Daily Brief China: Tencent, Tianqi Lithium, CanSino Biologics Inc, Giant Biogene Holding, China Communications Construction, Country Garden Holdings Co and more

• Chinese social media giant Tencent Holdings Ltd. and state telecom operator China Unicom were cleared by the country’s antitrust regulator to set up a joint venture to develop data and cloud-related businesses.
• The new business, one of 15 investment deals that cleared antitrust review Tuesday, will focus on content delivery networks and edge computing.
• The partnership is another tie-up between Tencent and China Unicom after a 2017 investment in which the social media giant acquired a 5.18% stake in the telecom company.

• Tianqi Lithium (9696 HK) and JD Health (6618 HK) could be inclusions while XPeng (9868 HK) and Longfor Properties (960 HK) are near certain deletions.
• There are a few stocks that are close to the deletion threshold and could be deleted from the index if they continue to sell off over the next few weeks.
• Tianqi Lithium (9696 HK) is also a high probability inclusion to the FTSE All-World Index at the December rebalance. That will bring in additional inflows to the stock.

• The fake news about China reopen and the COVID-19 vaccine business are the major driving force for the rally of CanSino’s share price. However, such rally would not last long.
• CanSino didn’t perform well in Q3 and 2022 would be a difficult year for CanSino. The major turning point of CanSino performance still lies in MCV4, not COVID-19 vaccines. 
• CanSino’s H-share valuation has become more reasonable,but the downside risk in HKEX is hard to predict. Investors could consider offload and secure the gains. There’s better opportunity to long ahead.

• Giant Biogene has priced its IPO at HK$24.30 per share, at the lower end of the company’s indicative IPO price range of HK$24.3-27.7 per share and raised HK$495.8m (US$63.2m).
• The HK offering was oversubscribed by only 2.08 times while the international offering was subscribed by 4.22 times.
• Though Biogene’s IPO was priced attractively, we think lower demand for the company’s shares led to pricing at the bottom of the IPO price range.

• Apparently, China Communications Construction (1800 HK) has an uninspiring 3Q22, but this is mainly due to losses at concession projects and heavy credit and asset impairments.
• We estimate outstanding backlog at Rmb3.28trn, enough to cover 4.5x FY22F revenue. Expansion in 3Q22 gross margin, against declines in 1Q22 and 2Q22, is a positive development.
• Despite outperformance against major indexes YTD, CCCC still trades on 2.3x and 2.1x PERs for FY22-23. Its 0.16x P/B has overly discounted the value of underlying assets.

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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