China

• 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.

• 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: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
• Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).  

• I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
• Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

• Polestar presented a mixed but broadly positive financial picture in the third quarter of 2023.
• The company, known for its focus on electric vehicles, reported record third-quarter deliveries of 13,976 units, marking a significant 51% increase from the previous year.
• This robust performance can be attributed to a positive product and channel mix and the initial rollout of the Polestar 2’s model year ’24, illustrating a strong consumer demand for Polestar’s offerings.

• Tencent Music Entertainment Group, a leading player in China’s music streaming industry, started the year 2024 with some substantial financial and operational achievements, reflecting its continued emphasis on a dual-engine strategy of content richness and platform optimization.
• However, not all indicators were uniformly positive, revealing certain challenges and strategic pivots.
• On the upside, Tencent Music reported a marked increase in its subscriber base, adding a record 6.8 million net subscribers during the quarter, which pushes the total count to 113.5 million music-paying users.

• SF Holding’s time-definite express service differentiates it from Chinese rivals
• We believe SF dominates China’s domestic inter-city air express segment
• High exposure to air service mostly beneficial, with few risks, in our view

• Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type.  The stock is now ~35% below terms
• Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both. 
• Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

• Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
• The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
• The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.

• The recent news on China Merchants China Direct Investments (133 HK) was director Elizabeth Kan narrowly getting re-elected. Of interest, ISS recommended shareholders vote AGAINST. Glass Lewis was FOR re-election.
• The key takeaway here is that the majority of the minorities want change. The next development may occur in the lead up to the management agreement renewal in November. 
• In addition, Argyle Street Management, CMSCI’s key shareholder activist, is also requesting the company buy back 20% of shares outstanding at 90% of NAV. 

• Oriental Watch (398 HK) reported revenue/profits down 2%/15% YoY for the full year (vs our expectation of 10%). H2 revenue/profitability fell 12%/22% YoY due to a weak Q4. 
• Cash and investments fell from 1.1 bn to 920 mn HKD, owing to dividend payments, increased inventories, and reduced payables.  Cash represents 55% of market capitalization. 
• The company maintains a 100% dividend payout, but dividends declined in line with earnings to 51.5 cents (FY23: 60 cents), representing a 15% dividend yield. 

• Atour recorded steep product sales growth during 618. We raised our C2Q24 revenue by 7.5% and full year by 5.1%, driven by (1) stronger pillow sales during the 618 promotions; 
• Thanks to retail, Atour’s RevPAR after including retail sales maintained positive growth of 1.7% YoY, although pure hotel RevPAR dropped 2.9% YoY due to a decline in hotel price.
• We raise TP by US$1 to US$36/ADS and keep the rating as BUY, factoring in the strong growth momentum of Atour’s retail business.

• As we are entering the second half of 2024, inflation has remained sticky as expected.
• The lingering fear of a global recession has been mitigating rising shipping and production costs and, as a result, kept inflation in check.
• We see more opportunities in selected Chinese bonds in industries away from property and local government financing vehicle (LGFV) sectors and believe non-Asia emerging bonds offer better value.

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.

• New World Development
• Softbank Group

• On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
• The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal. 
• There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

• China announced game approval for the June batch. The number of games approved remained at a higher level than 2023.
• The pace of China game approval appears to have accelerated to the same level as pre-tightening, though the number of approvals appears to be slower than March.
• Of companies that we are monitoring, Tencent and iDreamSky clinched one approval each.

• In an unusual move, property developer Midea Real Estate Holding (3990 HK)  announced the In-Specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash. 
• As this is considered a “very substantial disposal“, a Scheme-like vote from independent shareholders is required at an EGM. And controlling shareholders – with 81.13% – are required to abstain. 
• The EGM will be held on the 2 September, with the cash payment expected on (or before) the 18 October. The question is: what is the Rump worth?

• Bayzed’s business model is similar to that of Hygeia and Inkon Life Technology. However, Bayzed’s profit margin is largely lagging behind peers. This makes us concerned about its future profitability.
• The nationwide expansion of oncology hospitals is very challenging. Bayzed’s expansion pace may not be as fast as expected if it hopes to control the quality of expansion.
• Due to “heavy asset” model, Bayzed would continue to face capital pressure.The latest valuation of Bayzed in 2023 is RMB2.625 billion. We think Bayzed’s valuation should be lower than peers.

• On 25 June, Midea Real Estate Holding (3990 HK) disclosed an in-specie distribution of its PD&S business through a scrip or cash (HK$5.90 per share, 57.33% premium to undisturbed price).
• The key condition will be approval of the distribution by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection).
• Midea RE will remain listed with an asset-light retained business, which is estimated to be worth HK$1.93. The Group’s estimated value is HK$7.83, a 17.6% upside to the last close.

