ChinaDaily Briefs

China: Li Ning, EVE Energy, Alibaba Group, China Huarong Asset Management, JD Logistics, Weibo Corp, So-Young, Cloud Village, Biel Crystal, Eyebright Medical Technology Beijing and more

In today’s briefing:

  • FTSE China 50 Index Rebalance Preview: Li Ning (2331) Should Replace Country Garden (2007)
  • FTSE China A50 Index Rebalance Preview: Two Sets of Changes
  • China Considering a Data Tax on Big Tech
  • China Huarong (2799 HK)’s Full Circulation
  • JD Logistics (京东物流) Lock-Up Expiry – Cornerstone Sitting on Losses, Pre-IPO Investors Still Up
  • Weibo Secondary Listing – Needs to Come at a Discount
  • So-Young’s Derisory Privatisation Bid
  • Cloud Village IPO (PHIP): Earnings Growth Slowing Down and Expect No Profits
  • Biel Crystal IPO Initiation: Through the Looking Glass
  • Eyebright Medical Technology (688050.CH) -The Impact Of Centralized Procurement and Business Outlook

FTSE China 50 Index Rebalance Preview: Li Ning (2331) Should Replace Country Garden (2007)

By Brian Freitas

  • At the end of the review period for the December rebalance of the FTSE China 50 Index, we see Li Ning (2331 HK) replacing Country Garden Holdings Co (2007 HK)
  • Due to capping changes and the add/delete, the one-way turnover at the rebalance jumps to 5.95% and will result in a one-way trade of HK$2,770m.
  • Li Ning (2331 HK) trades at expensive valuations compared to its peers but has strong momentum. Country Garden trades cheaper than its peers and is still underperforming.

FTSE China A50 Index Rebalance Preview: Two Sets of Changes

By Brian Freitas

  • At the end of the review period, we expect Zhangzhou Pientzehuang Pharmaceutical and EVE Energy to be added to the index, replacing Sany Heavy Industry and Anhui Conch Cement.
  • We estimate one-way turnover at 3.14% and that will result in a one-way trade of CNY 1,591m. Impact on the stocks appears subdued given the extremely high liquidity.
  • The inclusions have outperformed the deletion by a large margin and there are opportunities to exit overvalued/ enter undervalued stocks using the passive flow to minimize impact.

China Considering a Data Tax on Big Tech

By Oshadhi Kumarasiri

  • Nikkei reports that a high ranking CCP official has suggested that the platforms possessing personal data should return around 20-30% of the revenue generated to the common prosperity cause. 
  • We expect big tech to lose competitiveness as the government takes control of the use of personal data. Meanwhile the Chinese economic slowdown is a double blow to big tech. 
  • If remaining investors lose faith and exit, big tech can trade at around 1.0-1.5x price to book in the next few years.

China Huarong (2799 HK)’s Full Circulation

By David Blennerhassett

  • China Huarong Asset Management (2799 HK), which is expected to be in contravention of Hong Kong’s public float, is contemplating the “full circulation” of some domestic shares. 
  • If implemented, the conversion of these domestic shares would be largely ceremonial.
  • To date, 28 companies have sought approval to convert their domestic shares and/or unlisted foreign shares into H shares on the Hong Kong exchange. 

JD Logistics (京东物流) Lock-Up Expiry – Cornerstone Sitting on Losses, Pre-IPO Investors Still Up

By Zhen Zhou, Toh

  • JD Logistics (2618 HK) (JDL) was listed on the Hong Kong Exchange on 28th May, 2021. Its IPO lock-up will expire on 28th November, 2021.
  • JD Logistics (JDL) was the leading supply chain solutions and logistics services provider in China in terms of revenue in 2018 and 2019.
  • Cornerstone investors are sitting on about 26% loss whereas pre-IPO investors are still mostly up 53% on their investments but have held since 2018.

Weibo Secondary Listing – Needs to Come at a Discount

By Sumeet Singh

  • Weibo plans to raise around US$500-700m in its secondary listing in Hong Kong. 
  • The company won listing approval and filed its PHIP on last week and will look to launch its secondary offering soon.
  • In this note, we’ll take a look at the deal and talk about the impact of the raising.

So-Young’s Derisory Privatisation Bid

By Arun George

  • So-Young (SY US) is a leading Chinese plastic surgery platform. It was listed on 2 May 2019 and raised $162.9 million at $13.80 per ADS. 
  • It has received a non-binding privatisation proposal from Mr Xing Jin (co-founder, Chairman and CEO) at $5.30 per ADS, a 22.7% premium to the last close price. 
  • The offer price is derisory in the context of historical multiples and share prices. Nevertheless, Xing Jin already meets the two-thirds voting power threshold.    

Cloud Village IPO (PHIP): Earnings Growth Slowing Down and Expect No Profits

By Shifara Samsudeen, ACMA, CGMA

  • Cloud Village (CLV HK) is a leading music streaming platform in China and the company is backed-by NetEase, one of the largest games and entertainment companies in China. 
  • The company has received approval to raise about US$500m through its IPO and this insight focuses on the new data points from the revised PHIP filing.
  • During 2Q2021, the company’s revenues grew 50.5% YoY while operating losses declined to 21.0% of revenues compared to 32.1% in the same quarter last year.

Biel Crystal IPO Initiation: Through the Looking Glass

By Arun George

  • Biel Crystal (0924581D HK) is one of the world’s largest suppliers of cover glass for smartphones. 
  • Biel has won approval for an HKEx IPO to raise $1-2 billion, according to press reports. 
  • Biel’s fundamentals are attractive with solid top-line growth, operating leverage and cash generation. 

Eyebright Medical Technology (688050.CH) -The Impact Of Centralized Procurement and Business Outlook

By Xinyao (Criss) Wang

  • We analyzed the centralized procurement of IOL and the potential impact on Eyebright Medical Technology Beijing (688050 CH).
  • The OK lens and cosmetic contact lenses have strong consumption attribute, indicating “immune” to centralized procurement policy.
  • We are optimistic about the outlook for Eyebright and there could still be upside potential of its stock price.

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