Daily Brief China: A8 New Media, Mao Geping Cosmetics, Shenzhen Transsion Holdings , QuantumPharm, Medtide, Yankuang Energy Group, Beijing Capital International Airport (BCIA), Jiangsu Hengrui Medicine, Road King Infrastructure and more

• A8 New Media (800 HK) disclosed a Cayman scheme privatisation offer from Mr Liu Xiaosong (Founder, Chairman, CEO) at HK$0.36 per share, a 162.8% premium to the last close price. 
• The massive premium is unsurprising, as A8’s EV has been negative since April 2023 due to headwinds from the weak Chinese leasing sector and uncertainty about cash use.  
• The high takeover premium, no shareholder holding a blocking stake, and low AGM minority participation rate point to a done deal. However, this is a small-cap illiquid stock.  

• Mao Geping Cosmetics is looking to raise around US$300m in its upcoming Hong Kong IPO.
• Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
• In this note, we look at the company’s past performance.

• Transsion is the global No. 4 largest smartphone producer according to IDC.
• In 1Q24, shipments increased by 34% YoY and revenue increased by 88% YoY.
• We see the stock’s upside at 17% and the price target at RMB100.00.

• QuantumPharm (QUP HK) raised US$126m from its Hong Kong IPO.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• Medtide (1268709D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Morgan Stanley and Citic Securities.
• Medtide is the third largest peptide-focused contract research, development and manufacturing organization (CRDMO) worldwide in terms of sales revenue in 2023, according to F&S. 
• Its full-cycle services range from early-stage discovery, pre-clinical research and clinical development to commercial-stage production.

• Increased demand from power plants under construction outside  G-7 countries
• There is constrained supply as with many other fossil fuels
• We look at a basket of coal stocks with good balance sheets and increasing production

• The worst is behind Beijing Capital International Airport. We believe it is on track to achieve breakeven on quarterly basis in 2H24.
• We see recent parking fee hikes at Daxing Airport as a signal that more will come, which is not in the price and can bring in extra option value.
• Boom-And-Bust in China property sector is behind the airport’s share price cycle. The airport is at the cusp of a steady recovery driving mean reversion of valuation .

• Following a suspension on the 28th May, property rental play A8 New Media (800 HK) has now announced an Offer by way of a Scheme from chairman/founder/major shareholder Liu Xiaosong.
• The Cancellation price is $0.36, a whopping 162.77% to last close. The price is final.
• This is a done deal. But A8 is an illiquid micro cap. 

• Around RMB5 billion generic drugs would be included in VBP in 2024/2025 (e.g. sevoflurane/Ioversol/butorphanol tartrate). So, the assumption that all the negative effects of VBP have cleared up isn’t correct.
• Hengrui’s innovative drugs would lose growth momentum after they reach peak sales. It’s difficult for Hengrui to maintain its scale expansion or achieve the over 20% YoY revenue growth.
• Hengrui’s PE would fall below 30 (or even below 20) in the future, which means its valuation would start to enter a downward trend. Current high valuation cannot be justified.

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.

• Nickel Industries
• Road King Infrastructure
• Yankuang Energy Group