China

• New World Development (17 HK) nudges an all-time low P/B and implied stub; as the privatisation of NWS Holdings (659 HK) moves gradually forward. 
• Preceding my comments on NWD/NWS are the current setup/unwind tables for Asia-Pacific Holdcos
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• J&T Global Express (1936374D CH), a leading express delivery business in Southeast Asia and China, is pre-marketing a HKEx IPO to raise US$500 million, according to press reports.   
• We previously discussed the IPO in J&T Global Express IPO: The Bull Case and J&T Global Express IPO: The Bear Case. 
• The PHIP filing favours the bull case due to a return to organic growth across the main geographies, maiden profitability, stabilization in contract liabilities and declining FCF burn.

We view China Oil and Gas (COG) as “Medium Risk” on the LARA scale. This takes into account: [1] regulatory risk, with the company having experienced over three years of delays in cost pass-throughs for tariffs in Qinghai (albeit these have since been resolved); [2] COG’s exposure to oil price volatility in the small upstream oil & gas segment; and [3] the company’s track record of aggressive debt-funded acquisitions, albeit management has said that it is not keen on increasing indebtedness for expansion or acquisitions.

COG’s main asset is its 51% interest in downstream gas provider China City Natural Gas, with the remaining 49% held by Kunlun Energy, a subsidiary of SOE PetroChina. Hence, cash leakage from dividends is significant. We believe the relationship with Kunlun helps secure COG’s gas supply and improves the company’s ability to obtain gas distribution concessions. In addition, PetroChina’s parent, China National Petroleum Corporation, previously provided financing to CCNG at competitive rates.

Our Credit Bias on COG is “Stable”, given the company’s solid revenue growth from natural gas sales and distribution, despite volatilities associated with the upstream oil exploitation and production business. COG has historically maintained a sound liquidity profile and reasonable access to funding. That said, we remain cautious over the financial performance of Shandong Shengli (for which COG is the single largest shareholder at 22%). This is as COG has provided guarantees for Shengli’s banking facilities, which could impact COG’s credit profile.  

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

• Concord Healthcare Group (CHG HK)’s hospital business is not strong enough to contribute strong performance consistently, leading to unsatisfactory profit margin considering its weak hospital operation and management capability.
• The network business could face some legal risks based on our analysis. In the context of anti-corruption campaign in China healthcare, Concord’s business and patients flow could be affected.
• Together with potential policy risks such as DRGs/centralized procurement, we tend to be conservative about Concord’s outlook. In terms of valuation, Concord’s valuation should be lower than Inkon Life Technology.

• CALB Group (3931 HK) raised around US$1.2bn in its Hong Kong IPO in Oct 2022. The lockup on its pre-IPO shareholders will expire tomorrow.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products in China.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Topsports International Holdin (6110 HK) is a pure-play on Nike and Adidas retail sales in China, as it is a leading retail partner of Nike and Adidas in China.
• Nike’s Greater China sales grew 12% yoy during the most recent quarter.  During the earnings call, Nike management was bullish on the prospects of the China business.
• The company currently trades at 13x forward PE, with a forward dividend yielf of 7%. 

• Cainiao Smart Logistics (1437124D HK) has filed an application proof to list on the HKEX (388 HK) and could raise US$1bn at a valuation between US$15bn-20bn.
• Cainiao Smart Logistics (1437124D HK) could get Fast Entry to the HSCI and be included in Southbound Stock Connect once the price stabilisation period is complete.
• Inclusion in other indices will take longer with the highest probability of index inclusion in June. Earlier inclusion will depend on the IPO timing, size and allocation to strategic/cornerstone investors.

• Global logistics and express delivery service provider J&T Express’ HKEx IPO application has been approved and this insight focuses on new data points from the PHIP filings.
• SEA segment’s GPM has further declined during 1H2023, however, gross losses of the other two segments have declined significantly resulting in GPM for the company.
• Our analysis suggests that with falling SEA margins, J&T Global Express (1936374D CH) may not be able to generate operating profits in the medium-term.

