Daily Brief China: AAC Technologies Holdings, BeiGene Ltd, Aag Energy Holdings, ABM Investama, Taste Gourmet, Aier Eye Hospital Group, Sinotrans, JD.com Inc., Lu DaoPei Medical Group Holding and more

• In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSTECH Index in June 2023.
• Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
• Here are our latest flow expectations based on the current prices.

• In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
• Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
• Here are our latest flow expectations based on the current prices.

• Aag Energy Holdings (2686 HK)’s latest AGM results show a strong dissent from minorities. The number of NO votes per resolution varied from 590.9-652.5 million or 17.40%-19.22% of outstanding shares.
• The AGM voting shows that Xinjiang Xintai Natural Gas (603393 CH) will struggle to pass the scheme even if the record date is changed and some NO votes are invalidated.
• The risk-reward profile remains unfavourable as the downside to a scheme fail (12.1% to 17.0% downside) is greater than the upside to a scheme pass (+12.1% to HK$1.85 offer).

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.

• In unprecedented fashion, AAG Energy Holdings (2686 HK)‘s board adjourned the Court Meeting on the 27 April due to some voting instructions not being duly processed.
• That reasoning had a whiff of nonsense. And just under a week later, there has been no update. Perhaps this is moot though.
• At yesterday’s AGM, disinterested shareholders turned up in record numbers to vote against stock-standard resolutions. If a similar turnout were present at the Court Meeting, the Scheme would have failed. 

• Taste Gourmet (8371 HK) will report FY23 (March YE) results on June 23rd. Channel checks indicate strong momentum in Q4 Vs. Q3 FY23.
• Based on our estimates of 72/112 mn HKD for FY23/24e, the stock trades at 8x/5x FY23e/FY24e with a 7.6%/11.9% dividend yield assuming a 60% payout ratio.
• The company has 114 mn HKD of cash (20% of market cap), which is earmarked for restaurant expansion by 6-10 outlets and dividend payout (50-60% of earnings) in HK/China.

• Aier’s performance slowed significantly in 2022, with revenue and net profit growth rates at their lowest in nearly a decade.Although performance rebounded in 23Q1, the growth rate lags behind peers.
• In front of increasing competition and difficulty of finding good acquisition targets, Aier’s poor operational capabilities and endogenous growth cannot support rapid growth. The beautiful story has shown obvious cracks.
• Future single-digit growth is inevitable. Aier is significantly overvalued due to problematic long logic. It should be noted that there would be four further holdings reductions for Aier this year.

• While meeting expectations in 1Q23, Sinotrans (598 HK) has relied on a 105.2% surge in other income, mostly government subsidies. Without them, pre-tax profit would have dropped 21%.
• For most business areas, volume has come down YoY and QoQ, highlighting challenging operating environment. JV contribution, mostly DHL-Sinotrans, has also declined 11.5% YoY.
• While we like its long-term fundamentals and undemanding multiples, we have concerns on near-term headwinds and weakened earnings quality; and risks of profit downgrades.  

• We believe JD’s growth rate will continue to slow down and its margin will continue to improve in 1Q23.
• However, we also believe revenue growth will recover from 2Q23.
• We set a price target of HK$256, implying an upside of 85%. Buy.

• The government has started to encourage social capital to run hospitals. By entering the market that haven’t been fully covered by public hospitals, LDP has large development space theoretically.
• The current gross profit margin of LDP isn’t satisfactory. Together with continuous expansion of new hospitals with large investment, LDP could face either continuous loss or very low profit margin.
• China’s high degree of regulation depresses medical service price.The benefit chain of hospitals is complicated.In essence, an industry with low level of terminal payment is hard to generate high profits.