China

• In January 2021, Tianneng Power (819 HK)‘s (TPI) battery unit Tianneng Battery (688819 CH) (TBG) was listed on China’s Star Market, as discussed in Tianneng: Star Market Battery Spin-Off Priced.
• TBG is now proposing the issuance of GDRs, accounting for 10% of existing shares out, to be listed on the SIX Swiss Exchange.  
• A circular has been issued and TPI shareholders go to the vote on the 31 January. TPI currently holds 86.53% in TBG worth >300% of its market cap.

• China ( >20% of revenue ) changing its stance on COVID provides Perfect Medical Health (1830 HK) with an opportunity to crystallize its expansion plans there. 
• The border reopening between HK/China will provide a boost to its HK operations (>70% of revenue). The second half of H1 2023 results reflect an improving revenue trend for HK.
• The stock trades at 16x/11x FY23e/24e with ~15% of the market cap in cash and a dividend yield of 6.5%/9.5% FY23e/24e (based on ~100% payout ratio). 

• Chinese e-commerce giant Alibaba Group Holding Ltd. signed a strategic cooperation agreement with the government of Hangzhou, the eastern China city where the company is headquartered
• Alibaba and its finance affiliate Ant Group Co. Ltd. have been at the center of the Chinese government’s multi-year crackdown on the internet sector since October 2020.
• In 2021, Alibaba was fined a record 18.2 billion yuan ($2.6 billion) for monopolistic behavior.

• Positive response of China Education Group (839 HK)‘s placement indicated a good return of investor appetite to the sector. Its premium multiples stay well justified even after recent rally. 
• The HK$1.6bn proceeds will reduce gearing to 29.2% (including contract liabilities) from 41.7% with minimal dilution. Narrowing in valuation gap against asking price of targets means more M&A potential. 
• More funding for expansion of existing campuses, increase in accommodation and the set up of COVID-19 related curriculum will allow CEG to realise higher revenue per student.

• On 30th November we proposed a restructure of a bullish FXI US trade
• Since then FXI US has rallied 12% and implied vols have decreased significantly
• We evaluate the call ladder that we highlighted and consider what to do next

• Lu Daopei Medical Group (1816743D CH) Lu DaoPei Medical Group is looking to raise around US$400m in its upcoming Hong Kong IPO. The bookrunners are CITIC Securities, CMB International, and Macquarie.
• Lu DaoPei Medical Group (LDPM) is a hospital operator focusing on hematology healthcare services.
• As per F&S, the firm was the largest hematology healthcare services provider in China in terms of 2021 revenue.

• After China reopens and demand for COVID-19 testing drops sharply, Lepu has lost the big driving force of performance growth. The 2022 full year performance may not be optimistic.
• Lepu Medical Technology A (300003 CH) has begun to focus more on capital operation. As a holding platform, the valuable assets are spun off, which changes the valuation logic.
• Even if Lepu could finally digest the negative impact of centralized procurement, such development mode would still put pressure/uncertainties on its future performance, leading to lower-than-expected financial results.

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 SCE
• China Vanke
• CIFI Holdings
• Lippo Karawaci

• Binjiang Service Group (3316 HK) trades at 12.2x/9.5x FY22/23e with 32% of the market cap in net cash and a dividend yield of 5%/6.4% FY22e/23e (assuming a 60% payout). 
• The company has asserted it will maintain its payout ratio at 60% and conserve cash for M&A. Its approach will be conservative and involve lengthy due diligence.
• With an improving market environment and good results around the corner in March, we believe a rally to 30 HKD/share is within the realm of possibility.

• With the recent rally in the equity markets in Hong Kong and China, we think the asset play investment thesis for China Dongxiang Group Co (3818 HK) has revived.  
• We estimate its investment portfolio value may have increased by HK$2bn since end-Sep, yet market capitalisation only rose HK$500m, suggesting still significant 77% discount. 
• Encouraging recent developments at Alibaba Group (9988 HK) and Ant Financial, which both are its holdings, are positive. The reduction is losses for sportswear business is an added driver. 

