Category

China

Daily Brief China: Shanghai Henlius Biotech , Midea Real Estate Holding , TBEA Co Ltd A, Gambol Pet Group , China Gas Holdings, China Oilfield Services H, Dong E E Jiaoco Ltd A and more

By | China, Daily Briefs

In today’s briefing:

  • Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price
  • Midea Real Estate (3990 HK):  Divesting Property Development Business (Cash Option At 57% Premium)
  • Quiddity Leaderboard SSE50/180 Dec 24: Some Expected DELs Could Underperform Peers
  • Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: Expected ADDs Could Outperform Expected DELs
  • Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer
  • China Gas Holdings (384 HK): Still Warrants a Look
  • China Oilfield Services 2883.HK – Capitalising on the Boom in Offshore Exploration
  • Dong E E Jiao (000423.CH) – Big Dividends and Potential Leap in Valuation Are Highly Anticipated


Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price

By Arun George

  • Shanghai Henlius Biotech (2696 HK) disclosed a pre-conditional privatisation offer by Shanghai Fosun Pharmaceutical (Group) (2196 HK) at HK$24.60, a 36.7% premium to the undisturbed price. The offer price is final. 
  • The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is no minimum acceptance condition. 
  • Long term investors will be unimpressed as the offer is half the HK$49.60 IPO price. However, shareholders with blocking stakes should be supportive partly because of the share alternative option.

Midea Real Estate (3990 HK):  Divesting Property Development Business (Cash Option At 57% Premium)

By Steve Zhou, CFA

  • Midea Real Estate Holding (3990 HK) announced last night a proposal for distribution in specie of the property development business to shareholders.
  • The proposal allows shareholders to select between receiving pro rata shares in the PrivateCo, or the cash alternative at HKD5.90 per share, a 57% premium to last close at HKD3.75. 
  • I believe this is a good deal for minority shareholders.  The company (ex. property development business) will continue to be listed on the HKSE after the distribution. 

Quiddity Leaderboard SSE50/180 Dec 24: Some Expected DELs Could Underperform Peers

By Janaghan Jeyakumar, CFA

  • SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
  • In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
  • We currently estimate one-way flows to be US$1.4bn and US$235mn for the SSE 50 and 180, respectively.

Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: Expected ADDs Could Outperform Expected DELs

By Janaghan Jeyakumar, CFA

  • The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
  • The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
  • We see seven change for the ChiNext index and five changes for the ChiNext 50 index.

Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer

By David Blennerhassett

  • Shanghai Fosun Pharmaceutical (2196 HK) has made a HK$24.60/share Offer (best & final), in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative may be afforded. 
  • As Henlius is PRC-incorporated, this Offer is structured as a Merger by Absorption, involving a Scheme-like vote for independent H-shareholders. There is no tendering condition.
  • Pre-Conditions include NDRC, MoC, and SAFE. The Long Stop date to secure these conditions is 30th April 2025. That’s way too conservative. This should be wrapped up around mid 4Q24.

China Gas Holdings (384 HK): Still Warrants a Look

By Osbert Tang, CFA

  • China Gas Holdings (384 HK)‘s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. 
  • FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.
  • China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. 

China Oilfield Services 2883.HK – Capitalising on the Boom in Offshore Exploration

By Rikki Malik

  • The largest player in Asia in the offshore oil services sector with limited competition
  • Business dynamics trending up as offshore exploration is the focus of many energy majors
  • Recent sell-off due to concerns over Aramco drilling delays provide a good entry point

Dong E E Jiao (000423.CH) – Big Dividends and Potential Leap in Valuation Are Highly Anticipated

By Xinyao (Criss) Wang

  • Dong-E-E-Jiao’s performance is exciting. The first-ever equity incentive plan fully demonstrates the new management team’s confidence in the future development of the Company. There’s potential for another leap in valuation.
  • Our 2024 forecast is net profit to reach RMB1.4 billion, up 20% YoY. Reasonable valuation is 25-30x P/E.If market value falls below RMB35 billion, this is a great buying opportunity.
  • Dong-E-E-Jiao is worth long-term holding due to attractive dividend policy. China Resources may further improve dividend payout, which is in line with the major trend for SOE to increase dividends.

