China

• Founder Zhu Zhongyuan is a key figure in biotech landscape.So, when Duality first started its entrepreneurial financing, the process was smooth and the starting point of Duality was not low.
• The R&D progress of Duality’s pipelines is slower than competing candidates, so they would be in a passive position after market launch. So, Duality’s valuation would be lower than Kelun Bio.
• Duality’s pipeline still has “good stories” to tell. There’s a chance its valuation could be higher than RemeGen, whose business model/investment logic have been falsified due to weak sales data.

• Minieye Technology, a fast-growing provider of intelligent driving and cabin solutions in China, will price its IPO this week.
• The company was backed by CICC Capital, Beijing Siwei, Shenzhen Zeyi, and Mr. Wu Yongming, the current CEO of Alibaba, among others.
• IPO valuation multiples appear justified given the company’s top-line growth of 30%+ and full-stack in-house R&D capabilities.

• After Shanghai Henlius Biotech (2696 HK) secured NDRC approval on the 22nd Nov; fulfilled pre-cons on the 16th December, the Circular was dispatched last night, the 22nd December. 
• The EGM/H-share class meeting will take place on the 22nd January, one day past my estimate. Settlement should be on ore around the 18th Feb, a week beyond my estimate. 
• Trading at a gross/annualised spread off 2.9%/20.3%. Still attractive here.

• Communication Services had 39% of single stock option volumes vs only 22% of the open interest highlighting short expiry / speculative nature of trading.
• Tencent and Baidu heading in opposite directions – Baidu vol on the inexpensive side vs Tencent vol.
• Xiaomi one of only 2 optionable names trading at 52-week high (Sunny optical being the other).

• When VCredit Holdings (2003 HK), a provider of consumer financial services in China, was suspended pursuant to the Takeovers Code, I expected an Offer from Ma Ting Hung, VCredit’s chairman.
• Well, we do have an Offer. Ma acquired 4.19% via two SPAs, lifting his stake to 44.04%. Stephen Liu (an ED) also acquired 1.43% via an SPA.
• As Ma, Liu, and other parties, are presumed to be acting in concert, an unconditional MGO is triggered. But at HK$1.80/share, a 9.09% discount to undisturbed.

• On 17 December, Goldlion Holdings (533 HK) announced a scheme offer from Mr Tsang (Chairman/CEO) at HK$1.5232 per share, a 71.1% premium to the undisturbed price of HK$0.89 (20 November). 
• The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). The shareholder with a blocking stake is a seller. 
• The offer is reasonable compared to peer multiples and historical trading ranges. At the last close and for a late April payment, the gross/annualised spread is 7.3%/22.7%.

• Alibaba sells 100% equities in Intime Department Store to Youngor.
• Meituan plans to shorten delivery workers’ work hours due to sudden death cases.
• Mixue, the lowest price fresh drink provider, began to raise its prices.

• On 20 December, Shandong Xinjufeng Technology Packaging (301296 CH) satisfied the precondition for its Greatview Aseptic Packaging (468 HK) offer. The offer document will be despatched by 27 December.
• Analysing the EGM vote on 18 October suggests that the 50% minimum acceptance condition will be met if no competing management offer is made. 
• Management will oppose the offer, but the last EGM protest votes suggest that many minorities will ignore management. At the last close, the gross/annualised spread was 2.3%/25.3%.

• On Friday, the 20th December, GAPack (468 HK) announced that Shandong Xinjufeng Technology (301296 CH) (XJF) had satisfied all pre-conditions.
• The Offer Document has now been dispatched, and the Offer is now open for tendering. The First Close is the 21st January.
• This Doc is largely a nothing burger. The Response Document, which will include the IFA, is required to be dispatched on or before the 7 January 2025. 

• 2024 is the year when CanSino achieves a fundamental reversal. Based on the current sales performance of meningococcal vaccines, 2024 full-year revenue is expected to reach about RMB840 million.
• Under normal circumstances, PCV13i is expected to be approved in Q1-Q2 next year. If everything goes smoothly, PCV13i would be approved at the beginning of next year at the earliest.
• Market value of RMB8-10 billion is reasonable range for CanSino. If a new virus causes a pandemic in the future, this will be a powerful catalyst for stock price.

• Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. 
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. 
• Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.

• Hopson Development (754 HK) is cash-strapped and it will most likely choose cash dividend, which would increase the likelihood that Glorious Peace’s shareholding ratio will increase to more than 50%.
• If PAGD’s share price is higher than HK$6.12, there is arbitrage opportunity. Since Ping An may hope other shareholders to choose cash dividends, future stock price may fall below HK$6.12
• A risk point is Ping An can actually wait for other shareholders to make their choices before making the final decisions based on the stock price situation at that time.

• Vesync (2148 HK)‘s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited. 
• 1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.
• Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector’s average PER multiple implies ~70% higher than the pre-suspension price.

• Sleepy week highlighted by small closing price ranges that were among the 3-5 quietest of the year.
• Volumes across both indexes were down about 1/3 from the prior week.
• Despite low volumes open interest expanded across out-of-the-money options for both Puts and Calls.

• Volume growth & price declines both moderated in November vs preceding months
• We believe most express companies should be experiencing margin expansion in Q424
• We finish with a review 2024’s winners and losers in China’s ecomm fulfillment space

• SOUTHBOUND gross trading activity fell 20% week-on-week this week. Net buying was a little stronger. 
• Alibaba Group Holding (9988 HK) was a net SOUTHBOUND sell this week for the first weekly sell since it became Southbound-eligible. Friday was the largest one-day sell in that period.
• Tech is still on the sell side and financials are still being bought very bigly.

• Pentamaster International (1665 HK) disclosed a Cayman scheme privatisation offer from Pentamaster Corp (PENT MK) and AchiCapital at HK$1.00 (HK$0.93 cash + HK$0.07 dividend), a 56.3% premium to the undisturbed price. 
• The offer is final but unattractive compared to peer multiples. The shareholder with a blocking stake is a seller, but there is risk due to a high AGM participation rate.
• An arguably light offer in which the Holdco is privatising its OpCo by arbitraging the valuation discrepancies across two exchanges may not sit well with minorities.

• Increasing revenue without increasing profits is “a big denial” of a company’s business model. Unless Zai Lab significantly reduces costs and maintains revenue high growth, its investment value is low.
• Junshi’s 2024 revenue is likely to return to over RMB1.5 billion due to market share expansion in PD-1. Strict cost control will be the main theme for the future.
• If PAGD’s share price is higher than HK$6.12, there would be arbitrage opportunity. If Ping An hopes other shareholders to choose cash dividend, future stock price may fall below HK$6.12.

• AH Premia are all over the place this week. Despite that, pairwise intracorrelation is…. up? Yup. Average Pairwise Volatility is up even more.
• Some of this may be stocks being bullied by large SOUTHBOUND flows in a quieter end-of-year market. 
• Finance is seeing big net SOUTHBOUND buying but that is not showing up in A/H premia. I expect things stay noisy through year-end.

• November’s pricing weakness vs Summer peak is among the sharpest declines in 10+ years
• A work stoppage at some US ports could hit in January, but impact likely muted
• Share prices under pressure as investors begin pricing in softer conditions in 2025

• During the lunch break, Greatview Aseptic Packaging (468 HK)  announced that Shandong Xinjufeng Technology Packaging (301296 CH) (XJF) had satisfied all pre-conditions – the final approvals concerned outbound direct investments.
• The Offer Document, including the IFA opinion, is expected to be dispatched  in seven days – or 27th December, at which time, the Offer will be open to acceptances.
• Evidently the Jeff Bi/Gong Hong MGO isn’t materialising any time soon. Provided the IFA is supportive – and that should now be known – management should unanimously back XJF’s Offer.

