China Archives | Page 123 of 199 | Smartkarma

• The Ping An AH premium has traded around 10% over the last few days – this is near its historical highs and close to where reversals take place from.
• The AH premium of the broader market is below its highs, while the AH premium on large cap financials has been trending lower over the last few months.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last few months.

• Sinotrans (598 HK) has confirmed its plan to issue infrastructure REIT using six warehouse logistics assets as underlying assets, and they represents 7.6% of its total warehouse area.
• The proposed issuance may boost its value by HK$0.16/share, or 7.3% of share price. Should all 4m sq.m. of warehouse assets are securitised, this may nearly double the stock’s price.
• Since Jun, Sinotrans has repurchased 14m H-shares, suggesting positive view on outlook. There will be more to come, and as the shares will be cancelled, EPS will be enhanced. 

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.

• Guangzhou R&F Properties
• Jingrui Holdings

• Due to doctors’ poor diagnosis/limited affordability, commercialization prospects of China autoimmune disease market could be much lower than expected. Internationalization is inevitable, but Keymed is lack of cash for MRCT.
• For CM310 and CM326, their total sales in China could be less than RMB2 billion. For CMG901, it is hard to say if Claudin 18.2 (ADC) would finally be successful.
• As long as Keymed can successfully develop either CM310 or CM326 (key premise), even temporarily only commercializing in the domestic market, the Company has the potential to double in valuation.

• It was a busy Friday with multiple implementations of the June rebalance – FTSE All-World/All-Cap, FTSE China 50/A50/TW50, S&P/ASX, REMX and GDXJ among others.
• We highlight potential upcoming changes to the HSCEI INDEX and LQ45 Index, when Kakao Pay (377300 KS) could be added in MSCI Korea & the Thai Life IPO index inclusion.
• There were large inflows to China and Korea focused ETFs during the week.

• No stock in the sector among major operators has taken a bigger hit than Melco, down over 60% this year.
• The bet is tied to whether Beijing will begin to ease travel bans and lockdowns or not before the end of this year. If so, Melco is very cheap here.
• Performance of its Manila property, the opening of its new Cyprus resorts could carry the company safely until Macau recovery is in place.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• IPO volumes remain subdued across the region, although a number of deals are said to be looking to launch soon.
• Given the recent market volatility, there were no large placements this week.

• Reuters and several other news media outlets reported that Baidu (BIDU US) is planning to sell its stake in iQIYI Inc (IQ US) .
• Baidu has supposedly valued iQiyi at US$7bn, implying US$8.2 per ADR which is at a 78% premium to iQiyi’s last close of US$4.6 per ADR.
• IQiyi reported first-ever operating profit in 1Q2022 driven by huge cost cutting. However, it is yet to be seen if the company could continue to maintain margins without compromising growth.

• China’s motor insurance has been showing signs of growth after years of decline due to deregulations and reforms in the sector.
• Motor insurance tailwind will benefit large players the most. Bullish on PICC P&C since it’s the largest player in motor insurance and to likely benefit the most from the tailwind.
• Bearish on CPIC since its P&C business is much smaller than PICC P&C and Ping An P&C, while its L&H growth continues to be under pressure.  

• China United Lines (CUL HK) is looking to raise around US$300m in its upcoming Hong Kong IPO.
• China United Lines (CUL) is a container shipping company in China. CUL has grown rapidly and its large proportion of vessels being chartered-in, has allowed it to scale its capacity.
• Shipping volume growth was accompanied by topline growth, and margins have been on the uptrend. However, the firm is only a small player in a concentrated market.

• Chinese digital advertising revenue growth has slowed down considerably over the past 4 quarters and Baidu has continued to consistently lose market share to the broader industry.
• Non-Marketing revenue has led the growth for Baidu over the past 2 years and now contributes roughly 26% to Baidu Core (excludes iQiyi) revenue.
• On a PE basis, Baidu is trading at only a slight discount to global giant, Alphabet, which testifies to the negative impact on earnings expectations from Baidu’s growth engines.

• Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants. 
• FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
• The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.

• OOIL’s (316 HK) macro uptrend remains intact but does exhibit some weak tactical signals for a pullback to the 200 support zone. 270 is the near sell zone.
• Buy volumes on the rise in late May showed a slowing pace and the recent sell down saw sell volumes pick up. Wedge support is due to come under pressure.
• RSI shows support pressure to break post uptick. WTI key levels to hold/break are 115 and 105 as pressure release valves.

• Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
• A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
• The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.

• ClouDr was the largest digital chronic condition management solution provider in China. The company’ application for a HKEx IPO has been approved and plans to raise proceeds of around US$500m.
• The company is well positioned to benefit from growing demand for digital healthcare marketing and services in China driven by increased health awareness, technological advancements and prevalence of chronic conditions.
• In this insight, we examine the company’s business model, segments and financials.