• Naspers and Prosus released results for FY24 yesterday morning. The initial market reaction was positive, both discounts closed narrower for the day.
• Since the appointment of Fabricio Bloisi was announced in May, both discounts have widened.
• JSE indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R58bn, R38bn traded in the closing auction (66%).

• The Cancellation Price of HK$24.60 per share is about 50% lower than the IPO price of HK$49.6 per share in 2019. So, those long-term investors would suffer big losses.
• Henlius’ share price has outperformed the index. If it remains listed, it’s able to continue to grow and provide long-term returns for shareholders. Reasonable Cancellation Price should be above HK$30/share.
• As usual, Fosun doesn’t consider the interests of long-term investors and shareholders. There would be some investors/shareholders vote against the privatization, but the returns for arbitrageurs is not bad.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the September 2024 index rebal event.
• We currently see two ADDs and two DELs for the STAR 50 index resulting in one-way flows of US$681mn.

• ZJLD Group (6979 HK) held its annual general meeting last Friday (June 21). 
• The share price is down 21% in the last 30 days, mainly due to a major sector pullback.
• I continue to expect 20% net profit growth for the company in 2024E.  The company is trading at 13x 2024E PE which I believe is attractive. 

We view New World Development (NWD) as “Medium Risk” on the LARA scale. The company is one of the leading Hong Kong-based property developers and the flagship real estate arm of the Chow Tai Fook (CTF) group. NWD has an established property-development track record in Hong Kong and Mainland China, as well as a sizeable and growing portfolio of investment properties (under the premium K11 brand) in both regions. In addition, it has a large land bank (particularly in Hong Kong), which would support its development pipeline.

Overall, we believe NWD’s credit profile is underpinned by expectation of support from the CTF group, as well as its high quality and mostly unencumbered investment property portfolio. That said, the company has high leverage and weak financial metrics.

Our fundamental Credit Bias on NWD is “Negative”. This is mainly on account of the challenging industry environment, which has pressured the company’s property development contracted sales and margins. Going forward, NWD is likely to gradually grow its rental income from investment properties, supported by contributions from newly completed assets. Positively, management has communicated a deleveraging plan, albeit this may hinge on the company’s ability to carry out further non-core asset disposals.  

Controversies are “Immaterial”. In 2021, NWD had to demolish and rebuild two out of seven blocks at The Pavilia Farm Phase 3 project, after the building contractor found construction defects during concrete strength tests. That said, the company adequately compensated affected homebuyers and commissioned an independent third party to carry out tests on the project’s Phase 1 and 2 sections. In 2008, NWD became the subject of a minor controversy after it appointed a former top civil servant (Leung Chin-man, who was Hong Kong’s Permanent Secretary for Housing, Planning and Lands from 2002 to 2005) as deputy MD and ED of NWCL. The appointment was subsequently rescinded after a public outcry. Overall, the ESG Impact on Credit is “Neutral”. 

We initiate coverage on NWD with a “Hold” recommendation on the NWDEVL notes. We believe investors with a higher risk appetite can consider investing in the three NWDEVL perpetual securities that contain coupon step-ups (in the event of non-call at their respective first call dates), considering the attractive YTC. 

• Xiao-I (NASDAQ: AIXI) is leveraging its existing relationships and signing new clients at an impressive pace.
• The company has announced nearly a dozen new products or relationships utilizing its AI platforms in the past two months.
• Competition remains intense in the AI market and we think investors are questioning if Xiao-I has the financial capacity to remain competitive across multiple industries as private and public companies continue to invest heavily in its core markets.

• Cadonilimab (AK104)(PD-1/CTLA-4) achieved 7.1% market share in China’s PD-1(L1) market in 2023, up from 3.4% in 2022, ranking it No.4 in revenue market share after Tislelezumab, Keytruda and Sintilimab;
• With six days to go, the chance to receives NMPA approval for Gastric Cancer is slim, which means the June 18 price cut is for the existing Cervical Cancer indication;
• The big question is the price elasticity following Cadonilimab’s inclusion to NDRL. With ~110K new patients each year and only ~2,100 receiving Cadonilimab, we expect a moderate price cut.

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.

