China

• The SSE180, SSE380 and SZSE1000 indices rebalance at the close on Friday and that will lead to changes to the list of stocks eligible for Northbound Stock Connect.
• Deletion from the Northbound Stock Connect Buy and Sell list will result in MSCI and FTSE deleting stocks from their indices. That selling will take place at the close Friday.
• We expect 37 stocks to be deleted from the MSCI and FTSE indices at the close on 9 December – the announcements should be made later today or tomorrow.

• Country Garden Holdings Co (2007 HK)  aims to raise around US$500m via a primary placement
• This will be the third placement by the company this year and the second one within a month’s time.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Sunpower has had a rough +/-18 months as input cost rises coincided with Force Majeure issues at some of its clients due to never-ending rolling Chinese lockdowns.
• Mr. Market has pushed Sunpower back below 0.27 SGD/share (-43% YTD) despite revenue- and EBITDA growth continuing at its GI division. Profits have been compressed due to rising input costs.
• As China re-opens in FY23 Sunpower should benefit from normalization and recovery in demand from its industrial base customers. However, CB conversion details are needed for re-rating to start.

• Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names. 
• Of these companies, only two are expected to be EBITDA positive in FY22. 
• They are JOYY (YY US) and Sohu.com (SOHU US). This insight looks at both names. 

• Beijing-Shanghai High Speed Railway-A (601816 CH) will be deleted from the Northbound Stock Connect Buy and Sell list from the close on 9 December.
• Beijing-Shanghai High Speed Railway will be deleted from the SSE180, MSCI and FTSE indices. Plus a deletion from the FTSE China A50 Index (XIN9I INDEX). 
• The replacement for Beijing-Shanghai High Speed Railway-A (601816 CH) will be determined at the close of trading today and the announcement will be made post market close.

• A recent rally in property management companies due to measures taken by the government has set Binjiang Service Group (3316 HK) for a big move upwards.
• The stock is cheap and trades at 10.5x/8.1x FY22/23e PE with 37% of the market cap in cash and a 5.8%/7.4% FY22e/23e dividend yield.
• Catalysts for the company are further loosening on the property by the government and a profit alert of 38-40% earnings growth for FY22.

• The revenue growth accelerated and the operating margin improved in 3Q22.
• However, management said the performance may not continue and profit is not their target.
• We believe the stock has a downside of 23% for year end 2023. 

• In the near-term, China’s relaxation of COVID-combating measures will boost consumption and demand for cross-province travel. China Tourism Group Duty Free Corp Ltd (1880 HK) is a beneficiary.
• Hotel bookings in Sanya have surged over the last two days, reflecting positive demand reaction. However, China’s full border opening likely in 2023 is a challenge to CDFC.  
• Low base in FY22 will drive 45% earnings growth for FY23. However, valuations are not cheap at 33.8x PER for FY23, a significant premium to consumption sector and international peers.

• Weilong Delicious has downsized its IPO to raise around HK$942m (US$121.3m). The company also has the flexibility to set its IPO price at a 10% discount to the bottom.
• The company’s top line growth has slowed down in 1H2022 and margins have been under pressure with increased S&M spending to further penetrate into online channels.
• Weilong’s IPO is priced at a significant premium to domestic as well as multinational peers which do not justify the growth prospects.

• Nearly 85% of the way through the review period, we see 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• Given the significantly higher market cap of the inclusions using a 6-month minimum listing history, we expect the index committee will continue to use the shorter listing history requirement.
• With 5 changes a side, one-way turnover is estimated at 5.15% and will result in a one-way trade of CNY 3,994m. Impact on some deletions is quite high.

• On the 26 November, Macau’s government renewed the concession periods of the city’s six incumbent gambling concessionaires for another 10 years.
• Genting Malaysia (GENM MK), a last-minute interloper, failed in its bid to secure a license. It scored lowest under the government’s bidding review. MGM China (2282 HK) topped the scoresheets. 
• As with all incumbents, Melco International (200 HK) and Melco Resorts & Entertainment (MLCO US) eked out strong gains following the renewal. Melco’s current discount to NAV is currently 20%.

• Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
• Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
• The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.

