China Archives | Page 35 of 154 | Smartkarma

• Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Champion REIT is facing multiple headwinds, including weakness in its office building due to upcoming office supply
• Its retail asset Langham is doing better post COVID, but not enough to offset the weakness in office
• DPU may continue to decline over time. Therefore we stay bearish until we see turn-around signal

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
• China Vanke
• Greentown China
• Vedanta Resources

• Midea Group Co Ltd A (000333 CH) announced on September 18 the approval for H-share listing for a total of not more than 10% of its outstanding shares (before overallotment).
• Reasons for the listing include the possible share incentive program for overseas employees and more exposure to foreign investors. 
• The H-share listing could be a safe bet given the current valuation profile, especially if the discount to A-share is larger than 10%. 

• Novartis’ return of PD-1 to BeiGene may actually have nothing to do with TIGIT project. Long-term strategic adjustment and decreasing value of tislelizumab to Novartis could be the core reasons.
• Abandoning PD-1 is a simple decision for Novartis, but not for BeiGene, who will do its best to promote FDA approval for tislelizumab, aiming to expand internationalization and stabilize valuation.
• We advise investors not to focus too much on whether or not tislelizumab will eventually get FDA approval,because the actual peak sales tislelizumab can contribute to BeiGene could be disappointing.

• British chip designer Arm Holdings Plc remains committed to China and to working closely with its mainland-based partner following its $4.87 billion IPO, according to chief executive Rene Haas.

• The Softbank-backed firm floated in New York last week via the world’s largest public offering year-to-date. But that has not affected its strategy globally.

• Shanghai-headquartered Arm Technology (China) Co. Ltd., also known as Arm China, operates independently and is the exclusive licensing platform of Arm’s global intellectual property in China

• 4Paradigm has announced the terms for its IPO. The company plans to raise gross proceeds of $131-144m through issuing 18.4m shares at an indicative price range of HK$55.6-61.16 per shares.
• The company’s IPO is timed perfectly when AI adoption is expected to expand on a large scale with the popularity of ChatGPT and other AI applications.
• Though we liked 4Paradigm (1764934D HK) for its improving financials and growth prospects, our analysis suggests that the IPO is expensive.

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.

• First Pacific Co

• Active clients increased 6.5% to 46,627 [roughly 30% of total], despite challenging domestic markets. Note: this metric surged 27% sequentially
• 82% of client activity focused on international markets/products, highlighting the diverse, value-added nature of Hywin’s offerings
• Transaction value of overall wealth products declined -9%, asset-backed products down -5.8%, reflecting weak equity & property markets

• Luxury liquor-maker Kweichow Moutai has teamed up with candy giant Mars Inc. to launch an alcohol-infused chocolate.
• The state-owned Chinese company’s latest move to introduce its brand of fiery spirits to a new, and preferably younger, group of consumers.
• The chocolate is Moutai’s latest effort to give its brand a bit more cache through partnerships with well-known consumer brands.

• DPC Dash (1405 HK) raised around US$75m in its Hong Kong IPO in Mar 2023. Its IPO linked lockup is set to expire soon.
• The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 672 stores across 20 cities, as of Jun 2023.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• MNSO’s FY23 SEHK filing updated its operation metrics post C2Q23, where domestic was in-line but overseas beat our estimates. We attribute this performance to direct store expansion in North America;
• We raise 2024/25 top line by 14%/19% and operating profit by 22%/25%;
• We maintain BUY and raise TP by US$4.5 to US$30.5 to factor in the profitability ramping up of oversea businesses.

• China further expanded the use of the digital yuan by enabling consumers to use it to pay utility bills. 
• The digital yuan, also known as the e-CNY, is a legal currency in digital form issued by the central bank.
• The People’s Bank of China (PBOC) recently updated its e-CNY mobile wallet app, adding new features that allow users to pay water, gas, electricity, heating and phone bills with the digital yuan. 

