China

• Late December 2024, Alibaba (9988 HK) entered an SPA with DCP Capital to offload its 78.7% stake in Sun Art (6808 HK) at HK$1.38/share, a 44.4% discount to last close.
• The SPA completed on the 27th Feb, triggering an unconditional MGO, also at HK$1.38. FWIW, a deferred payment option raises the Offer Price to a maximum of HK$1.58/share. 
• The Composite Document is now out, with a Closing Date for tendering on the 27th March. This won’t be extended. The IFA (Somerley) says NOT fair & reasonable.

• Tencent’s stock price has risen by 35% since our last buy rating. Downgrade to Hold.
• Our EPS estimate for 2025 is 12% over the market consensus.
• We believe both revenue growth and margin will improve in the coming 4Q24 results.

• There is speculation about Deepseek’s wafer manufacturing yield issue at Semiconductor Manufacturing International Corp (SMIC) (981 HK) these days.  
• The potential concern serves as a signal for a hot topic within the company, carrying two underlying meanings.
• Although NVIDIA Corp (NVDA US) is making waves in AI applications, we must not overlook the potential for continued creative developments in the world, such as Deepseek’s solution.  

• Hang Seng Index (HSI INDEX) put options show concentrated positioning at the 19,000 and 20,000 strike levels.
• Traders continue to establish new positions approximately 15%-20% below current market levels, suggesting protection against major market corrections rather than minor pullbacks. The focus is on near-term risk.
• Implied volatility has remained stable at 25-30% over the past two weeks, consistent with a broadly sideways movement in the index itself.

• Sigenergy (SIG CH) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The deal will be run by CITIC and BNP Paribas.
• It provides renewable energy solutions, catering to 1) residential, 2) commercial, and 3) industrial applications.
• The group markets and sells to distributors and primarily serves the European market.

• Following CK Hutchison Holdings (1 HK)‘s port disposal, Cosco Shipping Ports (1199 HK) looks interesting, given its portfolio of port projects, which spans globally.
• Overseas ports accounted for 38.9% of its noncurrent assets. A disposal of half of such portfolio will generate HK$15.2bn of cash flow, equalling almost 89% of its market capitalisation. 
• Even without corporate activities, its 6.4x PER, 6.7% dividend yield, and 11.8x EV/EBITDA are inexpensive. The 0.36x P/B for FY25 also deeply undervalued its assets.

• iQIYI reported a mixed set of results for the fourth quarter and fiscal year 2024.
• The company observed significant improvements in several operational metrics towards the end of the quarter, fueled by the strong performance of its top-tier content.
• This uptick in content performance led to an increase in subscribing members and higher user engagement.

• 70% of Senior Directors are confident in data centres, showing faith in their reliability and efficiency despite challenges.
• HPL’s acquisition of InterContinental Auckland for $102M marks its entry into the New Zealand market, expanding its portfolio.
• Stuart Grant’s appointment as head of Hongkong Land’s $8B Shanghai project highlights the company’s commitment to growth and development in the region.

• Market traders of Hang Seng Index (HSI INDEX) call options maintain significant holdings in lower strikes, with notable concentration at the 20,000 strike level.
• Open interest data reveals significant increase in open interest for 25,000 and 26,000 strike calls since late February, reflecting active trading as traders built new positions.
• Despite increased trading activity and changes in market positioning, implied volatility has remained stable at 25-30% over the past two weeks, reflecting a consistent market sentiment.

• UMP Healthcare (722 HK) reported a Revenue/PAT growth of -1.2%/45.7% YoY as cost-cutting initiatives bore fruit for the company in H1 FY25. 
• Net cash and investments reached 294 mn HKD (representing 88% of the market capitalization) due to robust operating profits and excellent working capital control. 
• Trading at 7.7x PE and 0.4x EV-EBITDA, with an 8% dividend yield, there is massive value in the name. The key lies in improving ROCE, which remains low- single digit. 

