Daily Brief China: SJM Holdings, Alibaba Group, AMTD Digital, Giant Biogene Holding, JD Health, Chongqing Hongjiu Fruit, Xiaomi Corp, Biocytogen Pharmaceuticals (Beijing), Adaro Energy, Cali Biosciences and more

• SJM Holdings (880 HK) announced earnings on Monday and a HK$3bn Rights Issue last night designed to inject capital into Macau gaming licensee SJM Resorts. 
• An increase in share capital is required to pre-qualify for then tender process where the Macau Govt would allocate a 10-year gaming concession starting 1 Jan 2023. 
• 54.7% SJM Holder/Parent Sociedade de Turismo e Diversões de Macau (STDM) had previously extended a loan to SJM designed to allow SJM to inject capital to SJM Resorts.

• Alibaba’s revenue stopped growing for the first time on record.
• We still believe the revenue growth rate will recover in the December quarter.
• We believe the stock price will have at least an upside of 29% after a significant plunge.

• AMTD Digital’s stock price has started to sink and now there are news that the Cheung Kong (CK) Group (HK) wants to sell its stake in AMTD Group Co.
• The discussion of the CK Group disposing its stake in AMTD Group altogether is likely to further negatively impact AMTD Digital’s share price.
• Li Ka-Shing and his family probably want to distance themselves from all the unnecessary media attention given to AMTD Digital (HKD US) and AMTD Idea Group (AMTD US). 

• Giant Biogene (GB) aims to raise around US$500m in its Hong Kong IPO.
• GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
• In this note, we talk about the not-so-positive aspects of the deal.

• Shenzhou Intl Group Holdings (2313 HK) is a high probability deletion in September, while JD Health (6618 HK) is currently the highest ranked non-constituent stock.
• There are a couple of other stocks that are close to the inclusion/exclusion thresholds and price changes over the next few weeks will determine if there are any more changes.
• Short interest on JD Health (6618 HK) is high in terms of days to cover and as a percentage of free float. Covering could take the stock higher.

• Chongqing Hongjiu Fruit (CHF HK), a multi-brand fruit company in China, is pre-marketing an HKEX IPO to raise US$200-300 million.
• The fundamentals are uninspiring as it is delivering profitable growth with a heavy cash burn. The rising but tiny market share suggests a lack of sustainable competitive advantage.
• Hongjiu Fruit aims to be the first HKEx-listed fruit distributor. Investors can likely avoid a bitter aftertaste by remaining on the sidelines.

• The Hong Kong Indices have been much weaker than Taiwan & China due to liquidity and open capital account.
• It is a canary for global indices and should be analyzed accordingly.
• There is no change in views of real estate and technology sector stocks mentioned in previous updates on Hang Seng constituents.

• Biocytogen, a China-based pre-clinical research and biopharmaceutical company, will pre-market its IPO to raise USD 25m, which is a significant downsize from the previous USD 300m fundraising target.
• In our previous note, we covered the company’s fundamentals and compared its business with its peers.
• We will provide an update on its latest prospectus and its peer performance in this note.

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.

• Adaro Minerals
• China Hongqiao
• Gajah Tunggal
• Sino-Ocean Service

• Both the postoperative pain management and the expansive application of anesthetics in various fields would increase the market demand for ropivacaine.
• Cali Biosciences (CALI HK)’s core product, the ropivacaine long-acting analgesic injection drug candidate CPL-01, would have to face the challenges of fierce competition, uncertain market acceptance, and negative policy impact.
• Together with other concerns such as slow development progress, “not rich enough” pipeline and potential liquidity risk, we are conservative about Cali’s outlook at the current stage.