China

• Tianqi Lithium (TL) is looking to raise up to US$1.5bn via its H-shares listing. It undertakes mining of lithium ore and manufacturing of lithium concentrate, lithium compounds and derivatives.
• TL was the largest producer of mined lithium globally in terms of output and ranked third in terms of revenue generated from lithium in 2020, according to Wood Mackenzie .
• In this note, we look at the company’s past performance and the deal dynamics.

• Viva China Holdings is a deep value stock with several key catalysts. Viva China Holdings’10.36% stake in Li Ning (2331 HK) alone is worth 152% of its market cap.
• In addition, Viva China Holdings is making solid acquisitions in the global footwear/apparel sector such as Clarks, which is one of the most well known footwear brands in the U.K.
• A major ongoing risk factor is the recent major lockdowns in Shanghai and other cities in China, which is intent on pursing a zero COVID policy.

• A better way to think of the Hong Kong Market in the current cycle is that it has both US & China’s economic headwinds and requires sharply lower rates and currency to correct macro imbalances.
• HKMA should be cutting interest rates, but it cannot do so due to the currency peg.
• Over the last 12-18 months, Hong Kong developers have enjoyed stability in expectations of reopening borders, investment demand, strong balance sheet compared to mainland developers, and low funding costs (HIBOR). These tailwinds are now headwinds.

• Sequential passenger traffic improvement makes us believe that the worst was over for Air China (753 HK). We expect it continues the YTD outperformance vs. Air China Ltd (753 HK). 
• With the pandemic under control and government’s focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.
• Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit Cathay Pacific Airways (293 HK) which now anticipates lower losses YoY in 1H22.

• Based on the business analysis, Beijing Yuanxin Technology Group Co Ltd (1865453D CH) is more of a traditional offline chain drugstores than a healthcare technology company.
• Yuanxin has been suffering from loss for years. With a gross margin of lower than 10%, it’s going to be tough to turn a profit, leading to concerns on survival. 
• Due to the fierce competition in each of its businesses, homogeneous business model, weak financial position, lack of high moat, policy risks, etc., we are conservative about the Company’s 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.

• Bright Scholar Education
• China South City
• Medco Energi

• Urban planner China Vast Industrial Urban Development (6166 HK) has received a pre-conditional Offer, by way of a Scheme, from China Jinmao Holdings (817 HK).
• The cancellation price is HK$2.40/share, a ~30% premium to the undisturbed price. The Offer Price is final.
• Pre-Conditions include approvals from SAMR, SASAC, and NDRC. These won’t be an issue as Jinamo is backed by SOE Sinochem.

• Last week saw the rebalance implementation of the KOSPI2 INDEX, KOSDAQ 150, HSI INDEX, HSCEI INDEX, HSTECH INDEX, CSI 300 Index, STAR50 INDEX and the SSE family of indices.
• The coming week has the rebalance implementation of the FTSE All-World/All-Cap, EPRA Nareit, FTSE China 50, FTSE China A50, FTSE TWSE Taiwan 50 and S&P/ASX indices.
• Big inflows to the Yuanta/P-shares Taiwan Top 50 ETF (0050 TT) as we enter dividend season. The trade looks bigger than usual this year.

• There are 48 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals this week: Jardine Cycle & Carriage (JCNC SP) & Tunas Andolan’s indirect delisting proposal for Tunas Ridean (TURI IJ) & China Vast Industrial Urban (6166 HK)‘s pre-conditional Offer.
• Key updates took place for: Yancoal Australia (YAL AU), Hwa Hong Corp (HWAH SP), Mapletree North Asia Commercial Trust (MAGIC SP), and Lanzhou Zhuangyuan Pasture (1533 HK).

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• IPO volumes remain subdued across the region, although a number of deals are said to be looking to launch soon.
• Placements stole the limelight this week too with Kakao Pay’s selldown by Ant and Joy Spreader’s crash pulling the scales even on last week’s better performing deals.

• 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, net inflow was ~US$0.6bn, split (roughly) <US$0.1bn for Shanghai and US$0.5bn for Shenzhen.
• The largest inflows were into Kuaishou Technology (1024 HK) and Wuxi Biologics (2269 HK). The largest outflows were in CNOOC Ltd (883 HK) and Tencent (700 HK).