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Daily Brief China: MMG, Swire Properties, Cathay Pacific Airways, YSB, Guangzhou Automobile Group, Acotec Scientific Holdings, Greentown China and more

By | China, Daily Briefs

In today’s briefing:

  • MMG (1208 HK): Rights Trade Playbook
  • Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas
  • Cathay Pacific (293 HK): Multiple Positive Developments
  • China Healthcare Weekly (Jun23)-Retail Pharmacy’s Dilemma, Logic to Biotech’s Stock Price,YSB’s Risk
  • China Consumption Weekly (24 Jun 2024): Kuaishou, Bilibili, NetEase, GAC, Honda Motor, Chow Tai Fook
  • Acotec Scientific Holdings (6669.HK) – The Company Is Now In Trouble
  • Morning Views Asia: Greentown China


MMG (1208 HK): Rights Trade Playbook

By Arun George

  • On 4 June, MMG (1208 HK) announced plans to raise HK$9.1bn (US$1.2bn) through 2 rights shares for every five existing shares rights offering, with a rights price of HK$2.62.
  • Since the rights issue announcement, MMG shares have declined by 16.2% to the undisturbed price and by 8.0% compared to the TERP of HK$3.48 per share. 
  • MMG’s trading pattern has diverged from Link REIT/Yuexiu’s rights trading due to the statement on 18 May that the Peruvian mine is not liable for a 30% withholding tax.

Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas

By Brian Freitas


Cathay Pacific (293 HK): Multiple Positive Developments

By Osbert Tang, CFA

  • With more foreign countries being granted visa-free visits to China, Cathay Pacific Airways (293 HK) will benefit from more transfer traffic via Hong Kong.
  • Recovery is decent with passenger traffic rising 37.5% in 5M24. CX’s capacity already returned to 80% of pre-pandemic in 2Q24, and this will reach 100% in 1Q25. 
  • YTD, CX is still a laggard relative to many global airlines. Its P/B valuation is not stretched at 0.8x, given ROE of 11% over the next 3 years.  

China Healthcare Weekly (Jun23)-Retail Pharmacy’s Dilemma, Logic to Biotech’s Stock Price,YSB’s Risk

By Xinyao (Criss) Wang

  • Retail pharmacies experienced performance decline in April and May. Due to negative policies, retail pharmacies will experience industry clearance. Therefore, we do not recommend investors to bottom-fish related stocks now.
  • There is a logic to biotech’s performance from 2023 to present.The clearer the path of sustainable development, the better the stock price performance. They can be divided into three types.
  • YSB faces big risks and the outlook is not optimistic. If the final valuation of the Company is lower than China Resources Pharmaceutical and Shanghai Pharmaceuticals, we wouldn’t be too surprised.

China Consumption Weekly (24 Jun 2024): Kuaishou, Bilibili, NetEase, GAC, Honda Motor, Chow Tai Fook

By Ming Lu

  • Kuaishou and Bilibili’s GMV surged YoY during “June 18” sales.
  • World of Warcraft: Wrath of the Lich King, will formally start on June 27.
  • GAC Honda Automobile Ltd planned to dismiss 1700 employees, about 14% of total.

Acotec Scientific Holdings (6669.HK) – The Company Is Now In Trouble

By Xinyao (Criss) Wang

  • Acotec’s 2023 performance was unsatisfactory. Core products suffered weak growth. Positive trend of continuing to optimize revenue structure was broken. Sales of latecomers’ competing products would expand rapidly in 2024/2025. 
  • Revenue proportion in overseas markets was still below 5% in 2023. If no highlights in Acotec’s cooperation with Boston Scientific in 2024, this collaboration could be considered a failure.
  • Due to VBP, margin could further decline. If it’s just the current situation, then Acotec is not as good as Zylox-Tonbridge. So, its valuation should also be lower than Zylox-Tonbridge.

Morning Views Asia: Greentown China

By Leonard Law, CFA

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.


