Daily Brief China: Xingda International, Tongcheng-Elong Holdings Ltd, JD Logistics, OrbusNeich Medical Group, Anta Sports Products, Sunshine Insurance, Hong Kong Hang Seng Index, Sunac China Holdings and more

• Xingda International (1899 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
• The controlling shareholders – more commonly known as the Five Parties – hold 45.6% of shares out. 
• Two years ago, Xingda sought to spin-off its key operating vehicle. Perhaps the Five Parties are privatising Xingda, then IPOing Xingda Steel Tyre Cord. Or, cashing out their positions.

• Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
• One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
• After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

• Xingda International (1899 HK) disclosed a partial offer from management to acquire a maximum of 80.0 million shares at HK$1.88 per share, a 24.50% premium to the undisturbed price.
• The pre-condition is Executive approval. The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form. 
• The partial offer is an opportunistic foray to seize statutory control as it would not be sufficiently enticing to overcome FIL’s 9.99% blocking stake in a privatisation scheme.

• Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• It is likely that the management, representing 45.60% of ordinary shares (through a five parties agreement), is seeking to privatise Xingda.
• The bid is likely privatisation through a scheme. Due to FIL’s blocking stake, a decent premium is required, such as an offer approaching HK$2.00 (33% premium to the last close).  

• The growth rate of total revenue accelerated in the third quarter of 2022.
• We believe the organic growth was also strong besides the acquisition of Deppon.
• We set an upside of 29% and a price target of HK$19.90.

• OrbusNeich Medical Group (NEICHZ HK) is among the top six players in PCI balloon markets in terms of sales volume in multiple countries including China, Japan, the U.S., and Europe.
• OrbusNeich earns ~60% of revenue from Europe, Japan, and the U.S. The company’s high exposure to international markets safeguards it from the low prices commanded by China’s centralized procurement system.
• With diversified product portfolio, robust inhouse production facilities, established global sales network, rich pipeline enabling continuous launching of new products, and growing market demand, OrbusNeich is well-positioned for strong growth.

• The potential IPO of Anta Sports Products (2020 HK)‘s 52.7% owned Amer Sports is positive in unlocking the latter’s underlying value, though the impact is quite limited.
• Assuming a P/S of 1.8x (30% discount to peers) and 25% enlargement in share capital, we estimate the exercise may bring ~HK$6n of potential pre-tax deemed disposal gain.
• Although Anta Sports may not receive any cash, it can still pay out special dividends given its Rmb12bn net cash, and this will raise FY23 dividend yield to 3.1%.  

• Sunshine Insurance Group (SIG), a life, health and P&C insurance company, raised around US$850m in its HK IPO.
• SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
• We have looked at various aspects of the deal in our previous notes. In this note, we will talk about the trading dynamics.

• The announcement of easing most Covid restrictions resulted in a new rally high, but the close was below at least the previous two-day open/closes, making it an outside day reversal pattern.
• This note highlights the reversal patterns in HSI, HSTECH, AIA, and Tencent. These have some of the cleanest reversal patterns.
• In real estate, SOEs like China Resource Land [-11.75% from 30th November intraday peak] and China Overseas Land [-9.7% from 29th intraday peak] reversed before the China Mainland Property index [6th December], a reflection of a short squeeze as a crucial driver of sector rally. Longfor peaked on 6th December and is down 17% after a 276% rally.

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 Jinmao Holdings
• Greenland Holdings Corp
• Sunac China Holdings