• China Vast Industrial Urban Development (6166 HK) announced a pre-conditional privatisation offer from China Jinmao Holdings (817 HK) at HK$2.40 per share, a 30.4% premium to the undisturbed price.
• Key conditions include approval by at least 75% disinterested shareholders (<10% of disinterested shareholders rejection). Shareholders with blocking stakes will be supportive.
• The headcount test (if still applicable) is a key challenge as minorities are likely to be unimpressed. We would be buyers up to HK$2.26 per share (implies 75% deal probability).

• Bilibili reported 1Q2022 results yesterday. Revenue grew 29.6% YoY to RMB5.1bn (vs consensus RMB5.04bn) while operating losses as a % of revenue increased to 39.4% from 26.4% in 1Q2021.
• Monthly Paying Users (MPUs) reached 27.2m vs 20.5m in 1Q2021, however, blended ARPU declined to RMB41.8 from RMB43.4 a year ago suggesting that user growth comes at lower pricing.
• Bilibili’s ADS’ closed 15% lower at the end of yesterday’s trading as widening losses and softer guidance for 2Q2022 disappointed the market.

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-Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net inflow was ~US$6.5bn, split between Shanghai (+US$5.5bn) and Shenzhen (+US$1.0bn).
• The largest inflows were into LONGi Green Energy Technology (601012 CH) and Kweichow Moutai (600519 CH). The largest outflows were in CATL (300750 CH) and Cosco Shipping Holdings (601919 CH).

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. Indika Energy
2. Country Garden Holdings Co
3. China SCE
4. Powerlong Real Estate Holdings
5. Seazen (Formerly Future Land)

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

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. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

• Giordano International (709 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code. 
• The Cheng Yu Tung family is the largest shareholder with 24.37%, as it has been since December 2015. A possible Offer ahead of a (potentially) improving retail outlook? 
• And just for some (possible) added excitement, David Webb holds 5.1%. 

• China announced game approval last night for June batch, after a break in May.
• We discussed in our previous note that China had resume game approval but at a slower pace.
• Tencent and Netease continue to score zero in June domestic game approval.

• As reported by Reuters, yesterday China’s gaming regulator granted licences for 60 new games, none of which were published by Tencent or NetEase. 
• The two dominant companies in the industry did not feature in the list of 45 approvals in April either and this pattern should not be ignored by investors. 
• The lack of approval of foreign titles in the two batches is also striking and a further negative in our view.

• Ant Financial Services Group (6688 HK) is declaring a dividend at a time when regulators have forced the company to increase its capital base.
• Moreover, Ant’s financial performance doesn’t support a dividend payment of RMB 11.8bn in the short term.
• We think the sale of 5.0m Kakao Pay (377300 KS) shares today was forced upon Ant through the lack of usual funding sources at Alibaba Group (9988 HK)’s disposal.

• WM Motor Technology Co Ltd (WMT CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. The deal will be run by Haitong International, CMBI and BOCI.
• WM Motor is a smart EV player in China. As of the latest practicable date, it had a total of four main EV models (with various versions of each model). 
• As per the CIC, it was the first EV automaker in China to have established its own manufacturing facilities from the outset. 

• With only one change expected in September using a 12 month minimum listing history, we expect the index committee to continue using a 6 month minimum listing history.
• That will see the maximum of 5 changes that are permitted at a single rebalance resulting in a one-way turnover just shy of 5%.
• Over the last few rebalances, the adds have outperformed the deletes post the end of the review period. That’s expected given passive trackers need to buy/sell a lot of stock.

• Tuhu Car (2007986D HK) is looking to raise up to US$400m in its upcoming Hong Kong IPO.
• Tuhu is an integrated online and offline platform for automotive services in China.   
• The firm remains loss making with no signs of being profitable in the near/medium term given its aggressive growth strategy.

• GoGoX Holdings (GOGO HK) is a major online intra-city logistics platform in Asia. It has passed the listing hearing for an HKEx IPO to raise US$100-150 million.   
• In GOGOX IPO Initiation: A Less than Perfect Delivery, we noted that as the losses are expected to persist over the next three years, we would avoid the IPO.
• In this note, we examine the PHIP for the 2021 results and recent developments. The fundamentals remain unattractive and we would give the IPO a pass. 

