China

• Topsports International Holdings (6110 HK) announced first half FY24 (fiscal year ending February) results last week, with net profit up 17% yoy.
• The company trades at a 7% dividend yield, backed by strong free cash flow.
• The stock is not only a yield play, but also a call option on the recovery of Nike and Adidas’ retail performance in China.

• In this insight we first consider which comparables are the most appropriate for CaiNiao
• We then discuss which valuation multiples make sense, plus some potential pitfalls 
• We believe CaiNiao and their bankers could justify a valuation up to 310 bn CNY

• 3Q23 is expected to achieve over 40% YoY growth. 2023 overall performance would be better than previous guidance- Revenue up 40+% YoY and adjusted net profit up about 45% YoY.
• With abundant cash flow, Gushengtang has increased dividend payouts and share buyback, indicating that the current stock price is undervalued and has not yet reflected its high growth expectations/healthy fundamentals.
• Gushengtang has cross-regional expansion capability. The “sustainability” + “high growth” of performance are worth noting. Depressed sentiment/complex external environment provide a good buying opportunity. Rebound in stock price is 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.

• Hopson Development

• In this month’s Tracker, we focus on a new price war among the ‘sort & transport’ names
• Q3 ASPs at these express companies fell by -12% Y/Y, and volume growth softened
• We believe margins are under increasing pressure in China’s mainstream express segment

• Weight loss and Alzheimer’s disease (AD) have been ranked among the top indications in the pharmaceutical history and are undeniable opportunities, but they are expected to generate different investment returns.
• We have noticed that some companies have started developing GLP-1 gene therapy. We would be cautious about this.
• Without strong fundamentals but is eager to go public on A-share market, AIM Vaccine (6660 HK) seems more enthusiastic about capital operations to make quick money.We consider this company risky.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• J&T Global Express (1519 HK) launched its US$500m HK IPO earlier in the week, with more than half of the Offer Shares going to its pre-IPO shareholders.
• It was a busy week for placements as well, with Liontown Resources (LTR AU)‘s stealing the spotlight with its equity/debt raising, after Albemarle withdrew its acquisition bid. 

• I tally 42 – 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 on Smartkarma this week:Lithium Power International (LPI AU)‘s Scheme. Vinda International (3331 HK) and Shinko Electric Industries (6967 JP) are in the cross hairs. 
• Key updates took place for: Origin Energy (ORG AU), Liontown Resources (LTR AU), Golden Eagle Energy (SMMT IJ) and Kenedix REITs.

• On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
• That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
• The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September. 

• According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again. 
• WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E.  Since 2016, the company has had an average PE of 11x. 
• The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited. 

• Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits. 
• Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%. 
• We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x. 

• In this insight, we summarized NWD’s FY2023 results.  We think the gearing and balance sheet, the biggest concern that market has, has been clearly addressed
• NWD has announced disposal of its stake in NWS, and will have more corporate actions to come.  The dividend expectation is reset
• We view most of the negatives are priced in at current valuation.  NWD is much better than a Chinese developer, and should not be trading at 0.19x PB

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Medco Energi
2. NagaCorp Ltd
3. China Vanke
4. Lippo Malls Indonesia Retail Trust
5. Tata Motors Ltd

and more…

• ZJLD Group (6979 HK) raised US$676m in its Hong Kong IPO in April 2023. Its six-month lockup will expire on 26th Oct 2023.
• ZJLD is a Chinese liquor company producing baijiu. As per F&S, the firm ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• There is little in the long-term and current figures of Bank Of China Ltd (H) (3988 HK) that leaves one assured of strength, stability, earnings power, and rather the opposite.
• Sharply expanding LDR is an increase in loans relative to deposits, and it tends to drive rising NIM. Where LDR expands (a lot) but NIM contracts, it is a concern.
• The bank appears to have a 2-3x higher base of credit costs/operating profit, with an ROE of 10% now vs 18% some years ago – with much more geopolitical risk.

• China Overseas Property (2669 HK) announced an acquisition on October 11 of a technical consultancy business from China State Construction Development (830 HK), a sister company. 
• The deal consideration will be not higher than HKD950m, which amounts to a PE ratio of 17.5x based on estimated 2023 earnings of the acquired business.
• In the current extremely shaky market, this kind of deal is very damaging to the market confidence of the stock.  Further derating is likely. 

