China

• Significant increase in the lithium market, with double digit percentage increases in the sector
• The information about the market came from China and was transparent, leading to positive market reactions
• Potential impact on downstream battery facilities and operating costs for CATL ‘s lepidolite mine

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• An announcement by Contemporary Amperex Technology Co. Ltd. (CATL) that is to halt production at its giant lithium concentrator in Yichun, Jiangxi province, triggered a sharp rise in domestic lithium mining companies’ stocks.
• Ganfeng Lithium Group Co. Ltd. and Tianqi Lithium Corp. hit their daily price limits Wednesday, while other lithium firms saw significant gains.
• CATL’s decision to stop production comes after steep falls in lithium prices, which have dropped 60% from previous highs.

• Huawei Technologies Co. Ltd. on Tuesday began taking preorders for the second electric vehicle (EV) co-developed with automaker partner Chery Automobile Co. Ltd., after seemingly overcoming production hurdles that dogged their earlier model.

• The Luxeed R7 is the first electric coupe SUV marketed under Huawei’s Harmony Intelligent Mobility Alliance — originally known as Smart Selection.

• Positioned as a challenger to Tesla Inc.’s Model Y, the new car’s preorder prices range from 268,000 yuan ($37,651) to 348,000 yuan, according to Huawei’s official online store Vmall.

• Back in August 2017, Xingxuan Technology, a privately held Cayman Islands company operating in the online food delivery space in China, was transferred by way of a statutory merger. 
• The buyer was Alibaba Group (9988 HK)-backed Rajax, the key seller, Baidu (9888 HK). The dissenter, having paid US$125mn for its shares, was offered cash/scrip worth an estimated US$42mn.
• The dissenter considered terms low-balled. The judge agreed. The uplift? 659%.

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.
• In CR Beverage IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on core business’ pricing pressure, a slow pace of revenue diversification, a sizeable pre-IPO dividend, and margin and FCF generation below its key peer. 

• Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
• Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
• The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

• Shuangdeng Group Co Ltd (JISHUZ CH) is looking to raise about US$150m in its upcoming Hong Kong IPO. The deal will be run by CICC, CCBI and Huatai.
• Shuangdeng Group Co Ltd is engaged in energy storage business for big-data and telecommunication industries with a focus on design, R&D, manufacturing and sales of energy storage batteries and systems.
• It was ranked first among global telecom base station and data-center energy storage battery providers in terms of shipment volume, achieving a 10.4% market share in 2023, according to F&S.

• Hong Kong market is range bound with conglomerates showing strength over the last few weeks.  As the CNY/HKD strengthens the A/H premium should narrow.
• SUNeVision Holdings (1686 HK) reported good results on the back of increased demand driven by the AI sector. 
• Yum China Holdings (9987 HK),Yum China Holdings (YUMC US) reported flat sales and an increase in operating profit in a difficult fast food retail environment in China.

• Duality Biotherapeutics, a China-based clinical-stage biotechnology company, plans to raise up to US$300m via a Hong Kong listing.
• In this note, we examine the company’s two core products, namely DB-1313 (HER2 ADC) and DB-1311 (B7-H3 ADC). We think the company’s products are not yet convincing.
• While the management has expertise as biotech investors, biotech-related operational experience seems to be lacking.

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.

• Adaro Energy
• China Vanke
• Greentown China

• There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
• We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
• Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

• Hozon New Energy Automobile is looking to raise up to US$1bn in its upcoming HK IPO.
• Hozon New Energy Automobile (HNEA) is a NEV technology company which sells cars under the Neta brand. The prices of its vehicles generally range between US$15,000 to US$45,000.
• In this note, we 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 Jinmao Holdings
• Continuum Green Energy
• Sands China

• 2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).
• Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.
• Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).

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 Water Affairs
• Meituan

• We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares. 
• We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
• Pricing of this offering is expected to be completed on 13 September and listing on 17 September. 

• On the 18th June, personal computer parts and accessories play PC Partner (1263 HK) (PCP) announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
• PCP’s 30th August announcement provided clarity on a step-by-step approach for the HKEx withdrawal. I recently held zooms with the SFC and SGX for added clarification.
• PCP’s exchange relocation is predicated on PCP’s operational expansion into new markets, in particular, Southeast Asia. How and when the SGX becomes the preferred trading exchange  remains an unanswered question. 

