China

• Back on the 7th December, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management (known as the Five parties) at HK$1.88/share, a 24.5% premium to undisturbed. 
• Pre-Conditions were satisfied on the 15 December and the Composite Document was dispatched last night.
• The first close is the 24 February. Payment under the Offer is expected to be the 21 March.

• With a minimum acceptance hurdle of 50% and irrevocables of 60.14%, Acotec Scientific Holdings (6669 HK)‘s partial offer was always going to turn unconditional. 
• As per last night’s announcement, valid acceptances were 78.59%. The Offer has automatically been extended to the 9 February – this is the final close. Pro-ration is currently 82.7%.
• The minor quirk for partial Offers is that payment occurs within seven business days of the final close, not seven days from the Offer turning unconditional. 

• We have a positive view of Luxshare Precision Industry (002475 CH) and we believe its shares are well poised to outperform the market this year. 
• The recent production halts and protests at Foxconn’s Zhengzhou facility due to the overly stringent COVID measures has benefited Luxshare since Apple has given more orders to the company.
• We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023.

• SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
• There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
• Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

• On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
• We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
• With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

• As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
• The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
• Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share. 

• Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January. 
• It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG. 
• The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00. 

• Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
• The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
• The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.

• Back on the 14 May 2018, AAG Energy Holdings (2686 HK) announced a partial offer (50.5%) from Xinjiang Xintai Natural Gas (603393 CH) at HK$1.75/share. 
• This morning AAG was suspended pursuant to Hong Kong Code on Takeovers and Mergers.
• I expect a Scheme Offer from Xinjiang Xintai, which currently holds 56.98%. Potentially, Fosun (656 HK) has returned to the well.

• ZJLD Group (ZJLD HK) is looking to raise up to US$400m in its Hong Kong IPO. The deal will be run by Goldman Sachs and China Securities. 
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• As per F&S, the firm was the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales. 

• The spring coil centralized procurement of neuro-interventional consumables in 21 provinces led by Jilin is about to start. The result may be unexpected, which could cause uncertainty to NeuroTech’s performance.
• The promotion of import substitution in the field of neuro-intervention has not been as smooth as expected. If foreign brands win the bid, doctors would give priority to imported products.
• Since NeuroTech is in leading position among domestic peers and has core R&D capabilities in this industry, we think it still has investment value. The valuation is in comfortable range.

• On 26 January 2023 we published our bearish multi-month Nifty Index (NIFTY INDEX) outlook. For the RV player, the Hang Seng CEI (HSCEI) is likely to present material opportunity.
• At TMA we place tremendous emphasis on momentum confirmation. Currently, LT momentum triggers confirm a sustainable multi-month to multi-quarter uptrend in the HSCEI.
• Occasionally Fibonacci retracement levels, based off different portions of a trend, coincide. These create high probability targets. 9450/70 in the HSCEI is one such high probability target in 2023.

• Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
• Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
• That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.

• CanSino Biologics Inc (6185 HK) disclosed plans to publicly list in Switzerland, but the story of the fourth dose of COVID-19 vaccine is difficult to boost its stock price/valuation. 
• According to CanSino’s management,MCV4’s commercialization faced some challenges, which means 2022 annual performance may not be good. 2021 would probably be a high point of CanSino’s performance in recent years.
• Share price could pullback when 2022 annual report is released, which offers a better opportunity if investors want to go long, considering CanSino’s long-term investment value analyzed in prior insights. 

• China’s construction engineering industry declined more than expected in 2022
• The industry may reach the inflection point by the end of 2023 or 1H24
• Sany Heavy is expected to recover earlier than its peers

• Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
• Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
• Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.

• Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers. 
• It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.  
• CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable. 

• HUTCHMED entered into an exclusive license agreement with Takeda- HUTCHMED will receive up to US$1.13 billion including US$400 million upfront, the third highest upfront among China’s TOP 10 license-out deals.
• Even if fruquintinib may probably not become a blockbuster product in the future, HUTCHMED still gets a decent upfront to relieve its cash flow pressure and an internationalization admission ticket.
• Hutchmed China Ltd (13 HK) is undervalued based on our sales forecast. After savolitinib has been included in the updated NRDL, this year’s performance growth is worth looking forward to.

• The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
• Tencent closed its XR business and terminated a property rental contract.
• NetEase refused to extend service for Activision Blizzard for additional six months.

• Zadaxin has been the biggest performance driver of SciClone, but it would face the risk of losing market share and increased pricing pressures after generic drugs were included in VBP.
• SciClone is primarily a pharmaceutical development/sales company, rather than a research-based innovative drug company.The increasingly low cost performance of in-licensed products has made the capital “reconsider” and be more rational.
• SciClone is a good stock for short-term trade, especially by taking advantage of the positive momentum after it reaches licensing deals/launches new products, but we’re concerned about its long-term prospects.

• 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 – iQIYI Inc (IQ US), Bilibili Inc (BILI US) placements, VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
• Event-Driven developments – China Internet (810 HK), Shandong Fengxiang (9977 HK), Kingston Financial (1031 HK),  Golden Energy & Resources (GER SP), Olam Group (OLG SP), Sabana Industrial REIT (SSREIT SP). 

• The 2022 NRDL negotiation results were released. We analyzed some points worth investor’s attention.
• The “safety pad” brought by medical insurance is difficult to ensure products future sales.Even after entering NRDL, how to improve patient/doctor coverage is an important problem for enterprises to consider.
• Here are some companies that investors are interested in. We mainly analyzed some key points of them, including Sirnaomics (2257 HK), JW Therapeutics (2126 HK), Antengene (6996 HK). 

• Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months. 
• Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
• Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.  

• We estimate that TME’s 4Q22 topline/bottom line would be (2.5%)/3.8% vs cons., because of disturbance in its social entertainment and ads business.
• We forecast net income would only slightly beat cons by 6.1%, due to likely expense rebound and no major improvement on main businesses.
• Reiterate SELL rating but raise TP to US$ 6.7 to reflect margin beat and improvement of macro environment. Our TP implies 12.3X PE in 2023.

• We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
• We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
• Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

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.

• Fosun International
• Yankuang Energy Group

• We expect BEKE C4Q22 revenue and non-GAAP NI to be 9% and 64% above consensus. The bottom line beat is a result of earning leverage;
• We expect the market monthly EH/NH transaction volume to turn positive growth in C1H23, with resumed offline activities and continuing policy support as main drivers
• We raise TP by US$1 to US$20: 1) dialling up GTV in 4Q22, 2) faster pace transaction recovery in 2023, and 3) rebase FX from 7.05 to 6.77 in valuation.

• While BILI’s top line in 4Q22/2023 would be in line, we suggest that its bottom line in 4Q22/2023 would beat cons. by 6%/18% due to cost-savings and optimized monetization efficiency. 
• BILI’s adjusted net loss would be significantly narrowed to (3.2)bn RMB in 2023, per our estimation. However, we still have concerns about some of BILI’s fundamentals.
• Maintain SELL but raise TP to US$ 16.4, implying 1.8X PS in 2023.

• Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
• ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
• Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

• 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

• China Internet Investment Finance Holdings (810 HK)/CIIF disclosed that it received a letter from a potential offeror, stating that it is considering making a voluntary conditional cash offer.
• The possible offer will have two conditions – a 50% minimum acceptance condition and that the shares remain listed. No price or timeline has been disclosed.
• An offer if it materialises, will likely be a take-under due to the presence of a willing seller (Chairman) seeking a liquidity event and CIIF’s unjustified share price run.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

• Xpeng announced price cuts on existing G3i, P5 and P7, which surprised the market on negative side, potentially indicating weaker demand and profitability
• Recent management changes has also hurt sentiment with the new CEO from a ‘traditional’ car background
• Xpeng’s share price has bottomed in our view and we expect a 2H’23 recovery with improving fundamentals

• The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
• This index was launched in 2020 and has gained significant passive tracking over the last two years.
• In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

• China’s gaming regulator granted publishing licenses to 88 video games including three licenses to Tencent (for Undawn, Alchemy Stars and Yuan Meng Zhi Xing) and one for NetEase (for Badlanders).
• In December, NPPA gave approvals to 84 new domestic games and 44 imported games suggesting the 18-month long crackdown on the sector is nearing an end.
• Tencent’s online games revenue declined YoY for three consecutive quarters with regulatory hurdles and drop in ranking of key titles but we expect an improvement going into 2023.

• Despite the steep stock rebound following a strong recovery in sales, stock attracts modest valuations in line with Infant milk players. Re-rating potential exists from valuing high-growth segments differently.
• Strong growth in Adult Nutrition and Pet products fueled overall sales. Baby Nutrition sales growth is muted and accounts for less than half of total sales (vs 2/3rd in 2020).
• Stock rebound triggered by a recovery in Sep. quarter sales thanks to its diverse product portfolio, and prospects of a revival in cross-border trade following China opening its borders.

• Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
• Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines’ drag are drivers. 
• ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. 

• 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.
• Stocks mentioned include Asymchem Laboratories (6821 HK), Honbridge Holdings (8137 HK), Flat Glass (6865 HK), and Gushengtang (2273 HK).

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.

• Vedanta Resources
• O-Net Technologies (Group)

• In this note, we will take a look at broker performance for HK IPOs from 2019-2022. 
• The following dataset includes all HK IPOs above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 173 deals. 
• The deals you see in this note are based on our historical IPO tracker. Feel free to drop us a message for additional information on any of these IPOs.

• China just announced game approval for January batch. The number of games approved is slightly higher than the previous three months.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game each. Overall Tencent is still behind its peers since the approval resumed.

• IQiyi announced a follow-on equity offering of 76.5m ADS priced at $5.90 per ADS (at a 11% discount to previous close) and will raise approx. $442.3m through the issuance.
• Each ADS represents seven Class A ordinary shares and the new equity offering of 76.5m ADS will account for approx. 8.5% of iQiyi’s extended share capital post offering.
• Following the announcement, the company’s shares fell 16.4% and we think the upside is limited here.

• Shandong Fengxiang (9977 HK)‘s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.
• PAG’s MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.
• PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.

• HK$0.96 per share special dividend announced last Friday disappointed the market. 
• The dividend implies only 20% of the cash on the balance sheet paid out in dividends
• We think there could be 1-2 more special dividends in 2023E given lack of obvious uses for the cash balance

• IQIYI Inc (IQ US) aims to raise net proceeds of US$442.3 million through the placement of 76.5 million ADS at US$5.90 per ADS.
• The net proceeds will be used for working capital purposes, including serving its existing debt obligations. The placement closes on 19 January. 
• The placement price is fair vs peers and is an opportunity to play iQiyi’s expected topline recovery which is supported by ongoing margin improvement and declining cash burn.