• ZTO Express Cayman Inc (2057 HK) has outperformed industry volume growth in 1Q22 and such trend continues into 2Q22 with good ASP improvement and cost control. 
• Its strong operating cash flow and declining capex will lead to an accumulation of cash over the next few years, adding to the 1Q22 net cash position of Rmb4.1bn. 
• We think the stock’s underperformance against peers not warranted. With a below-sector earnings multiple, leadership position and successful business model, we consider ZTO a “Growth at a reasonable price”.

• After hitting the bottom during the COVID crisis, the only direction left for MINISO Group Holdings (MNSO US) to move is up.
• Given the current valuations, Miniso could generate multi-bagger returns during favourable market conditions.
• In addition, Miniso could help investors generate sizable returns in the short-term on the short side with increased short exposure to Chinese E-commerce.

• Junshi’s fatal flaw is not that it is still suffering loss, or that its founders have no medical background, but that the Company is very short of money.
• Considering the gloomy prospects of etesevimab/VV116, uncertainties in toripalimab and other late-stage candidates, we remain conservative about Junshi’s commercialization outlook. Junshi’s higher valuation than Innovent is not justified.
• Together with unfriendly macro environment, we don’t think heavy investment in R&D/MRCT/commercial development could bring high return as expected.Investors need to be rational about Junshi’s RMB4 billion private placement plan.

• Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK). 
• SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
• There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.

• Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
• Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
• Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it’s still overvalued. The upside potential could be limited.

• Share price of Lonking Holdings (3339 HK) has seen muted reaction to weak industry figures recently but it is still unexciting in near-term, based on our catch-up with the company. 
• It has underperformed industry sales volume in 5M22 across all product categories, with that for wheel loader behind 4pp and excavator by 10pp. Forklift sales were down 18% YoY. 
• Both gross margin and investment income are set to contract in this year, making it highly likely to see significant earnings downgrade after 1H22 result announcement in Aug. 

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.

• Kawasan Industri Jababeka
• Jingrui Holdings
• KWG Living Group
• Road King Infrastructure

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• This week, the highest spreads are Xiamen International Port H (3378 HK), Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU)
• Lowest gross spreads are Yancoal Australia (YAL AU), Hwa Hong Corp (HWAH SP), Virtus Health (VRT AU), Irongate Group (IAP AU), Uniti Group Ltd (UWL AU), AKM Industrial (1639 HK). 

• We think the underperformance of China Power International (2380 HK) (CPI) against the market in this year is unjustified given a projected improvement in profitability.
• CPI has secured coal supply with more than 60% of contracts on annual long-term basis within the benchmark price range. Also, power tariff is expected to be on an uptrend.
• The proposed new management incentive scheme will better align management’s and shareholders’ interests. CPI also indicated good room to lower leverage in this year while sustaining growth. 

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.

• Modern Land China

• IRay’s performance has shown a trend of accelerating growth in 2021/2022Q1, mainly driven by the mobile DR sales during COVID-19 as well as the dental (CBCT) and industrial security businesses.
• The sales of mobile DR would slow down after COVID is under control. The decreasing price due to fierce competition in grassroots markets would finally drag down gross profit margin. 
• The concern is that the market space (DR/dental/industrial fields) is not big, with obvious growth ceiling. So, we lowered our revenue/profit margin forecast and we think iRay is overvalued 

• SOE terminal operator Xiamen International Port (3378 HK) has announced a pre-conditional Offer from Xiamen Port Holding, a Fujian SASAC-controlled entity.
• The Offer price is HK$2.25 per H-share, a 55% premium to last close. The Offer price will NOT be increased. The final dividend will be added to the cancellation price. 
• Pre-Conditions include approvals from NDRC, MoC, SAFE, and CSRC. There is no tendering condition. This deal mirrors Guodian Technology (1296 HK), BCL (2868 HK), and Jin Jiang Capital (2006 HK).

• Inside is a recap of movements in the last week relating to the Hong Kong Stock-Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry. 
• Overall, net inflow was ~US$6.1bn, split between Shanghai (+US$3.5bn) and Shenzhen (+US$2.6bn)  
• The largest inflows were into Shanghai Putailai (603659 CH) and Satelltte Chemical (002648 CH). The largest outflows were in Anhui Conch Cement (600585 CH) and Guangzhou Tinci Materials (002709 CH).

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, net inflow was ~US$0.8bn, split (roughly) US$0.2bn for Shanghai and US$0.6bn Shenzhen.
• The largest inflows were into  CNOOC Ltd (883 HK), China Mobile (941 HK), and Kuaishou Technology (1024 HK). The largest outflows were in Tencent (700 HK) and ICBC (1398 HK).

