Daily Brief China: Aag Energy Holdings, China Longyuan Power, Fu Shou Yuan, Tencent, Seazen (Formerly Future Land) and more

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Origin Energy (ORG AU), 111 Inc (YI US), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU). 
• Lowest spreads – Boustead Projects (BOCJ SP), Ihara Science (5999 JP), Nitro Software Ltd (NTO AU), Tyro Payments (TYR AU), Essential Metals (ESS AU), Warrego Energy (WGO AU). 

• The FY22 profit warning for China Longyuan Power (916 HK) reflected mostly items of one-off in nature and the weak result should be a matter of the past.
• The Jan overall generation growth of 30.6% and wind power growth of 44.4% are very solid performance. With economic rebound and low comparison base, we expect growth to sustain.
• Asset injection from CHN Energy and improvement in financial position through subsidy collection are positives, making its below 10x PERs for FY23 and FY24 attractive. 

• The second wave of pandemic is important logic to drive up Fu Shou Yuan’s share price, but the peak value/lethality could be lower than first wave, leading to lower-than-expected demand.
• Whether the second wave can “arrive as expected” may not depend on pandemic itself, but on “whether to let it happen”,especially when China’s making every effort to promote economic recovery.
• Besides solid fundamentals/optimistic performance, hot market sentiment is very essential if Fu Shou Yuan (1448 HK)’s share price is to outperform. Policy changes are also a potential source of unease.

• Chinese online game revenue decreased year over year for the first time since the statistic started.
• From 2018, the Press and Publishing Administration had significantly reduced the number of new game license.
• Short video has been gradually taking time on site from online game.

• The Chinese online game market shrank for the first time in 2022.
• Tencent’s WeChat plans to launch a cooked food delivery platform.
• Douyin dismissed 15% employees in PICO, which is Douyin’s virtual reality team.

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.

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