• Midea Group Co Ltd A (000333 CH) could raise between HK$35-54bn (US$4.5-6.9bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
• The H-shares could get Fast Entry to some global indices depending on the number of shares that are allotted to cornerstone and/or strategic investors.
• The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

• Bob van Dijk, CEO of both Naspers (NPN SJ) and Prosus NV (PRX NA), has stepped down, effective 18 September. 
• Van Dijk was instrumental in the 2019 listing of Prosus and the creation (and subsequent unwinding) of the highly-criticised Prosus/Naspers cross-holding structure. 
• His departure should have minimal impact. Everything else basically stays the same. Continue to be long Prosus vs. NAV – that is, Prosus vs. Tencent (700 HK).

• The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
• Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
• We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

• Last year, United Lab mainly relied on antibiotics to make money. However, after the pandemic is under control, antibiotic sales may decline. United Lab’s performance could be under pressure.
• As a late comer, sales of United Lab’s weight management products could be lower than expected in the future under increasing competition. The veterinary drugs business requires time to cultivate.
• RMB12 billion market value of United Lab has priced in all positive factors.There could be a pullback in valuation. RMB6 billion market value is a safe place to go long.

We view H&H International as “Medium Risk” on the LARA scale. The company has a sound business profile, with stable branded products in the Baby Nutrition & Care (BNC) and Adult Nutrition & Care (ANC) markets. The acquisition of Zesty Paws in 2021 allowed H&H to expand into the Pet Nutrition & Care (PNC) market. The company’s strong distribution channels support cross-border and e-commerce sales strategies. That said, the positive factors are balanced by risks associated with penetration into new markets and products, along with the fragmented and competitive Chinese market.

We view positively H&H’s solid business fundamentals and strong market positions. We highlight the company’s sound liquidity profile and stable CFO. Negatively, the Zesty Paws acquisition affected H&H’s financial profile, weakening the leverage metrics. That said, PNC is part of the company’s sustainable growth plan. We expect H&H to work on deleveraging in the near term, in order to maintain a healthy credit profile.

Bondholders of the 2026 USD notes suffer from small degree of structural subordination, as the company’s PRC subsidiaries do not guarantee the notes, but certain PRC subsidiaries are likely to be guarantors for the term loan.

Our Credit Bias on H&H is “Stable”, given the company’s solid business fundamentals, strong market positions and moderate financial profile. ANC and PNC are expected to deliver better numbers going forward, while BNC should remain challenging. As a result, ANC and PNC will likely be H&H’s key growth segments, offsetting high competition in the BNC business. The company aims to expand into other business segments and markets outside China, in order to compensate for muted growth in the country.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

• 4Paradigm (1764934D HK), a leader in enterprise artificial intelligence (AI) in China, has launched an HKEx IPO to raise up to US$144 million.
• We previously discussed the IPO in 4Paradigm IPO: The Bull Case and 4Paradigm IPO: The Bear Case. 
• In this note, we discuss forecasts and valuation. Our analysis suggests that the IPO price range of HK$55.60-61.16 per share is unattractive. We would give the IPO a pass.

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.

• ENN Natural Gas

• ZTO Express Cayman (2057 HK)‘s impressive 1H23 and 2Q23 results are only reflections of its competitive strengths. We believe the company is poised to generate even better profitability. 
• Its market share expansion, excellent cost management, positive volume growth, new business initiatives and solid net cash position are all strengths that drive long-term outlook.
• While trading on premium vs. peers, ZTO’s PER valuations are well justified by its leadership position, healthy financial position, and high EPS CAGR for FY23-FY25F.

• Private general hospitals are the core business of Shulan, but the business model for general hospitals is not good – heavy assets, challenging operations, low profits, difficult to expand nationwide. 
• Even with the endorsement of renowned academician Dr. Li Lanjuan, whether Shulan’s hospitals can attract constantly sufficient patient flow remains a question. Most patients still prioritize public hospitals for treatment.
• Due to the lack of solid profit model and expansion model, we’re not optimistic about Shulan’s profitability and future financial performance. Shulan may be in a state of long-term loss.

