Daily Brief China: Giordano International, Tencent, Onewo Space-Tech, Beneunder, Kintor Pharmaceutical, Sino-Ocean Group, China Jinmao Holdings and more

• The offeror and acceptances reached 44.98%, just short of the 50% minimum acceptance condition. The closing date has been extended to 13 September. 
• If the offer is declared unconditional on or before 8 September, Giordano International (709 HK) shareholders who accept the offer will get HK$1.88 but not the dividend of HK$0.085.
• The offeror likely remains confident that it will hit the 50% threshold. At the last close, the gross and annualised spread for 17 Sep payment is 1.1% and 37.2%, respectively.

• NetEase will start its first game studio in Europe after setting up two studios in the U.S.
• Tencent and Sony invested minor shareholding in a Japanese game developer.
• In 1H22, S.F. Holding’s revenue grew dramatically and its margins improved significantly.

• Onewo Space-Tech (OST) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke Co Ltd (H) (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we talk about the updates from its recently filed PHIP.

• Late last night, Giordano International (709 HK) announced the Offeror – the Cheng Family – had 44.98% in the bag after 20.41% of shares out had been tendered.
• The Offer has been extended for one week, until the 13 September. 
• Whether investors receive the Offer consideration AND the interim divided is still up for debate.

• Beneunder has large sales volume on Chinese e-commerce platforms and has a large physical store chain.
• However, outdoor brands and apparel brands compete with Beneunder and some brands’ prices are close to Beneunder.
• Beneunder has to keep physical stores and control online advertising budget.

• Over the past year, we’ve seen the stock price of Kintor fluctuate largely, which was mainly driven by its COVID-19 drug proxalutamide. However, we are not optimistic about its outlook.
• There are big concerns about the credibility of management. The suspicion caused by mistrust leads us to suggest that investors directly enter the “show me the result” mode.
• Shares plunged after the announcement of the Placing. Obviously, Kintor Pharmaceutical (9939 HK) is short of money. Considering the potential risks behind, we are bearish on Kintor. 

Sino-Ocean’s H1/22 results were mixed in our view. Contracted sales fell by 14% y-o-y, slightly better than the average industry decline of 30-40%. The company also managed to repay c. CNY 20 bn of debt in H1/22. Sino-Ocean enjoys good access to financing, raising CNY 6 bn from the capital markets amid weak market sentiment in the period. It also intends to issue state-backed guarantee bonds in the near term.

Negatively, Cash/ST Debt was inadequate, with available cash of only CNY 14 bn. Sino-Ocean plans to explore various channels to repay the existing debt, including boosting contracted sales with a faster cash collection rate, project financing and obtaining financing support from shareholders. That said, any price discount or additional financing will weaken the credit metrics further. Moreover, Sino-Ocean fell in the yellow category under the regulator’s Three Red Lines thresholds (FY 2021: green), which would limit the amount of new debt that could be taken up.

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.

• ABM Investama
• China Jinmao Holdings
• China Vanke
• Country Garden Holdings Co
• Sino-Ocean Service