In today’s briefing:
- Asian Equities: It’s China’s Year – Our “China Twelve” In the Year of the Snake
- CATL IPO Listing in Hong Kong Preview
- StubWorld: Melco Is Trading Too Tight
- Hengrui (恒瑞医药) A/H Listing: A Worthy Comparison with Hansoh Pharma
- Asia Real Estate Tracker (13-Feb-2025): HK’s Link REIT Manager Now Offers Private Funds.
- SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength
Asian Equities: It’s China’s Year – Our “China Twelve” In the Year of the Snake
- We believe in 2025 HK/China shall outperform EM. While the undervalued and under-owned characteristic of the China market is well-known, monetizability of China’s technological capabilities has become apparent only recently.
- Policy stimuli during the upcoming NPC could catalyze consumer sentiment and market performance. China’s structural hurdles, Debt, Demographics and Deflation, remain. But correct stock and sector selection can generate alpha.
- We prefer the internet platforms, consumer discretionary and high dividend yield, the latter largely SOEs. Our “China Twelve” are mostly reasonably valued (low teen PE), with double digit EPS growth.
CATL IPO Listing in Hong Kong Preview
- Contemporary Amperex Technology (CATL) is getting ready to complete its IPO on the Hong Kong exchange. CATL is expected to raise at least US$5 billion.
- CATL maintained its 36.8% share in the global EV battery market in 2023 and January to November 2024. CATL has excellent fundamentals and improving profit margins.
- Major risk factors include additional tariffs by the US, recent addition to Pentagon’s blacklist, declining sales in 2024, and lower government subsidies for EVs globally.
StubWorld: Melco Is Trading Too Tight
- At an 8% discount to NAV, Melco International Development (200 HK) is trading too tight for what is a simple holding company structure.
- Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Hengrui (恒瑞医药) A/H Listing: A Worthy Comparison with Hansoh Pharma
- Jiangsu Hengrui Medicine (600276 CH) a China-based pharmaceutical company, aims to raise around US$2bn in its H-share listing.
- Given its similarity to Hong Kong-listed Hansoh Pharma, we think it is worth a comparison between the two.
- Both companies are decent biopharma players and are trading at a premium to other pharmaceutical company peers. Upon comparison, we think Hengrui’s H should be at a premium to Hansoh.
Asia Real Estate Tracker (13-Feb-2025): HK’s Link REIT Manager Now Offers Private Funds.
- Link REIT’s HK manager is starting a private funds venture in the market, showcasing a new area of investment and growth potential.
- Yanlord is looking to sell a half-stake in an Anson Road project for $240M, indicating a strategic move in their property portfolio.
- Weave Living is expanding its presence in Singapore with 2 new locations, adding a total of 330 units to their portfolio.
SMIC (SEHK: 00981, SSE STAR MARKET: 688981): Risky to Chase Strength
- Media reports of a sharp decline in profit linked to trade tensions are not correct. Gross, operating and total net profit all increased from 1Q to 4Q of 2024.
- Management’s guidance for 1Q of 2025 has sales growth accelerating to 6% to 8% and the gross margin remaining relatively high at 19% to 21%. This looks reasonable.
- But the shares are near their all-time high and too expensive to chase given the potential negative impact of President Trump’s trade policy. Take profits.
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