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Daily Brief China: L’Occitane, Luxshare Precision Industry, Trip.com and more

By | China, Daily Briefs

In today’s briefing:

  • Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon
  • Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again
  • Monthly Chinese Tourism Tracker | Outbound Recovery Expands | Domestic Solid Too | (June 2024)


Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon

By Arun George


Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again

By Travis Lundy

  • The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
  • Last week saw NORTHBOUND net SELL RMB 16.1bn of A-shares. NORTHBOUND bought tech and sold everything else, especially consumer names. Kweichow Moutai, Midea, appliances and renewables.
  • Ongoing questions as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected from earlier announcements.

Monthly Chinese Tourism Tracker | Outbound Recovery Expands | Domestic Solid Too | (June 2024)

By Daniel Hellberg

  • Growth of outbound Chinese travel demand strong in May as HK, Macau slow
  • Domestic travel demand also showed solid growth in May and early June
  • Trip.com appears reasonably cheap now that it’s dipped below US$50, BUY

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Daily Brief China: China Merchants China Direct Investments, Tianju Dihe Technology, Foxconn Industrial Internet and more

By | China, Daily Briefs

In today’s briefing:

  • CMCDI (133 HK): Kan Re-Elected. But Only Just
  • Tianju Dihe Technology IPO: Limited Room For Multiple Expansion Despite Healthy Growth
  • Downgrading Europe to Market Weight; Europe Indexes Still Bullish (Price); Bullish Outlook Intact


CMCDI (133 HK): Kan Re-Elected. But Only Just

By David Blennerhassett

  • At the AGM yesterday, China Merchants China Direct Investments (133 HK)‘s director Elizabeth Kan was re-appointed, but by a wafer-thin margin: 29.97% of shares out FOR, and 29.44% AGAINST.
  • Stripping out Victor Chu’s stake (~2%?) and China Merchant’s (27.6%), or collectively ~29.6% of shares out, it’s fair to say the remainder of the shareholder register wants her out. 
  • CMCDI is currently trading at a 55% discount to the latest NAV (as at 31st May 2024) of HK$30.42/share.  Argyle continues to add to its position. 

Tianju Dihe Technology IPO: Limited Room For Multiple Expansion Despite Healthy Growth

By Andrei Zakharov

  • Tianju Dihe Technology, a provider of integrated API-enabled data exchange services in China, set terms for an IPO and plans to raise ~HK$400M in June.
  • The initial public offering is expected to be priced at HK$83.33 per H share, valuing the technology company at ~HK$4.2B or $535M based on 50.1M outstanding shares.  
  • Cornerstone investors have agreed to acquire ~3.8M H shares, representing 80% of the offer shares or ~8% of the total outstanding shares.

Downgrading Europe to Market Weight; Europe Indexes Still Bullish (Price); Bullish Outlook Intact

By Joe Jasper

  • Not much has changed since our latest Int’l Compass from May 31, 2024 titled “Buy the Pullback.” 
  • We were buyers of the pullback in global equities (MSCI ACWI, ACWI ex-US, EAFE, EM, Europe, Japan, Taiwan, etc.) with important supports holding, combined with ongoing healthy market dynamics.
  • Supports are holding, and our bullish outlook (since early-November 2023) remains intact. Continue to buy dips.

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Daily Brief China: Taste Gourmet, SenseTime Group , PC Partner, Hengdeli Holdings, Shanghai Rural Commercial Bank, Sa Sa International Hldgs, China Merchants China Direct Investments, Road King Infrastructure and more

By | China, Daily Briefs

In today’s briefing:

  • Taste Gourmet (8371 HK): Strong FY24, 6.7x PE, Cash ~23% of Mkt Cap and >8% Dividend Yield
  • Sensetime Placement – Seems Highly Opportunistic
  • PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal
  • Hengdeli Holdings (3389 HK)’s Pitiful Partial Offer
  • Quiddity Leaderboard CSI 300/​​500 Dec 24:  A Long-Short Basket Trade Idea with High Momentum
  • Sa Sa Intl (178 HK): Every Coin Has Two Sides
  • CMCDI Update: Warning Shot Fired At AGM Despite Kan’s Successful Re-Election
  • Morning Views Asia: Road King Infrastructure


Taste Gourmet (8371 HK): Strong FY24, 6.7x PE, Cash ~23% of Mkt Cap and >8% Dividend Yield

By Sameer Taneja

  • Taste Gourmet (8371 HK) reported revenues up 37% YoY and profits up 29% YoY (lower than our expectation of 39% profit growth) due to a slightly weaker-than-expected Q4.
  • Dividends for H2 were 7.4 cents/share (overall FY24:12.9 cents), implying an 8.1% dividend yield. Net cash on the balance sheet was 143 mn HKD (23% of market cap).
  • Trading at 6.7x PE FY24 (March end) and with an excellent execution track record, we believe that the company will be able to post more robust numbers in FY25. 

