Brief Multi-Strategy: Hong Kong Buyback Weekly: Duiba Leading the Buybacks in a Quiet Week and more

In this briefing:

  1. Hong Kong Buyback Weekly: Duiba Leading the Buybacks in a Quiet Week
  2. Canaan IPO Preview
  3. Thai Strategy 2020 (Part 2): Sector Outlook
  4. Last Week on China Internet (4Nov19): JD Logistics, 5G, and Sina Layoff

1. Hong Kong Buyback Weekly: Duiba Leading the Buybacks in a Quiet Week

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods. 

In the past 7 days, the top 3 companies that repurchased the most shares from the market were Duiba (1753 HK) (HKD 22.4 million worth of buybacks), Hkc (Holdings) (190 HK) (HKD 9.1 million worth of buybacks), Weimob Inc. (2013 HK) (HKD 7.7 million worth of buybacks). There were 30 companies that repurchased shares in the market. These repurchases amounted to HKD 82.8 million.

In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent Holdings Limited (700 HK) (HKD 233.2 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 100.0 million worth of buybacks), Ronshine China Holdings Limited (3301 HK) (HKD 78.6 million worth of buybacks). 

In the past 90 days, the top 3 companies that repurchased the most shares from the market were Tencent Holdings Limited (700 HK) (HKD 1,125.6 million worth of buybacks), Xiaomi Corporation (1810 HK) (HKD 924.8 million worth of buybacks), Country Garden Holdings Company Limited (2007 HK) (HKD 354.5 million worth of buybacks). 

In the past year, the top 3 companies that repurchased the most shares from the market were Xiaomi Corporation (1810 HK) (HKD 2,124.8 million worth of buybacks), Tencent Holdings Limited (700 HK) (HKD 1,125.6 million worth of buybacks), Hengan International Group Company Limited (1044 HK) (HKD 904.4 million worth of buybacks). 

2. Canaan IPO Preview

Bitcoin

Canaan Inc. (CAN US) the second largest producer of bitcoin mining machines in the world, is getting ready to complete an IPO in the US in the next few weeks. Canaan designs chips for mainly cryptocurrencies mining machines. It is also trying to make chips for various AI applications. The company has put the IPO placeholder at $400 million.

Canaan’s IPO filings suggest that the company may be getting desperate for financial capital and at initial glance, most institutional investors will be highly skeptical of the company’s ability to complete this IPO. Canaan’s revenue declined 85% YoY to 288.8 million RMB in 1H19. Its gross profit declined by 97% to 11.2 million RMB in 1H19. In addition, the company generated a net loss of -330.9 million RMB in 1H19, from a net income of 216.8 million RMB in 1H18. 

In our view, it is probably in the best interests of Canaan as well as the potential IPO investors for the company to postpone the IPO once again when the company’s financials are in a much better shape and meanwhile try to seek other private market capital. The IPO filing is on the border of being ridiculous. The potential institutional investors that put their precious capital into this IPO need to answer to their bosses and there are some serious flaws with this IPO, of which the most prominent concern is the collapse in ASPs of the bitcoin mining machines and the sharp decline in revenues. 

3. Thai Strategy 2020 (Part 2): Sector Outlook

Thailand health expenditure total percent of gdp wb data@2x

As mentioned in the Thematic Review on Thai Strategy, there is reason for optimism after a year of under-performance (2019). Relative to our previous portfolio, these are the key adjustments MCorp Review has made:

  • Upgrades to: 1) energy on geopolitical tensions; 2) commodities and consumers due to improving farm incomes; and 3) media due to lower competition.
  • Downgrades to: 1) banks due to increased regulations; and 2) many sectors (eg. autos, healthcare, and power) due to high base effects.
  • Maintenance of: 1) our originally bullish stance on tourism, telecoms, IE, construction, and transport; and 2) our bearish stance on property.

As is expected from an improving market, there are more upgrades than downgrades.

4. Last Week on China Internet (4Nov19): JD Logistics, 5G, and Sina Layoff

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While doing research on Chinese Internet companies, we frequently come across news that merits being highlighted to investors, however, it is not big enough to warrant a research note. In our inaugural Last Week on China Internet series, we have tried to summarize the weekly news flow. Please do let us know if you need the context of the news below. 

  • JD.com (JD) logistics gained revenues from outside of the company.
  • NetEase (NTES)’s Cloud Music will go public.
  • Telecom operators announced fee packages for 5G and handset makers started selling 5G handsets.
  • Sina (SINA) dismissed employees.

Ratings of our coverage in China:

  • Buy: Alibaba (BABA), Tencent (700 HK), Meituan (3690), NetEase (NTES), TAL Education (TAL), New Oriental (EDU).
  • Hold: Ctrip.com (CTRP), Autohome (HTHM), 58.com (WUBA)
  • Sell: Tencent Music (TME), Baidu (BIDU), Weibo (WB), Niu Technologies (NIU)

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