China Archives | Page 58 of 154 | Smartkarma

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. China Jinmao Holdings
2. Lifestyle International Holdings
3. Geely Auto
4. First Pacific Co
5. Tata Motors Ltd

and more…

• The Hang Seng Index (HSI INDEX) is a blue-chip index that represents the performance of the large cap stocks listed in the Hong Kong Stock Exchange.
• The index is undergoing some significant composition changes and the index provider currently uses a highly subjective constituent selection process which is quite challenging to decode.
• In this insight, we take a look at Quiddity’s approach to solving this Hang Seng constituent selection puzzle and the historical performance of past rebalance events.

• Likely new 4G restrictions will delay Huawei’s ability to launch mid-range offerings at volume. Xiaomi stands to gain 1.2ppts of share in 2024 vs. our prior forecast. 
• However, new limits are long-term negative, as it (1) raises the chance for cascading limits on China 3Cs; (2)  triggers reduced 3C electronics demand; (3) weaker industry electronics demand.
• The impact of the latest set of restrictions will likely prove net negative, in our view, as a result we re-iterate our SELL rating and HK$7.3 TP.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• January 2023 confirmed a high probability bullish outlook when all 3 pillars were definitively triggered. 
• Monthly Relative Strength Index (RSI) has an incredible multi-year history of confirming large upswings in 916 HK. January completed the 5th such bullish confirmation since 2014. Multi-month target at 12.945. 

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.

• Shineway released good turnover data in 22Q1-Q3. Due to large market demand for COVID-related TCM, 22Q4 performance would remain strong growth momentum, leading to positive outlook of 2022 annual report.
• With the peak of respiratory disease outbreak past and COVID-19 also begins to be under control, demand for related TCM would weaken. Accordingly, the pullback of share price could begin.
• Strong performance of Shineway’s share price may not be sustainable in long term. Shineway is no longer cheap at current valuation. While short-term catalysts remain, future upside may become limited. 

• After Greatview Aseptic (468 HK) was suspended on the 30 January, it emerged that Shandong Xinjufeng (301296 CH) had entered a SPA to acquire Jardine Matheson (JM SP)‘s 28.22% stake
• Greatview has now confirmed the transaction. Shares were supposed to resume trading this afternoon but were immediately suspended again.
• Importantly, Inner Mongolia Yili Industrial Group (A) (600887 CH), Xinjufeng’s largest customer is a main competitor of Greatview’s largest customer. That may be an untenable situation, according to the announcement.

• Cosco Shipping Energy Transportation (1138 HK) rallied 12.5% in the last two trading days after issuing a FY22 positive profit alert, but we are concerned that momentum is peaking. 
• Its P/B of 0.92x is 4SD above average since 2016, more than sufficient to reflect rebound in FY23-24F profitability. Meanwhile, VLCC rate has plunged 80% in the last 3 months.  
• We believe CSET is already midway in the upcycle which normally lasts for 2-3 years. With high 4Q22 profit difficult to sustain for long, there is downside risk on earnings.  

• Single product structure is the biggest risk of BCHT. Varicella vaccine is hard to drive BCHT’s performance growth in the future and the sales of influenza vaccine are not ideal. 
• There’re concerns about the protection rate of attenuated zoster vaccine,which won’t be officially sold until 2023H2/2024. It’s not sure whether the situation can be reversed by attenuated zoster vaccine alone.
• BCHT is inferior to CanSino in terms of pipeline quality and R&D capability. The investment value of BCHT is not high. We think its valuation should be lower than CanSino.

• Many people aren’t optimistic about CD47 because there is no sufficient evidence to solve blood toxicity. Although I-MAB’s problem-solving idea has no obvious flaws in logic, risks remain.
• CD73 is still at a relatively “shallow level”, which can be understood as a low level of verification. I-MAB has to make a last-ditch effort on CD47.
• At such low market cap, Investors could make an “entertaining bet”. If CD47 is successful, you can earn several times. If not, then admit the defeat.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng Tech Index (HSTECH INDEX) in March 2023.
• According to our estimation, there could be two changes for the HSTECH in March 2023 and there could be one-way index flows of US$365mn.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• The review period for the March rebalance ends today. We forecast 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• We expect the index committee to continue using a 6-month minimum listing history. The impact on the potential deletes is a lot higher than the impact on the potential adds.
• With 5 changes to the index, estimated one-way turnover is 5.1% resulting in a one-way trade of CNY 4,549m. There is a reasonably large reverse funding trade.

