In today’s briefing:
- EQD | Hong Kong Single Stock Options Weekly (January 20 – 24): Rally Continues on Less Participation
- Lifestyle China (2136 HK): Expectations of a Deal Break with a Vote on 20 February
- China Consumption Weekly (27 Jan 2025): Alibaba, JD.com, Kuaishou, NIO, Honor, Apple
- Dada Nexus (DADA US): JD.com’s Light Non-Binding Offer at US$2 Per ADS
- EQD| Lunar New Year: Do HSI, KOSPI, and FXI Follow a Pattern?
- WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- EQD | Hong Kong Index Options Weekly (HSI and HSCEI January 20-24): Seasonals Provide Tailwind
- Monthly Container Shipping Tracker: December Respite Likely Short-Lived | Stay SHORT (January 2025)
- Visen Pharmaceuticals IPO: Unfavorable Trends
- Pre-IPO Wuhan Dazhong Dental Medical – Valuation Performance May Disappoint Investors
EQD | Hong Kong Single Stock Options Weekly (January 20 – 24): Rally Continues on Less Participation
- Information technology very strong with AAC Tech, Sunny Optical, Kingdee Int’l and Byd Elec all posting > 10% weekly gains.
- Gains were positive with helpful seasonals but not as widespread as last week with fewer singles stocks and Sectors participating in the rally.
- China Vanke has big increase in option trading, in particular Calls, with implied vols also rising.
Lifestyle China (2136 HK): Expectations of a Deal Break with a Vote on 20 February
- Lifestyle China (2136 HK)’s IFA opines that Mr Thomas Lau’s HK$0.98 privatisation offer is fair and reasonable. The vote is on 20 February.
- The IFA analysis is flawed. The revised and final offer is light compared to precedent transactions, peer multiples and historical trading ranges.
- The high AGM minority participation rates remain a vote risk, mainly as retail seems firmly against the offer. The 14.0% gross spread is high but justified.
China Consumption Weekly (27 Jan 2025): Alibaba, JD.com, Kuaishou, NIO, Honor, Apple
- Consumers accused that Alibaba and JD.com took national consumption subsidies.
- Kuaishou’s new year sales GMV (Gross Merchandise Value) increased by 71%.
- Honor Smartphone CEO resigned largely due to the IPO plan.
Dada Nexus (DADA US): JD.com’s Light Non-Binding Offer at US$2 Per ADS
- Dada Nexus (DADA US) disclosed a non-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 offer is light compared to the IPO price (US$16.00), average sell-side price targets (US$2.19) and historical trading ranges.
- The shareholder vote is low-risk (two-thirds voting threshold), as JD.com represents 63.2% of the voting power. The key risk is the timing of a binding proposal.
EQD| Lunar New Year: Do HSI, KOSPI, and FXI Follow a Pattern?
- All three markets exhibited larger average returns in the 5 days leading up to Lunar New Years compared to out-of-sample data.
- The pattern for the period after Lunar New Year does not show the same characteristics as prior to Lunar New Year.
- The strongest returns were seen in FXI with average returns 10X out-of-sample average returns.
WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- On the 21st January 2025, WH Group (288 HK), the world’s largest pork producer, announced Smithfield had made a public filing of the “Preliminary Prospectus” with the SEC.
- A US$23-US$27/share indicative price range backed out a possible market cap for Smithfield of US$9.0bn-US$10.6bn, at the high end of my estimate, and more than twice its 2013 privatisation value.
- Reportedly, WHG are now guiding that Smithfield is likely to be priced at $20/share. Expect WHG to sell off here.
EQD | Hong Kong Index Options Weekly (HSI and HSCEI January 20-24): Seasonals Provide Tailwind
- The lead up to Lunar New Year typically sees stronger than normal returns and last week was no exception with the strong rally continuing for both markets.
- Price action was more volatile than has been seen lately pushing up short term historic volatility measures with 1M implieds +- 1point.
- June 6000 Puts in HSCEI seeing continued trading interest at the June 27 expiry.
Monthly Container Shipping Tracker: December Respite Likely Short-Lived | Stay SHORT (January 2025)
- After four straight months of decline, our index of price momentum stabilized in December
- But unsustainably strong US imports & potential Suez re-opening suggest rates to keep falling
- We retain our bearish view of the container shipping segment, and suggest staying SHORT
Visen Pharmaceuticals IPO: Unfavorable Trends
- Visen Pharmaceuticals is looking at raising up to USD 300m to list in Hong Kong.
- We look at the company’s core product and highlight two unfavorable trends.
- We are not excited about the company’s fundamentals, and are not keen in the deal.
Pre-IPO Wuhan Dazhong Dental Medical – Valuation Performance May Disappoint Investors
- In other to attract and retain high-quality dentists, dental services providers need to pay higher salaries than public hospitals, which inevitably drives up manpower costs and drag down profit margin.
- Regulatory pricing controls and centralized procurement policies on dental implants and orthodontic materials will affect the pricing of Dazhong’s dental services, thus put pressure on its future revenue growth.
- The future valuation performance largely depends on if Dazhong is able to expand out of Central China and achieve nationwide coverage. However, so far, no successful cases have emerged.
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