Daily Brief China: Poly Culture Group Corp H, Lansen Pharmaceutical Holdings Co, Ltd., Keep Inc, Tuhu Car, 4Paradigm, Longfor Properties, Beijing Chunlizhengda Medical Instruments, AGBA Group Holding and more

• Back on the 23 June, SOE-backed Poly Group tabled an HK$8.88 bid per Poly Culture Group (3636 HK) H Share and RMB8.17386240 per Domestic Share. Terms were declared final.
• This Merger by Absorption Offer incorporates a Scheme-like vote. There is no tendering condition. The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.
• The Composite Doc is out. Independent H-shareholders get to vote on the transaction on the 3rd of November. Payment is expected on or before the 23 November. I’d get involved. 

• The Poly Culture Group Corp H (3636 HK) H Shareholders’ class meeting is scheduled for 3 November. The IFA considers the HK$8.88 per H share offer fair and reasonable.
• The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and shareholder structure helps the vote. At the current price and for the 23 November payment, the gross/annualised spread is 3.3%/19.2%.

• Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a perennial takeover target. And now we have an Offer.
• Wu Zhen Tao, NED and Chairman of Lansen, has made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.   
• This looks done. Get involved if small-cap illiquid arbs are your thing. 

• There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
• Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

• Chinese automotive maintenance services platform Tuhu Car has announced the terms for its HKEx IPO. Tuhu plans to raise net proceeds of HK$1.0-1.1bn (US$132-161m) through the issuance of 40.62m shares.
• Tuhu Car (2007986D HK) ‘s franchised business model seems to have worked well, while its focus on high margin products/services have helped improve profitability.
• In this insight, we discuss our forecasts and valuation for the company, and our analysis suggests that Tuhu Car’s IPO is priced reasonably.

• 4Paradigm (1764934D HK) is looking to raise up to US$144m in its Hong Kong IPO, after downsizing from an earlier reported float of US$600m.
• 4P is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC.
• In our previous notes, we covered the company’s performance and refiling updates. In this note, we will cover the firm’s PHIP updates, peer comparison and share our thoughts on valuation.

• In this insight, we conducted fundamental analysis on Longfor, which has always been perceived as the best Chinese developer among all private players
• However, since Chairlady resigns due to personal reasons, and given the policy clamp down, we think Longfor may not be able to sustain its competitive advantages over time
• Longfor was trading at a premium to CRL and COLI, we believe the valuation premium should narrow over time.  On a relative basis we are not positive on Longfor

• Beijing Chunlizhengda Medical Instruments didn’t perform well in 23H1. Obviously, the Company did not anticipate sufficiently the negative impact of centralized procurement on performance. Comparatively, AK Medical’s situation is better.
• The anti-corruption campaign has led to a marked drop in hospital outpatient visits and surgeries. Therefore, Chunlizhengda’s Q3 performance may not be optimistic, resulting in a lower-than-expected 2023 full-year performance.
• We think both revenue and net profit of Chunlizhengda would have negative YoY growth in 2023. The Company has fallen behind its competitor in R&D capabilities and high-end product lines. 

AGBA generated sales of US$28.4m in H123, 361% higher than in H122, as it continued to onboard agents and COVID-19 restrictions were relaxed. Compared to Q123, revenue increased by 54% as AGBA continued to benefit from the reopening of the Hong Kong-China border in February and the Chinese economy. Despite the positive momentum, AGBA has reduced its forecasts for each consecutive year to 2026 because of the slower-than-expected revival of the Chinese and Hong Kong economies so far in 2023. It still projects double-digit growth in subsequent years and expects to capitalise on increasing travel to Hong Kong from Mainland Chinese looking for high-quality health and wealth products.