China

• The September rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
• The round-trip trade across all stocks across the four indices is estimated at HK$18.1bn (US$2.3bn).
• Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

• The close of 3 September 2024 was the final price to determine capping for the Hang Seng Index Rebalances which will take place this Friday 6 September 2024 at close.
• The numbers are largely unchanged, though price changes in the interim cause more Kuaishou Technology (1024 HK) to be bought, and more Xiaomi Corp (1810 HK) to be sold.
• The biggest name in flows is, of course, ASM Pacific Technology (522 HK) which sees 15 days to buy.

• South Africa was downweighted in ACW, EM and EM ex China for a second consecutive quarter. 
• Brazil was the largest upweight in ACW, EM and EM ex China.
• Tencent was downweighted in the EM index but upweighted in ACW.

• With 70% of the review period complete, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
• There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes for both indices on a year-to-date basis, but near-term performance has been lackluster.

• China TCM’s 24H1 results is weaker-than-expected. Net profit YoY growth for the whole year of 2024 could be negative. Based on calculation, without privatization, HK$3.26/share is fair for China TCM.
• The remedial tax is a “one-time expenditure” to clear the “obstacle” so as to smooth the completion of privatization. Weak financial performance in 24H1 should help the shareholder vote. 
• Due to the low base in 2024, 2025 is expected to see an obvious performance rebound.Long-term outlook of TCM granules business is still promising, reasonable share price is above HK$5/share.

• At the first close , SASAC/NCSSF-backed Champion Holdings failed to secure the 50% acceptance condition. No surprises there. What was a surprise was Champion Tech letting the Offer lapse. 
• Champion Tech could have extended the Offer to the 30th Sept, which would have achieved little. But they could have bumped terms. They did neither.
• That leaves ORG Technology Co., Ltd. A (002701 CH) as the sole bidder for CPMC Holdings (906 HK) . And arguably, an unwilling bidder at that. 

• Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years 
• Chart analysis is to compliment our recent report Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play published yesterday
• Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. 

• Midea Group Co Ltd A (000333 CH) aims to raise up to US$3bn in its H-share listing, as per media reports.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premiums.

• Asia Ex-Japan fund managers continue to reduce their positions in Hong Kong Exchanges & Clearing.
• Percentage of funds invested and the average weight of the stock in portfolios have been on a downward trend since the recent peak in early 2023
• Wave of position closures in 2024 by Allianz, T Rowe Price, and Baillie Gifford has resulted in over half of the historical investor base exiting the stock

• Estimated take rate up vs year ago and vs Q124, and EBITA margin turned +ive
• However, revenue growth in core China market slowed considerably in Q224
• Cash Flow and Liquidity both appear ample, little pressure to raise new funds

• Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.   
• Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies. 
• The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified. 

• Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
• Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
• Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

• The market has lingering concern about substantial slowdown in PDD’s growth and has been pricing in the outlook for most part of the year.
• 2Q results did signal imminent growth deceleration, and management’s blunt yet honest comments about the pressure on margin further stoke fears.
• We regard 1/3 market cap wipe-out after the results as over-reaction. While risks have been reflected to large extent, we do not expect a meaningful re-rating until 2H25.

• First Pacific Co (142 HK) is a Southeast Asian conglomerate that has been handicapped by its listing in the Hong Kong market over the last several years.
• As Southeast Asian markets (Indonesia and Philippines) begin to re-rate on the back of a more accommodating Fed policy, First Pacific is beginning to participate in the uptrend.
• Metro Pacific Investments Corp (MPIC), the second largest piece of the company’s NAV has been active in acquiring more infrastructure assets since being privatized last year.

• 1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
• Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
• ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.  

• Despite slower top-line growth, Trip.com posted firmer margins in Q224
• Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
• Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS

• Dream International (1126 HK) reported revenues/profits of -7.8%/-17% YoY for H1 FY24 due to prolonged destocking of plastic/plush toys, resulting in weak (-18% YoY) North American sales (43% of revenues).
• With over 1.26 bn HKD net cash (43% of the market cap), the company paid another generous dividend of 20 cents (we believe H2 will be higher).
• The company has deep value, trading at 3.9x FY24e PE/1.1x EV-EBITDA, with a 12.7% yield. 