• We expect BABA’s  revenue in C4Q22 to be in line with cons., non-GAAP net income to beat cons. by 6%, supported by cost reduction in Freshippo, Taocaicai and Taobao Deal. 
• Affected by logistics disruption and rising infections, we estimate BABA’s GMV and local consumer service in C4Q22 to decelerate compared to C3Q22. Both segments are to recover in C1Q23.
• We raise TP from US$110 to US$130 to reflect upsides from rebound of discretionary demand, slowing Douyin eCommerce growth, and easing regulatory environment. Our TP implies 13x PE in FY2024.

• CDP Holdings (1782198D CH) is looking to raise up to US$400m in its upcoming Hong Kong IPO. 
• CDP Holding (CDP) is a human capital management (HCM) service provider.
• As per CIC, CDP was the No. 1 HCM SaaS+ platform in China in terms of revenue generated from HCM SaaS+ services in 2021.

• Eva Precision Industrial Holdings (838 HK) has come off its lows but still trades at an attractive  7.8x/5x PE FY22e/23e and a dividend yield of 3.8%/5.9% FY22e/23e (assuming 30% payout).
• The auto business should be propelled forward by orders from EV stalwarts, BYD, Nio, Tesla, etc. We expect the auto business (30% of revenue) to grow 50% in 2023.
• Another two catalysts we look forward to are the split of the auto business to unlock value and the completion of the buyback announced by the company in 2022.

• Chinese equity vol has been high over the last few months with extreme market moves on a number of headlines but is starting to calm down
• US equity volatility continues to screen cheap despite calls for a challenging year and likely recession
• We consider 2 relative vol trades to play a narrowing of the spread

• We expect FUTU to post C4Q22 revenue and non-GAAP net income 6.4% and 16.0% above consensus, driven by the improved turnover rate in HKEX and the rising interest rate. 
• We believe the recent regulation measures has little impact on FUTU’s adjusted expectations now widely held by investors. We expect revenue growth to reaccelerate at 37%/31% YoY in 4Q22/2023.
• Maintain BUY to FUTU and raise TP by US$1 to US$51.

• Rept Battero is a lithium-ion battery manufacturer focusing on lithium-ion EV battery products and ESS battery products. The company has filed for an IPO on the Hong Kong Stock Exchange.
• The company had recorded strong growth over all its battery segments and was the fastest growing battery manufacturer among top 10 lithium-ion battery manufacturers in China.
• However, we find the company’s inability to generate profits at gross profit level concerning.

• In C4Q22, we expect JD’s total revenue to grow 8% YoY, largely in line with cons. Non-GAAP net margin is expected to reach 2.0%, up 0.7ppt YoY.
• We estimate JD’s GMV growth in C4Q22 to be ~7% YoY, slightly slower than C3Q22 due to logistics disruption in October and November.
• Maintain BUY rating and raise TP to US$70.0 due to for acceleration in top line as well as margin improvement. Our TP implies 23x P/2023E.

• Retailers /hoteliers will welcome the return of Chinese travellers, with ~US$250bn in annual spending. That should bode well for mall operators like Swire Properties and, in turn, Swire Pacific.
• Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• H World Group (HTHT US) aims to raise around US$260m via a follow-on ADS offering.
• The company plans to use the proceeds mostly for investment. This will be the first deal by the company post its H-share listing in 2020.
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• China Internet Investment Finance Holdings (810 HK) (CII), an investment manager, is currently suspended pursuant to the Hong Kong Code on Takeovers and Mergers. 
• CII has thrice responded to unusual price action in its share price in the past four months. Shares are up a staggering ~1,000% in the past six months.
• This insight provides some background information on CII. Trading at 64x book value, this is one avoidable company. 

• Company’s second largest shareholder General Atlantic sold out entire holdings at 5.9% to 6.4% discount to Monday close. 
• The placement reflected mainly General Atlantic’s attempt to time market to recoup a 10-year investment instead of any negative read of company fundamentals, in our view.
• Recent newsflow continues pointing to steady recovery in all business lines of Xiabu group.  Its valuation discount relative to peers  has not captured strong turnaround prospects. Sector top pick. 