• As part of a US$22.8bn transaction, BlackRock, Global Infrastructure Partners and Terminal Investment, have agreed to buy two contentious Panama ports from Li Ka-shing’s CK Hutchison (1 HK) (CKH).
• The transaction also includes an 80% stake in CKH’s ports subsidiaries, which operate 43 ports comprising 199 berths in 23 countries.
• CKH expects cash proceeds in excess of US$19bn. CKH’s current market cap was – at the time of deal – also  ~US$19bn. 

• The huge rally in SUNeVision Holdings (1686 HK) will bring passive inflows to the stock after being added to a global sector index.
• Estimated passive buying is 19.4m shares (US$22m; 0.55x ADV) with implementation scheduled for the close of trading on 21 March.
• Shorts have risen sharply in the last couple of weeks and cumulative excess volume has jumped too. But we see a similar pattern in a close peer.

• PC Partner (1263 HK) reported FY24 results which showed a strong finish to the year
• Relisting on SGX on track to complete by 3Q25. If this completes it should allow the company to finally access NVDA’s AI chips.
• Better availability of RTX5090 and RTX5080 in 2Q25 and potential AI chips could turbocharge 2H25 results.

• Crystal International ‘s business operations started to turn around in 2024 as most brand customers ended the destocking cycle and adjusted their inventory strategy.
• Crystal International is trading at attractive valuations of EV/EBITDA of 3.5x and P/E of 8.1x, based on 2025 consensus earnings estimates. Estimated dividend yield is at 6.5% in 2025. 
• The company is one of the largest OEM apparel manufacturers in the world. It has a proven record of executing its business strategy successfully for more than five decades.

• SJM Holdings’ FY 2024 results were acceptable in our view, as its earnings and market share improved y-o-y.
• In particular, GLP has managed to improve market share gradually over the course of the year.
• Still, SJM’s overall market share remained below the pre-pandemic FY 2019 level.

• Far East Consortium sold a UK hotel to AMTD IDEA Group for $57M, expanding the latter’s presence in the hospitality industry.
• Qingjian and CCCC made a joint bid of $234M for a Singapore site, highlighting the competitive nature of real estate acquisitions in the region.
• C&W reports that the APAC data center market will require a substantial $116B in funding to support its growing pipeline of projects.

• On March 5 Chinese freight platform Full Truck Alliance posted another great set of results
• Strong Q424 top-line growth was matched by firm OpEx control, leading to higher margins
• We’ve upped our FY25 earnings numbers; we rate YMM a BUY with a US$17/ADS target

• The entire condiments market in China is deeply mired in fierce competition with limited market increment space. The future performance growth of companies in the industry will further slow down.
• Haitian tries to find new growth points through diversification/internationalization. A big concern is whether China’s local brand will face “adaptation issue” overseas. The supply chain system is not yet perfect
• Due to the concerns on slowing performance growth in the future as well as the uncertainties on internationalization, we think reasonable valuation for Haitian is about 20-30x P/E.

• The March rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
• The gross round-trip trade across all stocks across the four indices is estimated at HK$41.1bn (US$5.3bn). The net round-trip trade is HK$37.3bn (US$4.8bn).
• Meituan ,  JD.com, Baidu, Horizon Robotics, ICBC, BeiGene, Kuaishou Technology and China Construction Bank are the largest buys. Alibaba, Xiaomi, HSBC, ZhongAn Online and Tencent are the largest sells.

• CK Hutchison Holdings (1 HK) (CKH) is trading “cheap” as Panama’s Supreme Court agrees to consider a request to nullify CKH’s canal concessions. 
• Preceding my comments on CKH, CK Infrastructure Holdings (1038 HK) (coming up cheap on my monitor), and Power Assets Holdings (6 HK) 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%.

