In today’s briefing:
- Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
- ECM Weekly (19th Mar 2023) – Japan Post Bank, SBI Sumishin, Harita, Trial Holding, ZKH, DPC, Kelsian
- Korean Government Reviews Rules to Ease Foreign Ownership Limits
- SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
- ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance
- [KE Holdings (BEKE US) Target Price Change]: Raise TP for Better Market Outlook and Profitability
- [NetEase (NTES US) Company Update]: Eggy Party Could Have Long Life Cycle
- Comms Group Limited – Global Revenue Growth Is Calling
Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
- In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
- In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
- US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.
ECM Weekly (19th Mar 2023) – Japan Post Bank, SBI Sumishin, Harita, Trial Holding, ZKH, DPC, Kelsian
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- IPO activity continues to pick up momentum, although the recent market volatility will likely make a few companies reconsider their near term plans.
- On the placements front, Japan Post Bank (7182 JP) hasn’t been playing ball, as has been the case with most of the other past deals which offered a trivial discount.
Korean Government Reviews Rules to Ease Foreign Ownership Limits
- In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
- The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
- Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
- Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
- We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
- The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance
- Three quarters of the way through the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.
- The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.
[KE Holdings (BEKE US) Target Price Change]: Raise TP for Better Market Outlook and Profitability
- BEKE (Beike) reported 4Q22 revenue in-line/4.9% vs our est./cons. Non-GAAP operating income 65% higher than our estimate and non-GAAP net income 59%/122% higher than our est./cons.
- We estimate 1Q23/2023 revenue to rise 46%/24% YoY. We think Beike’s strategy on focusing quality above scale is suitable under current real estate market trend, bode well for profitability.
- We maintain BUY rating and raise the TP by US$2 to US$23 to reflect 1) the gross margin improvement, 2)narrower loss-making in new initiatives.
[NetEase (NTES US) Company Update]: Eggy Party Could Have Long Life Cycle
- We suggest that the recent strong performance of <Eggy Party> could be sustainable because of the absence of competitive games…
- …an emerging user-generated-content (UGC) ecosystem with much potential, social connections among players, and popularity on social media.
- We maintain our previous estimation that <Eggy Party> could at least contribute RMB 4-5 bn this year. NetEase is one of our top picks in China internet.
Comms Group Limited – Global Revenue Growth Is Calling
- Comms Group Ltd (ASX:CCG) operates in the broad IT and communication space both domestically and offshore.
- Domestically, CCG provides a full range of IT and communication services in the highly fragmented MSP/ICT market, a sector expected to grow on the back of digitalisation, an increasingly remote workforce, the need for cyber security, and increasing complexity.
- Internationally, CCG is a niche player in the provision of corporate voice solutions for enterprises with an established, capital-light network particularly strong in the Asia Pacific.
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