• We believe total revenue growth rate will accelerate from 4Q22 and grow by 9% in 2023.
• We believe the operating margin will be stable from 4Q22 to 2Q23, but the margin will climb up from 3Q23.
• We believe that EPS will increase by 16% and the stock will have an upside of 21%~44%.

• Shandong Xinjufeng Technology Packaging (301296 CH) agreed to acquire Jardine Matheson Holdings (JM SP)’s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65 per share.
• Post-Completion, Xinjufeng will be the largest shareholder. As Xinjufeng’s shareholding will remain below the 30% voting threshold, the transaction will NOT result in a mandatory general offer. 
• The transaction price, which is a 22.7% premium to the last close, highlights Greatview’s value. Greatview’s forward P/E multiple is undemanding in comparison to peer P/E multiples.

• The company has defaulted since 2021 and has already missed a few payments as well as the deadline to deliver a restructuring blueprint at the end of 2022.
• We believe the Chinese government is looking now to rescue developers (such as Country Garden) which are seen as systemically important.  
• We are of the opinion that the sector is not investable for the general public  in 2023 and only the Distressed specialists should endeavor investing in Chinese high-yield property developers.

• Xpeng has announced it is speeding up its new model launch pipeline by launching 5 new models this year
• If all go to plan, Xpeng’s sales may hit 30k vehicles/month end of ’23 or early ’24
• The appointment of new President from ICE sector may lead to some market confusion on management and branding in the short term

• New policy about surgical robots was released, which is conducive to the promotion and popularization of surgical robots in China. However, the situation is not as simple as it seems.
• We deep dive the business environment of surgical robots in China.Even with favorable policies, both surgical robot systems and consumables have to reduce price largely so as to be affordable.
• It’s difficult to make profits in China. Medbot could lose money for quite some time.Without solid internationalization, the rally cannot be sustained for a long time only by policy catalyst.

• In this note, we will take a look at the performance of bookrunners for ASEAN placements from 2019-2022.
• The following dataset includes all ASEAN placements above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 54 deals.
• The deals you see in this note are based on our historical placements tracker. Feel free to drop us a message for additional information on any of these placements.

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.

• The PBOC has extended the use of its policy tools to support the green loan industry as part of the country’s’ drive towards carbon neutrality.
• China’s green loan market is already the largest in the world, if you agree with its definitions and can look past its limitations.
• The state of green finance matters to investors, and not just those with explicit ESG mandates. We look at the potential pitfalls in the China.

• China catering players have seen strong recovery during the Chinese New Year starting from Jan 22th, amidst a broad-based revival of the service sector as a whole.
• For Xiabuxiabu, latest data points suggest significant progress in turnaround and higher visibility into 2023 performance.
• We see upside to our financial projection for 2023 and are more confident that Xiabuxiabu is the most attractively-priced to play re-opening in China catering sector. Expect 50% upside.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng China Enterprises Index (HSCEI INDEX) in March 2023.
• According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
• The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
• There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP). 

• 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 – New Ruipeng Pet Group (RPET US) and Hesai Group file for US$100 million IPOs for listing in the US.
• Event-Driven developments – Aag Energy Holdings (2686 HK), Acotec Scientific Holdings (6669 HK), Xingda International (1899 HK), Kanematsu Electronics (8096 JP), Toyo Construction (1890 JP), Origin Energy (ORG AU). 

• 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

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• While the holiday shortened week didn’t see much action in Asia, but there was one more ADR filing in the US, adding to the mini-pipeline.
• Adani’s ongoing FPO was the only live deal this week, although it had enough drama to make up for the lack of other deals.

