Daily Brief China: Tianneng Power International, Perfect Medical Health, Alibaba Group, China Education Group, iShares China Large-Cap (FXI), Lu Daopei Medical Group, Lepu Medical Technology A, CIFI Holdings and more

• In January 2021, Tianneng Power (819 HK)‘s (TPI) battery unit Tianneng Battery (688819 CH) (TBG) was listed on China’s Star Market, as discussed in Tianneng: Star Market Battery Spin-Off Priced.
• TBG is now proposing the issuance of GDRs, accounting for 10% of existing shares out, to be listed on the SIX Swiss Exchange.  
• A circular has been issued and TPI shareholders go to the vote on the 31 January. TPI currently holds 86.53% in TBG worth >300% of its market cap.

• China ( >20% of revenue ) changing its stance on COVID provides Perfect Medical Health (1830 HK) with an opportunity to crystallize its expansion plans there. 
• The border reopening between HK/China will provide a boost to its HK operations (>70% of revenue). The second half of H1 2023 results reflect an improving revenue trend for HK.
• The stock trades at 16x/11x FY23e/24e with ~15% of the market cap in cash and a dividend yield of 6.5%/9.5% FY23e/24e (based on ~100% payout ratio). 

• Chinese e-commerce giant Alibaba Group Holding Ltd. signed a strategic cooperation agreement with the government of Hangzhou, the eastern China city where the company is headquartered
• Alibaba and its finance affiliate Ant Group Co. Ltd. have been at the center of the Chinese government’s multi-year crackdown on the internet sector since October 2020.
• In 2021, Alibaba was fined a record 18.2 billion yuan ($2.6 billion) for monopolistic behavior.

• Positive response of China Education Group (839 HK)‘s placement indicated a good return of investor appetite to the sector. Its premium multiples stay well justified even after recent rally. 
• The HK$1.6bn proceeds will reduce gearing to 29.2% (including contract liabilities) from 41.7% with minimal dilution. Narrowing in valuation gap against asking price of targets means more M&A potential. 
• More funding for expansion of existing campuses, increase in accommodation and the set up of COVID-19 related curriculum will allow CEG to realise higher revenue per student.

• On 30th November we proposed a restructure of a bullish FXI US trade
• Since then FXI US has rallied 12% and implied vols have decreased significantly
• We evaluate the call ladder that we highlighted and consider what to do next

• Lu Daopei Medical Group (1816743D CH) Lu DaoPei Medical Group is looking to raise around US$400m in its upcoming Hong Kong IPO. The bookrunners are CITIC Securities, CMB International, and Macquarie.
• Lu DaoPei Medical Group (LDPM) is a hospital operator focusing on hematology healthcare services.
• As per F&S, the firm was the largest hematology healthcare services provider in China in terms of 2021 revenue.

• After China reopens and demand for COVID-19 testing drops sharply, Lepu has lost the big driving force of performance growth. The 2022 full year performance may not be optimistic.
• Lepu Medical Technology A (300003 CH) has begun to focus more on capital operation. As a holding platform, the valuable assets are spun off, which changes the valuation logic.
• Even if Lepu could finally digest the negative impact of centralized procurement, such development mode would still put pressure/uncertainties on its future performance, leading to lower-than-expected financial results.

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.

• China SCE
• China Vanke
• CIFI Holdings
• Lippo Karawaci