China: Sichuan Tianqi Lithium Industries, Inc, Viva China Holdings, HKEX, Air China Ltd (H), Beijing Yuanxin Technology Group Co Ltd, Medco Energi and more

• Tianqi Lithium (TL) is looking to raise up to US$1.5bn via its H-shares listing. It undertakes mining of lithium ore and manufacturing of lithium concentrate, lithium compounds and derivatives.
• TL was the largest producer of mined lithium globally in terms of output and ranked third in terms of revenue generated from lithium in 2020, according to Wood Mackenzie .
• In this note, we look at the company’s past performance and the deal dynamics.

• Viva China Holdings is a deep value stock with several key catalysts. Viva China Holdings’10.36% stake in Li Ning (2331 HK) alone is worth 152% of its market cap.
• In addition, Viva China Holdings is making solid acquisitions in the global footwear/apparel sector such as Clarks, which is one of the most well known footwear brands in the U.K.
• A major ongoing risk factor is the recent major lockdowns in Shanghai and other cities in China, which is intent on pursing a zero COVID policy.

• A better way to think of the Hong Kong Market in the current cycle is that it has both US & China’s economic headwinds and requires sharply lower rates and currency to correct macro imbalances.
• HKMA should be cutting interest rates, but it cannot do so due to the currency peg.
• Over the last 12-18 months, Hong Kong developers have enjoyed stability in expectations of reopening borders, investment demand, strong balance sheet compared to mainland developers, and low funding costs (HIBOR). These tailwinds are now headwinds.

• Sequential passenger traffic improvement makes us believe that the worst was over for Air China (753 HK). We expect it continues the YTD outperformance vs. Air China Ltd (753 HK). 
• With the pandemic under control and government’s focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.
• Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit Cathay Pacific Airways (293 HK) which now anticipates lower losses YoY in 1H22.

• Based on the business analysis, Beijing Yuanxin Technology Group Co Ltd (1865453D CH) is more of a traditional offline chain drugstores than a healthcare technology company.
• Yuanxin has been suffering from loss for years. With a gross margin of lower than 10%, it’s going to be tough to turn a profit, leading to concerns on survival. 
• Due to the fierce competition in each of its businesses, homogeneous business model, weak financial position, lack of high moat, policy risks, etc., we are conservative about the Company’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.

• Bright Scholar Education
• China South City
• Medco Energi