China

• Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
• The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
• Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.

• Gotion High-Tech Co Ltd (002074 CH) (GHT) is looking to raise US$1bn from its Swiss GDR listing. Bookrunners on the deal are CICC and Haitong International.
• The shares offered in GHT’s GDR offering ranges between 16.65m – 33.29m GDRs (83.24m – 166.47m A-shares), ranging the deal size between US$499m-US$1bn. 
• At the top end, in terms of number of GDRs offered, the deal would represent 4.7 days of ADV on the A-share market and 9.6% of current mcap.

• Gem Co Ltd A (002340 CH) is looking to raise around US$245m in its Swiss GDR listing.
• Proceeds will be used mainly for overseas expansion, such as the development of the Indonesian Nickel Resource Base and development of its production base and recycling center in Europe.
• In terms of discount, relative to the most recent two deals, Keda Industrial and Ningbo Shanshan, GEM’s GDRs are offered at a more enticing 11.7-14.2% discount to its A-shares,

• Pop Mart’s share price has lost more than 50% YTD as resurgence of Covid in China has severely impacted the company’s operations including closure of physical stores and robo shops.
• The company also issued a profit warning last week for 1H2022 that was severely impacted by the spread of Covid-19 as well as business expansion related costs.
• We expect the company’s aggressive overseas expansion strategy to continue to impact the company’s profitability and there is further downside.

• Shenzhen Pagoda Industrial (1317437D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Shenzhen Pagoda Industrial (SPI) is a fruit retail operator in China. According to Frost & Sullivan, it ranked first among all fruit specialty retail operators in China in 2021.
• However, the firm operates in a highly fragmented industry with low market share of 1.0%, even as the largest player. 

• Pharmaron’s share price plunged after the release of the estimate for 2022 interim results, even dragging down the entire CXO sector, which reflected the attitude of Mr Market.
• One important reason for low net profit growth is related to the development strategy – Even if Pharmaron achieves  “integration”, its advantage/profit margin could largely shrink due to overcapacity/fierce competition.  
• Pharmaron can only achieve V-shaped rebound by making breakthroughs in CGT CXO to boost valuations and expectations on outlook rather than pursue the strategy of “integration” as in the past.

• We believe Alibaba’s revenue growth rate will reach historical low in 1Q23, but it will recover two quarters later.
• Alibaba’s stock price fell from HK$300 in October 2020 to HK$100 today.
• We believe Alibaba has at least an upside of 43%.

• Onewo Space-Tech (OST) aims to raise around 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 will talk about the positive aspects of the deal.

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.

• Honghua Group
• Tata Steel Thailand

• We have completed days 1-5 in the review period for the MSCI August QIR. This is the last review that will use the current QIR methodology.
• Most changes are expected in China with the largest inflows on Gcl Poly Energy Holdings Limited (3800 HK), Tianqi Lithium (002466 CH) and Qinghai Salt Lake Industry (000792 CH). 
• There are a few stocks that will have same way flows from the FTSE All-World and All-Cap trackers at the September SAIR.

• BYD (1211 HK) is a short on upticks near the gap and physical resistance for a decline to pressure intermediate support at 240 (break expected).
• Sell volumes spiked on the jolt down with sellers waiting overhead on a secondary bounce attempt.
• RSI shows a compelling bearish set up after topping at the 70+ sell zone with bear divergence that supports a downside surprise.

• Share price of China Longyuan Power (916 HK) has been under pressure over the last two weeks due to concern on future offshore wind power project return.
• We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.
• China Longyuan’s growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive. 

• Alibaba’s Freshippo expands to two inland cities, which reflects its success in coastal areas.
• Online game’s revenue and players decreased for the first time in 14 years.
• NetEase set up the second game studios in the United States.

• China Resources Medical has more advantages than ordinary private medical institutions in terms of its State-owned Key Enterprises background, delicacy management, cost reduction and efficiency increase, resources/talents, industrial chain layout.
• However, due to the policy environment, China Resources Medical just represents “a small area of relatively little risk in a large area that is clearly risky”. 
• General hospitals have poor business model and profitability. Despite its strength, we are conservative about the outlook of China Resources Medical, which is difficult to achieve a higher valuation.

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.

• Evergrande
• CIFI Holdings
• JSW Steel Ltd
• Lenovo
• Reliance Industries

• We have gone through days 1-5 of the review period for the MSCI September rebalance. There are multiple review cutoffs in the coming week.
• The announcement of the changes to the LQ45/IDX30/IDX80 indices should be made early in the coming week and implemented at the close on 29 July.
• China had the largest ETF inflows over the last week, while there were outflows from Korea focused ETFs.