• As recently written by Brian Freitas and Sumeet Singh , BYD (1211 HK) is placing new shares on the market at at a price range of HK$333-345/share.
• The stock today dropped to roughly 340 and it’s oversold WEEKLY according to our models. Buying here, at this price, should bear fruit in coming weeks. More details below.
• We cannot yet predict the profit targets because our model needs the WEEKLY Close for this week, to do that. We will update this information when it becomes available.

• Recent surge of share price is driven by the craze for DeepSeek/AI in digital healthcare, not the improvement of fundamentals or effective validation of business model.So, the rally won’t last.
• Although AI is a great story, the extent to which DeepSeek can bring substantial benefits to PAGD remains to be verified. Small revenue scale may lead to low valuation premium.
• PAGD is expected to turn loss into profits in 2024. Short-term valuation should be lower than peers. When PAGD achieve profitability/revenue in large scale, P/B would approach the industry average.

• Over the last 25 months, there’s been a steady stream of bad news for DTC platform SHEIN
• The latest challenges: US tariff chaos & Amazon’s launch of its competing platform, Haul
• Tariff changes & growth of Haul could mean SHEIN IPO gets done at fraction of 2023 valuation

• Link REIT, as the largest REIT in Asia, owns a well diversified portfolio which provides visibility and certainty to its future growth
• Given the stable fundamentals in Hong Kong, we think the REIT is over-penalized by the market, which presents an attractive entry point
• Valuation is not demanding, we think it is a good opportunity for long-term investor

• In the US, the ISM manufacturing index edged down to 50.3 (50.7 e / 50.9 p) in February.
• This was on account of a contraction in the new orders and employment components, which were offset somewhat by a sharp increase in the prices paid component.
• Meanwhile, the February (final) S&P manufacturing PMI rose to 52.7 (51.2 p), above the preliminary estimate of 51.6.

• Zhejiang Sanhua Intellignt Controls Co., Ltd. (002050 CH) (ZSIC), a manufacturer of refrigeration and air-conditioning control components, aims to raise around US$1bn in its H-share listing.
• ZSIC is a market leader in a number of products, with commanding market share both domestically and globally.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• BYD (1211 HK) is looking to raise around US$5.2bn via selling 4% additional shares.
• The company has undertaken a few deals before and they have ended up performing well.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Overnight, BYD (1211 HK) has announced a placement of 118m shares at a price range of HK$333-345/share that could raise up to HK$40.7bn (US$5.2bn).
• The Pink Sheets listing for BYD (BYDDY.PK) closed at US$87.1/share and traded US$155m for the day. That close implies an open of HK$338.7/share for BYD, middle of the placement range.
• There will be passive buying from global index trackers later this week while buying from Hang Seng Index and Hang Seng China Enterprises Index trackers will come in April.

• Baidu’s fourth-quarter and full-year 2024 financial results reveal a company navigating both challenges and opportunities, driven by its ongoing transformation into an AI-centric entity.
• The reported total revenues for the fourth quarter amounted to RMB 34.1 billion, a 2% decrease year-over-year, while full-year revenues were down by 1%, at RMB 133.1 billion.
• Despite these slight declines, Baidu Core’s revenue performance was stable, increasing by 1% for both the fourth quarter and full year.

• The March 2025 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 28th February 2025.
• There will be 3 changes for the STAR 50 index and 6 changes for the STAR 100 index.
• We expect one-way flows of approximately US$1bn and US$356mn for the STAR 50 and STAR 100 index rebal events respectively.

• JD.com (9618 HK) upcoming Q4 and Full Year 2024 results announcement on 6 March historically triggers significant stock volatility, with full-year announcements causing 12-14% price movements.
• Options market pricing implies a 9.4% post-announcement move (up or down), which is less than previous full-year announcement reactions but nearly double the average quarterly announcement impact.
• Long Straddle positions break even at 9.2% price movements, appearing expensive compared to quarterly announcement history but potentially profitable based on full-year announcement patterns.