• Beijing UBOX Online Technology (1741985D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Beijing UBOX Online Technology (UBOX) is an unmanned retail operator (vending machine) in China.
• We had looked at its past performance earlier. In this note, we look at the updates from its recently filed PHIP. 

• In this insight we focus on J&T’s improved H123 performance in China and SE Asia
• How did the company achieve these gains? And do the improvements appear sustainable?
• We conclude with an updated estimate of J&T’s Enterprise Value: US$9.1 Bn

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• After going ex-dividend in June, Water Oasis (1161 HK) corrected and has remained rangebound at the 1.35-1.45 HKD/levels due to negative sentiment on HK/China.
• We expect FY23 results to be reported in late November/early December. We expect an increase of 19%/85%  in Revenue/PAT with a 16-cent dividend for FY23 (11.4% dividend yield).
• Stock trades at 7.6x/6.2x PE FY23e/24e, a dividend yield of 11.4%/14% FY23e/24e with 25% of the market capitalization in cash. 

• Malo’s revenue had good growth, but revenue scale is still small. At the current gross margin level, it would be difficult to generate decent profits considering the large SG&A expenses.
• Dental care expansion is difficult. Malo would face the challenging such as lack of high-quality dentists and centralized procurement. Both would drag down profits and cash flow.
• We are not optimistic about Malo’s share price performance after IPO. This industry’s profit mode is not mature. Most of chain dental services providers are still in cash-burning expansion stage.

• Luyuan Group, a pioneer in the e-bike industry in China, set terms for an upcoming IPO. The company offers ~106.7M shares at the expected price range of HK$6.00 to HK$8.00.
• The IPO price range implies a market cap of roughly HK$3B at the midpoint. Cornerstone investors have agreed to subscribe and purchase ~71% of the Offer Shares.
• Shares will begin trading on the HKSE next week. I believe the IPO will be priced at the low end of the range as e-bikes sales have slowed in Asia. 

• J&T Global Express, a global logistics service provider, is looking to raise about US$500m in its upcoming 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 in our earlier notes. In this note we will look at its PHIP updates.

• Last week, the Cyberspace Administration of China (CAC) put forth a proposal to relax certain stringent regulations concerning the transfer of sensitive data to foreign countries.
• This could be advantageous for Alibaba Group Holding (9988 HK)‘s Cloud business, especially as a potential candidate for an IPO following the recent IPO filing of the logistics arm, Cainiao.
• Despite improved regulations, concerns about stability, leadership, and financial performance pose hurdles for Alibaba Cloud’s IPO.

• With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons
• The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs
• Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs

• Yichang HEC Changjiang Pharma (1558 HK) reported a whopping 148% YoY growth in revenue to RMB3,209M in 1H23. Net profit rebounded to RMB3,209M from a loss of RMB33M in 1H22.
• In H1 2023, revenue from Kewei, approved for first-line treatment of influenza, jumped 186% YoY to RMB2,881M, representing ~90% of total revenue, mainly due to spiking flu cases in China.
• Recently, the company obtained approval for premixed Protamine human insulin injection and submitted marketing application for its self-developed product, Yiqibuvir for the treatment of chronic Hepatitis C in China.

• The Brand-Spanking New (8 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 47 Trade Recommendations.
• The last 7 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%.

• Business model: how does CaiNiao get paid, and by whom, and for what?
• Key relationships with parent Alibaba and with China’s listed express companies
• Differentiators: what makes CaiNiao different from other e-comm logistics names?

• Several provinces have successively introduced policies to encourage childbirth. Increasing medical insurance reimbursement and special additional deduction standards for personal income tax would be the common direction. 
• This year is mainly a period of intensive introduction of relevant fertility support policies, so the impact on company’s performance is limited.The focus would be on next year’s financial results.
• We analyzed the performance of Livzon Pharmaceutical Group In (000513 CH),BGI Genomics (300676 CH) and Jinxin Fertility Group (1951 HK) based on their 23H1 reports, and adjusted our forecast accordingly.

