Daily Brief China: Iluvatar CoreX, Guotai Junan International, S.F. Holding, Alibaba, AirPower Technologies, Tongda Group, PAX Global Technology, Zhejiang Energy Marine Environmental Technology and more

• The review period for the September rebalance of the Hang Seng TECH Index ended on 30 June, the changes will be announced on 21 August and implemented on 4 September.
• 1 constituent change, float changes and capping changes will result in a one-way turnover of 3.9% resulting in a round-trip trade of HK$22.2bn (US$2.8bn).
• Short interest has increased in the forecast add and forecast delete and there could be short covering ahead of the implementation of the changes.

• I summarise the latest spreads and newsflow for the merger arb situations covered across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, the Philippines, Thailand, and Chinese ADRs.
• Highest spreads: Skyworth (751 HK), Changhong Jiahua (3991 HK), Guotai Junan International (1788 HK), OFX Group (OFX AU), Cygnus Metals (CY5 AU), European Lithium (EUR AU), Z Fin (1168 HK). 
• Lowest spreads: Accent Group (AX1 AU), Kakaku.com Inc (2371 JP), Taiyo Holdings (4626 JP), Future Corporation (4722 JP), Japan Property Management Center (3276 JP), oOh!Media Ltd (OML AU). 

• S.F. Holding is the largest integrated logistics provider in Asia, distinguishing itself with a premium, time-definite service model supported by an extensive air and ground fleet.
• The company is strategically diversifying into high-growth areas such as supply chain management, cold chain, and international logistics, partly through acquisitions like Kerry Logistics, to build a second growth curve beyond the competitive domestic express market.
• While facing intense domestic competition and macroeconomic headwinds, S.F. Holding‘s focus on high-end services, technological investment, and network optimization provides a foundation for long-term, sustainable growth and margin improvement.

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• Alibaba (9988 HK, BABA US) will report its June Quarter 2026 results on 20 August and hold its conference call at 7:30 p.m. Hong Kong time.
• Implied volatility comparisons show U.S.-listed options are already repricing for the event, while HK-listed prices have yet to reflect the expected event-related volatility.
• The new HK weekly contract expiring on 21 August, together with later weekly and monthly expiries, should drive active Hong Kong trading, with potential spillover into the next U.S. session.

• Guotai Haitong Securities (2611 HK) proposed to privatise Guotai Junan International (1788 HK) at HK$3.0, a 44.2% premium to the pre-suspension price, which looks good enough. 
• The proposed price equals 11.9x PER for FY26F, higher than the average of 10.1x since 2024. This is better than the sector’s average PER of 10.3x.
• It also equates to 1.6x 12-month forward P/B, or 1.3SD above the 5-year average, well reflecting a projected ROE recovery in the next two years.

• Leading Independent Producer in a Consolidating Market: AirPower Technologies is the largest independent industrial gas supplier in China, formed through the 2021 merger of Yingde Gases and Baosteel Gases. This scale provides a significant competitive advantage in a market dominated by a few global players, allowing it to serve blue-chip customers across key industrial corridors.
• Strategic Expansion into High-Growth Sectors and Geographies: The company is strategically targeting high-growth end-markets like electronics, healthcare, and clean energy, particularly the hydrogen sector. Furthermore, its expansion into Southeast Asia and affiliation with India-based NovaAir positions it to capitalize on broader regional industrialization.
• Resilient Business Model with Utility-Like Cash Flows: The industrial gases business is characterized by long-term contracts, high switching costs, and recurring demand from a diverse industrial base, which provides a foundation for stable, utility-like cash flow generation. The provided financials from 2018-2020 demonstrate strong growth in revenue, net income, and free cash flow.

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• We believe the revenue growth will rise significantly to 9% in 1Q27.
• In 1Q27, the disposal cases, Sun Art and Intime, would no longer impact “all others” revenue.
• We expect Alibaba has an upside of 59% for Dec. 2027 according to other e-commerce companies’ Price/Sales and EV/Sales.

• A significant valuation disconnect exists between Tongda Group and its high-performing subsidiary, Tongda Smart Tech, with the market assigning a negative value to the parent company’s own operations.
• The parent company is burdened by debt, and management is prioritizing debt reduction over shareholder returns like dividends or share buybacks, which has pressured the stock performance.
• Despite the parent company’s challenges, its core business in consumer electronics components is positioned to benefit from a potential smartphone market recovery and growth in areas like WiFi 7 routers and smart appliances.

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• PAX Global is a leading global provider of EFT-POS terminals, strategically shifting towards higher-value Android-based smart terminals, which now account for over 70% of revenue.
• The company is expanding its SaaS offerings through its MAXSTORE platform, a terminal management and app distribution ecosystem with over 17 million connected devices, aiming to enhance operational efficiency for its partners and create recurring revenue streams.
• Despite a strong market position and a strategic shift to higher-margin products, the company faces significant headwinds from geopolitical tensions, intense competition from both hardware and software-focused rivals, and supply chain cost pressures.

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• Zhejiang Energy Marine Environmental Technology Co., Ltd, founded in 2018, is a leading global green shipping equipment and systems provider. It offers five business lines and was the largest provider.
• The company was the largest global green shipping equipment and system provider by revenue in 2025. Revenue increased by 89.4% from RMB1.32 billion (5M2025) to RMB2.51 billion (5M2026).
• Revenue was RMB2,507,000 thousand (5M2026) and profit for the period was RMB622,104 thousand (5M2026). Total assets were RMB4,119,286 thousand as of May 31, 2026.

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