• NetEase reported C2Q24 top line, GAAP operating profit and GAAP net income in line, (5.6%) and (7.3%) vs. our estimates, and in line, (4.0%) and (5.5%) vs. consensus. 
• We believe game growth will materially accelerate in C2H24 and 2025, based on our projection for Naraka Mobile, Where Winds Meet and the two Marvel games. 
• We keep TP of US$122 unchanged and maintain BUY .

• In a previous insight we have postulated that a pullback may be behind the corner for the Hang Seng Index (HSI INDEX).
• We said the pullback could come the week after the insight was published, or the following week (i.e. this week). Last week closed up, the index could retrace this week.
• In this insight we want to update the levels to buy LONG for this week, to benefit from a highly probable continuation of the rally in September.

• The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
• There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
• The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

• There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
• There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
• The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

• 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), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP). 

• Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
• While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process. 
• The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.

• Recap of 1H 24 on two of the largest and most influential EV makers; Tesla (TSLA US) and BYD (1211 HK) .
• BYD performance is superior to Tesla yet it trades at a discount to Tesla, notably 0.2x vs 3x PEG.
• BYD faces tailwinds in North America and the EU, but those are not its main destinations.

• SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
• This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up. 
• SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we looked at Kioxia Holdings (6600 JP), Bajaj Housing Finance (BHF IN) and Niva Bupa Health along with Premier Energies.
• Placement were flowing through again this week, mainly across India and Japan.

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.    
• CR Beverage has a product portfolio of 13 brands, including C’estbon, Zhi Ben Qing Run, Mi Shui Series, Holiday Series and Zuo Wei Cha Shi, comprising 56 SKUs.
• The bull case rests on a large TAM, a core business in good health, beverages providing the second growth leg, profitability, and strong cash conversion.

• Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes up, but not high. 
• SOUTHBOUND rebounded cutting its weekly net sell streak at one. ETFs again a net sell. NORTHBOUND net data is not not released on a daily/weekly basis; only quarterly.
• As expected (with AH 20d Premia returns at multi-year highs 3wks ago), AH Premia fell slightly, narrow premia falling more than wide premia. I continue to expect more H-vs-A gains.

• Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. 
• The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. 
• We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.

• Draconian ‘de minimis’ reform proposal in the US has bipartisan support
• In Q224 results, rampant signs of a Chinese X-border retail slowdown
• Other news: plastics laws, new Amazon threat, SHEIN sustainability initiatives

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
• Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP). 

• Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won’t improve quickly.
• Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.
• If investors truly understand “the essence” of HEC Changjiang Pharma, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.

• LI Auto (LI) reported C2Q24 top line, non-GAAP operating profit and GAAP net income 5.0%, (5.2%) and (20%) vs. our estimates, and in-line, 53% and 6.8% vs. consensus.
• We believe the market has oversold the company.But in our view,the key question is LI’s next product entry under the backdrop of Xiaomi consolidating its position in the EV sector. 
• We believe LI should continue to explore its “family car” brand niche in entering the sedan market. If so, volume and margin can co-exist.

• 2Q-2024 results is within ours and consensus expectations. Competition is tough, but LiAuto managed to remain profitable   
• Management is boosting R&D expenditure and boost spending on  expanding number of charging stations, all for the benefit of its customers. 
• Our fair value of USD25 implies 16x FY25 PE – average for auto growth stock. A bargain with 3-year CAGR of 38%, net cash, and churns high free cash flow.

• Meituan reported C2Q24 revenue 1.4%/2.3% higher than our estimate/consensus and adjusted net income 17%/28% higher than our estimate/consensus, thanks to lower rider cost and less subsidies to users;
• Although poor economy has plunged Meituan’s merchant base to the loss-making zone, we expect Meituan’s take rate to persist as take-out order represents incremental revenue to offset merchants’ fixed cost.
• We reiterate BUY rating and raise TP to HK$165/share. Catalysts are reduced competition, expansion of Pinhaofan, and overseas expansion.

• ORG Technology Co., Ltd. A (002701 CH) has received SAMR clearance, the key regulatory hurdle, for its HK$7.21 voluntary offer for CPMC Holdings (906 HK).
• SAMR approval paves the way for the ORG precondition to be satisfied in September. Changping Industrial’s HK$6.87 offer first close is on 3 September.
• Changping Industrial has little choice but to revise its terms. It has a short window to seize the initiative by bumping its offer before ORG’s competing and higher offer opens. 