• Mega should establish core competitiveness via entering hospital market and being recognized by hospitals. It’s not a long-term solution to exploit the market by mainly relying on Meinian.
• Although Mega’s competitive advantage in the channels is still more obvious due to Meinian, it is actually a double-edged sword, especially when Meinian is in financial difficulty.
• Without Meinian, whether Mega can develop independently is a question mark. In terms of valuation, BGI and Berry could be comparable companies, and Mega’s valuation could be lower than Berry.

• 58 Freight (GogoX) (1903638D HK) is looking to raise US$150m in its upcoming Hong Kong IPO.
• GogoX is an online intra-city logistics platform in Asia. The company operates in more than 30 cities across five countries and regions in Asia.
• GGX’s platform services segment continues to languish, even after the firm expended much higher incentives during the fiscal period. In this note, we look at GGX’s June 2022 PHIP updates.

• On 27 May, the SFC and CSRC announced that they had agreed in principle to the inclusion of Exchange Traded Funds by mainland and Hong Kong exchanges in Stock Connect.
• We currently see 6 ETF being eligible for inclusion in Southbound Connect and another couple that could be included at a subsequent review.
• Increased mainland participation in the ETF market could lead to sustained premium/discount on the ETFs and this will be transmitted to index futures and affect pricing of short-term/long-term repo.

• The June 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 JD.com Inc. (9618 HK), Tencent (700 HK), Baidu (9888 HK), SMIC (981 HK), Orient Overseas (316 HK), Zhongsheng Group (881 HK), Lenovo (992 HK).
• The largest outflows will be on Meituan (3690 HK), Alibaba (9988 HK), ASM Pacific (522 HK), Kuaishou (1024 HK), AIA (1299 HK), China Construction Bank (939 HK), HKEX (388 HK).

• Changes to the Northbound Stock Connect Buy and Sell list were announced yesterday with 35 SSE-listed stocks becoming sell-only, and 32 SZSE-listed stocks becoming sell-only.
• This will result in the deletion of 45 stocks from the FTSE All-World, All-Cap and Micro-cap indices, while there will be 9 deletions from the MSCI Standard Index.
• There are a few stocks with over 1 day of ADV to sell from passive trackers and these stocks could trade weaker than the market over the next few days.

• Given their market leadership in China’s personal care industry, Hengan International Group (1044 HK) and Vinda International Holdings (3331 HK) arguably make a valid pair trade.
• Yet Hengan’s bottom line is dominated by its sanitary napkin products; whereas Vinda’s tissue segment has a similarly high contribution to its net profit. 
• On various valuation metrics, both companies, relative to listed peers, and their historical trading numbers, appear inexpensive.

• Tuhu Car (2007986D HK) is looking to raise up to US$400m in its upcoming Hong Kong IPO.
• Tuhu is an integrated online and offline platform for automotive services in China.   
• Initially starting as a pure online retail platform, the firm has over time been building its offline network with well-managed stores and technicians to deliver standardized services in-store.

• Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of China Education Group (839 HK) are still yet to be fully reflected.
• The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.
• Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.

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 Vanke
• Vedanta Resources
• Yanlord Land
• 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 Vanke
• Vedanta Resources
• Yanlord Land
• Yuexiu Property

• JDL’s stock price has declined from HK$40 at its IPO to HK$15.
• We believe JDL will recover from the lockdown in Shanghai in 3Q22.
• We also believe the stock has an upside of 46%.

• Back 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. The Offer Doc is now out.
• This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. 
• This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.

• Commercialization prospects of domestic autoimmune disease market is highly uncertain. Related drugs’ sales could be very limited in short term. Overseas market space is much larger, so internationalization is inevitable.
• Our forecast on RemeGen’s total sales is just RMB3.5-4 billion. The deal with Seagen still puzzles us, which is the key to determine how far RemeGen can go in internationalization.
• Keymed is like “a younger RemeGen” due to the differentiation strategy of pipeline layout. However, Keymed’s internationalization progress is much weaker, with higher risks and uncertainties than RemeGen.

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.

• Hopson Development
• Kawasan Industri Jababeka
• KWG Living Group