Daily Brief China: Bilibili Inc, China Education Group, Hainan Meilan International Airport, Ant Financial Services Group, Alibaba Group, Alibaba (ADR), Modern Dental Group, Melco Resorts & Entertainment and more

• Bilibili Inc (BILI US)  aims to raise around US$400m via a follow-on ADS offering.
• The company plans to use most of the proceeds to redeem its 2026 notes.
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• China Education Group (839 HK) is looking to raise up to US$209m in its top-up placement. 
• This will be the fourth placement by the group since its listing in 2017, we have earlier looked at the past three placements as well.
• In this note, we will look  at the deal dynamics and run the deal through our ECM framework.

• Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.
• While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.
• We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.

• News headlines on Ant Group are overwhelmingly positive these days and they try to hide the fact that the consumer finance business is worth just 1/2 of last year’s value.
• We think the main reason why markets are so optimistic these days is that they seem to think that regulatory crackdowns on the platform economy are finally over.
• With Jack Ma surrendering control of Ant Financial Services Group (6688 HK) just a few days ago, could anybody say that regulatory pressure is really over?

• A state-owned company invested in Ant Group which was also founded by Jack Ma.
• We believe both the revenue growth rate and the operating margin will rise in following quarters.
• We believe the stock price still has significant upside even after the surge in past four trading days.

• 2022 marked our seventh year covering Equity Capital Markets (ECM) in Asia Pacific. 2022 was rather quiet ending with us covering one of the lowest number of IPOs and placements.
• We ended 2022 with an accuracy rate of 74.6% across 55 IPOs that we covered and 70.5% across 78 placements. 
• For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

• Modern Dental Group (MDG) disclosed selected unaudited operational data for 22Q1-Q3. The negative trend on performance would continue to 22Q4. The overall 2022 performance of MDG would show a negative growth.
• We may face a situation where both domestic and external demand would weaken in 2023. MDG’s overseas revenue is expected to see a bigger YoY decline than domestic revenue.
• There would be strong expectations but weak realities in 2023Q1-Q2, during which MDG’s share price could rally in short term, but it’s not based on the improvement of its fundamentals.

• Bilibili announced a follow-on equity offering of 15.34m ADS priced at $26.65 per ADS partially in exchange for convertible senior notes due 2026 (US$384.8m) and to replenish its cash reserves.
• Each ADS represents one ordinary share and new equity offering of 15.34m shares will account for approx. 3.7% of the company’s extended share capital post follow-on offering.
• Bilibili Inc (BILI US) ADS dropped 5.76% following the announcement of the follow-on offering and we believe there is limited upside.

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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