China

• SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
• Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell. 
• No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

• 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), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK). 
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU). 

• BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
• Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
• We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

• Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
• An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
• Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

• As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
• Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK). 
• Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s buy streak was interrupted again this past week, but they still net bought, as did NORTHBOUND. HK stocks continued their rise with liquid Hs outperforming their As by 3.8%. 
• There were some BIG moves the past two weeks and Average AH Premia are now the lowest in nearly four years vs near 5yr wides less than 12 weeks ago. 

• 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: Modec Inc (6269 JP)‘s  US$535 million secondary offering.
• Event-Driven developments: ESR Group (1821 HK), L’Occitane (973 HK), CPMC Holdings (906 HK), Malaysia Airports Holdings (MAHB MK), I’Rom Group (2372 JP), Great Eastern Holdings (GE SP). 

• Lalatech Holdings, a technology based global logistics company, has updated its application for Hong Kong IPO and disclosed financial results for 2023.
• Lalatech Holdings is aiming to raise up to $1B and the company’s IPO looks imminent in the coming months as cash flow growth accelerated, while margins and profitability improved. 
• My fair valuation of Lalatech Holdings is close to $10B and investors should buy into upcoming IPO given the company’s substantial scale, massive network effects and operating efficiency.

• We are more bullish on PDD’s 1Q24 results on the back of better monetization of domestic e-commerce business and fast and quality growth of TEMU.
• We now expect 1Q24 adjusted earnings to almost double yoy to RMB20 billion, much higher than our previous estimate of 50% yoy growth and exceeding consensus by ~30%.
• Moreover, we believe earnings growth will be steady throughout 2024 instead of slowing down as we thought. 10x FY24 earnings against 80% yoy growth lead us to see 50%+ upside.

• While historically many new inclusions to the HSI have performed disappointingly after their addition, BYD Electronic (285 HK) looks unlikely to follow such a pattern.  
• Its share price has underperformed YTD, absolute PER valuations are not stretched and forward P/B multiple is only at the historical average level. These provide a good buffer.
• Its industry and business are not at structural and cyclical peaks, with further growth prospects from AI-enhanced products and solutions. A 33% surge in 1Q24 earnings also adds comfort.

• Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs. 
• Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

• The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
• This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up. 
• Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

• A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new. 
• The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
• These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down. 

• The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
• But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
• Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.

• The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
• Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
• We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.

• China momentum continues with KWEB breaking out above WEEKLY double-bottom base
• Stocks REPORTING this week that look technically sound include PDD BZ and EH
• In-Depth look at individual leaders in Tencent Holdings, Futu Holdings, and Sony Group

• The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
• We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase. 
• Relatively smaller flows here at 3% one-way with the big flows on the name changes.

• Naspers and Prosus have announced the appointment of Fabrício Bloisi as Group CEO, effective from 1 July 2024. Unlike his predecessor, Bloisi has an entrepreneurial background.
• Prosus and Naspers have sold off on the news. Prosus is down 1.7%, widening the discount by 80bps. Naspers is down 1.3%, widening the discount by 50bps.
• Since Bob van Dijk stepped down in September last year, both discounts have narrowed.

• Tencent reported C1Q24 revenue, IFRS operating profit, and IFRS net income in-line, 9.1%, 26% vs. our estimates and in-line, 16%, 21% vs. consensus;
• Game revenues were below our expectations while advertising was above, leading to a gross margin beat of 2.73ppt, powered by video account and AI. 
• We raised our TP to HK$450 to reflect the shift to better-margin revenue mix and upcoming revenue acceleration.

• JD.com (9618 HK) announced a set of in-line results for 1Q24.  Sales growth was 7% yoy, in-line with my 1Q24 preview.
• Operating profit margin for the core JD retail business declined by 0.5ppt yoy to 4.1%, which is also in-line with my preview. 
• The positive surprise was a big reduction in losses in the JD logistics business, which brought the overall non-GAAP net profit growth to 17% yoy for 1Q24. 

• L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties. 
• The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
• The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.

• In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
• That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
• Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known. 