• Back on 1 March, 51 Job Inc Adr (JOBS US) entered into a revised merger agreement at US$61.00/share, down 22.8% from the initial terms.
• This merger was approved at an EGM on the 27 April and became effective on the 6 May.
• Court proceedings have commenced for dissenters, accounting for a staggering 30.9% of shares out. It’s not just “fair value” under the microscope; but the legality of the downward revision.

• On the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share. 
• This two-step voluntary cash offer incorporated a Scheme-like vote and a 90% tendering condition. 
• Shareholders voted for the transaction on the 29 June. The tendering condition has now been satisfied. The last day of trading is on the 1 August.  

• 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 outflow over the past week was ~US$1.83bn, split between Shanghai (-US$1.3bn) and Shenzhen (-US$0.5bn).
• The largest inflows were into Yunnan Chuangxin New (002812 CH) and Shanghai Baosight (600845 CH). The largest outflows were in Sungrow Power (300274 CH) and Ping An Bank (000001 CH).

• 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 inflow over the past week was ~US$0.46bn, split (+US$0.36bn) for Shanghai and (+US$0.1bn) for Shenzhen.
• The largest inflows were into Tencent (700 HK) and BYD (1211 HK). The largest outflow was in Pop Mart International Group Limited (9992 HK) and Great Wall Motor (2333 HK).

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.

• FactSet has a fundamentally solid business model and its business has not been significantly affected despite the bearish trends in the S&P500.
• Asia Pacific continued to be a growth-driving geography with ASV growth at 14.3%, driven by demand from asset managers and vested owners.
• With greater expansion with asset owners and asset managers, respectively, both CTS and analytics contributed to growth.

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. Central China Real Estate
2. China South City
3. Lenovo
4. Agile Property Holdings
5. China Jinmao Holdings

and more…

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Central China Real Estate
2. China South City
3. Lenovo
4. Agile Property Holdings
5. China Jinmao Holdings

and more…

• CarMax had a decent start to the 2023 fiscal and generated total sales of $9.3 billion in the first quarter, up 21% from the previous year’s period.
• Total unit sales in their retail division fell by 11% in the first quarter, and used unit comps dropped by 12.7% from the same period in 2017.
• The same broad macroeconomic factors that contributed to a market-wide decline in used car sales during the quarter drove CarMax’s performance.

• Group Success Investments is looking to raise up to US$133m by trimming its holdings in Xtep International (1368 HK).
• We can’t say that the deal is expected and short interest on the stock hasn’t been creeping up as well. 
• While the deal won’t be a large one, representing just 5.7 days of three month ADV, the firm’s last deal hasn’t done well.

• China’s central government formally launched a state-owned iron ore giant to consolidate China’s massive mining investments and coordinate global purchases of steelmaking materials for the world’s largest steel producing nation
• With registered capital of 20 billion yuan ($3 billion), China Mineral Resources Group was established Tuesday in the Xiongan New Area
• Creation of the enterprise is seen as part of China’s long-pursued goal of enhancing its position in the global iron ore trade

We view China Jinmao as “Low Risk” on the LARA scale. The company is one of Sinochem’s most profitable subsidiaries, and enjoys sound relationships with provincial governments. Overall, we believe Jinmao’s credit profile is supported by its SOE status. A Change of Control will be triggered under the USD notes indenture if Sinochem ceases to be Jinmao’s largest/controlling shareholder. In addition, the indenture for Sinochem’s offshore notes contain cross acceleration in the event of default by any significant subsidiary.

Our fundamental Credit Bias on Jinmao is “Negative”, on account of the industry’s prolonged sales weakness and the company’s uncertain access to offshore capital markets. T

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

• The CAC of China said on Thursday that it has fined the country’s ride-hailing giant DiDi Global (DIDI US)  with RMB8.03bn (US$1.2bn) for violating data protection rules since 2015.
• According to their findings, Didi had been illegally collecting its users’ information which has been used in a manner which had endangered national security.
• In addition to the above fine on the company, CAC also has imposed two fines of RMb1m each on Didi’s Chief Executive Cheng Wei and President Jean Liu.

• Alphyn Capital Management LLC (“ACML”) is a registered investment advisor in New York. We help clients invest in high quality public companies to both preserve and grow their wealth over the long-term.
• The Master Account, in which I am personally invested alongside SMA clients, returned -14.7% net in Q2 2022, as reported by our fund administrator.
• With the threat of increasing rates, investors have renewed their focus on profits.
• I try not to take a position on a discrete event, such as interest rates or quarterly earnings, as the odds of getting these right are too low, and the costs of getting these wrong are too high.

• This is our first report on process automation player, Alteryx.
• The company had a great start to 2022 and saw increasing traction with large enterprise customers.
• The company’s brand-new, integrated Alteryx Analytics Cloud platform now offers access to its entire cloud portfolio.

