Daily Brief China: Yashili International Holdings, Hong Kong Hang Seng Index, Kunlun Energy, Akeso Biopharma Inc, Tencent, ABM Investama and more

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), 111 Inc (YI US), Pendal Group (PDL AU), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
• Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Tassal (TGR AU), OZ Minerals Ltd (OZL AU), China Vast Industrial Urban Development (6166 HK), PTB.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• 3Q22 result of Kunlun Gas is weaker than expected, but this is due to lower other income and surge in non-operating expenses. Without them, profit growth is actually more encouraging.
• While there is gross margin squeeze on higher input costs, Kunlun managed to reduce operating costs by 14.1%, successfully mitigated the negative impact.
• Kunlun Gas contributed 62.5% of 1H22 net profit of Kunlun Energy (135 HK). Its solid 36.2% 9M22 earnings growth still points to healthy underlying momentum for its parent.

• Akeso has made some business progress. We analyzed the commercialization outlook/concerns on its late stage products. Akeso still stays at the level of biotech, a long way from becoming biopharma.
• The core challenge is whether bispecific antibody can bring better marginal clinical benefits than the combination of two mab, and why patients are willing to pay higher price for them?
• The sales forecast of Akeso’s late stage products could be RMB2 billion to RMB3 billion. The market value by the end of Nov 4 was just reasonable but not undervalued.

• Tencent and Alibaba are rumored to be acquired by state-owned companies.
• Tencent charges for originally free function and JD.com re-organized to cut cost.
• Autohome’s revenue stopped declining in 3Q22 and it is time to accumulate.

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.

• ABM Investama
• NagaCorp Ltd
• Times China
• Yuexiu Property