In today’s briefing:
- Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Meituan (3690 HK): 4Q24, High Growth and Higher Margin, 60% Upside
- A/H Premium Tracker (To 21 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- Merger Arb Mondays (24 Mar) – HKBN, ESR, Canvest, Vesync, Seven & I, Proto, Makino, Spartan
- Weekly Deals Digest (23 Mar) – CK Hutchison, Canvest, ENN Energy, HKBN, Fengxiang, Spartan, DN Sols
- China Healthcare Weekly (Mar.23)-Fosun Pharma Sells United Family Healthcare, MNC’s Inflection Point
- China Merchants Port (144 HK): Will It Have a Role in CKH’s Port Sale?
- PC Partners (1263 HK): SGX Primary Listing Justified To Maintain NVIDIA Supply
- Didi Global Q424 Results: Another Set of Solid Numbers from China’s Ride Hailing Giant
- Jiangsu Zenergy Battery Technologies Pre- IPO – The Positives – Brisk Volume-Led Growth
Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Hang Seng Indexes has announced a change in the FreeFloat-Adjusted Factor (FAF) methodology for Secondary Listings that will be implemented from the next rebalance in June.
- NetEase (9999 HK), Baidu (9888 HK), Trip.com (9961 HK), NIO (9866 HK), New Oriental Education & Techn (9901 HK) and Weibo (9898 HK) benefit; GDS Holdings (9698 HK) loses out.
- The FAF changes along with capping changes will result in a round-trip trade of HK$34.2bn (US$4.4bn) at the June rebalance with the largest turnover for the Hang Seng TECH Index.
Meituan (3690 HK): 4Q24, High Growth and Higher Margin, 60% Upside
- In 4Q24, Meituan’s revenue growth rate was 20% YoY with all businesses rising.
- The operating margin improved to 8.8% in 4Q24 versus about zero in 4Q23.
- We set an upside of 61% and a price target of HK$270. Buy.
A/H Premium Tracker (To 21 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion was a barbell this week. Narrow and wide spreads see Hs outperform. Middling spreads outperform less.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile, though volatility is coming down.
- Lots of spreads see the HA premium less than 15%. That is historically tight.
Merger Arb Mondays (24 Mar) – HKBN, ESR, Canvest, Vesync, Seven & I, Proto, Makino, Spartan
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Seven & I Holdings (3382 JP), OneConnect Financial Technology (OCFT US), Insignia Financial (IFL AU), Smart Share Global (EM US), Soundwill Holdings (878 HK).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Domain Holdings Australia (DHG AU), Tonami Holdings (9070 JP), PointsBet Holdings (PBH AU).
Weekly Deals Digest (23 Mar) – CK Hutchison, Canvest, ENN Energy, HKBN, Fengxiang, Spartan, DN Sols
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: DN Solutions (298440 KS) seeks to raise US$1.1 billion in a KRX IPO.
- Event-Driven developments: CK Hutchison Holdings (1 HK), Canvest Environmental Protection Group (1381 HK), ENN Energy (2688 HK), HKBN Ltd (1310 HK), Shandong Fengxiang (9977 HK), Spartan Resources (SPR AU).
China Healthcare Weekly (Mar.23)-Fosun Pharma Sells United Family Healthcare, MNC’s Inflection Point
- Given new policy recommendations, it is only a matter of time before HPV vaccination is included in the national immunization program, which is detrimental to HPV vaccine companies.
- MNCs have seen a inflection point in performance growth in 2024 in China. Although VBP/NRDL negotiation are negative factors, is it also due to any consideration to withdraw from China?
- Fosun Pharma has agreed to sell its entire stake in United Family Healthcare to Calcite Gem Investments Group for US$124.1 million. We shared our views about the deal.
China Merchants Port (144 HK): Will It Have a Role in CKH’s Port Sale?
- China Merchants Port (144 HK) may potentially play a role in CK Hutchison Holdings (1 HK)‘s port portfolio disposal should the mainland government want to step in.
- While CMPH’s size is small relative to the port portfolio, its parent China Merchants Group and sister China Merchants Bank H (3968 HK) can easily facilitate such a transaction.
- Having the portfolio in the hands of mainland company is desirable to the Chinese government. Even if CMPH has no role, its 7.6x PER and 6% yield are attractive.
PC Partners (1263 HK): SGX Primary Listing Justified To Maintain NVIDIA Supply
- On the 18th June 2024, PC Partner (1263 HK)‘s board said it was considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
- A 30th August 2024 announcement provided clarity on a step-by-step approach for the HKEx withdrawal. A secondary listing on the SGX was established on the 15th November.
- The next step is to establish a dual-primary listing in Singapore. Then withdraw the HKEx listing. The key driver behind this exercise is ensure the uninterrupted supply of NVIDIAs GPUs.
Didi Global Q424 Results: Another Set of Solid Numbers from China’s Ride Hailing Giant
- Most key P&L items and revenue drivers improved Y/Y and sequentially vs Q324
- Although GTV per transaction dipped slightly, estimated “take rate” improved in Q424
- Strong OpCF obviates need for quick FY25 IPO — but it could still happen this year
Jiangsu Zenergy Battery Technologies Pre- IPO – The Positives – Brisk Volume-Led Growth
- Jiangsu Zenergy Battery Technologies (JSZENERGY CH) (Zenergy) is looking to raise up to US$300m in its upcoming HK IPO.
- Zenergy is an EV and energy storage system battery manufacturer providing integrated battery solutions, encompassing battery cells, modules, packs and battery management systems dedicated to large-scale applications of electrochemical products.
- In this note, we talk about the positive aspects of the deal.
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