Smartkarma Daily Briefs

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Symbio Holdings (SYM AU), ENM Holdings (128 HK), Eoflow (294090 KS), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), Costa Group.
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), Yaizu Suisankagaku Industry (2812 JP), Kenedix Retail REIT (3453 JP), Penguin International (PBS SP). 

• As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
• Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
• Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

• This is the Brand Spanking New and Improved and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see H/A relationships easily. 
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations. 
• We hope this new version serves readers even better. Improvements this week due to popular demand, and updated format. Further feedback is welcome/appreciated. 

• Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
• The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk. 
• The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote. 

• The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK). 
• Neither of these two are a surprise. Neither are hugely impactful. 
• There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

• Fu Shou Yuan (1448 HK) has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.
• Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.
• A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&As are added drivers to earnings prospects.

• The TSE listing rules that include numerical targets for female board members are limited to prime market listed companies, so the majority of listed companies are not covered.
• The “priority policy” on diversity is not budgeted or legislated. In the absence of underlying legislation, it is left to companies to decide how seriously they will implement it.
• Regarding “30% or more female board members by 2030,” if companies want to achieve this goal, they’ll have to rely on female outside board members to make up the numbers.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Hongqiao
• Gajah Tunggal

• It is an indisputable fact that JD Health’s revenue growth has slowed down. The core reason is the industry beta brought by mobile Internet demographic dividend/COVID-19 dividend has faded away.
• JD Health’s performance could be under pressure in 2H23. If revenue growth continues to show a downward trend, whether the current profit margin/profitability can be maintained is a question mark.
• JD health is facing four major dilemmas, including both business and policy aspects. Long-term valuation outlook for JD Health is not optimistic. We advise investors to re-evaluate the Company.