Smartkarma Daily Briefs

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK).
• Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Tatsuta Electric Wire & Cable (5809 JP), Infocom Corp (4348 JP), Kfc Holdings Japan (9873 JP).

• Investors should be aware of the increasing prices of TCM raw materials, which could lead to fluctuations in profit margins of TCM companies. Investors should prepare for these potential impacts.
• After years of “fast-follow”, we’ve finally seen products from Chinese pharmaceutical companies stand at the center of the stage for the first time in the new generation of ADC.
• China Resources Medical’s profitability outlook is not promising due to issues within the Chinese healthcare system. The bottom line is P/B above 1 and P/E above 10x.

• Douyin’ GMV increased by 300% YoY in the “June 18” sales season.
• The revenue of a pre-IPO restaurant chain, Green Tea, increased by 55% in 2023.
• Alibaba’s supermarket chain, Freshippo, opened 12 new stores in June.

• Perfect Medical Health (1830 HK) reported flat revenue/profit growth for FY24 due to a weak Q4 that plagued the entire HK consumer space. H2FY24  revenue/profit growth was -6.3%/-12.5%
• The company paid a generous dividend of 31.5 cents for FY24 (vs. 30.0 cents), resulting in a 12.5% dividend yield.
• We will follow up with more details after the earnings call and presentation. 

• Xingqi’s 0.01% atropine sulfate eye drops got approved for marketing this March, which is expected to monopolize the domestic market for at least 2.5-3 years, and enjoy higher gross margin.
• Peak sales of 0.01% atropine sulfate eye drops would reach RMB5 billion at least. Together with other products, Xingqi’s total revenue would reach at least RMB6 billion in the future.
• Due to attractive dividend policy, this stock is worth holding for the long term.Xingqi’s market value could even reach RMB50 billion if the sales exclusivity period is longer than expected. 

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.

• China Water Affairs
• Health And Happiness (H&H)

• Metalpha is a small-cap Chinese supply chain company that has transitioned into an OTC underwriter focused on crypto derivatives through a reverse-merger.
• Despite being one of the smallest market cap crypto companies, it is not perceived as a “crypto” play by investors leading to low trading volume and lack of visibility.
• As the company gains recognition and the team continues to deliver results, it is expected to see a significant increase in valuation, potentially offering 4-17x returns to shareholders in the next 24-36 months.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.