Daily Brief China: Golden Eagle Retail, Piotech, Inner Mongolia Yitai Coal Company Ltd, Hong Kong Hang Seng Index, Cathay Pacific Airways, China Overseas Land & Investment, Tata Motors Ltd, New Horizon Health and more

• Golden Eagle Retail (3308 HK) disclosed a scheme privatisation offer from the controlling family at HK$6.88 per share, a 40.4% premium to the undisturbed price (HK$4.90 on 22 May).
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable. 
• The offer price is final. The offer is reasonable particularly as the sentiment on the department store sector remains weak. This looks like a done deal. 

• There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
• All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
• The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.

• There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
• One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
• 8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), HKBN Ltd (1310 HK), Hailan Holdings (2278 HK), Origin Energy (ORG AU).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Silk Laser Australia (SLA AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Penguin International (PBS SP).

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• PRC department store play Golden Eagle (3308 HK) has announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close. The price is final.
• The Offeror is the Wang family, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable. 
• Apart from shareholder approval, there are no key regulatory approvals to be obtained. 

• The recent discrimination incident will likely affect traffic recovery pace of Cathay Pacific Airways (293 HK) negatively if it turns into a full-scale boycott by mainland passengers.
• The scenario of CX becoming majority-owned by Air China Ltd (H) (753 HK) is getting increasingly possible. This may not be totally positive to CX given CA’s weaker service ranking.
• Consensus forecasts now look somewhat bullish following the incident, and the stock’s 0.7x P/B does not stand out as attractive relative to history or ROE (7% in FY25F).

• In this insight, we explore the investment thesis and major share price drivers for 688 HK
• COLI saw share price weakness, and is trading at 0.46x P/B.  Potential risks are 1) fail to meet 20% growth target 2) slower than expected land acquisition
• We see value emerging from the stock, and recommend BUY as long as the stock trades below HKD20 (as a technical indicator)

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.

• Meituan
• Tata Motors ADR

• New Horizon Health (NHH) achieved high performance growth last year. However, we recommend investors take a calm and objective view of NHH’s current high growth rate if they see the real story.
• NHH’s dual attributes of medical+consumption means large growth potential/strong profitability. Thus, the real expectation for NHH is not just about achieving breakeven, but more about how to achieve high profitablity.
• If market education level falls short of expectations in the future, it’s difficult for NHH to achieve expected scale/profit margin. There would be greater valuation downward risk at that time.