• Back on the 23 June, SOE-backed Poly Group tabled an HK$8.88 bid per Poly Culture Group (3636 HK) H Share and RMB8.17386240 per Domestic Share. Terms were declared final.
• This Merger by Absorption Offer incorporates a Scheme-like vote. There is no tendering condition. The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.
• The Composite Doc is out. Independent H-shareholders get to vote on the transaction on the 3rd of November. Payment is expected on or before the 23 November. I’d get involved. 

• The Poly Culture Group Corp H (3636 HK) H Shareholders’ class meeting is scheduled for 3 November. The IFA considers the HK$8.88 per H share offer fair and reasonable.
• The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and shareholder structure helps the vote. At the current price and for the 23 November payment, the gross/annualised spread is 3.3%/19.2%.

• Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a perennial takeover target. And now we have an Offer.
• Wu Zhen Tao, NED and Chairman of Lansen, has made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.   
• This looks done. Get involved if small-cap illiquid arbs are your thing. 

• There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
• Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

• Chinese automotive maintenance services platform Tuhu Car has announced the terms for its HKEx IPO. Tuhu plans to raise net proceeds of HK$1.0-1.1bn (US$132-161m) through the issuance of 40.62m shares.
• Tuhu Car (2007986D HK) ‘s franchised business model seems to have worked well, while its focus on high margin products/services have helped improve profitability.
• In this insight, we discuss our forecasts and valuation for the company, and our analysis suggests that Tuhu Car’s IPO is priced reasonably.

• 4Paradigm (1764934D HK) is looking to raise up to US$144m in its Hong Kong IPO, after downsizing from an earlier reported float of US$600m.
• 4P is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC.
• In our previous notes, we covered the company’s performance and refiling updates. In this note, we will cover the firm’s PHIP updates, peer comparison and share our thoughts on valuation.

• In this insight, we conducted fundamental analysis on Longfor, which has always been perceived as the best Chinese developer among all private players
• However, since Chairlady resigns due to personal reasons, and given the policy clamp down, we think Longfor may not be able to sustain its competitive advantages over time
• Longfor was trading at a premium to CRL and COLI, we believe the valuation premium should narrow over time.  On a relative basis we are not positive on Longfor

• Beijing Chunlizhengda Medical Instruments didn’t perform well in 23H1. Obviously, the Company did not anticipate sufficiently the negative impact of centralized procurement on performance. Comparatively, AK Medical’s situation is better.
• The anti-corruption campaign has led to a marked drop in hospital outpatient visits and surgeries. Therefore, Chunlizhengda’s Q3 performance may not be optimistic, resulting in a lower-than-expected 2023 full-year performance.
• We think both revenue and net profit of Chunlizhengda would have negative YoY growth in 2023. The Company has fallen behind its competitor in R&D capabilities and high-end product lines. 

AGBA generated sales of US$28.4m in H123, 361% higher than in H122, as it continued to onboard agents and COVID-19 restrictions were relaxed. Compared to Q123, revenue increased by 54% as AGBA continued to benefit from the reopening of the Hong Kong-China border in February and the Chinese economy. Despite the positive momentum, AGBA has reduced its forecasts for each consecutive year to 2026 because of the slower-than-expected revival of the Chinese and Hong Kong economies so far in 2023. It still projects double-digit growth in subsequent years and expects to capitalise on increasing travel to Hong Kong from Mainland Chinese looking for high-quality health and wealth products.

• The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
• The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

• Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
• Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
• Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

• AviChina Industry & Technology H (2357 HK) is expected to see sustained profit upturn in 2H23 following a 26.8% growth in 1H23. Continued geopolitical turmoil will still benefit it.  
• All its listed A-share subsidiaries recorded a pick-up in earnings momentum in 2Q23, and this indicates solid underlying demand as well as the impact of product developments.
• Avicopter PLC (600038 CH) has seen volume and price recovery after product portfolio refinement while new products have stimulated the ancillary system and related business.

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.

