Daily Brief China: Taste Gourmet, SenseTime Group , PC Partner, Hengdeli Holdings, Shanghai Rural Commercial Bank, Sa Sa International Hldgs, China Merchants China Direct Investments, Road King Infrastructure and more

• Taste Gourmet (8371 HK) reported revenues up 37% YoY and profits up 29% YoY (lower than our expectation of 39% profit growth) due to a slightly weaker-than-expected Q4.
• Dividends for H2 were 7.4 cents/share (overall FY24:12.9 cents), implying an 8.1% dividend yield. Net cash on the balance sheet was 143 mn HKD (23% of market cap).
• Trading at 6.7x PE FY24 (March end) and with an excellent execution track record, we believe that the company will be able to post more robust numbers in FY25. 

• SenseTime Group (20 HK)  aims to raise up to US$263m via selling around 4.5% stake.
• Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• On the 18th June, personal computer (PC) parts and accessories play PC Partner (1263 HK) announced a profit alert for 1H24. 
• That’s positive. What is also interesting is that the board is considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
• Precedents are thin on the ground. And for good reason. The process is not straightforward.

• After watch accessory play Hengdeli Holdings (3389 HK) was suspended on the 17th June pursuant to the Takeovers Code, I didn’t hold out high hopes of a knock-out Offer.
• And on cue, CEO Tony Cheung (16%), son of founder Zhang Yuping (holding 17%), has made a Partial Offer (for 15% of shares outstanding) at HK$0.16/share, towards gaining majority control.
• That’s a 18.5% premium to last close … and a 80% discount to NAV, and a 47% discount to Hengdeli’s net cash as at 31 December 2023.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
• Currently, we see 16 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

• Despite missing market consensus, Sa Sa International Hldgs (178 HK)‘s FY24 result still have silver linings. Its resumption of dividends with a 70% payout ratio is welcoming.
• Tax credit in 2H23 has distorted comparison. At pre-tax level, 2H24 profit has gone up by 29.5%. Cost management is solid, generating a 0.9pp FY24 operating margin expansion. 
• While overall 1Q25 sales have dropped, mainland China sales surged 83.9%. The macro environment should have bottomed and government efforts to attract tourists will pay off.  

• While Elizabeth Kan barely survived the AGM vote, ASM has effectively mobilized minority shareholders.
• Lazard (owns 15% of CMCDI) probably voted alongside ASM (owns 9%). Other than China Merchants Group and Victor Chu, almost no “outside shareholders” voted in favor of Kan, .
• The next battleground is a vote in November when CMCDI needs to renew its investment management agreement. Intense behind-the-scene negotiations are expected, given the bargaining power ASM now demonstrated.

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.

• Road King Infrastructure