• ATRenew (RERE US) operates the largest pre-owned consumer electronics transactions and services platform in China. It is listed in June 2021 at US$14 per ADS. 
• The shares are down 63% YTD largely due to the tech market sell-off. Unlike most tech companies, ATRenew is starting to deliver growth with profits, cash generation and share buybacks.
• The valuation is undemanding compared to a peer group of pre-owned marketplaces and global online retail marketplaces. It will also appeal to investors with an ESG mandate.

• Richard Liu came back to manage JD.com after he resigned half a year ago.
• Alibaba Health revenue increased 23% YoY in 1H23, which benefited from hospitals being closed.
• Pinduoduo revenue increased by 65% YoY and operating profit increased 388% YoY in 3Q22.

• The revenue growth rate accelerated to 28% YoY in 3Q22 versus 16% YoY in 2Q22.
• Operating Loss was close to zero in 3Q22 and we believe it will turn positive in 2023.
• According to price / sales history, we believe the company has an upside of 89% for year end 2023.

• Bilibili Inc (BILI US) reported 3Q2022 results Tuesday. 3Q revenue increased 11.3% YoY to RMB5.8bn (vs consensus RMB5.7bn) while operating losses for the quarter dropped to RMB1.8bn vs consensus RMB2.1bn.
• Recovery in mobile games biz alongside aggressive cost cutting measures supported improvement in Bilibili’s profitability during the quarter.
• Pandaily reported that Bilibili is exploring expanding into the SEA region and increased R&D spending could be an indication that plans are underway.  

• DPC Dash (DPC HK) is the exclusive master franchisee of Domino’s Pizza (DPZ US) in mainland China, Hong Kong and Macau with around 546 stores as of 9M2022.
• The company has refiled for an IPO on the Hong Kong Stock Exchange after failing the first time to raise around US $100m in March 2022.
• Discounted pricing has failed to propel the Dominos brand to the top in many Asian markets where pizza is considered a luxury meal. DPC-Dash is experiencing the same in China.

• ATRenew (RERE US) is one of the stocks in China that is starting to look very attractive after a sharp decline in its share price since its IPO.
• ATRenew has achieved noticeable improvements in operations and profitability in the recent quarter.
• Our base case valuation analysis suggests an implied market cap of US$720 million, representing an implied price of US$3.15 per share, representing an upside of 43% from current price.

• Weilong Delicious Global (WDG HK)  a spicy snack food company in China, aims to raise around US$140m in its Hong Kong IPO.
• According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
• We have covered various aspects of the deal in our previous notes, in this note, we will talk about  the final valuations.

• Weilong Delicious Global (WDG HK), a leading spicy snack food company in China, has launched its IPO to raise up to US$141 million. 
• We previously discussed the IPO in Weilong Delicious IPO: Remains in a Pickle, Weilong Delicious IPO: In a Pickle, Weilong Delicious IPO: Mixed Update, Weilong Delicious IPO Initiation: Tasty Bite. 
• In this note, we present our forecasts and look at valuation. Weilong is unattractively valued at the IPO price range. We would pass on the IPO.

• Despite the plunge in share price after FY22 result, we think Hope Education Group Co Ltd (1765 HK) has not yet reached its bottom given the challenging outlook faced.
• We are concerned about stretched financial position with gearing surged 32.5pp in last year. Heavy capex and need to repay outstanding convertible bonds will strain its cash flow.  
• Market earnings expectations are still overly optimistic. New schools looks to drag on near-term margins while surge in staffing, primarily teacher, costs is an added pressure.

• As investors we are faced with a deluge of noisy breaking news, business media talking heads, and what has felt like non-stop Fed speakers offering their differing views on the economy and the path of rate hikes going in 2023.
• This week was no different. Fed Chair Jay Powell was front and center suggesting that interest rate hikes will likely be stepped down to 50bps in the upcoming December Fed meeting in a few weeks.
• This was already discounted and expected by the market and effectively didn’t offer much of anything Wall St. didn’t already know.

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
• China Datang Corp Renewable Power
• Shui On Land

• In this post I tracked my performance on stock mentioned in my blog, and I would like to officially close some ideas here.
• I will start doing that from now on. Something I did privately but not on the blog publicly.
• Either because they have worked out and upside is no more attractive, or because the facts have changed.

• 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, the two Japanese IPO set the ball rolling for the year end rush, with a few more lined up in Hong Kong along with Sunshine.
• There were a few largish selldowns in Japan and India and given Hong Kong’s recent performace, it will see some deals soon as well.