• China Education Group (CEG) completed the placement of HKD1.61bn on Jan 9.
• CEG used to do 2-3 M&As per year and had a decent track record.
• CEG also has chances to acquire public companies or their assets.

• In this note, we will take a look at the Asia Pacific IPO pipeline for 2023, starting with Hong Kong. 
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

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 Jinmao Holdings
• Sunac China Holdings
• Sunny Optical

• Bilibili Inc (BILI US)  aims to raise around US$400m via a follow-on ADS offering.
• The company plans to use most of the proceeds to redeem its 2026 notes.
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• China Education Group (839 HK) is looking to raise up to US$209m in its top-up placement. 
• This will be the fourth placement by the group since its listing in 2017, we have earlier looked at the past three placements as well.
• In this note, we will look  at the deal dynamics and run the deal through our ECM framework.

• Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.
• While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.
• We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.

• News headlines on Ant Group are overwhelmingly positive these days and they try to hide the fact that the consumer finance business is worth just 1/2 of last year’s value.
• We think the main reason why markets are so optimistic these days is that they seem to think that regulatory crackdowns on the platform economy are finally over.
• With Jack Ma surrendering control of Ant Financial Services Group (6688 HK) just a few days ago, could anybody say that regulatory pressure is really over?

• A state-owned company invested in Ant Group which was also founded by Jack Ma.
• We believe both the revenue growth rate and the operating margin will rise in following quarters.
• We believe the stock price still has significant upside even after the surge in past four trading days.

• 2022 marked our seventh year covering Equity Capital Markets (ECM) in Asia Pacific. 2022 was rather quiet ending with us covering one of the lowest number of IPOs and placements.
• We ended 2022 with an accuracy rate of 74.6% across 55 IPOs that we covered and 70.5% across 78 placements. 
• For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

• Modern Dental Group (MDG) disclosed selected unaudited operational data for 22Q1-Q3. The negative trend on performance would continue to 22Q4. The overall 2022 performance of MDG would show a negative growth.
• We may face a situation where both domestic and external demand would weaken in 2023. MDG’s overseas revenue is expected to see a bigger YoY decline than domestic revenue.
• There would be strong expectations but weak realities in 2023Q1-Q2, during which MDG’s share price could rally in short term, but it’s not based on the improvement of its fundamentals.

• Bilibili announced a follow-on equity offering of 15.34m ADS priced at $26.65 per ADS partially in exchange for convertible senior notes due 2026 (US$384.8m) and to replenish its cash reserves.
• Each ADS represents one ordinary share and new equity offering of 15.34m shares will account for approx. 3.7% of the company’s extended share capital post follow-on offering.
• Bilibili Inc (BILI US) ADS dropped 5.76% following the announcement of the follow-on offering and we believe there is limited upside.

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.

• Central China Securities
• Greentown China
• Melco Resorts & Entertainment
• Shui On Land
• Sunny Optical
• Tata Motors ADR
• Wynn Macau Ltd

• The announced restructuring of Ant Group holding companies will block founder Jack Ma from achieving majority voting on the board following the implementation of the holdcos adjustment
• The majority of board directors will be “independent” post the holdco restructuring and they are likely to drive a more social policy focused agenda, as the 2021 sustainability report suggests
• We see these developments, and especially the lack of IPO plan, to be negative for non-government aligned Ant Group shareholders, such as the international private equity groups and especially Alibaba

• A state-owned company invested in Ant Group, which boosted Alibaba’s stock price.
• Tencent obtained five new game licenses in December, three of which are imported games.
• China Literature’s daily active users increased by 80% in 2022 and reached the historical high.

• Youlife International Holdings (1759732D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Macquarie and CCB International. 
• Youlife International is a blue-collar lifetime service platform in China. It assists blue-collar talent with upskilling and lifetime career development. 
• According to CIC, Youlife ranked first among all blue-collar lifetime service platforms in China in terms of revenue generated from blue-collar lifetime services in 2021. 

