Smartkarma Daily Briefs

• Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now open. The IFA opines it to be fair and reasonable.
• The partial offer is conditional on the offeror hitting 50.01% voting rights. Irrevocables ensure that it will be declared unconditional on or before the first closing date (26 January).
• Based on a minimum proration of 71.31% and at the current share price of HK$17.20 per share, the estimated breakeven price is HK$10.38 per share.

• We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
• We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.
• Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.
• We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.

• For the month of December, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
• The average premium for the new deals announced (or first discussed) in December was ~46%, giving an average for 2022 of 41%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

• Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
• We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

• On 30 December, Super Hi International Holding (9658 HK) completed its separate listing in HK from Haidilao by the way of introduction. The trading has been highly volatile so far.
• Our base case valuation of Super Hi International is target price of HKD13.6 per share, which represents a 40% upside from current levels.
• The same store sales at Super Hi improved significantly in nearly all major regions in 1H 2022. 

• Sales has been weak since October, mainly due to price hike.
• Technology leadership may not be sustainable with limited R&D investments.
• EREV version may not be the right solution for the company’s long-term growth. 

• There could be some catalyst for Hengrui, such as the NRDL negotiation in early January 2023, the slowing down of the negative impact of VBP and the increasing outpatient volume. 
• Hengrui’s performance low point was in 2022, and it would gradually recover after that. If investors want to invest in Hengrui, 2023 is a good time to take action.
• However, Hengrui could be hard to return to its peak. Without the next PD-1 level blockbuster product, it would be difficult for Hengrui to achieve complete performance reversal. 

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.

• Anton Oilfield
• Japfa Comfeed Indonesia
• Sands China
• Times China