Daily Briefs

Meituan reported C3Q23 top line (1.0%)/0.6% vs. our estimate/consensus, non-GAAP net income (9.7%)/8.3% vs our estimate/consensus. Subsidies and investment in in-store business is the main reason for bottom-line miss.
Meituan in-store GTV increased 90% YoY in 3Q23, effectively counteracted Douyin’s attack and maintained size ratio at 3:1 vs. Douyin in-store, which scarified profit.
Meituan OPM lowered 2.5ppt QoQ to 4.4% in 3Q23, and we expect it decline to 2.4% in 4Q23.

Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy

A holistic view of the three different documents here suggests the Denso Corp (6902 JP) buyback, indeed, “It was a trap”.
3D Investment Partners raised its stake in Sapporo Holdings (2501 JP), suggesting the activist investor is optimistic about successfully advancing their proposals.
A firm merger proposal is expected for Hollysys Automation Technologies (HOLI US) in the next couple of weeks. Time to buy.

Weekly Deals Digest (03 Dec) – Denso, T&K Toka, CIMC Vehicles, Origin, OreCorp, Hollysys, BPLANT

By Arun George

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 – Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – CIMC Vehicle Group Co Ltd (1839 HK), Origin Energy (ORG AU), Orecorp Ltd (ORR AU), Hollysys Automation Technologies (HOLI US), Boustead Plantations (BPLANT MK).

ECM Weekly (3rd Dec 2023) – Denso, Toyota, Zensho, Asahi, Kotak, Zomato, Zeekr, Tatatech, IREDA

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Tata Technologies and IREDA continued the India IPO juggernaut.
On the placements front, there seems to be no stopping Japan flows.

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Dec 03

Daily Brief Quantitative Analysis: Screening for GEMs: December 2023 and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Screening for GEMs: December 2023
TWSE Short Interest Weekly (Dec 1st): Genius Electronics

Screening for GEMs: December 2023

By Wium Malan, CFA

An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.
The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.
Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.

TWSE Short Interest Weekly (Dec 1st): Genius Electronics

By Ke Yan, CFA, FRM

We analyzed the changes in short interest of TWSE Stocks as of Dec 1st which has an aggregated short interest worth USD15.3bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
We highlight TWSE short interest weekly changes in Genius Elec.

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Dec 03

Daily Brief Thematic (Sector/Industry): US Consumers Remain Resilient While Setting Record Sales During Black Friday and Cyber Monday and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

US Consumers Remain Resilient While Setting Record Sales During Black Friday and Cyber Monday
GEMWeekly (1 Dec 2023): China, South Korea, India Macro; ByteDance, NIO, Geely, Alibaba
What to Avoid if AI Server Will Continue to Squeeze General Server Market in 2024-2025?
Auctus on Friday – 24/11/2023

US Consumers Remain Resilient While Setting Record Sales During Black Friday and Cyber Monday

By Amrutha Raj

Black Friday is the busiest shopping day of the year. Cyber Monday comes second. This year BFCM set a record of USD 38 billion across 200+ million shoppers.
Buy Now, Pay Later drove USD 940m in online spending on Cyber Monday, up a staggering 42.5% YoY. Online Sales via smartphone set a fresh record of 59%.
In a year, where good news for the main street is unwelcome news for the wall street, record shattering holiday shopping numbers comes amid a buoyant stock market.

GEMWeekly (1 Dec 2023): China, South Korea, India Macro; ByteDance, NIO, Geely, Alibaba

By Wium Malan, CFA

The Global Emerging Markets Weekly provides a summary of the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
Macro data points:China PMI data, South Korean interest rates and economic activity data, India GDP growth.
Companies mentioned:ByteDance (1439927D CH), NIO (9866 HK), Geely Auto (175 HK), Alibaba Group Holding (9988 HK)

What to Avoid if AI Server Will Continue to Squeeze General Server Market in 2024-2025?

