In today’s briefing:
- Tianqi Lithium H Share Listing: AH Discount Views
- Li Auto’s US$2 Billion ATM Offering
- HSTECH Index Rebalance Preview (Sep): Free Float & Capping Changes To Drive Flows
- Miniso Dual Primary Listing: Positive on Momentum, Valuation and Acceleration of Global Expansion
- ETFs in Stock Connect: List Announced; Effective 4 July
- Arrail Group (6639.HK) – The Development Strategy Cannot Generate High Returns
Tianqi Lithium H Share Listing: AH Discount Views
- Sichuan Tianqi Lithium Industries, Inc (002466 CH) has upped its targeted H Share raise from US$1.0-1.5 billion to US$1.5–2.0 billion. The listing will kick off on Thursday.
- In Tianqi Lithium H Share Listing: Riding the Wave, we noted that Tianqi is well-placed to leverage the high lithium prices to deliver growth, margin and cash generation.
- In this note, we examine the likely discount that Sichuan Tianqi Lithium Industries, Inc. (TIANQI HK) will offer its H Shares in comparison to the A Shares.
Li Auto’s US$2 Billion ATM Offering
- Li Auto Inc. (LI US) has announced an ATM offering to sell US$2.0 billion of ADS. The offering appears to be timed to take advantage of the share price rally.
- Li Auto (2015 HK)‘s strong balance sheet and cash generation do not necessitate the need for the offering. The impending launch of the Li L9 underpins its prospects.
- However, with the recent rally, the shares are at best fully valued at the last close. We prefer remaining on the sidelines for now.
HSTECH Index Rebalance Preview (Sep): Free Float & Capping Changes To Drive Flows
- We do not expect any inclusions or exclusions for the Hang Seng Tech Index (HSTECH INDEX) at the September rebalance.
- Float and capping changes will lead to a one-way turnover of 6.5% and that will result in a one-way trade of HK$4,913m.
- SenseTime Group (20 HK) will have the largest buying flow due a potential increase in free float. The stock is also a potential inclusion to the HSCEI INDEX in September.
Miniso Dual Primary Listing: Positive on Momentum, Valuation and Acceleration of Global Expansion
- MINISO Group Holdings (MNSO US) rallied more than 70% this month before receiving approval for a $100m placement on the Hong Kong Stock Exchange yesterday (27th June 2022).
- The company has no requirement for extra cash and this Hong Kong listing is mostly a precautionary measure against a potential delisting of Chinese companies from US markets.
- Overall, we are positive about this placement on account of momentum, reasonableness of current valuation and positive reception of what we would regard as an intention to accelerate expansion.
ETFs in Stock Connect: List Announced; Effective 4 July
- CSRC and SFC have approved the inclusion of eligible ETFs in Stock Connect and trading of the ETFs under Stock Connect would begin from 4 July.
- There are 4 ETFs included in Southbound Stock Connect, while there are 83 ETFs that have been included in Northbound Stock Connect.
- Under Stock Connect, only secondary trading is allowed in the ETFs with no creations or redemptions permitted. This will have implications for short-term and long-term repo on the HSI/HSCEI/HSTECH indices.
Arrail Group (6639.HK) – The Development Strategy Cannot Generate High Returns
- Arrial’s positioning at high-end private dental chain indicates limited growth space. The large investment in dental professionals drags down overall margins but fails to generate good word-of-mouth and expected returns.
- Public hospitals with NRDL reimbursement and private dental chains with high cost performance would put more pressure on Arrail. Increasing marketing/promotion expenses cannot turn things around but further reduce margins.
- Overall, the high-end strategy cannot bring high-end returns. We are not optimistic about Arrail’s prospects and profitability. The Company may even keep losing money and hard to turn profitable.
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