Daily Brief China: New World Development, Hua Hong Semiconductor, Shenzhen New Industries Biomedical Engineering-A, China Power International, Auntea Jenny (Shanghai) Industrial, UMP Healthcare, Nameson Holdings, Greentown China and more

• Despite the lifting of the “spicy” property cooling measures last week, New World Development (17 HK) has plumbed fresh P/B lows after a (very) brief respite. 
• Preceding my comments on NWD are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

For our next Corporate Webinar, we are glad to welcome Hua Hong Seminconductor’s Chief Financial Officer, Daniel Yu-Cheng Wang. 

In the upcoming webinar, Daniel will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Eric Wen. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 12 March 2024, 16:00 SGT.

About Hua Hong Semiconductor

Hua Hong Semiconductor Limited, an investment holding company, manufactures and sells semiconductor products. The company provides embedded non-volatile memory, standard logic and mixed-signal, radio frequency, power management integrated circuits, power discrete, and automotive solutions. It also offers foundry services; and design services comprising standard and customized IP development, full-custom layout design, and customer-specific integrated solutions, as well as design support and tape out services. In addition, the company provides multi-project wafer services; mask making services; and backend services, such as in-house testing, backside processing and dicing, and backend turnkey services, as well as assembly and testing services. 

Further, it engages in real estate development. Its products are used in consumer electronics, communications, computing, industrial, and automotive markets in the People’s Republic of China, North America, Europe, Japan, and other Asian countries. The company was founded in 1997 and is headquartered in Shanghai, the People’s Republic of China. Hua Hong Semiconductor Limited is a subsidiary of Shanghai Alliance Investment Ltd.

• With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
• We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
• The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

• China Power International (2380 HK)‘s Jan power sales showed a sharp 41.2% YoY growth. More importantly, this marks sustaining a solid MoM trend in the last few months. 
• Recovery of the hydropower generation is encouraging as this was a drag last year. Meanwhile, higher coal-fired generation will capture the better profitability of this segment.
• CPI’s strongest earnings CAGR in the sector has made its earnings multiples increasingly cheap over the next two years. After +15.7% YTD in its share price, there is further upside.

• Auntea Jenny is positioned in the same league as Guming. Both have similar business model/strategy. However, in terms of the number of stores/revenue scale/profitability, Auntea Jenny lags behind its peers.
• China’s freshly-made beverage industry has developed to the stage of capitalization. Auntea Jenny has to obtain more funds to strengthen barriers, improve supply chain, accelerate expansion.The real competition just begins.
• Pre-IPO valuation of Auntea Jenny was already RMB5.1 billion, but the market seems not optimistic about the franchising model. Valuation of Auntea Jenny should be lower than that of Guming/MIXUE.  

• UMP Healthcare (722 HK) delivered a slow start to FY24, with revenues up 2.3% YoY and profits down 63% YoY, due to sluggish demand in Hong Kong. 
• The company cut dividend for H1 FY24 by 25% to 1.3 HKD cents/share. Net cash on the balance sheet remained healthy at 265 mn HKD representing 64% of market capitalization.
• The company is implementing stringent cost control and we believe that a slow turnaround and a 9-10% dividend yield is very probable at these levels. 

• First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China.
• They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$.
• This somewhat obscures their true earnings power.

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
• Greentown China