Sensetime Placement – Seems Highly Opportunistic

By Sumeet Singh

  • SenseTime Group (20 HK)  aims to raise up to US$263m via selling around 4.5% stake.
  • Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
  • In this note, we will talk about the placement and run the deal through our ECM framework.

PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal

By David Blennerhassett

  • On the 18th June, personal computer (PC) parts and accessories play PC Partner (1263 HK) announced a profit alert for 1H24. 
  • That’s positive. What is also interesting is that the board is considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
  • Precedents are thin on the ground. And for good reason. The process is not straightforward.

Hengdeli Holdings (3389 HK)’s Pitiful Partial Offer

By David Blennerhassett

  • After watch accessory play Hengdeli Holdings (3389 HK) was suspended on the 17th June pursuant to the Takeovers Code, I didn’t hold out high hopes of a knock-out Offer.
  • And on cue, CEO Tony Cheung (16%), son of founder Zhang Yuping (holding 17%), has made a Partial Offer (for 15% of shares outstanding) at HK$0.16/share, towards gaining majority control.
  • That’s a 18.5% premium to last close … and a 80% discount to NAV, and a 47% discount to Hengdeli’s net cash as at 31 December 2023.

Quiddity Leaderboard CSI 300/​​500 Dec 24:  A Long-Short Basket Trade Idea with High Momentum

By Janaghan Jeyakumar, CFA

  • CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
  • In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
  • Currently, we see 16 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

Sa Sa Intl (178 HK): Every Coin Has Two Sides

By Osbert Tang, CFA

  • Despite missing market consensus, Sa Sa International Hldgs (178 HK)‘s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.
  • Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. 
  • While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  

CMCDI Update: Warning Shot Fired At AGM Despite Kan’s Successful Re-Election

By Alec Tseung

  • While Elizabeth Kan barely survived the AGM vote, ASM has effectively mobilized minority shareholders.
  • Lazard (owns 15% of CMCDI) probably voted alongside ASM (owns 9%). Other than China Merchants Group and Victor Chu, almost no “outside shareholders” voted in favor of Kan, .
  • The next battleground is a vote in November when CMCDI needs to renew its investment management agreement. Intense behind-the-scene negotiations are expected, given the bargaining power ASM now demonstrated.

Morning Views Asia: Road King Infrastructure

By Leonard Law, CFA

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.


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Daily Brief China: Cosco Shipping Energy Transportation Co. Ltd. (H), West China Cement, Black Sesame Technologies, Bloks Group, Soft International Group and more

By | China, Daily Briefs

In today’s briefing:

  • Recent Sell-Off in Tanker Stocks Provides an Opportunity in Cosco Shipping Energy – 1138.HK
  • West China Cement (2233 HK):  African Cement Play At 4x 2024E PE
  • Black Sesame Pre-IPO – PHIP Updates – Unable to Shake off Its Loss-Making Tendencies
  • Bloks Group IPO: Exceptional Revenue Hyper-Growth and Profitability Are Unique Among Toy Makers
  • Pre-IPO Soft International Group – Whether Performance Growth Can Be Sustained Is a Question Mark


Recent Sell-Off in Tanker Stocks Provides an Opportunity in Cosco Shipping Energy – 1138.HK

By Rikki Malik

  • All the business fundamentals continue to trend in the right direction
  • The sector has sold off with the general commodity sell-off
  • Investors not giving the benefit of the doubt to future oil demand

West China Cement (2233 HK):  African Cement Play At 4x 2024E PE

By Steve Zhou, CFA

  • West China Cement (2233 HK) is a cement company based in Western China.  Sales volume in Africa in 2023 was 2.6 million tons, up 117% from 1.2 million tons in 2022. 
  • The company has 2 million tons of cement capacity in Mozambique, 1.5 million tons in Congo, and 1.3 million tons in Ethiopia. 
  • The company is trading at 4x 2024E PE.  I believe the risk reward is quite high here. 