• Back on the 7th December, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management (known as the Five parties) at HK$1.88/share, a 24.5% premium to undisturbed. 
• Pre-Conditions were satisfied on the 15 December and the Composite Document was dispatched last night.
• The first close is the 24 February. Payment under the Offer is expected to be the 21 March.

• With a minimum acceptance hurdle of 50% and irrevocables of 60.14%, Acotec Scientific Holdings (6669 HK)‘s partial offer was always going to turn unconditional. 
• As per last night’s announcement, valid acceptances were 78.59%. The Offer has automatically been extended to the 9 February – this is the final close. Pro-ration is currently 82.7%.
• The minor quirk for partial Offers is that payment occurs within seven business days of the final close, not seven days from the Offer turning unconditional. 

• We have a positive view of Luxshare Precision Industry (002475 CH) and we believe its shares are well poised to outperform the market this year. 
• The recent production halts and protests at Foxconn’s Zhengzhou facility due to the overly stringent COVID measures has benefited Luxshare since Apple has given more orders to the company.
• We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023.

• SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
• There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
• Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

• On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
• We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
• With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

• As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
• The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
• Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share. 

• Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January. 
• It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG. 
• The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00. 

• Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
• The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
• The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.

• Back on the 14 May 2018, AAG Energy Holdings (2686 HK) announced a partial offer (50.5%) from Xinjiang Xintai Natural Gas (603393 CH) at HK$1.75/share. 
• This morning AAG was suspended pursuant to Hong Kong Code on Takeovers and Mergers.
• I expect a Scheme Offer from Xinjiang Xintai, which currently holds 56.98%. Potentially, Fosun (656 HK) has returned to the well.

• ZJLD Group (ZJLD HK) is looking to raise up to US$400m in its Hong Kong IPO. The deal will be run by Goldman Sachs and China Securities. 
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• As per F&S, the firm was the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales. 

• The spring coil centralized procurement of neuro-interventional consumables in 21 provinces led by Jilin is about to start. The result may be unexpected, which could cause uncertainty to NeuroTech’s performance.
• The promotion of import substitution in the field of neuro-intervention has not been as smooth as expected. If foreign brands win the bid, doctors would give priority to imported products.
• Since NeuroTech is in leading position among domestic peers and has core R&D capabilities in this industry, we think it still has investment value. The valuation is in comfortable range.

• On 26 January 2023 we published our bearish multi-month Nifty Index (NIFTY INDEX) outlook. For the RV player, the Hang Seng CEI (HSCEI) is likely to present material opportunity.
• At TMA we place tremendous emphasis on momentum confirmation. Currently, LT momentum triggers confirm a sustainable multi-month to multi-quarter uptrend in the HSCEI.
• Occasionally Fibonacci retracement levels, based off different portions of a trend, coincide. These create high probability targets. 9450/70 in the HSCEI is one such high probability target in 2023.

• Bullish sentiments doubled BABA share price post 20th Party congress, as investors look beyond a soft December quarter and focus on re-opening prospects and flashing regulatory green lights.
• Expect single-Digit GMV growth, more disciplined OPEX and hence margin recovery to generate RMB180 billion non-GAAP net profit for BABA by FY25. Materializing fundamental recovery will support continued re-rating.
• That said, we also see headwinds to multiple expansion and expect 18-20x PER (among lowest in sector) for FY25, implying 21%/28% compounded annual return over FY23-25.

• CanSino Biologics Inc (6185 HK) disclosed plans to publicly list in Switzerland, but the story of the fourth dose of COVID-19 vaccine is difficult to boost its stock price/valuation. 
• According to CanSino’s management,MCV4’s commercialization faced some challenges, which means 2022 annual performance may not be good. 2021 would probably be a high point of CanSino’s performance in recent years.
• Share price could pullback when 2022 annual report is released, which offers a better opportunity if investors want to go long, considering CanSino’s long-term investment value analyzed in prior insights. 

• China’s construction engineering industry declined more than expected in 2022
• The industry may reach the inflection point by the end of 2023 or 1H24
• Sany Heavy is expected to recover earlier than its peers