• Plover Bay Technologies (1523.HK , “Plover Bay”) with a market cap of approximately USD 739 million, experienced another stellar year with its FY24A annual results, showcasing a notable 24% revenue increase, exceeding the USD 100 million threshold (also known as the “valley of death ”) to reach USD 117 million, while also realizing a 36% YoY growth in net profit, amounting to USD 38 million.
• This success is complemented by strategic partnerships, and ongoing innovation.
• With deepening collaborations, an expanding product line-up, and an emphasis on recurring revenues, Plover Bay is well-positioned for sustained growth in 2025 and beyond.

• Oneconnect Financial Technology (6638 HK) disclosed a preliminary non-binding privatisation offer from Ping An Insurance (H) (2318 HK) at HK$2.068 (US$7.98 per ADS), a 72.33% premium to the undisturbed price.
• Despite the hefty premium, the offer is opportunistic as it values OneConnect around net cash and is at a material discount to historical trading ranges. 
• If a binding proposal materialises, the offer price will not be increased. A high minority participation rate could be an issue for the vote.  

• Mixue Group (2097 HK) has a successful IPO in Hong Kong, with share price surged 43.2%. We will trim from here and will not buy at the current level.  
• Our forecasts call for a decent 20.8% and 17.6% earnings growth for FY25 and FY26, putting it on RICH PERs of 19.1x for FY25 and 16.3x for FY26.
• The Chinese tea sector has average PERs of 12.4x and 10.5x, suggesting MIXUE’s leadership is well reflected in the over 50% premium, and the safety margin has significantly narrowed. 

• Dual-Listed OneConnect Financial Technology (6638 HK/OCFT US), a digital retail banking/commercial banking/ digital insurance play, has announced a non-binding proposal from Ping An, OneConnect’s controlling shareholder with 32.12%.
• Ping An is offering, by way of a Scheme, HK$2.068/share, or US$7.98/ADS, a 72.33% premium to last close, and a 131.66% premium to the 30-day average. The price is final. 
• What now? Back in OneConnect’s boards’ court whether to engage or not. Which they should. No competing Offer will emerge.

• Chery Automobile is getting ready to complete an IPO in Hong Kong in the coming months. The company could raise up to US$1 billion in this IPO.
• Chery Auto is the second largest automaker in China and the 11th largest auto company globally. The valuation of Chery Auto could be more than 100 billion yuan (US$14 billion).
• Chery Auto has one of the best records among all the major auto companies globally in the past three years in terms of sales and net profit growth.

• There are 3 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the March rebalance that will be implemented at the close on 14 March.
• The last-minute methodology change could lead to under/over positioning on some names and those stocks could move the most over the next few days.
• Performance has been mixed in the changes to the STAR50 INDEX but the outright adds have continued to outperform the outright deletes for the STAR100 Index.

• AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best. 
• Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
• This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.

• Gross SOUTHBOUND volumes cleared HK$800bn for the second week in a row. NET buying by SOUTHBOUND was HK$75bn which was perhaps a new record.
• Notable again is the HUGE back-and-forth. If HK$865bn traded and SOUTHBOUND “only” bought HK$75bn, HK$395bn was round-tripped for short-term purposes.
• Last week I flipped to short Alibaba Group Holding (9988 HK). Sentiment may worsen and there’s lots to sell later this week. Staying short Alibaba for now. 

• Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.
• Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset’s price movement.
• Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.

• Chifeng Jilong Gold Mining (600988 CH) has launched an H-share offering that could raise up to US$554m if the offer size adjustment option and overallocation option are both exercised.
• The price range of HK$13.72-HK$15.83/share is a discount of 18.7-29.5% to the A-shares and between 17-26% of the offering will be allocated to cornerstone investors.
• The small issue size will result in the stock staying out the global indices for the foreseeable future. Inclusion in Southbound Stock Connect will take place in April.

