ChinaDaily Briefs

China: Linklogis, Geely Auto, Xpeng, SHEIN, China Grand Automotive Services, Transcenta Holding, Medco Energi and more

In today’s briefing:

  • Linklogis Short Sheller Report – Some Merit, Some Plain Drama – Mixed Bag
  • Short Seller, Valiant Varriors Says Linklogis Is a Glorified Mortgage Broker
  • Geely: Blind Ordering Expectations Mismatch Transitory, Buy on Weakness
  • Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends
  • SHEIN Is In- Gen Z’s Own Fast Fashion Revolution
  • Indonesia; Lai Sun, China Grand Auto Launch $ Bonds; Macro; Rating Changes; New Issues; Talking H…
  • Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns
  • Morning Views Asia: ABM Investama, Evergrande Real Estate Group, Medco Energi

Linklogis Short Sheller Report – Some Merit, Some Plain Drama – Mixed Bag

By Sumeet Singh

Linklogis, a technology solution provider for supply chain finance in China raised around US$1bn in its Hong Kong IPO in Apr 21. It was subject of a short-seller report by Valliant Varriors which was published yesterday, see here.

In this report, we will talk about the points raised by the short sellers.

We have covered various aspects of the deal in our earlier notes:


Short Seller, Valiant Varriors Says Linklogis Is a Glorified Mortgage Broker

By Oshadhi Kumarasiri

Short seller Valiant Varriors may not have hard facts to accuse Linklogis (9959 HK) of clear fraud apart from minor violations of the law by some of the subsidiaries. However, the underlying factor that the short seller highlight is that Linklogis is nothing but a glorified mortgage broker (not a tech-enabled cloud software as a service platform), relying on cheap human labour instead of AI to do the work.

Linklogis fooled many investors, including the biggest investment managers and technology companies like Tencent, portraying itself as a technology company when it was really a mortgage broker. The Chinese government is currently on high alert about these issues in overseas listings and it is possible that Linklogis might result in an extension of crackdowns to Hong Kong and the domestic exchanges.

Valiant Varriors also highlights that Linklogis has consistently lied about its large exposure to the risky real estate market, violated laws related to factoring companies, exaggerated technology capabilities, evaded tax and misled investors by overstating revenues.

We believe all these are very series allegations, and it is hard to refute the basis of the short seller’s arguments and some of the evidence presented.


Geely: Blind Ordering Expectations Mismatch Transitory, Buy on Weakness

By Victoria Li

Geely’s share performance has been under pressure these days, due to 1) mismatch between unveiled model details of ZEEKR 001 and expectations of blind order customers; 2) yoy growth rates has been weak of late.

We don’t think investors should worry too much about these transitory issues and short term weakness bring buying opportunity. Reiterate BUY.


Xpeng (9868 HK): Potential HSCEI Inclusion & Impact on 2022 Dividends

By Brian Freitas

Xpeng (9868 HK) listed in Hong Kong on 7 July was added to the Hang Seng Composite Index (HSCI) at the close of trading on 20 July. However, being a WVR security, the stock will not be eligible for Southbound Stock Connect till early 2022.

Subject to passing the velocity test, we see Xpeng (9868 HK) as an inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, replacing Evergrande Real Estate Group (3333 HK).

With Hang Seng Indexes treating the stock as a primary listing, HSCEI passive trackers will need to buy a large part of the stock that was offered in Hong Kong. This could push Xpeng (9868 HK) to trade at a premium to Xpeng (XPEV US) and there will be arb opportunities which could result in conversion from the ADS to the HK listing.

The inclusion of Xpeng (9868 HK) in the index will push the Hang Seng China Enterprises Index (HSCEI INDEX) 2022 dividend futures lower. With the recent changes in China to companies looking to list on a foreign exchange, the HFCAA, and other structural changes to the index, we prefer a short position in the HSCEI 2022 dividend futures.


SHEIN Is In- Gen Z’s Own Fast Fashion Revolution

By Evelyn Zhang

  • SheIn targets women aged 18-35 with below average income; they are more sensitive to the price (Shein’s products are $9-24) and are less demanding in terms of shipping time (over 2 weeks) and quality; sensitive to fashion trends (3000 new SKU every day, 7-8 days design to shelf time).
  • The sales growth is driven by the increase in order volume and high users retention rate;
  • SheIn is adopting the C2M model in which customers interest and feedback directly influence the production.
  • SheIn uses offline buyers and trawls online influencers to capture fashion trends, then designs products based on the information to create bestseller products.
  • SheIn has in-depth cooperation with 2,000-3,000 small and medium-sized manufacturers (including 300 core suppliers), 100 fabric suppliers in Guangzhou to establish a fast response supply chain.
  • SheIn adopts a “small order quick turnaround” production model, that is, each product has only about 100 pieces of initial order, and then put on the market for testing, and feedback, and iterate by launching new products every day
  • SheIn built its own supplier management system to coordinate long-term cooperative suppliers. SheIn can access detailed production line information from suppliers, including textile type, the personnel status, the current fabric and dye inventory level, production capacity etc.
  • SheIn started online influencer & celebrity marketing in 2011, by providing commissions/exclusive discounts/payments cooperation, now inviting internet celebrities to live broadcast on unboxing, try on, review etc.,
  • Thanks to the company’s brilliant marketing and dominant position, the marketing expense ratio from 2017 to 2019 has decreased YoY to 28.5%, 26.2%, and 17.5%, respectively.

Indonesia; Lai Sun, China Grand Auto Launch $ Bonds; Macro; Rating Changes; New Issues; Talking H…

By BondEvalue

US markets rebounded, making up most of Monday’s losses as the S&P and Nasdaq gained 1.5% and 1.6% respectively. Industrials and Financials led the charge and were up 2.7% and 2.4%. Real Estate, Consumer Discretionary, IT, Energy, Materials, Healthcare and Communication Services were up more than 1%. Earnings reports continued with Netflix, UBS and United Airlines reporting their quarterly numbers (scroll down for details). US 10Y Treasury yields were flat at 1.21%. European indices also climbed more than 0.5% – CAC was up 0.8% and DAX and FTSE were up 0.5% each. US IG CDS spreads tightened 1.6bp and HY tightened 5.1bp. EU Main and Crossover spreads tightened 0.1bp and 1.45bp respectively. Brazil’s Bovespa was up 0.8%. Gulf markets remained closed for Eid and oil prices remained sub $70/bbl. A Chinese Finance Ministry official said that China’s fiscal revenue growth  is likely to slow significantly in the second half. Asian markets were upbeat – Nikkei was up 1.4% and  Shanghai,  HSI and Singapore’s STI were up between 0.2%-0.6%. Asia ex-Japan CDS spreads were 1.7bp wider.

Pre-IPO Transcenta Holding – Insights on Pipeline and the Concerns

By Xinyao (Criss) Wang

Recently, Transcenta Holding (THL HK) has passed the listing hearing of the HKEX and is expected to be listed on the main board in the near future. Transcenta is a clinical stage global biopharmaceutical company that integrates the capacities of discovery, research, development, manufacturing and business development, with nine product candidates in the pipeline, eight of which are oncology drug candidates. This insight mainly analyzed the important product candidates (such as MSB2311, TST001, TST005 and MSB0254) in the pipeline and related concerns. 


Morning Views Asia: ABM Investama, Evergrande Real Estate Group, Medco Energi

By Charles Macgregor

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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