China

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• LG Energy Solution (LGENERGY KS) started book building for its mega US$10bn+ IPO
• Placements too got off to a large, if not strong, start with Sea Ltd (SE US) and Nippon Paint Holdings (4612 JP) US$1bn+ deals. 

• PC Partner (1263 HK) issued a positive profit alert 15/12/2021.
• Company will report FY21 results in 60 days which will be the best ever. 1H22 is on track to show growth YoY. 
• Forecast exceptional dividend to celebrate 25-yr since founding and 10-yr since IPO. 

• In December, Tencent announced that its board of directors has resolved to declare a special dividend by way of a distribution of its Class A ordinary shares of JD.com. 
• This seems to be in line with regulators’ aim of bringing down walled gardens; however, we think these steps are aimed more towards restructuring Tencent’s fintech business.
• Tencent’s fintech arm has been benefitting from its partnerships with JD.com and Pinduoduo which has helped face competition from closest rival AliPay.

• Shares have declined ~9% since copper/cobalt miner Jinchuan Group International Resources (2362 HK) said it was unaware Jinchuan Group, its largest shareholder, was proposing a privatisation plan.
• As the world moves towards alternative energy sources, copper will remain in high demand. Jinchuan is also China’s third-largest cobalt refiner, whose output is used in lithium-ion batteries.
• Jinchuan is not expensive. And taking the company private is not a significant outlay for Jinchuan Group. Especially ahead of the copper/cobalt Musonoi project coming online next year.

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. Yuzhou Group
2. Agile Property Holdings
3. Central China Real Estate
4. Logan Property Holdings
5. Times China

and more…

• We take a look at the Asia Pacific IPO pipeline for 2022. This list has been compiled on a best effort basis from tracking company filings and other sources.
• For readers who aren’t familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific (ex A-shares), including China ADRs. 
• 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.

• China Huarong Asset Management (2799 HK) has resumed trading after a 9 month suspension. Core Tier-1 capital was replenished and the plan is for the business to be downsized.
• The stock was deleted from the MSCI and FTSE indices in June 2021 and passive trackers that were long the stock will be selling today to flatten their exposure.
• The stock should be included in the MSCI Standard, FTSE All-World and HSCI later this year. Once included in the HSCI, the stock will become a part of Stock Connect.

• The gross spread to the HK$2.82 per share offer has retouched the high of 23%. The headcount test is a key challenge as some minorities voice displeasure over the price.  
• Based on the unaffected price of HK$1.81 and at the last close of HK$2.30, the deal probability retouched lows of 48.5%. A 65% deal probability would imply HK$2.47 per share. 
• In the event of a failed deal, Razer Inc (1337 HK)’s strong fundamentals provide solid valuation support. Our SoTP valuation is HK$2.96 per share, 5% higher than the privatisation price.

• Sea Sale: Tencent sold 14.5 mn shares in Sea, raising approximately USD 3 bn in cash – reducing Tencent’s position in Sea from 21.3% to 18.7%;   
• Not A Surprise: Given mainland China’s crackdown on the country’s largest internet companies, Tencent’s disposal of Sea shares is not a surprise; and  
• Other Stake Sales To Follow: Further divestitures of major stakes are likely if Tencent wishes to remain on the right side of mainland China’s Communist Party.    

• By deconsolidating Shenzhen Expressway (548 HK) (SZX) from Shenzhen International (152 HK) (SZI), SZI’s net book value reached HK$16.4bn. Its current market cap of HK$18.9bn implies SZX is almost free. 
• SZI’s high gearing is primarily due to SZX. Excluding SZX, SZI’s gearing is just 32.3%. As Shenzhen’s flagship SOE, there is consistent monitoring and huge support from the local government.   
• SZI’s 0.47x P/B is more than 2SD below historical average; but it has proven capability to realise value of underlying assets. Excluding SZX, SZI is on even cheaper 0.32x P/B. 

• Ping An Healthcare and Technology Company (SEHK:1833) operates an Internet healthcare platform in China (Ping An Good Doctor), which delivers on-demand healthcare. Its mobile platform was launched in April 2015.     
• It is one of the leading online healthcare providers in China and has reported strong growth in revenues and gross profit since inception.
• The company has been positively impacted by the spread of COVID-19 with more people switching to online healthcare rather than visiting hospitals.

• 2021 marked our sixth year covering Equity Capital Markets (ECM) in Asia Pacific. 
• Most markets were in top gear on the ECM front and we ended the year covering the highest number of IPOs and the second highest number of placements since inception.
• 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.

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.

• Guangzhou R&F Properties
• Yuzhou Group

• The price review period for the FTSE All-World/All-Cap March 2022 SAIR ended on 31 December. The changes are expected to be announced on 18 February and implemented on 18 March.
• There are loads of potential inclusions to the index for China – a lot of the changes are a result of stocks being included in Northbound Stock Connect.
• There are stocks that are potential inclusions in other indices and will have additional passive inflows. Nongfu Spring could also be included in the FTSE China 50 and HSI indices.

• Although Endovastec has leading position in aortic products, the growth space of this field in China is relatively limited and is not enough to support the long-term development of Endovastec.
• The lack of revolutionary blockbuster product/candidate with global pricing power as well as the current weak international business layout are also the concerns.
• Our view is that Shanghai Microport Endovascular MedTech (688016 CH) (Endovastec) is a good company, but it is not as attractive as Lifetech Scientific (1302 HK) at the current stage.