China: Tencent, Yashili International Holdings, Ping An Healthcare and Technology Company Limited, CanSino Biologics Inc, Guangzhou R&F Properties, Green Tea Group and more

• Short notional in Hong Kong is HK$488bn and has been falling mainly as a result of a falling market. Short interest has increased substantially from end January.
• From 31 January to 4 March, the largest shorts have been built on Tencent, China Merchants Bank, AIA Group Ltd, Alibaba, JD.com, Meituan, Xiaomi, JD Health and Xinyi Solar.
• Over the same period, shorts have covered on COSCO Shipping Holdings, HKEX, Longfor Properties, China Construction Bank, Ping An Insurance, Yanzhou Coal Mining Company and HSBC Holdings.

• Layoff rumors are spreading, which shadow two departments and 10% of Tencent’s employees.
• China Banking Regulatory Commission (CBRC) will fine Tencent for money laundering.
• Short video apps are taking time on site from Tencent’s WeChat app.

• Yashili International Holdings (1230 HK) announced its controlling shareholder, China Mengniu Dairy Co (2319 HK), is in discussions regarding its holdings in Yashili and several potential transactions.
• If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).
• The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.  

• Ping An Health (SEHK:1833) reported 2H2021 earnings on Tuesday after market close. The company’s revenue declined by 14.7% YoY with a 7.5% decline in gross margins.
• On a full-year basis, 2021 revenue grew by 6.8% despite a 3.9% decline in gross margins. We are concerned on the slowdown of revenue growth and margin decline.
• The company is trading at a significant discount to historical median and peers. Withou clarity regarding segments, we think it is too soon to take a completely negative stance.

• Our bear call on Tencent met the reverse target at 320 at macro support to go long with some choppy trade expected in coming weeks. Volume spikes to induce volatility.
• Hong Kong tech index also met the 3,500 rally support. 4,500 represents immediate resistance that will induce a rejection and pullback. Magnitude of this rise will need a give back.
• Tencent 390/400 is near resistance to sell (tactical short) and sets up the bigger buy in the lower range quadrant. 400 is the level to clear for bull traction.

• The main performance contributor in 2021 was CanSino’s COVID-19 vaccine.However, the high vaccination rates, new alternatives (e.g. oral COVID-19 pills) and concerns on capacity make the future sales highly uncertain.
• The commercialization performance of MCV2 and MCV4 would largely determine when CanSino could truly shift to relying on conventional vaccine business rather than COVID-19 vaccine to contribute performance.
• Objectively speaking, CanSino’s pipeline, R&D capability and technology platforms do have advantages and investment value.

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.

• Greenland Holdings Corp
• Guangzhou R&F Properties

• Green Tea Group (GT HK) is looking to raise about US$150m in its upcoming Hong Kong IPO. 
• Green Tea Group is a restaurant chain operator for fusion cuisine in China. 
• As of the latest practicable date (LPD), it had a restaurant network of 236 restaurants covering 18 provinces, four municipalities and three autonomous regions in the PRC.