In today’s briefing:
- Skyworth Group (751 HK)’s Latest Partial Buyback. Thoughts On Proration
- BYD (1211 HK) Tactical Outlook: Buy-The-Dip Scenarios With Passive Buying from HSI/HSCEI Trackers
- Wuxi XDC Placement – Following Biologics Playbook, past Deals Have Been Mixed
- Dada Nexus (DADA US): JD.com’s Binding Offer a Done Deal
- Fushan Energy (639 HK): Cash 80% of Market Cap, 100% Payout Implies 12% Trailing Dividend Yield
- KE (BEKE US, 2423 HK): 2024 Result, Accelerating Quarter by Quarter, Upside Above 100%
- ENN Energy (2688 HK): Valuing ENN Natural Gas H-Share
- Helixtap China Report: Short-term Downward Bias In China Demand Outlook Amid Tariff Tensions
- Jinke Smart (9666 HK): Boyu Returns To The Well?
- China TCM (570.HK) – Updates on Performance Forecast and Valuation Outlook Based on 2024 Results
Skyworth Group (751 HK)’s Latest Partial Buyback. Thoughts On Proration
- Back on the 23 December 2022, Skyworth Group (751 HK) announced (another) partial buyback, at HK$3.80/share, a 20.25% premium to undisturbed. On the 28 March, terms were bumped to $5.00/share.
- At the close of the Offer, the Wong Concert Group held 50.35%, and were no longer subject to the creeper rule. The Group now holds 56.04%
- Yet another Partial Offer has been announced (HK$3.11/share, a 15.19% premium)), which will lift the Group’s stake to 66.45%. Minimum pro-ration is 37.84%. It is likely to go higher.
BYD (1211 HK) Tactical Outlook: Buy-The-Dip Scenarios With Passive Buying from HSI/HSCEI Trackers
- A recent insight by Brian Freitas signals that BYD (1211 HK)buying from global index trackers is done (more passive buying from HSI/HSCEI trackers may come later this month).
- As of Tuesday, the stock is currently in the middle of a modest pullback, 1 week down, reached a support area where the probability of a bounce is around 50%.
- We are at the start of the month, it may be early to benefit from the passive buying discussed by Brian Freitas, however this pullback could support a buy-the-dips strategy.
Wuxi XDC Placement – Following Biologics Playbook, past Deals Have Been Mixed
- WuXi AppTec (2359 HK) aims to raise around US$250m via selling around 3.5% stake in WuXi XDC Cayman (2268 HK).
- WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Dada Nexus (DADA US): JD.com’s Binding Offer a Done Deal
- Dada Nexus (DADA US) disclosed a binding proposal from JD.com Inc (ADR) (JD US) at US$2.00 per ADS, a 41.8% premium to the undisturbed price of US$1.41 (24 January).
- The shareholder vote is low-risk (two-thirds voting threshold), as JD.com represents 63.2% of voting power. The dissenting condition (less than 12% of outstanding shares) is waivable.
- Although the offer is unattractive, this is a done deal. The transaction is expected to close within the third quarter of 2025.
Fushan Energy (639 HK): Cash 80% of Market Cap, 100% Payout Implies 12% Trailing Dividend Yield
- Shougang Fushan Resources’ (639 HK) FY24 revenues/profits were down 14%/21% YoY due to the decline in coking coal prices, which were 14% YoY to 1666 RMB/ton (on similar volumes).
- At 1295 RMB/ton, spot prices are 25% lower than last year’s average, yet the stock is supported by cash, which represents 80% of its market capitalization (10 billion HKD).
- The company provided a 100% payout of 30 HKD cents, resulting in a 12% dividend yield; however, at current spot prices, the yield is 7%.
KE (BEKE US, 2423 HK): 2024 Result, Accelerating Quarter by Quarter, Upside Above 100%
- Exhibiting home revenue recovered significantly in 4Q24, while new home revenue recovered from 3Q24.
- The growth rate of active stores and active agents accelerated quarter by quarter.
- We conclude an upside of 105% and a price target of US$42.00. Buy.
ENN Energy (2688 HK): Valuing ENN Natural Gas H-Share
- We calculated that after the privatisation of ENN Energy (2688 HK), the EPS of ENN Natural Gas (600803 CH) will be Rmb1.94 for FY25F and Rmb2.11 for FY26F.
- By using ENN Energy’s undisturbed PER (with and without a 10% discount) and Kunlun Energy (135 HK)‘s ex-cash PER, ENN-NG H-share is worth 6.8-7.9x for FY25F and 6.3-7.2x for FY26F.
- ENN-NG H-share is hence valued at HK$14.11-16.37, implying that ENN Energy’s value under the privatisation proposal is HK$66.02-72.67, which is lower than Somerly’s HK$80 estimate.
Helixtap China Report: Short-term Downward Bias In China Demand Outlook Amid Tariff Tensions
- Trade war impacts the trade flow
- Arbitrage narrows on wintering
- Fluctuating inventory level indicates at a whimsical buying pattern
Jinke Smart (9666 HK): Boyu Returns To The Well?
- Back on the 27th September 2022, Boyu Group launched a HK$12/share VGO for PRC-incorporated property management play Jinke Smart Services (9666 HK), a 33.04% premium to last close.
- Boyu and concert parties held 53.05%, and the Offer was contingent on regulatory approvals and 7.71% of shares out tendering. 4.79% tendered. Boyu also acquired 7.15% in the market.
- Two days after announcing very ordinary FY24 results, Jinke shares were suspended pursuant to the Takeovers Code. Presumably Boyu is on the acquisition path again. Another VGO or a privatisation?
China TCM (570.HK) – Updates on Performance Forecast and Valuation Outlook Based on 2024 Results
- TCM finished drugs and TCM decoction pieces businesses could be the second and third growth curve of China TCM when the concentrated TCM granules business is facing VBP headwinds.
- 2024 would be the performance low point. Due to 2024 low base, we would see positive growth in 2025.Performance recovery is expected in next three years based on our forecast.
- Annual profit of RMB1 billion is achievable. If based on 10x P/E, market value is RMB10 billion.We think if valuations fall below RMB10 billion, investors can consider buying on dips.
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