Black Sesame Pre-IPO – PHIP Updates – Unable to Shake off Its Loss-Making Tendencies

By Clarence Chu

  • Black Sesame Technologies (BLACKSES HK) is looking to raise around US$300m in its upcoming Hong Kong IPO.
  • Black Sesame International Holdings (BSIH) is an automotive-grade computing SoC and SoC-based intelligent vehicle solution provider.
  • In our previous note we looked at the company’s past performance. In this note, we discuss Black Sesame’s PHIP updates.

Bloks Group IPO: Exceptional Revenue Hyper-Growth and Profitability Are Unique Among Toy Makers

By Andrei Zakharov

  • Bloks Group, a fast-growing toy company and leader of assembly character toys, filed for a Hong Kong IPO. The company is headquartered in Shanghai, PRC, and has 410 full-time employees.
  • Bloks Group has raised $200M+ to date from investors, including YF Capital, Legend Capital, Source Code Capital, Gaorong Capital and SinoMedia Asia Pacific.
  • The Chinese toy maker has delivered an exceptional revenue hyper-growth of 169% y/y in 2023. Elite operating metrics and impressive financial profile make IPO attractive for investors.

Pre-IPO Soft International Group – Whether Performance Growth Can Be Sustained Is a Question Mark

By Xinyao (Criss) Wang

  • The top two biggest markets of Soft International (China and Russia) are encountering the challenge of slowing growth or even growth stagnation due to decreasing birth rate and increasing competition.
  • Single-Digit net profit margin is not satisfactory for a company with strong consumption attributes. This makes us wonder if the personal hygienic disposables is not a money-making business. 
  • Overreliance on Russian Top-tier Retailer would bring risks to the business.Both revenue growth and profitability could decrease sharply if adverse situations occur. Soft International’s valuation could be lower than peers.

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Daily Brief China: L’Occitane, COFCO Joycome Foods, Hutchmed China Ltd, ENN Energy and more

By | China, Daily Briefs

In today’s briefing:

  • L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump
  • COFCO Joycome (1610 HK): Brewing a Hog Cycle Upturn?
  • Hutchmed China Ltd (13.HK/​​HCM.US) – Time to Reassess Valuation Prospects Despite the Pain Points
  • Morning Views Asia: China Jinmao Holdings, ENN Energy, ENN Natural Gas, MGM China Holdings


L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump

By David Blennerhassett

  • In a long-awaited development, L’Occitane (973 HK)  announced during the lunchbreak yesterday, a scrip alternative. Plus Pleasant Lake Partners (PLP) (3.25%) will accept the Offer (either in cash or scrip). 
  • This was positive news. And the market reacted accordingly, up ~1.0% in the afternoon session.
  • One quirk in the doc was the perception those electing the scrip alternative may get a higher % in the unlisted Offeror. A back-end bump for PLP? (Hint: No).

COFCO Joycome (1610 HK): Brewing a Hog Cycle Upturn?

By Osbert Tang, CFA

  • Cofco Joycome (1610 HK) is in a good position to benefit from the hog cycle upturn. China’s anti-dumping investigation into imported pork from the EU may also disrupt supply.
  • Its average hog price has increased by 12.7% YTD and by 1.6% YoY for 5M24. Market hog price further surged by 10.4% in the week of 12-Jun from end-May.
  • Its P/B of 0.78x is inexpensive at 1SD below the 5-year average. Its peers like Muyuan Foodstuff (002714 CH) and Wens Foodstuff Group (300498 CH) are also interesting. 

Hutchmed China Ltd (13.HK/​​HCM.US) – Time to Reassess Valuation Prospects Despite the Pain Points

By Xinyao (Criss) Wang

  • Takeda’s sales team is fully prepared for the launch of fruquintinib in EU. 2024 full-year overseas sales may once again beat the expectations. High growth is expected from 2024 to 2026.
  • Peak sales of fruquintinib + savolitinib + surufatinib that recorded in HUTCHMED’s revenue is expected to be over US$750 million.Without considering other revenue, market value would reach about US$4.5 billion.
  • HUTCHMED’s pipeline lacks blockbuster products and the indications are small. With the rise of PROTAC, small molecule drugs would face challenges, which would test the management’s resilience in the future.

