China

• The offeror and acceptances reached 44.98%, just short of the 50% minimum acceptance condition. The closing date has been extended to 13 September. 
• If the offer is declared unconditional on or before 8 September, Giordano International (709 HK) shareholders who accept the offer will get HK$1.88 but not the dividend of HK$0.085.
• The offeror likely remains confident that it will hit the 50% threshold. At the last close, the gross and annualised spread for 17 Sep payment is 1.1% and 37.2%, respectively.

• NetEase will start its first game studio in Europe after setting up two studios in the U.S.
• Tencent and Sony invested minor shareholding in a Japanese game developer.
• In 1H22, S.F. Holding’s revenue grew dramatically and its margins improved significantly.

• Onewo Space-Tech (OST) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke Co Ltd (H) (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 talk about the updates from its recently filed PHIP.

• Late last night, Giordano International (709 HK) announced the Offeror – the Cheng Family – had 44.98% in the bag after 20.41% of shares out had been tendered.
• The Offer has been extended for one week, until the 13 September. 
• Whether investors receive the Offer consideration AND the interim divided is still up for debate.

• Beneunder has large sales volume on Chinese e-commerce platforms and has a large physical store chain.
• However, outdoor brands and apparel brands compete with Beneunder and some brands’ prices are close to Beneunder.
• Beneunder has to keep physical stores and control online advertising budget.

• Over the past year, we’ve seen the stock price of Kintor fluctuate largely, which was mainly driven by its COVID-19 drug proxalutamide. However, we are not optimistic about its outlook.
• There are big concerns about the credibility of management. The suspicion caused by mistrust leads us to suggest that investors directly enter the “show me the result” mode.
• Shares plunged after the announcement of the Placing. Obviously, Kintor Pharmaceutical (9939 HK) is short of money. Considering the potential risks behind, we are bearish on Kintor. 

Sino-Ocean’s H1/22 results were mixed in our view. Contracted sales fell by 14% y-o-y, slightly better than the average industry decline of 30-40%. The company also managed to repay c. CNY 20 bn of debt in H1/22. Sino-Ocean enjoys good access to financing, raising CNY 6 bn from the capital markets amid weak market sentiment in the period. It also intends to issue state-backed guarantee bonds in the near term.

Negatively, Cash/ST Debt was inadequate, with available cash of only CNY 14 bn. Sino-Ocean plans to explore various channels to repay the existing debt, including boosting contracted sales with a faster cash collection rate, project financing and obtaining financing support from shareholders. That said, any price discount or additional financing will weaken the credit metrics further. Moreover, Sino-Ocean fell in the yellow category under the regulator’s Three Red Lines thresholds (FY 2021: green), which would limit the amount of new debt that could be taken 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.

• ABM Investama
• China Jinmao Holdings
• China Vanke
• Country Garden Holdings Co
• Sino-Ocean Service

• Driven by recovery of Casarte after lockdown removed and premiumisation of product and pricing, Haier Smart Home (6690 HK) should see sustained healthy earnings growth in 2H22.
• We expect room to improve gross margin sequentially as cost pressure subsides in 2H22. Meanwhile, overseas markets still present good expansion opportunities. 
• Premium valuations are justified by its brand strength, global presence and strong execution capability. Healthy 1H22 should clear market’s concerns on impact of weak property market. 

• 2018 was a watershed for Tongrentang. After the incident of using expired honey was exposed and the corruption scandal afterwards, Tongrentang’s performance declined significantly and didn’t recover until 2021.
• Angong Niuhuang Pill is the major performance driver and also Tongrentang’s core product. Due to the economic downturn, the price increase of Angong Niuhuang Pills could lead to inventory overstocking.
• The high growth in 2021 may not be sustained. We lowered our forecast for 2022. Without core competitiveness and high moat, we are conservative about Tongrentang’s long-term outlook.

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.

• KWG Living Group

• China MeiDong Auto (1268 HK) presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). 
• China MeiDong Auto (1268 HK) ‘s integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. 
• The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. 

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• 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) and Onewo Space-Tech (ONEWO HK) are pre-marketing a US$1.5 billion and US$2.0 billion HKEx IPO, respectively.
• Event-Driven developments – BYD (1211 HK), Giordano International (709 HK), MACA Ltd (MLD AU), Nitro Software Ltd (NTO AU), Link Net (LINK IJ).

