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  111 Inc (YI US), Chindata Group (CD US), ENM Holdings (128 HK), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Kenedix Residential Investment (3278 JP), Penguin International (PBS SP), Challenger Technologies (CHLG SP). 

• Although WuXi XDC has financing needs, we’re more inclined to view this spin-off listing as another capital operation of WuXi AppTec/WuXi Bio, who may not want to take risks alone.
• Global ADC/broader bioconjugate market is at a nascent stage of development, with high R&D risks/commercialization uncertainties. We cannot guarantee whether WuXi XDC will maintain its industry-leading position in the future.
• Although high growth can bring good stories, we’re not sure how much actual market space WuXi XDC will have in the future,which is the key to determining the valuation ceiling.

• Guangdong Archealth Health Industry Group (GAHI HK) is looking to raise around US$100m in its upcoming Hong Kong IPO. The bookrunners on the deal are CICC and ABCI.
• Guangdong Archealth Health Industry Group (GAHI) is a digital health management provider.
• According to F&S, the firm ranked first in the weight management industry and first in the digital weight management industry in China as per 2022 sales.

• New Horizon Health reported a solid set of preliminary results for 1H2023
• We speak to the company’s management post result announcement to figure out the key drivers and summarize the key points in this note.
• The company upgraded its full year guidance and is on track to meet its long term target.

• We expect JDL to report C2Q23 revenue and non-IFRS net profit margin (1.5%) and 0.4ppts vs. consensus. We expect 2Q revenue (excl. Deppon) to grow 5%~ YoY .
• JDL is facing increasing competition from (1) the recent launch of Cainiao’s high-end delivery service, (2) improved ZTO service, and (2) Douyin’s actions to increasingly in-source logistics.
• We maintain JDL’s SELL rating but raise its TP to HK$ 9.4, as we expect JDL will lower staffing costs, and by reducing staff redundancy.

• In this insight, we conducted fundamental analysis on Wharf REIC .  It has a simple business model that it operates key malls in HK including Harbour City and Times Square
• Macro-Wise, despite Wharf REIC should be seeing a recovery trend in terms of retail sales, the weak Chinese economy could pose concern on Wharf REIC’s retail sales
• Wharf REIC is also facing several headwinds such as high interest cost and weak office market in Hong Kong.  We view the re-rating potential limited despite attractive valuation

• 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

• Founded in 2012, Unisound AI Technology is a Beijing-based pioneer in Artificial General Intelligence (AGI). The company offers easy-to-deploy AI products and solutions in China. 
• Unisound AI Technology seeks to raise capital for R&D activities, international expansion, and general working capital purposes. The company chose CICC and Haitong to tap capital markets with HK IPO. 
• I like growing brand recognition, in-house 60B-parameter LLM UniGPT, high growth in the Smart Life segment, and the opportunity to sell self-developed proprietary AI chips in China.

• We expect the 2Q23 online music revenue growth to be 34.4% YoY, driven by more promotions to drive up users’ retentions;
• We anticipate the 2Q23 social entertainment growth rate to be (12.9%) YoY, due to intense competition and strengthened regulatory in live streaming. 
• We expect TME’s 2Q23’s rev./non-GAAP net income to be (1.8%)/ (3.9%) vs cons. We maintain SELL because of continuous pressure from Bytedance’s Soda Music, Wechat Video Account and Kuaishou.

• We expect Atour to report 2Q23 revenue and non-GAAP NI at 94% YoY and 259% YoY, which is 22% and 20% above BBG consensus respectively. 
• We expect Atour’s RevPAR in 3Q23/2023 increase to 110%/114% of corresponding 2019 level from previous estimate at 105%/112%. 
• We maintain the stock as BUY rating, and maintain TP at US$35 because the operational gains has been mitigated by FX loss in terms of valuation

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. Central China Real Estate
2. Anton Oilfield
3. Seazen (Formerly Future Land)
4. Agung Podomoro Land
5. Hopson Development

and more…

• This morning (13 July), IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share.
• The Offer price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day. Evidently, there was news leakage.
• IMAX US holds  71.63% in IMAX China, therefore the blocking stake at the Schene Meeting is 2.837% of shares out. 