• The growth in revenue and profit was mainly driven by the face mask business, but this business has ceased, which raises the concerns on future growth momentum of Best Wellness.
• Best Wellness’s weak performance of its own-brand business would prevent it from standing out in the fierce market competition in the long term. 
• Together with over-reliance on limited customers and the complex international relations, we are conservative about the Company’s outlook at the current stage.

• Waste Management Inc is the market leader in the waste management business with a dominant share in the U.S. market.
• The company’s strong performance in the initial months of the year has set the tone for the remainder of 2022.
• Among major developments, the seventeenth R&D plant in their network and the fifth created by Waste Management will be coming online shortly in Oklahoma.

• This is our first report on environmental services player, Republic Services.
• The company has had a decent start to 2022 delivering EBITDA and revenue growth and showed an increase in the generated adjusted earnings.
• Also, Republic Services continues to realize the advantages of its investments in technology.

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
• China South City
• Future Retail Ltd
• KWG Living Group
• Lenovo
• Sands China Ltd

• Tian Tu Capital (1390587D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. The deal will be run by JP Morgan and Huatai International.
• Tian Tu Capital is a private equity investor that invests in Chinese consumer brands/companies, managing capital for institutional investors and high-net worth individuals.  
• Among the 205 portfolio companies it had invested in up to FY21 (Dec 31, 2021), 23 of them had reached a valuation of US$1bn at that date. 

• Beneunder Limited (BL) aims to raise around US$500m in its Hong Kong IPO.
• According to CIC, it was the largest sunprotection apparel brand in China in terms of both total retail sales value and online retail sales value with 5.0% and 12.9% marketshare. 
• In this note, we will talk about the positive aspects of the deal.

• Innovent is expected to transform from a biotech to a biopharma. From the present point of view, the Company is a better comprehensive choice of certainty, elasticity and safety.  
• With high R&D efficiency, strong sales capability, top talent teams, and mindset keeping pace with the times, investors could consider to replace Hengrui with Innovent in the portfolio.  
• Innovent’s valuation anchor is HK$40 billion, below which it’s undervalued. Its market value could reach about RMB80 billion to RMB120 billion, based on sales of RMB10 billion to RMB15 billion. 

Lenovo has launched a roadshow to market dual-tranche 144A/RegS bond offerings of 5.5Y and 10Y. The 10Y notes will be the company’s first green bonds, while the 5.5Y bonds will be conventional notes. Proceeds from the green bonds will be used to finance or refinance eligible projects, including green buildings and renewable energy initiatives. 

Lenovo also launched a concurrent tender offer for the USD 4.75 23 notes, of which USD 687 mn is outstanding. The tender offer price is USD 1,005 per USD 1,000 principal. The consideration will include accrued interest. The tender cap will be determined and announced on or around July 22nd, after the company has priced the notes offerings.

Initial price guidance was announced earlier today, as follows: 5.5Y: CT5 + 290 bps, and 10Y: CT10 + 370 bps. We find this fair, in view of the existing LENOVO curve and taking into account global peers HPQ and DELL.

• Beneunder Limited (BL) aims to raise around US$500m in its Hong Kong IPO.
• According to CIC, it was the largest sunprotection apparel brand in China in terms of both total retail sales value and online retail sales value with 5.0% and 12.9% marketshare. 
• In this note, we will talk about the not-so-positive aspects of the deal.

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
• Lenovo

• Swire Pacific (A) (19 HK) expands its beverages ops, its best-performing unlisted segment, via the acquisition of Coke bottling operations in Vietnam and Cambodia. 
• Preceding my comments on Swire – and Swire Properties (1972 HK) and Cathay Pacific Airways (293 HK) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• Beijing UBOX Online Technology (1741985D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Beijing UBOX Online Technology (UBOX) is an unmanned retail operator (vending machine) in China. 
• As per F&S, it was the largest unmanned retail operator in China, with the largest retail machine network in the country. 

• Fosun Tourism (1992 HK) expects a sharp 87.5-92.5% reduction in its losses in 1H22, driven primarily by significant revival in its Club Med business, though China is weak.
• Outlook for 2H22 looks very encouraging as booking figures indicate good YoY volume growth and double-digit rate improvement in EMEA and Americas. 
• China also witnessed solid rebound in Jul and Aug after removal of lockdowns in 2Q22. New Club Med Joyview resorts including Changbaishan and Qiandaohu are added contributors. 