• Road King Infrastructure

• So far in 2023 TS Lines has sold off close to one quarter of its shipping capacity
• In the company’s core market, Intra-Asia, it appears rates have bottomed out here in Q323
• We also review Q2 financial results from TS Lines’ main comp, Wan Hai Lines (WHL)

• The National Health Commission and The People’s Daily made “mild” statements about anti-corruption in China healthcare, bringing investors “new hope”. However, there could be a “misconception” regarding the anti-corruption movement. 
• There was news that some type 2 vaccines could be converted to type 1 vaccines. Even though some vaccines will be affected by this policy, others will not.
• Kangtai’s had strong 23H1 net profit, but it has little investment value due to lack of core R&D strength.Kangtai’s vaccines face the risk of being included in national immunization program.

• This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

• It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
• Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
• A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at the names leading the race to become ADDs and DELETEs in the December 2023 Rebalance.

• 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

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.
• I currently expect one ADD and one DEL for the STAR 50 index in December 2023.

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
• Our latest estimates show that the combined one-way flow for CSI 300 and CSI 500 could be around US$2.8bn.

• CaiNiao and JD Logistics have grown far faster than their parents’ platforms in recent years, and also far faster than “plain vanilla” Chinese express companies
• CaiNiao, JD Logistics, and SF Holding enjoy more avenues to growth than just the continued gradual expansion of China’s domestic e-commerce activity
• In the medium-term, we believe shares of market leader SF Holding can outperform a basket of shares from SF’s “plain vanilla” peers in express

• This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Softbank Group
2. China SCE
3. Sino-Ocean Group
4. China Jinmao Holdings
5. Geely Auto

and more…

• Since the inclusion in the Southbound Stock Connect 7 trading days ago, ZJLD Group (6979 HK)’s stock price is up 16%, suggesting strong interest from the southbound investors.
• ZJLD has one of the best channel inventory and distributor perception among all the sauce aroma baijiu brands currently.
• Expect further share price upside mainly from southbound buy, as the baijiu sector is one of the most followed sectors in A-share.     

• In the face of mounting American political and regulatory pressure, the Chinese video app TikTok officially launched an online shopping feature in the U.S., aiming to cash in on its popularity among 150 million American users.
• TikTok Shop will give brands, merchants, and creators the tools to sell directly through content on the app, the ByteDance Ltd.-owned enterprise said in a press release.
• Users will now find a “Shop” button prominently displayed in certain videos and can buy tagged products directly from videos and livestreaming.

• Huawei Technologies Co. Ltd. and its auto partner Seres Group Co. Ltd. (601127.SH +10.01%) launched an upgraded version of the Aito M7 electric SUV on Tuesday, marking the latest push by the tech giant into China’s highly competitive auto market.
• With a starting price of 249,800 yuan ($34,280), deliveries of the luxury electric vehicle (EV) will begin immediately, Huawei said in a press release. The company is also offering a discount of 33,000 yuan to customers who place their orders before Oct. 7.
• The model, which comes in five variants, is also equipped with Huawei ADS 2.0, the latest generation of its automated driving software and a digital cockpit powered by its Harmony operating system, the company said.

• JD.com Inc. managed to surpass the revenue and earnings expectations of Wall Street.
• Service revenues grew, of which marketing and marketplace revenues were up.
• During the quarter, JD.com noticed strong user engagement trends, including higher purchase rates and ARPU on its app.

• Tuhu Car (2007986D HK) is looking to raise around US$160m in its Hong Kong IPO. Tuhu is an integrated online and offline platform for automotive services in China.
• In earlier notes, we had looked at the firm’s past performance, discussed our earnings assumptions and our thoughts on Tuhu’s valuation.
• In this note, we discuss valuations at the final price range.

• IMAX China Holding (1970 HK)‘s scheme document is out, with the court meeting scheduled for 10 October. The IFA considers IMAX Corp (IMAX US)‘s HK$10.00 offer fair and reasonable.
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• A recovering box office, early indications of an effort to rally retail NO votes and a high minority participation rate in AGMs pose a risk. The risk/reward profile is unfavourable. 