• Ant’s buyback valuation of $79bn is in line with market expectation
• While 40% loss is deep for the latest round investors, earlier investors are still in the money
• Alibaba is expected to record a profit of $18bn if it decided to join the buyback

• IMAX China Holding (1970 HK) disclosed a scheme privatisation offer from IMAX Corp (IMAX US) at HK$10.00 per share, a 39.5% premium to the undisturbed price (HK$7.17 on 10 July).
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• The offer price is final. While the offer price is light compared to peer multiples and historical share prices, the deal will likely succeed. 

• We estimate Baidu’s ads revenue growth in 2Q23 will be 10.8% YoY. We largely cut our forecast of 3Q23’s ads revenue growth from 14.7% to 7.1%.
• We lower Baidu’s core other revenue growth in 2Q23 from 18.0% to 9.0% YoY. Baidu’s smart transportation AI cloud business has been affected by the contraction in local government expenses.
• We expect Baidu’s 2Q23’s rev./non-GAAP net income to be (2.3%)/ (1.9%) vs cons, also cut the TP to $162, which implies 16.5X PE in 2023.

• Fenbi Ltd (2469 HK) announced after market today a very strong positive profit alert for 1H2023, with adjusted net profit up not less than 182% yoy.  
• As a reminder, share price was heavily sold off in June due to pre-IPO shareholders selling, as well as weak market sentiment, niche sector, and new stock (under researched).
• Even with the recent bounce back in share price with heavy volume, Fenbi is still very undervalued.

• On July 7, HKMA announced measures to ease property based lending. The major changes involve relaxation of LTVs, according to property values
• We see these policies target the up-graders and will support the residential market. Housing price has been on a decline trend since early 2022
• Residential developers are trading at attractive valuation.  In particular, we see a lot of upside for 17 HK NWD and 101 HK HLP

• Autostreets Development (AUTOSTR0 CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Citic Securities and Haitong International.
• Autostreets Development is China’s largest used vehicle transaction platform in terms of transaction volume in 2022, according to CIC. 
• In 2022, approximately 160,000 units of used vehicles were transacted through its transaction platform, with a market share of 12.6% among China’s used vehicle transaction platforms, as per the company. 

• A Review on Final Results Oriental Watch recently announced its earnings for the fiscal year, and the results were quite impressive.
• On June 20, 2023, the company reported a revenue of HKD3.7 billion and a net profit of HKD295 million.
• These figures surpassed our initial estimates of HKD3.

• In my previous insight Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV, I highlighted why one must explore the stock as a viable investment.
• NCAV (Net current asset value) in FY23 was 7.5 HKD/share ( Vs. current share price of 4.25 HKD/share), with net cash + ST/LT financial investments now at 9.7 HKD/share. 
• Absolute DPS ( dividend per share) was 35 cents representing a yield of 8.2% ( payout ratio of 55%). The trailing PE is 6.6x FY23. 

• InSilico ’s business model is more of AI-CXO + AI-SaaS, but hasn’t reached the stage of AI-biotech, considering its current revenue streams, which may lead to InSilico ultimately changing its positioning.
• The significance of pipeline lies in the need for InSilico to verify the effectiveness of AI platforms/algorithms/technology through successful product launch. However, valuation of InSilico could be different from biotech.
• AI pharmaceutical industry is at its infancy, which is a far cry from current levels of investment and expectations in the sector.We advise investors to be rational about this field.

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
• Central China Securities

• My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
• Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
• This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 

• Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
• The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
• The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  

• Three weeks ahead of the global launch of TMNT Mutant Mayhem momentum is building
• Google Trends searches reveal rising interest in both movies and toys
• Risk/Reward is still highly attractive, last time a TMNT movie was a success stock hit 4 HKD

• Ant Group Co. Ltd. has offered to buy back some shares at a whopping 70% discount to the unrealized valuation for its ill-fated IPO, shortly after regulators hit the fintech giant with an almost $1 billion fine.
• Ant Group announced Saturday that it had proposed to repurchase as much as 7.6% at a price that values the company at approximately 567 billion yuan ($78 billion).
• The offer represents a roughly 40% discount to the approximate 960 billion yuan figure achieved in Ant Group’s last fundraising round in 2018, and is around 70% cheaper than the 2.1 trillion yuan valuation touted in its planned 2020 IPO.