• Physical rubber prices gained strength during the Asian trade day as a typhoon in Vietnam disrupted the supply chain, limiting supply in the market. 
• In addition, increased inquiries from the Chinese tire makers for the prompt cargoes resulted in further support for the prices. 
• Chinese state buying up to 100kt of rubber, prices to be announced on 13 Sep 2024. This would provide some short term support on the SHFE 

• Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
• The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
• As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively. 

• NIO Motors (NIO) reported C2Q24 top line, non-GAAP operating loss and GAAP net loss in-line, narrower and narrower vs. our estimate, and in-line, narrower and in-line vs. consensus. 
• The brightest spot of the result is gross margin due to both vehicle and service gross margin improvements. 
• We keep rating at SELL and raise TP to US$1 to reflect better OPEX control.

• Market consensus is unrealistic as it expects China Tourism Group Duty Free (1880 HK) to record 32.1% YoY and 14.6% HoH earnings growth in 2H24. More downgrade risk ahead.
• Average per-customer duty-free sales in Hainan dropped by 19.2% YoY in Jul, indicating the negative wealth effect and deteriorating middle-class spending appetite.
• Overseas duty-free sales to Chinese residents surged by almost 50% YoY in Aug, implying a diversion effect which is also detrimental. 

• Speculative liquidation of crude oil positions opens up an opportunity
• A seasonally strong period for crude tanker rates coming up
• Company option scheme for senior management approved. Strike above current price

• AK112’s HARMONi-2 results were impressive, but there’s still critical data gap before obtaining approval from FDA. The main concern is whether good PFS can be translated into significant OS benefits.
• Akeso will be eligible to receive low double-digit royalties on net sales from Summit. So, Summit is actually a better investment because it has complete global rights of AK112.
• Investors are betting Summit to be acquired by MNCs at a high price.Due to anti-monopoly issue, the narrowing pool of potential buyers would increase the difficulty of Summit being acquired.

• Shougang Fushan Resources (639 HK) ended H1 FY24 with over 10.5 bn HKD of net cash and investments, compared to 12.7 bn HKD of market capitalization. 
• At 1600 RMB/ton coking coal prices (current spot price), the business will be able to generate 1.1 bn HKD of profits, with an 80% payout implying a 7% dividend yield. 
• The current spot prices are 16% below the average five-year price of 1900 RMB/ton ( yield 10%), and at these prices, the company still makes an EBITDA margin of 40-45%. 

• Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
• We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views. 
• Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

• Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK), two of China’s leading state-backed brokerages, intend to merger via a share swap, subject to regulatory approvals.
• Via a Merger by Absorption. GJS will issue new A and H shares to Haitong shareholders. The ratio hasn’t been firmed. Upon completion, the MergeCo creates China’s largest securities entity.
• A merger is welcome – possibly mandated – amid challenging capital markets and a tightening regulatory backdrop.

• Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the deal background in our previous notes. In this note, we talk about valuations.

• Midea Group Co Ltd A (000333 CH)  is offering 492.1 million shares in Hong Kong, priced between HKD52 and HKD54.8 per share.The valuation looks attractive.
• Nearly one-third of the Hong Kong share offering has already been subscribed by cornerstone investors.
• Midea’s strong market share in home appliances, consistent revenue growth, margin expansion, and appealing return ratios make a compelling investment case.

• ETF flows showed subdued activity during the week although the Southbound Connect platform had a minor outflow.
• Great Wall Motor (2333 HK) and China Feihe (6186 HK) both had positive news sentiment helping their share prices rally on better earnings announcements.
• New World Development (17 HK) announced a major asset impairment write-down sending its stock to historic lows.  China Tourism Group Duty Free (1880 HK) disappointed on 2Q24 sales and profits.

• Nongfu Spring (9633 HK)‘s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.
• The derating is largely due to the negative media portrayal of the company’s Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24. 
• Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy. 