• Put trading as a percentage of total volume continues to increase and coupled with a shift in the skew highlights changing sentiment.
• Volatile price action this week with Wednesday and Friday both moving ~3.50%.
• Implied and historic volatilities were all up on the week and seasonal setup over next two weeks not favorble. 

• Mixue Group (2097 HK) raised around US$450m in its Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the trading dynamics.

• Broad based weakness, less than ½ of optionable stocks were up on the week with the average size of losses larger than average size of gains.
• Total single stock Put option volume the highest in the past 4 months pushing the Put/Call ratio to a local extreme. 
• Laggards from the rally holding on, rally leaders broadly weak.

• BeiGene’s 2024 results beat expectations, mainly driven by strong sales growth of BRUKINSA. In 2025, BRUKINSA’s sales would exceed Calquence for the first time.But sales performance of tislelizumab remains lackluster.
• Based on positive trend, turning losses into profits is just a matter of time. BeiGene is expected to achieve positive GAAP operating income in 2025, which is an inflection point.
• US$24.5-26.5 billion is the valuation bottom line, below which BeiGene is undervalued. Our forecast is that market value would reach US$37.5 billion. So, there is still upside potential in valuation.

• Chifeng Jilong Gold Mining (600988 CH) , a gold mining company in China, is now looking to raise up to US$419m in its H-share listing in Hong Kong.
• It operates six gold mines in Asia and Africa and has been listed on the Shenzhen Stock Exchange since 2004.
• We have covered the company and deal background in our previous notes. In this note, we talk about the IPO pricing.

• Alibaba Group Holding Ltd. is making a record-breaking bet on artificial intelligence (AI) and cloud computing, announcing on Monday that it will inject more than 380 billion yuan ($53 billion) into cloud and AI infrastructure over the next three years — more than its total capital expenditure over the past decade.
• The Chinese tech giant said in a statement that the investment marks the largest private-sector commitment to cloud and AI hardware in China.
• Since its 2014 initial public offering, Alibaba’s total capital expenditures from 2015 to 2024 have amounted to approximately 376 billion yuan.

• CSI announced the changes for the March rebalance after market close on 28 February and the changes will be effective after the close of trading on 14 March.
• As expected, Shenzhen Bluetrum Technology (688332 CH) will be added to the index while JoulWatt Technology Co (688141 CH) will be deleted.
• Shenzhen Bluetrum Technology (688332 CH) outperformed JoulWatt Technology Co (688141 CH) in the last quarter of 2024 and there has been a reversal of fortunes this calendar year.

• Several US tariffs are expected in March, but their implementation remains uncertain and is part of ongoing negotiations.
• Central banks in India, Japan, and the US will announce rate decisions in March, with India possibly cutting rates by 0.25%.
• Major HK stocks are set to announce earnings in March, and index changes will occur in the S&P 500, Nifty 50, S&P/ASX 200, and HSCEI indices.

• The NewCo model can be considered as an “intermediate state” for Chinese biotech companies when they hopes to enter overseas markets, rather than a real success in internationalization.
• After the announcement of Pfizer-Summit cooperation, share price of Summit plunged. Pfizer is clearly the beneficiary. The possibility of Summit being acquired could be reduced, which make investors unhappy.
• Shares of Henlius surged. Thanks to Lin Lijun’s dissenting vote, investors have the opportunity to profit at a higher price.Next goal is to be included in Hong Kong Stock Connect.

• TCOM reported C4Q24 revenue 5.4%/3.6% higher than our estimate/consensus, and non-GAAP operating profit 11.2%/6.2% higher than our estimate/consensus, supported by strong domestic travel rebound;
• Even though C1Q25 margin guidance was soft due to commitment to overseas expansions and a couple of one-time events affecting outbound, 
• We keep the stock as BUY rating and keep TP at US$74/ADS.

