Daily Brief China: Alibaba Group Holding , CGN New Energy Holdings, Melco International Development, Sichuan Baicha Baidao Industrial, Cosco Shipping Energy Transportation Co. Ltd. (H), China Jinmao Holdings and more

• We expect Alibaba to report CY1Q24 top-line, non-GAAP EBITA and non-GAAP net income in-line, (14.2%) and (7.4%) vs. consensus. We cut non-GAAP EBITA by 10% and kept topline unchanged;
• BABA is prioritizing growth of both AliCloud and cross-border ecommerce (AliExpress), which will weaken profitability in the near-term but is the right thing to do. 
• BABA is transforming itself into Chinese Microsoft with hopes of e-commerce mainly pinned on overseas. We maintain BUY and US$ 85 TP, implying 9.5x CY24 P/E.

• Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private. 
• CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
• The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

• Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
• Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, will launch an HKEx IPO to raise US$300 million next week, according to press reports. 
• Biacha is China’s third largest freshly-made tea shop company in terms of retail sales value in 2023, according to Frost & Sullivan.
• The bull case rests on a rising market share, high revenue growth, sector-leading margins, cash generation and a strong balance sheet. 

• Despite YTD strengths in share price, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is still cheap at 5.7x PER and 0.9x P/B.
• VLCC is forecast to stay undersupplied in FY24 and FY25, supporting the rates and CSET’s profitability. YTD, the VLCC rates have recovered by 19.5%.
• LNG transportation generated 19% of FY23 earnings. With 40 more vessels on order, compared with a current fleet of 43, there is immense upside from this segment.

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.

• China Jinmao Holdings
• Yuexiu Property