Daily Brief China: Chow Tai Fook Jewellery, JD.com Inc (ADR), Luckin Coffee, Hong Kong Television Network, AP Moeller – Maersk A/S, UMP Healthcare, China Hongqiao and more

• Chow Tai Fook Jewellery (1929 HK) reported a weaker-than-expected FY24 net profit. Despite having HK$2.2bn net cash, the lack of a special dividend is even more disappointing. 
• Surge in unrealised loss on gold loans and a YoY contraction in margin have contributed to the poor 2H24 result. Apr-May operating figures showed a deteriorated operating environment.
• Lacking a special dividend, CTF no longer looks attractive at the current level. Overoptimistic FY25 and FY26 consensus forecasts mean earnings downgrade pressure. 

• Travel and box office data in the past three-day Dragonboat Holiday showed worrying weakness despite sharp price cuts by hotel and airlines. 
• Removing travellers from Hong Kong, inbound travel was also quite bad; 
• E-Commerce sales backed by trade-in stimulus outperformed regular merchandises, indicating consumer confidence is still low. We believe the weak travel data boded ill for consumption throughout the year.

• Luckin launched lemonade drinks with raging success of 5.08 mn cups sold for the first week, ~10% of store sales. Market cheered to send the stock higher;  
• We view it with mixed feelings. While it is margin accretive and sales enhancing,  is not conducive to improving coffee penetration and cultivating consumers’ habit for drinking coffee;
• We see Luckin as increasingly one of, instead of the, street drink company, because lemonade is actually the top selling SKU of all milk tea vendors in China. 

• Back on the 22nd May, online shopping platform play Hong Kong Television Network (1137 HK) announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
• Should the Offer complete, co-founder Ricky Wong’s stake, together with concert parties, increases to 51.55% (before exercising options), up from 45.75% currently. Optically, it’s a opportunistic share grab. 
• The Offer Doc is now out, with an EGM to vote on the whitewash waiver on the 9th July. 

• Its unclear whether Yemen-based Houthis would end attacks after ceasefire
• We’ve entered peak Summer shipping season from Asia to US, Europe
• Higher spot rates have already lifted contract rates in Q2 2024

• We preview UMP Healthcare (722 HK)  earnings for FY24 (June-end), which will be declared in September, and our outlook for FY25. 
• The company has more than 300 mn HKD of net cash (almost 75% of its market cap), and even assuming a 20% dividend cut, it has an ~8% dividend yield.
• On core earnings for FY24, we estimate that the stock trades at 12x PE( ex-cash 2.8x PE), with low-hanging fruit from streamlining the business in FY25. 

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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