Daily Brief China: JD.com Inc., Tencent, Country Garden Holdings Co, PetroChina, China SCE, Indika Energy, Sino-Ocean Group and more

• Two days ago, media reported Alibaba Group (9988 HK) / Alibaba (ADR) (BABA US) would split and possibly list several businesses. Last night Cainiao was reported as starting listing preparations.
• Last night, JD.com Inc. (9618 HK) made two announcements it was proposing to spin off and list its JD Property and JD Industrial arms. This is NOT a spinoff war.
• JD raised Series A and B for both companies. These were always going to be spins, like Health, Digits, and Logistics. JD Properties will be biggish.

• While all eyes are on Alibaba splitting its business into six mini-Babas, some were quick to conclude that Tencent could be the next candidate for a similar split.
• Unlike Alibaba (ADR) (BABA US) whose business units have clear divisions and stand on its own, Tencent (700 HK) ’s businesses are interconnected making a similar split very difficult.
• Having looked at Tencent’s business units and past regulatory probe on the company, it seems unlikely for the company to be the next candidate for an Alibaba style separation.

Country Garden has released its FY 2022 results, with revenue and earnings declines as well as margin contraction. Reported debt decreased. EBITDA/Interest and Debt/EBITDA weakened significantly, but Net Debt/Net Property Assets remained sound. In December, the company received HKD 4.74 bn (c. USD 609 mn) from a private placement of 1.78 bn shares, with the funds primarily to be used for offshore debt commitments.

We are not surprised by Country Garden’s poor earnings performance in FY 2022, given that it had been a dire year for the Chinese property industry. We view positively the company’s repayment of debts due in 2022, despite difficulties in property sales and cash collection.

We remain cautious about the likelihood that management can achieve its goal of increasing Country Garden’s market share in higher-tier cities. We also continue to be highly concerned over the recovery trajectory for the group’s margins and property sales in FY 2023, considering the relatively large portion of existing inventory in Tier 3 and 4 cities compared to peers.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• PetroChina Co Ltd (857 HK) bottomed in Oct/Nov 2022 around the 61.8% retracement support. The subsequent impulsive multi-month uptrend maintains the bullish LT trend reversal confirmed in 2021.
• March 2023 has delivered new bullish breakouts in price and LT momentum that confirm a sustainable LT uptrend bias. Initial target at 5.28 (+13%). Longer term risk to 6.50/6.80 (+40%).

SCE’s FY 2022 results were as expected, with sustained weakness in contracted sales and revenue, along with weaker margins. Going forward, management’s strategy includes progressing steadily to deal with the volatility in the industry. The delivery of projects will be a key objective, in order to maintain homebuyer confidence.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Japfa Comfeed Indonesia
2. Yankuang Energy Group
3. Anton Oilfield
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

Sino-Ocean’s FY 2022 results were very weak. The decline in property sales revenue and profitability did not come as a surprise, given the moribund state of the property industry. The CNY 4.8 bn increase in gross debt and CNY 5.2 bn write-down on financial investments were, however, somewhat unexpected. These reflect very poorly on management and, needless to say, there have been no changes of note in this regard.