Daily Brief China: Galaxy Entertainment Group, China Shengmu Organic Milk, NetEase, Sands China, Iron Ore, Dekon Food and Agriculture, Prosperous Industrial, Robotechnik Intelligent Te-A, Shenzhen Megmeet Electrical , Dream International and more

• HK$35.0bn net cash funds Phase 4 — Macau’s largest expansion — without a single dollar of new debt or dilution, while peers carry leverage at 2–8x EBITDA.
• FY2025 EBITDA grew 19% and NPAS rose 22%, yet shares fell. A 50-percentage-point divergence between fundamentals and price is not noise — it is the trade.
• We are BULLISH with a derived FV of HK$37.0 – 6.1x FY2027E EV/EBITDA — near the bottom of Galaxy’s historical range — we apply 8.0x for Fair Value.

• On the 30th October 2025, China Modern Dairy (1117 HK) (CMD) entered into a SPA to acquire 1.28% in China Shengmu (1432 HK), the completion of which triggered a MGO.  
• The Composite Doc was dispatched on the 30th June 2026, with a First Close on the 21st July. 31st August is the final close – unless unconditional 14 days beforehand. 
• CMD intends to Shengmu’s maintain listing. The Offer is conditional on CMD holding 50%. By my estimate, ~14.4% of shares out have now tendered, lifting CMD’s stake to ~45.66%. 

• NetEase (9999 HK) converted from a Secondary Listing to a Dual Primary Listing on the HKEX (388 HK) on 30 June as added to Southbound Stock Connect the same day.
• There has been steady buying in NetEase (9999 HK) via the link in the past 2 weeks and the inclusion in the HKC Internet index should double those holdings.
• Marketingforce (2556 HK) will be deleted from the index, and the stock could break to new lows as passives sell.

• ~26% GGR share, five resorts, 12,000+ rooms — the largest integrated gaming and hospitality footprint in Macau, and the sector’s leading non-gaming and MICE business.
• The LVS-consolidated leverage figure is misleading. SCL-specific net debt (~US$5.75bn) is materially lower than the parent figure, which includes Marina Bay Sands Singapore — a distinction consistently missed.
• Bullish, Fair Value HK$16.40. At 7.5x FY2027E EV/EBITDA — a 14% discount to our 8.75x warranted — the GGR franchise leader is priced as though the margin compression never stabilises.

• Supply side support lifted iron ore prices, yet deteriorating steel mill profitability keeps the underlying demand picture under pressure.
• Managed money participants maintained a firm bearish stance, suggesting downside risks continue to outweigh expectations of a sustained recovery.
• CMRG’s broader restrictions on Fortescue’s Super Special Fines could gradually pressure shipments, clouding the miner’s near-term sales outlook.

• Dekon is a major, vertically integrated producer of pork and poultry in China, the world’s largest pork market. Its performance is intrinsically linked to the highly cyclical nature of hog prices, which drives significant volatility in profitability.
• The company is focused on a ‘Company + Family Farm’ model, which aims to leverage the efficiency of local farmers while providing them with technology, breeding stock, and feed. This strategy, combined with investments in genetics and digital farming, is designed to create a cost-competitive advantage.
• While the industry is undergoing consolidation, providing opportunities for large players like Dekon, it faces persistent risks from animal diseases (such as African Swine Fever), volatile feed costs, and ongoing oversupply issues in the Chinese pork market which pressure prices and profitability.

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• Strong Financial Performance and Shareholder Returns: The company exhibits a robust growth profile, with a 3-year net income CAGR of 33.18% and an impressive 3-year free cash flow CAGR of 88.11%. This financial strength supports a very attractive dividend yield of 11.39%, underpinned by a 3-year dividend CAGR of nearly 26%.
• Attractive Valuation Relative to Peers: Prosperous Industrial trades at a significant discount to its peers across key valuation metrics, including a P/E ratio of 4.4x and a P/B ratio of 0.6x. This suggests a potentially undervalued opportunity for investors, especially given its strong growth and dividend profile.
• Established OEM/ODM with Diversified Production Base: With over 50 years of experience, the company has established itself as a key manufacturing partner for renowned global brands. Its production facilities are strategically located in China, Vietnam, and Cambodia, mitigating concentration risk and enhancing supply chain flexibility.

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• Robotechnik Intelligent Te-A (300757 CH), aims to raise up to US$1bn in its H-share listing.
• It is a leading global provider of high-precision intelligent manufacturing equipment and systems specializing in photovoltaic (PV) manufacturing solutions and silicon photonics (SiPh) assembly and testing equipment.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Megmeet, a power supply manufacturer, is seeking an A+H listing. Huatai and Citi are the sponsors.
• We look at the company’s core segments: smart home appliances and power supplies.
• We discuss preliminary thoughts on the company’s valuation based on A-H premiums.

• Dream International is a well-established contract toy manufacturer with a strong dividend track record and a diversified manufacturing base across China and Vietnam, positioning it to navigate supply chain shifts.
• The company faces headwinds from declining gross margins, as seen in its recent financial performance, and high dependency on a concentrated base of major toy brands and retailers in North America and Japan.
• Future growth hinges on management’s ability to secure new programs from key clients, expand its manufacturing capacity efficiently in regions like Vietnam and Indonesia, and adapt to the growing demand for licensed and smart toys.

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