Daily Brief China: Soho China, Tianqi Lithium, CIFI Holdings, New Horizon Health, Super Hi International Holding, China Traditional Chinese Medicine, Guangzhou R&F Properties and more

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• We have a Negative view of Soho China, despite the stock trading at 0.2x P/B. 
• The three biggest negative factors for the company include potential write down of assets, CFO being investigated for insider trading, and China’s emphasis on zero COVID policy.
• Two more significant concerning factors include 0.4 million people in China not able to withdraw their deposits and other large Chinese property developers defaulting on debt.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website. 
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute. 
• These insights also flags those companies where shares have been pledged, both recently and ongoing.

• New Horizon Health released positive profit alert last Friday. We speak with management post the profit alert.
• The company is expected to achieve 410.9% total revenue growth compared to a year ago in 1H2022, based on the middle point of guidance.
• The company has also achieved margin expansion thanks to a favorable change of mix to the high margin channel. 

• Haidilao International announced the spin-off plan of its overseas arm, Super Hi.
• We take a quick look at Super Hi’s fundamentals. We think it is unlikely for Super Hi to achieve the level of economy of scale as Haidilao in China.
• We think the valuation of Super Hi should be compared to F&B peers in the ASEAN region given that its business is mainly focused on the ASEAN region. 

• China Traditional Chinese Medicine released unsatisfactory 2022H1 profit warning, which was mainly due to the poor performance on both revenue and cost side of its core business concentrated TCM granules.
• We analyzed the policy impact and business outlook. The Company’s performance would be under pressure in 2022. The VBP impact on concentrated TCM granules hasn’t shown up in financial reports.
• Overall, we are skeptical of the Company’s profitability in the long term, and its profit margin will struggle to support a significant expansion in valuation.

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.

• Guangzhou R&F Properties