Daily Brief China: Perfect Medical Health, Mobvoi, KraneShares CSI China Internet ETF, Prosus NV, ENN Energy, Zhubajie Co Ltd, Pacific Basin Shipping, Nameson Holdings and more

• Perfect Medical Health (1830 HK), post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&investments representing 24% of the market cap.
• HK is experiencing a dip in consumer sentiment, and the company isn’t immune to it, but flat sales/profitability, a 24% net margin, and >40% ROE provide great margin of safety.
• The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.

• Mobvoi, an emerging AIGC market player in China, set terms for an IPO and plans to raise ~HK$330M (~$42M) in Hong Kong. CICC and CMB International are leading the offering.
• The initial public offering is expected to be between HK$3.70 and HK$4.10. At the midpoint of the range, Mobvoi has a market value of ~HK$5.8B based on 1491.5M outstanding shares.
• In my insight, I discuss valuation framework for comparable company analysis and outline revenue growth scenarios for each business segment under my base case.

• KWEB giving an attractive entry point here, as it begins to outperform the domestic FDN.
• Toyota>Honda and look for that relationship to continue going forward.
• JD>BABA, a new dynamic divergence between the two, and my opinion is JD will be the leader in 2024 and beyond.

• The discounts of both Naspers and Prosus have widened during the last 5 trading sessions.
• We see current levels as attractive entry points for trading the rump.
• In our view, there are a number of fundamental factors that could act as positive catalysts to a further structural narrowing of the discount.

We view ENN Energy as “Low Risk” on the LARA scale. This reflects the company’s large scale and diversified business profile across Mainland China as well as its robust financial position, with low leverage. These are balanced against ENN Energy’s exposure to commodity price risks and potential changes in government policies. In addition, the company has ongoing related-party transactions.

Our fundamental Credit Bias on ENN Energy is “Stable”, supported by the defensive nature of the industry and the company’s good cash-flow generation. ENN Energy has maintained c. 1.0x net leverage over the past five years.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”. While natural gas is a fossil fuel, it has a lower carbon footprint compared to coal, and has been regarded as a “transition fuel” for countries currently dependent on coal (e.g. China and Indonesia). This will likely support strong gas demand over the next decade, particularly in developing countries.

We have a “Hold” recommendation on the XINAOG notes, with the 2.625 ’30s at 83.9/5.6%/5.7 years.

• Zhubajie Co Ltd (ZHUHKZ HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO.
• Zhubajie (ZBJ) is a customized enterprise services e-commerce platform in China. The firm focuses on matching and facilitating the transactions between enterprise clients and service providers through its ZBJ platform.
• In this note, we talk about the firm’s historical performance.

• Pacific Basin Shipping (2343 HK) just announced a US$40m buyback which equals 2.5% of market capitalisation, showcasing management’s confidence in the outlook.
• At end-1Q24, it covered 68% of FY24 Handysize days at US$10,960/day and 78% of Supermax days at US$13,370/day, leaving significant room to capture the upside in 2H24.
• Market consensus looks overly conservative with FY24 earnings of US$154m, given BDI of 1,808 YTD. The average half-year BDI and net profit since 1H20 is 1,822 and US$189m.  

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
• JSW Steel Ltd
• Sands China
• Yuexiu Property