Daily Brief China: Yuexiu Property, China Mobile, Aag Energy Holdings, ZJLD Group, Shangri-La Asia, HKBN Ltd, Jiangnan, Jingdong Property, Jiangsu Hengrui Medicine, Sunac China Holdings and more

• On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
• The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
• There are, however, flow dynamics which are of interest. There almost always are.

• In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
• HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
• All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK). 

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), United Malt Group Ltd (UMG AU), Origin Energy (ORG AU), Toshiba Corp (6502 JP). 
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), HKBN Ltd (1310 HK), Mincor Resources NL (MCR AU).

• ZJLD Group, a founder-led baijiu company, backed by PE firm KKR priced its Hong Kong IPO at HK$10.82/share. ZJLD Group shares are expected to start trading on Thursday, Apr.27.
• The company’s IPO price implies a market cap of ~$4.6B, making it the Hong Kong’s largest IPO this year. Goldman Sachs and China Securities International acted as joint sponsors. 
• Baijiu is the world’s most consumed liquor and accounted for ~70% of the alcoholic beverage market in China in 2021. Baijiu has a history of more than 5,000 years.

• Despite Shangri-La Asia (69 HK)‘s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China’s re-opening. More upside to come.
• Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China’s RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.
• Share of China’s EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Yuexiu Property (123 HK) rights issue and ADICON Holdings Limited (ADI HK), ZJLD Group (ZJLD HK), Mankind Pharma (6596876Z IN) IPOs.
• Event-Driven developments – HKBN Ltd (1310 HK), Jiangnan (1366 HK), Essential Metals (ESS AU), Healius (HLS AU), Lian Beng (LBG SP), Oishi Group PCL (OISHI TB). 

• On the 21st Feb, Chu Hui, Jiangnan (1366 HK)‘s chairman and major shareholder, offered HK$0.40/share by of a Scheme, a 12.68% premium to last close.
• However, shares gained 63% in the morning session of the 16 Feb, before being suspended, therefore the premium was an impressive 83.49% over the last full trading day’s closing price.  
• A shareholder with a blocking stake gave his irrevocable on the 22 March. The IFA reckons terms are fair and reasonable. This is done.  The Court Meeting is May 15th.

• Jingdong Property (JDP HK) is looking to raise about US$1bn in its upcoming Hong Kong IPO.
• JD Property (JDP) develops and manages modern infrastructure, consisting primarily of logistics parks, as well as business parks and other assets in China and in Asia.
• In this note, we will talk about the positive aspects of the deal.

• The contribution of innovative drugs cannot offset the generics revenue decline caused by VBP. Without PD-1 level big variety emerging, the pressure of VBP would continue for a long time. 
• Hengrui launched Luzsana to develop global business, seeming to send “a compromise and ambiguous signal” to various complex forces within this traditional pharmaceutical empire. ADC pipeline remains to be seen.
• Hengrui still has many problems that are difficult to solve. Even though there is a rebound, Hengrui’s stock price performance may not deliver excess returns, with lower-than-expected upside elasticity.

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.

• Reliance Industries
• Sunac China Holdings