China Archives | Page 127 of 199 | Smartkarma

• Guodian Technology & Environment Group (1296 HK)’s privatisation offer from China Energy is HK$1.08 per H share. The pre-condition was fulfilled on 22 April.  
• The key conditions for the delisting will be approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.  
• At last close and for a mid-June effective date (composite document despatched by 29 April), the gross and annualised spread to the offer is 2.9% and 19.9%, respectively.

• Zhihu Technology (ZH US) raised around US$106m via a dual primary listing in Hong Kong. 
• Unlike all the prior dual primary/secondary listings which have been done via offering either only primary or a mix of primary+secondary shares, Zhihu’s offering will consist of only secondary shares.
• In this note, we’ll talk about the demand and trading dynamics.

• Skyrocketing material costs shook the stock of Contemporary Amperex Technology Co. Ltd. (CATL) as investors wiped billions of dollars off the value of the world’s largest electric-vehicle battery manufacturer.
• Word circulated in the market that CATL is set to post net profit of less than 5 billion yuan for the first quarter, a sharp decline from the previous quarter.
• The company hasn’t issued detailed financials for the fourth quarter and all of 2021. An estimate issued in January put annual net profit between 14 billion yuan and 16.5 billion yuan.

• Hong Kong’s hospitality industry has endured three years of upheaval, first with the democracy protestors in 2019, which slowed inbound, followed by the onset of Covid in early 2020.
• Beginning today, 21 April, the Government commenced the relaxation of most social distancing measures, to be eased over three phases.
• This evolving dynamic is welcome, yet the progress and recovery for many operators may be gradual.

• CR Gas (1193 HK)’s privatisation bid for Suchuang Gas Corp (1430 HK) was derailed by the trading suspension due to the disclosure of previously unaccounted for pledges/guarantees by subsidiaries.
• The controlling shareholders have attempted to keep the offer alive by agreeing to fully indemnify CR Gas for losses related to the pledges/guarantees.
• The long stop date of the offer was extended to 31 August 2022. The key risk is that the timeframe to fulfil the resumption guidance exceeds the long stop date. 

• As of the last close, we expect Li Auto (2015 HK) and PICC Property & Casualty H (2328 HK) to replace Smoore International (6969 HK) and Sunny Optical (2382 HK). 
• There are some reasonably large capping changes that will result in one-way turnover estimated at 4.25% and will result in a one-way trade of HK$2,090m.
• Short interest has spiked recently on Smoore International (6969 HK), while there has been short covering on the other potential inclusions and exclusion. 

• JD.com met our 240+ short zone and has gapped below immediate 215 support, opening the way for  C wave decline to our target and buy zone near 180.
• RSI trendline rejection sets up a slide to the sub 30 area which mean we will at least hit 180 if not reach for 160.
• Holding the 160 low sets up an intermediate long trade. Be aware that there will be some wide tactical swing over the turbulent summer cycle.

• On 16 April, the Shanghai Financial Court published the details for the auction of China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK). 
• If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.
• The base bid implies an MGO price of HK$1.294 per H Share, a 112.1% premium to the last close. The auction will be held from 18 May to 19 May.

• After both stocks were suspended on the 19 April, the forced liquidation of China Zhengtong (1728 HK)‘s stake in Dongzheng (2718 HK) will occur, via auction, on the 18 May. 
• That minimum bid price is HK$1.294/share, or a 112% premium to last close.
• ZhengTong’s stake is 71.04% of shares out. A mandatory general offer – conditional or unconditional – may materialise from the auction process. 

• Several news media outlets report that ByteDance has launched a new music streaming service in China called Qishui Yinyue.
• Tencent Music (TME US) earnings have come under pressure with ending of exclusive music streaming licensing deals and increased regulatory pressure on its social entertainment biz.
• We expect TME’s 1Q2022E earnings to decline further with increased competition and drop in social entertainment.

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.

