ChinaDaily Briefs

China: Trip.com, Linklogis, Industrial Bank Co Ltd A, GSX Techedu, China Citic Bank Corp Ltd H, Tata Steel Ltd, Hygeia Healthcare Group and more

In today’s briefing:

  • Trip.com Secondary Listing: No Heads in the Clouds
  • Linklogis IPO: Singapore Digital Banking Could Fetch Billions of Dollars in Valuation
  • Industrial Bank – Not Out Of The Woods
  • GSX Post Archegos’ Liquidation, Chinese K12 Parents Survey – Q2 2021
  • China CITIC Bank – No Credit Deserved
  • Morning Views Asia: Country Garden Holdings Co, Guangzhou R&F Properties, Tata Steel Ltd
  • Hygeia Healthcare Group (6078.HK) – The Investment Logic, the Key Catalyst and the Risk Factors

Trip.com Secondary Listing: No Heads in the Clouds

By Arun George

Trip.com (TCOM US) is a leading one-stop travel platform that currently operates through four leading travel brands which are Ctrip, Qunar, Trip.com and Skyscanner. Trip.com passed its Hong Kong listing committee hearing and could raise up to $1-2 billion through a secondary listing, according to press reports. 

Trip.com is braving choppy markets and waning investor enthusiasm on secondary listings/IPOs. The recent Hong Kong secondary listings of Autohome Inc (Adr) (ATHM US) and Bilibili Inc (BILI US) are trading 3% and 8% above their H-share listing price, respectively. Baidu (BIDU US) is trading -13% below its H-share listing price largely due to the fallout from the fire sale at Archegos Capital.   

Trip.com is a play on the expected reopening and recovery of travel in 2021 due to the global rollout of vaccines. In the post-pandemic world, Trip.com aims to cement its market share gains through strengthening its supply chain (such as short-distance travel), higher conversion via content investment (such as live streaming) and rising penetration in lower-tier cities (>40% of new mobile app users in 2020 were from lower-tier cities). We think that Trip.com is an attractive play on travel recovery at the last close price. 


Linklogis IPO: Singapore Digital Banking Could Fetch Billions of Dollars in Valuation

By Oshadhi Kumarasiri

Linklogis (LINK HK) is an extremely attractive business, with a 63.9% revenue CAGR over the last two years alongside healthy operating margins of 14.3%, 20.0%, and 31.1% in 2018, 2019, and 2020 respectively. The company’s revenue model is predominantly a recurring revenue model, where customers are charged based on transaction value. Furthermore, Linklogis has an extremely high customer retention rate (100%, 91% and 99% in 2018, 2019 and 2020 respectively).

At 15.5-17.4x FY+2 EV/Sales with a 35% revenue CAGR, Linklogis does not appear overly cheap compared to peer multiples (Ming Yuan Cloud: 16.8x FY+2 EV/Sales with 36% revenue CAGR, Weimob: 19.1x with 39% CAGR, Kingdee International: 13.2x with 24% CAGR, Snowflake: 35.3x with 73% CAGR, Cloopen: 12.6x with 36% CAGR, and OneConnect: 5.5x with 43% CAGR).

The above EV/Sales exclude Linklogis’s exposure to Singapore Digital Banking, but once adjusted EV/Sales appear to be on the low side relative to peer multiples.


Industrial Bank – Not Out Of The Woods

By Thomas J. Monaco

*Weak 4Q20 Numbers: Industrial Bank (601166.CH) [Industrial] reported fairly disappointing 4Q20 earnings result of CNY 14.8 bn – declining CNY 4.5 bn (23.5%) on a linked quarter basis. From an operating perspective, Industrial struggled this quarter with negative operating jaws, as revenues declined CNY 925 mn (1.8%) whilst expenses increased CNY 3.4 bn (27.2%); and

*COVID Credit Hangover Persists: In our view, the stated credit figures far from tell the entire story. Net new NPLs amounted to CNY 20.6 bn or increasing an alarming 145.4% on an annualized basis. When one considers the continued high level break-down in credit quality, reserves would appear to be incredibly light by CNY 36 bn, in our view, which amounts to about two quarters of pre-tax results at Industrial.    


GSX Post Archegos’ Liquidation, Chinese K12 Parents Survey – Q2 2021

By Junheng Li

We see posts by GSX Techedu (GSX US)  employees on Maimai mentioning that certain “celebrity instructors” in K11 and K12 may be leaving the platform after the spring semester as the tutors were instructed to cease recruiting new enrollments for the instructors.   We believe that “celebrity teachers” receive options with a lockup period when signing up with GSX.  The recent stock selloff could result in a significant number of departures of “celebrity instructors”.  GSX consistently claims that “celebrity teachers” are their moat, resulting in their reported unusually high profit margins that the entire K12 AST industry have hard time to comprehend.


China CITIC Bank – No Credit Deserved

By Thomas J. Monaco

*Poor Result Even Before Provision Cut:China CITIC Bank (998.HK) [CITIC] reported 2H20 results of CNY 23.6 bn, declining CNY 3.6 bn (13.3%) HOH. Unlike other mainland Chinese banks, CITIC gives almost no breakdown of revenues. Nevertheless, the poor HOH results were driven by negative operating jaws as revenues declined CNY 9.2 bn (9.1%) while operating expenses increased CNY 6.6 bn (27.8%); and

*Credit Still A Major Challenge: Riskier and chunkier real estate and construction NPLs increased 211 bp and 293 bp HOH, respectively. Further, we note zero reprieve in net new NPL growth at CNY 41.1 bn  – growing 106.9% on an annualized basis – this remains very troubling. We calculate that the accelerated net new NPL growth has caused CITIC to be underprovided for in the neighborhood of CNY 101 bn or nearly a full year of stated PBT.


Morning Views Asia: Country Garden Holdings Co, Guangzhou R&F Properties, Tata Steel Ltd

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.


Hygeia Healthcare Group (6078.HK) – The Investment Logic, the Key Catalyst and the Risk Factors

By Xinyao (Criss) Wang

Recently, Hygeia released its 2020 financial results. The Company achieved revenue of RMB1.402 billion, up 29.1% YoY. Net profit was RMB177 million, up 345% YoY. The results beat expectations. In fact, there’s increasing certainty about the Hygeia’s performance, and the rally of stock price on March 30th, 2021 was the market’s best feedback on its financial results. 

The insights on the market potential and business model of Hygeia was in the article: Hygeia Healthcare Group (6078 HK) – Good Business Model with Large Market Potential. Read more: https://skr.ma/BTYr2. The following mainly analyzed the investment logic, operation situation, key catalyst and risk factors.


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