Daily Brief China: HKBN Ltd, iQIYI Inc, China Yuhua Education, Trip.com, China Jinmao Holdings, Pinduoduo, BeiGene and more

• Bloomberg reportedHKBN Ltd (1310 HK) has received a takeover offer from HGC Global Communications at a valuation of more than US$1 billion (implies around HK$6 per share).
• The shares rose 11.6% to HK$5.59 before entering a trading halt. The rumoured price is underwhelming compared to historical multiples and share prices. 
• HKBN has a relatively concentrated shareholder register which suggests that the rumoured takeover premium of around 20% is not going to cut it.

• IQIYI Inc (IQ US) ‘s share price is up 30.8% YTD primarily driven by upbeat 4Q2022 results. The main highlight was strong increase in members alongside improvement in OPM.
• The company’s aggressive cost cutting measures have helped reach operating profits, however, we don’t think this is sustainable given user growth depends on content.
• We expect iQiyi’s 1Q2023E results to be strong driven by the launch of The Knockout series, however, further cutting down costs will impact the company’s long-term prospects.

• Despite the rally in share price after trading resumption and a reasonable FY22 result, there are still several tough issues faced by China Yuhua Education (6169 HK). 
• Cash management, especially for offshore; no dividend payout in the near term; availability of CB refinancing and weakened margins are just some of the challenges. 
• Conversion to profit-basis for its schools and the operating outlook for new schools are also added issues that it needs to address. In our view, risks still outweigh return.

• Trip.com reported a strong growth in booking volumes during CNY. Booking volumes remain strong in Feb 2023
• Outbound travel is likely to accelerate in 2H 2023
• Ending almost three-years of zero-Covid policy, China’s domestic and outbound travel enjoyed a long-awaited boom post China’s reopening and lifting of travel restrictions.

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.

• China Jinmao Holdings
• Vedanta Resources

• We conducted interviews with Temu and Shein merchants. We expect Temu to be more aggressive in expansion. Most metrics of Temu are improving, and it creates increasing pressure on Shein. 
• Yet, investors should be aware about Temu’s widening losses and the possible margin drag in the domestic eCommerce business due to the subsidy campaign launched by JD.
• We revised our forecasts on Temu’s GMV/non-GAAP net loss in 2023 from USD 2bn/(1)bn to USD 5bn/(3)bn. We cut PDD’s TP to US$100.

• BeiGene (BGNE) reported C4Q22 top line missing our estimate by 13%. Main reason for the miss is weaker than expected BRUKINSA and Tislelizumab sales in China; 
• While China growth does appear to be a drag, international sales is robust and has potential. Consensus is also reasonable with gross margin having upside;
• We cut TP from US$225 to US$219 and maintain BUY. Reliance on international sales heightens BGNE’s political risk.