China

• The Composite Document for Shandong Fengxiang (9977 HK)‘s unconditional mandatory Offer from PAG Capital is now out.
• Shareholders who tender will be paid within 7 business days. 
• An H-class meeting will be held on the 18 January to vote on whether to delist Fengxiang. There is no guarantee this will occur.

• Kingsoft Cloud (KC US) shares will begin trading on the Main Board of the HKEx on Friday, 30th December by way of an introduction.
• The company’s competitive pricing strategy to onboard customers has impacted its profitability, however, KC has begun to shift focus on profitability by raising prices in the medium term.
• Raising prices in the medium term will likely support KC’s profitability and we have valued the company using potential price hikes to non-key customers.

• Tencent (700 HK)‘s in-specie distribution of Meituan (3690 HK) shares goes ex-dividend next Thursday. Passive Hang Seng trackers will sell Meituan (3690 HK) stock at the close on 4 January.
• The passive impact is not very large but there could be selling from active investors, both before and after settlement of the shares that is scheduled for 24 March.
• Prosus/Naspers will receive 258.93m shares (HK$47.69bn; 6.5x ADV; 4.18% of shares outstanding) of Meituan (3690 HK) and that will be an overhang on the stock for the near future.

• We have seen some positive policies released in China to support assisted reproduction. However, domestic policy support is more of a short-term catalyst and would not fundamentally change Jinxin’s prospects.
• The number of assisted reproductive centers in China is close to supply-demand equilibrium. It’s hard to support Jinxin’s valuation expansion by relying on China market. The breakthrough point is internationalization.
• Jinxin’s 2023 performance wouldn’t rebound largely. Investors could do short-term trade based on positive news/policy related to ARS in China.There’s no signal to support the complete reversal of share price.

• Skyworth Group Limited (751 HK) has announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  
• On 17 June 2020, Skyworth announced a partial buyback – 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close. 
• Upon successfully completing this partial offer, Stephen Wong & concert parties would hold >50%, prior to the excise of any outstanding options. 

• FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
• With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months. 
• With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the market cap in cash.

• AviChina Industry & Tech (2357 HK) announced plan to consolidate helicopter business by disposing Changhe Aircraft and Harbin Aircraft to its subsidiary Avic Helicopter (600038 CH). 
• AviChina can achieve synergy at its helicopter business, realise capital gains from disposal and enjoy higher valuations on these assets while maintaining its controlling ownership.
• The resultant increase in stake in Avicopter will further widen AviChina’s discount to its holdings in four listed A-share subsidiaries. Its current 66% discount is just too steep.

• Beauty Farm Medical and Health Industry (BFM HK)’s solid growth has indicated that its business model works. But the industry tightening regulation and potential policy risk are our concerns.
• As a downstream company in this industry, we are conservative about Beauty Farm’s profitability. Its profit space could be limited. The Company has weak bargaining power in the whole industrial chain.
• Beauty Farm’s performance could continue to be under pressure due to weak recovery of domestic demand after three years of the pandemic, especially those non-rigid consumption demand. 

• Merck entered into an agreement with Kelun to develop seven new ADC candidates. Merck will pay an upfront payment of US$175 million, with milestone payments worth up to US$9.3 billion.
• It’s a strong signal that Merck gives up acquiring Seagen and fully embraces Kelun. Merck may not just simply recognize Kelun’s ADC candidates but is optimistic about its ADC platform/technology.
• Chinese pharmaceutical enterprises are becoming more pragmatic and peaceful in licensing cooperation, which has more trend significance for the development of industry than the value of a product or an enterprise. 

• 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

• In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
• The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
• Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

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. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China 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. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• Chinese equities have continued to outperform versus other global markets
• The HSI Index 200dma has proved to be a barrier to the upside
• We evaluate the call ratio we suggested in November and recommend action

• Holiday Volume and excessive price actions make market analysis less than helpful. HSI daily shares traded volume on 21st was the lowest year to date.
• Thursday saw a pick-up in volume. Word on easing Covid restrictions for international travelers, reopening HK-China Border in January, and a higher close in the US market brought outsized gains.
• The stock was up 4.12% and had the heaviest volume on HKEX on the 22nd, yet the stock volume was well below 21 days’ average volume.

• Several news media outlets reported that Xiaomi Corp (1810 HK) has started laying off about 10-15% of its employees across several units of its smartphone and internet services businesses.
• Xiaomi’s margins have come under pressure with entering into the premium smartphones segment which has resulted in aggressive expansion of offline stores.
• The company’s 3Q2022 revenues declined 9.7% YoY as a result of decrease in revenue from all three business segments while margins further dropped compared to 3Q2021.

• JD Health (6618 HK) is on the right track in terms of business model and investment logic. The Company has also begun to enter a virtuous circle in financial performance.
• There were some positive business updates in term of To B business in 22Q1-Q3, which would bring JD Health closer to establishing a complete “retail pharmacy + healthcare service” ecosystem.
• For trading strategy, at present, considering the complex external environment, we recommend investors to do short-term trade, rather than long-term hold.

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.

• First Pacific Co

• On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
• For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
• There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.

• Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
• Our proprietary store expansion framework suggests divergent growth outlook for major players – stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
• Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     

• A little over two months since PAG Capital won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK), the acquisition has now cleared all regulatory clearances, including SAMR.
• PAG will now be required to make an unconditional Offer for all H-shares at HK$1.5132/share. Separately, PAG intends to delist Fengxiang which involves Scheme-like delisting resolutions. 
• This is done. The timing for approving the SPA was bang-on with my expectation.