• Lichen China, niche provider of financial and taxation services, filed for an IPO in the United States, and plans to raise ~$25M. Investment bank Univest Securities is leading the offering. 
• The company applied to list Class A shares on the Nasdaq Capital Market under the symbol Lichen China (LICN US) and will have Class A shares and Class B shares. 
• We have a favorable view of the upcoming IPO, and consider an IPO valuation of ~$119M as attractive at ~2x EV/FY22E revenue and a forward P/E of ~14x.  

• Onewo Space-Tech (ONEWO HK), China Vanke Co Ltd (H) (2202 HK)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
• In Onewo 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 the organic growth rates half of the reported rates, slow revenue diversification, lacklustre gross margin and declining contract liabilities ratio.

• 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 starting to move with Leapmotor and Onewo, while CALB continues to have second thoughts.
• The biggest placement this week was Doosan, but there was news of Tencent setting its sights on sizeable future placements via divestments.

• There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• One new deal was discussed this week: Potentia’s rejected proposal for Nitro Software Ltd (NTO AU).
• Key updates took place for MACA Ltd (MLD AU), Giordano International (709 HK), and Link Net (LINK IJ).

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.

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry
• Overall, net inflow over the past week was ~US$0.7bn, split between Shanghai (US$0.3bn) and Shenzhen (US$0.4bn).
• The largest inflows were into Gree Electric Appliances (000651 CH) and CATL (300750 CH). The largest outflows were in Industrial Bank (601166 CH) and China Merchants Bank (600036 CH).

• Leapmotor (2007699D HK), a Chinese EV manufacturer, is pre-marketing a US$1.5 billion HKEx IPO, according to press reports.
• We previously discussed the IPO in Leapmotor IPO: The Bull Case, Leapmotor IPO: The Bear Case and Leapmotor IPO: Look Before You Leap. 
• In this note, we present our forecasts and take the first look at Leapmotor’s potential valuation range. 

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, the net outflow over the past week was ~US$0.1bn, split (-US$0.4bn) for Shanghai and (+US$0.3bn) for Shenzhen.
• The largest inflows were into CNOOC Ltd (883 HK) and Yankuang Energy Group (1171 HK). The largest outflows were in Meituan (3690 HK) and Kuaishou Technology (1024 HK).

• Chongqing Hongjiu Fruit (6689 HK) raised around US$71m in its Hong Kong IPO.
• CHJF’s subscription rates were lackluster with weak coverage on the institutional tranche and the retail portion being undersubscribed.
• However, after applying a discount to the local peer average, we think there still remains some upside for investors given its higher revenue and profitability growth.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

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. ABM Investama
2. China Jinmao Holdings
3. Lifestyle International Holdings
4. Geely Auto
5. First Pacific Co

and more…

In our view, First Pacific’s H1/22 results were robust. All investee companies performed well, with the two key assets (Indofood and Philippine Long Distance Telephony) delivering record high revenue and earnings. Indofood’s guidance for H2 is positive, with a significant increase in margins as higher raw material costs are passed through. While leverage increased slightly due to lower share prices of investee companies, we believe it is still at an acceptable level due to the general market volatility. Liquidity at the holdco is adequate, given the good debt maturity profile. The financial risk profile remains stable, with no real improvement as excess cash flows are mainly returned to shareholders. That said, if the situation deteriorates, such distributions can be delayed/postponed to repair the balance sheet.

• Pc Partner reported a strong set of 1H22 results last week and held a conf call with investors this week. Importantly, management sees no impact by US/China Nvidia AI situation.
• 3Q22 results will be weak as old inventory is being discounted in front of the launch of RTX 40 by NVIDIA Corp (NVDA US) in early 4Q22.
• Stock is unlikely to rally before more clarity on inventory situation improvement, but well supported by net cash (5.4 HKD) and high interim dividend (11.4%). 

• Hang Lung (10 HK) recently announced it had acquired 1.3% in Hang Lung Properties (101 HK) over a one-year period, increasing its holding to 59.5%.
• HLG currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
• HLG is the most basic of Holdco structures – there is almost a 100% overlap in the stub ops with HLP’s property investments. 

