In today’s briefing:
- Tencent Nearing Our Buy Zone
- Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting
- Yashili (1230 HK): Scheme Vote on 23 June
- MoneyHero SPAC Listing: Thoughts on Valuation
- Mason Group (273 HK): Halted Pursuant To Takeover’s Code
- Alibaba Cloud: Price War Rages as Nationalization Looms in China
- Tam Jai International: High-Quality Assets, Low-Quality Capital Allocation
- Alibaba Potential IPOs – Part 5 – An Early Look at Local Operations
- Perfect Medical: The Perfect Opportunity to Add
- Water Oasis: H1 FY23 Results, Moving in the Right Direction
Tencent Nearing Our Buy Zone
- Tencent is nearing our 302 support target with undershoot risk to sub 300, support at 290. HSI continues to trade heavy but reaching oversold levels.
- The break below 331 acted as the most recent sell trigger and will turn into resistance on the way back up. We turned bearish Tencent back in February.
- Need to see lower price with weakening sell volumes for better buy conviction. Lower wedge support the buy zone, sync with an HSI low.
Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting
- At long last, Yashili International Holdings (1230 HK) has dispatched the Scheme Document.
- The Court Meeting and EGM will be held on the 23 June. The IFA says the Offer is fair. At a ~160% premium to undisturbed, it certainly is.
- Assuming the transaction gets up, payment will occur on or before the 13 July.
Yashili (1230 HK): Scheme Vote on 23 June
- The Yashili International Holdings (1230 HK) scheme document is out with the court meeting scheduled for 23 June. The IFA considers the HK$1.20 per share offer to be fair and reasonable.
- Key conditions include approval by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). The shareholder with a blocking stake should be supportive.
- This is a done deal. At the last close and for the 13 July payment, the gross and annualised spread is 1.7% and 15.3%, respectively.
MoneyHero SPAC Listing: Thoughts on Valuation
- Asia-Based leading personal finance aggregation and comparison platform MoneyHero has filed to go public in the US by merging with Bridgetown Holdings and raise proceeds of up to US$154m.
- This would give MoneyHero a pre-money enterprise value of US$200m and an equity value of US$198m with post-money EV of US$342m assuming no redemption by Bridgetown’s public shareholders.
- MoneyHero Global (1534965D HK) plans to use proceeds from the deal to further accelerate growth and capture market opportunity in the region.
Mason Group (273 HK): Halted Pursuant To Takeover’s Code
- Broker Mason Financial Holdings (273 HK) is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
- Shares are down 95% from its June 2015 peak, and 54% since the onset of Covid. The company last turned a profit in 2018.
- The largest shareholder is the chairman of Shimao Group (813 HK).
Alibaba Cloud: Price War Rages as Nationalization Looms in China
- The potential spin-off listing of Alibaba Group (9988 HK) Cloud faces significant challenges from various factors, making the timing particularly challenging for the spin-off.
- The Cloud Business is experiencing intensifying price competition, while simultaneously facing substantial regulatory risks, particularly with the Chinese Government’s plans to nationalize the cloud computing market.
- Due to the ongoing price war and the potential risk of nationalization, we believe that Alibaba (ADR) (BABA US) Cloud’s fair value is substantially below $10bn.
Tam Jai International: High-Quality Assets, Low-Quality Capital Allocation
- We tend to shy away from the restaurant industry but decided to make an exception for Tam Jai;
- The brand has become a household name in Hong Kong and delivers attractive business economics for owners from its home market;
- However, we see multiple red/yellow flags when it comes to the management’s capital allocation, particularly relating to overseas expansion.
Alibaba Potential IPOs – Part 5 – An Early Look at Local Operations
- On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
- Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
- In our previous notes, we highlighted which divisions could list and looked at some of the divisions in more detail. In this note, we will talk about the local operations.
Perfect Medical: The Perfect Opportunity to Add
- Perfect Medical Health’s (1830 HK) share price correction seems overdone. News that COVID cases are expected to rise to over 65 million a week by June in China: the culprit.
- The stock presents an excellent opportunity to invest with a 8.9%/11.8% FY23e/24e dividend yield and 20% of the market capitalization in cash. Such excessive pessimism in this name is unwarranted.
- Catalysts for the stock would be the FY23 March-end results to be declared on June 28th, 2023.
Water Oasis: H1 FY23 Results, Moving in the Right Direction
- Water Oasis (1161 HK) H1 FY23 results were encouraging and a step in the positive direction as revenue/PAT improved by 27%/116% YoY ( although below our estimates by 10%/30%).
- The company paid a semi-annual dividend of 7 cents (9% annualized yield) for an 82% payout ratio. Net cash of 243 mn HKD represents 25% of market capitalization.
- The company has made several investments in new locations and spent heavily on advertising ( costs up 76% YoY); A positive inflection of trends will bear fruit in H2 2023.
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