ConsumerDaily Briefs

Consumer: WH Group, Xpeng, Fuyao Glass Industry Group, Bharat Forge, Nexteer Automotive and more

In today’s briefing:

  • WH Group Buyback Offer Announced – Strong Accretion Creates Accretion Risk
  • Xpeng: Short Term Negative Priced In, Positive Momentum Is Back
  • Fuyao Glass Vs Xinyi Glass: Which One?
  • Bharat Forge (4QFY21): Outlook upbeat; simplifying group structure. Maintain BUY
  • Nexteer (1316): Positive Sentiment and Exciting 2H 2021

WH Group Buyback Offer Announced – Strong Accretion Creates Accretion Risk

By Travis Lundy

Alternate Title: Today’s Pig is Tomorrow’s Pig, Only Leaner.

On 2 June at mid-day, WH Group (288 HK) shares were halted “pending the release of an announcement which contains inside information of the Company pursuant to the Codes on Takeovers and Mergers and Share Buy-backs.”

David Blennerhassett covered the run-up to the situation and some comps in WH Group (288 HK): Today’s Pig Is Tomorrow’s Bacon? while speculating on a fair price should an Offer eventuate. 

It wasn’t a Takeover Offer. 

It turns out to be a Buyback Offer.

Today (6 June 2021) the company announced a Voluntary Offer through BoAML and Morgan Stanley to buy back 1,916,937,202 shares (13% of shares outstanding) at a price of HK$7.80/share. 

This is a 17.29% premium to the close on 1 June and a 12.6% premium to the last trade before the suspension (the stock was up 4.2% on the 2nd before being suspended).

Because the Controlling Shareholders (Heroic Zone, Chang Yun, Sure Pass, High Zenith, Mr. Wan Long, Mr. Wan Hongwei, Mr. Guo Lijun and Mr. Ma Xiangjie) has irrevocably undertaken that shares under their control will not be tendered, and they own 34.14%, pursuant to Rule 32.1 of the Takeovers Code and Rule 6 of the Buybacks Code, the increase in voting rights would constitute an “acquisition” for purposes of the Code, so Heroic Zone, controlling 34.11%, will make an application to the Executive for a Whitewash Waiver which would require approval at an EGM by 75% of independent shareholders in attendance.

Lots of details to consider. More below the fold. 

Xpeng: Short Term Negative Priced In, Positive Momentum Is Back

By Victoria Li

With its share price hit YTD low of US$22.73 at mid-May, short term negative, mainly the uncertainty of its coming P5 model, has been fully digested by the market, in our view. Looking forward, positive momentums are expected. Xpeng’s car delivery would be boosted by

1) increasing delivery of  LFP version and wing version of P7;

2) rising market interest triggered by valet parking assist function coming with latest OTA;

3) G3 facelift in Q3;

4) new P5 model, whose MSRP and technical specifications might be available in July-August;

5) easing of chip shortage. 

Fuyao Glass Vs Xinyi Glass: Which One?

By Henry Soediarko

source: Reuters

The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. 

However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass’s largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities. 

Bharat Forge (4QFY21): Outlook upbeat; simplifying group structure. Maintain BUY

By HDFC Securities

We maintain BUY with a revised target price of INR 860 at 34.5x FY23E EPS (vs 32x earlier) the multiple has been raised to factor in the reorganised group structure, emerging opportunities in defence and PV segments, and stronger-than-expected demand. The stock is our preferred pick in the CV segment. Key risks: delayed defence orders; any sudden lockdowns due to COVID Bharat Forges (BFL) 4QFY21 results were a significant beat with APAT coming in at INR 2.06bn (vs 0.98bn QoQ). The management is upbeat on the outlook for Class-8 trucks and expects its volume to reach 300k (+50%) in FY22E.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

By Henry Soediarko

Nexteer’s share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue (around 9x) although the reality could be different, nevertheless, it presents growth potential for Nexteer Automotive (1316 HK) .

Before it’s here, it’s on Smartkarma