Daily Brief China: China Traditional Chinese Medicine, Swire Properties, CanSino Biologics , Plover Bay Technologies, BeiGene , Pacific Basin Shipping, China Resources Beverage, Zylox-Tonbridge Medical Technology, Shui On Land and more

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK). 
• Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).

• Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
• The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
• Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?

• We summarized the varieties that would miss 2024 NRDL negotiation and have to wait until 2026 to enter medical insurance coverage. This however means competing products would have more advantages.
• As the NRDL negotiation becomes more transparent/reasonable, there will be a balance point among companies’ profits, patient affordability and medical insurance budget. So, there’s no need to be overly pessimistic.
• The approval process of CanSino’s PCV13i could be faster than expected. 2024 is the best time to bottom-fish this stock. Reasonable market value is at least RMB5 billion.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We provide updates on recent results for Plover Bay Technologies (1523 HK) and upcoming H1 results for the Philippines names. 

• BeiGene’s 24Q2 results far exceeded expectations. Sales of BRUKINSA may exceed that of Calquence for the first time next year. Breakeven in 2024 becomes possible if effective cost control continues.
• BeiGene’s 2024 revenue could exceed Hengrui, marking the official transition of China’s innovative pharmaceutical industry from the old generation to the new one. Reasonable market value for BeiGene is US$19-27.5bn.
• Current valuation cannot reflect strong fundamentals.As BeiGene has established a convincing profit model, the market turmoil actually provides investors with a good opportunity to buy the stock at low price.

• Pacific Basin Shipping (2343 HK) may realise at least US$60m of revenue, or around 10% higher total TCE, in 2H24, based on its solid forward vessel coverage.  
• Sustained re-routing of vessels due to Middle East tension and higher demand from China due to fixed asset spending are supportive of rates. FFA is now 3-4% higher than spot.
• The stock is inexpensive at 9.7x PER and 0.8x P/B, and its 7.6% dividend yield is attractive. A solid balance sheet also means an upside on the payout ratio. 

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, the prior week witnessed a number of listings with divergent results.
• Given the market volatility, there was only one large placements in the prior week.

• Zylox is a beneficiary of VBP and it has turned losses into profits. 2024 full-year revenue could be up 40-50% YoY. Net profit could be close to RMB100 million.
• Whether in terms of the number of products on the market or the efficiency of R&D, Zylox’s performance is superior to peers.Its valuation is expected to be higher than peers.
• We’re in a bear market, together with weak liquidity, Zylox’s valuation doesn’t fully reflect its strong fundamentals. So, while this is a good company, investors may need to be patient.

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.

• Adani Green Energy
• New World Development
• Rakuten
• Shui On Land

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.

• Adani Green Energy
• New World Development
• Rakuten
• Shui On Land