• The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
• 2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
• There should not be concerns about CCCC’s contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.

• Shineway’s 23H1 performance exceeded expectations. High growth of injection products/TCM formula granules was commendable.But as pandemic is under control, sales of Shineway’s respiratory system prescription medications would decrease in 23H2.
• The national VBP of TCM formula granules and the anti-corruption campaign in 23H2 could be the short-term headwinds to Shineway’s performance, which could lead to lower-than-expected 23H2 performance growth. 
• China’s favorable policies will provide strong support for the development of TCM industry. Shineway’s TCM formula granules business would have outstanding future growth. So, we’re optimistic about Shineway’s long-term outlook.  

• 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  Kokusai Electric (6525 JP), Doosan Robotics (454910 KS), Seoul Guarantee Insurance (031210 KS), Cainiao Smart Logistics (1437124D HK), J&T Global Express (1936374D CH),VNG (VinaGame) (VNG US) IPOs. 
• Event-Driven developments – Keiyo Co Ltd (8168 JP), System Information (3677 JP), Toyo Construction (1890 JP), IMAX China Holding (1970 HK), Nws Holdings (659 HK), Symbio Holdings (SYM AU). 

• 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 – Keiyo Co Ltd (8168 JP), 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), IMAX China Holding (1970 HK), JSR Corp (4185 JP). 
• Lowest spreads  Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), Celltrion Healthcare (091990 KS), Seiko Pmc Corp (4963 JP). 

• Haitong International Securities Group (665 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 27 September. 
• Bloomberg reported that Haitong Securities Co Ltd (H) (6837 HK), the controlling shareholder, plans to buy the remainder of Haitong International to stem its losses.
• Privatisation through a Bermuda scheme involves the headcount test, so a decent premium is required – privatisation precedents suggest HK$1.08-1.13 per share offer (52%-59% premium to last close). 

• This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables+charts (please play with them!) and we welcome feedback. This 4-day week saw HKD 14.0bn+ of net buying. That makes 11 weeks of net inflows.

• This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• Please play with nifty interactive tables+charts. We welcome feedback. This 4-day week saw RMB 17.5bn+ of net selling. Back to the trenches!

• We talk about what we see and hear here on the ground, that the company may not mention in its prospectus.
• We believe Cainiao has the ambition to take the whole logistics chain from retailers’ doors to shoppers’ doors since the company’s inception.
• We also believe Cainiao has been trying to take competitors’ market share by taking their client lists.

• We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.
• While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.
• Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.  

• Sonoscape maintained strong growth momentum in 23H1. Profit margin further improved. The Company has entered a stage where scale effect has emerged. However, declining contract liability balance raised our concern.
• Japanese companies setting up factories in China would shake competitive landscape of the domestic market. The anti-corruption campaign could lead to “unexpected impact” on performance in 23H2. 
• We lowered 2023 revenue forecast to RMB2 billion. After negative factors are fully priced in, share price would rebound. 

• In an updated HKEX filing posted on September 28th, Lalatech disclosed H123 financial results
• Solid Revenue growth plus sharp expense reductions led to +28 ppt OP margin expansion
• Is this progress sustainable, defendable? Lalatech management needs to explain gains

• Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Cainiao Smart Logistics finally set the ball rollling for Alibaba (ADR) (BABA US)‘s restrucuting, by filing for an HK listing
• In the placement space, Star Entertainment Group (SGR AU) was back in the market again, while Zhejiang Leapmotor Technologie (9863 HK) and DPC Dash (1405 HK) came of lock-ups.

