China: Hutchison Telecommunications Hong Kong Holdings, Giordano International, Sichuan Tianqi Lithium Industries, Inc, Water Oasis, Tencent and more

In today’s briefing:

Hutch Tel (215 HK): Something’s Brewing

Hutchison Telecommunications (215 HK)‘s share price is up 33% month to date.
The average volume in June has been 11.9mn shares per day, compared to 3.8mn shares on average over the past year, and 3mn in the past six months.
Of interest, Southbound buying has accelerated in the last two weeks, with a holding of 0.76% of shares out, up from 0.11% at the beginning of the month.

Giordano International (709 HK) announced a voluntary conditional offer from the Cheng Yu Tung family at HK$1.88 per share, an 18.2% premium to the undisturbed price.
The VGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 24.57%). The VGO price is underwhelming.
David Webb’s (the retail activist investor) presence on the shareholder register likely deterred a privatisation bid. We think there is a 50% chance that the VGO becomes unconditional.

Sichuan Tianqi Lithium Industries, Inc. (TIANQI HK) is pre-marketing an H Share listing to raise US$1.0-1.5 billion. It was listed on the Shenzhen Stock Exchange in 2010.
The H Share proceeds will be used to repay the outstanding Quimica Y Minera Chil-Sp Adr (SQM US) related debt, fund construction costs and working capital
The fundamentals are strong as Sichuan Tianqi Lithium Industries, Inc (002466 CH) is well-placed to leverage the high lithium prices to deliver growth, margin and cash generation.

Water Oasis (1161 HK) reported a tepid H1 with profits coming in at 26 mn HKD, down 56.2% YoY. This was below our expectations as the company received no subsidies.
No interim dividend was paid as the profit in H1 was minuscule, and business had commenced on the 21st of April, impacting a month of H2.
Save for another lockdown in HK, we see a substantial improvement in profitability for Water Oasis (1161 HK) in H2, along with subsidies that are being paid retrospectively.

Tencent has been actively divesting its investments (mainly in China) given the ongoing regulatory challenges faced by tech platforms in China. Moreover, macroeconomic conditions also have led to these sell-downs.
The company has explicitly mentioned that it would restructure its investment portfolio to manage risk, this includes divestments and distribution to shareholders.
The latest sell-down was Tencent (700 HK) stake in online education platform Koolearn, whose share price more-than tripled this month following its venture into livestreaming.

The Cheng family has made a voluntary conditional Offer of $1.88/share for Giordano International (709 HK).
The Cheng’s (and concert parties) control 24.57%. The Offer is conditional on the family getting to more than 50% via tendering.
The intention is to maintain Giordano’s listing. The Offer Price has not been declared final.

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