• The First Huarui Offer Closing Date is Jan.10 2025. The latest time/date by which the Huarui Offer can become or be declared unconditional as to acceptances is 18 February 2025.
• China Foods once chose to side with Baosteel – They are both SOEs.Although regulatory agencies have given the green light, it’s still unclear if China Foods will accept Huarui Offer.
• The “key variable” is Zhang Wei’s attitude. Investors can choose bet on it.It would be wise for arbitrageurs to wait until Zhang Wei makes his move before making a decision.

• Bloks Group, a fast-growing toy company in China, will disclose the proposed size and the initial price range for the share sale soon.
• In my insight, I discuss IPO valuation, update relative valuation table and set a target valuation for Bloks Group ahead of an IPO.
• Bloks Group enjoys higher relative growth profile and superior gross profit margins. The company has over RMB600M in cash and equivalents and no debt.  

• Widespread caution around Chinese buying sentiment 
• Weakness in Yuan can pose significant challenge
• Trade data not very optimistic

• On December 16th, Kuaishou launched a subscription service for its micro drama channel, we believe it marks a key step towards improving monetization;
• The penetration rate of heavy micro drama users on the platform has steadily increased, and leveraging their loyalty and monetization efficiency may improve with the subscription model.
• The new model could better help mitigate the macroeconomic risks posed by advertising and the content quality risks of its long-tail partners.

• After the China Traditional Chinese Medicine (570 HK) fiasco back in October, Hong Kong M&As have received some welcome Xmas cheer of late.
• Small-Cap CM Hi-Tech  (2115 HK) secured reg approvals in record time. Then CPMC (906 HK)‘s pre-cons were satisfied on 13th December. Now Shanghai Henlius (2696 HK)‘s pre-cons are also fulfilled. 
• Henlius’ spread narrowed after securing NDRC approval on the 22nd Nov; and again after fulfilling pre-cons this week. A 3.1% gross spread is okay. This is done. Get involved.

• 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 June 2025.
• Currently, we see 6 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
• In this insight, we look at the potential ADDs/DELs for the STAR50/STAR100 indices for the March 2025 index rebal event and suggest a high impact trade idea.

• At a 1.5% gross spread to terms, CPMC Holdings (906 HK) is trading with completion is mind after the last pre-condition – SAFE – was satisfied on the 13th December. 
• The Offer Doc is now out and the transaction is open for acceptances. The First Close is the 10th January. 
• I’d expect this deal to turn unconditional on or before the First Close, with payment around the 20th January.  

• Bloks Group, founded in 2014, is China’s top assembly character toy company, targetting primiary school students.
• Bloks faces competition from multiple domestic competitors in a slow growing market. The company’s aggressive market expanison in the past 2 years has come at a significant cost .
• The IPO valuation may be high, considering the industry’s low barriers to entry and the company’s unstainable growth.

• Global aviation supply continues to suffer from various supply chain disruptions, driving up lease rates and aircraft values and benefiting aircraft lessors, such as BOC Aviation (BOCA) 
• Although BOCA’s interim results were disappointing due to delayed aircraft deliveries, I expect its momentum to recover in 2025, driven by incoming aircraft and lower interest costs. 
• Stock is trading at 0.9x PB, nearing its historical trough of 0.8x, and offering a decent 5% dividend yield.

• Temu, the Chinese cross-border e-commerce platform owned by PDD Holdings Inc. has suffered its first major setback since launching in 2022 after Vietnam banned its operations citing regulatory non-compliance only two months after it entered the market.
• Temu was ordered by the Ministry of Industry and Trade to stop using the Vietnamese language on its website and app, to notify customers that its e-commerce registration was under review, and to halt all marketing activities in the country, according to a report by Vietnam News Agency on Dec.
• The suspension is Temu’s first since expanding into more than 80 countries around the world.

• The H share market continues to be the top performing market in Asia in 2024.  The HSCEI has outperformed all Asian markets on a USD basis.
• China Longyuan Power (916 HK) was rated a BUY at JP Morgan with the company hosting a roadshow to discuss its future growth strategy. 
• China Resources Beverage (2460 HK) was initiated as a BUY at CMB International as the company rapidly expands into the ready-to-drink category with teas and sports drinks.