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous note, we spoke about the company’s past performance,  PHIP updates and undertook a peer comparison. In this note, we will talk about valuations.

• Two big headlines drove the short squeeze, helped by the record level of short selling as a percentage of total volume in recent months.
• The recovery remains a low volume rally and short turnover as share continues to be high.
• Most of the short selling remains in Index ETF and very large-cap stocks.

• In 2Q22, we believe revenue will grow fast, especially for value added service and advertising.
• We believe operating loss will shrink, but far from making profit.
• We believe the stock has an upside of 18% for the end of 2023.

• Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
• Onewo ranked first in China’s property management services market as measured by revenue from basic property management services, with a market share of 4.28% in 2021.
• The key elements of the bull case rest on the solid financial health of the parent, strong growth, growth runway from undelivered GFA, share gains, renewal rates and cash generation.

• China Communications Construction (1800 HK) should see positive new contract momentum in 2H22. We also expect softening in cost pressure to bring about better margin. 
• It is actively looking to recycle and realise the value of its assets and good progress are expected in 2H22. Such moves will narrow the currently deeply discounted 0.18x P/B. 
• With order backlog amounting to 4.6x of annualised 1H22 revenue, earnings prospects are well secured, making its FY22F PER of 2.6x and FY23F of 2.3x very cheap.

• Burning Rock Biotech (BNR US) has announced Q2 results. Despite the negative impact from COVID-related restrictions in China, revenue increased 3% y/y to RMB130.8 million, driven by pharma R&D service.
• Gross margin deteriorated due to unfavorable revenue mix and inventory write down. Even upon this, operating expenses grew 19%, thereby widening net loss to RMB262.1 million.
• Encouraged by ongoing business volume recovery, management has reiterated full-year 2022 revenue guidance of approximately RMB620 million, indicating H2 2022 revenue of RMB354 million, which represents 29% y/y growth.    

Fosun International’s H1/22 results appear to be reasonable, with higher revenue but lower earnings. The reported credit metrics are not very representative of the credit profile in our view, given the company’s investment holding nature. Thus, it is difficult to assess Fosun’s credit health. However, we take some comfort from the rate of divestments, which is outpacing the rate of investments. Reported liquidity on a consolidated basis seems adequate. That said, we have no visibility on liquidity at the holdco.

Still, we highlight that Fosun has major assets to be sold, especially those without ample synergies. The company has accelerated its asset sale process since 2021. However, it cannot name the assets currently, as details of the transactions are still confidential. Moreover, Fosun does not wish to affect the morale of employees at these assets. The asset disposals are focused on non-core assets, which are typically not listed.

• With favorable policies and improved intellectual property protection, investors’ attitude towards rare diseases in China has changed significantly and become more interested in this field.
• Since no new candidates would be commercialized until 2024, Beijing Continent Pharmaceuticals (CPH HK) could face increasing competition and financial pressure. The breakthrough point is to develop overseas markets.
• In terms of valuation, Continent is better than CANbridge Pharmaceuticals (1228 HK), so it is expected to have higher valuation than CANbridge after listing.

• The Cheng-family Offer for Giordano International (709 HK) became open to tendering after the Composite Doc was issued on the 15 August.
• With the first close less than a week away, acceptances are minimal – ~3.6%.
• Separately, David Webb, who definitely will not be tendering, has increased his stake to 5.79%.

• BYD (1211 HK)’s shares declined by -8% on disclosure that Berkshire Hathaway Inc Cl B (BRK/B US) trimmed its stake from 20.04% to 19.92% of outstanding H Shares. 
• Berkshire will likely follow its PetroChina (857 HK) playbook and materially sell down over the next few months. Buffet stated that the PetroChina exit was “a decision based on valuation.”
• Berkshire will apply the same investment discipline to the BYD stake. While the shares are trading at a discount to historical multiples, the Berkshire stake is an overhang.

• EVE Energy (300014 CH), PetroChina (601857 CH) and Shaanxi Coal (601225 CH) replace Anhui Conch (600585 CH), CPIC (601601 CH) and Zhangzhou Pientzehuang (600436 CH) at the close 16 September.
• Estimated one-way index turnover at the rebalance is 3.1% and will result in a one-way trade of CNY 1,678m.
• PetroChina (601857 CH) is also an inclusion to the FTSE All-World Index while China Pacific Insurance (2601 HK) is a delete from the Hang Seng China Enterprises Index (HSCEI INDEX). 

