Daily Brief China: Hong Kong Aerospace Technology, iQIYI Inc, Kingston Financial, Fu Shou Yuan, Wuxi Biologics, ABM Investama, Country Garden Holdings Co and more

• On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
• In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
• HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites. 

• IQIYI aims to raise around US$500m via a follow-on ADS offering.
• While the company hasn’t stated its use of proceeds, it will probably use most of it to redeem convertible notes
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• The Kingston Financial (1031 HK) scheme document is out with the scheme meeting scheduled for 9 February. The IFA considers the offer to be fair and reasonable. 
• Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
• Peer re-rating increases the headcount test risk. At the last close and for the 10 March payment, the gross and annualised spread is 5.3% and 42.2%, respectively.

• China recorded 270,000 increases in deaths in 2022 to 10.41m (+2.7% YoY, vs. flat in 2020). This is a sad demographic trend but favourable to Fu Shou Yuan (1448 HK).  
• Death rate of 0.74% has returned to the 1974 level. With termination of “zero COVID” policy, this is poised to increase. This will also stimulate demand for its pre-need services.
• Despite a 73% rebound in share price from trough, valuation is still undemanding at 14.4x FY23F PER. This implies a 35% discount to the average of 22x since 2013. 

• WuXi Bio announced the placing of existing shares by substantial shareholder. Obviously, the share price was in  “comfortable position” for the management, so they think it’s time to take action.
• WuXi Bio faces the uncertainty of future high growth.GSK deal/AD drug orders cannot offset the loss of COVID-19 orders.We advised to invest when it’s in “sector resonance” with “difference in expectations”.
• What we’re most worried about this year isn’t recession/depression but Taiwan, which is the last card the US hasn’t yet played. If situation’s really bad,something may happen in Taiwan Strait.

The Asia HY Trade Book for January 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

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.

• Country Garden Holdings Co
• Powerlong Commercial Management Holdings
• Yuexiu Property

• The Scheme Booklet is now out and Kingston Financial (1031 HK)‘s shareholders can vote on Chu Yuet Wah’s Offer on the 9 February.
• The Cancellation price of HK$0.30/share was a 47.78% premium to the undisturbed prices. It will not be increased. 
• Currently trading at a gross/annualised spread of 5.3%/44.4%, assuming payment on the 10 March. 

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.

• Country Garden Holdings Co
• Powerlong Commercial Management Holdings
• Yuexiu Property