Daily Brief China: Swire Pacific (A), China Tourism Group Duty Free Corp Ltd, Tencent, Kuaishou Technology, Biocytogen Pharmaceuticals (Beijing), China Everbright Water, Hong Kong Hang Seng Index, Central China Real Estate and more

• Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
• Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
• There will be passive selling once the buyback is complete, but the stocks should run up prior to that.

• Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.  
• Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers. 
• The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.

• China Tourism Group Duty Free Corporation Limited (CDF) is gearing up to launch Hong Kong’s largest listing so far this year, with a reported deal size of around US$2-3bn.
• Prior to the deal launch, we’ve had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
• Overall, most of the recent A/H listings haven’t done much over the first month.

• We believe revenue would Still Be Slow in 2Q22, but will recover in 4Q22 or 2023.
• We believe FinTech will be the only highlight, but online game and advertising will be negatively impacted.
• However, we estimate the stock price will have an upside of 55%.

• Swire Pacific (19 HK) has announced a “small” buyback at HK$4bn, but it is a material portion of ADV.  
• What remains unknown is how the buyback will be split.  The split will only be known once buyback volumes are announced. 
• Swire is trading cheap at a look-through forward P/B of 0.28x compared to its five-year average of 0.38x, and the two-year average pre-Covid of 0.48x. 

• Kuaishou Technology Co. Ltd., the operator of China’s second-largest short video app, unveiled the new video cloud brand StreamLake and a self-developed intelligent video processing chip Wednesday in key moves to expand its business
• The launch of StreamLake, the first enterprise-facing product from Kuaishou, marks the short-video platform operator’s official entry into the cloud services market and a shift from its original consumer-focused businesses
• StreamLake will provide artificial intelligence-powered video creation and distribution solutions for corporate clients, Kuaishou said.

• Biocytogen Pharmaceuticals (Beijing) (BCP HK) is a biopharmaceutical and pre-clinical research services company with two core products (YH003 and YH001) and 10 other pipeline candidates.
• The company currently does not have any commercialised products and earns revenue through offering pre-clinical research services and antibody development.
• Biocytogen’s business model comes with inherent risks such as absence of approved drugs. Hence, we would recommend staying on the side line.

• A slow 1H22 new project momentum and a slight retreat in net profit are not expected to materially alter the positive outlook for China Everbright Water (1857 HK). 
• We estimate project pipeline equals to about 28% of its existing operating capacity. They will underpin growth prospects over the next two years.
• New project growth should accelerate in 2H22 given the increase in local governments’ special purpose bonds issue. Cost inflation is expected to moderate sequentially as well.

• The carnage in China and some Hong Kong real estate and property management companies and financials went largely unnoticed.
• The five-day decline in Longfor was 18%, Country Garden by 15.50%, Hang Seng Mainland Properties Index fell 6.75%, and HSI Properties Index fell 2.75%.
• It has had zero impact on the rest of the world (ROW) markets.

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.

• Central China Securities
• Pakuwon Jati