Daily Brief China: Piotech , Prosus NV, L’Occitane, Dali Foods Group, China Power International, Unisound AI Technology, Nayuki Holdings, Greenland Holdings Corp, Trip.com and more

• The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
• The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
• One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

• Prosus looks to continue to cut its stake in Tencent by 2-3% every year to fund its open-ended share buyback program.
• Evidence would suggest that the buyback is set to continue at a relatively steady pace for the foreseeable future, which should support the discount to NAV going forward.
• The simplification of the shareholding structure, to remove the cross-holding, could sustainably reduce Prosus’ discount to NAV by roughly 10%.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
• Event-Driven developments – Eoflow (294090 KS), Dali Foods Group (3799 HK), L’Occitane (973 HK), Toshiba Corp (6502 JP), Pacific Current (PAC AU), Estia Health (EHE AU). 

• Back on the 27 June, Dali Foods Group (3799 HK), announced a privatisation Offer by way of a Scheme from its founder/chairman/CEO Xu Shihui.
• The cancellation price, which has been declared final, was HK$3.75/share, a decent 37.87% premium to undisturbed.
• The Scheme Doc is now out. The Scheme Meeting is the 23 August. Xu and concert parties control 88.89%, therefore a blocking stake is 1.11% of shares out. 

• The Rmb10.8bn acquisition of clean energy assets from parent by China Power International (2380 HK) is positive in raising its clean energy proportion to over 70% of total capacity.
• The drop in share price reflects concerns about elevation of gearing and the need for potential equity funding. However, even all equity financing scenario will only dilute EPS by 1%.
• We think its earnings quality will improve, balance sheet will be enhanced and profitability will be raised. Its 1H23 positive profit alert also showed a recovery in operational performance. 

• Unisound AI Technology, a Beijing-based AI unicorn, filed to go public in Hong Kong. I used a diverse peer group of domestic AI companies to come up with IPO valuation. 
• From a peer group perspective, I arrived at an IPO valuation close to ~RMB12b (or ~$1.7B), using a ~15x EV/CY22 Revenue to my 2023 revenue estimate of RMB780m (+30% y/y).
• However, I believe SaaS valuation multiples may appear rich for the stock, keeping in mind non-recurring revenue and the high hardware cost in the total cost of sales and services.

• Our 1H23 revenue estimate is 8.7% lower than consensus, and we expect 1H23 NPM at breakeven vs. consensus at 5%。
• Mainly because teahouse brands in China had suffered the intensified competition from the price war in Coffee industry.
• We maintain the stock as BUY rating as the margin improvement process is gradual showing effect, while we lower TP by US$2 to US$9.3 to reflect the intensified competition pressure.

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 Hongqiao
• Greenland Holdings Corp
• Lippo Karawaci

• We see decidedly mixed signals in Chinese outbound tourism numbers from June
• Meanwhile, the modest pace of the recovery in domestic air traffic continued last month
• What to look for in Q2/H1 earnings results over the next several weeks