By Andrew Lu

After our global server market model update, we see 3Q23 server market decline and data center vendors’ capex cut not consistent with Nvidia’s robust y/y sales growth of over 200%;
Discrepancy: 1. Nvidia gaining value on AI server, losing zero on non AI; 2. AI servers grow at the expenses of non AI; 3. most vendors not only in server;
Different from consensus view, we expect general (non AI) server market to decline 16% y/y in 2024 and 29% in 2025 and suggest to avoid general server supply chain vendors.

Auctus on Friday – 24/11/2023

By Auctus Advisors

ADX Energy (ADX AU)C ; target price of A$0.80 per share: Equity raise to fund increased WI in Anshof – ADX is raising A$4.2 mm of new equity plus up to A$1 mm through an offer to shareholders at a price of A$0.10 per share.
Subscribers will also receive half a warrant with an exercise price of A$0.16 per share.
The capital injection will provide funding for ADX’s increased interest in Anshof (from 50-60%) following the decision of Xstate Resources not to participate in the upcoming programme as well as funding for the Welchau-1 gas well (50% funded by MCF Energy) which ADX expects to spud in January 2024 after an anticipated environmental clearance.

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Dec 03

Daily Brief ECM: ECM Weekly (3rd Dec 2023) – Denso and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

ECM Weekly (3rd Dec 2023) – Denso, Toyota, Zensho, Asahi, Kotak, Zomato, Zeekr, Tatatech, IREDA
Weekly Deals Digest (03 Dec) – Denso, T&K Toka, CIMC Vehicles, Origin, OreCorp, Hollysys, BPLANT

ECM Weekly (3rd Dec 2023) – Denso, Toyota, Zensho, Asahi, Kotak, Zomato, Zeekr, Tatatech, IREDA

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Tata Technologies and IREDA continued the India IPO juggernaut.
On the placements front, there seems to be no stopping Japan flows.

Weekly Deals Digest (03 Dec) – Denso, T&K Toka, CIMC Vehicles, Origin, OreCorp, Hollysys, BPLANT

By Arun George

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 – Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – CIMC Vehicle Group Co Ltd (1839 HK), Origin Energy (ORG AU), Orecorp Ltd (ORR AU), Hollysys Automation Technologies (HOLI US), Boustead Plantations (BPLANT MK).

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Dec 03

Daily Brief Equity Bottom-Up: 2024 High Conviction: China Tourism Group (601888 CH and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
Asian Dividend Gems: Fufeng
China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)
[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation

2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees

By Mohshin Aziz

China stock market despair has brought down China Tourism Group Duty Free Corp Ltd (601888 CH) to its lowest forward valuation in the past ten years
Poised for long-term growth, Chinese are buying albeit more prudently, government supportive on promoting domestic consumption, efficiency enhancements will lower cost and boost margins
Using the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24, we derive a target price of CNY106 (+21% UPSIDE)

[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas

Meituan reported C3Q23 top line (1.0%)/0.6% vs. our estimate/consensus, non-GAAP net income (9.7%)/8.3% vs our estimate/consensus. Subsidies and investment in in-store business is the main reason for bottom-line miss.
Meituan in-store GTV increased 90% YoY in 3Q23, effectively counteracted Douyin’s attack and maintained size ratio at 3:1 vs. Douyin in-store, which scarified profit.
Meituan OPM lowered 2.5ppt QoQ to 4.4% in 3Q23, and we expect it decline to 2.4% in 4Q23.

Asian Dividend Gems: Fufeng

By Douglas Kim

Fufeng (546 HK)’s core businesses include food additives such as MSG, animal nutrition, high-end amino acids, and colloid such as xanthan gum.
Xantham gum is increasingly becoming popular as millions of people around the world purchase gluten free foods.
Fufeng’s dividend yield averaged 7.5% annually from 2018 to 2022. Its current dividend yield is about 11-12%. Fufeng is trading at P/E of 2.9x and EV/EBITDA of 1.8x in 2024.