• Monthly deep-dive into price and vol metrics across Asian indexes as well as macro assets.
• Provides an in-depth look at the current state of the markets as well as how volatility and price are likely to unfold for March.
• HSI, Nifty, SP500, SPASX200 and Gold are all highlighted as having tradeable patterns in March.

• January air cargo activity moderated; timing of LNY holiday also made for tough comps
• January Int’l air cargo tons at US gateways grew far less than inbound (ocean) TEUs
• Data from Asian carriers & US gateways indicates low utilization, softening growth

• 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.
• The key stocks mentioned in this regular series include: Mobvista (1860 HK), Xtep International (1368 HK), Onewo (2602 HK), and Bonny International Holding (1906 HK).

• During yesterday’s Option expiration day, Tencent (700 HK) experienced an intra-day swing of 4.1%.
• Trading in the afternoon oscillated around the prominent 500 strike level. Around 66% of calls and 2% of puts expired in the money.
• Volume was lower than in the preceding days; a total of 38 million shares were traded, with the morning session accounting for 53% of the volume.

• Hong Kong has halted land sales in order to boost the office market within the region.
• Singapore’s Centurion saw their profits more than double to $257M, driven by soaring property valuations.
• Alibaba announces plans to invest a substantial $53 billion in AI infrastructure development.

• Price momentum for deep sea container carriers continued to plunge in January 2025
• January’s revenue decline vs the Summer peak also historically bad despite LNY boost
• We take down emerging consensus view that “all trade disruptions are good for carriers”

• In our last insight covering  China Mobile (941 HK) we said the stock was overbought. It made a sharp pullback last week that may turn into a good BUY opportunity.
• Support levels to buy range from 79.1 to 76.4, assuming this pullback is a buy-the-dip scenario, something we will discuss in this insight.
• If the stock resumes its rally, the next WEEKLY profit targets will be between 82.64 and 84.4.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Xiaomi Corp
• In the US, the second estimate for Q4/24 real GDP was unchanged from the advance estimate at an annualised rate of 2.3% q-o-q, driven by a 4.2% increase (unchanged) in consumer spending. That said, the core PCE price index was revised upwards to 2.7% (from 2.5% in the advance estimate).
• Full-year real GDP growth in 2024 stood at 2.8% y-o-y (vs. 2.9% in 2023). Separately, durable goods orders rose 3.1% m-o-m in January (2.0% e / -1.8% p).

• In 4Q24, BeiGene (6160 HK) reported U.S. sales of Brukinsa of $616M, up 97% YoY and 22% QoQ, with 60%+ of demand growth coming from expanded use in CLL. 
• Brukinsa holds 25% market share in new patient starts in the U.S. in CLL, followed by Calquence (20%). For the first time, Brukinsa’s quarterly U.S. revenue outpaced that of Calquence.
• Beigene has guided for 2025 revenue of $4.9–5.3B (up 29–39% YoY), driven by Brukinsa’s U.S. leadership position and continued global expansion in both Europe and other markets.

• We Doctor Holdings, a top-tier provider of AI-enabled medical services and digital platform which connects hospitals, doctors, and pharmacies, plans to go public in Hong Kong.
• We Doctor Holdings has raised ~$1.5B to date from investors, including Tencent, 5Y Capital, Goldman Sachs, Hillhouse Capital, AIA, and Qiming Venture Partners, among others.
• The Hangzhou-based healthtech company has delivered explosive revenue growth of 107% y/y for the six months ended Jun-24.  

• STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
• The methodology for constituent selection for this index was revised yesterday. These revisions will influence the ADDs/DELs for the March 2025 review which is to be announced soon.
• In this insight, we have presented our updated expectations for the new methodology.

• Li Auto’s (LI) share surged 13% on photos released on its official Weibo of a BEV SUV slated for release in April, two months ahead of our expectation. 
• Based on information released, we dialed up LI’s BEV forecast from 73K to 106K for 2025, contributing 20% of revenue instead of 15%. 
• We raise LI’s TP from US$22 to US$25 but keep at SELL.

