China

• Back on the 19 May, SAIC (600104 CH) acquired China Zhengtong Auto Services (1728 HK)‘s 71.04% stake in Dongzheng Automotive Finance (2718 HK) at a judicial auction. This triggered the mandatory Offer.
• SAIC confirmed a possible unconditional mandatory cash Offer for Dongzheng on the 26 May.
• The Composite Doc has now been dispatched. The Offer is open for tendering and closes on the 16 October

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• We previously discussed the IPO in CALB IPO: The Bull Case and CALB IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• The 1Q and truncated 1H numbers outline the highest growth among peers, customer diversification and sequential improvement in gross margin. The IPO is worth a look.

• Dongzheng Automotive Finance (2718 HK)‘s composite document is out with the offer open from 15 September to 6 October. The IFA considers the offer to be fair and reasonable.
• SAIC Motor (600104 CH), which acquired a 71.04% stake, has launched an unconditional MGO at HK$1.2430 per H Share. SAIC intends to maintain Dongzheng’s listing status.
• At the last close and the 17 October payment, the gross and annualised spread to the MGO price is 1.1% and 13.3%, respectively.

• Lepu Medical Technology A (300003 CH) is looking to raise up to US$550m in its Swiss GDR listing. Bookrunners on the deal are CICC, Citic Securities, and Credit Suisse.
• The firm has earlier secured CSRC’s approval to list a maximum 36.09m GDRs (or 180.46m A-shares, at a 1:5 conversion). 
• As per media reports, Lepu Medical will look to launch its Swiss GDR offering soon and the eventual deal size might amount to US$300m.

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
• In our previous note, we undertook a peer comparison. In this note, we will talk about valuations.

• HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
• Implied vols are low and options offer a great way to play a tactical long
• We highlight a relative value vol trade vs the SPX

• The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.
• Hang Seng Index and most of its constituents continue to read like bear porn. Without a meaningful reversal/impulse rally, it is hard to call for a reversal.
• I hear and agree the case is so bad that it must be a buy signal. The sentiment is precious, BUT it needs a price action supporting the exhaustion thesis.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China SCE
• CIFI Holdings
• Fosun International
• Sino-Ocean Service
• Vedanta Resources

• Back on the 11 April, Chinese internet data center services provider VNET (VNET US) announced a non-binding proposal from Hina Group and Shanghai’s Industrial Bank at an utterly underwhelming US$8.00/ADS.
• Then crickets. A reported tilt from MBK Partners failed to materialise.
• VNET has now announced a preliminary non-binding proposal from founder Josh Sheng Chen, at a similarly underwhelming price of US$8.20/ADS. 

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
• In this note, we undertake a peer comparison and talk about the company’s expansion plans.

• Eva Precision Industrial Holdings (838 HK) is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3% dividend yield (30% payout ratio).
• H1 2022 was groundbreaking for the company as it commenced strategic cooperation with  BYD (1211 HK) on products and bagged orders from Huwaei and Tesla, with more coming in H2.
• There is additional room for buybacks as the stock price is < 2HKD and the company only completed 3-4% of its 200 mn HKD buyback.

• 4Paradigm (1764934D HK) is a pioneer and leader in enterprise AI. Company offers platform-centric AI solutions to enterprises that can be deployed on a large scale to support decision making.
• The company was ranked the largest player in the platform-centric decision-making AI market in China in 2021 and has filed for a HKEx listing for the third-time this month.
• 4Paradigm’s top line and margins have improved since we last wrote on the company.

• CALB’s revenue surged by 266% YoY to reach 3.9 billion RMB in 1Q 2022. Its  operating profit also increased by 43.5% YoY in 1Q 2022, respectively. 
• CALB also had the highest sales growth rate of 266.5% YoY in 1Q 2022 versus 154% growth YoY for CATL and 63% growth YoY for BYD in 1Q 2022.
• CALB is one of the most interesting large cap IPOs globally in 2022. Despite horrible market conditions, the company is trying to complete its IPO in the next several weeks.