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.

• Sands China
• SJM Holdings
• Yanlord Land

• Artificial Intelligence (AI) and Deep Learning Applications are all the rage, primarily thanks to the likes of OpenAI’s ChatGPT being used for text and Dall-E being used to generate digital images.
• ChatGPT’s popularity has soared, reaching a user base of 1 million users in 5 days, and OpenAI itself is benefiting from the surge in users, now valued at $29 Billion.
• Investors are already looking for the next wave of AI products that can make a big splash and potentially disrupt legacy industries. 

• CBIRC approved the capital replenishment plan of RMB10.5bn of Ant CFC on Dec 30, 2022
• Under the regulatory guidance, Ant Group needs to complete a multifaceted rectification plan
• After the fund raising, Ant Group’s next step is to obtain FHC license and credit bureau license

• Junshi once generated sales and profits in scale, but lost money again. Its story suddenly changed from cancer drugs to COVID-19. We have lost sight of its development direction.
• Junshi’s commercialization history has lost its reference value for confirming the outlook. The calculation of peak sales doesn’t make much sense, because they cannot help Junshi turn losses into profits.
• The current market value still has too much “bubble”, and COVID-19 drug is a major “interference” to the valuation. We analyzed our thoughts on future valuation by excluding COVID-19 projects.  

• Food delivery daily order growth gradually recovered in late Dec
• Instashopping continued its growth momentum. Community group purchase has transformed into Next Day Delivery
• With the recovery of restaurants and travel post re-opening, Meituan is expected to be one of the biggest beneficiaries.

• End December was the end of the review cutoff for a lot of indices that will rebalance within the next couple of months.
• PEXA Group (PXA AU) replaces Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 12 January.
• There were big outflows from Hong Kong and China focused ETFs led by Hang Seng H Share Index ETF (2828 HK) and Tracker Fund of Hong Kong Ltd (2800 HK).

• We expect PDD’s total revenue in C4Q22 to be in line with cons., and non-GAAP net income to beat cons. by 9%.
• Faster-Than-Peers user growth, increase in brand product contribution and newly launched marketing program support PDD’s strong GMV trend and high take rate in the near term.
• Temu is moving to increase order volume and ASP to improve scale and save logistics cost.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
• On the IPO front,  only the smaller issuers were active with most following through on year end listing plans.
• On placements front, HK market got going in a jiffy, riding on the coattails of China reopening.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Quiet week as VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
• Event-Driven developments – Acotec Scientific Holdings (6669 HK), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Warrego Energy (WGO AU), Halcyon Agri (HACL SP). 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned include Tian An China Investment (28 HK), Differ Group Auto (6878 HK), Pharmaron Beijing Co Ltd-H (3759 HK), Joinn Laboratories (H) (6127 HK), and Gushengtang (2273 HK).

• Since we highlighted the compelling asymmetrical risk-return payoff of IQ last November, the stock has surged 200%, compared to 45% gain for KWEB which tracks China ADRs.
• We believe the outperformance was driven by more concrete progress in fundamental turnaround including multiple blockbuster drama released, increase in subscription fee and removal of debt overhang.
• With $7 billion market cap (on diluted basis), IQ already trades at 35 times 2023 earnings, pricing in fair degree of positive prospects. We advise investors to lock in profits.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

• We estimate that NetEase’s 4Q22 revenue/non-GAAP net income will be in line/12% vs cons. Our 2023’s revenue/non-GAAP net income are in line/12% vs cons.
• In 4Q22, several of NetEase’s mid-tier games saw declines in ranking.  We expect that NetEase will have a period of single digit growth in revenue.
• We still rate NetEase BUY and raise TP to US$ 87. But NetEase is not our top pick within China internet space.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Fosun International
2. Lippo Karawaci
3. Agile Property Holdings
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

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.

• We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&P 500, and several European indexes still below major resistance.
• We continue to expect rangebound price action in the months ahead on the MSCI ACWI.
• And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)

• Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
• We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
• Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.

• Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
• On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Our Tencent 4Q22’s rev. is in line, while non-IFRS net income would beat cons. by 5.2%. We estimate that top and bottom line will grow 13%/14% YoY in 2023.
• We suggest major business lines see turning points in 4Q22, supported by rebound of Peacekeeper Elite’s gross billings, approval of new game codes, monetization of Wechat Video Account, etc.
• Tencent is one of our top picks. Video Account, global game publishing, and margin beat are three major catalysts. Our TP HK$ 407 implies 26.1X PE in 2023.

• Taste Gourmet Group (8371 HK) is an excellent play on China/HK reopening with a 5.7x/4.2x FY23/24 PE and 10+% dividend yield, with 25% of the mkt cap in net cash.
• Reopening of China and HK borders after Jan 8th will provide a boost to the revenue and margins. The company will also resume its expansions in China (3 restaurants). 
• Channel checks suggest a solid Q3 2023, with the company expanding to 38 restaurants in HK (34 in Q2 2023), with a surge in revenue likely due to seasonality. 

• China MeiDong Auto (1268 HK) raised 800mn HKD in a top placement (px~15 HKD/share), resulting in a ~4% dilution, citing an opportunistic raise for M&A.
• While the company asserts there is a well-defined pipeline, it was not very specific on the size and scope of its targets which was not taken well by the market.
• We continue to like the company, trading at a 15x/9x PE FY22e/23e, with a 5.2%/8.8% dividend yield (assuming an 80% payout ratio), with the optionality of M&A potential. 

• Stock is up over 80% from October lows and almost 10% in 2023 already
• Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
• We consider some option strategies to roll profits and reduce exposure

• CSRC’s rectification on FUTU to suspend new user registration from mainland China while allow service continuation to existing user is well expected. We believe the market over-reacted;
• FUTU caters to overseas Chinese and populations falling outside of major currency zones. This market supports a paying user growth of 12% and revenue growth of 19% CAGR to 2025.
• We maintain BUY and cut TP from US$58.5 to US$50 due to moderate decline in mainland China users.

• Ant Group Co. Ltd.’s online lending subsidiary has been given the go-ahead from regulators to boost its registered capital by 10.5 billion yuan ($1.5 billion), marking a key step forward in the fintech giant’s government-driven, year-long revamp
• The approval was granted a month and a half after some of the unit’s shareholders disclosed the plan, underscoring the recent pledge by authorities to promote healthy development
• Ant Group, backed by billionaire Jack Ma’s e-commerce giant Alibaba Group Holding Ltd., has been conducting a rectification required by the government since a regulatory storm saw its planned blockbuster IPO suspended in November 2020

• The government has changed its tone and started to encourage social capital to run hospitals, indicating that the previous concerns about the policy risk on Hygeia has been relieved.
• At this stage, Hygeia has more investment value, greater expansion space and higher market demand than Aier Eye Hospital. Meanwhile, the Company performs better in trans provincial expansion than Topchoice. 
• Due to large investment/“heavy asset” model, Hygeia would continue to face capital pressure. Its expansion pace may not be as fast as expected if it hopes to control expansion quality. 

• Loongson Technology Corp. Ltd., a Chinese chip architecture developer, took a major step into the consumer market by opening its first brick-and-mortar pop-up store
• Loongson is also exhibiting its development kits and solutions for printers, smart door locks, and treadmills in the store
• This is not the first time Loongson has attempted to enter the consumer market. The firm opened an online store on e-commerce platform JD.com in October 2021, selling laptops, desktops, and their components like motherboards and memory kits

• Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
• There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
• Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.

• On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.  
• Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
• The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration. 

• China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
• Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
• We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
• All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

• Jinxin Fertility Co Ltd (1951 HK) is looking to raise US$122m via a top-up placement. 
• Proceeds from the offering will be used to repay its outstanding convertible bond and general corporate purposes. 
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
• Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds. 
• Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

• Hisense announced the long-awaited equity incentive scheme on Jan 2. 
• For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level. 
• We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company. 

• There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
• We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
• We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

• The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
• Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.  
• Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC. 

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.

• Times China

• 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.

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