Daily Brief China: Linklogis, Hong Kong Television Network, The United Laboratories International Holdings Limited, B&K Corporation, Lenovo and more

• The review cutoff date for the September rebalance of the HSIII was 28 June. The changes will be announced on 16 August and become effective after the close 6 September.
• There could be 3 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
• Capping will result in passives buying Kuaishou Technology (1024 HK) and JD.com (9618 HK) while selling Meituan (3690 HK) and Tencent (700 HK).

• The Hong Kong Television Network (1137 HK) vote on the share buyback for a maximum of 100.0m or 11.25% of outstanding shares at HK$2.15 was comfortably passed at the EGM.
• The partial offer is designed to help the co-founders bypass the creeper rule and increase their grip on the shares. There is no minimum acceptance condition. 
• While the IFA opines the offer is fair and reasonable, it is unattractive. A 100% minority participation rate implies a minimum proration of 20.74%. The offer closes on 23 July.  

• At a 4.6 FPE, you would expect to find some real concerns, however there are no gremlins anywhere?  
• What you are buying is an antibiotic developer and distributor who is performing better than expected, given that the antibiotic market is thriving.
• The extensive pipeline including GLP-1 drugs is still at an early stage/midway through development, however at this valuation, you are probably not paying for it!

• The growth factor drug market is highly competitive. Many competing products have been on the market for many years with NRDL reimbursement coverage and also accumulated rich recognition from doctors/patients.
• Even if Pro-101 is approved for market launch, B&K may have to reduce its price largely and invest heavily in market education/promotion. B&K’s commercialization capability still needs to be verified.
• Valuation of B&K would be lower than peers. It is hard for B&K to receive expected valuation premium since its latest round of post investment valuation is already RMB3.3 billion.

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.

• Lenovo