• Zhenro Properties

• Both Dongzheng Automotive Finance (2718 HK) and China Zhengtong Auto Services Hldg (1728 HK) issued HKEx suspension notices at the same time yesterday morning.
• In no uncertain terms, the Shanghai office of the China Banking and Insurance Regulatory Commission has forced the liquidation of ZhengTong’s 71.04% stake in Dongzheng.
• That stake “sale” may trigger an Offer for Dongzheng. Dongzheng’s suspension is “pursuant to the Hong Kong Code on Takeovers and Mergers“.

• Tencent short call at 390-400 is a hold but needs to break below the 351 low for bear traction toward our downside targets at 333 and 320 (bull zone).
• The current flat/trapped range shows resistance at 382 and pivot support at 351/350. Below 350 would open the way lower.
• Re test of the low zone is a buying opportunity for a rally to the 320-30 macro barrier. HK tech index sub 4k buy zone is our long counter balance.

We view Meituan as “Low Risk” on the LARA scale, given the company’s: [1] leading market positions in China’s food delivery as well as the in-store, hotel & travel accommodation industries; [2] increasing market share and scale, which should drive operating leverage; and [3] robust balance sheet, with net cash and a strong liquidity position. Meituan benefits from regulations that restrict aggressive pricing to gain market share. In addition, the company has fast-growing revenue streams across its business segments. However, the credit profile is weighed down by: [1] regulatory headwinds in the food delivery business; and [2] the ongoing losses and cash burn from the company’s community group-buying business.

Our Credit Bias is “Stable”, given the robust business risk profile and strong balance sheet.

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.

• Sunac China Holdings

• The company was told a year ago that it had data problems. It was then told in June it had serious data problems and was given 15 days to fix.
• It did not. It listed itself, against the wishes of the regulators. Then it got in serious hot water. And it has only been getting hotter. 
• A hoped-for HK Listing By Introduction was nixed 5 weeks ago. Now the Company is simply going to delist to try to solve its problems behind closed doors before relisting.

• DiDi Global (DIDI US) will hold an EGM on 23 May to vote to delist the ADS from the NYSE. The shares will not be listed on another exchange before delisting. 
• Due to the regulatory restrictions, DiDi is losing market share and pricing power to competitors in China. The 4Q21 results were poor. 
• Directors and key pre-IPO investors together account for 48.2% of outstanding shares, suggesting that the ordinary resolution will pass. 

• Nikkei reported that Meituan intends to pay better compensation to small-and-medium restaurants and to delivery workers to prove that the company is in line with Beijing’s common prosperity measures.
• As Shanghai is under strict Covid lockdown, Meituan has seen a sharp rise in demand for grocery deliveries, however, margins are expected to be thin due to additional costs.
• The company has been under tremendous pressure to improve its cost structure and is undertaking 10-20% job cuts across all its business units.

• Tencent’s increase in investment acquisition activity has coincided with a general weakness in equity prices and valuation levels.
• Tencent management’s assessment of the fair value of its listed investee holdings, of RMB982.8bn on 31 December 2021, equates to roughly 27.4% of its market cap.
• The market value of Tencent’s investee holdings in more-mature, Chinese-listed, internet-orientated holdings equates to roughly 9% of its current market cap.

• Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
• We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar. 
• Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.

• As the “the king of generics”, Sino Biopharmaceutical (1177 HK) is lucky to have three “golden eggs”(Entecavir, Anlotinib, CoronaVac) to contribute huge performance over the years.
• The promotion of VBP and fierce competition make Sino Biopharmaceutical’s products lose pricing power. Due to little revolutionary technology/slow product iteration/weak R&D, it’s unlikely to have another Anlotinib level asset.
• The Company’s development mode, the mindset of management, and other concerns could be more serious problems, causing investors to distrust the management level and preventing it from getting high valuation.

We view China Vanke as “Low Risk” on the LARA scale, given the company’s: [1] leading market position in terms of sales and branding; [2] sound financial profile; and [3] diversified geographical coverage. Vanke is transitioning to become a more diversified company, with increased exposure outside the residential project sector and higher participation in the “Rail+Property” development model. Furthermore, the company is able to acquire land at lower cost amid the current bleak environment, and has lower financing costs due to its ties to the state.