• The main bottleneck in this market in China is the severe shortage of doctors and limited qualified hospitals to carry out such surgery, leading to lower-than-expected market penetration/sales performance.
• Jenscare Scientific (JCS HK)’s products have to face fierce competition, without obvious advantage of development progress, or the progress has already lagged behind the competitors. 
• Overall, good valuation cannot be supported without promising commercialization outlook. We are not sure whether Jenscare can finally achieve the ideal return in the case of unfriendly external environment.

We view First Pacific (FIRPAC) as “Low Risk” on the LARA scale. This is primarily due to the group’s strong assets and tight control over key investee companies, which ensure reliable dividend streams to service debt. The investment holding company has a reasonable track record. Its key assets include Philippine Long Distance Telephone Company, Indofood and Metro Pacific Investments Corp. The group’s asset concentration is offset by the strength of these companies, which are: [1] leaders in their market segments; and [2] stable non-cyclical businesses. Leverage is moderate (measured as Net Debt at Holdco/Market Value of Assets). The investment portfolio has high transparency, with almost all assets (based on NAV) being listed.

Our fundamental Credit Bias is “Stable”​, due to the subsidiaries’ robust performance.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”. As an investment holding company, FIRPAC does not face substantial regulatory, geopolitical or ESG risks.

• Jenscare Scientific (JCS HK) is developing interventional products for the treatment of structural heart diseases. Its core product LuX-Valve is expected to become the first commercialized TTVR product in China.
• With its comprehensive portfolio and early mover advantage, Jenscare is well-positioned to capitalize on large and underpenetrated China’s structural heart diseases treatment market worth of RMB20.3 billion in 2030.
• Jenscare Scientific plans to raise $30 million (HKD234 million) in its third application for a Hong Kong IPO, with CICC and Citigroup being the joint sponsors.

• China Conch Venture Holdings (586 HK) is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.
• The company’s waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.
• We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China’s new energy industry.

• Due to better-than-expected VBP results, we saw a decent rally of MDG’s share price last Friday. However, all the medical products that are covered by VBP begin to lose logic. 
• Backwardness in R&D is a bottleneck restricting MDG’s future growth. MDG is more like a manufacturing/processing plant relying on labor dividends than a technology company with high product added value.
• Multiple risks (e.g.pandemic, depreciation of exchange rate against US dollar, economic downturn, etc.) will add more uncertainties to MDG’s 2022 performance. MDG’s share price could remain tepid after temporary rally. 

• The offeror and acceptances reached 46.04%, just short of the 50% minimum acceptance condition. The offeror has decided to let the Giordano International (709 HK) offer lapse.
• The offer fell short of the 50% threshold as the Cheng family mistakenly assumed that shareholders behind Halycon’s stake were friendly shares, which would support the offer.
• The downside will be muted as the shares are trading in line with the 1-year average forward P/E, minorities thought the offer was low, and David Webb is a buyer.

• 21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
• The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET. 
• The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products. 
• In this note, we talk about the updates from the company’s recent PHIP filings.

• Utter carnage in arb-world this week, as Frasers Hospitality Trust (FHT SP) fails, Link Administration (LNK AU) and Ramsay Health (RHC AU) are potentially next, and now Giordano (709 HK).
• 46.04%. That’s the only number that matters, which represents the total shares owned by the Cheng family plus shares tendered. 
• The Chengs are restricted from launching another Offer for 12 months. Giordano will be sold off today, however, this is a buy if it retraces to around the undisturbed levels.

• 111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu – both co-founders and co-chairmans.
• Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price. 
• Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.

• NetDragon Websoft announced that it has appointed Ms. Tang Wu (a virtual humanoid robot powered by AI) as its new CEO which would be the first ever in the world. 
• The company’s education revenue increased by 71.2% YoY to reach 2.4 billion RMB in 1H 2022. Profitability of the edtech business is also improving.
• Despite the company’s lower valuation multiples than its peers combined with catalysts including improving edtech business, we are cautious on its shares mainly due to the overall market related risks. 

• Genscript’s four business segments are the horizontal and vertical extension based on gene synthesis technology. There is also synergy between Genscript and its subsidiaries, which can promote each other’s development.
• If only from the business level, GenScript is a worthy target for investment. It has the exponential growth potential in valuation and could reach a new high in the future.
• However, our biggest worry lies in the “black swans events” . We don’t know what “new surprises” GenScript will bring us in the future. 

