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 Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

• By many metrics, Chinese airlines’ recent performance exceeds pre-Covid levels
• Medium-Term, ongoing int’l recovery and benign fuel prices can boost margins
• We believe the airlines could recoup weak relative performance vs Trip.com

• The Hang Seng Internet & IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).
• In this insight, we take a look at our capping flow expectations for the December 2024 index rebal event.
• We have also presented our index change expectations for the next semiannual index review which will take place in March 2025.

• HARMONi-2 results are impressive and the overall data is solid and reliable. The NMPA has approved NDA of ebronucimab and sNDA of cadonilimab. Akeso’s fundamentals have indeed undergone positive changes.
• Akeso’s current market capitalization already partially reflects the positive expectation about the future successful FDA approval of AK112. In our view, the Placing Price is not cheap.
• When the market value falls back to below RMB45 billion is a more comfortable valuation to buy Akeso, and below RMB35 billion market value provides a golden opportunity. 

• HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market—Attractive Yield & Rapid Expansion Outside China—Sep 2024 helped us screen out great names.
• Nameson Holdings (1982 HK), a knitwear supplier that trades at 4.5x PE, is net cash (considering investments) and has a 17% dividend yield, is one of them. 
• We find this name attractive, and the yield can be sustainable as it shifts its supply base from China to Vietnam. Hence, we initiate with a detailed write-up. 

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
• Yuexiu Property

• Leading Chinese biotech firms are among the few sub-sectors sustaining rapid growth. However, RemeGen stands as a negative example, with its business model and investment rationale proving flawed.
• “Increasing revenue without increasing profits” is actually a “denial” of a company’s business model. Even though the losses decreased in 24H1, this doesn’t change our negative expectations for Zai Lab.
• Genor Biopharma and Edding Group are merging through a reverse takeover, benefiting both companies by boosting Genor’s valuation and allowing Edding to achieve its goal of going public.

• The Guotai Junan Securities (2611 HK)/Haitong Securities Co Ltd (H) (6837 HK) merger is a done deal.  The key risk, as withTCM (570 HK)‘s Offer, is one of timing.
• IF you are an arbitrageur,  Buy Shin Kong Financial Holding (2888 TT) vs A Basket of FHC Peers (not including Taishin).
• First Pacific Co (142 HK)‘s 46.2% share of Metro Pacific Investments Co (MPI PM)at delisting last year was worth ~US$1.25bn. It is now potentially worth ~US$3.21bn. 

• The HS HK-Listed Biotech Index (“Hang Seng Biotech Index”) represents the 50 largest biotech companies listed in Hong Kong (HKEX).
• In this insight, we take a look at the final rankings of potential ADDs/DELs and our capping flow expectations for the December 2024 index rebal event.
• We expect two changes for the HSHKBIO index in December 2024. 

• In our previous insight about the Hang Seng Index‘s we theorized a probable continuation of the rally in October, after some resistance, but the index just shoot up straight.
• Resistance appeared last week, from an area considered a tail by our SHORT model, so it was not possible to make a forecast from there.
• The question now is: can the index re-start to rally from here? Or will it pull back more this coming week?

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 Oil And Gas
2. ICTSI
3. Pt Cikarang Listrindo Tbk
4. Tata Motors Ltd
5. Adani Green Energy

and more…

• IDC reported 3Q24 PC shipments declining -2% YoY, Canalys an increase of +1%. Let’s call this flat. If 4Q24 is “average seasonal”, 2024 will reach ~265m, or the pre-Covid range. 
• No AI fever, no accelerated replacement cycle, for now. If it happens, it will take time, ie compelling AI apps that only run locally and need a new PC.
• In Asia, PC vendors: Lenovo, Acer, Asus. Taiwan ODM: Compal, Quanta, Wistron. Semi with high exposure: Novatek, Realtek. 

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 Oil And Gas
• Continuum Green Energy
• China International Marine Containers A
• Shui On Land

• Two fulfillment centers added. In line with its goal to establish a national pharmaceutical logistics network (Kunpeng), 111 announced that it has added two new fulfillment centers.
• This brings its network up from 11 to 13 centers across China. One of the new additions is in Guangzhou, Guangdong province in the South, with the other in Wuhan, in the central province of Hubei.
• The two new centers expand the scale and capabilities of the company’s existing fulfillment operations in each of those populous regions.