Morning Views Asia: China Jinmao Holdings, ENN Energy, ENN Natural Gas, MGM China Holdings

By Leonard Law, CFA

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.


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Daily Brief China: L’Occitane, Hengdeli Holdings, XPeng , New Oriental Education & Techn, Lufax Holding , Taste Gourmet, Iron Ore and more

By | China, Daily Briefs

In today’s briefing:

  • L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional
  • Hengdeli Holdings (3389 HK): Negative EV Play Halted
  • Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping
  • Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way
  • L’Occitane (973.HK) – The Privatization Is About to Succeed
  • Closing Lufax
  • Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – June 2024
  • Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down


L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional

By Arun George

  • L’Occitane (973 HK) announced the share alternative at an exchange ratio of 10 rollover shares for each offer share, subject to a cap of 5% of outstanding shares.
  • The share alternative option will help the offer and was likely required to get Pleasant Lake Partners’ support (3.25% of outstanding shares). There is minimal vocal opposition to the offer. 
  • Irrevocables/Letters of support represent 49.83% of disinterested shares. An attractive offer and the share alternative facilitate meeting the minimum acceptance condition, which requires an 80% disinterested acceptance rate (ex. irrevocables).

Hengdeli Holdings (3389 HK): Negative EV Play Halted

By David Blennerhassett

  • Watch accessory play Hengdeli Holdings (3389 HK) is currently suspended pursuant to the Takeovers Code.
  • Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or Swatch Group (UHR SW) (9.94%) may table an Offer. My money is on Zhang.
  • This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn – as at 31 December 2023 – against a market cap of HK$0.59bn.

Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping

By Janaghan Jeyakumar, CFA

  • The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
  • In this insight, we take a look at the rankings of potential ADDs and potential DELs for the September 2024 index rebal event.
  • We do not see any index changes in September 2024 but there could be one-way flows of US$425mn due to capping.

Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

By Janaghan Jeyakumar, CFA

  • The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
  • In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.
  • Based on the current data, I see two ADDs and two DELs.

L’Occitane (973.HK) – The Privatization Is About to Succeed

By Xinyao (Criss) Wang

  • So far, about 49.8% of disinterested shares from Irrevocable Undertakings/Non-binding Letters of Support would accept the Share Offer. Success is within reach based on a “good enough” privatization price. 
  • The Share Alternative is mainly aimed at investors who are hoping for the future re-listing of L’Occitane in the overseas markets – They can still get a vantage point.
  • However, re-listing seems still distant/uncertain. The value of Rollover Shares in the future remains uncertain. Investors would face risks if they choose the Share Alternative. The Cash Alternative is preferred.

Closing Lufax

By Turtles all the way down

  • It has come to my attention that Lufax management has recently altered the terms of their convertible debt: Based on the terms and conditions of the Ping An Convertible Promissory Notes, as a result of the Special Dividend, the Conversion Price will be adjusted from US$12.
  • Based on the terms and conditions of the Ping An Convertible Promissory Notes, as a result of the Special Dividend, the Conversion Price will be adjusted from US$12.76 per Share as at the date of this circular to US$2.32 per Share upon settlement of the Special Dividend, and thus, upon full conversion, the Ping An Convertible Promissory Notes can be converted into a maximum number of 421,077,586 Shares (the “Conversion Shares”).
  • The Company considers that the adjustment formula is in line with market practice for anti-dilution provisions in convertible securities.

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – June 2024

By Sameer Taneja


Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down

By Srinidhi Raghavendra

  • Chinese real estate investments fell 10.1% in the first five months of 2024 YoY. New home prices fell at the fastest pace in more than 9.5 years in May.
  • Fresh bank lending in China rebounded well expectations in May. Chinese banks issued 950B yuan (v/s 1.36T yuan issued last May) in new loans last month.
  • China’s consumer inflation held flat in May amid feeble domestic demand, uneven economic recovery, and consumer confidence weakness.

