China Archives | Page 59 of 154 | Smartkarma

• Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
• Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
• Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.

• Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers. 
• It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.  
• CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable. 

• HUTCHMED entered into an exclusive license agreement with Takeda- HUTCHMED will receive up to US$1.13 billion including US$400 million upfront, the third highest upfront among China’s TOP 10 license-out deals.
• Even if fruquintinib may probably not become a blockbuster product in the future, HUTCHMED still gets a decent upfront to relieve its cash flow pressure and an internationalization admission ticket.
• Hutchmed China Ltd (13 HK) is undervalued based on our sales forecast. After savolitinib has been included in the updated NRDL, this year’s performance growth is worth looking forward to.

• The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
• Tencent closed its XR business and terminated a property rental contract.
• NetEase refused to extend service for Activision Blizzard for additional six months.

• Zadaxin has been the biggest performance driver of SciClone, but it would face the risk of losing market share and increased pricing pressures after generic drugs were included in VBP.
• SciClone is primarily a pharmaceutical development/sales company, rather than a research-based innovative drug company.The increasingly low cost performance of in-licensed products has made the capital “reconsider” and be more rational.
• SciClone is a good stock for short-term trade, especially by taking advantage of the positive momentum after it reaches licensing deals/launches new products, but we’re concerned about its long-term prospects.

• 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 – iQIYI Inc (IQ US), Bilibili Inc (BILI US) placements, VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
• Event-Driven developments – China Internet (810 HK), Shandong Fengxiang (9977 HK), Kingston Financial (1031 HK),  Golden Energy & Resources (GER SP), Olam Group (OLG SP), Sabana Industrial REIT (SSREIT SP). 

• The 2022 NRDL negotiation results were released. We analyzed some points worth investor’s attention.
• The “safety pad” brought by medical insurance is difficult to ensure products future sales.Even after entering NRDL, how to improve patient/doctor coverage is an important problem for enterprises to consider.
• Here are some companies that investors are interested in. We mainly analyzed some key points of them, including Sirnaomics (2257 HK), JW Therapeutics (2126 HK), Antengene (6996 HK). 

• Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months. 
• Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
• Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.  

• We estimate that TME’s 4Q22 topline/bottom line would be (2.5%)/3.8% vs cons., because of disturbance in its social entertainment and ads business.
• We forecast net income would only slightly beat cons by 6.1%, due to likely expense rebound and no major improvement on main businesses.
• Reiterate SELL rating but raise TP to US$ 6.7 to reflect margin beat and improvement of macro environment. Our TP implies 12.3X PE in 2023.

• We expect JDL (including Deppon) to report C4Q22 net revenue in line with cons., and non-IFRS net margin beat cons. by 0.5ppt. 
• We expect JDL’s top line to reaccelerate starting in C2Q23, supported by recovery of JD GMV, growing standalone delivery services, and returning demand for integrated supply chain services.
• Increasing scale and improving operating efficiency in warehousing and transportation will contribute to JDL’s margin expansion. We upgrade JDL to BUY rating and raise TP to HK$ 21. 

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.

• Fosun International
• Yankuang Energy Group

• We expect BEKE C4Q22 revenue and non-GAAP NI to be 9% and 64% above consensus. The bottom line beat is a result of earning leverage;
• We expect the market monthly EH/NH transaction volume to turn positive growth in C1H23, with resumed offline activities and continuing policy support as main drivers
• We raise TP by US$1 to US$20: 1) dialling up GTV in 4Q22, 2) faster pace transaction recovery in 2023, and 3) rebase FX from 7.05 to 6.77 in valuation.

• While BILI’s top line in 4Q22/2023 would be in line, we suggest that its bottom line in 4Q22/2023 would beat cons. by 6%/18% due to cost-savings and optimized monetization efficiency. 
• BILI’s adjusted net loss would be significantly narrowed to (3.2)bn RMB in 2023, per our estimation. However, we still have concerns about some of BILI’s fundamentals.
• Maintain SELL but raise TP to US$ 16.4, implying 1.8X PS in 2023.

• Based on our tracking, ZTO’s parcel volume in C4Q22 increased 4.5% YoY and 4.1% QoQ,and its market share reached 21.8%, up 1.6ppt YoY and down (0.4ppt) QoQ due to seasonality. 
• ZTO benefits from the recovery of eCommerce and industry volume. It is highly competitive both in pricing and in service quality, which fend off peers under escalating competition into 2023.
• Maintain BUY and raise TP to US$35.0 due to industry rebound and ZTO’s competitive edges in service and pricing. Our TP implies 23x P/2023E.