• A month after China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong Securities (H) (6837 HK), announced an intention to merge, we have a firm deal. 
• Via a share swap, each Haitong H share may be exchanged for 0.62 H shares of GJS. A similar ratio is in place for the As. Cash options are afforded
• Conditions include GJS and Haitong shareholder approval; plus the usual suspects on the regulatory front. The key risk, as with TCM (570 HK)‘s Offer, is one of timing.

• Akeso Biopharma Inc (9926 HK) is looking to raise around US$200m from its primary placement. Proceeds from the placement will be used for R&D.
• Past deals in the name haven’t done well recently but the shares have been doing well and the deal size remains small.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Shiyue Daotian (1892269D CH) was listed in Hong Kong on 12th Oct 2023 after raising US$105m close to the top end of its indicative IPO price range. 
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.  
• The firm’s one-year lockup will expire on 12th Oct 2024.  In this note, we will talk about the lock-up dynamics and updates since our last note.

• Zhou Liu Fu Jewellery Co., Ltd. (1716396D CH)  is looking to raise $US200m in its upcoming Hong Kong IPO. 
• It is a leading and fast growing jewellery franchise in China offering a diverse range of products through offline and online sales channels.
• In this note, we look at the firm’s past performance.

• Jiangsu Guofu (1628452D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. The deal will be run by Haitong International, CLSA, CCB International and China Securities.
• Jiangsu Guofu is a leading hydrogen energy storage and transport equipment manufacturer in China.
• It develops and manufactures hydrogen energy core equipment used in the entire industrial value chain of hydrogen energy, consisting of production, storage, transportation, refueling and use.

• Polestar has released its Q2 2024 financial results, revealing both strengths and areas that require attention.
• A thorough assessment of these results offers a comprehensive perspective on the firm’s current financial health and business trajectory.
• Starting with the positives, Polestar demonstrated an impressive 80% increase in global vehicle sales, reaching 13,150 cars.

• Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x. 
• The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds. 
• The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip. 

• There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
• Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
• Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.

• China Conch Venture (586 HK) shares are down 20% the past two days. Anhui Conch Cement (600585 CH) is down ~8% today. CCV’s implied stub is toward the historical low-end.
• Preceding my comments on China Conch/Anhui 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%.

• Huaqing Petroleum to set up plant worth US$1.39 billion in Hunan
• Linglong commences serial production at its Serbia plant 
• ZC Rubber Group cements network for supply to Nordic countries

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.

• Pt Cikarang Listrindo Tbk
• Greentown China

• China Boqi Environmental Hol (2377 HK), a flue gas treatment play in China, is suspended pursuant to the Takeovers Code.
• Co-Founders Zeng Zhijun (27.71%, chairman) and Richard Cheng (16.76%, NED) collectively hold 44.47%. However, they had a falling out in January 2021, and probably won’t jointly bid. Individually, maybe.
• China Petroleum & Chemical (386 HK) (a.k.a. Sinopec) holds 10.97% and could make a move to secure control.

• Investors are concerned the Long Stop Date may be extended.But the style of SOEs is rigorous, which means CNPGC has anticipated the potential delays and reserved more time in advance. 
• Although CNPGC can extend Long Stop Date, this indicates CNPGC fails to complete the set work in scheduled time, which is equivalent to admitting its previous work arrangement was “inappropriate”.
• If there’re unexpected circumstances, one possible scenario is privatization would be completed before the Chinese New Year.Because entering 2025, integrating China TCM and Taiji will be the focus of CNPGC.

• Back in October 2023, a consortium including First Pacific (142 HK) took Metro Pacific Investments Co (MPI PM) private. First Pac’s 46.2% share at delisting was worth ~US$1.25bn.
• Following Mitsui (8031 JP)–backed Mit-Pacific’s possible stake in a tollway operator held by MPIC, First Pac’s 43.2% holding in MPIC, including the 47.5% stake in Meralco, is potentially worth ~US$3.21bn.
• The question is whether this recent development from Mitsui has any bearing. First Pac’s discount to NAV is elevated versus its historical trading range. 