• Macau’s mass GGR in 3Q23, including slots, was down just 6.7% on 3Q19 levels, but up 11.1% quarter-on-quarter.
• The shifting regulatory sands across the gaming landscape has resulted in VIP baccarat revenue accounting for 24% of GGR in 3Q23, down from 43.8% in 3Q19, and 64.6% in 3Q13.
• All concessionaires have been impacted by the collapse of the junket industry. But those who relied less on VIP flow have fared better on a comparative basis.

• Country Garden’s offshore debt default is happening. Its time to investor to revisit their position as restructuring is looming.
• Investors may not have any access to Country Garden’s onshore assets under its current offshore issuance structure.
• Evergrande’s offshore debt issuing structure could be more favourable compared to that of Country Garden in bankruptcy, depending on how the court interprets its Keepwell agreement.

• VISEN’s candidates are potential Best-In-Class or represent novel technologies, but they need to obtain doctors/authorities’ recognition.The competition pattern in growth hormone market would continue to deteriorate with increasing new entrants. 
• Once the growth hormone market is taken seriously by the regulatory authorities, the industry’s growth momentum would be challenged. The actual market space could be greatly reduced as a result.
• In front of competitors with strong sales system, commercialization is a big challenge for VISEN. The Company has yet to prove this.VBP news on rhGH would weigh on market sentiment.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Jinmao’s ESG as “Adequate”, in line with the company’s Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

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.

• Country Garden Holdings Co

• J&T Global Express (1519 HK) has announced the terms for its IPO. The company plans to issue 327m shares at HK$12 per share, which should raise proceeds of around US$501m.
• Though profitability of the company’s China business has improved, SEA margins continue to decline, hence our analysis suggests that J&T may not be able to generate profits in the near-term.
• Our SOTP valuation offers per share value of HK$9.48 per share which is at a 21% discount to the indicative IPO price suggesting J&T’s IPO is overvalued.

• Cainiao Smart Logistics (1437124D HK), a global leader in e-commerce logistics, has filed for a HKEx IPO to raise at least US$1 billion at a US$15-20 billion valuation. 
• According to CIC, Cainiao is the world’s leading cross-border e-commerce logistics company regarding parcel volume in 2022, with one of the world’s largest logistics networks in terms of geographic reach.
• The bull case rests on market share gains in China, improving performance of the largest business (international logistics), and rising gross and operating margins. 

• Xtep International (1368 HK) announced yesterday strong retail sales of high-teens growth in 3Q23.
• Though the growth was at the expense of slightly higher overall discounts of 25-30% off during the quarter.
• I prefer Anta over Xtep given higher visibility in Anta’s bottom line, as Xtep’s growth continues to be of lesser quality than Anta’s. 

• Anta Sports Products (2020 HK) achieved a decent 3Q23 with sales performance of major brands outperformed. With a low comparison base, 4Q23 sales will be even more impressive. 
• Indications are that sales for the Golden Week are satisfactory and “double-11” sales are optimistic. The acquisition of MAIA ACTIVE will further add to its product portfolio.
• Amer’s IPO is another catalyst and reports are that this has been filed in the US. Anta Sports’ stake may be valued at US$4bn, almost 12% of its market cap.

• Since IPO, stock price of Kelun-Biotech has performed quite well. Then, the Company’s valuation fluctuated. Investors seem not excited about Sichuan Kelun-Biotech Biopharm (6990 HK)’s 23H1 performance.
• We won’t expect too much on A166 in such a difficult competitive landscape.Commercialization of SKB264 is also challenging.It’s difficult to make up the story after A166/SKB264 begin to generate revenue.
• After out-licensing all valuable/core assets to Merck, together with the departure of core R&D personnel, Kelun-Biotech has been “hollowed out”.So, Kelun-Biotech’s value lies in short-term trade rather than long-term hold.

• Cainiao Smart Logistics, Alibaba Group Holding’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In our previous note we looked at the company’s past performance and undertook a peer comparison. In this note, we will talk about valuations.

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 Vanke
• NagaCorp Ltd
• Road King Infrastructure

• J&T Global Express (1936374D CH) is looking to raise HK$3.92bn (US$501m) in its IPO by selling 326.55m shares at HK$12/share, valuing the company at HK$105.75bn (US$13.52bn).
• J&T Global Express (1936374D CH) will not get Fast Entry to any indices but should be added to the HSCI in March. Inclusion to Southbound Stock Connect will take longer.
• Inclusion in other indices will take longer with the highest probability of index inclusion in September 2024. 

