In today’s briefing:
- Quiddity Leaderboard HSCEI Jun25: US$396mn One-Way; Announcement Tomorrow
- Quiddity Leaderboard HSIII Jun25: US$423mn One-Way for Jun; Some Sector-Neutral Pair Trades for Sep
- CATL (3750 HK): Powered by the PetroDollar. HK Offer Overview and Valuations.
- OneConnect Financial (6638 HK/OCFT US): Ping An’s Preconditional Scheme Offer Is Below Net Cash
- Bharti Airtel Block – Another Singtel Selldown Worth US$1bn
- Intel 18A: Cracks in the Wall. Good for TSMC.
- Appier (4180 JP) | AI Marketing Leader Positioned for Long-Term Growth
- Intel. From Copy Exactly To Copy TSMC?
- High Conviction 2025 – Freee: Robust Business Model Supports Stable Margins; Further Upside Ahead
- [SMIC (981 HK, BUY, TP HK$43.5) TP Change]: C1Q25 Review: Two Headwinds but One Steady Hand
Quiddity Leaderboard HSCEI Jun25: US$396mn One-Way; Announcement Tomorrow
- The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
- The official index changes and indicative weights for the June 2025 index rebal event will be announced on Friday 16th May 2025.
- We continue to expect zero index changes for June 2025 but we estimate there to be capping flows of US$396mn one-way.
Quiddity Leaderboard HSIII Jun25: US$423mn One-Way for Jun; Some Sector-Neutral Pair Trades for Sep
- The Hang Seng Internet & IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).
- For the June 2025 index rebal, we estimate there to be US$423mn one-way flows due to capping.
- We also expect three index changes (so far) for the next semiannual index review which will take place in September 2025 (regular ADDs/DELs only take place in March and September).
CATL (3750 HK): Powered by the PetroDollar. HK Offer Overview and Valuations.
- Contemporary Amperex Technology (CATL) (300750 CH) has offered118 million shares in Hong Kong, priced at HKD263 per share, a modest discount to its A share price.
- More than half of the USD4 Billion Hong Kong share offering has already been subscribed by cornerstone investors.
- Middle Eastern sovereign wealth funds are amongst CATL’s key corner stone investors while the deal excluded US onshore investors given the mounting geopolitical tensions.
OneConnect Financial (6638 HK/OCFT US): Ping An’s Preconditional Scheme Offer Is Below Net Cash
- Oneconnect Financial Technology (6638 HK) disclosed a preconditional scheme offer from Ping An Insurance (H) (2318 HK) at HK$2.068 per share (US$7.976 per ADS).
- Despite the hefty premium, the offer is opportunistic as it values OneConnect below net cash, and the FCF burn is modest (net cash can fund 8 years of FCF burn).
- Ping An has secured support from M&G to lower vote risk. The key risk remains that an activist stealthily builds a blocking stake (below the 5% HKEx disclosure threshold).
Bharti Airtel Block – Another Singtel Selldown Worth US$1bn
- Pastel Ltd, a subsidiary of Singapore Telecommunications (Singtel) is looking to raise up to US$1bn via selling a 0.8% stake in Bharti Airtel Limited.
- Singtel had sold a 0.8% stake (US$950m then) to GQG Partners in Mar 2024. Singtel had a total stake of around 29.3% in the firm, as of the last close.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
Intel 18A: Cracks in the Wall. Good for TSMC.
- Typical Intel? 18A node was going to be a great success with customers lining up. CFO now says that revenues from external customers is “not significant”, limited to packaging only.
- Intel CFO toned expectation of significant external 18A revenues by 2027: some revenues with UMC, Tower, some packaging, some older gen Intel16 “not a ton has to come from 18A”.
- Clear admission that Intel Foundry won’t be ready for external clients before 14A in 2028 due to lack of design tools (PDK). All that is good for TSMC.
Appier (4180 JP) | AI Marketing Leader Positioned for Long-Term Growth
- Solid Q1 and reaffirmed guidance: Appier delivered 27% organic growth in Q1, maintained FY targets, and continues to benefit from resilient demand for AI marketing solutions.
- Strategic acquisition of AdCreative.ai: The deal expands Appier’s AI portfolio, enhances creative automation capabilities, and supports cross-sell potential, despite short-term margin pressure from integration.
- Attractive valuation with upside: Despite strong fundamentals, shares trade below 3x EV/sales; H2 seasonality and AI adoption present a compelling re-rating opportunity.
Intel. From Copy Exactly To Copy TSMC?
- Intel has signalled a shift from its long held Copy Exactly strategy to a “democratization of innovation between Technology Development & High Volume Manufacturing
- This may be more akin to how TSMC operates. Some hail this as a positive, others are not quite so convinced, but it’s a seismic shift at a critical juncture
- If Intel is indeed switching from CE to CT, it needs to be a carefully thought out, well planned transition to succeed. But that’s not what what we see happening.
High Conviction 2025 – Freee: Robust Business Model Supports Stable Margins; Further Upside Ahead
- Freee KK (4478 JP) reported 3QFY06/2025 results today. Revenue for the quarter was marginally below consensus despite increasing 27% YoY, while GAAP OP beat consensus by a huge margin.
- Due to the tax filing season, freee’s S&M costs tends to be higher during 3Q which led to slightly lower Adj. OP during the quarter. Price revisions have improved ARPU.
- Freee’s share price has been up more than 40% YTD, strengthening profitability and its solid business model vs Money Forward (3994 JP) mean there is further upside.
[SMIC (981 HK, BUY, TP HK$43.5) TP Change]: C1Q25 Review: Two Headwinds but One Steady Hand
- SMIC reported C1Q25 top line, IFRS operating profit and IFRS net income (8.3%), in-line and (8.9%) vs our estimates.
- Evidence pointed to the revenue shortfall stemming from manufacturing issues associated with high ASP, 300mm, which we suspect to be advanced node products.
- We cut the TP from HK$47 to HK$43.5 to reflect the headwinds above.
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