In today’s briefing:
- Dream International (1126 HK): Riding the Popmart Bubble
- Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety
- Pre-IPO Guangzhou Xiao Noodles Catering Management – Pain Points in Operation Mode and Profit Margin
- Sino Biopharmaceutical (1177 HK): Acquisition To Enrich Pipeline and Enhance International Influence
- Unisplendour Corp A/H Listing – Growth Slowing, Margins Dropping
Dream International (1126 HK): Riding the Popmart Bubble
- We believe that toymakers are experiencing a bubble like rally led by Pop Mart International Group L (9992 HK) and Hasbro Inc (HAS US) which raised forecasts recently.
- Dream International (1126 HK) has returned >200% since liberation day tariffs were declared on April 2nd 2025 and now trades at 12.7x trailing earnings (vs 3.7x when we initiated).
- “Never look a gift horse in the mouth” ! .We would take some money off the table here as toy stocks go through periods of cyclicality due restocking/destocking.
Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety
- Asian buybacks, dominated by HK, China and Korea, are skyrocketing. In H125, buybacks more than doubled from their full year 2024 levels in HK/China and increased 40% in Korea.
- We screen companies repurchasing consistently, with total buyback of minimum $1bn and buyback over 2024-25 of at least 2% of present market cap, yielding companies in HK(11), Korea(6), Philippines(2), Singapore(1).
- Top five repurchasers are Alibaba, Tencent, China Communication Construction, AIA, Netease. These, barring the third, are up more than 20% this year. Share price support from buybacks do seem solid.
Pre-IPO Guangzhou Xiao Noodles Catering Management – Pain Points in Operation Mode and Profit Margin
- Although the revenue is growing, net profit margin is low, which is due to Xiao Noodles’ operational model, high costs, products and brand positioning. Key performance indicators declined in 2024.
- If competition becomes increasingly fierce and Xiao Noodles’ price reduction strategy continues, the investment return period would be longer, which will affect the Company’s future expansion plans and performance growth.
- Based on our forecast, pre-IPO valuation of RMB3 billion is expensive. If Xiao Noodles is unable to reverse the trend of declining performance, it will face valuation discounts after IPO.
Sino Biopharmaceutical (1177 HK): Acquisition To Enrich Pipeline and Enhance International Influence
- Sino Biopharmaceutical (1177 HK) is acquiring the balance 95% equity interests in LaNova Medicines for net consideration of $500M to be funded by internal resources and bank borrowings.
- With focus on oncology and differentiated capability spanning monoclonal antibodies, bispecific antibody, and ADC drug, LaNova is a strategic fit for Sino Biopharma.
- The acquisition will enhance Sino Biopharma’s reputation and image in the global pharmaceutical industry, and promote the conclusion of potential international transactions in the future.
Unisplendour Corp A/H Listing – Growth Slowing, Margins Dropping
- Unisplendour Corporation Limited (000938 CH), an ICT infrastructure products provider, aims to raise around US$1bn in its H-share listing.
- UC designs and sells a diverse portfolio of ICT infrastructure products, covering the entire digital solutions industry chain.
- In this note, we look at its past performance and other deal dynamics that might impact the listing.
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