China: Tencent, Miniso, Readboy Education, Anton Oilfield, Alibaba Health Information Technology, Yanlord Land, ABM Investama and more

• Alibaba CEO’s article appeared on a government journal, which can be a positive signal to non-state-owned companies.
• Prosus sells shareholdings in Tencent and JD.com to repurchase its own shares.
• Tencent is trying to use game technologies in other fields.

• The offer period for Miniso (MNSO US)’s HK listing began on 30th June at a maximum offer-price of HK$22.10 per-share, which translates to a 42% premium to its ADSs .
• With store-level performance expected to reach the pre-COVID level , alongside an aggressive plan to increase the store count by 60%, we predict more than 100% upside to FY24 consensus.
• Our estimates put Miniso on 4.3x FY24 OP, which seems genuinely cheap compared to most of the GMS stocks in New York and Hong Kong.

• Readboy Education has the second largest market share in China’s smart learning device market. The company has filed for an IPO on the HKEx to raise around HK$ 520m.
• The company grew its revenues strongly over the past three years but shipments have been declining in 2021 amidst the COVID-19 resurgence and subsequent lockdowns.
• Margins have been declining due to raw material shortages and even though Readboy claims to have taken measures to deal with the shortages, we are yet to see its effectiveness.

We view Anton Oilfield as “High Risk” on the LARA scale, due to refinancing risk for the USD 2022 notes (maturing in December) amid a challenging capital market. That said, we believe the refinancing risk is manageable. We also consider the company’s: [1] small scale; [2] customer concentration; and [3] expertise in horizontal drilling, which is expensive and likely to be cut during downturns. Anton may face heightened geopolitical risks due to its increased exposure to Iraq, with c. 50% of the order book derived from the Middle East and Central Africa. Positively, the shale gas business in China could be more stable than other parts of the upstream oil industry, due to the government’s policy of improving oil & gas self-sufficiency. Anton’s near-term outlook is supported by its large backlog (more than two years of revenues).

Our Credit Bias remains “Stable”, given the reasonable operational performance on the back of supportive oil prices and an improving operating environment.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

• Alibaba Health’s core pharmaceutical direct sales business is facing challenges in terms of increasing competition as well as lower revenue growth and margins, dragging down the overall performance.
• The recent new policies about online drug sales on third-party digital healthcare platforms and online diagnosis and treatment would add more uncertainties on Alibaba Health’s business and outlook.
• If such unfavorable trend continues, the gap between Alibaba Health and JD Health would be wider. It’s not easy to break the deadlock. Investors may need to take heed.

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.

• Yanlord Land
• Yuexiu Property

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.

• Yanlord Land
• Yuexiu Property

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.