We view Yanlord Land as “Medium Risk” on the LARA scale. The company has a strong brand name, having established its reputation as a high-end Chinese property developer over the last 20 years. While Yanlord’s scale is small, its projects are of good quality and distributed across key Tier 1/2 cities in the Yangtze and Pearl River Delta regions. Yanlord enjoys higher gross margins compared to peers, due to its focus on premium products in high-tier cities. This helps the company maintain stronger interest coverage compared to peers, which provides a buffer for rising land prices and ASP declines. These positives are slightly offset by Yanlord’s high reliance on JV structures (with low attrition rates).

Our fundamental Credit Bias on Yanlord is “Negative”, due to a prolonged sales weakness and subdued financing environment across the Chinese Property industry. That said, the company has a good-quality asset base and sizeable investment property portfolio which may allow it to obtain new financing. Yanlord also has a clean debt structure compared to peers.

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.

• China South City
• NagaCorp Ltd
• Vedanta Resources

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• We have a Negative view of Soho China, despite the stock trading at 0.2x P/B. 
• The three biggest negative factors for the company include potential write down of assets, CFO being investigated for insider trading, and China’s emphasis on zero COVID policy.
• Two more significant concerning factors include 0.4 million people in China not able to withdraw their deposits and other large Chinese property developers defaulting on debt.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• 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 also flags those companies where shares have been pledged, both recently and ongoing.

• New Horizon Health released positive profit alert last Friday. We speak with management post the profit alert.
• The company is expected to achieve 410.9% total revenue growth compared to a year ago in 1H2022, based on the middle point of guidance.
• The company has also achieved margin expansion thanks to a favorable change of mix to the high margin channel. 

• Haidilao International announced the spin-off plan of its overseas arm, Super Hi.
• We take a quick look at Super Hi’s fundamentals. We think it is unlikely for Super Hi to achieve the level of economy of scale as Haidilao in China.
• We think the valuation of Super Hi should be compared to F&B peers in the ASEAN region given that its business is mainly focused on the ASEAN region. 

• China Traditional Chinese Medicine released unsatisfactory 2022H1 profit warning, which was mainly due to the poor performance on both revenue and cost side of its core business concentrated TCM granules.
• We analyzed the policy impact and business outlook. The Company’s performance would be under pressure in 2022. The VBP impact on concentrated TCM granules hasn’t shown up in financial reports.
• Overall, we are skeptical of the Company’s profitability in the long term, and its profit margin will struggle to support a significant expansion in valuation.

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.

• Guangzhou R&F Properties

• 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 and Chinese ADRs.
• On the ECM front, Tianqi Lithium (9696 HK) listed its H Shares, WCP (WCP KS) plans to launch a KRW900 billion (US$692 million) IPO in August. 
• Event-Driven developments at Link Administration (LNK AU), DTAC/True, BYD (1211 HK), Genting Singapore (GENS SP), Tassal (TGR AU), Resapp Health (RAP AU), Dongzheng Automotive Finance (2718 HK).      

• CSPC Pharmaceutical Group (1093 HK) reported Q1 results, with revenue growth of 17% y/y to RMB8 billion, driven by a 15% y/y growth in finished drugs revenue.
• Oncology, with 34% contribution to finished drug revenue remained the main growth engine. Oncology revenue grew 15% y/y. The company has launched one new innovative oncology drug in Q1.
• CSPC’s net profit declined 5% y/y to RMB1.40 billion, dragged by fair-value losses of RMB133 million on its financial assets. Without considering one-off charge, net profit would have increased 10%.

• Tencent’s games gave only three hours a week to juveniles in school summer vacation.
• Tencent and NetEase did not get new game licenses for the third time this year.
• Kingsoft censors files on users’ computers, which will benefit Microsoft Office.

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
• China South City

• The cryoablation market accounts for about 1/3 of the total tumor ablation market overseas, while this percentage is less than 1/10 in China, indicating promising growth potential in the future.
• Cryofocus Medtech (Shanghai) (CFM HK)’s products and candidates do have technical advantages, offering more choices for patients and doctors.
• However, the commercialization outlook remains to be seen because of the potential large price reduction after entering national medical insurance coverage and the uncertainties over acceptance by patients and doctors.

• Galaxy presents a bull case as Macau still struggles with Beijing zero tolerance policy.
• Its huge cash position will comfortably outlast the monthly burn rate for at least three to five years ahead by which time, covid might be long gone.
• Galaxy stock is caught in the overall bearish outlook on the sector. Time to accumulate with a relatively low risk on.

• Berkshire appears set to exit BYD (1211 HK) partially or in full. But why signal to market well in advance?
• United Tractors (UNTR IJ)‘s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.
• The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Tianqi’s soggy debut in Hong Kong despite its wide discount will probably put Hong Kong ECM back in snooze mode for a while
• There were no major placements this week and its likely to remain that was as we approach the half-yearly results season.