• Fosun Pharma will make every effort to promote the success of this privatization. The management has disclosed the afterwards arrangements- Henlius and Fosun Pharma will further expand/integrate in the future.
• Henlius’ revenue is expected to reach RMB6 billion in 2024 and RMB8-9 billion in next 2-3 years. Even if the privatization fails, things are still manageable due to strong fundamentals.
• Fosun Pharma will not stop its capital operation against Henlius, but the plans of re-listing could be based on a new entity. So, the Cash Alternative is a better choice. 

• Industry wheel loader sales rose 15.2% in Aug, continuing the healthy momentum. A low base in 2H24 will be another favourable factor, and Lonking Holdings (3339 HK) is well placed.   
• Forklift outlook will stay strong and serve as a growth engine. There is also a significant pick-up in demand for industry excavator sales in Jul and Aug.
• Net cash amounted to 81% of the share price. Including investments, it will increase to 118%. Conservative FY24 consensus earnings forecast means potential upside surprise.

• Back on the 23 June 2024, property developer Midea Real Estate Holding (3990 HK) announced the in-specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
• The in-specie involved distributing 97.8% of Midea’s assets (involved in property development and sales); accounting for 95% of revenue and ~91% of profit. All figures as at FY23.
• Midea went ex yesterday, closing down just HK$4.87/share. Midea, ex-in-specie, is currently trading at a trailing 0.6x P/B, and 2.3x PER. Pricing looks full.

• Hozon New Energy Automobile is looking to raise up to US$1bn in its upcoming HK IPO. 
• Hozon New Energy Automobile (HNEA) is a NEV technology company which sells cars under the Neta brand. The prices of its vehicles generally range between US$15,000 to US$45,000.
• In this note, we talk about the positive aspects of the deal.

• The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
• Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
• Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

• On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange. 
• The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
• In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

• SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
• ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small. 
• This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).

• China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
• However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
• Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.

• Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
• AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
• It is not clear what impetus there might be for better H performance.

• We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
• We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
• Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out – they have had positive inflections in their earnings/dividend payouts and capital allocation.

• JNBY Design Ltd (3306 HK) is successful in capturing China’s niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
• Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
• Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we looked at Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN), which are two relatively large listings coming up. 
• Placement were flowing through again this week, across the region.

• A change in depreciation policy boosted reported profits in Jan-May 2024
• But Adjusted EBITDA margins have declined consistently in recent periods
• Among our growing list of questions: why hasn’t Hive Box grown faster?

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

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) IPO.
• Event-Driven developments: Fuji Soft Inc (9749 JP), Pasco Corp (9232 JP), Seven & I Holdings (3382 JP), Xingda International (1899 HK), CPMC Holdings (906 HK), Psc Insurance (PSI AU). 

• The past “infrastructure-driven demand model” in medical devices has become “an updated model”. The future reasonable demand for medical devices may fall back to a quarter of pre anti-corruption levels.
• Top innovative pharmaceutical companies worth investing in need to meet certain conditions. Currently, there is still a gap between Chinese pharmaceutical companies and companies like Regeneron in various aspects.
• Henlius is of great strategic significance for Fosun Pharma, which actually increases the privatization success rate. Valuation logic of Fosun Pharma should be based on PE/VC firms not traditional pharma.

• Miniso (MNSO) reported C2Q24 revenue (3.2%)/1.9% vs. our estimate/consensus. Non-GAAP NI (5.6%)/(2.7%) vs. our estimate/consensus. 
• Recent weak economic data in both China and U.S.,along with MNSO’s deceleration in overseas average store sales;
• We cut TP from US$34 to US$24 and maintain BUY.

• Media rife with narrative of booming inbound foreign tourism to China
• But the numbers are well below historical highs, and climbing up from low base
• Chinese tourists, not foreign, determine strength of Chinese tourism recovery

• Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
• Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
• In the past five days, Midea’s price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.  

• PDD Holdings, Inc. has shared their financial results for the second quarter of 2024 along with an overview of strategic actions and challenges.
• The company saw substantial revenue growth, with total revenue reaching RMB 97 billion, marking an 86% year-on-year increase.
• This significant growth stems mainly from robust online marketing and transaction services.

