Daily Brief Financials: Kingston Financial, Bank Rakyat Indonesia, HDFC Bank, People’s Insurance (PICC), LIC Housing Finance, Sino-Ocean Group and more

• Kingston Financial (1031 HK)’s scheme resolution was approved at today’s scheme meeting – 99.89% of independent share votes cast FOR (0.09% of all independent shareholders AGAINST).
• The scheme comfortably passed the headcount test with 44 FOR and 13 AGAINST the scheme (56 FOR and 20 AGAINST on a look-through basis).  
• The last trading is on 10 February. At the last close and for the 3 March payment, the gross and annualised spread to the offer is 3.4% and 69.3%, respectively. 

• Bank Rakyat Indonesia (BBRI IJ) did not disappoint with a strong set of FY2022 results, which came in around  4% above expectations, driven by strong micro and expanding NIMS.
• The bank also saw improving credit costs and declining provisions, which helped to drive profits and returns close to pre-pandemic levels plus the bank continues its advance on digitalisation. 
• Bank Rakyat will drive growth through MSME lending, which now makes up 82.5% of loans, with micro and ultra-micro having significant upsides. Valuations are attractive on 2.1x FY2023 PBV.

• HDFC Bank (HDFCB IN) continues to focus on growing its offline distribution network and added 684 new branches in Q3FY23, taking the total to 7183.
• It is also focusing on niche under-penetrated segments like Gold Loans and Wealth Management. Its Payment Acceptance Points network has also seen rapid growth.
• QoQ loan growth was somewhat muted, largely due to underwhelming growth on the corporate side as pricing in the marketplace is not as remunerative due to elevated competition.

• To build on our earlier work on the insurance space — and as we search for beta-neutral relative value plays — we look at PICC Group-H’s SOTP valuation.
• The group’s life and health business has historically traded at a steep implicit discount to China Life-H, perhaps deservedly so. But price dislocations do occur from time to time.
• We share our cheat sheet on how we approach these opportunities, which are often good for a quick 10% trade. As usual, we highlight the potential risks as well.

• LICHF reported Q3FY23 earnings that was lower than expected due to the increase in provisioning. LICHF reported annualized credit cost of 1.2% vs expected run-rate of <0.5%.
• The higher provisioning was done purely from a management overlay perspective for extra caution. It led the PCR to rise to 51% vs 43%+ earlier. 
• The higher provisioning was not due to asset quality deterioration. In fact, asset quality improved slightly with GNPA at 4.75% vs 4.90% QoQ.

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.

• Sino-Ocean Service
• Sunny Optical
• Vedanta Resources
• Wynn Macau Ltd
• Yuexiu Property