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange. 
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of ChiNext and ChiNext 50 rebalance baskets.

• Tuhu Car (2007986D HK), a leading integrated online and offline platform for automotive service in China, has launched its HKEx IPO at a price range of HK$28.00-31.00 per share.
• In TUHU Car IPO: The Investment Case, we highlighted the key elements of the investment case. In this note, we present our forecasts and discuss valuation.
• Our valuation analysis suggests that Tuhu is reasonably priced at the IPO price range. We would participate in the IPO. 

• Back on the 13 July, IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share. Terms have been declared final.
• The price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day, suggesting apparent news leakage.
• The Scheme Doc is out and independent shareholders get to vote on the transaction on the 10th October. This vote could – should – be close. Only for the brave.

• Chinese automotive maintenance services platform Tuhu Car (2007986D HK) is planning to raise around US$160m in its upcoming HKEx IPO.
• The company’s franchised business model seems to have worked well, while its focus on high margin products/services have helped improve profitability.
• In this insight, we take a look at Tuhu Car’s business model, business segments and financials and we will discuss the company’s valuation in a follow-up insight.

• Perfect Medical Health (1830 HK) will report its H1 2024 results in late November 2023. We expect slow China growth to result in revenue/profit growth of 10%/15% YoY. 
• The company will continue to open outlets in HK, and the plan is to open ten by the end of FY24 (3-4 at the end of H1FY24e).  
• The stock trades at 12.7x PE FY24e, with an 8.7% dividend yield and around 16% of the market capitalization in net cash and investments (~800 mn HKD). 

• Health And Happiness (H&H) (1112 HK) has transformed from an infant formula company to a nutritional supplements company.
• The company currently trades at 5.3x 2024E PE – still valued as a Chinese infant formula company and not a growing and more global nutritional supplements company.
• As the company continues to deliver growth in the nutritional supplements business, rerating will come eventually. 

The Asia Trade Book for September 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia HY and crossover credits.

Please reach out to our analysts to discuss any of these ideas, or other trade recommendations from our Asia coverage.

• Troubled Chinese electric-vehicle startup WM Motor Holdings Ltd.’s hopes of a business turnaround were dashed as a white knight investor bailed out of a $2.02 billion takeover.
• Hong Kong-traded Apollo Future Mobility Group Ltd. Friday dropped its planned acquisition of WM and said a related share placement plan will no longer proceed.
• The deal, announced in January, was seen as a survival move for embattled WM as it was intended to float the EV maker in Hong Kong through a backdoor listing.

• After Sun Hung Kai Properties (16 HK) released its interim results, shares declined 12.7% intra-day this past Monday, touching a 14-year low, before closing down 9.5%. 
• The same day, the Kwok family increased their stake in the company, purchasing ~2.2mn shares for ~HK$175mn.  
• SHKP is currently trading a trailing P/B of 0.36x versus its five-year average of 0.54x, and the five-year average preceding Covid of 0.68x.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Shougang Fushan Resources (639 HK) experienced a decline of 23% YoY in NPAT for H1 2023 despite coal prices falling 22% YoY due to improved coking coal recovery rates. 
• Gross cash and Investments totaled 9.4 bn HKD. Netting the dividend/tax payable and buyback of 1.4/0.4/0.3 bn HKD, net cash is 7.3 bn (60% of mktcap) and growing. 
• We estimate a dividend payment of 32 cents (13% yield) for FY23e; H1 FY23 dividend payment was 10 cents ( H1 FY22: 15 cents  FY22: 43 cents).

• Shulan Health Management (1807987D CH) is looking to raise around US$150m in its Hong Kong IPO. The deal will be run by CICC, and Citic Securities.
• Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
• The firm owned and operated three private general hospitals and provided hospital management services to 14 partner hospitals in China as of March 31, 2023.

