In today’s briefing:
- CATL (3750 HK): The Tail Wags the Dog
- ESR Group (1821 HK): Done Deal as Scheme Vote on 13 June
- Tencent/Netease: None Gets Approvals for Domestic Games
- CSI Medical Service Index Rebalance Preview: Five Changes as Trade Flatlines
- [Tencent (700 HK, BUY, TP HK$584) TP Change]: C1Q25 Review: Outperformance in Low Game Season
- Chery IPO Preview: More Than A Local Hero, Chery’s Road To IPO Glory
- ESR (1821 HK): 13th June Vote On Starwood/Warburg’s Offer
- Yadea Group Holdings (1585.HK):The Silent EV Titan Scaling Beyond Borders; Positive Outlook for 2025
- Update on Innovent Biologics (1801 HK)
- Xiamen Hithium Pre-IPO: Potential Data Center Play
CATL (3750 HK): The Tail Wags the Dog
- The buying in Contemporary Amperex Technology (3750 HK) over the last couple of days has dragged Contemporary Amperex Technology (CATL) (300750 CH) higher as the arbs trade the AH spread.
- The Fast Entry into a global index could keep CATL (3750 HK) supported over the next few trading days, but reality will take hold pretty soon.
- Short CATL (3750 HK) / long CATL (300750 CH) offers great risk/reward, while an outright CATL (3750 HK) short offers higher return albeit at a much higher level of risk.
ESR Group (1821 HK): Done Deal as Scheme Vote on 13 June
- ESR Group (1821 HK)’s IFA opines that the consortium’s HK$13.00 offer is fair and reasonable. The vote is on 13 June.
- Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection). The offer price is final.
- This is a done deal due to the substantial irrevocables. At the last close and for the 10 July payment, the gross/annualised spread is 1.3%/9.12%.
Tencent/Netease: None Gets Approvals for Domestic Games
- China announced game approval for the May batch. The number of games approved remained at a higher level than 2023.
- The pace of China’s game approval appears to have accelerated to the same level as pre-tightening.
- Of the companies that we are monitoring, none of them got approval for domestic games but a handful approvals of imported games save their day.
CSI Medical Service Index Rebalance Preview: Five Changes as Trade Flatlines
- The review period ended on 30 April, the changes should be announced on 30 May and will be effective after the close of trading on 13 June.
- There could be 5 changes in June where passive trackers will need to trade between 0.7-2x ADV in the forecast adds and sell between 1-4x ADV in the forecast deletes.
- A long adds/ short deletes trade has gone nowhere in the last 6-7 months, and the volatility of the trade has reduced even further in the last couple of months.
[Tencent (700 HK, BUY, TP HK$584) TP Change]: C1Q25 Review: Outperformance in Low Game Season
- Tencent reported C1Q25 rev., IFRS op. profit, and IFRS net inc, in-line, (3.1%), (5.6%) vs. our est. and 3.8%, (2.3%), (4.9%) vs. cons.
- As predicted, Tencent maintained a transitional game quarter well, going forward new game launches shall fill the pipeline while recovering consumption helping on advertising and fintech.
- We raised our TP to HK$584 for better outlook and place Tencent back to the TOP BUY list. Our TP implies 21x PE.
Chery IPO Preview: More Than A Local Hero, Chery’s Road To IPO Glory
- Chery Auto, one of China’s oldest state-owned carmakers and #2 domestic passenger vehicle brand, plans to raise more than $1B in its upcoming IPO in Hong Kong.
- The company has been China’s top vehicle exporter for 22 consecutive years since 2003. The automaker was founded in 1997 Mr. Yin Tongyue, Chairman & President of Chery Auto.
- Chery Auto is an extremely ambitious company with strong overseas presence. The biggest revenue growth driver will be higher NEV sales in the coming years, in my view.
ESR (1821 HK): 13th June Vote On Starwood/Warburg’s Offer
- On the 4th December 2024, the Starwood/Warburg Pincus Consortium announced a firm pre-conditional Offer for ESR Group (1821 HK) at HK$13/share (best & final), by way of a Scheme.
- There was a raft of pre-cons, however processing went like clockwork, and all were satisfied by the 15th May.
- The Scheme Doc is now out, with a Court Meeting on the 13th June, and payment on or before the 10th July. The IFA (Anglo Chinese) says “fair & reasonable“.
Yadea Group Holdings (1585.HK):The Silent EV Titan Scaling Beyond Borders; Positive Outlook for 2025
- Volume Dip in 2024:Yadea Group Holdings (1585 HK) ‘s total unit sales fell 21% YoY amid regulatory shifts, inventory destocking, and weak market sentiment.
- Innovation Resilience: Despite headwinds, Yadea launched sodium-ion e-bikes, reinforcing its R&D leadership and product differentiation.
- Positive 2025 Outlook: Management guides for rebound driven by “trade-in” policy, regulatory clarity, and international expansion.
Update on Innovent Biologics (1801 HK)
- Strong results reflect progress of existing approved drugs including key oncology drugs.
- Mazdutide is set to be released in 2025, and the company is currently making plans for the release.
- Innovent Biologics continues to add to its drug development portfolio.
Xiamen Hithium Pre-IPO: Potential Data Center Play
- Xiamen Hithium (2190977D CH) is looking to raise at least US$500m in its upcoming HK IPO.
- It is a leading global new energy technology company providing all-round energy storage solutions centred around energy storage batteries and systems.
- In this note, we look at the firm’s past performance.
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