China

• 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.

• 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.

• 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.

• 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.

• 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) 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.

• 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. 

• 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.

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.

• Softbank Group
• Sunac China Holdings

• China ADRs were sharply lower last week as the SEC started to name companies that were identified under the Holding Foreign Companies Accountable Act (HFCAA).
• Then DiDi Global dropped 44% on Friday following reports that the their proposals to prevent data/security leaks did not meet CAC’s requirements and work on the HK listing was halted.
• With 2024 not too far away, a lot of the U.S. listed companies will look at listing in Hong Kong in the near future. That will have its own implications.

• Entering 2022, Hengrui’s stock price has gone through continuous correction. The market is not that optimistic about the performance of Hengrui in 2021 full year and 2021Q4.
• We analyzed the possible future development trajectory of Hengrui’s performance, which would be up and down due to VBP and NRDL negotiation. Investors could get prepared in advance.
• Due to Hengrui’s  “DNA”  and development mode, it could have “stable growth” after getting out of the difficult situation, but hard to achieve “explosive growth or significant return”.

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.

• Silergy foresees the demand will be larger than capacity in 2022. Silergy expects Auto, Sever Mother-board, SSD and others should be showing a strong demand in 2022.
• The shipment lead-time is controlled around 5~6 months, which indicated that the demand is strong for 2022~23.
• The generation 3rd will be optimized until 2026. Silergy will need some new suppliers for generation 4th in 2023. In 2026, generation 3rd & 4th will dominate Silergy’s revenue. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• As SBI Sumishin Net Bank (7163 JP) called off its listing, Government of India is still vacillating on Life Insurance Corp of India (LIC) (1248Z IN). 
• Placement scene remains quiet with Cosmo Energy Holdings (5021 JP) deeply discounted block following up on ZIP Holdings (ZHL AU) deeply discounted block the previous week.

• On 8th Mar 2022, Securities Exchange Commission (SEC) added five China ADR names to its provisional list of issuers under the Holding Foreign Companies Accountable Act (HFCAA).
• There is nothing new about the list, on 2nd Dec 2021, SEC had issued final amendments to implement the HFCAA which had already spoken about the list and its implications.
• In this note, we’ll talk about the latest developments its possible timelines and implications.

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.

Yuexiu Property​ (YXP) has released satisfactory FY 2021 results, given the weakness in the industry. Leverage edged up slightly, due to the issuance of new bonds in FY 2021. That said, the company continues to have access to external funding, thanks to its SOE status. In addition, a high proportion of its cash balance is freely available, with only 24% restricted under escrow accounts. We believe YXP has adequate liquidity and manageable refinancing risk.

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. Fosun International
2. Times China
3. Kwg Property Holding
4. Logan Property Holdings
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. Fosun International
2. Times China
3. Kwg Property Holding
4. Logan Property Holdings
5. Central China Real Estate

and more…

• Revenue grew rapidly by 23% in 4Q21 and we believe revenue will grow by 18% in 2022.
• We are not concerned about the zero net margin, because operating cash flows were still strong in 2021.
• We believe the stock has a price target of US$73, which is 18% over last closing price.

• There could be 3 or 5 changes to the STAR50 INDEX in June depending on the minimum listing history (6 months or 12 months) used by the index committee.
• Jinko Solar (688223 CH) is a high probability inclusion while Shanghai Microport Endovascular MedTech (688016 CH), ArcSoft Corp Ltd (688088 CH) and DBAPP Security Ltd (688023) are high probability deletions.
• The March rebalance will be implemented at the close tomorrow. The adds have outperformed the deletes post announcement and there could be a reversal from next week.

• Norges Bank excludes Li Ning (2331 HK) from its list due to poor labor practices/human rights issues.
• Today’s share price could be a telltale sign of the near-term prospect, down when the majority are up. 
• Will the other international shareholders follow suit on dumping the shares because of the human rights abuse? Potentially yes. 