• PAG completed the auction procedures for the acquisition of a 70.92% stake in Shandong Fengxiang (9977 HK). This will trigger an unconditional MGO at HK$1.5132 per H Share.
• As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
• The composite document is to be despatched on or before 28 December. At last close and for an end-of-January payment, the gross and annualised spread is 5.1% and 65.9%, respectively.

• REPT BATTERO Energy (REPT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are Morgan Stanley, and Citic Securities.
• REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs. 
• As per F&S, it was amongst the top ten lithium-ion battery manufacturers in China as per installations for new energy application in 2021.

• ClouDr released positive profit alert for 2022. We think ClouDr is in a virtuous circle based on its solid business model. It’s a matter of time before ClouDr achieves breakeven. 
• As the number of hospitals/pharmacies newly deploying SaaS modules increases, and the existing B-end users continue to receive new patients,ClouDr is able to absorb new C-end users at low cost.
• When more powerful competitors come in and carve up B-end market, ClouDr’s long-term prospects may be uncertain, but its valuation shouldn’t be much lower than Ping An Good Doctor. 

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.

• Zx Inc (ZX CH) is looking to raise about US$100m in its upcoming HK IPO. The deal will be run by CICC and China Securities International. 
• Zx Inc runs three different businesses, namely an interactive entertainment business (Tan Wan), an instant food brand (Zha Zha Hui) and pop toy business (Bro Kooli). 
• Its interactive entertainment business Tan Wan focuses on publishing game products while while leveraging its precision marketing, in-depth operation and brand incubation capabilities. 

• Kanzhun (BZ US) a.k.a. has been listed in the US since about the same time as DiDi Global (DIDI US), and it had similar but minor tech issues pre-listing. 
• On Friday 16 December, the company announced it would conduct a Listing by Introduction in Hong Kong under the ticker Zhipin (2076 HK), listing on 22 Dec. 
• That creates an interesting launch supply/demand dynamic, likely HS Tech inclusion in March 2023, and then Southbound much later in 2023.

• Trip.com’s revenue increased by 29% YoY and adjusted EBITDA increased 164% YoY in 3Q22.
• Kuaishou announced that the views of short play increased by 40% in 2022.
• Activision Blizzard announced that they are looking for a new agency in China.

• Beauty Farm Medical and Health Industry (BFM HK) is the largest provider of traditional beauty services and the fourth largest non-surgical aesthetic medical service provider in China.
• The company seeks to raise $300 million from an IPO in Hong Kong market. Morgan Stanley, Haitong International, and Huatai International are the joint sponsors for the proposed IPO.
• COVID-19 has hurt recent financial performance of the company and forced it to shut many of the stores in multiple locations. Further, stretched valuation make the IPO unappealing to investors.

• It was recently announced that US government put 36 Chinese companies including Cambricon Technologies on its trade blacklist that can restrict the semiconductor maker’s access to US technologies and products.
• The US government has determined that Cambricon Technologies and these other Chinese companies pose risk to the US national security.
• We believe that Cambricon Technologies being included in the trade blacklist by the US government is likely to have a long-term negative impact on the company.

• CIFI Holdings (884 HK) is looking to raise US$127m in a top-up placement. Proceeds from the raising are expected to refinance its existing loans and for general corporate purposes.
• While the deal represents just 2.1 days of three month ADV, total shares offered would amount to 7.5% of current mcap. 
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• BABA ADR shows well defined range trade points as the rising wedge matures. 173 stands out as formidable sell resistance and 157 the level to crack.
• MACD trendline coincides the “0” turn level that is expected to cap the upside near term and induce fresh down leg. The May break does send a forward weak signal.
• The macro picture continues to warn of a 135 retest in 2023. Current rising wedge is corrective in nature.

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 South City
• Kawasan Industri Jababeka
• Lifestyle International Holdings

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 South City
• Kawasan Industri Jababeka
• Lifestyle International Holdings

• Dmall Inc (1751691D CH) is looking to raise about US$200m in its upcoming HK IPO. The deal will be run by Credit Suisse and CMB International.
• Dmall provides cloud-based, end-to-end SaaS platforms purpose-built for the local retail industry. 
• Its service offerings consist of a retail core service cloud, an e-commerce service cloud and a marketing and advertising service cloud. 

• 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 – VinFast (1905332D VN) pre-markets a US$1bn IPO and Weilong Delicious Global (9985 HK) has a poor debut.
• Event-Driven developments – Genesis Minerals (GMD AU)/St Barbara Ltd (SBM AU), Norwest Energy Nl (NWE AU), Acotec Scientific Holdings (6669 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), O2Micro.

• China private higher education sector is recovering with the supportive government policy
• The sector trades at single digit P/E, which is attractive
• China Education Group with its largest scale and solid trade record is a good candidate for investment

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.

• Central China Securities

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
• On the IPO front,  things are started to cool down in to the year end with some smaller issuers still trying their luck to get listed before the year end.
• On placements front, most of the action was in India with Australia seeing a large offering after a while.

• It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
• The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
• There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

• Kanzhun (BZ US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 22 December.
• Following the changes to the handling of Dual-Primary-listed companies, Kanzhun (BZ US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
• Kanzhun (BZ US)‘s inclusion will lead to other changes to the Hang Seng Tech Index (HSTECH INDEX) with an extra deletion to keep the number of index constituents at 30.

• 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