China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech

By Xinyao (Criss) Wang

The national centralized procurement of high-value medical consumables for intraocular lens (IOL) and medical consumables related to sports medicine released results, with lower than expected price reductions.
Despite anti-corruption campaign, the business/profit model validation process of Chinese Biotech has not slowed down. There’s a chance to see Chinese Biotech turn losses into profits in 2024-2025.
Zhejiang Orient Gene Biotech (688298 CH) once brought considerable returns to investors, but now the beautiful story is over.After deletion from CSI Medical Service Index, share price could remain weak.

3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)

By Sessa Investment Research

Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs
2) 2023 application, 2024 approval and 2025 launch of DW-1002 in Japan, 2023 application/approval/launch in China, as well as expedited development of combination formula MembraneBlue-DualR (DW-1002 + trypan blue) in the US [NEW]
3) clinical trials in 2024 in Japan and application for approval in 2025 of regenerative cell medicine DWR-2206

[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation

Bilibili reported C3Q23 revenue, operating profit, and GAAP net income inline, 4.37%, (21.6%) vs. consensus. The miss was primarily due to ineffective investment in game studio and related costs.
We are bearish on BILI’s game pipeline as ACGN is already a crowded market with well-entrenched competitors
We maintain our SELL rating and cut the TP from US$ 12.3 to US$ 9.04, and consider that it is unlikely for them to breakeven in 2024

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Dec 03

Daily Brief Event-Driven: S&P500 Index Rebalance: Calling an UBER and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P500 Index Rebalance: Calling an UBER
Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
Quiddity TDIV/50/100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical
Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

Quiddity TDIV/50/100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names

By Janaghan Jeyakumar, CFA

The index changes for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st December 2023.
The index changes were mostly in line with our final expectations.
In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy

A holistic view of the three different documents here suggests the Denso Corp (6902 JP) buyback, indeed, “It was a trap”.
3D Investment Partners raised its stake in Sapporo Holdings (2501 JP), suggesting the activist investor is optimistic about successfully advancing their proposals.
A firm merger proposal is expected for Hollysys Automation Technologies (HOLI US) in the next couple of weeks. Time to buy.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed on Smartkarma this week: Glosel (9995 JP)‘s Tender Offer; and the indicative Offer for CIMC Vehicle Group Co Ltd (1839 HK)‘s H-shares.
Key updates on: Orecorp Ltd (ORR AU), Tietto Minerals Ltd (TIE AU), and Lansen Pharmaceutical Holdings Co, Ltd. (503 HK)

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

By Janaghan Jeyakumar, CFA

The December 2023 review results for ASX indices were announced after the close on Friday 1st December 2023.
There will be three ADDs and thee DELs for the ASX 200 index. There are no changes for ASX 20, 50, and 100.
In this insight, we take a look at our index flow expectations, trends in short interest, and the recent trading performance of the names involved in the ASX 200 changes.

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Dec 03

Daily Brief Australia: Boss Resources and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

By Janaghan Jeyakumar, CFA

The December 2023 review results for ASX indices were announced after the close on Friday 1st December 2023.
There will be three ADDs and thee DELs for the ASX 200 index. There are no changes for ASX 20, 50, and 100.
In this insight, we take a look at our index flow expectations, trends in short interest, and the recent trading performance of the names involved in the ASX 200 changes.

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Dec 03

Daily Brief United States: Uber Technologies , Hollysys Automation Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

S&P500 Index Rebalance: Calling an UBER
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed on Smartkarma this week: Glosel (9995 JP)‘s Tender Offer; and the indicative Offer for CIMC Vehicle Group Co Ltd (1839 HK)‘s H-shares.
Key updates on: Orecorp Ltd (ORR AU), Tietto Minerals Ltd (TIE AU), and Lansen Pharmaceutical Holdings Co, Ltd. (503 HK)

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Dec 03

Daily Brief Japan: Taisho Pharmaceutical Holdin, Cosmo Energy Holdings , Denso Corp, D.Western Therapeutics Institute Inc. and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy
3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)
Weekly Deals Digest (03 Dec) – Denso, T&K Toka, CIMC Vehicles, Origin, OreCorp, Hollysys, BPLANT
ECM Weekly (3rd Dec 2023) – Denso, Toyota, Zensho, Asahi, Kotak, Zomato, Zeekr, Tatatech, IREDA

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy

A holistic view of the three different documents here suggests the Denso Corp (6902 JP) buyback, indeed, “It was a trap”.
3D Investment Partners raised its stake in Sapporo Holdings (2501 JP), suggesting the activist investor is optimistic about successfully advancing their proposals.
A firm merger proposal is expected for Hollysys Automation Technologies (HOLI US) in the next couple of weeks. Time to buy.

