China Archives | Page 39 of 154 | Smartkarma

• Chindata Group (CD US) has entered a definite agreement with Bain Capital at US$8.60 per ADS, 7.5% higher than its previous offer of US$8.00 per ADS.
• Completion is conditional on shareholder approval, dissenting shareholders representing less than 12% of outstanding shares and any applicable regulatory approvals. The completion conditions should be met.
• CMC’s offer, while higher, does not meet the “superior proposal” criterion. At the last close price and December-end completion, the gross and annualised spread is 6.0% and 16.6%, respectively.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In India, TVS Supply Chain Solutions (1915741D IN) launched its IPO bookbuild. Suzlon Energy (SUEL IN) had also launched its well-flagged INR20bn (US$240m) QIP.
• While Japan saw Star Asia Investment (3468 JP) launching its primary follow-on for acquiring properties as well. 

• Recent share-price declines in healthcare is mainly related to anti-corruption campaigns. Here’re some updates.We recommend investors not to rush to buy the dip, but wait for the bottom.
• We recommend A-share healthcare companies to buy back shares/increase dividends, in which case, despite slowing growth, A-shares are still the RMB-asset with the greatest potential for increases in expected returns.
• CanSino Biologics (6185 HK) has entered a Framework Agreement with AstraZeneca, but investors should not be overly optimistic about the short-term or even medium-term performance contribution brought by this cooperation.

• Li Ning (2331 HK) reported today a headline beat on 1H23 results, with sales up 13% yoy and net profit down 3% yoy.
• Both numbers are around 5% better than the already low market expectations. 
• However, a closer look at the results shows that the quality of the beat is low. 

• Sino Land is a developer in Hong Kong and China with both DP and IP rental business. 
• Sino Land has a net cash position of HKD41bn, its strong balance sheet makes the stock a defensive play
• Despite trading at attractive valuation (0.46x P/B), we see there is a lack of catalyst and the stock may remain as value trap

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. Country Garden Holdings Co
2. Longfor Properties
3. Sino-Ocean Group
4. China SCE
5. Sunny Optical Technology Group

and more…

Country Garden Holdings Co. Ltd., one of China’s largest property developers, said it expects to report a record, multibillion-dollar net loss for the first half, raising further concerns as the company slides deeper into a debt crisis.

Guangdong-based Country Garden estimated its net loss at 45 billion yuan to 55 billion yuan ($6.2 billion to $7.6 billion) for the first six months of 2023, compared with a net profit of 1.91 billion yuan a year ago, according to a Hong Kong exchange filing late Thursday.

The company warned July 31 that it would report red ink for the first half.

• The revenue growth rate rose to 14% in 1Q24, compared to the past four stagnant quarters.
• All businesses continued to improve their margins, so that the general operating margin rose to 19% in 1Q24 versus 12% in 1Q23.
• We believe the re-organization is successful and the stock price is overly impacted. Buy.

• Alibaba (ADR) (BABA US)‘s 1QFY24 revenue and OP beat consensus by RMB 9.2bn and RMB 14.4bn respectively, possibly on the back of a successful 6.18 shopping festival.
• It looks like Alibaba Group Holding (9988 HK) has decided to abandon its New Retail Strategy and instead, put more effort into e-commerce, especially on popular platforms like Taobao and Tmall.
• Although this is a good-sign and could rally the stock short-term, we would still steer clear of Alibaba as we remain skeptical about the overall health of the Chinese economy.

• According to Sing Tao, two PRC firms and a mainland bank have formed a consortium to acquire Hongkong Land (HKL SP)‘s 33-storey Three Exchange Square.
• This “news” is straight out of left field. For its part, HKL said the market rumour is pure speculation.
• HKL’s P/B of 0.24x is closing in on its all-time low of 0.21x during the depths of Covid. 

• We expect Huitongda (HTD) 1H23 revenue in-line with consensus, and non-IFRS NI 15.6% lower than consensus. 
• The lower bottom-line is due to 1) product mix change result in lower gross margin; 2) higher impairment loss from account receivables due to its SME focused model.
• We maintain the stock as SELL. We raise TP by HK$2.5 to HK$20.5 to factor in the upward revision of NI from downsizing of minority interest.

• Taste Gourmet (8371 HK) reported its Q1 FY24 with revenues up 47% YoY and core profits up 349% YoY.  We believe that the company will report stronger revenues in Q2.
• The restaurant count increased from 39 to 42 by the end of Q1 FY24 for HK. As of the latest date, the company has 46 restaurants in HK. 
• The company also had 126.5 mn HKD of net cash at the end of Q1 FY24 (vs 118 mn HKD in FY23), almost 20% of the current market capitalization. 

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.

• Country Garden Holdings Co
• Sino-Ocean Service
• Wynn Macau Ltd

• According to Bloomberg, L’Occitane (973 HK) is set to receive a HK$35 per share privatisation offer from Reinold Geiger, the Chairman and the largest shareholder.
• The rumoured price is attractive and represents an all-time high share price. Therefore, Acatis KVG, the shareholder with a blocking stake, would be supportive.
• The rumoured price implies multiples at a discount to peer multiples, which explains Mr Geiger’s ambitions for a possible European listing to secure higher valuation multiples. 