• 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

• Stock has recovered from an October low but may be running out of steam 
• Realised vol has been high and implied vols have not fallen as much as other equity assets
• We suggest three trade ideas into year-end to take advantage of the vol surface and spot level

• 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. However, such disclosures are by no means an absolute. 
• These insights may flag those companies where shares have been pledged. Stocks mentioned include: Perfect Medical Health (1830 HK), Hong Kong Aerospace Technology (1725 HK), and ESR Group (1821 HK).

• The renewal results of coronary stent centralized procurement reflected that the government’s attitude towards the price reduction in VBP has changed, who tend to correct the excessively low price.
• Investors’d better not to have such a misconception that they only attach importance to R&D rather than commercialization. Only if sales ability is verified can enterprises have better valuation premium.
• Investors are advised to find the targets that are in “sector resonance” but also has “difference in expectations”. Ecology of innovative drug has changed, such as Remegen (688331 CH).

• Yili is the largest dairy company in China with established entry barriers of brand and products.
• Yili aims to join the world’s top three dairy enterprises by 2025 and strives to seize first place by 2030.
• Management announced the plan of a revenue CAGR of ~10% y/y between 2021 and 2025 and margin improvement of 50bps each year.

• Perfect Medical Health (1830 HK) showed a resilient set of numbers for H1 2023, with profits down only 30% despite losing a month in HK and more in China.
• With over 700 mn HKD in cash (18% of market capitalization), PE of 12.4x FY23e/8.5x FY24e, and dividend yields of 8.5%FY23e/12.4%FY24e it trades on an exciting yield/valuation.
• Catalysts for the company include the reopening of China (>20% of revenue), the recovery of HK(70% of revenue), and expansion into newer business lines and geographies.

• PDD’s spectacular 3Q results will prove unsustainable based on our assessments of its core markets and deep-dive benchmark analysis of growth trajectory of PDD and Alibaba, using GMV as scale.
• We see earnings risk going into 2023 due to well-penetrated wallet share of core user base, deflating growth drivers and ramp-up of investments.
• In the long term, inevitable multiple compression also renders the risk-return payoff of this US$100bn company mediocre, even under blue-sky growth forecasts. Prefer Alibaba over PDD.

• The NRDL negotiation has completely changed the pricing method and valuation logic of innovative drugs. Based on the 3D Alphamab Simcere Agreements, 3D Medicines would have limited profits from envafolimab.
• The majority candidates are based on license-in model. The intention to “pile up” a nice pipeline based on license-in model before IPO is obvious. 3D Medicines’s R&D capability is questionable.
• The overall quality and core competitiveness of 3D Medicines are not high. Mr. Market is not friendly to the valuation of companies based on license-in model. 

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. Medco Energi
2. China Jinmao Holdings
3. Guangzhou R&F Properties
4. Sunac China Holdings
5. Evergrande

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. Medco Energi
2. China Jinmao Holdings
3. Guangzhou R&F Properties
4. Sunac China Holdings
5. Evergrande

and more…

• The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
• There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes. 
• There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.

• Mandi, OTC alopecia drug of 3SBio Inc (1530 HK), reported revenue growth of 42% y/y in 1H22 and gained 70bps market share over the last six months.
• With the resurgence of COVID-19 in China interrupting the regular operations of outpatient services at medical institutions, 3SBio’s performance is expected to be affected in near-term.
• 3SBio is preparing to launch its new drug nalfuraphine hydrochloride orally disintegrating tablets for liver and kidney disease pruritus in China.

• The operator of Chinese recruitment app Boss Zhipin reported drops in third-quarter revenue and profit after restarting new user registrations following a nearly one-year suspension as part of a national security probe. 
• During the three months through September, Nasdaq-listed Kanzhun Ltd.logged a net profit of 211.7 million yuan ($29.8 million), representing a year-on-year drop of 26%
• The firm generated about 99% of its revenue, or 1.16 billion yuan, from sales of recruitment services to corporate clients — a 2.7% year-on-year decrease.

• Volume picked up on Tuesday, 29th November, just slightly below the 15th November volume, the previous buying climax.
• Wednesday’s Volume fell 10% with new price highs.
• The erratic rather than trending Volume without capitulation volume on the 31st October price lows are hallmarks of a bear market rally.