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Daily Brief China: SHEIN, WuXi AppTec, 4Paradigm, Alibaba Group Holding , BYD, China Railway Signal & Communication, Ascentage Pharma Group Corp, Fangzhou, Iron Ore, China Vanke and more

By | China, Daily Briefs

In today’s briefing:

  • Growth of SHEIN, Temu Appears to Be Boosting Asia-US Air Cargo Volume & Pricing
  • China Healthcare Weekly (Jun16)-WuXi Get A “Reprieve”, Vaccine Company in Trouble, Insurance Surplus
  • 4Paradigm: Sage AI Platform 5.0. Could Drive ~30% Y/Y Revenue Growth in 2024, PT Raised To HK$100
  • ECM Weekly (17th June 2024)-Shift Up, Webtoon, Quantum, Guzman, MaoGeping, Johor Plant, Telix, Atour
  • China Consumption Weekly (17 Jun 2024): BYD, Geely, Zeekr, Zhihu, China Literature, Tencent
  • China CRSC (3969 HK): Well Worth the Premium
  • Ascentage Pharma (6855.HK) Signs $1.3B Deal with Takeda – Finally on the Right Path
  • Pre-IPO Fangzhou Inc. (PHIP Updates) – Some Points Worth the Attention
  • Harvesting Seasonality in Iron Ore Prices Induced by Weather, Inventory Restocking, and Holidays
  • Morning Views Asia: Bharti Airtel, China Vanke , Nickel Industries


Growth of SHEIN, Temu Appears to Be Boosting Asia-US Air Cargo Volume & Pricing

By Daniel Hellberg

  • For first time since 2022, carriers’ cargo revenue, yield, load factor all rising
  • Asia outbound, US inbound air cargo tons both improving in early 2024
  • SHEIN, Temu could account for 40%+ of US inbound air tons from CH, HK, TW

China Healthcare Weekly (Jun16)-WuXi Get A “Reprieve”, Vaccine Company in Trouble, Insurance Surplus

By Xinyao (Criss) Wang

  • Due to increasing competition/price reduction/overcapacity issue, outlook of domestic vaccine companies isn’t optimistic, which has been reflected in 24Q1 results. However, there’s also a “special one” that deserves investors’ attention.
  • The status of medical insurance funds is improving rather than deteriorating, but we’re currently in the first half of the decade with the highest pressure on medical insurance.
  • As the H.R.8333 proposal faced obstacles in the process of being included in NDAA, WuXi AppTec/WuXi Bio’s shares once rebounded.We remain conservative as situation is not as simple as imagined.

4Paradigm: Sage AI Platform 5.0. Could Drive ~30% Y/Y Revenue Growth in 2024, PT Raised To HK$100

By Andrei Zakharov

  • 4Paradigm, China’s AI software company with focus on enterprise-level solutions, performed well and achieved solid growth in 2023 and Q1 2024. 
  • In my insight, I discuss valuation framework for comparable company analysis and set a new 12-month PT for 4Paradigm.
  • The company’s management has set a clear goal of profitability. I like 4Paradigm’s leadership position and hyper-growth in revenue from the Sage AI Platform.

ECM Weekly (17th June 2024)-Shift Up, Webtoon, Quantum, Guzman, MaoGeping, Johor Plant, Telix, Atour

By Sumeet Singh


China Consumption Weekly (17 Jun 2024): BYD, Geely, Zeekr, Zhihu, China Literature, Tencent

By Ming Lu

  • European Commission will impose provisional tariffs on imported Chinese battery electric vehicles.
  • Zeekr’s deliveries increased by 117% YoY in 1Q24 and by 112% YoY in the first five months of 2024.
  • Ant Group will pay RMB1 billion to sponsor content creators on AliPay.

China CRSC (3969 HK): Well Worth the Premium

By Osbert Tang, CFA

  • China Railway Signal & Communication (3969 HK)‘s latest order backlog is estimated to be Rmb173.7bn, enough to cover FY24F revenue by 4.4x.
  • Gross margin has sustained expansion, reaching a record high of 27.8% in 1Q24. Higher R&D expenses will benefit its medium-term earnings.
  • Net cash equals 59% of the share price, allowing it to maintain over 50% payout and potentially higher going forward. Operating cash flow has also turned around to positive.

