent (2019-05-17)

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In our weekly HK Connect Ideas series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine, and highlight interesting trade ideas. 

We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.

In this insight, we will highlight that inflows into ICBC (H) (1398 HK) were particularly strong last week, and inflow into Tencent still sustained from the prior week, thanks to newsflows pertaining to the strong sales of its newly approved mobile game. 

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