ChinaDaily Briefs

China: Ant Financial, Yum China Holdings Inc, Huazhu Group, Nongfu Spring, Allied Properties (H.K.), Boqii Holding, Joy Spreader Interactive Technology, Dada Nexus Ltd, China Yongda Automobile Services Hldg and more

By September 11, 2020 No Comments

In today’s briefing:

  • Ant Group – Index Inclusion Possibilities & Timeline
  • Yum China Secondary Listing – Is There More Downside?
  • Huazhu HK Secondary Listing – Needs the Money but Looks Toppish
  • Nongfu Spring’s Sparkling Debut: Opened 85% Up- Is It Time to Short?
  • Allied Props (56 HK). Stalled At The Finish
  • Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms
  • Joy Spreader (乐享互动) IPO – Fairly Valued at Best
  • Dada-Nexus: More — And Less — Than Meets the Eye
  • China Yongda Automobile Services – Accelerating into 2H20
  • Joy Spreader IPO Initiation: For the Joy of It

Ant Group – Index Inclusion Possibilities & Timeline

By Brian Freitas

Ant Financial (1051260D CH) is looking to complete a dual listing on the Shanghai Stock Exchange’s STAR Market and the HKEX (388 HK). Media reports have indicated that the company is looking to raise US$30bn, with US$20bn being raised in China on the STAR Market and US$10bn in Hong Kong. In a filing, Ant said that it plans to sell no less than 10% of its enlarged share capital.

FTSE has started a market consultation to include the STAR Market to the list of eligible market segments within the non Stock Connect indices, and to introduce Fast Entry rules for China A-shares listed on the STAR Market where there are no pricing limits for the first 5 trading days.

In this Insight, we take a look at the timeline for inclusion of the A-shares and the H-shares in various indices and what it would take for the HK listed line to be included in the Hong Kong Hang Seng Index (HSI INDEX) and Hang Seng China Enterprises Index (HSCEI INDEX)

Yum China Secondary Listing – Is There More Downside?

By Rickin Thakrar

Yum China (9987 HK) had a tough debut for its secondary listing, with the shares closing down c5%. We have been cautious on the secondary listing (note here) and the HK shares currently trade at a c5% discount to the ADR last close price and flat vs the ADR pre-market price. We give our updated thoughts on the secondary listing below.

Huazhu HK Secondary Listing – Needs the Money but Looks Toppish

By Sumeet Singh

Huazhu Group (HTHT US) plans to raise around US$900m in its secondary listing in Hong Kong.

I have covered the background of the deal in my earlier note, Huazhu HK Secondary Listing – Early Look – Needs the Cash More than Most Secondary Candidates.

In this insight, I’ll talk about the deal dynamics and what to do with the ADR while waiting for the completion of the Hong Kong listing.

Nongfu Spring’s Sparkling Debut: Opened 85% Up- Is It Time to Short?

By Aqila Ali

As expected Nongfu Spring (9633 HK) had a successful IPO. Nongfu’s stock opened at HKD 39.8 per share up 85% from its issue price. The stock ended the day at HKD 33.1 per share, 54% above the IPO price. The IPO was oversubscribed 1,148 times. The share price performance shows investor demand for defensive stocks amidst the ongoing COVID-19 crisis. 
During the second day of trading, the share price increased another 2.3%, closing at HKD 34.1 per share. At the current share price (HKD 35.9), Nongfu is trading at FY+2 EV/EBIT and PE of 43.6x and 47.6x respectively. 
The company’s valuation looks expensive – the question is, should you take profits, keep it in the radar to short, or hold on?
We go through the details below.

Allied Props (56 HK). Stalled At The Finish

By David Blennerhassett

Back on the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for 75%-held Allied Properties Hk (56 HK) (APH), by way of a Scheme, at $1.92/share (cash), a 34.2% premium to last close. The Offer consideration was Final, and would be split between a $0.42/share Scheme Consideration and a $1.50 Scheme Dividend.  The Scheme Doc was despatched on the 19 June. The Court Meeting was held on the 15 July and the resolutions to approve the Scheme was approved. Shares continue to trade until the 14 August (inclusive). Cheques were supposed to be despatched on or before the 8 Sept.

Then something went awry. 