• The tech giant Huawei Technologies Co. Ltd is to complete the spinoff of its intelligent automotive business unit to become an independent company, Shenzhen Yinwang Intelligent Technology Co.

• Huawei’s aim is to solidify its position as a leading smart vehicle supplier amid industry challenges and expanding partnerships.

• Founded in 2019, Huawei’s car business unit originally said it would not make cars itself, but focus on supplying automotive components, particularly autonomous driving systems, through its Huawei Inside (HI) model.

• UBTech Robotics (9880 HK) was listed in Hong Kong on 29th Dec 2023 after it raised US$130m. Its one-year lockup will expire on 28th Dec 2024.
• UBTech Robotics is engaged in artificial intelligence (AI)-empowered robotics in China, dedicated to the innovation of humanoid robots and development and sales of smart service robotic solutions.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
• Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
• As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.

• The Shanghai Shenzhen CSI 300 Index (SHSZ300 Index) exploded higher in mid-September 2024, then went flat in a range (still there as we write).
• Our models currently see uptrend and downtrend targets positioned at an equal distance from the last WEEKLY CLose on December 13th.
• In short this means that the index is “perfectly neutral” at the moment, a rare scenario that requires straddle and strangle-like strategies to be able to profit.

• China New Higher Education (2001 HK) has rebounded by 40% from its post-result trough but was still down by 34% from the pre-FY24 result level, despite healthy FY24 results.
• Net profit is healthy, but it is the all-scrip final dividends that dragged on the share price. Concerns are on higher gearing, but at 69.9%, this is still acceptable. 
• The consensus earnings forecast of a 6% growth in FY25 and FY26 seems not excessive. At 2.2x PER and 22% yield for FY25, it seems worthy of the risks.

• Bloks Group, a founder-led leader in China’s assembly character toy segment, updated its PHIP and continued to post hyper growth.
• In the nine months ended Sep-24, the company’s revenue totaled ~RMB1629m, representing a y/y growth of ~177%, due to significant increase in product sales volume.
• According to the most recent PHIP, Ultraman IP license in China was extended to 2027 and TRANSFORMERS IP license with Hasbro will expire only in 2028.

• The two core businesses is corporate and digital marketing services (2B business) and health and medical services (2C business),the synergy of which can form a virtuous cycle within the platform.
• The key performance driver for HealthWay is 2B business, but the pain point is 2C business, which is hard to scale up. Actually, HealthyWay’s growth momentum has slowed down significantly.
• After completing the final round of financing, HealthyWay’s valuation reached RMB4.1 billion. We think its valuation could be higher than ClouDr but lower than JD Health and Alibaba Health.

• DiDi Global (DIDI US) has begun to generate positive EBITDA after several challenging years post-IPO.  With a high degree of operating leverage, the company is poised to grow quickly.
• Didi which maintains a 70% market share in the ride-hailing industry in China is expanding into Tier 3 cities where there is a large untapped opportunity.
• The company has indicated that it wants to list in Hong Kong in 2025 providing a catalyst for share price re-rating next year.

• After Goldlion Holdings (533 HK), an apparel manufacturer/distributor, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, from the Tsang family (63.09% stakeholder).  
• And that it’s exactly what unfolded.  The Cancellation Price is $1.5232/share (declared final), a 24.85% premium to last price, but a punchy 71% premium to undisturbed. 
• The long stop is the 30th September 2025. This will probably be completed in less than half the time. There will be a question mark over the low price-to-book multiple. 

• It is difficult for Fosun Tourism (1992 HK) to return to its peak and IPO share prices over the next two years. The buyback proposal represents a good exit opportunity.
• Net profit is unlikely to go back to FY19 level even in FY26F. The derating of the Chinese equities and Fosun Group, as well as its high gearing, are barriers.
• Its PER multiples have already aligned back to the sector average from the extremely depressed level previously. Relative to global names, it is now only at slight discounts.

