Smartkarma Daily Briefs

• On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
• For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
• There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.

• Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
• Our proprietary store expansion framework suggests divergent growth outlook for major players – stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
• Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     

• A little over two months since PAG Capital won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK), the acquisition has now cleared all regulatory clearances, including SAMR.
• PAG will now be required to make an unconditional Offer for all H-shares at HK$1.5132/share. Separately, PAG intends to delist Fengxiang which involves Scheme-like delisting resolutions. 
• This is done. The timing for approving the SPA was bang-on with my expectation.

• PAG completed the auction procedures for the acquisition of a 70.92% stake in Shandong Fengxiang (9977 HK). This will trigger an unconditional MGO at HK$1.5132 per H Share.
• As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
• The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised spread is 5.1% and 65.9%, respectively.

• REPT BATTERO Energy (REPT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are Morgan Stanley, and Citic Securities.
• REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs. 
• As per F&S, it was amongst the top ten lithium-ion battery manufacturers in China as per installations for new energy application in 2021.

• ClouDr released positive profit alert for 2022. We think ClouDr is in a virtuous circle based on its solid business model. It’s a matter of time before ClouDr achieves breakeven. 
• As the number of hospitals/pharmacies newly deploying SaaS modules increases, and the existing B-end users continue to receive new patients,ClouDr is able to absorb new C-end users at low cost.
• When more powerful competitors come in and carve up B-end market, ClouDr’s long-term prospects may be uncertain, but its valuation shouldn’t be much lower than Ping An Good Doctor. 

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.

• Zx Inc (ZX CH) is looking to raise about US$100m in its upcoming HK IPO. The deal will be run by CICC and China Securities International. 
• Zx Inc runs three different businesses, namely an interactive entertainment business (Tan Wan), an instant food brand (Zha Zha Hui) and pop toy business (Bro Kooli). 
• Its interactive entertainment business Tan Wan focuses on publishing game products while while leveraging its precision marketing, in-depth operation and brand incubation capabilities.