• We have discovered something interesting from the innovative drug evaluations disclosed by the NMPA over the years. It’s recommended to establish rational expectations for the investment return of biopharmaceutical industry.
• We analyzed the different situations faced by Biotech in IPO/M&A process, so as to help investors make rational judgments. R&D team is likely to be cut regardless of the circumstances.
• We updated views on Huadong. Its old businesses dragged down valuation. It may need to wait until Huadong delivers better-than-expected sales/profit growth in weight-loss management business before further boosting valuation.

• China just announced game approval for September batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Neither Tencent or Netease received approval for any game. Same thing happened for July batch.

• The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
• SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
• SMIC’s accomplishment is not reflected in its share price which lies midways between 52 week highs & lows

• After a heavy decline in ownership between 2016 and 2020, active Asia Ex-Japan managers are re-engaging with Baidu Inc.
• Ownership levels are at 4-year highs, with Baidu one of the key beneficiaries of manager rotation this year.
• Baidu is the 3rd largest holding in the Communication Services sector, but there a plenty of funds with a history of ownership who remain on the sidelines for now.

• Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading. 
• Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
• Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade. 

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. Vedanta Resources
2. Tata Steel Ltd
3. JSW Steel Ltd
4. China Jinmao Holdings
5. Geely Auto

and more…

• 4Paradigm, a self-developed AI platform and scenario-specific AI applications provider, has completed an IPO and raised net proceeds of ~HK$836M, excluding the over-allotment option. 
• Founder-Led AI unicorn priced its IPO at the bottom end of the range at HK$55.60 per share. Cornerstone investors agreed to purchase ~13.6M H shares at the IPO price. 
• I like the company’s leadership position in China’s fastest-growing decision-making AI market, large TAM for their enterprise-grade generative AI offering SageGPT and top-tier VC investors. 

• Shiyue Daotian (1892269D CH) is looking to raise up to US$108m in its Hong Kong IPO, after downsizing from an earlier reported float of US$200m.
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
• In our previous notes, we covered the company’s performance. In this note, we will cover the firm’s PHIP updates and share our thoughts on valuation.

• EC Healthcare (2138 HK) reported record high revenue of HK$3.9B in FY23 and started FY24 on a strong note, with Q1FY24 revenue increasing 23% YoY, driven by medical services segment.
• Cost pressure is negatively impacting the bottom line. The company is reporting decelerating EBITDA and net profit margins since FY20. ROE deteriorated to 4.5% in FY23 from 33% in FY19.
• The company is well-positioned to see turnaround in profitability with the resumption of Mainland China visitors in Hong Kong providing impetus to high margin earning aesthetic business and cost optimization.

• China Petroleum & Chemical Corp., the state-owned energy giant known as Sinopec, is making a bigger push into a renewable energy generated by heat within the earth as the country looks to diversify its sources of green energy.
• Sinopec’s push could serve as a catalyst for fast-tracking the exploration and use of geothermal energy, and spur the development of related technologies in the country, experts said.
• The company said on social media on Sept. 14 that it was expecting a “major development” in its geothermal heating segment and that it was on track to expand its service to more than 60 cities in over 10 regions in China by the end of the year.

• Huawei Technologies Co. Ltd. launched a line of new products this week, including a tablet and smart TV, powered by self-developed chips, in its latest show of semiconductor self-sufficiency in the face of U.S. sanctions.
• The fall season launch event on Monday came a month after the tech giant made headlines with the rollout of its new flagship smartphone the Mate 60 Pro — a handset using Huawei’s own Kirin 9000s chip that reviewers claimed can rival 5G speeds.
• During the launch event, the head of Huawei’s consumer division, Richard Yu, spent much of his time on stage measuring the company’s new MatePad Pro tablet against Apple’s iPad Pro.

• Hengan International Group (1044 HK) and Vinda International (3331 HK) are both market leaders in China’s personal care industry.
• Hengan’s operations have greater exposure to sanitary napkins and diapers; whereas tissues account for 83% of Vinda’s revenue. Both companies have been impacted by an increase in wood pulp prices.
• Hengan is trading cheap; but Vinda’s bottom line is forecast to return to its glory days. Plus rumours of a possible takeover of Vinda continue to do the rounds. 

