Daily Brief China: Alibaba Group, J&T Global Express, SML Group, Wuxi Biologics, Health And Happiness (H&H), UMP Healthcare, Agile Property Holdings and more

• Daniel Zhang’s transition to a less prominent role within Alibaba’s Cloud business, after previously serving as CEO and Chairman of Alibaba Group (9988 HK), could be seen as a demotion.
• We suspect that there could be some government influence on these proposed leadership changes.
• Nonetheless, the situation is not encouraging, especially as the company enters a turbulent phase with multiple units poised to pursue IPOs in the near future.

• J&T Global Express (1936374D CH), a leading express delivery business in Southeast Asia and China has filed for a HKEx IPO to raise US$1 billion, according to press reports.   
• In J&T Global Express IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on organic revenue decline in SEA/China, deteriorating contract liabilities, SEA margin pressure, high cash burn and weak balance sheet.

• SML Group (SMLGZ HK) is looking to raise about US$200m in its upcoming Hong Kong IPO.
• SML Group (SMLG) is a vertically integrated digital identification solutions provider. It primarily engages in developing, manufacturing and selling label and tag products with radio frequency identification (RFID).
• SMLG’s revenue growth rebounded post-COVID on the back of improved consumer sentiment. However, the firm’s profitability growth has been slowing down yet it has undertaken additional debt to payout dividends.

• A major reason for investors’ disappointment is that the number of new projects in 23H1 were significantly lower-than-expected. The impact of slowdown in financing activity began to show in 23H1.
• Higher revenue growth of non-COVID projects is needed to achieve the performance guidance target.If the management fail to fulfill the commitment to accelerate business recovery in 23H2,they may lose creditability.
• It’s unlikely to receive AD drugs orders this year. The market would react directly to short-term sentiment. Without big catalysts, it’s difficult for WuXi Bio’s stock price to perform well.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess H&H International’s ESG as “Adequate”, in line with the “Adequate” Environmental, Social and Governance scores. The Social pillar has the highest weightage, given the nature of the business. Controversies are “Immaterial” and Disclosure is “Strong”.

• We held a conference call with the Chief Investment Officer of UMP Healthcare (722 HK), Patrick Cheung, on the 19th of June, 2023. 
• The company continues to forge strategic alliances and collaborations, the latest being Hong Kong Adventist Hospital, in addition to the recent partnerships with Pedder Health/Human Health Holdings (1410 HK).
• The stock represents an excellent opportunity when trading at 6.6x PE FY23E with 44% of the market capitalization in cash and a 7.7% dividend yield on our numbers (50% payout).

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.