China: Dongzheng Automotive Finance, Tencent, Meituan, Sunac China Holdings and more

• Both Dongzheng Automotive Finance (2718 HK) and China Zhengtong Auto Services Hldg (1728 HK) issued HKEx suspension notices at the same time yesterday morning.
• In no uncertain terms, the Shanghai office of the China Banking and Insurance Regulatory Commission has forced the liquidation of ZhengTong’s 71.04% stake in Dongzheng.
• That stake “sale” may trigger an Offer for Dongzheng. Dongzheng’s suspension is “pursuant to the Hong Kong Code on Takeovers and Mergers“.

• Tencent short call at 390-400 is a hold but needs to break below the 351 low for bear traction toward our downside targets at 333 and 320 (bull zone).
• The current flat/trapped range shows resistance at 382 and pivot support at 351/350. Below 350 would open the way lower.
• Re test of the low zone is a buying opportunity for a rally to the 320-30 macro barrier. HK tech index sub 4k buy zone is our long counter balance.

We view Meituan as “Low Risk” on the LARA scale, given the company’s: [1] leading market positions in China’s food delivery as well as the in-store, hotel & travel accommodation industries; [2] increasing market share and scale, which should drive operating leverage; and [3] robust balance sheet, with net cash and a strong liquidity position. Meituan benefits from regulations that restrict aggressive pricing to gain market share. In addition, the company has fast-growing revenue streams across its business segments. However, the credit profile is weighed down by: [1] regulatory headwinds in the food delivery business; and [2] the ongoing losses and cash burn from the company’s community group-buying business.

Our Credit Bias is “Stable”, given the robust business risk profile and strong balance sheet.

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.

• Sunac China Holdings