Daily Brief China: Swire Pacific (A), ACM Research Shanghai Inc, Beijing UBOX Online Technology, Fosun Tourism, Yanlord Land, China South City and more

• Swire Pacific (A) (19 HK) expands its beverages ops, its best-performing unlisted segment, via the acquisition of Coke bottling operations in Vietnam and Cambodia. 
• Preceding my comments on Swire – and Swire Properties (1972 HK) and Cathay Pacific Airways (293 HK) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• Beijing UBOX Online Technology (1741985D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Beijing UBOX Online Technology (UBOX) is an unmanned retail operator (vending machine) in China. 
• As per F&S, it was the largest unmanned retail operator in China, with the largest retail machine network in the country. 

• Fosun Tourism (1992 HK) expects a sharp 87.5-92.5% reduction in its losses in 1H22, driven primarily by significant revival in its Club Med business, though China is weak.
• Outlook for 2H22 looks very encouraging as booking figures indicate good YoY volume growth and double-digit rate improvement in EMEA and Americas. 
• China also witnessed solid rebound in Jul and Aug after removal of lockdowns in 2Q22. New Club Med Joyview resorts including Changbaishan and Qiandaohu are added contributors. 

We view Yanlord Land as “Medium Risk” on the LARA scale. The company has a strong brand name, having established its reputation as a high-end Chinese property developer over the last 20 years. While Yanlord’s scale is small, its projects are of good quality and distributed across key Tier 1/2 cities in the Yangtze and Pearl River Delta regions. Yanlord enjoys higher gross margins compared to peers, due to its focus on premium products in high-tier cities. This helps the company maintain stronger interest coverage compared to peers, which provides a buffer for rising land prices and ASP declines. These positives are slightly offset by Yanlord’s high reliance on JV structures (with low attrition rates).

Our fundamental Credit Bias on Yanlord is “Negative”, due to a prolonged sales weakness and subdued financing environment across the Chinese Property industry. That said, the company has a good-quality asset base and sizeable investment property portfolio which may allow it to obtain new financing. Yanlord also has a clean debt structure compared to peers.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

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.

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