Our fundamental Credit Bias on Vanke is “Stable”, given its adequate liquidity and sound credit metrics. We expect the company to have good access to funding, thanks to its status as a state-owned enterprise. That said, negative sentiment in the industry could weigh on Vanke’s performance.

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.

• KWG Living Group

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
• This week, the highest gross spreads are Yashili International Holdings (1230 HK), 21Vianet Group (VNET US), Sezzle Inc (SZL AU), Link Administration Holdings (LNK AU), Razer Inc (1337 HK).  
• The lowest gross spreads are China Logistics Property Holdings (1589 HK), Virtus Health (VRT AU), 51 Job Inc Adr (JOBS US), Uniti Group Ltd (UWL AU), Irongate Group (IAP AU). 

• Under the current policy in China, any minor changes to vaccine doses require a series of clinical data support and registration changes. So, WHO’s recommendation won’t affect Zhifei’s short-term performance.
• The increasing domestic competing HPV vaccines in the future would be a big threat to Zhifei’s agency business. Its self-developed products may not be strong enough to compensate. 
• The performance in 2022 is expected to be solid before real challenge comes in 2024. The valuation logic and outlook won’t be brighten unless there’s new breakthrough in agency business.

• Legend Biotech Corp (LEGN US) received FDA approval for its first product Carvykti in February as a fifth-line treatment of relapsed or refractory multiple myeloma.
• Label expansion of Carvykti for earlier line of multiple myeloma treatments should expand addressable market, thereby increasing peak sales opportunity to $5 billion from initial expectation of $1.5 billion.
• The U.S. Securities and Exchange Commission has added Legend to their delisting watchlist last week. The company needs to release required evidence by May 3 to stay listed.

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.

• Alam Sutera Realty
• Anton Oilfield
• Central China Securities
• CIFI Holdings
• KWG Living Group
• Ronshine China Holdings

• JD.com (9618 HK)‘s CCASS movements are a thing, and there are things going on in the background, but the things in the foreground are not as menacing as they appear. 
• Suzuki Co Ltd (6785 JP)‘s NAV discount and implied stub plumb new lows. Again.
• Musk has made a non-binding proposal for Twitter Inc (TWTR US) at US$54.20/share. Get it? Get it? Nudge nudge wink wink. That’s all part of the fun for him.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPOs front, Zhihu and the SK twins were the main active deals, with LIC being in the pipeline for a potential launch in the coming week.
• Placement flows remained slow over the holiday shortened week. With Japan continuing to favour accelerated book build.

• We have previously commented on Valorant’s relatively unique position in esports due to its high degree of regional parity and that is being further underscored during its ongoing Masters tournament. 
• In particular, Japan, a region not known for any particular prowess in FPS titles secured its first top eight position generating significant buzz on twitter in doing so. 
• The implications look positive here for both Valorant overall and for Japan’s esports ambitions where it is probably now time to truly familiarise yourself with the potential plays.

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.

• Shortly after piped natural gas operator Suchuang Gas Corp (1430 HK) announced a privatisation Offer from CR Gas (1193 HK) last August, shares were suspended. And remain suspended today.
• That suspension pivoted off previously unreleased information that certain bank deposits of Suchuang Gas’ subsidiaries had been pledged. 
• An investigation remains ongoing. A material portion of those pledges have defaulted. Financial results have been delayed. However, the Offer appears to still be moving forward. 

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…

• As China’s leading assisted reproductive service provider, Jinxin Fertility Co Ltd (1951 HK) can be negatively affected by the country’s consistently falling birth rate.
• The company performed 27,354 IVF cycles in 2021, 20% higher than that of 2020. However, it is still lower than 27,854 IVF cycles performed in 2019, pre-COVID era.
• Concern over the fact that the Chinese government may impose restrictions on the for-profit healthcare service providers, like it did for K12 education sector, is souring near-term sentiment.

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…

• Shanghai is in lockdown and citizens are finding it hard to get enough food.
• Community group purchase has been taking consumers from e-commerce apps.
• The central government reiterates the zero-COVID policy, but the Omicron variant is spreading with very few death cases.