• In late 2018, there were reports that French beauty retailer L’Occitane (973 HK) had drawn interest from Advent International. That rumour came to naught. 
• Similarly, late last month, L’Occitane clarified media reports that it had not received any Offer or proposal. 
• After going into a trading halt this morning, reportedly (Reuters) Chairman Reinold Geiger has been discussing a possible offer of ~HK$35 for each L’Occitane share he doesn’t already own.

• STAR 50 Index represents the performance of the top 50 securities by market capitalization and liquidity listed on the Science and Technology Innovation (STAR) Board of the Shanghai Stock Exchange.
• This is one of the most significant indices in Mainland China when considering the average passive AUM per stock as a percentage of float.
• In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of STAR 50 index rebalance baskets.

• Li Auto reported solid 2Q23 results, with both top line beating cons/our est. by 5.3%/3.6% and GPM of 21.8% beating cons/our est. by 1.1/1.7ppt.
• We reiterate that capacity ramp-up is the key for Q3/Q4 delivery. Q3 sees a temporary capacity bottleneck albeit this is likely to be resolved in Q4.
• We expect the launch of MEGA BEV in 4Q23 to be the next catalyst. We reiterate Li Auto as our top pick and raise TP due to better-than-expected margin outlook.

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 SCE
• Hopson Development
• Sunny Optical Technology Group

• Based on endogenous development and external M&A, the outlook of Hygeia is full of imagination. Hygeia also start to expand business in northwest region of China by acquiring Chang’an Hospital.
• If public hospitals have a role in “guiding patients” to Hygeia, anti-corruption campaign would affect Hygeia’s future performance, which is a significant uncertainty that could also shake its investment logic.
• There may be short-term chaos. It remains to be seen whether performance can sustain growth of around 30%. The 23H2 revenue growth would be an important guidance for Hygeia’s outlook.

• Swire Properties is one of the largest office and retail landlords in HK.  Office is facing headwind despite should see recovery in the long-term.  HK retail is recovering.
• Swire announced to spend 100bn to expand its portfolio in terms of capital management, yet it did not announce a share buyback that many investors would like to see
• Lack of share buyback, with weak HK office and China retail, could drag Swire’s share price.  Despite we see value in the stock, it could remain as value trap

• HealthyWay cannot rely on drug/product sales to achieve rapid expansion of revenue scale because it hasn’t huge user base accumulated on e-commerce platforms like Taobao/JD.com, leading to different business model.
• Relying on Baidu’s search engine to guide traffic could be worthless, because B-end users would not pay for the traffic that cannot provide added value.HealthyWay hasn’t a strong cornerstone business. 
• HealthyWay’s valuation should be lower than that of ClouDr. Due to the lack of imagination space in business model, it would to some extent suppress the valuation growth of HealthyWay.

• SF Holding differs from its Chinese peers in several important ways, including business scale, its lack of a formal relationship with Alibaba, and its many non-express lines of business
• SF also differs from the pre-Covid version of itself: it’s far larger than it was in 2019, but core margins have declined, and internatonal exposure has risen dramatically
• In this insight we also take a look at current EV/Revenue valuations vs peers and list important milestones to watch for ahead of the company’s planned HK IPO

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.

• Adani Ports & Special Economic Zone
• Softbank Group

• Teenage Mutant Ninja Turtles: Mutant Mayhem had a smash opening grossing over 50M USD at the box office in its first week of operation.
• The box office success de-risks the upside potential for Playmates Toys as successful movies have a high likelihood of driving toy sales.
• Paramount+ launching the new TMNT-inspired series will also drive Ninja Turtles’ revival even more.

• According to various public news sources, Brazil’s Suzano SA, the world’s largest pulp maker, and a few private equity players may participate in the bidding for Vinda International (3331 HK).
• Note that the controlling shareholder Essity is looking to potentially dispose its stake, announced in April this year. 
• Two major drivers of share price – pulp price and competition – likely have reached the bottom and could improve in 2H23. 

• SHEIN announced it wants a role in reforming US de minimis import regulations
• A tightening of de minimis threshholds could undermine SHEIN (and Temu) in the US
• The de minimis issue highlights SHEIN’s and Temu’s lack of political allies in the US

• BeiGene maintained strong product sales in 23H1 and its net loss continued to narrow. This means that BeiGene has realized the cost control problem and entered a healthy growth phase.
• Our revenue forecast indicates BeiGene is approaching the minimum threshold for turning losses into profits. A more likely scenario is revenue need to reach over US$4 billion to be breakeven
• However, regardless of the calculation, BeiGene ‘s valuation is still unreasonably high. Its potential/certainty is nowhere near that of Alnylam. Maintaining sustained high growth is not easy because “accidents” remain.

• International Housewares Retail (1373 HK) reported weaker than expected numbers, with revenues down 3% YoY and profits down 18% YoY for FY23 (down 10%/42% for H2 FY23).
• The cause for the decline was the roll-off in COVID-related subsidies worth 30 mn HKD and weak revenues in Q4 FY23 owing to a surge in outbound travel.
• The company declared a 10-cent final dividend ( Full Year: 22 cents). Post the correction in share price, it represents an 8.3% dividend yield. 

