Daily Brief China: Sun Hung Kai Properties, Ninebot , Shougang Fushan Resources, Shulan Health Management, Haier Smart Home , 4Paradigm, ENN Natural Gas, Neusoft Xikang Healthcare Technology Co Ltd and more

• After Sun Hung Kai Properties (16 HK) released its interim results, shares declined 12.7% intra-day this past Monday, touching a 14-year low, before closing down 9.5%. 
• The same day, the Kwok family increased their stake in the company, purchasing ~2.2mn shares for ~HK$175mn.  
• SHKP is currently trading a trailing P/B of 0.36x versus its five-year average of 0.54x, and the five-year average preceding Covid of 0.68x.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Shougang Fushan Resources (639 HK) experienced a decline of 23% YoY in NPAT for H1 2023 despite coal prices falling 22% YoY due to improved coking coal recovery rates. 
• Gross cash and Investments totaled 9.4 bn HKD. Netting the dividend/tax payable and buyback of 1.4/0.4/0.3 bn HKD, net cash is 7.3 bn (60% of mktcap) and growing. 
• We estimate a dividend payment of 32 cents (13% yield) for FY23e; H1 FY23 dividend payment was 10 cents ( H1 FY22: 15 cents  FY22: 43 cents).

• Shulan Health Management (1807987D CH) is looking to raise around US$150m in its Hong Kong IPO. The deal will be run by CICC, and Citic Securities.
• Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
• The firm owned and operated three private general hospitals and provided hospital management services to 14 partner hospitals in China as of March 31, 2023.

• The weak share price of Haier Smart Home (6690 HK) looks unjustified given its healthy 1H23 result and solid financial position with net cash equals 11% of share price. 
• We anticipate product advancement and innovation will allow HSH to gain more market share. Its high-end brand Casarte will sustain as an important driver for earnings performance.
• Gross margin looks to have room to expand due to better cost dynamics with digitalisation and AI initiatives. Continued growth in developing overseas market is also positive. 

• 4Paradigm (1764934D HK), a leader in enterprise artificial intelligence (AI) in China, is pre-marketing a US$150-200 million HKEx IPO.
• In 4Paradigm IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on Sage Platform’s rapid slowdown, high customer concentration risk, recent gross margin pressure, FCF burn, rising cash collection cycle and BIS entity list designation. 

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.

• ENN Natural Gas

• Either from business model or investment logic, the key is to increase the revenue proportion of cloud hospital platform services. However, many restrictions have led to difficulties in nationwide expansion.
• Overreliance on government projects and public hospitals makes it difficult to generate high profits. Xikang may continue to suffer loss in the future, and its profitability is worrying. 
• Based on our analysis, it could be difficult for Xikang to achieve good valuation performance in the future. we think its valuation should be lower than that of ClouDr.