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. Evergrande
2. Logan Property Holdings
3. Times China
4. Ronshine China Holdings
5. China Jinmao Holdings

and more…

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. Evergrande
2. Logan Property Holdings
3. Times China
4. Ronshine China Holdings
5. China Jinmao Holdings

and more…

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

• Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
• Longleaf Partners International Fund declined 12.04% in the first quarter, while the MSCI EAFE Index declined 5.91%.
• New investments have a high hurdle to qualify given our conviction in our current holdings and the steep discount of the portfolio.
• We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

• Weibo Corp (WB US) delivered robust 1Q22 results with ad revenue growing 10% year-over-year and outperforming other Chinese social networks, which underscores Weibo’s prominent position for advertisers.
• However, widespread lockdowns in China and economic slowdown could pressure Weibo in 2Q, and we expect a gradual recovery in 3Q-4Q with limited visibility. 
• We like Weibo attractive valuation at 10x forward P/E; it has amassed MAU 582 million till March 2022 and user engagement has been improving.

• Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
• Longleaf Partners Global Fund declined 5.84% in the first quarter, roughly in line with the MSCI World’s 5.15% decline.
• In a volatile quarter for markets across the globe, we saw one of the largest disconnects between price and value per share performance that we have seen for our portfolio in a long time.
• We remain fully invested with less than 2% cash, and our on-deck list isgrowing longer amid market volatility.
• We believe our companies in Asia and Europe are well positioned to navigatethe challenges facing each region today.

• Xiamen International Port H (3378 HK) announced a pre-conditional privatisation offer from Xiamen Port Holding at HK$2.25 per H share + final dividend of RMB0.021 per share (ex-div: 15 June). 
• The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.  
• The offer is attractive in comparison to historical share prices and multiples. We think that the privatisation proposal will likely succeed. At the last close, the gross spread is 55.2%.

For our next Corporate Webinar, we are glad to welcome China Shenshan Orchard (DKNG SP) Executive Director, David Zhao.

In the upcoming webinar, David will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 28 June 2022, 17:00 SGT.

China Shenshan Orchard Holdings Co. Ltd. is a horticultural company in the business of planting, cultivating, and selling kiwi fruit in the People’s Republic of China (“PRC”). The Group holds forest use rights for eight strategically located orchards, spanning a total land area of 9,805 mu (approximately 6.5 million sqm), which is believed to be one of the largest domestic kiwi fruit orchards concentrated in Chibi City, Hubei, the PRC.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Revenue growth mainly came from initiatives, which is the focus of April layoff.
• We believe revenue will slow down and the operating loss will shrink.
• We set a downside of 11.5% and a price target of HK$160.

• The government has taken several steps to improve supply-side restrictions on first and second homes.
• PBOC has added policy support by cutting longer-dated LPR rates for home loan pricing. Longfor Group and Country Garden are highly rated, large China Real Estate developers.
• They do not seem to respond positively to many tailwinds

• Burning Rock Biotech (BNR US) reported strong Q1 2022 results, with accelerated double-digit revenue growth of 27% y/y, higher than full year 2022 revenue growth guidance of 22%.
• Operating loss widened due to 41% y/y surge in opex, primarily attributed to higher staff cost, which resulted from an increase in headcount.
• Management reiterated 2022 revenue growth guidance of 22% y/y. With Shanghai re-opening, this seems to be achievable.

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.

• Evergrande
• Country Garden Holdings Co
• Jingrui Holdings
• Meituan
• China Datang Corp Renewable Power
• Ronshine China Holdings
• Times China

• National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.
• The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.
• Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake

• Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
• As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
• Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel & Travel which seems strange, suggesting 2Q numbers could be worse.

• There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 June.
• There will be 9 deletions from the MSCI Standard Index and 22 deletions from the FTSE All-World/All-Cap indices at the close on 9 June.
• Currently, 16 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 38 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

• The sharp plunge in share price of China Conch Environment Protection Holdings (587 HK) has not yet brought its valuations back to more reasonable levels and we see more downside.
• Its 10.1x PER for FY22F is at a significant premium over peer average. Even taking into account the impressive ROE, we still cannot find justifications for its high P/B multiple.  
• Negative catalysts include overly aggressive expansion target, slower profit growth than rise in capacity and surge in gearing and finance costs – they will potentially lead to earnings disappointment.

• The most recent two quarters have maintained positive growth. It is of great significance for Huadong, who once suffered a significant decline and now in a critical period of transformation.
• The large growth potential of medical cosmetology and industrial microbiology would be important driver for future development. It’s also wise to strike a balance between current performance and future strategy.
• Huadong’s revenue growth would be above 10% in next few years. It would have higher valuation than Imeik. Investors are advised to follow Huadong. It could be a “dark horse”.