In today’s briefing:
- Henlius (2696 HK): LVC Sits On A Blocking Stake. And Me (Maybe) Eating Humble Pie
- Henlius (2696 HK): Hurtling Towards a Likely Deal Break
- Foshan Haitian Flavouring & Food (603288 CH): Index Inclusion Post H-Share Listing
- ZTO FY24 & J&T Global Q424 Volume Growth Rates Suggest Painful Price-Volume Tradeoffs Continue
- Asia Real Estate Tracker (14-Jan-2025): NTT secures banks for $1B SG data centre REIT.
- Lucror Analytics – Morning Views Asia
- Pre-IPO Jiangsu Hengrui Medicine – High Valuation Cannot Be Justified
- UMP Healthcare (722 HK): Earnings Preview for H1 FY25
Henlius (2696 HK): LVC Sits On A Blocking Stake. And Me (Maybe) Eating Humble Pie
- I was wrong. Loyal Valley Capital (LVC) have stopped buying Shanghai Henlius (2696 HK) – or have not bought since reaching a blocking stake of 7.8295% on the 9th January.
- LVC could either use that stake as leverage to negotiate with the Offeror on the scrip terms. Or blow up the deal and pick up shares after the deal breaks
- OR perhaps, as per my initial impression, LVC tenders. And they may still do that. It should be this straightforward; but the fact that it is not raises questions.
Henlius (2696 HK): Hurtling Towards a Likely Deal Break
- The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread has ballooned to 21.8%, which suggests a deal break.
- I previously stated that LVC’s trading behaviour over the coming days will indicate its voting intentions. Unfortunately, this behaviour suggests a high likelihood of blocking the vote.
- Fosun Pharma has two potential options to secure LVC’s backing: increase the share alternative cap or introduce a rollover option. Both have challenges and are, therefore, not viable options.
Foshan Haitian Flavouring & Food (603288 CH): Index Inclusion Post H-Share Listing
- Foshan Haitian Flavouring & Food (603288 CH) has filed for a listing on the HKEX (388 HK) and reports indicate that the raise will be at least US$1.5bn.
- In line with the Midea Group (300 HK) and S.F. Holding (6936 HK) H-share listings, the discount on the H-shares could be in the 20-25% range.
- The stock will not get Fast Entry to any indices but there should be inclusions at subsequent rebalances, especially once the cornerstone investor lock-up expires.
ZTO FY24 & J&T Global Q424 Volume Growth Rates Suggest Painful Price-Volume Tradeoffs Continue
- Q424 volume growth for J&T’s two main segments accelerated — but how’d they do it?
- In Chinese domestic segment last year, J&T gained share vs market leader ZTO Express
- We believe J&T’s volatile growth patterns could indicate painful price-volume tradeoffs
Asia Real Estate Tracker (14-Jan-2025): NTT secures banks for $1B SG data centre REIT.
- NTT obtains $1B for a Singapore data center REIT, supporting expansion and growth in the region.
- Japan’s Open House acquires Bolder Presence in a $390M stake buy, increasing investment in the company.
- Shimao lowers Sheraton HK Airport hotel price by 30% to attract more customers, adjusting to market demand.
Lucror Analytics – Morning Views Asia
- In today’s Morning Views publication we comment on developments of the following high yield issuers: Yuexiu Property, Seazen Group, Vedanta Resources
- In the US, the UST curve bear steepened slightly, amid a rise in oil price and a heavy pipeline of corporate bond issuances. The yield on the 2Y UST was unchanged at 4.38%, while that on the 10Y UST was up 2 bps at 4.78%. Equities were mixed.
- The S&P 500 rebounded 0.2% from last Friday’s selloff to close at 5,836. That said, the Nasdaq fell 0.4% to 19,088, driven by a decline in large tech stocks.
Pre-IPO Jiangsu Hengrui Medicine – High Valuation Cannot Be Justified
- Hengrui plans to IPO in Hong Kong, but it hasn’t yet completed the business transformation from generic drugs to innovative drugs, and is still facing the negative impact of VBP.
- The key point is whether the innovative drug business has sustained high enough growth rate to offset the decline in generic drug business so as to support the high valuation.
- Hengrui is overvalued in A-Share. We think Hengrui’s valuation should be lower than that of BeiGene (6160 HK) and Hansoh Pharmaceutical Group (3692 HK) in Hong Kong stock market.
UMP Healthcare (722 HK): Earnings Preview for H1 FY25
- UMP Healthcare (722 HK) will report its results in late February. We estimate low single-digit revenue growth of 3% YoY, in line with the past two semiannuals.
- We flagged cost-cutting initiatives in UMP Healthcare (722 HK): Postcard From Hong Kong and Webinar Updates, which would result in 25% YoY profit growth.
- Trading at 6.4x FY25e PE, with a 10% dividend yield and 85% of the market capitalization in net cash and investments, the stock has the potential to double.
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