• Green Tea Group (GT HK) received the Hong Kong Stock Exchange approval to launch its IPO on 7th March 2022, almost a year after filing its first application.
• The company expects to raise around US$100-200m via an IPO jointly sponsored by Citi and CMB International.
• Growth prospects look decent with plans to open 75-100 new restaurants each year. However, We aren’t excited about the IPO as the Company’s business model seems significantly weaker than peers.

• Arrail, the largest dental services provider in China’s premium dental service market has announced the terms for its IPO.
• The company plans to raise net proceeds of approx. HK$590m (US$75.9m) through issuing 46.5m at a price of HK$14.62 per share.
• Cornerstone investors have agreed to purchase approx. US$65m worth of shares and these investors include Abax, Harvest, Hudson Bay, OrbiMed and TVHKL.

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
• Times China
• Yuzhou Group

• NIO Inc (9866 HK) is expected to list on the HKEX (388 HK) tomorrow. Nearly 820m Class A shares are now held on the Hong Kong Share Register.
• We do not expect NIO Inc (9866 HK) to get Fast Entry to the HSCEI INDEX and HSTECH INDEX, though inclusion in the HSTECH could take place in June.
• NIO Inc (9866 HK) is not likely to get Fast Entry to the HSCI. The stock is not eligible for Southbound Stock Connect as a Secondary Listing.

• Great Wall Motor (2333 HK) could replace Hansoh Pharmaceutical (3692 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance. The review period ends 31 March.
• Bilibili (9626 HK) is a close add while Sunac China Holdings (1918 HK) is a close delete. Stock prices moves over the next 3 weeks will decide on the changes.
• Passive HSCEI Index trackers will need to buy 1.74 days of ADV on Great Wall Motor (2333 HK) and sell over 3 days of ADV on Hansoh Pharmaceutical (3692 HK).

• Arrail is a leading premium dental service provider in China. The company launched book building to raise up to USD 87m via a Hong Kong listing.
• In our previous notes, we looked at the company’s background, its operation, its financials, and its expansion plan, and compared its key metrics with peers and provide thoughts on valuation.
• In this note, we provide a quick update for the book building.

• A Chinese metal giant is scrambling to manage massive losses from shorting nickel futures after the metal went on an unprecedented rally.
• Tsingshan Holding Group Ltd., one of the world’s biggest nickel and stainless steel producers, came under mounting pressure to meet margin calls for its short position
• The price of the metal, used in stainless steel and electric-vehicle batteries, surged as much as 250% in two days

• Jinmao Property Services (816 HK) raised around US$105m in its Hong Kong IPO. 
• In our view, the firm doesn’t deserve to trade at a premium to peers given its weaker margins and slower growth in FY20. 
• In this note, we will look at the trading dynamics and current valuation.

• Arrail is the largest dental services provider in China’s premium private dental service market and the third in the overall market in terms of total revenues in 2020.
• The company has filed for an IPO to list on the Hong Kong Stock Exchange and plans to raise about US$86m.
• The group has experienced strong growth despite the impact of COVID-19 and China’s growing private dental market offers large potential for the company to grow.

• Bilibili Inc (BILI US) reported 4Q2021 results last week where revenues increased 50.6% YoY to RMB 5.8bn while operating losses increased to RMB 2bn compared to RMB 903m in 4Q2020.
• This marks the lowest YoY growth in top line since 2Q2019. Though all segments experienced YoY growth in revenue, we have observed that the growth is slowing down.
• The company also has announced a share buyback of up to US$500m of its ADS over the next 24 months

• For ENT services, the number of patients and scale of ENT field are relatively stable, with growth ceiling.
• Due to the limited doctor resources in Singapore and the intensified multi-party competition faced by Ascent, there may not be exciting future growth potential.
• So, we are conservative about the Company’s outlook if it just operates the business within Singapore or without diversifying its business effectively.

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
• KWG Living Group

• Sold off in the market rout as it is a small-cap stock although growth potential is intact. 
• Margin decreased but revenue increased followed by lower expenses to sales ratio. 
• China High Speed Transmission Equip Grp (658 HK) build-up in inventories and increase in the account receivables reflect management’s confidence and action to prepare for a higher revenue growth.

• Arrail is a leading dental service provider in China. The company is looking to raise up to USD100m via a Hong Kong listing.
• In our previous note, we looked at the company’s background, its operation, its financials, and its expansion plan.
• In this note, we compare the key metric with its peer and provide our thoughts on the valuation.

• Weibo Corp (WB US) reported a set of solid results for 4Q21; ad revenue (excluding Alibaba) has post robust 28% year-over-year growth and MAU remains healthy.
• Weibo is leveraging its competences to increase user engagement. Weibo video account has amassed 25mn users; Weibo Live’s DAU has grown 100% year-over-year.
• Weibo current valuation 10x forward P/E looks attractive; we expect 1Q22 user engagement will improve given that topics on Winter Olympics has already exceeded Toyko Olympics.

• The Composite Document detailing the Conditional Voluntary General Offer for liquid chemical storage and handling outfit Dragon Crown Group (935 HK) (DCG) is now out.
• The Offer Price is HK$1.28/share. The Offer is conditional on 90% acceptance, with 86.91% in the bag.
• This will probably turn unconditional next week. Trading tight to term. 

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.

• Powerlong Commercial Management Holdings

• Provident Acquisition Corp. (PAQC) & Perfect Corp. (Valuation: $1.02B EV)
• FTAC Athena Acquisition (FTAA) and Pico’s business combination agreement was terminated
• Caravelle, “a global carbon-neutral ocean-going technology company”, has signed a letter of intent with Pacifico Acquisition Corp. (PAFO) on 12/31, apparently

• Beijing Enterprises Clean Energy Grp (1250 HK) and China Shandong Hi-Speed Financial Group (412 HK)/CSFG have simultaneously entered trading halts today. CSFG is likely a suitor for BE Clean Energy.
• There is a track record of SOE privatisations of clean energy companies – Huadian Fuxin Energy Corp (816 HK),  Huaneng Renewables Corp H (958 HK) and CP Clean Energy
• In this note, we look at CSFG’s recent failed attempt at acquiring a 22.78% stake at a price of HK$0.088, along with BE Clean Energy’s trading updates and peer multiples.   

• After raising over RMB70 billion,investors have much higher expectation on BeiGene than other biotech/biopharma, because BeiGene is “different”,but the real pressure will come over the next two or three years.
• Will BeiGene become China’s first truly international pharmaceutical company, or be dragged into mediocrity by the failure of key trials or the failure of commercialization to meet the market’s expectations?
• It is attractive if the market value is below US$20 billion. However, considering the Russia-Ukraine war and other potential external uncertainties, we advise investors to keep alert.

• We have guided bullish on Melco Resorts & Entertainment as an early bet on the improving conditions for its Philippines Entertainment Zone property and other group catalysts.
• GGR in Entertainment City Zone rose 20% in 2021 to US$1.35b–pandemic easing.
• Total industry Philippine GGR  for 2021 was up 14.5%  to $2.2b despite a decline in government run Pagcor casinos which had more widespread lockdowns.

• SITC International (1308 HK) achieved a record net profit which surged 2.3x in FY21, but our concern is that much of news has been well in the share price.
• While management is optimistic on its outlook, we think challenges are higher costs (port, bunker and charterhire) and little room for further significant freight rate increase. 
• Its 6.7x P/B for FY22F has well reflected its quality but with ROE likely to dip back in FY22 and FY23, we think upside does not look impressive.

• The 1st quarter is relatively a lower season. Therefore, we expect that the revenue/NM is about RMB$8. 7bn/9.0% in 1Q22 respectively, which declines ~10% QoQ and grow 30% YoY. 
• To our understanding, QCOM is still the biggest client in JCET. The rest of clients have changing a bit in JCET since Huawei was being driven out.
• Overall speaking, China is devoted in developing OSAT (Outsource Semiconductor Assembly and Packaging) business, and the gap shall be close to ASEH and Amkor. 

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
• Hopson Development
• Sino-Ocean Service
• Yuzhou Group