• According to PHIP and Crunchbase, We Doctor’s most recently reported valuation was a ~$411M Series F led by HongShan Capital and Millennium Management at a ~$6.7B post-money valuation.  
• My ballpark estimates suggest that IPO valuation target may be below last round valuation. However, I do not expect a significant discount to Series F post-money valuation of ~$6.7B.
• I think investors will ask what is the revenue growth trajectory ahead (FY25-FY28) and why gross profit margins can’t be higher? What is the path to positive free cash flow?

• This will be another quick idea flag and different from the typical cheapish-catalyst type situations I have often written about.
• This is a superb business that I’ve been monitoring for awhile that just saw some nasty correction.
• I’ve been tweeting incessantly about this business, and shares finally collapsed yesterday despite a relatively good earnings report.

• Li Auto (2015 HK) has surged recently due to the announcement of its new Li i8 model, accompanied by a significant rise in implied volatility.
• The elevated implied volatility, with one- and two-month levels above the 90th and 80th percentiles respectively, presents an opportunity for bearish and neutral investors to sell call options.
• March and April expirations are preferred due to the earnings release in May. 

• Hotel Indigo Auckland is up for sale by McVay Real Estate and Whillans Realty Group, offering a prime investment opportunity.
• CDL Chairman accuses son of attempted coup, but Kwek remains CEO, ensuring stability within the company’s leadership.
• Mapletree makes a strategic move by buying a Hong Kong site for $473M at a significant discount, positioning itself for future growth.

• Visen Pharmaceuticals is looking at raising up to USD 300m to list in Hong Kong.
• The company has passed the hearing for the listing and filed a new version of the prospectus.
• We look at the difference between previous filing and current filing. Most of the changes are not critical but we think overall it doesn’t look good.

• Reportedly, China International Capital Corporation (3908 HK) and China Galaxy Securities (6881 HK), two of China’s leading state-backed brokerages, intend to merge via a share swap, forming China’s third-largest broker.
• This report/rumour arrives shortly after the successful merger of Guotai Junan Securities (2611 HK) (GJS) and Haitong Securities (6837 HK). 
• As with GJS/Haitong, expect a Merger by Absorption structure, and that Galaxy (or CICC?) issue new A and H shares to the target. I’d be picking up CICC shares here. 

• This Insight analyses Tencent (700 HK)tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
• These traders tailor structures to risk budgets and take calculated bets. Diagonal call spreads are popular, many self-financing (0% premium). This strategy can play the 18 March earnings date.
• Call spreads can indicate where bullish traders see limits to the upside. The most bullish trade suggests a peak of up to 710 HKD by the end of March.

• Tencent (700 HK) stock options expiring on Thursday, February 27, show a concentration of approximately 40,000 open contracts at the 500 strike price, currently at the money.
• The open interest at the 500 strike may increase volatility and trading activity near expiry if the stock price hovers around 500, possibly leading to amplified intraday price swings.
• At the last monthly expiry in January the stock experienced intraday price swings of 2.5%.

• Vigonvita is looking to raise at least US$100 million via a Hong Kong listing.
• Vigonvita has commercialized COVID-19 anti-viral drug and is expanding the indication to RSV. 
• The main contributor to the company’s develop is not holding a key management role.

• Rubber latex exports value goes up to US$666.25 million in 2024  
• Average yearly rubber price marks a 47% YoY surge to US$1,971/mt  
• Domestic tire firms consume 58,000 tons of rubber in 2024

• Sales of generic drugs are the largest performance contributor. However, due to VBP and the price reduction, Haixi’s generic drug business may shrink and is hard to drive future growth.
• Haixi’s valuation outlook would be mainly based on innovative drug pipeline. The primary goal is to address the issue of druggability of C019199. Haixi needs to provide convincing clinical data.
• Valuation of Haixi was about RMB1.948 billion in 2022. Considering the VBP, R&D failure risk of C019199, no licensing cooperation with MNCs, we think valuation could be lower than peers.  