• Yankuang Energy Group (1171 HK) will replace Shenzhou Intl Group Holdings (2313 HK) in the FTSE China 50 Index at the close on 16 September.
• Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK).
• Short interest on Yankuang Energy Group (1171 HK) is over 10 days of ADV to cover and around 10% of float. That could help the stock move higher.

• Biocytogen raised HKD 471m (USD 60.77m) from its global offering and will list on the Hong Kong Stock Exchange on Thursday, September 1st.
• In the previous note, we looked at the company’s business lines including biotech and animal model businesses.
• In this note, we provide an update for the IPO before trading debut.

• CanSino’s performance declined in 22H1 due to decreased demand of COVID-19 vaccine. Since we have analyzed our concerns on performance in prior insight, there should be psychological expectations for the decline.
• The COVID-19 vaccine business brings CanSino rich cash flow and helps it establish commercial team. Together with MCV2/MCV4/mRNA/PCV13i, it’s too early to be completely bearish on CanSino.
• The market has exaggerated the impact of performance decline of COVID-19 vaccine on CanSino. Although 2022 is a difficult year, it is a good time to bottom fish this stock.

Country Garden’s H1/22 results were in line with our expectations. Contracted sales plunged 40% y-o-y, in line with the industry average of 30-40%. Positively, the company managed to maintain the cash collection rate at above 90%, and the leverage metrics remained broadly stable. That said, the H1/22 gross margin came under pressure at 11% (lower than most peers). Additionally, the average sell-through rate stood at only 50%, which could result in cash being trapped in developments with low demand.

• We visited a Leapmotor store in Shanghai China last weekend.
• Model C11 instead of T03 was popular despite the fact that T03 shows a large sales volume on prospectus.
• We believe pure electricity vehicle is promising in cities, especially in large cities.

• First Solar’s second quarter results were positive and it delivered an all-around beat.
• During the quarter, the management kept up their booking pace, strengthening their backlog of anticipated future deliveries, which now totals a record 44.3 gigawatts.
• The management is working on setting up the necessary supply chain to support the eventual launch of a bifacial CadTel module.

In our view, Anton Oilfield’s H1/22 results were robust and in line with expectations. In FY 2021, the company shifted its focus to profitability and an asset-light strategy. This shift in focus explains the softness in new orders, while the backlog continued to grow. All four business segments grew steadily, as the company benefited from the supportive operating environment with high and rising oil prices. Earnings still failed to catch up with revenue growth, and Anton will need to work through the old backlog before new orders with higher profitability kick in. Cash flows were good, while the company’s credit metrics improved and were modest. Liquidity is adequate.

• The September 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 Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Nuclear power is a clean energy source that contributes to energy savings and emissions reduction in society.
• SASAC backed CGN Power (1816 HK) is China’s leading nuclear play, accounting for 55% of on-grid nuclear power generation, but just 1.2% of China’s total installed capacity of power generation.
• As one of the few listed nuclear -plays in Asia, CGN trades at undemanding multiples, together with an attractive ROE and yield.

• Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
• The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
• Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK). 

• Leapmotor (2007699D HK), a Chinese EV manufacturer, is pre-marketing a US$1.5 billion HKEx IPO, according to press reports.
• We previously discussed the IPO in Leapmotor IPO: The Bull Case and Leapmotor IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• While the 1Q and truncated 1H numbers outline rapid growth and declining loss margin, key metrics continue to lag peers over comparable periods. We would pass on the IPO. 

• The 1H22 result of Shenzhen International (152 HK) is 4% ahead of indicated in profit warning. Key drags are toll roads and Shenzhen Airlines, but their 2H22 outlook is better.
• It will see many new logistics projects to commence operations in the next 12-18 months. Also, SZI guided that it will continue to realise underlying asset value through strategic disposals.
• We think the toughest time should be behind and expect more positive news on asset gains. The stock is very cheap at 0.41x P/B and 58% discount to appraised NAV. 

