Daily Brief China: Acotec Scientific Holdings, Yashili International Holdings, China Communications Construction, Meituan, DPC Dash, Weilong Delicious Global, Baidu, Alibaba Health Information Technology, Country Garden Holdings Co and more

• Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
• The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
• My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.

• Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied. 
• The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
• The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

• The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
• We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
• The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

• Meituan food delivery order growth slowed down in Oct and Nov due to covid restrictions.
• Meituan Instashopping continued to grow fast in terms of its daily orders.
• TikTok food delivery service so far hasn’t posed big threats to Meituan. 

• DPC Dash (1405 HK) is the exclusive master franchisee of Domino’s Pizza in mainland China, Hong Kong and Macau with around 546 stores as of 9M2022.
• With Domino’s trailing Pizza Hut in the Chinese market, we think DPC Dash doesn’t deserve to trade on par with other leading Domino’s Master Franchisees around the world.
• Therefore, we see an opportunity to make money on the short side, once the IPO is completed.

• Weilong Delicious Global (9985 HK) has priced its IPO at HK$10.56 per share, slightly above the bottom of the IPO price range of HK$10.4-11.4 per share.
• The company’s HK offering was oversubscribed by 10.53x while the international offering was oversubscribed by 2.6x.
• Even at the above price, Weilong’s IPO is still at a significant premium to domestic as well as international peers.

• This is our first report on Chinese internet behemoth, Baidu.
• The company’s operating loss and margin year over year and quarter over quarter for AI Cloud improved.
• Their new AI businesses, like AI Cloud and Intelligent Driving, are in line with China’s national ambitions and digital innovation.

• Although Alibaba Health turned loss into profit in FY23H1, it was mainly benefited from the obvious effect of expenses control,which isn’t a long-term solution to achieve the goal of profit. 
• Alibaba Health has a more difficult problem. The logic of relying on multiple entrances to obtain customers to drive online drug sales has failed to bring higher revenue growth.
• In other to keep sustainable growth, it’s important for Alibaba Health to further improve user conversion rate. It is also urgent to actively expand new business growth points.

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.

• Country Garden Holdings Co