• Cainiao Smart Logistics, Alibaba Group Holding (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 this note, we talk about the not-so-positive aspects of the deal.

• Haitong International Securities Group (665 HK) (HITSEC) is suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
• The rumour doing the rounds is that Haitong Securities Co Ltd (A) (600837 CH) (HSC) may take private its 73.4%-held Hong Kong-listed investment banking unit.
• HITSEC’s share performance since 1Q18 has been tragic. Financials have been dire since 2H20.  But expect a punchy premium if HTS does seek to take HITSEC private. 

• Cainiao Smart Logistics ,  Alibaba Group Holding (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 this note, we talk about the positive aspects of the deal.

• Alibaba (ADR) (BABA US)‘s logistics arm, Cainiao Smart Logistics (1437124D HK), filed for an IPO with HKEX yesterday, aiming to raise $1bn to $2bn.
• Although efficient, Cainiao may face business challenges, as the majority of logistics costs and revenues stem from services outsourced to logistics partners.
• Despite the proposed IPO, we believe that Cainiao will always operate in the shadow of Alibaba’s primary e-commerce business.

• Since my bearish insight on August 11 (Li Ning (2331 HK):  Low Quality Earnings Beat), Li Ning’s share price has declined by 27% in less than 2 months.
• Anta’s share price on the other hand has been flat during the same time frame (Anta Sports (2020 HK):  Most Resilient In Industry Down-Cycles).
• In this insight, we look at if there are now any positive catalysts on the name, given the steep share price decline.

• 4Paradigm has priced its IPO at HK$55.60 per share, at the bottom end of the indicative IPO price range of HK$55.6-61.16 per share and raised net proceeds of HK$835.5m.
• The HK offering and the international offering of the company were oversubscribed by 11.4x and 1.57x respectively implying very moderate demand for the company’s shares.
• Though priced at the bottom of the indicative IPO price range, our analysis suggests that 4Paradigm’s IPO is still expensive.

• HKEX (388 HK) announced strong results, defying some worsening trends in volume, new listings, with quarterly profit growth rising from 11% to 28% to 34% YoY from 4Q22 to 2Q23
• Cost controls have been key to 31% 1H23 profit growth, with 0% growth depreciation, amortization, financing costs, and taxation, which can continue to support profit delta
• Revenue growth of 18-19% YoY in each of the past 2 quarters is partly driven by new revenue streams, which can offset some weaknesses in traditional metrics

• 4Paradigm (6682 HK) raised around US$131m in its Hong Kong IPO. 
• 4P is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC. 
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

• MedSci’s all three businesses are targeting B-end customers (pharmaceutical and medical device companies) to generate revenue. In the context of VBP and anti-corruption campaign, B-end customers do have relevant needs.
• However, the binding between MedSci and hospitals isn’t deep, which would lead to MedSci being unable to grasp core medical resources, with weak bargaining power in front of B-end customers.
• Since the initiative is in the hands of the other parties not in MedSci, MedSci’s revenue growth/scale could be much lower-than-expected. This would suppress valuation and stock price performance.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Yantai North Andre Juice H (2218 HK).

• Because of significant business overlap, CK Infrastructure Holdings (1038 HK) looks very similar to Power Assets Holdings (6 HK). And CKI is coming up cheap on my monitor versus PAH. 
• Preceding my comments on CKI/PAH are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Tian Tu Capital (1390587D CH) is looking to raise up to US$253m in its Hong Kong IPO.
• Tian Tu Capital (TTC) is a private equity/venture capital investor and fund manager with a focus on Chinese consumer brands and companies.
• In this note, we will look at the updates since our last note and share our thoughts on valuation.

• Kanzhun or Boss Zhipin, is the largest online recruiting platform for white collar workers.
• Users exceeded servers’ capacity for the third time this year.
• The positive signal is that recruiters began to grow in 2Q23.

