In this briefing:
- Discover SZ/SH Connect: Foreigners Were Buying Industries and Financials in December
- Jardine C&C (JCNC SP): Close the Stub Trade
- Maoyan Entertainment IPO: The Trouble with Blockbusters
- Jeans Mate Posts a Profit at Last
- JD.com (JD): Lawsuit Over, Price Falling Back to First Trading Day, Defensive in Bear Market
1. Discover SZ/SH Connect: Foreigners Were Buying Industries and Financials in December
In our Discover SZ/SH Connect series, we aim to help our investors understand the flow of northbound trades via the Shanghai Connect and Shenzhen Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by offshore investors in the past seven days.
We split the stocks eligible for the northbound trade into three groups: those with a market capitalization of above USD 5 billion, and those with a market capitalization between USD 1 billion and USD 5 billion.
We note that offshore investors were buying industries and financials in December. Interesting stocks in the north bound trades are Han’S Laser Technology In A (002008 CH), Muyuan Foodstuff Co Ltd A (002714 CH) and Hangzhou Tigermed Consulting (300347 CH) .
2. Jardine C&C (JCNC SP): Close the Stub Trade
In my original insight on October 17, 2018 TRADE IDEA – Jardine Cycle & Carriage (JCNC SP) Stub , I proposed setting up a stub trade to profit from volatility in the markets that caused the Jardine Cycle & Carriage (JCNC SP) stub to trade at a historically low discount to NAV. During the 78 calendar days that followed, Jardine Cycle & Carriage (JCNC SP) has gained 23% and the trade has made 5.03% on the gross notional. I now recommend closing the trade.
In this insight I will discuss:
- Performance of ALL my recommended stub trades
- a post-mortem trade analysis on the JCNC stub
3. Maoyan Entertainment IPO: The Trouble with Blockbusters
Maoyan Entertainment, formerly Entertainment Plus (EPLUS HK), is the largest online movie ticketing service provider in China. According to press reports, Maoyan has started pre-marketing to raise $0.3 billion (down from earlier indication of $0.5-1.0 billion) through a Hong Kong IPO. Maoyan is backed by Beijing Enlight Media (300251 CH) (20.0% shareholder), Tencent Holdings (700 HK) (16.3% shareholder) and Meituan Dianping (3690 HK) (8.6% shareholder).
Maoyan is yet another proxy in the battle between Tencent and Alibaba Group Holding (BABA US). However, we believe that challenges abound for Maoyan and would be cautious about participating in the IPO.
4. Jeans Mate Posts a Profit at Last
While Rizap Group (2928 JP) has seen its share price crash and its CEO bow in apology after profit warnings and a plan to radically cut back on M&A, Jeans Mate Corp (7448 JP), which Rizap acquired last year, has quickly moved to modernise stores. It has just replaced its Shibuya store with a new concept called JEM that could mean the end of the Jeans Mate name altogether and posted its first operating profit in years. While many of Rizap’s acquisitions were dubious, Jeans Mate is one business that could be turned around into a modestly successful casual apparel retailer.
5. JD.com (JD): Lawsuit Over, Price Falling Back to First Trading Day, Defensive in Bear Market
- Minnesotan Authorities declined to charge the founder of JD.
- JD’s stock price has already plunged 52% in 2018. We believe JD is a defensive equity for portfolios, as the NASDAQ Composite just plunged 50% at most in the financial crisis of 2008.
- Compared to 2014, today’s JD has a higher market share in the larger e-commerce market. However, JD’s stock price is at the same level as the first trading day in 2014.
- JD continued to generate operating cash inflows in 2018 as previous years despite of its zero net margins.
- We are not concerned about the programmer layoff in December, as we believe JD overly invested in “hi-tech” that will not bring revenues in the near future.
- Based on historical Price / GMV, we believe there is an upside of 270% for JD’s stock price.
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