• Total revenue increased by 26% in 2Q24, as sales volume grew strongly after March.
• We believe the operating margin will be stable due to the ability of battery production.
• We also believe the tariff penalty from Europe is not a concern in the long run, as BYD’s products have expanded to 77 countries.

• Shenzhen International (152 HK) reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.
• In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.
• SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. 

• ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off. 
• Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
• What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing. 

Health and Happiness International’s (H&H) H1/24 results were in line with expectations. The company reported weaker earnings and margins from its main Baby Nutrition & Care (BNC) business in Mainland China, amid structural industry challenges stemming from low birth rates in the country. That said, the weakness in BNC was partly offset by growth in the Adult Nutrition & Care (ANC) and Pet Nutrition & Care (PNC) segments. We note that ANC is now H&H’s largest revenue contributor, eclipsing BNC’s numbers. Going forward, we expect the company to continue expanding the ANC and PNC segments in Mainland China and beyond, while seeking to contain the revenue decline at BNC and maintain stable margins for the segment.

H&H has reduced inventory days and generated a small working-capital inflow, which led to positive FCF generation and net debt reduction. The company has adequate liquidity, following its successful refinancing activities in July.

• The valuation of Huawei Technologies Co. Ltd’s smart car unit has surged to 115 billion yuan ($16 billion) only seven months after its launch, following a recent investment.

• Yinwang Intelligent Technology Co. Ltd., a wholly-owned subsidiary of Huawei founded in January, has agreed to sell a 10% stake to Avatr Technology Inc., an electric vehicle (EV) startup backed by China’s state-owned automaker Chongqing Changan Automobile Co. Ltd. (000625.SZ -1.54%) and battery giant Contemporary Amperex Technology Co. Ltd. (CATL). 

• Avatr agreed to pay 11.5 billion yuan for the stake, with the payment to be made in three installments, contingent on conditions such as the introduction of Huawei’s smart car technologies and talent to Yinwang.

Anton Oilfield’s H1/24 numbers were softer than expected in our view, with profitability growth lagging revenue improvement. Positively, there was a surge in new orders. This is the third consecutive quarter showing a significant rise in new orders. We expect the business’ positive momentum to continue in FY 2024. The large (3x revenue) and growing backlog support revenue visibility. The financial risk profile remains stable.

• Chinese parcel volume growth slowed in July (+22%) vs firmer pace in Q2 (+32%)
• At company level, there are signs the steep price declines from H1 are moderating
• If worst of price declines is in rearview mirror, beat down names are worth a look

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.

• MGM China Holdings
• New World Development
• Nickel Industries
• Tata Steel Thailand

• If the System or this treatment method is really effective and accepted by hospitals/doctors, under the coverage of medical insurance catalog already, why BrainAurora’s revenue scale is still so small?
• CSRC questioned BrainAurora’s high selling expenses. Since either SG&A or R&D expenses already exceed revenue, BrainAurora would continue to suffer from losses. The Company hasn’t established a solid profit model.
• BrainAurora completed a total of 7 rounds of financing, with a post investment valuation of RMB2.7 billion. However, it is difficult for BrainAurora to match this high valuation after IPO.

• Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
• The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
• Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.

• Despite a negative share price reaction following its 1Q2025 earnings report, Alibaba Group Holding (9988 HK) seems to have entered an earnings upgrade cycle due to improved profitability expectations.
• Despite recent share price pressure, due to negative industry readthroughs from peers, Alibaba Group’s near-term momentum indicators are displaying bullish signals.
• Alibaba Group trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.

• PDD Holdings (PDD US) shares fell 28% on Monday after a 3% revenue miss, with shares dropping an additional 4% yesterday.
• The results themselves weren’t bad enough to justify such a sharp price reaction.
• However, management’s comments on slower growth and a potential drop in profits triggered a significant sell-off.

• July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
• Domestic air travel demand also showed modest Y/Y improvement in July 
• We still like Trip.com on improving profitability, BUY with US$55 target

• PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus. 
• We believe PDD’s upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas. 
• Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China’s e-commerce sector.

