Daily Brief China: Alibaba Group Holding , New World Development, China Traditional Chinese Medicine, Kerry Logistics Network, Cainiao Smart Logistics Network, ENN Natural Gas, Hangzhou Tigermed Consulting C and more

• Alibaba’s revenue grew by 5% YoY and its operating margin improved by 2 percentage points YoY in 3Q24.
• We believe the company turned its focus from margin improvement to revenue growth.
• We set the upside at 20% and the price target at HK$90 for March 2025. Buy.

• New World Development (17 HK) stock has continued to drop and the decrease in market cap should result in selling from passive trackers at the end of the month.
• New World Development (17 HK) has underperformed its peers and now trades at cheaper valuations on most parameters.
• Passive trackers will need to sell over 100m shares of New World Development. That could provide liquidity for investors that see value and for shorts to cover their positions.

• Bloomberg reports that Sinopharm is reviving its interest in privatising China Traditional Chinese Medicine (570 HK)/CTCM. Sinopharm has contacted banks about financing and is considering partnering with other investors.
• Sinopharm’s best bet is to partner with Ping An Insurance Group of (601318 CH) and privatise through a scheme. In this scenario, no disinterested shareholder would hold a blocking stake.
• Due to Sinopharm’s previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding compared to peer multiples.

• We once again heard privatization rumor of China TCM, but China TCM denied it at this stage. We still recommend investors to remain vigilant until receive definite official announcement.
• One important background of privatization is the integration of SOE carried out in recent years. We do not rule out the possibility that Taiji Group would drive this privatization.
• It may not be an optimal time for the proposal of privatization by major shareholders. Other shareholders may not want to give up high-quality stocks, which makes privatization challenging.

• On the 29th December 2023, Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB).
• Given S.F. Holding (002352 CH) holds a 51.5% stake in KLN, it will hold 26.8% in KET post-in-specie, triggering an unconditional MTO. The MTO price will be THB5.50/share. 
• Thai SFC approval has now been satisfied.  The MTO should commence around the 13th Feb. with payment ~26th March. KLN, cum-entitlement to KEX, is the 19 Feb.

• CaiNiao’s revenue growth remained strong, up +24% Y/Y in December quarter
• EBITA turned positive from loss in prior year period, but margin < FYQ2
• Overall, an impressive set of results that distinguishes CaiNiao from express peers

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.

• ENN Natural Gas
• UPL Ltd

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Hangzhou Tigermed Consulting C (3347 HK), East Buy Holding (1797 HK) and Kingkey Financial (1468 HK).