• The large physician network is actually the cornerstone for MedSci Healthcare (MHH HK)’s precision omni-channel marketing solutions and RWS solutions, and also the key to support the overall investment logic.
• In fierce competition, how to retain physician network for a long time, convert them into business value continuously and achieve the high growth trend expected by the market is challenging.
• In terms of valuation, MedSci’s valuation could be higher than Medlive due to its stronger physician platform solutions business and medical professional network, but could be lower than HUAYIWANG. 

• JD Health (6618 HK) and Yum China Holdings Inc (9987 HK) will replace Longfor Properties (960 HK) and XPeng (9868 HK) in the FTSE China 50 Index on 16 December.
• The largest flow and impact of passive trading will be on Yum China Holdings Inc (9987 HK). There could be buying on Yum China Holdings, Inc (YUMC US) overnight.
• Short interest on the deletes is over 7% of float and there could be short covering against the passive selling at the close on 16 December.

• There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
• Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
• Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.

• Lygend Resources & Technology (2245 HK) priced its IPO at HK$15.80 per share to raise net proceeds of HK$3.5 billion (US$450 million). The shares will start trading tomorrow.
• We previously discussed the IPO in Lygend Resources & Technology IPO: Riding the Wave and Lygend Resources & Technology IPO: Valuation Insights.
• Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

• Chinese equities have been on a volatile path but are finally gaining some upside momentum
• Dollar seems to have peaked and USDCNH is retreating with renewed optimism for the Chinese economy reopening. 
• We revisit the trade and look at potential restructuring options

The Asia HY Trade Book for November 2022 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
• Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
• Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.

• Sunshine Insurance (6963 HK) has launched its HKEx listing at HK$5.83-6.45 per share to raise up to US$951 million. Books are open from 30 November to 5 December.
• We previously discussed the IPO in Sunshine Insurance Group IPO: The Bull Case and Sunshine Insurance Group IPO: The Bear Case. 
• At the IPO price range, Sunshine trades at a significant premium to median peer multiples. Therefore, we would avoid the IPO. 

• Lygend Resources & Technology (2245 HK) raised US$470m in its Hong Kong IPO.
• Lygend Resources & Technology (Lygend) is a nickel trading and production firm with a portfolio covering multiple areas across the nickel industry value chain.
• In this note we will talk about the trading dynamics.

• Weilong Delicious Global (WDG HK), a spicy snack food company in China, aims to raise around US$200m in its Hong Kong IPO.
• According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
• In this note, we provide an update to our earlier peer comparison and valuations.

• WuXi AppTec announced its proposed disposal of A Shares again. Investors’re worried about the signal behind – Performance growth has reached certain limit. There’s the possibility of a turning point.
• Such proposed disposal (regardless of share price) could continue to weigh on the valuation performance of the whole CXO sector – There is still “bubble” in share price.
• In fact, Li Ge (Founder of WuXi AppTec) knows CXO industry much better than anyone, when he decides to resolutely reduce his shareholding, it is very telling. 

• The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Alibaba Group, Haier Smart Home, Kuaishou Technology, Li Auto, PetroChina, Tencent, JD.com, China Resources Mixc Lifestyle Services and Tingyi Holding.
• The largest outflows will be on SMIC, NetEase, AIA Group, HSBC Holdings, China Construction Bank, Alibaba Health Information Technology, Innovent Biologics, China Mobile, Ping An Insurance and ICBC.

• Our call has centered around buying a dip in HK at HSCEI 5,800 and HSI 17,000 for a final upside drive into December to form at top.
• H shares (our long vehicle) – Met 5,800 long entry. 6,030 is the level to clear and hold above. PT at 6,600 just under the 6,700 MT barrier.
• Macro trend remains down. HSI 19,400 represents an excellent short opportunity for Q1 weakness. December is touted to be a topping/ range ahead of a more bearish Q1.

• Sunshine Insurance Group (SIG), a life, health and P&C insurance company, aims to raise up to US$1bn in its HK IPO.
• SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
• We have looked at the company’s past performance in our previous notes. In this note, we will undertake a peer comparison.

• Pinduoduo (PDD US)’s 3Q22 mirrored its strong previous quarter with revenue of RMB 35.5bn (consensus: RMB 30.8bn) and OP of RMB 10.4bn (consensus: RMB 6.7bn).
• CCP’s anti-monopoly drive and common prosperity measures are helping Pinduoduo to outperform the competition.
• Nonetheless, we refrain from being outright positive on any of the Chinese e-commerce names with the economy heading into a slowdown and the lowest sector-multiple at above 12x FY+1 OP.

