China: JD.com Inc., Taste Gourmet Group, Tencent, Cloud Village, Water Oasis, Zhihu Technology, 21Vianet Group, Hong Kong Hang Seng Index, West China Cement and more

• There has been an increase of 700m shares held in HK CCASS for JD.com Inc. (9618 HK) on 11 April.
• The largest part of 421.5m shares is likely the conversion of Class B to Class A shares following Richard Liu stepping down as CEO of the company.
• The rest is unknown at this point but could be Prosus (PRX NA) moving their shares to HK to sell-down and use the cash to buy back their own stock.

• The relaxing of restrictions by Hong Kong makes Taste Gourmet Group Ltd (8371 HK) a great reopening play, trading at 8.8x FY22e and 5.6x FY23e. 
• Despite a challenging environment, the company has executed well, maintaining net margins north of 7-8%, which are far superior to other listed competitors.
• With >60% payout ratios, it trades at a dividend yield of 6.7%/11.4% FY22e/FY23e. Since 29% of the market capitalization is cash, we are confident in the dividend payments. 

• Today, CCASS data showed that 700,000,047 Class A Shares of JD.com Inc. (9618 HK) popped into existence in CCASS (from outside of CCASS the day before). Poof!
• They showed up in Deutsche Bank’s CCASS Participant account. Just like the 600,000,000 Class A Shares which popped in on 15 December 2021. 
• There’s a thing here, and there are things going on in the background, but the things in the foreground are not as menacing as they appear. I explore and explain.

• China’s gaming regulator, National Press and Publication Administration granted publication licenses to a list of 45 games, ending the nine-month long freeze on new game approvals in the country.
• While it comes as a relief, The Cyberspace Administration of China has kicked off a formal campaign to investigate and rectify algorithm security issues of tech companies.
• Though any of Tencent (700 HK) games didn’t receive approvals, the company’s shares have moved positively during today’s trade and up 2.1% from yesterday’s close.

• After one month from the March batch of Hong Kong Connect inclusion, we provide an analysis on the stock inclusion for 19 stocks. 
• We analysed the inclusion by performance post announcement, performance post inclusion, inflows and analyst coverage.
• We observed outperformance post the HSCI announcement but not the actual inclusion despite the fact that southbound inflows has a significant impact on the trading volume. 

• Beauty services in Hong Kong will pick up from the 21st of April 2022 post the reopening, due to pent-up demand and the disbursement of Consumption Vouchers by the government. 
• Despite losing three months of H1 2022 and a month of H2 2022, we believe that Water Oasis (1161 HK)  is still trading at 5.4x PE FY22e.
• With an 80% payout ratio, the dividend yield is alluring at 16.4%. Net cash represents 38% of market capitalization. A year of uninterrupted operations implies a 3.8x PE. 

• Zhihu Technology (ZH US) has launched an HKEx dual-primary listing to raise $150-200 million. The H Shares will be priced on 14 April and listed on 22 April.
• In Zhihu Dual-Primary Listing: A Question of Judgment, we stated that while a loss-making tech name is not everybody’s cup of tea, Zhihu has resilient performance and an undemanding valuation.  
• In this note, we will look at Zhihu’s potential HK-ADS premium/(discount). Zhihu pricing its H-shares at a discount of 3-4% to its ADSs will be reasonable, in our view.

• Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai’s Industrial Bank Co. 
• The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
• The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.

• HSI’s bear turn at 22,500 is in line with 21k the level to break for further bear traction.
• HSI downside targets remain at 20,200 and 19,700 but below 19,500 would induce a weaker cycle into May with risk of re testing key lows.
• HK tech index, JD and Tencent levels are reiterated. Summer cycle lows to set up a more bullish second half of 2022.

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.

• Lippo Karawaci
• West China Cement