• After analyzing J&T’s Chinese and SE Asian operations in previous insights, in this note we turn to the company’s ‘Others’ segment, made up of New Markets and X-Border logistics
• Compared to China and SE Asia, J&T’s New Markets and X-Border logistics business lines are small (just 11% of 2022 Revenue) but could offer attractive growth in the medium-term
• We conclude this insight with a preliminary sum-of-parts valuation of J&T as a whole. Based on available information, our initial estimate of J&T’s EV is US$8.6 bn (pre-IPO)

• BeiGene and Novartis mutually terminate the Option Agreement on ociperlimab. Our interpretation is Novartis may think its clinical data wouldn’t meet expectations, and is therefore unwilling to take the risk.
• Theoretically, BeiGene still has the possibility of creating miracles to turn things around, but based on the current situation, the risk of TIGIT project failure is already very high.
• We suggest that investors can reduce the position of BeiGene in advance or even consider offload entirely (In case its stock price falls due to unsatisfactory clinical data in 23H2).

• Syngenta Group (1844795D CH) is looking to raise around US$9.2bn in its upcoming China A-share IPO.
• Syngenta Group (Syngenta) is one of the largest agricultural firms globally, developing, producing and commercializing a portfolio of crop protection, seeds, crop nutrition products.
• In this note, we will talk about the not so positive aspects of the deal.

• We expect that Tencent’s 2Q23’s rev./non-IFRS net income to be 0.2%/5.2% vs cons. 
• We raise Tencent’s ads growth in 2Q23 from 18.2% to 28.4% YoY per our recent checks with ads agencies. 
• There is an increasing possibility that “DNF Mobile” could be launched in the next several quarters. We raise the TP to $450, which implies 20.1X PE in 2023.

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.

• Agung Podomoro Land
• Shui On Land

• One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
• Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
• The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.

• Kelun-Biotech raised HKD 1,259m (USD 161m) from its global offering and will list on the Hong Kong Stock Exchange on Tuesday, July 10th.
• In our previous note, we looked at the company’s business lines of ADC products. We were of the view that the IPO is fairly priced, at best.
• In this note, we provide an update for the IPO before trading debut.

• China Merchants Capital (CMC) disclosed a competing preliminary non-binding proposal to acquire Chindata Group (CD US) at US$9.20 per ADS, a 15.0% premium to Bain Capital’s US$8.00 per ADS offer.
• Astonishingly, Chindata did not publicly disclose the CMC offer, which was sent to the special committee on 9 June, i.e., 34 days ago.
• CMC must get Bain Capital’s support due to its 92.34% voting rights. The presence of a credible competing proposal will require Bain Capital to match CMC’s offer.

• We expect BABA to report C2Q23 (F1Q24) top-line and non-IFRS net income 2% and 21.5% vs. consensus. For C2Q23, we raised (1) Taobao/Tmall GMV/CMR estimates due to return of merchants, 
• (2) International Commerce and Cainiao revenue estimates, and (3) EBITA margin estimates for all groups except cloud. We maintain our BUY rating and raise TP to US$ 116 TP, 
• Due to 1) merchants return to Taobao/Tmall;  2) independent listing of groups; and 3) improved incentive structure after the organizational change.

• The mechanism of NASH has not yet been accurately determined. Among the major players, FDA has postponed the approval of OCA (FXR) for NASH. THR-β is currently the most promising. 
• HighTide claims that HTD1801 is able to achieve the goal of improving effectiveness and reducing toxicity. However, HTD1801 hasn’t reached pathological endpoints. We’ll have to wait for future clinical data.
• This Company actually has high risk due to cash shortage and uncertain R&D progress, which could lead to lower-than-expected stock price performance. We are conservative about HighTide based on analysis.

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 SCE
• Hopson Development
• Reliance Industries
• Sino-Ocean Service
• Vedanta Resources

• PDD delivered an all-around beat in the previous quarter and the company saw clear recovery trends.
• Revenue increased in the quarter and contributed to a total of RMB37.6 billion.
• PDD has also launched its electronic shopping season and invested millions of RMB for promoting universal and high-quality access to reading.

• Syngenta Group (1844795D CH) is looking to raise around US$9.2bn in its upcoming China A-share IPO.
• Syngenta Group (Syngenta) is one of the largest agricultural firms globally, developing, producing and commercializing a portfolio of crop protection, seeds, crop nutrition products.
• In this note, we will talk about the positive aspects of the deal.

• Unisound AI Technology (1053075D CH) is looking to raise at least US$300m in its upcoming HK IPO. The deal will be run by CICC and Haitong International.
• The firm offers AI solutions centered around its computing cluster, scheduling computing power for machine learning tasks. It provides support to the development, optimization and commercialization of frontier AI models. 
• Its computing cluster currently harbors a computing power of over 200 peta floating point operations per second (PFLOPS), and a storage capacity of over 1.6 petabytes (PB). 