• The weak share price of Haier Smart Home (6690 HK) looks unjustified given its healthy 1H23 result and solid financial position with net cash equals 11% of share price. 
• We anticipate product advancement and innovation will allow HSH to gain more market share. Its high-end brand Casarte will sustain as an important driver for earnings performance.
• Gross margin looks to have room to expand due to better cost dynamics with digitalisation and AI initiatives. Continued growth in developing overseas market is also positive. 

• 4Paradigm (1764934D HK), a leader in enterprise artificial intelligence (AI) in China, is pre-marketing a US$150-200 million HKEx IPO.
• In 4Paradigm IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on Sage Platform’s rapid slowdown, high customer concentration risk, recent gross margin pressure, FCF burn, rising cash collection cycle and BIS entity list designation. 

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.

• ENN Natural Gas

• Either from business model or investment logic, the key is to increase the revenue proportion of cloud hospital platform services. However, many restrictions have led to difficulties in nationwide expansion.
• Overreliance on government projects and public hospitals makes it difficult to generate high profits. Xikang may continue to suffer loss in the future, and its profitability is worrying. 
• Based on our analysis, it could be difficult for Xikang to achieve good valuation performance in the future. we think its valuation should be lower than that of ClouDr.

• Back on the 27 June, art and culture play Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation at HK$8.88 per H-share.
• This Offer from SOE Poly Group is by way of a Merger by Absorption, incorporating a Scheme-like vote. There is no tendering condition.
• The pre-cons have now been fulfilled. The Composite Document, including the H Share Class meeting/EGM date and IFA opinion, is expected to be despatched on or before the 30 September. 

• Innovent is actually not short of money, so the Placing this time looks “strange”.If Innovent is unable to deliver performance that matches expectations, investors would reconsider its future financing needs.
• Innovent is undergoing important transition from quantitative change to qualitative change as turning losses into profits is within reach. So, the “concept validation” of Innovent’s business model has been completed.
• Innovent decides to place the shares at this moment reflects that its stock price is already high. Based on our forecast, there could be limited upside room for share price.  

• News broke yesterday that Daniel Zhang is no longer leading Alibaba (ADR) (BABA US)‘s Cloud Business unit.
• The statement from Alibaba’s current chairman, in which he mentions that Zhang would “switch to a different approach and continue to fight alongside us at Alibaba” raises skepticism.
• We also think that the $1.0bn Alibaba committed to a technology fund could be seen as a form of compensation to ensure Daniel Zhang’s silence.

• With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
• Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• 4Paradigm is a pioneer and leader in enterprise AI. The company offers platform-centric AI solutions to enterprises that can be deployed on a large scale to support decision making.
• The company’s application for HKEx IPO has been approved and this insight focuses on new data points from the company’s latest PHIP release (dated 07th Sep 2023).
• 4Paradigm (1764934D HK) revenues have continued to expand with significant reduction in operating losses, and we remain positive on the company’s growth prospects.

• Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
• Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
• There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

• Foshan Haitian Flavouring & Food (603288 CH), the largest condiment player in China is facing structural weakening of moat from a changed operating environment post-COVID. 
• Both catering and home consumption segments are faced with structural growth pressures that are difficult to solve for the company. 
• Expect further earnings weakness and derating in valuation multiple in the near term. 

• 4Paradigm (1764934D HK), a leader in enterprise artificial intelligence (AI) in China, is pre-marketing a US$150-200 million HKEx IPO.  
• 4Paradigm was the largest player by revenue in China’s platform-centric decision-making AI market with a market share of 22.6% in 2022, according to CIC. 
• The bull case rests on the success in increasing key account customer numbers, net dollar expansion rates, improving revenue visibility, strong growth in application development services and reducing loss margin.

• We think the mild recovery is driven by the delayed orders in Jul. and Aug, thus expect transaction volume to be flattish MoM in Sep.
• We think the recovery is on-track and expect Oct. volume to begin recovery and expect more meaningful rebound in Mar.-Apr. 2024, supported by 1) strong leading indicators from property agents, 
• 2) refer to the recover trajectory in 2014-2015.  We maintain the stock as BUY rating and maintain TP at US$24/ADS.

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.

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