• Medco Energi

• Shanghai Henlius Biotech (2696 HK) disclosed a pre-conditional privatisation offer by Shanghai Fosun Pharmaceutical (Group) (2196 HK) at HK$24.60, a 36.7% premium to the undisturbed price. The offer price is final. 
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is no minimum acceptance condition. 
• Long term investors will be unimpressed as the offer is half the HK$49.60 IPO price. However, shareholders with blocking stakes should be supportive partly because of the share alternative option.

• Midea Real Estate Holding (3990 HK) announced last night a proposal for distribution in specie of the property development business to shareholders.
• The proposal allows shareholders to select between receiving pro rata shares in the PrivateCo, or the cash alternative at HKD5.90 per share, a 57% premium to last close at HKD3.75. 
• I believe this is a good deal for minority shareholders.  The company (ex. property development business) will continue to be listed on the HKSE after the distribution. 

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
• We currently estimate one-way flows to be US$1.4bn and US$235mn for the SSE 50 and 180, respectively.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• We see seven change for the ChiNext index and five changes for the ChiNext 50 index.

• Shanghai Fosun Pharmaceutical (2196 HK) has made a HK$24.60/share Offer (best & final), in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative may be afforded. 
• As Henlius is PRC-incorporated, this Offer is structured as a Merger by Absorption, involving a Scheme-like vote for independent H-shareholders. There is no tendering condition.
• Pre-Conditions include NDRC, MoC, and SAFE. The Long Stop date to secure these conditions is 30th April 2025. That’s way too conservative. This should be wrapped up around mid 4Q24.

• China Gas Holdings (384 HK)‘s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. 
• FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.
• China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. 

• The largest player in Asia in the offshore oil services sector with limited competition
• Business dynamics trending up as offshore exploration is the focus of many energy majors
• Recent sell-off due to concerns over Aramco drilling delays provide a good entry point

• Dong-E-E-Jiao’s performance is exciting. The first-ever equity incentive plan fully demonstrates the new management team’s confidence in the future development of the Company. There’s potential for another leap in valuation.
• Our 2024 forecast is net profit to reach RMB1.4 billion, up 20% YoY. Reasonable valuation is 25-30x P/E.If market value falls below RMB35 billion, this is a great buying opportunity.
• Dong-E-E-Jiao is worth long-term holding due to attractive dividend policy. China Resources may further improve dividend payout, which is in line with the major trend for SOE to increase dividends.

• On 4 June, MMG (1208 HK) announced plans to raise HK$9.1bn (US$1.2bn) through 2 rights shares for every five existing shares rights offering, with a rights price of HK$2.62.
• Since the rights issue announcement, MMG shares have declined by 16.2% to the undisturbed price and by 8.0% compared to the TERP of HK$3.48 per share. 
• MMG’s trading pattern has diverged from Link REIT/Yuexiu’s rights trading due to the statement on 18 May that the Peruvian mine is not liable for a 30% withholding tax.

• The steady selloff in Swire Properties (1972 HK) could result in the stock being deleted from global passive portfolios in the next couple of months.
• Swire Properties (1972 HK) trades marginally cheaper than its similar sized peers on forward PE and price to book value.
• Swire Pacific (A) (19 HK) owns 82% of Swire Properties (1972 HK) and a big drop in the stock price could see them step in.

• With more foreign countries being granted visa-free visits to China, Cathay Pacific Airways (293 HK) will benefit from more transfer traffic via Hong Kong.
• Recovery is decent with passenger traffic rising 37.5% in 5M24. CX’s capacity already returned to 80% of pre-pandemic in 2Q24, and this will reach 100% in 1Q25. 
• YTD, CX is still a laggard relative to many global airlines. Its P/B valuation is not stretched at 0.8x, given ROE of 11% over the next 3 years.  

• Retail pharmacies experienced performance decline in April and May. Due to negative policies, retail pharmacies will experience industry clearance. Therefore, we do not recommend investors to bottom-fish related stocks now.
• There is a logic to biotech’s performance from 2023 to present.The clearer the path of sustainable development, the better the stock price performance. They can be divided into three types.
• YSB faces big risks and the outlook is not optimistic. If the final valuation of the Company is lower than China Resources Pharmaceutical and Shanghai Pharmaceuticals, we wouldn’t be too surprised.

• Kuaishou and Bilibili’s GMV surged YoY during “June 18” sales.
• World of Warcraft: Wrath of the Lich King, will formally start on June 27.
• GAC Honda Automobile Ltd planned to dismiss 1700 employees, about 14% of total.

