In this briefing:
- StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
- Shenwan Hongyuan IPO Preview: Struggling to Stand Out
- Guotai Junan Placement: A Reasonable Price for Reasonable Performance
- China’s New Semiconductor Thrust – Part 2: Commodities as a Quick Path to Success
- NTT DoCoMo: Sale of HTHK Mobile Stake Is the End of an Era (Thankfully)
1. StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
This week in StubWorld …
- Amorepacific Group (002790 KS)‘s discount to NAV veers towards its one-year wide level, however newsflow, liquidity and financial performance side with Amorepacific Corp (090430 KS).
- Kingboard Laminates Holdings (1888 HK)‘s more reasonable tilt for Kingboard Copper Foil Hldgs (KCF SP) has minimal bearing on the group, but one wonders when Elec & Eltek Int (ELEC SP) will similarly be taken out.
Preceding my comments on Amorepacific, Kingboard and other stubs, are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
2. Shenwan Hongyuan IPO Preview: Struggling to Stand Out
Shenwan Hongyuan Hk (218 HK) is a Chinese securities firm which is backed by Chinese state-owned investment firm, Central Huijin, a 57% shareholder. It listed on the Shenzhen Stock Exchange in January 2015 and seeking to raise $1.5 billion through a Hong Kong listing. Shenwan Hongyuan will start book-building on Thursday according to press reports.
Securities firms had a tough 2H18 due to unfavourable stock market conditions and rising competition in China and Hong Kong. In 2019, the share prices of securities firms have markedly risen YTD due to the strong index performance and rising trading volumes. Overall, Shenwan Hongyuan fundamentals are reflective of a mid-tier firm struggling to stand out.
3. Guotai Junan Placement: A Reasonable Price for Reasonable Performance
Guotai Junan Securities (H) (2611 HK), a Chinese securities firm, has launched a primary placement to raise HK$2.7 billion ($345 million) at a placing price of HK$16.34. The placing price is a 7% discount to the last close price of HK$17.64.
In 2019, the share prices of Chinese securities firms have markedly risen YTD due to the strong index performance and rising trading volumes. We believe Guotai Junan’s fundamentals are reasonable due to its mid-tier revenue growth and top-quartile margins. Overall, we would participate in the placing.
4. China’s New Semiconductor Thrust – Part 2: Commodities as a Quick Path to Success
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
5. NTT DoCoMo: Sale of HTHK Mobile Stake Is the End of an Era (Thankfully)
NTT Docomo Inc (9437 JP) recently announced it would sell its 25% stake in Hutchinson Telecom Hong Kong’s ( Hutchison Telecommunications Hk Hld (215 HK) mobile unit for US$60mn with closing expected at the end of May. This ends a 20-year association with Hutchinson forged in the initial excitement over 3G in 1999 but it hasn’t been a good ride for DoCoMo which lost close to 90% on its Hutchison investments and its other international forays were not much better. On a related note, the HK mobile sale follows soon after DoCoMo’s exit from its credit card joint venture with Sumitomo Mitsui but we would not read anything into this beyond a rationalization of its non-core investments.
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