• We believe that Kuaishou’s outsized bottom-line beat for 1H23 was driven by stronger advertising and e-commerce business and cost reduction than the street expected.
• However, the market’s muted response suggests that investors are looking beyond 1H23 or even FY23 to price in a mature growth outlook.
• Kuaishou is trading at ~40x our FY23 estimate against 24% earnings CAGR from 2023 to 2025 which represents a hefty valuation premium over other China tech giants.

• The Hang Seng Index (HSI) closed down last week (CC=-1), briefly touching OVERSOLD territory, it may close higher this week. 
• The HSI trend pattern currently identified with the Market Reversal Matrix (MRM) is quite bullish, on average.
• Support levels to go LONG are between 19367 (Q2/Median) and Q3 at 19021.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Concord Biotech Ltd (658823Z IN) and  SBFC Finance Limited (1547353D IN) opened their respective IPO bookbuilds this week.
• On the Placements front, India began picking up steam post-earnings seasons.

• HUTCHMED’s 23H1 results were in line with expectation. We updated our forecast for the three core products. Its 2023 total revenue would achieve a high double-digit growth. HUTCHMED is undervalued. 
• Performance prospects for 2024 and beyond largely depend on whether fruquintinib can smoothly obtain FDA approval in 2023, which means significant progress in internationalization and possibility of breakeven in 2025.
• Based on the performance so far, we think the clarity of HUTCHMED’s performance is high and the guidance given by management is reliable. The Company deserves more attention from investors.

• We expect Li Auto to report 2Q23 top line and GPM 2.3%/in line vs. cons. We think Li Auto’s share gain in Q1/Q2 reflects market consolidation.
• Our channel check found its weekly order intake remains robust at ~10k. We expect the capacity ramp-up to lead to Q3 delivery of ~100k, 12% vs. cons. 
• We reiterate Li Auto as our top pick, due to 1)  strong model cycle (L9/L8/L7) and channel expansion; 2) margin upside. Li’s MEGA BEV could be the next catalyst.

• We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &store expansion.  
• We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.
• Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.

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.

• Bharti Airtel
• China Jinmao Holdings
• China Vanke
• Greentown China
• Yuexiu Property

• SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange. 
• SSE 380 consists of 380 mid-cap stocks which are selected from the remaining Shanghai listed A-shares after the constituents of SSE 180 Index. 
• In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the SSE 50/180/380 index rebalance baskets.

• The rally of TCM companies has probably come to an end. But we think there would be good trading opportunities in 23Q4. Things could become challenging again in 24Q1.
• If P/E is used when calculating the valuation of innovative pharmaceutical companies, unreasonable situations may arise. Sales profit rather than net profit could be a better choice for P/E.
• Although iRay’s current P/E has fallen in reasonable range, due to concerns about its long-term growth prospects, valuation could further decline in long term. So, just short-term trade is recommended.

• Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
• This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade. 
• PCCWs current discount to NAV is at an unsustainable 5%.

• With that out of the way, let’s dive into Taste Gourmet, a catering group listed in the secondary market (or GEM board) of the Hong Kong Stock Exchange.
• Catering is usually a business with little moat, characterised by low barriers to entry. 
• While some brands are widely recognizable, humans generally want to devour something different each day, therefore it is an everyday struggle for restaurants to stand out among competition.

• Toyota Motor Corp., the world’s biggest car seller, has announced plans to consolidate its research and development (R&D) resources in China and ramp up its focus on electric vehicles (EVs), as it attempts to revive stalling sales in the highly competitive market.
• The Japanese automaker said on Monday it would change the name of its largest R&D facility in China from Toyota Motor Engineering & Manufacturing (China) Co. Ltd. to Intelligent ElectroMobility R&D Center by TOYOTA (China) Co. Ltd., and consolidate engineers from its three China ventures into the newly named facility based in Changshu, Jiangsu province.
• Among other plans, it would also strengthen local development of electrified vehicles (EVs) including battery, hybrid and plug-in hybrid models and accelerate the development of an electric powertrain with its two biggest suppliers, Denso Corp. and Aisin Corp., the company said.

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. Country Garden Holdings Co
2. Vedanta Resources
3. China Jinmao Holdings
4. Geely Auto
5. First Pacific Co

and more…

• S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) 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 certain indices and regular entry to others 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.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

Founder Securities Co. Ltd.’s third-largest shareholder, China Cinda Asset Management Co. Ltd., is selling 2% of the brokerage’s stock worth 1.2 billion yuan ($166 million).

The share sale is to meet Cinda’s needs for corporate operations, Founder Securities said Monday night in a statement.

China Cinda, the nation’s biggest state-owned bad-debt manager, plans to sell as many as 165 million shares of Founder Securities between Aug. 23 and Feb. 22, 2024, through centralized bidding, the brokerage said.

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.

• Country Garden Holdings Co
• MGM China Holdings
• Vedanta Resources