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, is premarketing an HKEx to raise US$0.5-1 billion.
• We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case. 
• In this note, we present our forecasts and examine CR Beverage’s potential valuation range for the first time.

• Since Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) were suspended around a month ago, pending a merger, a basket of peers are up 37%. 
• The Shanghai Composite is up 21%. Volumes are up, commissions are up. Citic Securities (600030 CH), the largest broker by market cap, is up 42% in the past month. 
• Zhejiang Expressway (576 HK) is also up ~45% in recent weeks due to its 40.3% look-through stake in Zheshang Securities (601878 CH).  The question: how much more in the tank?

• MDL Wholesale Limited is looking to raise about US$100m in its upcoming Hong Kong IPO.
• MDL is a leading food and FMCG distribution solution provider in China.
• In this note, we look at the firm’s past performance.

• The HK market is moving, and the share prices of high-yield companies are increasing. Despite the average YTD returns of 36%, stocks are trading at 5-18% dividend yields. 
• We await the November results of Pacific Textiles (1382 HK), which we will soon initiate coverage on.
• We note that Yue Yuen Industrial Holdings (551 HK) continues with its buybacks, having repurchased 3.2 million shares (0.2% of outstanding shares) since August 28th, 2024. 

• The loss of control over Greatview’s international business will lead to significant loss of Newjf’s interests,which is the most direct trigger of Newjf’s decision to initiate an acquisition of Greatview.
• Newjf is actively fulfilling the Pre-Conditions and is now progressing smoothly. Newjf’s acquisition of Greatview is complied with the Anti-monopoly Law. Newjf will make every effort to complete the acquisition. 
• Greatview urges shareholders to reject Newjf’s Offer is not for the benefit of the entire company. The “true motives” behind are questionable. We advise investors to take Newjf’s Offer seriously.

• Bright Smart Securities is a successful brokerage firm in Hong Kong founded by Mow Lum Yip in 1995 and publicly listed in 2010
• The company has shown steady growth since its IPO, with impressive increases in revenue and net income
• Despite a challenging market environment in Hong Kong, Bright Smart has maintained stable results, grown its client base and assets under management, and pays out all earnings in dividends, with dividends exceeding net earnings over the last 5 years.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• China Boqi Environmental Hol (2377 HK) entered a trading halt based on the Hong Kong Code on Takeovers and Mergers. The shares have been up 39% since 30 September. 
• It is likely that management, representing 59.59% of outstanding shares, is seeking to privatise Boqi through a Cayman scheme. 
• Sinopec, a pre-IPO investor potentially holding a blocking stake, is likely seeking to exit. At the last close, Boqi trades in line with the median peers’ P/B multiple. 

• We believe price momentum for global container carriers is unlikely to improve from here
• As price momentum falters, carriers’ shares could continue to give back big gains
• We would look for near-term opportunities to reduce or eliminate exposure to sector

• ESR Group (1821 HK) provided a positive update on the indicative proposal. The update notes that the consortium has expanded from three to six, representing 39.91% of outstanding shares.
• The addition of new consortium members is a positive. While the recent market rally is not a dealbreaker, it should give the consortium renewed impetus to launch an acceptable offer.   
• The downside to a deal break is low as ESR’s valuation is undemanding, which is supported by the potential earnings recovery in a more benign interest rate environment.

• Seven & I Holdings (3382 JP) is currently “in limbo” as the initial Alimentation Couche-Tard (ATD CN) (“ACT”) has been rejected, some news is out, and we await earnings/presentations.
• The news last week was that 7&i might sell down a stake in Seven Bank Ltd (8410 JP) and could sell its retail/superstore business to PE rather than an IPO.
• Both selldowns mean the focus on CVS everyone seems to want. That’s good news. And the shares are trading at/below ACT terms which “grossly undervalued” the company. Bullish. 

• The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
• The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
• There are 8 trading days to implementation and there are a bunch of stocks with over 2x ADV to trade.

• Acquiring CPMC at low price is in line with Baosteel’s strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn’t choose to raise its Offer 
• ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?
• If ORG is “forced to” acquire CPMC due to Baosteel’s low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.