• Didi Global Inc. is investing 670 million yuan ($94 million) in an affiliated firm of digital mapping company NavInfo Co. Ltd. (002405.SZ -3.09%) and has moved its team responsible for smart cockpit development to the venture, as the Chinese ride-hailing giant takes another step away from carmaking to streamline its business.
• Beijing-based Didi’s smart transportation arm will take a 16.46% stake in AutoAI (Nanjing) Technologies Co. Ltd., becoming its second-largest shareholder, NavInfo said in a Shenzhen Stock Exchange filing dated Wednesday.
• NavInfo, AutoAI’s largest shareholder, will also invest an additional 100 million yuan in AutoAI, diluting its stake from 30.29% to 27.01%, the filing said.

• 1H24 results was above expectation and showing good signs of cost control and topline recovery. We expect the momentum to continue. 
• Air traffic in China continues to grow strongly, with domestic travel leading the way. International traffic is picking up momentum, but still 23% gap to pre-Covid’s numbers. 
• Revised fair value of HKD11.10 (+18% UPSIDE) is based on 2025 PE 12.5x (1SD below mean). 

• iQIYI recently divulged its financial and operational results for the second quarter of 2024, revealing several intriguing aspects about its current business trajectory.
• This analysis aims to distill the substantial information provided during the earnings call and form an even-handed view on iQIYI’s performance and future prospects.
• iQIYI remains a significant player in the long-form video sector in China, holding a competitive edge in the drama and film categories.

• 0.08x P/B. That’s where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.
• So, what’s going on? Announcing an expected HK$19-20bn loss for FY24 last week didn’t help matters. Shares are down 14% this week and 85% since Covid.
• Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. 

• Back on the 7 Dec 2023, Xingda International (1899 HK)  announced a partial Offer from a consortium comprising management at HK$1.88/share.
• The consortium, at the time, held 45%, with the objective to hold >50.01% at the close of the Offer. The final % was 50.42%. 
• The consortium was then free to take their stake up to 75%. However the shareholder structure has materially changed in 2024. Xingda is suspended (again) pursuant to the Takeovers Code.

• Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• Significant changes in substantial shareholders have occurred since the previous partial offer closed on 10 March 2023, which could be the catalyst for an offer. 
• Management is likely reloading a partial offer to exercise statutory control and bypass the 2% creeper rule. The partial offer price could be around HK$1.60-1.70 per share. 

• Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
• Midea Group Co Ltd A (000333 CH)  has a diversified product portfolio,  well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
• Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

• Baidu has reported its financial results for the second quarter of fiscal year 2024, showcasing resilience with its Baidu Core which posted a modest revenue growth to RMB 26.7 billion.
• This growth was driven by the accelerating performance in the AI Cloud sector, which somewhat counterbalanced the drag provided by the online marketing segment.
• Notably, there was an 8% year-over-year increase in non-GAAP operating profit for Baidu Core, reflecting continued operational efficiencies.

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.

• Samvardhana Motherson International Ltd
• West China Cement
• Yuexiu Property

• NetEase’s 2024 second quarter earnings report revealed considerable strategic progress, although accompanied by some operational challenges typical for a growing enterprise.
• The company reported a total revenue of RMB 25.5 billion, indicating a 6% year-over-year increase, driven largely by the success in its gaming division and expanded efforts in international markets.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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
• Medco Energi

Shui On Land’s (SOL) H1/24 results were weak, as the company reported reduced earnings, higher net debt and weaker leverage. Positively, rental income continued to grow. As a result, recurring operating income from rentals and property management covered 0.9x of interest expense for LTM June (FY 2023: 0.8x). In addition, asset values were stable, with consolidated investment properties covering 1.7x of net debt. We expect cash flows to improve in H2/24, supported by the planned delivery of two projects.  

That said, liquidity is poor. We view negatively management’s cautious tone during the earnings call. Going forward, we believe that SOL could seek to monetise its 100% stake in its property investment and management arm, Shui On Xin Tian Di. In addition, the company may raise fresh funding by further increasing the LTV on its investment property portfolio to the maximum of 45%, albeit this is uncertain (depending on its arrangements with banks). SOL may also carry out more asset sales.

Meanwhile, we believe that the company may be considering potential liability management exercises for the USD bonds in the event it fails to obtain sufficient financing for repayment.