• Fangzhou Group (FANGZHOU HK) is looking to raise about US$300m in its upcoming HK IPO. The deal will be run by Citibank, UBS and ABC International. 
• Fangzhou Group is an online chronic disease management platform in China, considered the largest in terms of average MAU in 2021, according to CIC.
• It focuses on common and chronic diseases such as hypertension, cardiovascular and respiratory chronic diseases, providing tailored medical care and precision medicine covering the full disease cycle for patients.

• Sunshine Insurance (SUN HK), a Chinese life and P&C insurance company, is pre-marketing a US$1.0 billion HKEx IPO, according to press reports.
• In Sunshine Insurance Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.  
• The key elements of the bear case rest on Sunshine Life’s VNB margin decline and agent channel pressure; Sunshine P&C’s regulatory pressure on premiums and the group’s declining investment yield.

• China Education Group (839 HK)‘s 27.8% growth in net profit affirmed its solid fundamentals and minimal exposure to regulatory risks. We also welcome its resumption of dividends.
• Management expects profitability will be driven by the 48% new student enrollment growth, potential for tuition increase and global education segment recovery. Consensus forecasts are currently too conservative.
• Weaker 2H FY22 profit is due to higher depreciation and finance costs but will be absorbed with higher enrollment. Capex will be light and we also like its deleveraging move. 

• Commodities trader Theme International Holdings (990 HK) is up 670% since the inset of Covid, and that is after declining 52% from the July 2021 peak.
• A sharp increase in iron ore prices since 2020 resulted in FY21 net income of HK$1bn against HK$146mn in FY19. Net cash is currently HK$4.2bn, 38% of Theme’s market cap. 
• You Zhenhua is Theme’s largest shareholder. Theme recently acquired a 6.6% stake in You Zhenhua-controlled Esteel, which in turn holds a 61% stake in BRC Asia Ltd (BRC SP). 

• Sunshine Insurance (SUN HK) is looking to raise between US$859m-US$950m by selling 1.15bn shares in its IPO. At the top end, the company will be valued at HK$74bn.
• All of the pre-IPO shares are Domestic Shares and there appear to be no immediate plans to convert them to H-shares. The only H-shares will be the IPO shares.
• MSCI China inclusion requires a higher stock price or conversion of Domestic Shares to H-shares; FTSE inclusion is likely in June; HSCI and Stock Connect inclusion is expected in March.

• The revenue growth rate rose for the first time in one year and a half.
• Also, operating loss shrank for the first time in one year and a half.
• We believe the stock has an upside of 38% for year end 2023.

• Short video companies are taking users’ time from other kinds of apps.
• Kuaishou has a lot of promising data, such as active users, paying users, and time spent.
• The operating losses significantly shrank in the past four quarters.

• Jinxin Fertility is a leading IVF service provider in China. It has done a series of M&A in the past two years.
• We examine the thesis of the company for a trade into 2023.
• We believe the company has big potential to realize its synergy post acquisition and ramp up post expansion. More favorable policy to come.

• There will be 10 changes for the Chinext Price Index and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 December.
• One surprise is the inclusion of Hunan Zhongke Electric Co,Ltd. (300035 CH) in both indices. Four stocks are adds to both indices while two stocks are deletes from both indices.
• The adds have outperformed the deletes over the last 8 months but have given up some of the gains over the last month. There is a big sector skew.

• There are 47 changes for the SZSE 1000 index that will be implemented at the close of trading on 9 December.
• We see 51 stocks being added to Shenzhen Stock Connect (47 index adds + 4 existing constituents) and 83 deletions from Stock Connect (15 index adds + 68 existing constituents).
• There could be 4 adds to the MSCI China in February and 11 adds to the FTSE All-World/All-Cap in March. Plus a bunch of deletes at the close 9 December.

• Sunshine Insurance (SUN HK), a Chinese life and P&C insurance company, is pre-marketing a US$1.0 billion HKEx IPO, according to press reports.
• In 2020, Sunshine P&C ranked seventh and Sunshine Life ranked 12th as measured by original premiums income market share, according to the CBIRC and the Insurance Association of China.
• The key elements of the bull case rest on Sunshine Life’s robust premium growth and high persistency ratio; Sunshine P&C’s underwriting profits in 9M22 and its high group solvency ratio.