• On first look, Alibaba Group Holding (9988 HK) missed on margins in 4QFY24 as adjusted EBITA declined by 5% yoy.
• We can give the company the benefit of the doubt given that the important segments of the company are heading into the right direction.  
• Alibaba returned USD13.4bn and USD16.5bn to shareholders in FY23 and FY24, compared to the current market cap of USD197bn

• Giant Biogene (2367 HK) aims to raise up to US$205m via a top-up placement.
• We have followed the company since listing and its recent performance has been great. Although it doesn’t seem to need the cash.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Huafa Property Services Group (982 HK) is currently suspended pursuant to the Takeovers Code. 
• This SOE-backed property management play recently announced its highest-ever earnings.
• Shares have gained ~32% in the past fortnight, touching a three-year high. IF an Offer were to unfold, expect an Offer Price ~10% above the last close. 

• BABA reported CY1Q24 top line, GAAP operating profit and non-GAAP net income 0.9%, (4.6%) and (6.7%) vs. consensus, and in-line, in-line, (6.9%) vs. our estimate;
• Results reaffirmed our positive view as increased investment is leading to significant improvement in key businesses: (1) Taobao/Tmall stabilized, (2) overseas e-commerce accelerated along with overseas AntFin and Cainiao
• We expect pay-off from its strategy shift in 2H of the year. Spin-off, dividends,and share buy-backs provide valuation support until then.We maintain BUY and US$85 TP, implying 9.5x CY25 P/E.

• Miniso (MNSO) reported C1Q24 revenue in-line with our estimate/consensus. Non-GAAP NI beat our estimate/consensus by 4.2%/2.6%, mainly due to better gross margin from IP sales.
• Company cited pressure on profits in C2Q24 due to store expansion, yet we still believe MNSO can maintain an OPM of 20% for entire 2024
• We maintain a BUY rating on the stock and maintain TP at US$34/ADS

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

• We notice a pickup in consumer acceptance of instrashopping, as result of COVID-cultivated behavior. We notice similar business model worked outside of China (Coupang) for densely populated urban upper-middle-class customers;
• Meituan’s launch of membership is a wise step towards strengthening user stickiness and emphasizing transaction soundness over impulsive buying. Meituan’s portfolio in food, dining, hotel & travel offer unparalleled value;
• We see Meituan’s success in Hong Kong honed a replicable business model targeting single and low priced segment. Consolation on a global scale now seems a possibility.

• Alibaba Group Holding (BABA US)‘s FQ4 announcement portrays a resilient comeback to growth, suggesting the past four years’ challenges barely impacted its dominance in Chinese e-commerce.
• However, a closer look beyond the surface of Alibaba Group Holding (9988 HK)‘s FQ4 results announcement reveals that little has actually changed in recent months.
• Taobao and Tmall face challenges in a tough, stagnant market; AIDC’s growth largely covers for other Alibaba units’ failings, while AliExpress’s expansion cuts into margins.

• Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
• There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
• Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

• Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
• If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
• We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• After a massive recent correction for HK stocks, we are more constructive on the names, and yields there look very attractive.

• Alibaba reported in-line revenue but disappointed adjusted net income for 4QFY24.
• Yet a closer look shows strong core Taobao/Tmall performance was offset by higher-than-expected losses incurred by peripheral businesses.
• We remain convinced BABA is on track to turn around and an earnings upgrade cycle is one or two quarters away. We are buyer at this price.

• The slowdown in Chinese retail sales of apparel seems to have been factored into Vipshop Holdings (VIPS US) 1Q 2024 revenue growth expectations whilst bottom-line is supported by margin expansion.
• With net cash at ~40% of its market cap, the share price should be supported by the ongoing share repurchase program and its inaugural annual dividend policy.
• Its 6.6x NTM PE ratio (~4x ex-cash) seems extremely attractive for a highly cash-generative business set to (conservatively) grow earnings at high-single-digits whilst buying back shares and paying dividends.

• Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.
• Sunshine Lake Pharma’s pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.
• Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.

• Stellantis, the European automotive group, unveiled plans to distribute EVs made by Zhejiang Leapmotor Technology (9863 HK) across Europe, India, Asia Pacific, MEA, and South America via a 51/49 JV.
• This could help  Leapmotor (9863 HK) leapfrog regulatory hurdles and hasten access to EV markets globally by leveraging Stellantis NV (STLA IM) ‘s distribution network and manufacturing facilities.
• Leapmotor could likely qualify and stand to benefit from Indian Government’s recently announced policy initiatives for budget EVs.

• Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO.
• Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.
• We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.

• Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
• In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
• We also provide an update on how the discounts of Naspers and Prosus have traded.

• Tencent reported a decent set of results for Q1 FY24. Revenue for the quarter was up 2.8% QoQ and 6.3% YoY, ahead of consensus estimates (2.3% & 5.9%).
• The gross margin came in at 53%, 3 percentage points ahead of consensus, and an increase of 7 percentage points on Q1 FY23.
• The gross margin for the Fintech and Business Services segment, which accounts for 33% of revenue, increased by 12 percentage points to 46% (consensus 42.6%).

• Customer management as the largest business began to increase compared to the past two stagnant quarters.
• We believe margin will continue to decline as the company turned its focus to growth.
• We conclude an upside of 41% for March 2025 based on peer companies’ P/S ratios.

• The operating margin in 1Q24 reached the highest since 2Q16, as the gross margins of all businesses improved.
• The growth rate of online advertising is high than our estimate, but the growth rate of FinTech is lower than our estimate.
• We believe there is still an upside of 9% and the price target will be HK$415 for the end of 2024.

• Tencent (700 HK) reported 1Q2024 results today. Both revenues and OP grew 6.3% and 30.0% YoY respectively and beat consensus estimates.
• Though domestic games revenues declined YoY, there were signs of recovery in Tencent’s gaming business. Online advertising saw strong growth despite 1Q being a seasonally weak quarter for Tencent.
• Tencent’s investments in high-margin products have helped boost the company’s margins across all business segments.

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• The final results for the June 2024 index rebal event will be confirmed after market close on Friday 17th May 2024.
• In this insight, we take a look at our latest flow expectations.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• The index changes and indicative weights for the June 2024 index rebal event will be announced after market close on Friday 17th May 2024.
• In this insight, we take a look at the potential index changes and our latest flow expectations.

• Cheerwin is a strong turnaround story with significant earnings growth in 2023 with solid dividend yield. It is the number one player in the inspect repellent sector in China. 
• Cheerwin’s current price is 79% lower than the IPO  price. However, Cheerwin’s shares are up 35% YTD, sharply outperforming Hang Seng index which is up 13.6% YTD.
• We found Cheerwin (6601 HK) using Smartkarma’s Smart Score Screener system. We used the following screening methodology: Market cap – More than $300 million Dividends = 5 only.

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
• Softbank Group

• While its share price has collapsed, China Tourism Group Duty Free (1880 HK) is still facing many challenges and uncertainties which render it unattractive at current level.
• Average duty free spending per customer in Hainan is 46% lower than the peak and 26% lower YoY in Mar 2024, and the downtrend looks to continue.
• The government’s efforts to strike down purchasing agents in Hainan duty free products and the island’s change to a duty-free zone are also negative developments.

• Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
• Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
• Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.

• ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
• Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
• The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed. 

• Cafe De Coral Holdings (341 HK) share price never really rebounded post COVID despite its operating numbers gradually improving. 
• Haidilao International Holding (6862 HK) share price has rallied along with the Hang Seng Index (HSI INDEX) and Hang Seng China Enterprises Index (HSCEI INDEX) but not Cafe de Coral.
• Recent profit alert that, excluding pandemic subsidies, the group’s net profit will rise 470% YoY. 

• The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
• We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
• At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

• The new energy vehicle producers’ ranks changed a lot in April.
• GAC began to sell batteries to outside new energy vehicle producers.
• Kuaishou’s GMV (Gross Merchandise Value) increased by 420% YoY during the Labor Day.

• Breton Technology (1884270D CH) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by CICC and CMB International.
• Breton Technology is a clean energy solution provider in China, focusing on the design, development and commercialization of engineering machinery powered by new energy sources. 
• Such engineering machinery includes battery-electric loaders and wide-body dump trucks, each offering a variety of payload and battery capacities. 