• 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 insight include: BeiGene (6160 HK), China Wantian Holdings (1854 HK), and Super Hi International Holding (9658 HK) / Haidilao International Holding (6862 HK).

• HKTV is a prominent e-commerce platform in Hong Kong facing challenges from the pandemic and retail market.
• Founder Ricky Wong has shown a history of moonshot diversifications and strong leadership from executives like Jelly Zhou, leading to renewed optimism for the company.
• With a low valuation, potential for growth, and Ricky Wong’s history of successful ventures, HKTV could be a lucrative investment opportunity in the future.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: New World Development, Vedanta Resources, Softbank Group, AAC Technologies
• In the US, the December (preliminary) S&P manufacturing PMI fell to 48.3 (49.5 e / 49.7 p), while the services PMI expanded to 58.5 (55.8 e / 56.1 p).
• The composite PMI also rose to 56.6 (55.1 e / 54.9 p). Treasuries were little changed, ahead of the Fed’s rate decision tomorrow. The yield on the 2Y and 10Y UST were flat at 4.25% and 4.40%, respectively.

• Medical industry characteristics are the seriousness of diagnosis/treatment and the irreversibility of the process, which are the difficulties in implementing technology. The value that AI can provide is limited. 
• Xunfei’s business model is not To C, but To G (government) model. It’s not possible for SOE customers to pay high price for Xunfei’s AI model/products, leading to questionable profitability.
• Pre-IPO valuation has reached RMB8.4 billion. Without sustainable growth and stable profitability, valuation/liquidity of Xunfei after listing wouldn’t be good. We think Xunfei’s valuation could be similar to Yidu Tech.

• We see 32 potential and close adds and 44 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
• We expect 29 stocks to be added to Southbound Stock Connect following the rebalance while 31 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.

• In this insight, we provide a list of 70 prominent companies in Asia that could complete their IPOs in Asia next year. 
• This is a comprehensive, REFERENCE GUIDE to help clients so that they could get a broad view of the major IPOs that could get completed in Asia in 2025.
• Some of the most prominent potential IPOs in Asia next year include Reliance Jio, LG Electronics India, Shein, Sony Financial Group, Didi Global, and Okada Manila.

• BYD Electronics benefits from two key growth drivers in 2025: a cyclical upswing in its legacy EMS business, and sustained strong growth in auto electronics and AI data cooling devices.
• Earnings momentum is expected to pick up in 4Q, with key segments entering an earning upcycle. Expect bottomline growth to accelerate to 45% in 2025 from 9% in 2024.
• The 13x 2025 PE multiple does not capture BYDE’s transformation from a low-end, cyclical EMS to a leading high-precision manufacturer with a more diverse and balanced set of growth drivers.

• Top Ten most active contracts for the week all traded on Monday. Most of the active contracts were Calls with December expiries.
• Xiaomi Corp (1810 HK) makes the Top Ten non-Tencent most active contracts with both Puts and Call active – likely stock replacement and hedges following torrid run higher.
• Tencent implied vols trading at their lowest levels of the past year.

• Both HSI and HSCEI show characteristics of being short gamma at higher strikes highlighted by Mondays pop in spot and vol in both markets.
• Implied vol did a complete round-trip closing virtually unchanged from last week despite spot holding on to modest gains on the week and large high – low range.
• Up-Strike Calls look to have been added in both markets which will help maintain the positive spot vol correlation.

• In this insight we chart the progress of China’s tourism recovery vs pre-pandemic levels
• In October 2024, Chinese outbound (international) demand finally reached pre-Covid levels
• The recovery in domestic activity was completed earlier and more quickly than outbound

• Performance declined sharply in 24H1 mainly due to the decrease in orders from Customer A. Herbs Generation’s business/financial performance would be easily affected if the contributions from Customer A decline.
• Current sales model of Herbs Generation is hard to change, and the Company still has to invest heavily in offline marketing and promotional efforts, but the efficiency is not high.
• Herbs Generation’s ability to resist risks is relatively weak, which prevents us from building optimistic expectations for sustainable growth in the future. Valuation should be lower than peers.