Daily Brief China: Yuexiu Property, Travelsky Technology Ltd H, Horizon Construction Development, Acotec Scientific Holdings, Jiangsu Expressway (H), Zai Lab, Melco Resorts & Entertainment and more

• On 20 April, Yuexiu Property (123 HK) announced plans to raise US$1.1 billion through 30 rights shares for every 100 existing shares rights offering, with a rights price of HK$9.00.
• Since the announcement of the rights issue, Yuexiu shares have declined by -23.6% to the undisturbed price and by -18.2% compared to the TERP of HK$11.74 per share.
• The shares went ex-rights on 2 May and the rights start trading on 15 May. Link REIT (823 HK)’s trading over its rights period provides the playbook for Yuexiu’s trading.

• Travelsky Technology Ltd H (696 HK) is the IT provider for airports in China thus it should be one of the stocks to benefit from China’s reopening.
• Despite already operating at a profit, the share price is still lagging behind the other travel-related names that are still loss-making.
• Its operating numbers have already reached the 2019 level, a pre-COVID era, thus the opportunity to rebound is abundant. 

• Horizon Construction Development (1887128D HK) is looking to raise US$223m in its upcoming Hong Kong IPO.
• HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
• In our previous notes, we looked at the company’s past performance and refiled PHIP updates. In this note, we undertake a quick peer comparison and share our thoughts on valuation.

• With the launch of new products and their accelerated admission to hospitals, Acotec’s revenue streams become more diversified, which would enhance its own risk resistance ability and core competitiveness.
• Considering market size/increasing competition, Acotec’s growth ceiling is obvious if relies solely on domestic market. It becomes crucial whether Boston Scientific’s acquisition would bring expected value or have other intentions.
• How much room for improvement in future valuation depends on Acotec’s performance in overseas markets. After all, if there is no internationalization breakthrough, Acotec’s valuation logic would not be reshaped.

• We find good value in Jiangsu Expressway (H) (177 HK) – its 8.3x PER is cheap relative to 10.4% EPS CAGR and P/B multiple of 1.06x is below historical average.
• It has an extremely secured dividend stream for the next two years, yielding at least 6.3%. 1Q23 result showed a solid recovery, and potentially adding upside to earnings outlook.
• Key drivers are stronger traffic recovery, rise in contribution from clean energy, margin expansion through cost control and completion of new projects in the next two years.

• 2023 is a crucial year for Zai Lab.It’s the first time for Zai Lab to demonstrate the profitability of license-in model.If it fails, investors would lose confidence in the company.
• There is little correlation between the four commercialized products, which makes commercialization difficult and leads to low efficiency/high costs for sales team. So, breakeven could be more distant than expected.
• Zai Lab’s current pipelines are hard to make money. There are concerns whether its business model is sustainable in the long term. As its valuation lacks an “anchor”, risk is high.

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.

• Melco Resorts & Entertainment
• Sands China