• China’s regulators on Friday imposed Ant Financial Services Group (6688 HK) with a fine of RMB 7.12bn. A day later, Ant Group unveiled a share buyback program worth $6bn.
• The last time media created a positive narrative around Ant Group was in January 2023 when Jack Ma relinquished control of the company.
• However, the media excitement was short-lived as Alibaba Group Holding (9988 HK)‘s share price quickly resumed a downward trend after rising by around 22%.

• CDF’s 1H23 preliminary results suggest that business recovery remains on track. Voices of bottom-fishing are getting louder as free fall in its share price already erased 50% market cap YTD.
• We believe the dynamics have fundamentally changed compared to three years ago when CDF was the stock market darling. Investors need be aware of the anchoring effect in making decisions.
• Moderate growth, pressured margin and contracted valuation multiple will be the new reality facing investors of the stock in our view. Wait for better entry point.

• Meituan’s food delivery has taken 20% of the Hong Kong market share in its first month’s operations.
• The authorities suggests that they will not further restrict financial apps such as AliPay of Ant Group.
• Tencent’s WeChat Pay charged a money transfer commission, but it exempted university campus the next day.

• 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

• We cut our revenue estimations for 2H23, mainly due to increased uncertainty surrounding the launch of “Uma Musume.” 
• We also lower our estimations for live streaming due to concerns about macro factors. We slightly raise our estimations for BILI’s advertising business…
• …as we anticipate that it will benefit from gaming and e-commerce. Our rev./non-GAAP net income are 1.0% and (6.4%) vs cons in 2Q23. Cut TP to $12.3, maintaining “Sell” rating.

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
• Tata Motors ADR
• Vedanta Resources
• Yanlord Land

• VBP would continue to have an impact on Hansoh’s generic drug business in 2023.Such negative impact would gradually fade from 2024 as big varieties have all been included in VBP.
• The core difference between Hansoh and Hengrui is that someone similar to Zhang Lianshan’s role arrived late, resulting in a slower start and weaker overall framework for innovation drug business.
• Hansoh Pharmaceutical (3692 HK) is still in the process of business transformation. Before the harvest time of innovative drug pipeline comes, Hansoh’s valuation growth would still be a long-term story.

• Xiamen International Investment (1567256D HK) is looking to raise up to US$1.3bn in its upcoming HK IPO. The deal will be run by CICC, Citic Securities, Huatai and Industrial Securities.
• Xiamen International Investment (XII) is an integrated financial services group based in China’s Greater Bay Area. 
• The Group has two commercial banks headquartered in Hong Kong and Macau, respectively and operates through its two banks Chiyu Banking Corporation (CYB) and Luso International Banking (LIB).

• The Hong Kong Hang Seng Index (HSI INDEX) has been in a downtrend since January 2018. Long-term direction unclear, but the WEEKLY period is mildly OVERSOLD, it may bounce soon.
• The case for a LONG trade is valid if the market does not fall > 2 consecutive weeks from June 30th’s Close (18916.43). High-probability LONG trades from 17786.
• SHORT trade strategy possible but requires patience: if the market rises, it could rise for 2-3 weeks, based on MRM’s pattern readings. Better wait and short that scenario, not earlier.

• NHSA released the new NRDL negotiation rules of innovative drugs. Some adjustments will bring certain benefits to innovative drugs, but the overall impact will not be as good as expected. 
• Beijing announced that 16 assisted reproduction technologies will be covered by medical insurance reimbursement from July 1. This policy should benefit companies in the assisted reproduction industry chain.
• We analyzed the key flaws of Kintor Pharmaceutical (9939 HK), and we remain skeptical about this company.

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. Greentown China
2. First Pacific Co
3. Vedanta Resources
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

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. Greentown China
2. First Pacific Co
3. Vedanta Resources
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

• RoboSense Technology, one of the leading providers of LiDAR sensor systems and AI perception software, filed for a Hong Kong IPO with J.P. Morgan and China Renaissance leading the offering.
• RoboSense Technology is a high-growth mass producer of LiDAR products with mounting operating losses. The company is growing revenue in double digits and still has heavy losses.  
• I believe RoboSense Technology IPO is risky due to the company’s high cash burn rate, fierce competition, pricing pressure and unhealthy fundamentals. Moreover, LiDAR stocks continue to underperform.