• Temasek-backed Tikehau partners with Nikko AM to launch new Asia investment management joint venture, expanding their presence in the region.
• STT GDC commences construction on a 16MW data center in Johor, demonstrating growth in data infrastructure in Malaysia.
• Digital Edge CEO Samuel Lee resigns, former legal officer assumes leadership of the data centre platform, amidst continued investment in Australian logistics market.

• Total revenue grew by 24% in 4Q24, higher than 19% we expected.
• The stock price plunged in Hong Kong as we expect in our preview note.
• However, we believe, any stock decline over 11% means overreacted.

• Net Revenue growth accelerated to +23% Y/Y in Q424, far stronger than in Q224 and Q324
• But costs and expenses grew even faster, leading to surprisingly sharp margin contraction
• We no longer view Trip.com as an attractive play on Chinese travel; airlines may outperform

• ZTO Express Cayman (2057 HK) will be added to the Hang Seng China Enterprises Index (HSCEI INDEX) next week and to a global index couple of weeks after that.
• Despite passives needing to buy more than 5% of float inside a month, the stock has barely budged in a rallying China market.
• The increase in cumulative excess volume has been very gradual, indicative of low positioning in the stock. With a lot to buy over the next few weeks, that could change.

• Global capital flowing into Australian logistics market as it reaches turning point, attracting investments.
• Japan REIT makes deals in Tokyo, buying Tokyo Tower for $120M and selling office block for $62M.
• CapitaLand India Trust acquires Bengaluru offices for $170M after project funding, expanding its portfolio.

• Xiaomi has had a remarkable rally, ranking at the 99th percentile for all previous 1-month price changes.
• Implied vols have surged along with price with 1M, 2M and 3M implied vols all ranking above the 95th over the past 4 years.  
• We recommend how to manage risk and positioning given the extreme price and implied vol dynamics.

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 Vanke
• Greentown China
• UPL Ltd

• China Dongxiang (3818 HK)‘s share price change has not sufficiently reflected Alibaba Group (9988 HK)‘s movement. Their share price ratio is now at a historical low. 
• Its SOTP value increased by HK$927m with the surge in its PE, unlisted and fixed-income investment value, but its market capitalisation has gone up by just HK$258m.
• Holdings in unlisted assets like Ant Financial and JD Technology (JD Digital) will benefit from the AI bonanza and the better sentiment in the HK IPO market.

• NetEase reported C4Q24 rev., GAAP op. profit and GAAP net inc. in line/3.9%/27% vs. our est., and in line/9.3%/27% vs. cons. 
• We see NetEase entering a new phase of product-driven revenue growth, driven by rebounding mobile and accelerating PC game growth;
• We raise TP to US$122 and keep NTES as our TOP PICK in gaming sector.

• BUTONG’s growth momentum remained high, but customers are more focused on cost-effectiveness rather than premium products. We are unsure whether BUTONG’s  current high growth is sustainable in this low-growth industry. 
• The more revenue proportion from baby care products, the lower overall gross margin would be.BUTONG’s strategy of emphasizing sales over R&D isn’t conducive to establishing core competitiveness in fierce competition.
• After Series B financing, the post-investment valuation reached about RMB2 billion. However, the market value of peers is not high. BUTONG’s post-IPO valuation performance may be lower than expected.

• Manycore Tech (KOOL US) is looking to raise about US$300m in its upcoming Hong Kong IPO. The deal will be run by JPM and CCBI.
• Manycore Tech is an AI powered design and visualization platform with graphics processing unit clusters. Designs crafted can be translated into production-ready drawings, enabling an automated and accurate manufacturing process.
• According to F&S, it was world’s largest spatial design platform and largest software provider in China’s spatial design industry, based on average monthly active users and revenue, respectively, in 2023.