• Pinduoduo (PDD US)’s 2Q22 was rather strong with revenue of RMB 31.4bn (consensus: RMB 23.6bn) and OP of RMB 8.7bn (consensus: RMB 3.6bn).
• However, the management was quick to dismiss the pretence that piduoduo would be able to maintain these elevated growth/margin numbers throughout the rest of the year and over the medium-term.
• This creates a lot of downside to consensus 2H22 and medium-term revenue and OP estimates in a time when valuation multiples have expanded over 70% from the March 2022 bottom.

H&H International’s H1/22 results were adequate in our view, despite the challenging operating conditions in China. The company is gradually diversifying its businesses, with ANC and PNC accounting for 48% of total H1/22 revenue. Moreover, demand for PNC products is increasing, and H&H is focused on leveraging this to expand in the US and China. The Swiss brand under ANC is also growing steadily. Going forward, these would allow the company to balance any revenue decline from the intensified BNC business. H&H has a moderate financial risk profile overall, with sound liquidity.

• Tigermed had high revenue growth in 2022H1 but with a YoY decrease in net profit attributable to the owners of the Company, mainly due to poor performance of investment business.
• Tigermed’s investment business is like a “time bomb” that would detonate in the future. Its “CRO+PE/VC business model” would trap its performance in a vicious circle due to unfriendly macro.  
• We are conservative about Tigermed’s outlook and performance. Tigermed is difficult to achieve the V-shaped rebound. So we recommend investors to offload, or just do some short term trade.

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous notes, we spoke about the company’s past performance and its PHIP updates. In this note, we will undertake a peer comparison.

West China Cement’s H1/22 results were in line with expectations. The company reported broad sales volume declines across all regions in China, owing to pandemic-related disruptions. Still, its revenue and gross margin were largely stable, as the better-than-expected ASP growth was able to offset increases in coal and electricity costs. Moreover, the FCF deficit was smaller than anticipated, as capex fell y-o-y. Net Debt/EBITDA weakened slightly, but remained strong at 1.8x (FYE 2021: 1.6x). Management anticipates more meaningful earnings growth and margin expansion in FY 2023, supported by the contribution from its new plant in Congo (expected to commence at end-2022).

• On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
• On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
• In this note, we’ll talk about the latest developments and its implications.

• State-Owned-Entities (SOEs) in Tianjin are set to complete the migration of their data from private sector operators like Alibaba Group (9988 HK) to a state-backed cloud by 30th Sept 2022.
• This has already started to tip the balance of power in Chinese cloud computing in favour of politically favoured cloud operators like China Telecom.
• We think the impact of nationalising the cloud could escalate to Alibaba Cloud’s overseas markets as most of its customers overseas are Chinese companies with a global presence.

• The revenue growth rate decelerated, but operating loss shrank in 2Q22.
• We believe the the revenue reclassification is unnecessary and suspicious.
• We set a downside of 19% and a price target of HK$148.

• Tencent invested in Samsung Insurance China Co. Ltd. and is the second largest shareholder.
• JD Health’s revenue increased by 48% YoY, but the stock plunged.
• KE revenue shrank by 45% YoY due to the weak property market.

• Meituan (3690 HK) reported 2Q2022 results on Friday. Revenue grew 16.4% YoY to RMB50.9bn (vs consensus RMB49.2bn) while operating losses dropped to 1.0% of revenue to RMB493m (vs consensus RMB3.3bn).
• The company has changed its segmental reporting to a new reporting structure; Core Local Commerce, New Initiatives and Unallocated items.
• Disclosures on key operating matrices such as GTV and no. of hotel room nights have not been provided and difficult to assess the performance of core businesses.

• In 2Q22, revenue growth rate accelerated and the operating profit achieved record high.
• However, we believe PDD does not fully explain its exclusive advantages over competitors.
• We set a downside of 19% and a price target of US$47 for year end 2023.

• Leapmotor is getting ready to complete its IPO in Hong Kong in the next few weeks, aiming to raise US$1 billion to US$1.5 billion.
• Leapmotor is one of the fastest growing pure play EV companies in China in terms of delivery volume. Leapmotor shipped more than 43,000 EVs in 2021, up 443.5% YoY.
• Leapmotor’s revenue surged from 117 million RMB in 2019 to 3,132 million RMB in 2021. Operating margin improved from -625% in 2019 to -137.7% in 2020, and -91.6% in 2021.

