Quick Ideas #9

LU and back into YI

Another quick trade idea. A continuation of the China theme (see my last post for more info).  Lufax holdings (LU). Again courtesy of JohnTill on Stocktwits. A Chinese lending company, lending out directly and providing a peer to peer lending platform for the Chinese market. With Ping An being a ~41% shareholder. This stock trades both on the HK and US exchange. Interestingly on the Hong Kong side there was a large increase of the share price on huge volume, 1 day before their earnings release (which is on the 21st of March):

Which was not really followed up on the US exchange. US shares should trade to ~$3.8 to be on par with the HK traded shares. While they trade at only $3.3.

The sudden jump might be caused by insider trading? Possibly the earnings report will be quite good? Who knows. Either way the stock is quite cheap. Trading at only 14% of tangible book value and a 7x FW PE. At its height in 2021 the company earned more than its entire market cap. It paid out >50% of its current market cap in dividends in 2022. This VIC write-up provides a more in depth look at the company. Risk of this being a fraud is rather low due to it being backed by Ping An, a large Chinese insurance firm.

So I have entered into this stock as a speculative trade at $3.3/share. This is not a high conviction idea for me. 

Then I got back into 111 inc (YI) as well. I had this as a tiny <1% tracker position. Now it is back to just under 3%. Stock trades at a large discount to YSB which had a pretty good earnings report. The buyout is officially off, but I think it is likely the company is sold. This is basically a deep value investment at this point. Net debt could go to $75m if they cannot roll over the minority investor liability for another year. Market cap of $125m and if this is merged with a competitor, cost synergies alone could probably be $40-60m. 

In their last call they mentioned that Q4 will likely be quite good. Weak results in 2023 were mainly the result of inventory destocking due to Covid hoarding. So let’s see if the CEO can sell this one as he has with his previous venture YHD. 

Readers of this blog should do their own due diligence before buying or selling anything, since I have been wrong before and cannot guarantee all information in this write-up is 100% factual. I may buy or sell the above mentioned stocks at any time. I am not your financial advisor.