• TCOM reported C2Q24 revenue in-line with our est./cons., non-GAAP operating income also in-line with our est./cons., and non-GAAP net income beat our est./cons. by 18%/40%,mainly due to rising equity income
• Robust int’l growth offset weakness in domestic. With services possibly included in the government consume subsidy in C2H24/1H25 and Rmb’s appreciation.
• We feel it is time to buy TCOM again, TP to US$50 from US$42.

• The stock has declined for three years and a half, from HK$460 to HK$100.
• Revenue grew by 21% YoY and the operating margin improved significantly in 2Q24.
• We conclude the stock has an upside of 131% and a price target of HK$237. Buy.

• The “non-business factors” mentioned in PDD Holdings (PDD US) ‘s earnings call likely refer to potential political and policy risks in the U.S. due to the upcoming presidential elections.
• Temu, PDD Holdings’ global online shopping platform, has become the most downloaded shopping app in the U.S., significantly disrupting the local retail market.
• PDD’s rapid and disruptive growth has already led to litigation in the US, and political pressure could increase if Donald Trump wins the presidential election.

• Xinhua Winshare (811 HK)‘s 4.4% YoY decline in recurring profit in 1H24 is due to a 6.6x increase in taxation. Its pre-tax profit has still increased 5.8%.  
• We expect XW to maintain its textbook franchise and overall gross margin to stay stable. Growth in general book publication and distribution will supplement the textbook business.
• Net cash equals 70% of the share price, while its listed equity investments had appreciated 3.6x. It stands on a 5% dividend yield but this is a potential upside.

• Geely Automobile Holdings Ltd announced that it is to raise its 2024 export target to 380,000 units from 330,000 units, after reporting a 67% year-on-year growth in vehicle exports in the first half of this year.
• Gan Jiayue, Geely Auto Group’s CEO, highlighted the company’s impressive export performance, saying it was driven by aggressive expansion into emerging markets such as Africa, where sales surged over 400%.
• There had also been significant growth in Central Asia, Mexico and other regions such as the Middle East, Eastern Europe and Southeast Asia, with Geely targeting further expansion in these markets, Gan said.

• Ahead of Huafa Property Services Group (982 HK)‘s Scheme Meeting tomorrow, the 28th August, 42.57% of shares outstanding moved out of CCASS on the 8th July.
• One argument for Huafa trading wide-ish to terms is due to “suspicious” CCASS moves between the Offer announcement and the vote. 
• Some investors even cite the Golden Throat Holdings (6896 HK) debacle. This is not a Golden Throat situation. Not even close. It is decidedly less interesting and benign.

• PDD Holdings (PDD US) stock price nosedived 28.5% yesterday wiping away more than USD55 billion in market cap following Management’s call with investors.
• During the call, the management guided towards weakening profits in the next quarters and stated that high revenue growth was unsustainable in the long term.
• Investors however seemed to be spooked not by negative guidance on profitability/growth but by comments on impact of non-business factors and need to adapt to changing times etc.

• In 2Q24, total revenue increased by 14% YoY and hotel booking revenue increased by 20%.
• We believe the company has been riding on the recovery of the travel market and will see historical high quarter in 3Q24.
• We also believe the stock still has an upside of 18% after one day’s surge.

• 1H24, Nongfu’s revenue growth rate fell to 8% YoY, because Wahaha launched a propaganda against Nongfu.
• We believe the revenue growth will rise in 2H24 and 2025, as it seems that the public do not like the way Wahaha use.
• We set an upside of 26% and a price target at HK$38 for the end of 2025.

For our next Corporate Webinar, we are glad to welcome RemeGen’s Chief Financial Officer, Mr. Tong Shaojing.

In the upcoming webinar, Tong will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Eric Wen . The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Thursday, 19 September 2024, 09:00 SGT.

About RemeGen

RemeGen was cofounded in 2008 by Mr. Wang Weidong, founder of Rongchang Pharmaceuticals, a leading traditional Chinese medicine company in China and Dr. Fang Jianmin, a Canadian-American scientist. Headquartered in the coastal city of Yantai Shandong Province of China, RemeGen has research labs and offices throughout China and the United States. RemeGen is committed to the discovery, development, and commercialization of innovative and differentiated biologic drugs of significant clinical value in the key therapeutic areas of autoimmune oncology and ophthalmic diseases.

• ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.
• Stella International (1836 HK) will increase its dividends and buybacks after positive earnings surprise. AIA Group Ltd (1299 HK) saw a surge in new policies from mainlanders in HK.
• Lufax Holding (6623 HK) reported an earnings miss with declining loan volume. Yancoal Australia (3668 HK) reported a decline of 57% in earnings which was below analysts’ estimates.

• BIDU reported C2Q24 top line, non-GAAP operating profit and GAAP net income inline, 5.6% and 7.6% vs. our estimate and inline, 10% and 8.4% vs. consensus. 
• Weak economy is only part of the problem. Weak monetization exists across the entire product line. 
• We cut the TP to US$80 and reiterate SELL rating.

• Backed by strong US demand, spot container rates remain very firm
• On top of higher average freight rates, carriers now enjoying lower fuel prices
• Dispersion of returns on carrier shares is eye-opening, only a few performed

• Bilibili (BILI) reported C2Q24 revenue, GAAP operating profit, and GAAP net income in-line, 7.9%, 9.9% vs. our estimates and in-line, 12%, 18% vs. consensus. 
• BILI’s unique, urban user base and video format give it strong competitive advantage. Further, revenue from <Three Kingdom> game will be significant.
• We raise our TP to US$20 and reiterate BUY .  

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.

• AAC Technologies Holdings
• China Jinmao Holdings
• Greentown China
• JSW Infrastructure
• Citicore Renewable Energy

• A state-owned Offeror pitching a lifetime high Offer Price – with a solid premium –  for an illiquid company? Sounds like a slam dunk.
• Yet  property manager Huafa Property Services Group (982 HK) has perennially traded wide to Huafa Industrial Co., Ltd. Zhuhai (600325 CH)‘s terms. This is not justified. 
• The Scheme Meeting/SGM is tomorrow (28 August), with payment on (or before) the 30 September. Or a gross/annualised return of 4%/46%. Buy here. Then buy some more. 

• The stock plunged today after the announcement of excellent performance for 2Q24.
• In 2Q24, revenue grew by 86% YoY and the operating margin improved 10 percentage points YoY.
• We believe investors should buy, as it is just a tactic from major stock sellers.

• SOUTHBOUND was a net seller this past week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
• Gross volumes remain very low. Net volumes de minimis. Very August-ish. No sectors stood out. 
• The largest net buy was CSPC Pharmaceutical Group (1093 HK) where the net buying was the same size as the fifth largest net sell (Tencent (700 HK)) 

• Hong Kong’s unusual trading channel pattern may be coming to an end and short selling declines.
• Alibaba Group Holding (9988 HK) broke a falling triangle pattern and now trades above near term support levels.  The company’s dual listing announcement and large buyback program are near-term positives.
• GDS Holdings (9698 HK) has broken out of its rounding bottom pattern with a positive earnings announcement.  China Ruyi Holdings (136 HK) has broken out from its triangle pattern.

• Kunlun Energy (135 HK) posted a healthy 2.6% earnings growth for 1H24. If not for the expiry of two oilfields last year, its earnings growth would have reached 6.8%. 
• Natural gas sales pre-tax margin contracted 0.5pp YoY, but has recovered significantly HoH. Other businesses have all seen good margin expansion. 
• The company has further accumulated net cash which increased 8.3% in the last six months. At HK$2.76/share, this equals 35% of the share price.

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.

• ABM Investama
• Nickel Industries
• Road King Infrastructure

Longfor Group’s H1/24 results were acceptable. Earnings declined in line with expectations, driven by lower revenue and margins in the Property Development segment. That said, earnings growth from rentals and services remained robust, with LTM profit from recurring income covering interest expense by 1.6x (FY 2023: 1.4x).

Negatively, net debt increased marginally in H1/24, even though total debt declined. Going forward, we expect the company to continue reducing debt using OCF and refinance its maturing debt using additional operating loans backed by its investment properties. Overall, we believe near-term default risk for Longfor remains low, as the company’s pipeline of new malls should continue to support its access to secured bank loans for refinancing.

