ChinaDaily Briefs

China: Kingboard Laminates Holdings, GDS Holdings (ADR), Tencent Holdings, MINISO Group Holdings, Simcere Pharmaceutical Group, Shimao Services Holdings, Lufax Holdings, TAL Education, Vedanta Resources and more

In today’s briefing:

  • StubWorld: Kingboards’ All-Time Low Implied Stub; PICC Trading Rich
  • GDS Holdings Hong Kong Secondary – Hot Sector, Needs the Money
  • Tencent – Rubbing Two Nickels Together
  • MINISO Deserves More Than The IPO Valuation
  • Simcere Pharmaceutical IPO: Valuation Insights
  • Shimao Services (世茂服务) Pre-IPO – PHIP Updates – Impressive 6M 2020 Results
  • Miniso (MNSO US): Impulse Shopper’s Paradise. Not a Sustainable Growth Model.
  • Lufax IPO: Shift in Product Mix and Higher Customer Acquisition Cost Eat into Profits
  • TAL Education (TAL): App User Base Bounced, While Competitors Shrank in F2Q21, Upgrade to Hold
  • Morning Views Asia: Alam Sutera Realty, CIFI Holdings, Vedanta Resources

StubWorld: Kingboards’ All-Time Low Implied Stub; PICC Trading Rich

By David Blennerhassett

This week in StubWorld …

Kingboard Laminates Holdings (1888 HK)‘s announcement of a possible Chi-Next listing sends Kingboard Holdings (148 HK)‘s implied stub to an all-time low.

People’s Insurance Co (PICC) (1339 HK) trading rich – possibly as the A-share premium rallies. 

Preceding my comments on KBC and PICC are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % – of at least 20%.


GDS Holdings Hong Kong Secondary – Hot Sector, Needs the Money

By Sumeet Singh

Gds Holdings (Adr) (GDS US) plans to raise around US$1bn in its secondary listing in Hong Kong.

In our earlier insight, China ADRs Secondary Listing Deep-Dive: Yin and Yang and China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List we had shortlisted some of the companies that might look to undertake a secondary listing in Hong Kong. GDS has always been on that list. 

While GDS is yet to file its PHIP, media reports indicate that the deal could be launched as soon as next week.

Our previous coverage of the company

Links to my previous notes on the topic on Secondary listings:


Tencent – Rubbing Two Nickels Together

By Thomas J. Monaco

*Lucky and Smart: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest update, it was announced that AUSTRAC has decided that it will not be taking any further regulatory action and that that it had uplifted its AML/CTF compliance framework and financial crime function, and satisfactorily completed all required remediation activity. Further, Afterpay `launched its instore offering in the US market just in time for the Christmas shopping season following its Simon Property Group (SPG.US) collaboration in the US;

*Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets – uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and

*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 328% on this stake. 


MINISO Deserves More Than The IPO Valuation

By Oshadhi Kumarasiri

MINISO Group Holdings (MNSO US) is the leading variety retailer of lifestyle products globally with an aggregate GMV of RMB 19.0 billion (US$2.7 billion) and revenue of RMB 9.0 billion (US$1.3 billion).

Previously, we discussed MINISO’s business model, financials and valuation in MINISO IPO: Long Term Growth Prospects Secured By a Sustainable Competitive Advantage, MINISO IPO: As Appealing As MINISO Products and MINISO Valuation: Valued Like MINISO Merchandise – Bang for the Buck.

Our relative valuation indicated that there is significant upside, even at the higher end of the IPO price range. MINISO lacks directly comparable peers, hence an exhaustive relative valuation exercise may not be as reliable as we would have hoped.

Therefore, we feel it is worth exploring other valuation techniques to make sure that we don’t run into unpleasant surprises.


