In today’s briefing:
- Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
- Tencent (0700.HK): Revisiting Wechat Channels
- FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
- Auntea Jenny (Shanghai) Industrial Pre-IPO Tearsheet
- Hutchmed China Ltd (13.HK/HCM.US) – 2023 Results Preview and Catalysts in 2024
Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
- As of the review cutoff date of 19 February, there could be four changes for the iShares A50 China (2823 HK) / CSOP China A50 (HKD) (2822 HK) in March.
- Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank could replace Aier Eye Hospital Group, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery.
- CGN Power (1816 HK) is a potential iShares China Large-Cap (FXI) (FXI US) inclusion while Hygon Information Technology C (688041 CH) is an inclusion to a global index in March.
Tencent (0700.HK): Revisiting Wechat Channels
- One year ago, we published a note valuing Wechat Channels at US$29 billion by applying 25xPE to RMB8 billion net profit out of RMB37 billion revenue by 2024.
- Fast forward to today, the platform’s priority has been further elevated by Tencent management in its attempt to pursue high quality growth.
- We review our thesis on Wechat Channels based on recent channel checks and now believe that the platform could represent ~35% of Tencent’s total incremental profit from 2024 to 2026.
FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
- With the review period complete, there could be 3 changes for the iShares China Large-Cap (FXI) (FXI US) in March.
- CGN Power (1816 HK), Yankuang Energy (1171 HK) and China Coal Energy (1898 HK) could replace Wuxi Biologics (2269 HK), China Resources Beer (291 HK) and China Vanke (2202 HK).
- Short interest on China Vanke (H) (2202 HK) and Yankuang Energy Group (1171 HK) is higher than the other stocks and there could be covering on implementation day.
Auntea Jenny (Shanghai) Industrial Pre-IPO Tearsheet
- Auntea Jenny (Shanghai) Industrial (AJI HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are CITIC Securities, Haitong, and DFZQ.
- Auntea Jenny (Shanghai) Industrial (Auntea) is a freshly-made beverage producer.
- As per CIC, the firm operates the fourth largest network of freshly-made tea shops in China as of Sept 23, with an extensive reach into the lower-tier markets
Hutchmed China Ltd (13.HK/HCM.US) – 2023 Results Preview and Catalysts in 2024
- HUTCHMED’s 2023 results are relatively certain. Fruquintinib had a strong start after obtaining approval in the US, with sales of about US$13-15 million in just more than a month.
- Oncology/Immunology consolidated revenue would be in line with management’s performance guidance (US$450 to US$550 million) in 2023. There are promising data readout/NDA submission this year, which would be potential catalysts.
- HUTCHMED has sufficient cashflow and does not require external financing. From 2024 to 2026, it will enter a period of accelerated growth in product revenue. Breakeven is achievable in 2025.
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