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In today’s briefing:
- JD.com Tencent Div Distribution – The US$10bn Overhang – Passives Might Have to Sell
- Tencent: Possible Record Fine for Anti-Money Laundering
- Alibaba: Rumoured Layoffs Could Be a Sign of The Company Running Out of Funding Sources
- Yashili (1230 HK): More Formula Fortune?
- BE Energy (1250 HK): Not A Take-Out, More A China Shandong Hi-Speed Bail Out
- WH Group (288 HK) – Now Cheapest in Yonks Outright and Vs Peers
- HKEx (388.HK): Aftermath of Epic Short Squeeze of Nickel Future
- China Everbright Environment (257 HK): Sell-Down Unwarranted Given Positive Prospects
- Morning Views Asia: Softbank Group, Sunac China Holdings
JD.com Tencent Div Distribution – The US$10bn Overhang – Passives Might Have to Sell
- On 23rd Dec, Tencent declared a dividend in the form of distribution in specie of 457.326m shares of JD.com, i.e. 1 share of JD.com for every 21 shares of Tencent.
- While Tencent went ex-div on 20th Jan 2022, the actual settlement of the distribution is expected to happen on or about 25th Mar 2022.
- In this note, we talk about the likely impact of Prosus’ shareholding on passive flows at the time of settlement.
Tencent: Possible Record Fine for Anti-Money Laundering
- Wall Street Journal (WSJ) reported yesterday that Tencent (700 HK) is facing a possible record fine for violating anti-money laundering regulations in China.
- People’s Bank of China has found that WeChat Pay had allowed transfer and laundering of funds with illicit transactions which violates the country’s anti-money laundering regulations.
- Tencent’s shares dropped further 10.3% to HK$331 per share from HK$369 per share during yesterday’s trade following the above report.
Alibaba: Rumoured Layoffs Could Be a Sign of The Company Running Out of Funding Sources
- Over the last two days on Weibo there was a lot of noise regarding massive layoffs at Chinese tech giants such as Alibaba Group (BABA US) and Tencent (700 HK).
- Local news outlet “Yilanshangye”, called that Alibaba’s community group buying platform MMC is planning to release around 20% of its employees, with several business lines already finalising their layoff lists.
- With investor appetite for growth companies changing rapidly over the last few months, it seems Alibaba Group (9988 HK) could be struggling to finance several of its loss-making ventures.
Yashili (1230 HK): More Formula Fortune?
- Infant formula play Yashili International Holdings (1230 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
- Shares closed up 98% yesterday, on clear news leakage, before shares were suspended. China Mengniu Dairy Co (2319 HK) holds 51.04% with Danone SA (BN FP) another 25%.
- This trading halt follows the recent successful Offer for Ausnutria Dairy Corp (1717 HK), one of Yashili’s key peers.
BE Energy (1250 HK): Not A Take-Out, More A China Shandong Hi-Speed Bail Out
- China Shandong Hi-Speed Financial Group (412 HK) (CSFG) has entered into a subscription agreement with Beijing Enterprises Clean Energy Grp (1250 HK) (BECE).
- Subscription shares total 43.45% of BECE on a diluted basis. The subscription price is HK$0.096/share, a 7.69% discount to last close
- A mandatory takeover would be triggered at completion of this agreement, provided a whitewash waiver is not granted.
WH Group (288 HK) – Now Cheapest in Yonks Outright and Vs Peers
- WH Group (288 HK) is two businesses – a US pork processor and a Chinese one – and both businesses are suffering lower margins than they’d like.
- But they are doing better than and are cheaper than peers. And still the stock falls. Today, the stock price hit a 6-year low on dramatic underperformance of peers.
- The question is what the proper discount would be for people who question its governance credentials. It’s a really big discount now.
HKEx (388.HK): Aftermath of Epic Short Squeeze of Nickel Future
- LME Nickel future trading will be resumed on March 16 after its epic price surge before halting; the focus will be on safe reopen as more restrictions will be applied
- The trading suspension benefits Chinese billionaire behind Nickel short position, who has secured bank lending in past few days. The angry parties are mainly hedge fund and financial investors.
- We remain bullish on HKEX (388 HK) with the view that China economy will likely rebound in 2022, which will drive the rebound of IPO activities and trading volume.
China Everbright Environment (257 HK): Sell-Down Unwarranted Given Positive Prospects
- Share price was off 23% in the last two days, yet we think China Everbright Environment (257 HK) has posted a set of healthy result, though somewhat behind expectations.
- Good new project momentum, further increase in operation revenue and collection of national subsidies are key factors backing earnings growth and improvement in cash flow over the next 2 years.
- Longer term, management stays bullish on the industry growth opportunities. Its 14.5% ROE and mid-teens earnings growth both suggest the stock’s 3.3x PER, 0.45x P/B and 9.4% yield inexpensive.
Morning Views Asia: Softbank Group, Sunac China Holdings
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.
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