3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)

By Sessa Investment Research

Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs
2) 2023 application, 2024 approval and 2025 launch of DW-1002 in Japan, 2023 application/approval/launch in China, as well as expedited development of combination formula MembraneBlue-DualR (DW-1002 + trypan blue) in the US [NEW]
3) clinical trials in 2024 in Japan and application for approval in 2025 of regenerative cell medicine DWR-2206

Weekly Deals Digest (03 Dec) – Denso, T&K Toka, CIMC Vehicles, Origin, OreCorp, Hollysys, BPLANT

By Arun George

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 – Denso Corp (6902 JP)‘s US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback.
Event-Driven developments – CIMC Vehicle Group Co Ltd (1839 HK), Origin Energy (ORG AU), Orecorp Ltd (ORR AU), Hollysys Automation Technologies (HOLI US), Boustead Plantations (BPLANT MK).

ECM Weekly (3rd Dec 2023) – Denso, Toyota, Zensho, Asahi, Kotak, Zomato, Zeekr, Tatatech, IREDA

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Tata Technologies and IREDA continued the India IPO juggernaut.
On the placements front, there seems to be no stopping Japan flows.

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Dec 03

Daily Brief China: China Tourism Group Duty Free Corp Ltd, Meituan, Fufeng, Zhejiang Orient Gene Biotech C, Bilibili and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
Asian Dividend Gems: Fufeng
China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation

2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees

By Mohshin Aziz

China stock market despair has brought down China Tourism Group Duty Free Corp Ltd (601888 CH) to its lowest forward valuation in the past ten years
Poised for long-term growth, Chinese are buying albeit more prudently, government supportive on promoting domestic consumption, efficiency enhancements will lower cost and boost margins
Using the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24, we derive a target price of CNY106 (+21% UPSIDE)

[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas

Meituan reported C3Q23 top line (1.0%)/0.6% vs. our estimate/consensus, non-GAAP net income (9.7%)/8.3% vs our estimate/consensus. Subsidies and investment in in-store business is the main reason for bottom-line miss.
Meituan in-store GTV increased 90% YoY in 3Q23, effectively counteracted Douyin’s attack and maintained size ratio at 3:1 vs. Douyin in-store, which scarified profit.
Meituan OPM lowered 2.5ppt QoQ to 4.4% in 3Q23, and we expect it decline to 2.4% in 4Q23.

Asian Dividend Gems: Fufeng

By Douglas Kim

Fufeng (546 HK)’s core businesses include food additives such as MSG, animal nutrition, high-end amino acids, and colloid such as xanthan gum.
Xantham gum is increasingly becoming popular as millions of people around the world purchase gluten free foods.
Fufeng’s dividend yield averaged 7.5% annually from 2018 to 2022. Its current dividend yield is about 11-12%. Fufeng is trading at P/E of 2.9x and EV/EBITDA of 1.8x in 2024.

China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech

By Xinyao (Criss) Wang

The national centralized procurement of high-value medical consumables for intraocular lens (IOL) and medical consumables related to sports medicine released results, with lower than expected price reductions.
Despite anti-corruption campaign, the business/profit model validation process of Chinese Biotech has not slowed down. There’s a chance to see Chinese Biotech turn losses into profits in 2024-2025.
Zhejiang Orient Gene Biotech (688298 CH) once brought considerable returns to investors, but now the beautiful story is over.After deletion from CSI Medical Service Index, share price could remain weak.

[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation