China

• Liquid chemical storage and handling outfit Dragon Crown Group (935 HK) (DCG) announced on the 8 October a pre-conditional Offer from Guangdong Great River Smarter Logistics (002930 CH) at HK$1.28/share.
• GGRS has now released its own independent financial advisor’s report, which concluded the Offer was fair and reasonable. 
• Trading at a gross spread of 6.7% with possible payment early April. 

• Following an improvement in the financial performance, The FT reported that Luckin Coffee (LKNCY US) is plotting to relist its shares in the US sometime this year.
• Although financials have improved, relisting seems a bit premature, especially since Luckin is still not a completely clean house.
• This relisting feels a bit like another attempt by the ex-chairman to deceive minority investors to get the best possible exit price.

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. Sunac China Holdings
2. Anton Oilfield
3. Olam International
4. Times China
5. Shimao Property Holdings

and more…

• Cathay Pacific Airways (293 HK) dangles bonuses for pilots and first officers amid Hong Kong’s stringent crew quarantine requirements. 
• Preceding my comments on Cathay – and Swire Pacific (A) (19 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%.

• A share bull wedge stands out after meeting the 15k downside target. H shares bullish near lower wedge support.
• The cut in key lending rates is spurring a push in HK/China, one needs to make sure this is not just another flash in the pan given a weak SPX.
• HSI impulse out of bull flag cleared wedge resistance and needs resolution. On watch to close higher level shorts.

• ClouDr Group (16897333D CH) (CDG) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• The firm is a digital chronic condition management solution provider and is market leader in China in terms of the number of SaaS installations in hospitals and pharmacies in 2020.
• In this note, we share our thoughts on the company’s business, financials, and operating metrics.

• The stock price has risen 13% since our last note, but we still believe there is an upside of 21%.
• The company is cutting employee benefits, from housing allowance to afternoon tea.
• We believe the operating loss will shrink significantly in the following two years.

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
• Sunac China Holdings

• Aquila Acquisition Corporation (AAC HK), a SPAC backed by China Merchants Bank, has applied for listing in Hong Kong.
• Aquila is the first SPAC company to seek listing since new rules allowing such listings came into effect on the 1 January 2022. 
• Aquila is targeting technology-enabled companies in “new economy” sectors (such as green energy, life sciences, advanced technology and manufacturing) in Asia, with a focus on China.

• Country Garden is widely seen as one of the few remaining large and better quality developers
• However, its share and bond prices fell sharply following a reportedly failed USD300 billion convertible bond capital raising effort, triggering investor concerns  
• In this Insight, we highlight the top of mind questions for Country Garden’s management

• According to public news, the recent bribery scandal of Aier Eye Hospital Group (300015 CH) has raised widespread concern. Shenzhen stock Exchange also issued a letter of inquiry.
• The development model based on M&A funds helps rapid expansion, but also leads to profit orientation and large goodwill balance, indicating potential risks.
• The biggest risk is the revolutionary technology/drugs to disrupt the business value of Aier’s medical services. So, Aier could be a short-term trade, but not a long-term hold. 

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.

• Anton Oilfield
• Delta Dunia Makmur
• Yuzhou Group

• In this latest installment in a series dating back to March 2018, I’ve analysed 4,400 moves over three years inside CCASS, targeting >5% of shares outstanding of individual stocks. 
• The data continues to bear out the overall underperformance of stocks that exhibit large CCASS moves. 
• But it also serves to illustrate that when a certain % move takes place in tandem with a certain market capitalisation, there is a tendency for outperformance. 

• Citic Securities has launched a Rights Offering for H Shares and A Shares. The price is basically the same, which means a very big discount for A holders.
• The timing is different, and the H share Rights Issue process is drawn out past Chinese New Year. This may affect takeup rates and bullishness.
• The difference in capital approach between Dual H/A-share listed SOEs like Citic Securities and like China Mobile is stark. The dichotomy may expand. 

• The Kadoorie family, Hongkong & Shanghai Hotels (45 HK)‘s major shareholder, is paying HK$2.63bn to increase its holding to 72.43% from 59.98%.
• The price under the SPA is $12.80/share, a 92.5% premium to the undisturbed price. Shares promptly gained 19.5% yesterday. No Offer was triggered. 
• What is conveniently left out of the announcement, and in media articles, is the original owner of these shares – Tai United Holdings (718 HK).

• Short term interruption from chips and LFP battery shortage would be eased in 2H2022.
• Xpeng’s monthly delivery would ramp up to 30,000 cars with the launch of G9 in 3Q2022.
• We estimate Xpeng’s net profit will turn positive at the end of 2022, which would trigger further re-rating of the stock to HK$300 (or US$77).

• 2021 full year ADT has grown 29% year-over-year compared with 2020. Trading activities in December continued to slowdown to year-end given the relative weak market sentiment and policy uncertainty.
• We expect HKEX (388 HK) upcoming quarterly earning release (on Feb. 24) will be muted and estimate its 4Q21 revenue and profit will decline 3% and 7% year-over-year respectively. 
• However, 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.

• Yorkey Optical International Cayman (2788 HK)‘s Scheme Document is now out, with the Court Meeting to be held on the 22 February.
• Asia Optical (3019 TT) is offering HK$0.999/share, a 75.3% premium to the undisturbed close. David Webb has given an irrevocable undertaking to vote his shares in favour of the Scheme 
• This transaction is all stitched up. The Independent Financial Advisor considers the terms to be fair and reasonable. 

• The high price of EJiao discouraged consumers, leading to increasing inventory backlog in the distribution channel and reduction in payment collection, which finally resulted in Dong-E-E-Jiao’s net loss in 2019.
• Although the performance has showed a recovery trend since 2020,concerns on raw material shortage, low inventory turnover, single product structure, high selling expense ratio and fierce market competition still remain.
• There is still a long way to go for the Company to get back to peak, so we are conservative about Dong E E Jiaoco Ltd A (000423 CH)’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.

• Olam International

• Wanda Commercial Management Group (WCMG) is looking to raise up to US$4bn in its upcoming Hong Kong IPO.
• WCMG is a commercial operation service provider. As of Oct 2021, the firm managed 398 malls with total gross floor area (GFA) under management of 56.5m sqm.
• In this note, we will talk about the not so positive aspects of the deal.

• Flexible printed board player Akm Industrial (1639 HK) has announced a pre-conditional Scheme from Alpha Luck and AKM Meadville at HK$1.82/share. The Offer price will NOT be increased.
• Alpha Luck is ultimately held by SASAC and AKM Meadville by the government of Haicang District, Xiamen. The two intend to hold 40:60 respectively in the unlisted vehicle. 
• Various PRC regulatory approvals are required. This appears a transaction geared to complete. Timing is the key risk to the deal.

• Qingdao Ainnovation Technology Group Co Ltd (1853807D CH) is looking to raise up to US$157m in its Hong Kong IPO.
• Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions. 
• While we don’t have a fundamental issue with the listing, at asking valuations, the firm appears to be fairly valued with limited upside on its FY23 numbers. 

• AInnovation Technology (AIT HK) is a fast-growing enterprise AI solutions provider in China. It has launched an HKEx IPO to raise up to US$157 million. 
• In AInnovation Technology IPO Initiation: Code Amber, we stated that the negatives outweigh the positives and we would give the IPO a pass.
• Our valuation analysis suggests that the IPO price is fair. Due to our concerns about the fundamentals, we remain on the sidelines. Pricing is 20 January, listing on 27 January.

• Passenger traffic momentum of Air China Ltd (H) (753 HK) has picked up in Dec and it also narrowed down it gap against China Southern Airlines (1055 HK). 
• The resurgence of international traffic over the next two years with more border openings will provide significant benefits to Air China, helping it to recover its depressed load factors.
• Air China outperformed HSCEI by 3.6pp YTD, but we still consider its P/B of 1.0x, or around historical average, not stretched. Strength of Rmb is also a potential positive factor.

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
• Times China

• Wanda Commercial Management Group (WCMG) is looking to raise up to US$4bn in its upcoming Hong Kong IPO.
• WCMG is a commercial operation service provider. As of Oct 2021, the firm managed 398 malls with total gross floor area (GFA) under management of 56.5m sqm.
• In this note, we will talk about the positive aspects of the deal.

• The small market space of peripheral T-cell lymphoma indication and the fierce market competition of other indications, products and candidates make the Company’s future commercialization performance uncertain. 
• The continuous large investment in R&D, high selling expenses, and declining R&D expending capitalization would further drag down profitability.
• So, our view is that we are conservative about Chipscreen Biosciences’s outlook at the current stage.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• LG Energy Solution (373220 KS) saw very strong demand for its mega US$10bn+ IPO.
• While other IPO markets were in torpor, a number of placements continued to flow in.