• China’s gaming regulator granted publishing licenses to 73 online games on Tuesday, including one for NetEase Inc (NTES US) . However, Tencent (700 HK) was excluded for the fifth time.
• Though the 9-month long new game approval freeze was lifted in April, it has been more than a year since Tencent received approval for a new title.
• Tencent’s online game revenue declined YoY for two consecutive quarters and we expect online game revenue to decline further in 3Q2022E.

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
• KWG Living Group
• Sino-Ocean Service

• Nearly 90% of the way through the review period, we see 4 changes using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• There are overlaps in the inclusions using 6/12 month minimum listing history, so there is less risk if the index committee switches from 6 to 12 months at the review.
• Using a 6 month minimum listing history, one-way turnover is estimated at 5.07% and will result in a one-way trade of CNY 2,795m.

• Derivative trade ideas to maintain upside/protect downside in Tencent. Stock is cheap but risks remain 
• Take advantage of a retracement in implied vols and depressed skew levels to improve payoffs and protect against broader market risk
• We look at 3 alternative trades depending on your position and outlook

• Onewo Space-Tech (ONEWO HK) is getting ready to complete an IPO in Hong Kong in the coming weeks. The company is seeking to raise nearly US$2 billion in this IPO.
• Onewo is one of the leading property management service providers in China with a market share of 4.3% in the US$16 billion industry in China. 
• The major real estate downturn in China is one of the biggest headwinds on the Onewo IPO. 

• With concerns on weaker 1H22 profit and lower industry return (due to Lianjiang offshore project) now behind us, China Longyuan Power (916 HK) is well set for better 2H22.
• Utilisation hours should see improvement while new capacity growth is another major driver. The upgrades of aged and small-sized units will almost double its existing capacity. 
• Receipt of Rmb11.4bn subsidies clearly represented an acceleration in collection. This will stay as contributor to better cash flow and enhance financial position. 

• Simcere’s profit was mainly driven by the income of non-recurring items (investment business). Due to unfriendly external environment, investors are recommended to be prepared for further decline in net profit. 
• The overall quality of Simcere’s pipeline is not high, which would be difficult to bring decent revenue in the next few years. Simcere’s transformation is not as smooth as expected.
• In fact, over the years, Simcere’s strongest capability lies in the sales rather than R&D. Since the game rule changes, we are bearish on Simcere.

We view Health and Happiness International (H&H) as “Medium Risk” on the LARA scale. The company has a sound business profile, with stable branded products in the Baby Nutrition and Care​ (BNC) and Adult Nutrition and Care (ANC) markets. The acquisition of Zesty Paws in 2021 allowed H&H to expand into the Pet Nutrition and Care ​(PNC) business. The company’s strong distribution channels support cross-border and e-commerce sales strategies. That said, the positive factors are balanced by the risk of entering new markets and selling new products, along with the fragmented and competitive Chinese market. We like H&H’s solid business fundamentals, strong market positions and healthy financial profile. In particular, it has a sound liquidity profile and steady CFO.

We note that the acquisition has impacted H&H’s financial profile and weakened its leverage metrics. That said, PNC is part of the company’s sustainable growth plan. We expect it to work on deleveraging in the near term, in order to maintain a healthy credit profile.

The USD bondholders suffer material structural subordination. The issuing entity is a Cayman Islands company with no operating assets, and the PRC operating subsidiaries do not guarantee the USD notes. The level of priority creditors is high at the Australian subsidiary. Bondholders would have very limited access to assets in a liquidation scenario.

Our Credit Bias on H&H is “Stable”, given the company’s solid business fundamentals, strong market positions and moderate financial profile. The ANC and PNC segments are expected to deliver stronger performance, while BNC should continue facing challenges. As a result, ANC and PNC will likely be H&H’s key growth segments, offsetting the competitive BNC business. The company aims to expand into other business segments and markets outside China, in order to compensate for muted growth in the country.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

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.

• Longfor Properties
• Tower Bersama Infrastructure

• 111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price. 
• For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
• The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively. 

• 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, a few large Hong Kong IPOs are lining up to launch soon.
• Placements picked up this week in Japan and India with most being secondary deals.