• JPEX may be the biggest financial fraud in Hong Kong’s history, impacting government’s ambition to become a global centre for virtual assets
• SFC appeared to have no direct jurisdiction and powerless in the protection of investors in the JPEX case
• Web 3.0 and Virtual Assets are rapidly evolving, regulators may need to take a more dynamic approach in regulating such activities

• Gree Electric Appliances (000651 CH) trades at the lowest valuation multiple among the three major home appliance companies in China, at 7x forward PE and 7% forward yield.
• Investment case rests on stable earnings growth and high dividend payout and yield, which works well in a low interest rate environment in China.
• Resiliency of earnings for Gree is under-appreciated by the market, making rerating possible.

• Onewo (2602 HK) (OST) had raised around US$730m in its Hong Kong IPO in Sep 2022. Its one-year lockup is set to expire soon.
• OST is a property management service provider in China, primarily owned by China Vanke (H) (2202 HK).
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Cosco Shipping Energy Transportation (1138 HK) has rallied sharply on strong earnings recovery, but this is too excessive. We think unrealistic expectation has been built on 2H23 earnings.
• Over the last three months, the spot VLCC rate has collapsed by 90%, indicating a weakened demand outlook. The resilient share price has clearly not yet factored in this movement. 
• The recent surge in crude oil is driven by supply, not demand, factors. This has led to a 14% increase in bunker price which will heighten CSET’s fuel bill.  

• The reason why there are many doubts about Sipai is that its Specialty Pharmacy Business accounts for dominant proportion of total revenue but is almost difficult to make a profit.
• Sipai’s SMO business revenue will be difficult to grow at scale due to industry characteristics and the Health Insurance Services business is too small to bring substantial changes to performance.
• Sipai’s revenue structure/business model is difficult to improve in the short term. So it’s not surprising if Sipai suffers long-term losses. Its valuation should be lower than that of ClouDr.

• UMP Healthcare (722 HK) reported FY23 profits down 26% YoY at 55 mn HKD, impacted by preoperating expenses and an impairment cumulatively of 40 mn HKD. 
• A slow Q4 FY23 didn’t help either; revenues came in flat HoH instead of up 10% as our expectations and costs increased resulting in margin compression. 
• We believe the worst is behind us. The stock trades at 5.9x FY24 PE, with ~50% of the market cap in cash and an FY24 dividend yield of 8.5%.

• Tuhu Car (2007986D HK) raised around US$151m in its Hong Kong IPO.
• Tuhu is an integrated online and offline platform for automotive services in China.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

• Leapmotor (9863 HK) (LM) raised around US$800m in its Hong Kong IPO. The stock was listed in Sep 2022, its lockup on pre-IPO investors will expire on 29th Sep 2023.
• LM is a smart EV company based in China, founded in 2015.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• August outbound travel activity surged against easy 2022 comps, but offered no surprises
• The pace of outbound capacity rebuild slowed in August — what do airlines see ahead?
• Is there really “pent-up” tourism demand among Chinese consumers? We don’t think so

• Fee income is down 33% in the most recent quarter which may have prompted the bank to realize gains up 63% in the period to preserve profit growth
• Quality of earnings is not strong, with more than half of the bank’s pre-tax income delta driven by realized and unrealized gains, with credit cost decline the other key driver
• Loss NPLs are now 26% of total NPLs, from 11% a few year ago, suggesting worsening credit metrics. Declining credit costs seem at odds with economy, NPL distribution.

• Yuanxin’s financial performance has not improved and it is still in a state of continuous loss. At such low gross margin level, Yuanxin will find it difficult to make money.
• As China’s retail pharmacy market has entered a new era of integration as the industry growth is slowing down, the challenges Yuanxin has to face would be different from before.
• When the market pattern has been basically determined, Yuanxin has little chance to break through. Being acquired may be a better outcome. If IPO, valuation would be lower than peers.