In today’s briefing:
- Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
- Hong Kong CEO & Director Dealings – 26th July 2022
- Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity
- Preview Pc Partner 1H22 Earnings: Solid Profits and Cash Now over 100% of Market Cap
- Legend Biotech Follow-On – A Little Opportunistic. Last Deal Did Well, After a Large Correction
- China Education Group (839 HK): Sustaining Growth Trajectory
- Plus Digital Technologies Pre-IPO Tearsheet
- Sihuan Pharmaceutical (460.HK) – The Potential Disposal of Generic Drug Business and the Outlook
- Jabil Inc.: Initiation of Coverage – Collaborations With SolarEdge, Cardo Systems, & Other Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)
- Fidelity National Information Services: Initiation of Coverage – Core Processing Business Upside & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)
Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
- This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
- When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
- It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future.
Hong Kong CEO & Director Dealings – 26th July 2022
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- These insights also flags those companies where shares have been pledged, both recently and ongoing.
Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity
- China started mulling an expansion of its Stock Connect relationships in late 2021 with plans to allow GDR issuance in Switzerland and eventually Germany.
- New GDR issuance rules came into effect in February and companies started planning to issue GDRs in Switzerland in March.
- The new SIX Listing Rules went into effect 25 July. Two companies priced GDRs on 22 July and two more yesterday. US$1.5bn so far. There are 6 more near-term.
Preview Pc Partner 1H22 Earnings: Solid Profits and Cash Now over 100% of Market Cap
- 1H22 was a story of two halves: 1Q22 still showed record profits but 2Q22 got progressively worse. 3Q22 started weak with inventory clearance and Nvidia new GPU launch awaited.
- Even after paying a fantastic final dividend in June 2022, it is now trading below net cash on the balance sheet.
- We estimate net cash on the balance sheet is now 9 HKD vs 7 HKD share price.
Legend Biotech Follow-On – A Little Opportunistic. Last Deal Did Well, After a Large Correction
- Legend Biotech Corp (LEGN US), a non-wholly owned subsidiary of Hong Kong-listed Genscript Biotech (1548 HK), is planning to raise up to US$250m in its follow-on offering.
- The company last raised cash in Dec 2021 in a similar sized deal, which ended up doing very well after a sharp share price correction.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
China Education Group (839 HK): Sustaining Growth Trajectory
- China Education Group (839 HK) has retreated 23% from recent high with no regulatory and company news. Given its secured earnings growth outlook, we see an opportunity.
- We believe drivers are higher enrollment and tuition, further capacity growth, good progress in overseas education and light capex. There are positive developments in these aspects recently.
- CEG may return unused share buyback funds to shareholders via dividend, suggesting a potential resumption of payout. At just 5.7x PER for FY23F, its growth prospect is undervalued.
Plus Digital Technologies Pre-IPO Tearsheet
- Plus Digital Technologies (PDT CH) is looking to raise about US$150m in its upcoming Hong Kong IPO. The deal will be run by Jefferies and Guotai Junan.
- Plus Digital Technologies provides digitalised sales and marketing and SaaS+ services to its customers to enhance their offline sales and marketing efficiency and drive their offline retail sales.
- Its provision of services is supported by its Field Management Ecology System (FMES) platform, which contains a variety of digitalised products with different functionalities to meet customers’ various requirements.
Sihuan Pharmaceutical (460.HK) – The Potential Disposal of Generic Drug Business and the Outlook
- The disposal of generic drug segment would bring one-time cash flow. Together with the cash on hand, Sihuan Pharmaceutical Hldgs (460 HK) is undervalued based on its current market value.
- In the context of its innovative drug segment facing long-term losses, and the decreasing profit margins of medical beauty segment due to increasing competition, Sihuan’s prospects are no brighter.
- Due to the concerns on outlook and its development mode, Sihuan’s upside potential could be lower than expected, and the share price could fluctuate largely.
Jabil Inc.: Initiation of Coverage – Collaborations With SolarEdge, Cardo Systems, & Other Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)
- This is our first report on diversified manufacturing services and solutions provider, Jabil Inc.
- The company has maintained a strong diversification strategy which has helped it perform despite a difficult supply chain environment and widely reported shutdowns in China.
- During the quarter, the company further collaborated with two companies, SolarEdge and Cardo Systems, to expand its supply chain.
Fidelity National Information Services: Initiation of Coverage – Core Processing Business Upside & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)
- This is our first report on the leading global technology solutions provider to the banking and finance industry – Fidelity National Information.
- The company’s annual organic growth expectations were all exceeded with a 9% organic top-line growth.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
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