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
• In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
• In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

• PC Partner showed a significant improvement in its 1H24 results YoY.
• The company will be relocating HQ to Singapore and move its primary listing from HK to Singapore. If this move is successful, it will improve AI chips allocation from Nvidia.
• Why Singapore? PC Partner is preparing itself for a future where China/USA political relationship does not improve.

• China Tower (788 HK) will replace China International Capital Corporation (3908 HK) in the iShares China Large-Cap (FXI) (FXI US) at the close on 20 September.
• The appears to be a lot more positioning and short interest in China International Capital Corporation (3908 HK) compared to China Tower (788 HK). 
• The listing of Midea Group Co Ltd A (000333 CH) H-shares could result in another change for the ETF prior to the next scheduled rebalance in December.

• We have seen positive progress of the privatization of China TCM, which is still considered an important project on the agenda. CNPGC’s new leadership is very supportive of the deal.
• The SAMR process has begun. There should be no problem to meet the Pre-Conditions. If the approval process takes more time, Long Stop Date would be extended.
• Considering China Resources has decided to acquire Tasly, we think the integration of TCM business by CNPGC is expected to accelerate. We remain optimistic and this deal will get up. 

• The iShares A50 China (2823 HK) and CSOP China A50 (2822 HK) ETFs will rebalance their holdings at the close on 20 September.
• China National Nuclear Power (601985 CH) and Huaneng Lancang River Hydropow (600025) will replace China Tourism Group Duty Free (601888 CH) and Yihai Kerry Arawana (300999 CH) in the ETFs.
• Passive trackers are estimated to buy between 0.3-0.5 days of ADV in the adds and sell between 0.4-1.1 days of ADV in the deletes.

• Sanergy (2459 HK), a graphite electrode manufacturer, was added to the MSCI Small-Cap Index on 30th August; and was due to enter the Hang Seng Composite Index on 9th September.
• However, the SFC announced a concentration warning on the 2nd September. Shares promptly cratered ~98% yesterday (the 3rd September). Expect the HSCI inclusion to now be yanked.
• This Sanergy debacle should refocus investors on other heavily concentrated stocks, such as Jinhai Medical (2225 HK), in which GoFintech (290 HK) (another heavily concentrated stock) has inexplicably been buying. 

• China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) share price on downtrend due to negative sentiment, increased competition, and Chinese being more frugal in their consumption  
• 2024 and 2025 consensus earnings declined by -2%/-17%, but CTG will deliver +16% YoY earnings growth in 2025. CTG remains a growths stock, a fact we think many investors forget!  
• We revise our target price to CNY71.3 pegged to 18.5x FY25 PE (1.5 standard deviation below mean). We think the share price decline is overdone and ignores its strong fundamentals.  

• Zai Lab (9688 HK) recorded Vyvgart revenue of $10M, $13M, and $23M in 4Q23, 1Q24, and 2Q24, respectively. The company raised 2024 Vyvgart revenue guidance to $80M from $70M earlier.
• Despite strong momentum from Vyvgart, Zai Lab still has a lot of pain points. Decelerating revenue growth from Zejula is one of them.
• Due to its in-licensing business model, Zai Lab has lower gross profit margin of 64–65%, compared with ~80% for a typical innovator biotech company.

• Atour (ATAT) reported C2Q24 revenue 2.2%/8.3% higher than our est./cons., and non-GAAP NI 6.8%/12.3% higher than our est./ cons, driven by stronger hotel supply chain sales and better retail efficiency.
• We keep 2024 revenue growth estimate at 53% YoY vs. the uplift company guidance at 48%-52% YoY. Potential catalysts are stronger off-season travel,old hotel renovation scheme, and new brand launch.
• We keep TP unchanged at US$36/ADS and maintain the BUY rating.

• Carote Ltd (CARO HK) is looking to raise around US$120m in its upcoming Hong Kong IPO.
• Carote Ltd is a distributor of kitchenware products. Expanding its lineup of products, Carote aims to meet its customers’ varied kitchen scenarios and enhance their culinary experience.
• We had looked at the firm’s past performance in an earlier note. In this note, we discuss its PHIP updates.