Daily Brief China: Trip.com, Haitong International Securities Group, NetEase Inc, Health And Happiness (H&H), Air China Ltd (H), Kanzhun , Kuaishou Technology, JD Health International , AGBA Group Holding and more

• Trip.com reported strong Q3 earnings, reflecting 2023’s ongoing tourism revival
• Net Income beat expectations, and company made progress on expense control
• But we don’t see “game-changing” numbers in Trip.com’s latest earnings release

• Haitong International Securities Group (665 HK)’s scheme meeting is on 15 December. The IFA considers Haitong Securities Co Ltd (H) (6837 HK)’s HK$1.52 per share offer fair and reasonable. 
• Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. No shareholder holds a blocking stake.
• The high takeover premium ensures a done deal. At the last close and for the 18 January 2024 payment, the gross and annualised spread is 2.7% and 18.2%, respectively.

• NetEase reported revenue/non-GAAP operating profit/GAAP net income inline/5.24%/16.2% vs. our estimation.
• The bottom-line beats were primarily attributed to the operational efficiency achieved through the usage of AIGC tools, and reduced S&M expenses resulting from organic traffic generated by high-quality game content.
• We maintain our BUY rating and raised TP to $138 for future game releases, implying 19x PE, and it is currently trading at 17x PE in 2024

• Once the pre-cons were satisfied on the 15th November, it seemed pessimistic to stick to the delayed 29 December dispatch date for Haitong International Securities Group (665 HK)‘s Scheme Document. 
• And right on cue, the Doc was issued last night (21 Nov). The Court Meeting is the 15 December. with an expected cash despatch on or around the 18 January.
• Trading at a gross spread to terms of 2.7%. The headcount test applies. But this should comfortably get up. 

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.

• With P/B back to the 5-year average of 1.9x but ROE surpassing the last five years, Air China Ltd (753 HK) is our High Conviction pick for 2024.
• Lower US interest rates next year will reduce interest expenses as 18.7% of debt is USD-denominated. Potential Rmb appreciation vs. USD may bring significant exchange gain too.
• Supportive government policies will further drive domestic traffic. For international traffic, more capacity resumption will power recovery. Cathay Pacific Airways (293 HK) is another profit accelerator.

• BZ reported 3Q23 cash billing 0.8% higher than our est., revenue beat our estimate/consensus 5.2%/3.8%, non-GAAP NI beat our estimate/consensus by 103%/50%.
• Cost saving and investment income are the main reasons for bottom-line beat, which we think are not sustainable.
• Even BZ can deliver its “3 years with 100mn new users” target until 2025, we think its 20% earnings CAGR in 2023-25E still cannot justify its high valuation (TBC)

• Total revenue grew by 21% YoY in 3Q23, as both advertising and e-commerce expanded strongly.
• KS achieved historical high operating margin and operating profit, as the company continue to cut all operating expenses.
• We believe the stock has an upside of 63% and a price target of HK$95. Buy.

• JD Health’s 23Q3 results were below expectations. Due to the high base of 22H2 (especially 22Q4), revenue growth could become negative in 23Q4, thus dragging down 2023 full year growth.
• Considering the high base in 23H1, performance pressure could continue until 24H1. JD Health’s past high growth will be gone. Investors may need to get used to the lower-than-expected growth.
• Share price of JD Health is now in the bottom range. Current valuation is attractive. Despite the performance headwind, P/S is expected to return to about 3 to 4.

AGBA’s Q323 results continued to be affected by the weak recovery in China and consequent subdued mainland demand for Hong Kong health and wealth products. As a result, revenues were flat year-on-year at US$13.2m, but down from US$17.4m in Q223. The pre-tax loss was US$12.9m, putting the company on track to meet its US$49m projected loss for FY23. AGBA also announced that it has entered into term sheets for a US$6.2m private share placing with a new institutional investor, AGBA’s group president and AGBA management at US$0.70 per share plus warrants with an exercise price of US$1.00/share. The amount could expand subject to ongoing conversations with additional potential investors. The significant premium to the current share price signals management’s confidence in AGBA’s long-term value. The capital will go towards funding organic growth, strategic acquisitions and managing liquidity until projected material profitability in FY25.