• Acotec’s 2023 performance was unsatisfactory. Core products suffered weak growth. Positive trend of continuing to optimize revenue structure was broken. Sales of latecomers’ competing products would expand rapidly in 2024/2025. 
• Revenue proportion in overseas markets was still below 5% in 2023. If no highlights in Acotec’s cooperation with Boston Scientific in 2024, this collaboration could be considered a failure.
• Due to VBP, margin could further decline. If it’s just the current situation, then Acotec is not as good as Zylox-Tonbridge. So, its valuation should also be lower than Zylox-Tonbridge.

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.

• Greentown China

• 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: MMG (1208 HK) US$1.2 billion rights issue. Shift Up (462870 KS) and Webtoon Entertainment (WBTN US) IPOs.
• Event-Driven developments: L’Occitane (973 HK), Exedy Corp (7278 JP), Infocom Corp (4348 JP), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU). 

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 16.1bn of A-shares. NORTHBOUND bought tech and sold everything else, especially consumer names. Kweichow Moutai, Midea, appliances and renewables.
• Ongoing questions as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected from earlier announcements.

• Growth of outbound Chinese travel demand strong in May as HK, Macau slow
• Domestic travel demand also showed solid growth in May and early June
• Trip.com appears reasonably cheap now that it’s dipped below US$50, BUY

• At the AGM yesterday, China Merchants China Direct Investments (133 HK)‘s director Elizabeth Kan was re-appointed, but by a wafer-thin margin: 29.97% of shares out FOR, and 29.44% AGAINST.
• Stripping out Victor Chu’s stake (~2%?) and China Merchant’s (27.6%), or collectively ~29.6% of shares out, it’s fair to say the remainder of the shareholder register wants her out. 
• CMCDI is currently trading at a 55% discount to the latest NAV (as at 31st May 2024) of HK$30.42/share.  Argyle continues to add to its position. 

• Tianju Dihe Technology, a provider of integrated API-enabled data exchange services in China, set terms for an IPO and plans to raise ~HK$400M in June.
• The initial public offering is expected to be priced at HK$83.33 per H share, valuing the technology company at ~HK$4.2B or $535M based on 50.1M outstanding shares.  
• Cornerstone investors have agreed to acquire ~3.8M H shares, representing 80% of the offer shares or ~8% of the total outstanding shares.

• Not much has changed since our latest Int’l Compass from May 31, 2024 titled “Buy the Pullback.” 
• We were buyers of the pullback in global equities (MSCI ACWI, ACWI ex-US, EAFE, EM, Europe, Japan, Taiwan, etc.) with important supports holding, combined with ongoing healthy market dynamics.
• Supports are holding, and our bullish outlook (since early-November 2023) remains intact. Continue to buy dips.

• Taste Gourmet (8371 HK) reported revenues up 37% YoY and profits up 29% YoY (lower than our expectation of 39% profit growth) due to a slightly weaker-than-expected Q4.
• Dividends for H2 were 7.4 cents/share (overall FY24:12.9 cents), implying an 8.1% dividend yield. Net cash on the balance sheet was 143 mn HKD (23% of market cap).
• Trading at 6.7x PE FY24 (March end) and with an excellent execution track record, we believe that the company will be able to post more robust numbers in FY25. 

• SenseTime Group (20 HK)  aims to raise up to US$263m via selling around 4.5% stake.
• Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• On the 18th June, personal computer (PC) parts and accessories play PC Partner (1263 HK) announced a profit alert for 1H24. 
• That’s positive. What is also interesting is that the board is considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
• Precedents are thin on the ground. And for good reason. The process is not straightforward.

• After watch accessory play Hengdeli Holdings (3389 HK) was suspended on the 17th June pursuant to the Takeovers Code, I didn’t hold out high hopes of a knock-out Offer.
• And on cue, CEO Tony Cheung (16%), son of founder Zhang Yuping (holding 17%), has made a Partial Offer (for 15% of shares outstanding) at HK$0.16/share, towards gaining majority control.
• That’s a 18.5% premium to last close … and a 80% discount to NAV, and a 47% discount to Hengdeli’s net cash as at 31 December 2023.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
• Currently, we see 16 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

• Despite missing market consensus, Sa Sa International Hldgs (178 HK)‘s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.
• Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. 
• While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  

• While Elizabeth Kan barely survived the AGM vote, ASM has effectively mobilized minority shareholders.
• Lazard (owns 15% of CMCDI) probably voted alongside ASM (owns 9%). Other than China Merchants Group and Victor Chu, almost no “outside shareholders” voted in favor of Kan, .
• The next battleground is a vote in November when CMCDI needs to renew its investment management agreement. Intense behind-the-scene negotiations are expected, given the bargaining power ASM now demonstrated.

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.

• Road King Infrastructure