• Freshippo opened its first high-end supermarket, Premier, in Shanghai in September.
• We believe it is a good idea to take business from independent stores and small store chains.
• However, we do not believe those foreigner-oriented foods will be popular.

• J&T Global Express, a global logistics service provider, is looking to raise about US$500m in its  Hong Kong IPO.
• As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
• We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we talk about valuations.

• The Brand-Spanking New (9 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
• The last 9 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%.

• J&T Global Express (1519 HK), a leading express delivery business in Southeast Asia and China, has launched a HKEx IPO to raise US$500 million at a fixed price of HK$12.00.
• We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Updates Tilts the Balance Positively.
• The IPO price range is unattractive, with our SoTP valuation of HK$10.75 per share, 10% below the IPO price. Therefore, we would pass on the IPO.

• Cainiao Smart Logistics, Alibaba (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In our previous note we looked at the company’s past performance, in this note we will undertake a peer comparison.

• CDMO business usually have higher certainty/profit margin, and would be affected by the deterioration of overseas financing environment much later than CRO business. So, we prefer Asymchem to WuXi AppTec.
• Total market size of GLP-1s could exceed the sum of semaglutide + the vast majority of chronic disease drugs.No matter how GLP-1s expand indications, Asymchem has the opportunity to benefit.
• Asymchem needs to secure a large order related to GLP-1 drugs. Such big catalyst would certainly boost stock price, just like when COVID-19 order was received in November 2021.

• 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 – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Haitong International Securities Group (665 HK), Orecorp Ltd (ORR AU), Liontown Resources (LTR AU). 
• Owest spreads  Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Healthway Medical Corp (HMED SP). 

• In this insight we consider what it would take to pull our valuation up closer to US$13 bn
• Such a valuation would require solid revenue growth (+17-18% Y/Y or better), plus sustained progress on raising China and ‘Other’ EBITDA margins, which are currently negative
• Even with these optimistic assumptions, J&T would trade at 20x EV/2025 Adj EBITDA & at historical EV/Revenue multiples far above more profitable Chinese express names

• Market expectation for FY23/24 earnings of Sa Sa International Hldgs (178 HK) is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.
• Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months. 
• Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained. 

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.

• Anton Oilfield
• China Jinmao Holdings
• Pan Brothers
• Tata Motors ADR

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Due to IPO policy adjustment on SSE STAR Market, investment/financing for innovative drugs should continue to deteriorate.But the positive side is the innovative drug industry is emerging from the bottom.
• For the three hot fields in pharmaceutical industry (BsAb, ADC, CGT), we analyze their position and pecking order, which should be ADC > BsAb > CGT at the current stage.
• To better understand the investment logic of Fosun Pharmaceutical, it is necessary to fully understand the ecosystem/operational model of Fosun Group. Fosun Pharma’s role is just a “chess piece”.

• How did CaiNiao turn profitable? We answer with an analysis of the company’s P&L
• We also analyze CaiNiao’s Balance Sheet, Cash Flow statement, and Operating Stats
• We conclude with a list of ten questions we would put to CaiNiao management

• 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.
• In this insight, we take a look at our final expectations for the ADDs and DELs for the December 2023 and their flow implications.

• Accelerating the Offer timetable for NWS (659 HK) such that it closes before the dividend ex-date appeared stingy. But why pay dividends to shareholders that won’t hold the shares anymore?
• Those concerns have been put to rest with the despatch of NWS’ Composite Doc and New World (17 HK)‘s Circular, guaranteeing all shareholders the dividend, no matter the Offer outcome.
• The key risk now is NWD’s independent shareholder vote. On balance, this should get up.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Shui On Land
2. Seazen (Formerly Future Land)
3. Yuexiu Property
4. China Hongqiao
5. Longfor Properties

and more…

• Anta Sports Products (2020 HK) announced a set of strong 3Q23 operating data yesterday after market close.
• Both Anta and Fila brands performed well in a challenging macro environment in China in 3Q23, with 3Q22 being a high base. 
• Another bright spot is that other brands outside of Anta and Fila grew 45-50% yoy in 3Q23, with Descente up 40-45% yoy and Kolon up 65-70% yoy.