• Tencent invested more in Ubisoft Entertainment, a French game developer.
• The monthly active users of local life recovered in China in June and July.
• NetEase will close Music Street, the social networking-oriented karaoke app.

• As one of the few companies in the world that could provide one-stop solutions including all major medical devices used in non-vascular interventional surgery, Innovex’s outlook is promising.
• About 30% overseas revenue indicates that the Company’s internationalization is on track, which could help to “hedge” negative domestic policy risks.
• In terms of the valuation, Innovex’s valuation should be higher than Scivita but lower than Aohua. However, Innovex has the potential to surpass Aohua in the future.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China SCE
• Yuexiu Property

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China SCE
• Yuexiu Property

• Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
• In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
• Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Leapmotor (2007699D HK), Onewo Space-Tech (ONEWO HK) and CALB (CALBLZ CH) are pre-marketing a US$1.5 billion, US$2.0 billion and US$2.0 billion HKEx IPOs, respectively.
• Event-Driven developments – DTAC/True, Giordano International (709 HK), Link Administration (LNK AU), MyDeal.com.au Ltd (MYD AU), Nitro Software Ltd (NTO AU), Resapp Health (RAP AU), Tyro Payments (TYR AU). 

• China Aviation Lithium Battery (CALB) is getting ready for an IPO in Hong Kong.
• In the past several days, CALB received the approval from the Hong Kong stock exchange for an IPO.
• In the next two years, CALB expects its production capacity for lithium batteries to increase to about 55 GWh which is more than 6x the capacity at end of 2021. 

• Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
• We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case. 
• A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.

• The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
• The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
• There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

• Bilibili reported 2Q2022 results yesterday. Revenue grew 9.2% YoY to RMB4.91bn (in-line with consensus), however, it declined 2.9% YoY sequentially driven by YoY decrease in revenue from mobile games.
• Operating losses for the quarter further widened to RMB2.2bn (vs consensus RMB2.1bn) which accounted for 44.6% of revenues compared to 33.8% in the same period a year ago.
• Bilibili Inc (BILI US)  has taken several measure to improve its deteriorating profitability including headcount reduction, S&M cost cuts and close down of unprofitable businesses.

• Shougang Fushan Resources (639 HK) is back to interesting levels after a correction in HK/China and now trades at 4.5x PE/1.3x EV-EBITDA FY22e and a dividend yield of 17%. 
• With >50% of the market capitalization in cash (accounting for the dividend liability), there is an excellent margin of safety in the name.
• A further correction of coking coal prices by 20% from these levels to 1700-1800 RMB/ton would still have the stock trading at a >10% dividend yield. 

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.

• Palo Alto Networks’ management has continued to make significant investments to transform the company and take advantage of the rapidly growing and large market opportunity in cybersecurity.
• Palo Alto Networks is looking to grab a large chunk of market share and become a leader in the firewall market.
• We provide the stock of Palo Alto Networks with a ‘Hold’ rating with a revision in the target price.

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we provide our earnings estimates and thoughts on valuation.

• People’s Insurance (PICC) (1339 HK)’s 2022H1 performance outpaced the industry peers, mainly driven by the improved performance of motor vehicle insurance business and non-vehicle insurance business. 
• While non-life insurance business is the foundation/main driver of growth,life insurance business is the drag on performance, the successful transformation of which is an important factor to drive up valuation.
• PICC’s is undervalued. The major catalyst could be the upcoming 20th National Congress, expecting some rally during this period. Due to unfriendly macro, the rally may not last long.

• Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).
• The company has >35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.
• If the company is willing to continue paying >60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.

• Onewo Space-Tech (ONEWO HK)  is a leading property management service provider in China focused on offering basic property management services.
• Backed by China Vanke Co Ltd (H) (2202 HK) , the company has filed for an IPO on the HKEx and plans to raise proceeds of around US$2bn.
• In this insight, we discuss the company’s business model and deep dive into the largest business segment Community Space Living Consumption Services.

• YSB Inc (YSB HK) is looking to raise about US$500m in its upcoming Hong Kong IPO.  
• YSB Inc. (YSB) operates a pharmaceutical platform, digitizing the pharmaceutical transaction and service segment.
• However, gross margins have fluctuated owing to a changing sales mix. Growth has also come at the cost of profitability and YSB has consistently burned cash over its track period.

• Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
• Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
• We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

• In 2Q22, the revenue growth rate was lower than we expected, especially in the game business.
• We believe the May layoff will reduce operating expenses in following quarters.
• We set an upside of 8.3% and a price target of HK$197.

• Cummins delivered a third consecutive all-around beat in a quarter that was marked by a number of significant developments including many ke partnerships.
• The company announced partnerships with Daimler Truck, Scania, and North America for delivering fuel cell electric powertrains for heavy-duty truck applications, with Komatsu on developing haulage equipment zero-emission which includes hydrogen fuel cell solutions for the large mining haul truck applications.
• It also achieved a significant milestone in the quarter related to two acquisitions, namely Meritor and Jacobs Vehicle Systems.

• There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
• If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
• There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

• Pan Shiyi and Pan Zhangxin – Chairman and CEO respectively of SOHO China (410 HK) – have tendered their resignations, with immediate effect. 
• Both are resigning “to focus on supporting the arts and philanthropic pursuits“.
• That sounds like a “donation” is on the cards. And the Pans selling their stake in SOHO China would nicely fund that donation.

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• In CALB 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 its small scale, low profitability and high FCF burn compared to listed peers.   

• 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 also flag those companies where shares have been pledged, both recently and ongoing. Stocks mentioned include A8 New Media (800 HK) and China Fordoo Holdings (2399 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.

• China SCE
• CIFI Holdings

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• According to Frost & Sullivan, in terms of installed capacity in 2021, CALB ranked seventh globally among EV battery companies with a 3.2% market share.
• The key elements of the bull case rest on a large and growing market, rising market share, explosive top-line growth and ambitious capacity expansion plans.

• It was reported in August that Tencent was looking to raise its stake in Ubisoft and had reached out to Ubisoft’s founding family Guillemot who currently owns 14.0% of Ubisoft.
• Tencent has acquired a 49.9% economic stake in Guillemot Brothers for EUR300m and as part of the deal, will be allowed to up its current stake in Ubisoft.
• Ubisoft announced on Tuesday that its board of directors have authorised Tencent to increase its direct stake in Ubisoft from 4.5% to 9.99%.

• IQIYI Inc (IQ US) reported 2Q2022 earnings last week. Revenue decreased 12.5% YoY to RMB6.66bn (vs consensus RMB6.67bn) and reported an OP of RMB125.8m (vs consensus RMB30.4m).
• The company also announced a US$500m private placement of convertible notes with PAG (PAG HK)  and the transaction is expected to close in 4Q2022.
• The company also has entered into a content licensing agreement with Douyin which will likely bring in high-margin business for content distribution segment.

• The Aug China Express Development Index points to further industry recovery; and as the leader with 23% (+2pp YoY) market share, ZTO Express (2057 HK) should ride on the uptrend. 
• Sustained volume outperformance, upside on pricing and excellent cost control capability are drivers in 2H22. We are also comfortable with its solid financial position. 
• ZTO Express has above-average earnings quality and enjoys benefits from industry consolidation. Its on par valuation with the industry makes the stock appealing.

• YSB Inc (YSB HK) is looking to raise about US$500m in its upcoming Hong Kong IPO.  
• YSB Inc. (YSB) operates a pharmaceutical platform, digitizing the pharmaceutical transaction and service segment.
• Throughout its history, YSB has been evolving its business model and has been growing its user base rapidly as well, thereby leading to GMV growth and in turn, sales growth.

• The current two mainstream delivery platforms such as LNP delivery platform and GalNAc RNAi platform have been verified and recognized, with products using these platforms successfully launched on the market.
• Sirnaomics has developed its own differentiated delivery platforms, but the druggability has never been verified in trials, like a blind box. They will not be valuable until they are proven.
• Sirnaomics has cashflow pressure and is uncertain if it can survive “this winter”. It’s also difficult for Sirnaomics to find suitable valuation anchor in HKEX. Share price may fluctuate largely.

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we undertake a peer comparison with some of its larger listed peers.

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
• CIFI Holdings
• Fosun International
• Sino-Ocean Service
• Times China