Simcere Pharmaceutical IPO: Valuation Insights

By Arun George

Simcere Pharmaceutical Group (2096 HK) is engaged in the R&D, production and commercialisation of pharmaceuticals and is primarily focused on generic pharmaceuticals.  At the proposed IPO price range of HK$12.10-13.70 per share, Simcere will have a market cap of HK$31,528.8-35,697.9 million ($4.1-4.6 billion). At the mid-point of the IPO price range, Simcere will raise net proceeds of HK$3,191.3 million ($412 million). 

Seven cornerstone investors will subscribe for 43.81% of the offer shares at the mid-point of the IPO price range. The cornerstone investors are Hillhouse Capital, Jiangbei Investment Group, Shenzhen Capital Group, Lake Bleu Capital, OrbiMed, Sage Partners and Jericho Capital. 

In our initiation note, we highlighted that for investors willing to look past the 2020 results, Simcere is putting in place the right measures to ensure that the weak 1H20 was an exception rather than the rule. Overall, we think that an attractive PEG valuation and solid cornerstone support makes Simcere tempting at the proposed pricing range. 


Shimao Services (世茂服务) Pre-IPO – PHIP Updates – Impressive 6M 2020 Results

By Zhen Zhou, Toh

Shimao Services Holdings (SSH HK)  (SSH) is looking to raise up to US$1bn in its upcoming Hong Kong IPO. 

SSH is the property management unit of Shimao Group Holdings (813 HK) and was recently backed by Sequoia and Tencent. It provides property management community living services and, as of 31 December, 2019, has an aggregated GFA under management and contracted GFA of 68.2m sqm and 100.9m sqm, respectively.

In this note, we will look at updated financials and its recent acquisitions.

We have previously covered the IPO in:


Miniso (MNSO US): Impulse Shopper’s Paradise. Not a Sustainable Growth Model.

By Devi Subhakesan

MINISO Group Holdings (MNSO US), a Guangzhou, China, head-quartered offline-based branded variety discount retail chain that refers to itself as a Japanese-inspired lifestyle product retailer will trade in the US and proposes to raise up to USD562 mn via its IPO, listing on October 15th. With its strategy of frequent rollout of varied designs of low-value discretionary consumer products, Miniso’s products have an appeal similar to fast fashion – frequently bought, mostly on impulse, and easily discarded – sans the brand power. This, along with its extensive store expansion, has underpinned the company’s aggressive (pre-pandemic) growth. 

In the detailed note below, we discuss why Miniso’s aggressive (pre-pandemic) growth rate may not be sustainable and how its business model, like its products, lacks a competitive edge and longevity. We also highlight how Miniso’s operating model could be weakened if the shift in consumer shopping behavior and preferences, triggered during the pandemic, stays on.


Lufax IPO: Shift in Product Mix and Higher Customer Acquisition Cost Eat into Profits

By Shifara Samsudeen, ACMA, CGMA

Lufax Holdings, one of the largest financial services platforms in China has filed for an IPO in the US. The Shanghai-headquartered firm offers personal lending for small business owners and salaried employees, as well as tailor-made wealth management solutions to China’s fast growing middle-class and affluent population.

This is the Second of a series of reports on the IPO of Lufax Holdings. In this insight, we examine the company’s wealth management business and margins. In our previous insight on the company’s IPO, we examined the company’s business model, revenue sources and its core income generating business, Retail Credit Facilitation Business.

Read our previous insight:

Lufax IPO: Unsecured Loans Drive Top Line Growth but Risks Remain Despite Capital-Light Model 


TAL Education (TAL): App User Base Bounced, While Competitors Shrank in F2Q21, Upgrade to Hold

By Ming Lu

  • TAL will release its 2Q21 (by August 2020) result on October 22.
  • The monthly active user base bounced during the summer vacation, while competitors’ users shrank.
  • We believe revenue will grow 25% YoY in 2Q21 and 33% in FY2021.
  • We believe the operating margin in 2Q21 will be flat with 2Q20.
  • The P/E band suggests that the stock has a downside of 11.8%. Upgrade to hold.

Morning Views Asia: Alam Sutera Realty, CIFI Holdings, Vedanta Resources

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.


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