ChinaDaily Briefs

China: Sinopec Engineering Group H, Luckin Coffee, NetEase Inc, Weilong Delicious Global, China Travel International Investment Hong Kong, Biocytogen Pharmaceuticals (Beijing), Huayuan Medical Group Holding, China SCE, Asia High Yield Bond Index and more

In today’s briefing:

  • Sinopec Engineering (2386 HK): Priced For Liquidation. Again
  • Forensics 101 – Revenue Recognition Shenanigans and Key Detection Metrics
  • NetEase (NTES): 3Q21, Magic Awakened by Harry Potter
  • Weilong Delicious IPO: Mixed Update
  • Weilong Delicious Global Pre-IPO – PHIP Updates – Mixed Bag 1H21 Performance
  • China Travel Intl Inv (308 HK): Here Comes My Turn!
  • Biocytogen (百奥赛图) Pre-IPO: Peer Comparison and Prelim Valuation for Animal CRO
  • Pre-IPO Huayuan Medical Group Holding – How to Tell a Good Story After the COVID-19 Magic Disappear?
  • Morning Views Asia: China Aoyuan Property, China SCE
  • 5 New Deals incl. DBS, Olam, HDB; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers a…

Sinopec Engineering (2386 HK): Priced For Liquidation. Again

By David Blennerhassett

  • Sinopec Engineering Group H (2386 HK) (“SEG”) is currently trading 11% below its net cash position.
  • Net income has steadily increased over the past four years. 1H21 profit increased 6.8% compared to the corresponding period.
  • The payout ratio has averaged ~60% in the past five years. The current yield is 10%. 

Forensics 101 – Revenue Recognition Shenanigans and Key Detection Metrics

By Jason Yap, CFA

  • Revenue is the single most important line item on the income statement
  • Given its relative significance as a barometer of a company’s financial and operating performance, the revenue line item is highly susceptible to fraudulent misstatements 
  • In the 1st of this 3 part series, we discuss the Revenue Shenanigans Key Metrics. We will discuss Earnings Quality and Balance Sheet Health Key Metrics in future Insights 

NetEase (NTES): 3Q21, Magic Awakened by Harry Potter

By Ming Lu

  • Game revenue recovered due to the new game, “Harry Potter: Magic Awakened”.
  • Surprisingly, Youdao, Inc. (DAO US) did not shrink under the pressure of new policy. 
  • We believe both revenue growth and operating margin will rise in 2022.

Weilong Delicious IPO: Mixed Update

By Arun George

  • In Weilong Delicious IPO Initiation: Tasty Bite, we stated that Weilong offers an appealing mix of robust top-line growth, high margins and strong cash generation.
  • However, the 1H21 update is mixed. The top-line growth remains strong but at the cost of margins. Margin headwinds are likely to persist in the short term. 
  • In a weak HKEx IPO market, we think that Weilong’s mixed fundamentals will likely struggle to gain investor enthusiasm.   

Weilong Delicious Global Pre-IPO – PHIP Updates – Mixed Bag 1H21 Performance

By Sumeet Singh

  • Weilong Delicious Global (WDG), a spicy snack food company in China, aims to raise around US$1bn in its Hong Kong IPO.
  • According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 5.7%, and in the seasoned flour product and spicy vegetable snacks categories.
  • In this note, we will look at the updates from its recently filed PHIP.

China Travel Intl Inv (308 HK): Here Comes My Turn!

By Osbert Tang, CFA

  • Share price of China Travel International Investment Hong Kong (308 HK) (CTII) rallied by 20% over the last 10 trading days but we see good room for more to come.
  • Our view is that HK-China border opening, revival in domestic tourism, supportive measures and upgrade in attractions are some key drivers for an increasing positive outlook.
  • At 0.45x 12-month forward P/B (1.5SD below average), there is significant potential for re-rating. Its net cash of HK$0.40/share, or 30% of share price, adds further comfort to us.

Biocytogen (百奥赛图) Pre-IPO: Peer Comparison and Prelim Valuation for Animal CRO

By Ke Yan, CFA, FRM

  • Biocytogen, a China-based pre-clinical research and biopharmaceutical company, plans to raise up to USD 300m via a Hong Kong listing.
  • We compared the company’s key metrics with its close peer in the animal CRO segment.
  • We provide a preliminary thought on the valuation for its animal CRO.

Pre-IPO Huayuan Medical Group Holding – How to Tell a Good Story After the COVID-19 Magic Disappear?

By Xinyao (Criss) Wang

  • Huayuan Medical Group Holding (HUMG HK) is a manufacturer and supplier of disposable non-latex gloves based in China.
  • Huayuan’s market position is out of the first echelon. Thanks to COVID-19, its downward trend in performance had been reversed by the pandemic, but such “magic” would not last forever. 
  • Together with other concerns analyzed in the article, we are conservative about the Company’s outlook.

Morning Views Asia: China Aoyuan Property, China SCE

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.


5 New Deals incl. DBS, Olam, HDB; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers a…

By BondEvalue

US equities ended flat with the S&P and Nasdaq almost unchanged. Sectoral gains were led by Utilities, up 0.9% while losses were led by Materials, down 0.5%. US 10Y Treasury yields rose 5bp to 1.61%. European markets were mixed with the DAX, CAC and FTSE up 0.3% 0.5% and 0.1% respectively. Brazil’s Bovespa ended 1.2% lower. In the Middle East, UAE’s ADX was down 0.3% and Saudi TASI was down 0.6%. Asian markets have opened higher – Shanghai, HSI and Nikkei were up 0.2%, 1.1% and 0.3% while STI was flat. US IG CDS spreads were flat and HY CDS spreads were 0.6bp tighter. EU Main CDS spreads were 0.3 and Crossover CDS spreads were 1bp wider. Asia ex-Japan CDS spreads tightened 0.4bp.

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