In today’s briefing:
- J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- HSCEI Index Rebalance Preview: One Change or Two in June?
- China Healthcare Weekly (Apr.6) – Boom of TCM Injections Is Coming, Defects in GLP-1s, Sino Biopharm
- STAR50 Index Rebalance Preview: APT Medical Moving Higher
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – April 2024
- Fu Shou Yuan (1448.HK) – Due to the Pain Points, Investment Logic Changes
- ECM Weekly (8th Apr 2024) – Hyundai Marine, Waaree Energies, Horizon Robotics, Bharti Hexacom
- China Power International (2380 HK): Powering Forward
- China Consumption Weekly (8 Apr 2024): BYD, Li Auto, Trip.com, Alibaba
J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
- The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
- J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued.
HSCEI Index Rebalance Preview: One Change or Two in June?
- SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
- For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
- Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.
China Healthcare Weekly (Apr.6) – Boom of TCM Injections Is Coming, Defects in GLP-1s, Sino Biopharm
- The biggest changes in 2023 medical insurance catalog are the lifting of payment restrictions on TCM injections, which would drive rapid sales growth in the hospital market this year.
- GLP-1s are not flawless, and patients will lose not only fat but also muscle during weight-loss process. Then, another noteworthy opportunity has emerged – reduce fat and increase muscle.
- In 2024, Sino Biopharm is expected to achieve single-digit revenue growth. Deficiencies in corporate governance are one reason why the market is reluctant to offer Sino Biopharm high valuation.
STAR50 Index Rebalance Preview: APT Medical Moving Higher
- The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – April 2024
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
- We recently added Dream International (1126 HK). Read: Dream International (1126 HK): Dream Valuation of 3.7x PE and 12% Div Yield, >40% of Mkt Cap In Cash
Fu Shou Yuan (1448.HK) – Due to the Pain Points, Investment Logic Changes
- Fu Shou Yuan’s 2023 performance was indeed not good, with negative growth in 23H2.Shanghai alone has limited market capacity.No matter how strong it is, it cannot drive the national market.
- Fu Shou Yuan has encountered difficulties in external expansion and M&A, so it chooses to increase dividends. However, this means the Company may have to say goodbye to high growth.
- The founder’s “past bad record” and uncertain business outlook hinder the upward potential of valuation, which requires a high margin of safety.It’s better bought at low price to collect dividends.
ECM Weekly (8th Apr 2024) – Hyundai Marine, Waaree Energies, Horizon Robotics, Bharti Hexacom
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS) and Bharti Hexacom (6597372Z IN).
- On the placement front, India remained at the forefront with JSW Energy Ltd (JSW IN) and the potential share sale of Vodafone Idea (IDEA IN).
China Power International (2380 HK): Powering Forward
- China Power International (2380 HK)‘s earnings should accelerate in FY24, and rebound in hydropower is a key driver. Hydropower generation surged 84.3% YoY in 2M24.
- The 9.3GW of capacity acquired in Oct will provide first full-year contribution in FY24. Better economics for coal-fired plants will add to profit momentum.
- The 6pp increase in dividend payout signals management’s positive view in the outlook, and the Chairman is explicitly confident in good FY24 profit growth.
China Consumption Weekly (8 Apr 2024): BYD, Li Auto, Trip.com, Alibaba
- In March 2024, BYD’s Sales volume increased by 46% YoY and Li Auto’s sales volume increased by 39% YoY.
- AliPay announced that foreigners’ consumption amount in China in March was ten times of last year.
- Facing stagnancy and competition, Alibaba’s Taobao removed service charges from its retailers.
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