The sanctioning of the Scheme has now thrice been delayed by the High Court. At the last session on the 7 September, submissions from APL were made to the Court “whether the Scheme was approved by a majority in a number of APL Shareholders present and voting in person or by proxy at the Court Meeting“.

Huh? The headcount test doesn’t apply to Hong Kong-incorporated companies like APH.

As always, more below the fold.

(Shares are currently suspended, so there is no trade here. Look away now if this is not your thing – it will save you time).

Boqii IPO: Another Pet Humanization Stock in a Booming Market Led by Large E-Commerce Platforms

By Shifara Samsudeen, ACMA, CGMA

  • Boqii is one of the largest pet-focused platforms in China who offers a one-stop destination for pet parents to get everything they need for their pets including pet food, toys, vitamins and toiletries. The company operates an online platform as well as an offline retail network.
  • The company has filed for an IPO in the US and has a placeholder indication to raise US$115m and plans to use part of the IPO proceeds on further enhancing content, R&D, big data technology and develop private label brands.
  • China’s pet economy is still in its infant stages as the market is significantly underpenetrated and this presents a huge potential for industry participants. The young millennials are driving the growth in the market and the pet goods retail market is shifting largely towards online channels in the country.
  • Boqii earns a majority of its revenue through online platforms (self-operated Boqii Mall and other third-party platforms) and at the same time, the third-party platforms bring in almost two-third of the company’s revenues.
  • The online pet good retail market in China is highly competitive and are dominated by large and established online retail platforms, including generic e-commerce platforms.
  • In this insight, we examine the company’s business model, the industry and the revenue channels. Boqii is the largest pet-focused online retail platform in China and the company has taken several initiatives including M&A deals to expand its presence in the market. The company is operating in a growing market and it seems that the company has a strong business model.
  • In a follow-up insight, we will be discussing the company’s financials (revenue, margins and balance sheet) in detail.

Joy Spreader (乐享互动) IPO – Fairly Valued at Best

By Zhen Zhou, Toh

Joy Spreader Interactive Technology (6988 HK) (JST) is looking to raise up to US$225m in its upcoming Hong Kong IPO.

JST is a performance-based we-media marketing service provider in China. JST connects marketers and we-media publishers via its technology and platforms. The services provided to marketers include analyzing and distributing their products on the we-media network which will help marketers acquire users.

In this note, we will look at assumptions and share our thoughts on valuation.

Our previous coverage of the IPO:

Dada-Nexus: More — And Less — Than Meets the Eye

By Daniel Hellberg

Dada Nexus Ltd (DADA US) recently reported Q2 results that showed strong YoY revenue growth at its two main business units and solid progress on raising margins. Still, Dada posted a net loss of 457 mn RMB on revenue of 1.32 bn RMB, and its shares in the US have fallen since it reported. 

An examination of average revenue per order in its Dada Now business line suggests the company actually handles little ‘real’ on-demand traffic. Instead, by volume it appears Dada Now mostly handles last-mile delivery duties for JD Logistics and traditional (2-4 day) express delivery firms. 

In this note we remind readers there is more to Dada than its hyped on-demand retail and on-demand delivery — and less, too. We say this because Dada still appears to have substantial exposure to traditional eCommerce fulfillment, which features slower growth, entrenched rivals, and thin margins. 

China Yongda Automobile Services – Accelerating into 2H20

By Michael Ting

We met with the management of China Yongda Automobile Services Hldg (3669 HK) and came away with a bullish view. Luxury auto strength from 1H20 is carrying over into 2H20 driven by favorable government policy for auto consumption, ASP growth leading to potential gross margin expansion along with a solid model pipeline for the company’s key brands.

Joy Spreader IPO Initiation: For the Joy of It

By Arun George

Joy Spreader Interactive Technology (6988 HK) is an ad tech company which connect marketers (namely, product providers and merchants) with we-media publishers. Joy Spreader has launched a Hong Kong IPO to raise around net proceeds of $140-210 million. 

The post-IPO performance of Chinese ad tech companies has been mixed. Consequently, backing the winners is crucial to generate investment returns in the Chinese ad tech sector. For investors seeking Chinese ad tech exposure, we think Joy Spreader’s fundamentals are attractive. We will discuss the IPO valuation in our next piece. 

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