In today’s briefing:
- China/HK: Passive Activity Expected Later This Month
- ECM Weekly (10th Feb 2025) – Haitian, Guming, LG CNS, Dr Agarwal, Ola, Brainbees, Kaynes, Whirlpool
- Fosun Tourism (1992 HK)’s Scheme Buyback Vote On The 4th March
- Pre-IPO Guming Holdings – Thoughts on Valuation
- Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?
- Yum China (9987 HK): 2025 Outlook. Modest Growth and Margin Upside Amid Sector Headwinds
- HK Connect SOUTHBOUND Flows (To 7 Feb 2025); Busy Start Post CNY But Clear Selling of High Div SOEs
- EQD | HSI Index Options Weekly (Feb 02-07): 94th Percentile 1-Week Move
- Softcare Pre-IPO Tearsheet
- EQD | Hong Kong Single Stock Options Weekly (February 02 – 07): Rally Narrows, Info Tech Hot
China/HK: Passive Activity Expected Later This Month
- There could be up to 10 adds/ 29 deletes for the China global index in February. The actual number of changes will be smaller depending on the review date chosen.
- The flow on the forecast adds varies from US$17.5m-US$175m (0.05x-15x ADV) while the flow on the forecast deletes varies from US$14.4m-US$100.4m (0.25x-22.75x ADV).
- Bestechnic Shanghai (688608 CH) is a potential inclusion to multiple indices in June and there will be much larger passive flows to the stock then.
ECM Weekly (10th Feb 2025) – Haitian, Guming, LG CNS, Dr Agarwal, Ola, Brainbees, Kaynes, Whirlpool
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, neither of the two listings performed last week, while more are lining up to list across the region.
- On the placements front, given the ongoing earnings season there weren’t any deals. We did look at lockups and other possible upcoming deals.
Fosun Tourism (1992 HK)’s Scheme Buyback Vote On The 4th March
- On the 10th December 2024, Fosun Tourism (1992 HK) announced a Scheme buyback, with a Cancellation Price of $7.80/share (not declared final), a chunky 95% premium to undisturbed.
- Assuming the Scheme gets up, Fosun International (656 HK) and concert parties would hold 100% in Fosun Tourism.
- The Scheme Doc is now out, with a Court Meeting on the 4th March, and expected settlement on the 26th March. The IFA (Altus Capital) says “fair and reasonable”.
Pre-IPO Guming Holdings – Thoughts on Valuation
- If based on the market value of HK$20.246 billion to HK$23.185 billion in this IPO, a single store market value is about HK$2-2.4 million, higher than that of Baicha Baidao.
- Our forecast of 2024 net profit is RMB1.4 billion. Based on IPO price range of HK$8.68-9.94 per share, P/E is about 13.5-15.5x. There is still some upside room for valuation.
- Investors may need more “safety margins” on valuation due to the pressure of performance growth after IPO.The higher the IPO price, the greater the risk of future valuation downward revisions.
Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?
- Tam Jai Intl (2217 HK)‘s suspension has led to speculation about a privatisation or takeover. Its huge net cash, equal to 115% of market capitalisation, makes it appealing.
- Its controlling shareholder Toridoll Holding Limited owns a 74.61% stake and there is no shareholder with more than a 5% interest. This makes a deal seemingly simple.
- Assuming priced at the average P/B of 1.63x, this means HK$1.90, or 110% premium to the latest close, which is costly to the major shareholder.
Yum China (9987 HK): 2025 Outlook. Modest Growth and Margin Upside Amid Sector Headwinds
- Yum China Holdings (9987 HK) posted robust year-over-year operating profit growth in 4Q2024 on the back of low single digit sales increase and operating efficiencies.
- Despite significant sector headwinds, Yum China has managed to outperform peers and grow ahead of sector in 2024 by swiftly adapting to shifting consumer preferences.
- Yum China’s value-for-money QSR model with mid-tier pricing amidst tough sector outlook implies limited margin upside, a likely single-digit sales growth outlook, and a modest dividend yield for 2025.
HK Connect SOUTHBOUND Flows (To 7 Feb 2025); Busy Start Post CNY But Clear Selling of High Div SOEs
- In the post-CNY return, SOUTHBOUND gross trading activity was stronger per day than the previous several weeks, but SB Net Buying was not.
- Tech ended up being a big net buy, but Tencent (700 HK) a big net sell.
- Lower-Than-Expected tariff rates against China meant foreigners are back to buying Chinese stocks for the time being which may lower SB net buys near-term.
EQD | HSI Index Options Weekly (Feb 02-07): 94th Percentile 1-Week Move
- Powerful rally for HSI lands its 1-week price change in the 94th percentile of all weekly moves since 2000.
- Implied vols raising a caution flag, trading at the 78th percentile over the past year and 68th percentile since the start of 2001.
- Call volumes as a percentage of total option volumes has been dropping over the past three weeks.
Softcare Pre-IPO Tearsheet
- Softcare (SOFT HK) is looking to raise at least US$300m in its upcoming Hong Kong IPO. The deal will be run by CICC, CITIC and GF Securities.
- SC is principally engaged in the development, manufacturing and sales of baby and feminine hygiene products, focusing on the fast-growing emerging markets, including Africa, Latin America and Central Asia.
- As of September 30, 2024, SC had 18 sales branches in 12 countries, and an extensive sales network across over 2,500 wholesalers, distributors, supermarkets, and other retailers in total.
EQD | Hong Kong Single Stock Options Weekly (February 02 – 07): Rally Narrows, Info Tech Hot
- Third week in a row with declining participation in the rally.
- Information technology the hottest sector with all names up more than double digits, all but 2 stocks closing at a 52-week high and median implied vols at 96th percentile.
- Single Stock option volume registers the two highest days in the last 3 months but Call trading as a percentage of the total slipped week over week.
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