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 Oil And Gas
• First Pacific Co

Greentown’s H1/24 results were acceptable, given the above-industry sales and top-line growth. While gross profit declined, the property development gross margin was stable from FY 2023, and remained robust relative to peers. In addition, net debt was stable from FYE 2023. More importantly, the company’s access to onshore financing appears healthy, and liquidity is adequate.

The company remains active in land acquisitions and has a good quality land bank, mostly in high-tier cities in the Yangtze River Delta. Although Greentown is considered a pure-play developer (as its recurring income businesses are small), the company appears to have navigated the industry downturn well, thanks to its cautious approach towards land investments and operating efficiency to support a fast-churn model.

• Minth Group Ltd (425 HK) revenue went up by 14% (almost 3x of China’s passenger vehicle market, which grew 5%) and net income by 20% on 1H 24
• It has developed environmentally friendly collision aluminum, with a carbon emission of less than 2.5 kg CO2 /Kg.AL while typically it produces 16 CO2/kg.AL
• Battery housing business contributed 21% instead of 18% of total revenue with OPM expanded from 18% to 20%. 

• The Huafa Property Services Group (982 HK) vote on Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’ HK$0.29 offer is on 28 August. However, shares trade wide ahead of the vote.
• Several readers have enquired about the unusually high spread ahead of the vote of a seemingly clean deal. The conversations raised several concerns. 
• The concerns are unwarranted, and this remains a clean deal. At the last close and for the 30 September payment, the gross/annualised spread was 5.5%/68.9%. 

• 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), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Capitol Health (CAJ AU). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), C.I. TAKIRON Corporation (4215 JP).     

• Roughly six weeks ago, Shanghai Henlius Biotech (2696 HK) announced the scrip option condition was met. Just that Shanghai Fosun Pharmaceutical (2196 HK) (the Offeror) was weighing its options
• This situation mirrored L’Occitane (973 HK)‘s (eventual) scrip option. And in place of Pleasant Lake in that transaction; Henlius has Loyal Valley Capital (5.8309% shareholder) behind the scenes.
• Late Friday, Henlius updated the terms of Fosun’s Offer to now include the scrip option alternative. We expected nothing less. 1H24 results will also be out later today. 

• Tencent reported a softer set of results for Q2 relative to Q1. Revenue for the quarter was up 1% QoQ and 8% YoY.
• Since our last discount update mid-August, the discounts of both Naspers and Prosus have continued to narrow.
• Naspers’ discount is trading well off the lows reached at the end of July (~45%). 

• The 1H result was poor due to the inventory clearance from the new product standards, which rendered older products less desirable. 
• Management has proven to be able to manage costs carefully during a down cycle. 
• Yadea Group Holdings (1585 HK) used to trade around 35x PER; now it is only 10x PER. 

• The Share Alternative is necessary to improve success rate of privatization. Our guess is Henlius Biopharmaceuticals/Lin Lijun would vote for this privatization, but we’re not sure about Qatar Investment’s decision.
• Due to its “flaws”, undervaluation of Henlius is difficult to fundamentally change. So, those conservative and cautious investors would choose the Cash Alternative considering the risks behind the Share Alternative.
• Even if there’re plans of re-listing, it may be based on a new entity formed after integrating Henlius and other assets within Fosun Pharma. So, the value of Rollover Entities/Securities remains uncertain.

• China Power International (2380 HK) kicked off FY24 with an impressive 51.5% surge in 1H24 net profit. All business segments improved YoY, with hydropower being the best. 
• Both volume growth and cost reduction are the key drivers, supporting a 7.2pp gross margin expansion. The 5pp increase in the proportion of hydropower sold also lifted profitability.
• CPI will grow its capacity to 52GW by end FY24, a 15.5% YoY and 7.8% HoH increase. Moreover, the upside will come from more asset injection from its parent.

• Pop Mart’s total revenue increased by 62% YoY due to the promising overseas market.
• Tongcheng’ revenue grew by 48% YoY in 2Q24, as new businesses are successful.
• Alibaba’s Freshippo plans to set up frontline warehouses, which is a way back to online.

• Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
• With fewer young people and a growing number of older adults, the target market for alcoholic beverages is shrinking in many markets including China.
• Upsides from vertical integration could give Ola Electric (OLAELEC IN) a significant cost advantage over local competitors. Strong pricing power can allow it to decide whether to prioritize growth or margins.

• CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
• Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
• Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.