• YH Entertainment Group (2306 HK) is looking to raise up to US$144m in its Hong Kong IPO.
• YH Entertainment (YHE) is an artist management company in China. Its business covers the entire artist management industry value chain, from auditioning, training, artist operation to artist promotion.
• As per Frost & Sullivan (F&S), YHE was ranked first amongst artist management companies in China with a market share of 1.9%, based on artist management revenue generated in 2021. 

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous notes, we spoke about the company’s past performance. In this note, we will have a look at its PHIP updates.

Shui On’s H1/22 results were mixed in our view. The company’s revenue recognition was heavily impacted by pandemic-related lockdowns in Shanghai during Q2/22, though we expect an improvement from Q3/22. Positively, Shui On’s investment properties performed well despite the lockdowns. This was evidenced by the properties’ high occupancy rates, steady valuations and stable rental income. Negatively, the company’s financial profile weakened slightly, with net debt rising more than expected. This may be due to lower cash collections. Still, we deem Shui On’s near-term refinancing pressure as low.

• Friday in US time, the China Securities Regulatory Commission (CSRC), China’s MOF, and the US Public Company Accounting Oversight Board (PCAOB) “agreed” on a Statement of Protocol.
• This SoP sets the outlines for PCAOB access to inspect/investigate audit papers and accounting firms in China and HK for companies listed in the US.
• The releases’ difference in language is to be expected – different constituencies – but as PCAOB Chair Williams said, “Now we will find out whether those promises hold up.”

• New title approvals halved during 2021, yet overall industry games revenue grew by 3.4%y/y. 1H22 new games approvals are down a further 82%y/y, yet games revenue is down 1.8%.
• Tencent has lost revenue market share to the overall Chinese online game software market, most notably to NetEase, this year.
• Tencent’s paying gamer participation rate has dropped to levels last seen during 2018.

• We see the positive share price reaction of CIMC Enric Holdings (3899 HK) after posting a 34.5% 1H22 core profit growth not yet enough to reflect its encouraging earnings outlook.
• Good order backlog, recovery at clean energy and increase in liquid food demand will add to the strength at chemical and environment segment as CIMC Enric’s drivers.
• Hydrogen energy business made impressive contribution growth and it should benefit from local governments’ hydrogen initiatives. The stock’s high PERs are just reflection of huge long-term potential. 

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.

• Greentown China
• Meituan

• The centralized procurement of hemoperfusion cartridge is the major risk. This is why capital market is divided over the logic of long-term growth when performance continued to grow in 2022H1. 
• Jafron is not without chances to get out of a passive situation. Either business diversification or internationalization would help re-establish the investment logic and improve the outlook.
• The valuation of Jafron Biomedical Co Ltd (300529 CH)has entered the “hitting zone”. After continuous correction, there could be some rebound, like 10%-20% upside potential. Short term trade is recommended.

• Based on an admittedly somewhat finger-in-the-air estimate of probability of privatisation,  shorting Toshiba Corp (6502 JP) here against its Peer Basket is probably not a good outcome.
• Swire Pacific (19 HK) has started buying back with 3.5x the average ADV impact on Bs vs As. That is likely to continue. 
• KKR’s all cash A$88/share Offer for Ramsay Health (RHC AU) is off. The alternative Offer has a lower implied value, and has been unceremoniously rejected, despite Ramsay’s horrible FY22 numbers.

• 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, China Tourism’s listing appears to have set the ball rolling for others to follow.
• After a flurry of activity in the prior week, there weren’t any major placements this week.

• As China’s property market melts down, shares of property management companies are following suit.
• And there are increasing governance issues attached to these management units as a slew of questionable parent/subsidiary transactions unfold. 
• Valuations for property management companies are trading at multi-year lows. That trend is likely to continue.

• It was a busy week with a lot of review cutoffs for the FTSE country indices and the announcement of the STAR50 INDEX changes for September.
• The coming week has the implementation of the JPXNK400, MSCI, HSI, HSCEI and HSTECH rebalances. Plus announcements of the changes to the FTSE, NIFTY and S&P/ASX indices.
• There were outflows from iShares MSCI All Country Asia ex-Japan ETF (AAXJ US), IShares Core MSCI Asia Ex Japan ETF (3010 HK) and KraneShares CSI China Internet ETF (KWEB US).