• 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: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Canvest Environmental Protection Group (1381 HK), Shinko Electric Industries (6967 JP), Capitol Health (CAJ AU). 
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Platinum Asset Management (PTM AU), Xingda International (1899 HK), Trancom Co Ltd (9058 JP), Fuji Soft Inc (9749 JP). 

• Hang Seng Index (HSI INDEX), Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) and Nikkei 225 (NKY INDEX) all have elevated implied vols vs their peers and vs historical observations for October.
• NIFTY Index (NIFTY INDEX) , S&P 500 INDEX (SPX INDEX) and S&P/ASX 200 (AS51 INDEX)  implied vols are on the low end of what is typically realized in October.
• Most markets see price weakness in the 3rd week of the month with realized volatility underperforming over the back half of the month.

• By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.  
• The attributable market cap of Zheshang equals 90% of ZJE’s market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE’s 1H24 profit.
• ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.

• Given its holdings in four A-share subsidiaries, AviChina Industry & Technology H (2357 HK) will benefit from the surge in their share prices as mainland markets re-open.
• These A-share all lagged benchmark Indices YTD. Avichina’s holdings in them are already valued at 2.23x its own market capitalisation. 
• The historical discount range is 51-70% and currently stands at 55%, suggesting AviChina’s share price has not yet excessively priced in the post-Golden Week rally.

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.

• CIFI Holdings
• Vedanta Resources

• Half of all lithium-ion batteries could be made with recycled lithium by 2042, according to the founder of power cell giant Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ +11.06%), who presented a vision of an eco-friendlier industry at a recent event.

• Speaking at the World New Energy Vehicles Congress on Friday, Zeng Yuqun, also CATL’s chairman, highlighted the critical role power cells can play in driving the EV industry toward a zero-carbon future, saying that the sustainable development of the industry hinges on the use of recycled battery raw materials.

• CATL’s battery recycling business has already taken shape, with a current annual capacity to process 270,000 tons of used batteries, Zeng said.

• TCL Technology Group Corp.
• (000100.SZ +7.51%), a leading Chinese electronics maker, has agreed to pay 10.8 billion yuan ($1.54 billion) to acquire LG’s two display factories in Guangzhou, as Chinese manufacturers strengthen their dominance in the liquid crystal displays (LCD).
• TCL China Star Optoelectronics Technology (TCL CSOT), a subsidiary of TCL Technology, will acquire 80% of LG Display China and the entire stake of LG Display Guangzhou.

• Investors always have expectations for Chinese CXOs, believing that BIOSECURE Act will not pass and Chinese CXOs will bottom out. We can understand this, but we have to be rational.
• Selling the operations that have been negatively affected is a reasonable choice, which helps stabilize WuXi’s business/market expectations. But this does not necessarily mean the geopolitical conflict will end here.
• Without persuasive long-term logic, share price of Sihuan would still underperform. Despite strong performance of Chinese stocks, we advise investors to do short-term trading on Sihuan Pharmaceutical Hldgs (460 HK).

• In a new filing with HKEX, we can see Lalatech’s revenue growth slow
• The company’s grip on CoR loosened, but OpEx growth in H1 was minimal
• Given improving market conditions, we believe Lalatech may finally sell shares

• China’s key electric-vehicle (EV) makers set monthly delivery records in September as government subsidies and price cuts gave sales in the fiercely competitive industry a boost.
• BYD Co. Ltd. (002594.SZ +8.21%), the country’s top EV-maker, sold 419,426 vehicles in September, according to an exchange filing Tuesday.
• The figure, which consisted of 164,956 battery EVs and 252,647 plug-in hybrids, marked a 45.9% year-on-year increase and a new monthly sales record.

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. Biocon Ltd
2. Lippo Karawaci
3. Tata Motors Ltd
4. Softbank Group
5. Rakuten

and more…

• Despite the drastic bull turn in Chinese equity sending MNSO’s share 41% from its trough, we see MNSO’s investment in Yonghui Superstores as a risk venture.
• We believe the market has overestimated the scalability of the Pangdonglai rectification program for offline retail. 
• We downgrade the stock to SELL rating and cut TP to US$18/ADS