In today’s briefing:
- 2023 High Conviction: China Tourism Duty Free – All Ready for the Next Travel Wave
- 2023 High Conviction: JD.com to Benefit from Discretionary Spend Recovery, Margin Progress on Track
- Weilong Delicious Global Pre-IPO – Latest PHIP Updates – No Growth
- China Ecommerce- Still Can Chase
- Top Tencent Investor Naspers Considers Selling Meituan Shares
- Growatt Technology Pre-IPO – PHIP Updates – Profitability Still Accelerating
- Weilong Delicious IPO: Remains in a Pickle
- Lygend (2245 HK) IPO: No Index Inclusions Expected
- Iqiyi (IQ US): Compelling Asymmetrical Payoff
- US Vs China Technology, Alibaba, China Unicom, and New World Development
2023 High Conviction: China Tourism Duty Free – All Ready for the Next Travel Wave
- China Tourism Duty Free (CDF) is the largest travel retail operator in the world primarily focusing on sales of high-quality duty-free and duty-paid merchandise to domestic and international travelers.
- As per Frost & Sullivan (F&S), it had 86.0% market share by retail sales revenue in China duty-free merchandise sales in 2021.
- With signs emerging of China finally looking to relax its COVID restrictions over the coming months, this will lead to a sales revival at its airports.
2023 High Conviction: JD.com to Benefit from Discretionary Spend Recovery, Margin Progress on Track
- JD.com should have an outsized benefit from a recovery in Chinese retail sales as further macro stimulus and a gradual easing of China’s covid-zero policy stimulates demand throughout 2023.
- Following a return to margin expansion this year, due to economies of scale and curbing operating expenses during a challenging macro environment, the longer-term margin expansion trend remains on track.
- JD.com Inc. (9618 HK) trades on extremely attractive valuation multiples (PE, PEG, FCF yield) with net cash on its balance sheet equal to 32% of its market cap.
Weilong Delicious Global Pre-IPO – Latest PHIP Updates – No Growth
- Weilong Delicious Global (WDG HK), a spicy snack food company in China, aims to raise around US$200m in its Hong Kong IPO.
- According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
- In this note, we will talk about the updates from the recently re-refiled PHIP.
China Ecommerce- Still Can Chase
- Alibaba and JD stock prices have rallied around 20-30% in the past month, which was the low-hanging fruit for the investors.
- With the full re-opening in 2023 in China, there is still upside for the sector.
- Ecommerce players will enjoy GMV growth acceleration and margin improvement next year.
Top Tencent Investor Naspers Considers Selling Meituan Shares
- Prosus NV, the Dutch unit of Tencent Holdings Ltd.’s largest shareholder Naspers Ltd., said it will consider selling the $4.6 billion of Meituan shares it will receive from Tencent as a special dividend.
- South African media giant Naspers owns about 28% of the Chinese internet giant indirectly via Prosus.
- On Nov. 16, Tencent announced a special distribution of 958 million Meituan shares to shareholders.
Growatt Technology Pre-IPO – PHIP Updates – Profitability Still Accelerating
- Growatt Technology (1833969D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO.
- Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization.
- In our previous notes, we looked at the company’s past performance, peer comparison and our thoughts on valuation. In this note, we will talk about the updates from its PHIP.
Weilong Delicious IPO: Remains in a Pickle
- Weilong Delicious Global (WDG HK) has refiled (again) its PHIP with an aim to raise US$200 million, materially below its original ambition to raise US$1 billion.
- We have previously discussed the IPO in Weilong Delicious IPO: In a Pickle, Weilong Delicious IPO: Mixed Update and Weilong Delicious IPO Initiation: Tasty Bite.
- The latest PHIP highlights Weilong’s floundering attempt of putting in price increases to protect margins but without tanking demand. We would pass on the IPO.
Lygend (2245 HK) IPO: No Index Inclusions Expected
- Media reports indicate that Lygend Resources & Technology (2245 HK) has priced its IPO near the low end of the range at HK$15.80/share and will raise HK$3.67bn (US$470m).
- Most of the cornerstone investors will be classified as non-float and the stock will not be included in the MSCI or FTSE indices due to low float market cap.
- Importantly, Lygend Resources & Technology (2245 HK) will not meet the threshold for inclusion in the HSCI which means no inclusion to Southbound Stock Connect and no mainland flows.
Iqiyi (IQ US): Compelling Asymmetrical Payoff
- Iqiyi’s 3Q results released on Tuesday disappointed markets due to dim growth despite sustained profitability for the third quarter in a row.
- “Iconic” turnaround actually put IQ on firmer footing almost on all counts compared to one year ago.
- Stabilizing cost base, strong operating leverage potential and troughs in business and macro cycle spell for compelling asymmetrical payoff – limited downside VS. multi-fold upside.
US Vs China Technology, Alibaba, China Unicom, and New World Development
- The consensus of bottom in China Tech and China A shares continue to gain favour.
- Bank of America is the latest to recommend selling US tech to buy China Tech.
- The Bullish China stocks call is predicated on reopening Pivot, yet the daily increase in cases and sporadic lockdown put the Pivot callers to double down.
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