In today’s briefing:
- ZTO Express (2057 HK): On Track for Double (Maybe Triple) Index Inclusion
- J&T Global Express (1519 HK): Global Index Inclusion Coming Up
- Weekly Deals Digest (19 Jan) – Henlius, GA Pack, Lifestyle China, Jamco, Macromill, Insignia, AVJ
- Merger Arb Mondays (20 Jan) – Canvest, Henlius, Lifestyle China, Vesync, JAMCO, Insignia, AVJennings
- Lonking (3339 HK): A (Massive) Positive Profit Alert
- China Healthcare Weekly (Jan.19)- WuXi AppTec Sells Shares in WuXi XDC, National Biological Drug VBP
- JD.com (JD US): Trusted Online Retailer Trading at a 9x P/E with a Coming Margin Inflection
- Pre-IPO Guming Holdings (PHIP Updates) – Some Points Worth the Attention
ZTO Express (2057 HK): On Track for Double (Maybe Triple) Index Inclusion
- With improved liquidity, ZTO Express Cayman (2057 HK) could be added to the HSCEI INDEX early March and then to a global index a couple of weeks later.
- ZTO Express Cayman (2057 HK) is a lower probability inclusion to the Hang Seng Index (HSI INDEX) given the index committee discretion. Inclusion would further increase the impact.
- The stock has had a big drawdown recently and the potential index inclusion and passive demand provide a low-risk entry point into the stock, especially hedged with its peers.
J&T Global Express (1519 HK): Global Index Inclusion Coming Up
- J&T Global Express (1519 HK) listed in October 2023 and was added to one global index in June 2024 and to the HSCEI INDEX in September 2024.
- J&T Global Express (1519 HK) could be added to a global index in February and there will be a big passive buying impact. The company is also buying back stock.
- J&T Global Express (1519 HK) has underperformed its peers over the past year and the index inclusion could help in closing some of that gap.
Weekly Deals Digest (19 Jan) – Henlius, GA Pack, Lifestyle China, Jamco, Macromill, Insignia, AVJ
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million through a primary/secondary offering.
- Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Jamco Corp (7408 JP), Macromill, Inc (3978 JP), Insignia Financial (IFL AU), Avjennings Ltd (AVJ AU).
Merger Arb Mondays (20 Jan) – Canvest, Henlius, Lifestyle China, Vesync, JAMCO, Insignia, AVJennings
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Shanghai Henlius Biotech (2696 HK), Smart Share Global (EM US), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Fuji Soft Inc (9749 JP), Avjennings Ltd (AVJ AU), Latin Resources (LRS AU), Pressance Corp (3254 JP).
Lonking (3339 HK): A (Massive) Positive Profit Alert
- Lonking Holdings (3339 HK)‘s positive profit alert suggested that FY24 earnings will beat the market consensus by a significant 25.8-34.6%.
- Better profitability indicates that it will further accumulate net cash. At an unchanged 50% payout ratio, it yields 7.8%, but at a higher payout of 70%, it will be 10.9%.
- Trading on 0.59x P/B, it is at the historical average valuation. If 1SD above average, there will be a 20% upside. It will go to HK$2.20 if 2SD above.
China Healthcare Weekly (Jan.19)- WuXi AppTec Sells Shares in WuXi XDC, National Biological Drug VBP
- Anhui Province will lead the first National biological drugs VBP in 2025. However, we are optimistic because we think the whole industry will start to bottom out from here.
- EVER001 has the potential to become “a game changer” for membranous nephropathy treatment. We are waiting for Everest Medicines to reach licensing cooperation based on EVER001 in the future.
- The real motivation for the Disposals of WuXi XDC shares could be to boost WuXi AppTec’s stock price first so that the management can again reduce positions at high level.
JD.com (JD US): Trusted Online Retailer Trading at a 9x P/E with a Coming Margin Inflection
China-focused Twitter user “pandawatch” posted a tweet comparing the total shareholder return of Chinese tech companies.
At the top of the list was online retailer JD.com (JD US — US$57 billion) with a total dividend yield and buyback yield of 10% — even after deducting share-based compensation. That’s impressively high.
- JD is one of China’s largest e-commerce companies. It dominates the niche of selling authentic, branded goods online with fast and reliable delivery.
Pre-IPO Guming Holdings (PHIP Updates) – Some Points Worth the Attention
- Due to intense competition, freshly-made beverage market has shown signs of saturation after rapid growth in previous years. Guming is currently in a bottleneck period. Future performance growth will decline.
- Due to a decrease in consumption, we have seen the price war in this industry. We think Guming’s profit margin performance will decline in the future if it reduces prices.
- Guming’s valuation should be higher than Nayuki Holdings (2150 HK) and Sichuan Baicha Baidao Industrial (2555 HK) due to larger revenue scale/higher net profit margin, but lower than MIXUE.
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