Smartkarma Daily Briefs

• CALB (3931 HK) priced its H Share at HK$38.00 per share to raise net proceeds of HK$9.9 billion (US$1.3 billion). The H Share will start trading tomorrow.
• Grey market prices across various platforms show the shares last traded at HK$37.30-38.00 per share i.e., -2% down to unchanged compared to the IPO price.
• Despite peer multiple derating, the IPO price continues to imply a discount to the median peer CY2023 EV/EBITDA multiple. CALB should be, at least, valued in line with peer multiples.

• PICC Property & Casualty H (2328 HK) is a potential replacement for XPeng (9868 HK) at the December rebalance of the FTSE China 50 Index.
• There are a couple of index constituents that are close to the deletion threshold rank and that could drive two more changes. The review cutoff date is 21 November.
• Tianqi Lithium (9696 HK) will be eligible for index inclusion if it is added to the FTSE All-World Index in December – we have that as a high probability event.

• Greatpower Nickel & Cobalt Materials (1919613D CH) is looking to raise about US$300m in its upcoming Hong Kong IPO. The deal will be run by Haitong and China Securities International. 
• Greatpower Nickel and Cobalt Materials (GNCM) is a supplier of new energy battery materials in China, with a dual focus on nickel and cobalt for the production of cathode materials. 
• The company is principally engaged in the processing and sales of refined cobalt products as well as the trading of nickel and cobalt-related products. 

• Among domestic enterprises, MicroPort NeuroTech (2172 HK)’s product richness takes the lead. With the support of Microport Scientific (853 HK), the production quality system and capacity are relatively more guaranteed. 
• Fierce competition and centralized procurement are the major challenges, but the rich domestic distribution network and promising internationalization prospects would help NeuroTech find way out.
• By reducing the size of the IPO to maintain a good share price, at the expense of stock liquidity, it doesn’t really solve the problem.There’s risk of overvaluation for NeuroTech.

We view China Oil and Gas (COG) as “Medium Risk” on the LARA scale. This takes into account: [1] regulatory risk, with the company having experienced delays of over three years in cost pass-throughs for tariffs in Qinghai (since resolved); [2] exposure to oil price volatility in the small upstream oil and gas (O&G) segment; and [3] any aggressive debt-funded acquisitions, which we remain cautious about following the company’s acquisition of a 22% stake in Shandong Shengli in 2021. COG’s main asset is its 51% interest in downstream gas provider China City Natural Gas (CCNG), with the remaining 49% held by Kunlun Energy, a subsidiary of SOE PetroChina. Hence, cash leakage from dividends is significant. We believe the relationship with Kunlun helps secure COG’s gas supply and improves the company’s ability to obtain gas distribution concessions. In addition, PetroChina’s parent, China National Petroleum Corporation, had previously provided financing to CCNG at competitive rates.

Our Credit Bias on COG is “Stable”, given COG’s solid revenue growth from natural gas sales and distribution. Additionally, the upstream O&G business has benefited from strong oil prices. It has also expanded into production and sales of coal gasification, further diversifying the businesses. COG has a sound liquidity profile and reasonable access to funding. That said, we remain cautious about the financial performance of Shandong Shengli as COG has provided guarantees for its banking facilities, which could impact COG’s credit profile.  

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

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.

• CIFI Holdings
• NagaCorp Ltd
• Yuexiu Property

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.

• CIFI Holdings
• NagaCorp Ltd
• Yuexiu Property

• Currently at 69 index members, we just could reach 80 constituents at the December rebalance. That would leave the index committee to plan the move to 100 constituents in 2023.
• We list 10 potential inclusions to the index in December. One-way turnover is just under 4% and inclusions of all stocks will increase index market cap coverage significantly.
• Shorts are more than 3% of free float on five of the potential inclusions and these stocks could see some short covering ahead of the announcement of the changes.

• CALB raised around US$1.2bn in its Hong Kong IPO, after pricing its offering at the low-end.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
• In this note, we will talk about the demand for the deal and other trading dynamics.

• Dragged by partial disposal by its parent, Fosun Tourism (1992 HK) had a bad month in Sep and its share price is now back to early-2020 level. 
• 1H22 has seen good loss reduction and 2H22 outlook is on positive trend. Booking momentum at Club Med is encouraging and operational capacity will return to the 2H19 level.
• Atlantis Sanya has experienced gradual recovery in the Golden Week after the large-scale lockdown of Sanya in Aug. Completion of Lijiang and Taicang FOLIDAY Town will boost FY23.

• Hygeia had good performance in 2022H1,mainly because its business layout is mostly in lower-tier cities and its medical services belong to rigid demand. So, the impact of pandemic was limited.
• Hygeia is better than Topchoice and Aier Eye Hospital. The business model of specialized hospital is better than that of general hospital. Among for-profit hospitals, we are bullish on Hygeia.
• We think Hygeia will keep strong growth momentum in the future due to high demand. But pandemic and policy risk would weigh on valuations/sustainable bullish sentiment. Short-term trades are recommended.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.