Ascentage Pharma (6855.HK) Signs $1.3B Deal with Takeda – Finally on the Right Path

By Xinyao (Criss) Wang

  • Ascentage was originally in an extremely difficult situation, but the cooperation with Takeda turned things around. Ascentage has obtained urgently needed cash flow to solve the survival problem.
  • At this stage, it’s possible for Ascentage to hit about 50% market value of HCM.  Investors are interested to know if APG-2575 would also be out-licensed, which however is not easy.
  • Ascentage’s current strength isn’t sufficient to self-build sales system. While this deal is a good start, if Ascentage still chooses to do commercialization on its own, it’s time to sell. 

Pre-IPO Fangzhou Inc. (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

  • Fangzhou cannot get around the decreasing unit-price of drugs and the increasing role of medical insurance in chronic-disease treatment.It’s challenging to find patients willing to pay out of own pockets.
  • The internal dispute between the Founder and shareholders hasn’t ended, and related litigation is still pending. This makes us concerned about the stability of future business development and corporate governance. 
  • Fangzhou has significant cash flow pressure. In the case of increasingly fierce competition in the industry, without successful business diversification/transformation, growth prospects is gloomy, Valuation should be lower than peers. 

Harvesting Seasonality in Iron Ore Prices Induced by Weather, Inventory Restocking, and Holidays

By Srinidhi Raghavendra

  • SGX Iron Ore prices exhibit seasonality. For select six months being long Iron Ore combined with short positions during other months deliver positive P&L based on back tests. 
  • In line with prices, realised volatility exhibits seasonality too. Options strategies can exploit this to deliver superior alpha & higher sharpe ratio.
  • Averages confound extreme variances. Monthly iron ore futures price returns are less volatile during the months of December, February, June, October, & March based on range.

Morning Views Asia: Bharti Airtel, China Vanke , Nickel Industries

By Leonard Law, CFA

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.


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Daily Brief China: Plover Bay Technologies, Dickson Concepts Intl, Hang Seng Index and more

By | China, Daily Briefs

In today’s briefing:

  • Plover Bay 1523 HK Earnings Preview: Strong H1 FY24, Rerating to Continue
  • Dickson Concepts (113 HK): 38% Discount to NCAV, 8.6% Dividend Yield, Steady FY24
  • EQD | Is the HSI Correction Going to Continue? (Yes, For 1-2 Weeks)


Plover Bay 1523 HK Earnings Preview: Strong H1 FY24, Rerating to Continue

By Sameer Taneja

  • We expect strong 30-35% YoY earnings growth in Plover Bay Technologies (1523 HK) for its earnings to be released in July for H1 FY24. 
  • We expect the company to continue its 80% dividend payout ratio, which will result in a 4% semi-annual yield (8% annualized). 
  • Trading at 12.2x with >50% ROEs and net cash of >30 mn USD, we expect the strong results to catalyze a further multiple rerate.

Dickson Concepts (113 HK): 38% Discount to NCAV, 8.6% Dividend Yield, Steady FY24

By Sameer Taneja

  • Dickson Concepts Intl (113 HK) reported earnings growth of 39% YoY, led mostly by an increase in interest income on the 9.6 HKD/share of net cash/investments on the balance sheet. 
  • The company’s net current asset value (NCAV) expanded to 8.2 HKD/share (Vs. FY23: 7.6 HKD/share), and with the stock at 5.2 HKD/share, it trades at a 37% discount to NCAV. 
  • The dividend was increased to 45 cents ( from FY23:35 cents/share), placing the stock at an attractive dividend yield of 8.6%.

EQD | Is the HSI Correction Going to Continue? (Yes, For 1-2 Weeks)

By Nico Rosti

  • The Hang Seng Index correction has restarted this week, after a brief 1-week bounce.
  • The index may continue to downtrend for another 1-2 weeks, then a reversal should come and the uptrend should restart.
  • Look at the price support area in the 17500-17000 range, because that is where my model indicates the highest chance of LONG reversal.

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