Daily Brief China: Oriental Watch, Alibaba (ADR), Melco Resorts & Entertainment, PCCW Ltd, Powerlong Real Estate Holdings, BYD and more

• Oriental Watch (398 HK) reported a steady result, with 2023 earnings <18% YoY ( adjusted for one-time gains in 2022 <5% YoY), which was broadly in line with our expectations. 
• The DPS for FY23 was 61 cents (FY22: 74 cents) lower than our expectation of 65 cents, a 100% payout ratio equating to a 14% dividend yield.
• Cash at 1.07 bn represents > 50% of market capitalization. We believe the management will dip into reserves when it requires to manage a decent payout for shareholders.

• Alibaba (ADR) (BABA US) aims to complete a spin-off of the Cloud Intelligence Group via a stock dividend distribution, with it becoming publicly listed in the next 12 months.  
• The Cloud business is pursuing a land-grab strategy to reignite growth. While it is the only profitable Chinese cloud platform, the profitability gap to Amazon AWS highlights the opportunity. 
• The aim to bring in external strategic investors before the spin-off will provide a valuation benchmark. Our analysis points to a Cloud business valuation range of US$45-58 billion. 

• Melco has lagged other Asian operators as Macau recovery pits up speed. Concerns over debt levels continue.
• Fair value estimated slightly above current trade largely reflecting 2022 results.Maca
• Macau and Manila tracking positive, Cyprus could provide accretive EBITDA before end of this year and beyond/

• PCCW Ltd (8 HK) is selling an initial 26.1% equity stake in its streaming platform Viu, to Vivendi SA (VIV FP)‘s Canal+, for US$200mn.
• Via a staggered investment, Canal+ can increase its equity to US$300mn. In addition, a further investment, at Canal+’s option, could result in increasing its stake in Viu to 51%.  
• Elsewhere, PCCW’s 18% discount to NAV is the narrowest in over two years.

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.

• Powerlong Commercial Management Holdings

• The Hong Kong Stock Exchange (HKEX) launched its new dual-currency counter Monday, and the first batch of 24 stocks had a total turnover of 163 million yuan ($22.9 million) on the first day.
• The Hong Kong Dollar-yuan dual-currency counter allows investors to trade and settle designated shares in Hong Kong or mainland China currency, offering the potential to access new liquidity.
• The model also lays the groundwork to support the next phase of development to allow investors from the Chinese mainland to trade Hong Kong-listed yuan, or renminbi, securities through the southbound Stock Connect, the HKEX said.