In today’s briefing:
- CGN New Energy (1811 HK): Takeover Rumours
- Baicha Baidao IPO: The Bear Case
- Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook
- Cosco Shipping Energy 1138.HK – Higher for Longer
CGN New Energy (1811 HK): Takeover Rumours
- Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
- Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
- A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.
Baicha Baidao IPO: The Bear Case
- Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, will launch an HKEx IPO to raise US$300 million next week, according to press reports.
- In Baicha Baidao IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on pedestrian store KPIs, unsustainable historical growth rates, declining contract liabilities, and margin pressure reflecting a fiercely competitive market.
Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook
- Sinopharm Group Co Ltd H (1099 HK) reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.
- Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.
- Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.
Cosco Shipping Energy 1138.HK – Higher for Longer
- The Supply/ Demand imbalance in tankers will persist for longer, supporting earnings
- A beneficiary of increased global tensions and higher oil and gas prices
- Proposed Stock option scheme incentives management in the right way
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