China: JD.com Inc., Tencent, Alibaba Group, Yashili International Holdings, Beijing Enterprises Clean Energy Grp, WH Group, HKEX, China Everbright Environment, Logan Property Holdings and more

• 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.

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