• Pacific Basin Shipping (2343 HK) stays positive towards the outlook of the bulk shipping market despite the Russia-Ukraine war, higher inflation and lockdowns in China.
• 1Q22 coverage rates are 117% and 122% higher YoY for its Handysize and Supramax fleet, resepctively, and coverage for 2Q22 is also promising, securing good 1H22 earnings.
• We expect it to turn into net cash by end-FY22, and even with such strong financial position, it will still generate over 30% ROE for the next two years.

• Venus MedTech (2500 HK) is facing competition in China TAVR market and its market share has deteriorated to 70% in 2021 from 79.3% in 2018.
• Due to declining ASP and low pricing power, the company’s gross profit margin has declined to 78% in 2021 from 86% in 2018.
• During 2021, the company’s loss expanded 103% y/y to RMB372 million, mainly due to elevated selling and distribution expenses and R&D costs.

• IVF penetration rate in China is not high and the rate of improvement is very slow. With public hospitals accounting for over 90% market share, Jinxin’s growth space is limited.
• Jinxin has extended its business scope to support the entire fertility and pregnancy lifecycle. But it could drag down the overall net profit margin,resulting in lower-than-expected performance in the end.
• The breakthrough point is internationalization. If COVID-19 is under control and Jinxin continues to expand overseas markets successfully, it could change its valuation logic and open up upward potential.

• There has been an increase of 700m shares held in HK CCASS for JD.com Inc. (9618 HK) on 11 April.
• The largest part of 421.5m shares is likely the conversion of Class B to Class A shares following Richard Liu stepping down as CEO of the company.
• The rest is unknown at this point but could be Prosus (PRX NA) moving their shares to HK to sell-down and use the cash to buy back their own stock.

• The relaxing of restrictions by Hong Kong makes Taste Gourmet Group Ltd (8371 HK) a great reopening play, trading at 8.8x FY22e and 5.6x FY23e. 
• Despite a challenging environment, the company has executed well, maintaining net margins north of 7-8%, which are far superior to other listed competitors.
• With >60% payout ratios, it trades at a dividend yield of 6.7%/11.4% FY22e/FY23e. Since 29% of the market capitalization is cash, we are confident in the dividend payments. 

• Today, CCASS data showed that 700,000,047 Class A Shares of JD.com Inc. (9618 HK) popped into existence in CCASS (from outside of CCASS the day before). Poof!
• They showed up in Deutsche Bank’s CCASS Participant account. Just like the 600,000,000 Class A Shares which popped in on 15 December 2021. 
• There’s a thing here, and there are things going on in the background, but the things in the foreground are not as menacing as they appear. I explore and explain.

• China’s gaming regulator, National Press and Publication Administration granted publication licenses to a list of 45 games, ending the nine-month long freeze on new game approvals in the country.
• While it comes as a relief, The Cyberspace Administration of China has kicked off a formal campaign to investigate and rectify algorithm security issues of tech companies.
• Though any of Tencent (700 HK) games didn’t receive approvals, the company’s shares have moved positively during today’s trade and up 2.1% from yesterday’s close.

• After one month from the March batch of Hong Kong Connect inclusion, we provide an analysis on the stock inclusion for 19 stocks. 
• We analysed the inclusion by performance post announcement, performance post inclusion, inflows and analyst coverage.
• We observed outperformance post the HSCI announcement but not the actual inclusion despite the fact that southbound inflows has a significant impact on the trading volume. 

• Beauty services in Hong Kong will pick up from the 21st of April 2022 post the reopening, due to pent-up demand and the disbursement of Consumption Vouchers by the government. 
• Despite losing three months of H1 2022 and a month of H2 2022, we believe that Water Oasis (1161 HK)  is still trading at 5.4x PE FY22e.
• With an 80% payout ratio, the dividend yield is alluring at 16.4%. Net cash represents 38% of market capitalization. A year of uninterrupted operations implies a 3.8x PE. 