• The “Entrusted Management Agreement” indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and Shanghai Shyndec Pharmaceutical. 
• The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. 
• Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.

• Chongho Bridge (2314866D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
• Chongho Bridge (CB) is an integrated services provider to China’s rural population. It offers rural inclusive credit services, agricultural production services, rural consumer goods and rural clean energy services.
• In this note, we look at the firm’s past performance.

• We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
• Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
• Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK). 

• 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), Alps Logistics (9055 JP), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Southern Cross Media (SXL AU). 
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Alumina Ltd (AWC AU). 

• The National Health Commission and eight other departments issued “Opinions on strengthening the capacity building of critical care medical services”. New policy catalysts in the medical device sector arrives.
• Current valuations of weight-loss drug companies have “large bubble”, which have basically priced in all the potential of GLP-1s even based on optimistic assumptions. We advise investors to be rational.
• The price of core raw materials is showing a continuous upward trend, which will inevitably cause certain difficulties for Pientzehuang’s performance growth in 2024. Valuation has more downside ahead.

• The market is satisfied with BeiGene’s 24Q1 performance. The major reason for BeiGene to narrow net loss in 24Q1 was based on strong product revenue growth rather than cost control. 
• Given the varying pace of product promotion/R&D expenditure and the changes of product sales growth, BeiGene’s adjusted loss may achieve breakeven in a certain quarter of this year (e.g. 24Q4).
• BeiGene (6160 HK) is hard to cut costs largely. Sustained overall profitability may not be achieved until 2026 or 2027. But at least, we still see hope for a turnaround.

• China’s two national port companies China Merchants Port (144 HK) and Cosco Shipping Ports (1199 HK) have underperformed, but exports have picked up. We see an opportunity here.
• With a 9.2% increase in container throughput, CSPL even down by 4.8% YTD, underperformed CMPH by 12.9pp. There is room for it to catch up.
• CSPL is also cheaper at 7x and 6.3x PERs for the next two years, making it more attractive on a relative basis.

• We summarize our gleanings from the conference call with Dream International (1126 HK) to better understand growth opportunities and future expansion plans.
• The company is expanding in Indonesia to increase its capacity by 30 million USD ( over 830 million USD). (capacity utilization for FY23:83%).
• Trading at 4x FY24e PE, with an 11.4% dividend yield and a 15-year average ROE of 20%, this is a stock worth exploring. 

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 Jinmao Holdings
• Sunny Optical Technology Group
• Yuexiu Property

• Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
• The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
• Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.  

• Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
• The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). 
• There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   

• 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: HD Hyundai Marine Solution (443060 KS) and ZEEKR (ZK US) have strong IPO debuts.
• Event-Driven developments China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Yichang HEC Changjiang Pharma (1558 HK), CPMC Holdings (906 HK), Alps Logistics (9055 JP), Infocom Corp (4348 JP). 

• A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
• Net SOUTHBOUND buying was +HK11.3bn. Thursday saw a break of the SOUTHBOUND buying streak. 
• The big news in China markets this week was the idea that mainland investors through SOUTHBOUND would no longer be hit with a 20% w/h tax on dividends.

• 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 BUY RMB 4.8bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought Kweichow Moutai, banks, Haier Smarthome, etc.
• HUGE week in H vs A (since the 30 April close). This may be colouring foreigner activity in As quite a bit. 

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s buy streak was interrupted again this past week, but they still net bought, as did NORTHBOUND. HK stocks continued bouncing VERY hard. Hs outperformed As very strongly.
• As had a chance to catch up. Did not. Liquid Hs outperformed their As by 4.8% from 30-April through 10-May. Wide premia narrowed more than narrow premia.

• Back in September 2023, Jardine Matheson Holdings (JM SP) sold its 28.22% stake in Greatview Aseptic Packaging (468 HK) to Shandong Xinjufeng Technology Packaging (301296 CH) (XJF). 
• Then in November, XJF requisitioned an EGM to spill the board. At the EGM on the 26th January, not one of XJF’s five new proposed appointments were successful.
• XJF has now made a pre-conditional (various PRC approvals) voluntary general Offer at $2.65/share (best & final), contingent on a 50% acceptance hurdle.  Final/special dividends to be added.