• On October 6th we suggested selling HSBC vol vs buying ICBC vol
• We look at the trade performance both in terms of realised and implied vols
• We consider the trading options given the convergence in vols

• Sihuan is pursuing strategic adjustments actively, aiming to further improve the overall operating efficiency and financial performance of the Company. We summarized some business updates. 
• Based on our analysis, Sihuan’s business transformation to innovative drugs and medical aesthetics may not end up well, despite that they are “a good story” for the time being.
• Without persuasive long-term logic, share price of Sihuan could underperform. Therefore, considering the characteristics of Sihuan, we advise investors to do short-term trading – buy low and sell high.

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
• Lippo Malls Indonesia Retail Trust
• Perusahaan Gas Negara Perser

• There are 50 changes a side for the CSI 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 December.
• One-Way turnover at the rebalance is estimated at 12.64% leading to a one-way trade of CNY 9.3bn. The Materials, Information Technology and Consumer Discretionary sectors are net gainers.
• 9 adds to the CSI 500 Index are deletes from the CSI 300 Index while 7 deletes from the CSI 500 Index are adds to the CSI 300 Index.

• There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 December.
• There will be 10 deletions from the MSCI Standard Index and 26 deletions from the FTSE All-World/All-Cap indices at the close on 9 December.
• Currently, 8 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 21 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

• A “valuation system with Chinese characteristics” has the media, ostensibly, discussing whether this implies a premium for SOEs and companies aligned with national goals.
• In early 2020, SOE-backed clean energy play CGN New Energy Holdings (1811 HK) was subject to a potential privatisation from its parent; but it failed to materialise. 
• During the 14th and 15th Five-Year Plans (2021-30) period, China’s installed capacity for wind and solar power is expected double.

• Meituan reported 3Q2022 results. Revenue increased 28.2% YoY to RMB62.6bn (vs consensus RMB62.3bn) while reported an OP of RMB988m (consensus OP loss of RMB935m) for the first time since 3Q2019.
• However, on adjusted basis, Meituan made an adjusted operating loss of RMB1.1bn (1.7% of revenue) of revenues compared to an adjusted operating loss of RMB7.7bn (15.1% of revenue) in 3Q2022.
• Tencent announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends and Naspers is expected to sell the Meituan Shares it receives from Tencent.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads  21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU), 111 Inc (YI US).
• Lowest spreads  Tyro Payments (TYR AU), Warrego Energy (WGO AU), Nitro Software Ltd (NTO AU), Chip Eng Seng Corp (CHIP SP), Uzabase Inc (3966 JP), PTB Group Ltd (PTB AU). 

• Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$1.0 billion HKEx IPO, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: The Bull Case, Growatt Technology IPO: The Bear Case and Growatt Technology IPO: Growing Watts. 
• In this note, we present our forecasts and take the first look at Giant Biogene’s potential valuation range. 

• Our forecast of the total peak sales of BRUKINSA, tislelizumab and the rest commercialized products is about RMB10 billion, which is not enough for BeiGene to turn losses into profits. 
• BeiGene has the highest R&D/academic ability among domestic pharmaceutical enterprises,but BeiGene cannot be assessed according to the standards of Chinese pharmaceutical enterprises due to its fundamentally different cost structure/breakeven point.
• The current market value has already priced in the success of TIGIT project to some extent. In other words, the upward elasticity may be limited. But BeiGene deserves long-term follow.

• While China Gas Holdings (384 HK) expects better gas dollar margin HoH, there are still high profit uncertainties and its full-year operational guidance does not look exciting.
• The expectation of flat to 10% YoY decline in new residential household connections is not encouraging. With 1H FY23 profit only amounted to 42% of consensus, we see downgrade risks.
• Despite achieving positive free cash flow, its high gearing of 69.9% (+4pp HoH) is still very stretched relative to peers. We prefer Kunlun Energy (135 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.

• Indika Energy
• Meituan

• Amid the challenging market, Bosideng International Holdings (3998 HK)‘s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.
• It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.
• With 32% increase in online branded apparel sales, the channel will be Bosideng’s key growth impetus. For “double-11”, sales have outperformed peers significantly, showcasing its product strengths.