• Zhihu Technology (ZH US) has launched an HKEx dual-primary listing to raise $150-200 million. The H Shares will be priced on 14 April and listed on 22 April.
• In Zhihu Dual-Primary Listing: A Question of Judgment, we stated that while a loss-making tech name is not everybody’s cup of tea, Zhihu has resilient performance and an undemanding valuation.  
• In this note, we will look at Zhihu’s potential HK-ADS premium/(discount). Zhihu pricing its H-shares at a discount of 3-4% to its ADSs will be reasonable, in our view.

• Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai’s Industrial Bank Co. 
• The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
• The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.

• HSI’s bear turn at 22,500 is in line with 21k the level to break for further bear traction.
• HSI downside targets remain at 20,200 and 19,700 but below 19,500 would induce a weaker cycle into May with risk of re testing key lows.
• HK tech index, JD and Tencent levels are reiterated. Summer cycle lows to set up a more bullish second half of 2022.

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.

• Lippo Karawaci
• West China Cement

• Earlier this year, Jardine Matheson Holdings (JM SP) was understood to be exploring the sale of its 28% stake in Greatview Aseptic Packaging (468 HK).
• GA Pack announced its full-year results late last month and for the first time since 2012, opted not to pay a final dividend.
• Shares are down 20% since that non-dividend announcement. That’s convenient.

• CNOOC’s RMB Issue of 2.6bn Shares (about US$5bn with over-allotment) was priced at a 14.2% premium to Friday’s close. Not Great Bob.
• But 31 March indications of Q1 results, and the promises of an H-share buyback noted in the Annual Results a day earlier are worthwhile noting.
• CNOOC continues to trail Global Peers in Price and Forward EBIT multiple since the Executive Order 13959 dampened share demand and booted it from global indices. It’s still cheap though.

• VNET, formerly known as 21Vianet Group (VNET US), is a leading carrier and cloud-neutral data centre services provider in China. 
• It has received a non-binding privatisation proposal from The Hina Group and Industrial Bank Co Ltd A (601166 CH) at $8.00 per ADS, a 48.1% premium to the undisturbed price. 
• The Board has not made any decisions on the offer. Despite the juicy premium, the offer is unattractive in the context of historical multiples and share prices.    

• Zhihu plans to raise around US$130m via a dual primary listing in Hong Kong.
• Unlike all the prior dual primary/secondary listings which have been done via offering either only primary or a mix of primary+secondary shares, Zhihu’s offering will consist of only secondary shares.
• In this note, we’ll talk about the deal dynamics and structure.

• China announced game approval last night, after 8 months of silence.
• We discussed in our previous note that China would resume game approval.
• There is no game approved for Tencent and Netease this round but we believe their approval will come in due time.

• Zhihu has filed for a dual primary listing on the HKEx through offering of 26m shares (Class A) by existing shareholders at a maximum offer price of HK$51.8 per share.
• Two ADS represent one Class A ordinary share and shares closed at US$2.56 per ADS, and the maximum offer price implies a 31.5% premium to the last close.
• Zhihu’s business model seems to work in favour and the company’s shares are extremely cheap at the current multiples. There is upside but we would remain cautious.

• Following CCEP spin-off and share price decline, China Conch Venture (586 HK) is now at more attractive valuations relative to the stub, on sum-of-the-parts and on PER multiple. 
• Growth profile should improve in next two years and it has an optimistic expectation of of 76% increase in waste treatment and 79% growth in on-grid electricity for FY22.
• New business initiatives including anode and cathode materials of lithium iron phosphate and lithium batteries and used lithium batteries treatment may provide potential medium term upside.

• The three large orders for COVID-19 small molecule drugs are mostly one-off revenues, and after 2022, Asymchem Laboratories (6821 HK)‘s performance could decline from a high base.
• In essence, Asymchem mainly relies on cost advantage of large-scale capacity to obtain orders.Without core leading technology in frontier of medicine, Asymchem is difficult to enjoy sustainable industry development dividend.
• Overall, Asymchem’s moat is not strong enough, and the certainty of the Company’s long-term performance growth is also not high. It could be a short-term trade rather than long-term hold.

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.

• Honghua Group
• Sino-Ocean Service