• 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

• China Internet Investment Finance Holdings (810 HK)/CIIF disclosed that it received a letter from a potential offeror, stating that it is considering making a voluntary conditional cash offer.
• The possible offer will have two conditions – a 50% minimum acceptance condition and that the shares remain listed. No price or timeline has been disclosed.
• An offer if it materialises, will likely be a take-under due to the presence of a willing seller (Chairman) seeking a liquidity event and CIIF’s unjustified share price run.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

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. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

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. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

• Xpeng announced price cuts on existing G3i, P5 and P7, which surprised the market on negative side, potentially indicating weaker demand and profitability
• Recent management changes has also hurt sentiment with the new CEO from a ‘traditional’ car background
• Xpeng’s share price has bottomed in our view and we expect a 2H’23 recovery with improving fundamentals

• The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
• This index was launched in 2020 and has gained significant passive tracking over the last two years.
• In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

• China’s gaming regulator granted publishing licenses to 88 video games including three licenses to Tencent (for Undawn, Alchemy Stars and Yuan Meng Zhi Xing) and one for NetEase (for Badlanders).
• In December, NPPA gave approvals to 84 new domestic games and 44 imported games suggesting the 18-month long crackdown on the sector is nearing an end.
• Tencent’s online games revenue declined YoY for three consecutive quarters with regulatory hurdles and drop in ranking of key titles but we expect an improvement going into 2023.

• Despite the steep stock rebound following a strong recovery in sales, stock attracts modest valuations in line with Infant milk players. Re-rating potential exists from valuing high-growth segments differently.
• Strong growth in Adult Nutrition and Pet products fueled overall sales. Baby Nutrition sales growth is muted and accounts for less than half of total sales (vs 2/3rd in 2020).
• Stock rebound triggered by a recovery in Sep. quarter sales thanks to its diverse product portfolio, and prospects of a revival in cross-border trade following China opening its borders.

• Share price of Shenzhen International (152 HK) started slow in this year, but it is on course for stronger earnings in FY23, following a dip in last year. 
• Upside from logistics business, benefits to Shenzhen Expressway (548 HK) on border re-opening, potential massive contribution from logistics parks transformation and upgrading and lack of Shenzhen Airlines’ drag are drivers. 
• ROE is expected to rebound to 11-12% in next two years, returning to FY20-21 level. Back then, its average P/B was 0.68x, suggesting at least 31% upside from 0.52x currently. 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned include Asymchem Laboratories (6821 HK), Honbridge Holdings (8137 HK), Flat Glass (6865 HK), and Gushengtang (2273 HK).

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.

• Vedanta Resources
• O-Net Technologies (Group)

• In this note, we will take a look at broker performance for HK IPOs from 2019-2022. 
• The following dataset includes all HK IPOs above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 173 deals. 
• The deals you see in this note are based on our historical IPO tracker. Feel free to drop us a message for additional information on any of these IPOs.

• China just announced game approval for January batch. The number of games approved is slightly higher than the previous three months.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game each. Overall Tencent is still behind its peers since the approval resumed.

• IQiyi announced a follow-on equity offering of 76.5m ADS priced at $5.90 per ADS (at a 11% discount to previous close) and will raise approx. $442.3m through the issuance.
• Each ADS represents seven Class A ordinary shares and the new equity offering of 76.5m ADS will account for approx. 8.5% of iQiyi’s extended share capital post offering.
• Following the announcement, the company’s shares fell 16.4% and we think the upside is limited here.

• Shandong Fengxiang (9977 HK)‘s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.
• PAG’s MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.
• PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.

• HK$0.96 per share special dividend announced last Friday disappointed the market. 
• The dividend implies only 20% of the cash on the balance sheet paid out in dividends
• We think there could be 1-2 more special dividends in 2023E given lack of obvious uses for the cash balance

• IQIYI Inc (IQ US) aims to raise net proceeds of US$442.3 million through the placement of 76.5 million ADS at US$5.90 per ADS.
• The net proceeds will be used for working capital purposes, including serving its existing debt obligations. The placement closes on 19 January. 
• The placement price is fair vs peers and is an opportunity to play iQiyi’s expected topline recovery which is supported by ongoing margin improvement and declining cash burn. 

• On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
• In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
• HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites. 

• IQIYI aims to raise around US$500m via a follow-on ADS offering.
• While the company hasn’t stated its use of proceeds, it will probably use most of it to redeem convertible notes
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• The Kingston Financial (1031 HK) scheme document is out with the scheme meeting scheduled for 9 February. The IFA considers the offer to be fair and reasonable. 
• Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
• Peer re-rating increases the headcount test risk. At the last close and for the 10 March payment, the gross and annualised spread is 5.3% and 42.2%, respectively.

• China recorded 270,000 increases in deaths in 2022 to 10.41m (+2.7% YoY, vs. flat in 2020). This is a sad demographic trend but favourable to Fu Shou Yuan (1448 HK).  
• Death rate of 0.74% has returned to the 1974 level. With termination of “zero COVID” policy, this is poised to increase. This will also stimulate demand for its pre-need services.
• Despite a 73% rebound in share price from trough, valuation is still undemanding at 14.4x FY23F PER. This implies a 35% discount to the average of 22x since 2013. 

• WuXi Bio announced the placing of existing shares by substantial shareholder. Obviously, the share price was in  “comfortable position” for the management, so they think it’s time to take action.
• WuXi Bio faces the uncertainty of future high growth.GSK deal/AD drug orders cannot offset the loss of COVID-19 orders.We advised to invest when it’s in “sector resonance” with “difference in expectations”.
• What we’re most worried about this year isn’t recession/depression but Taiwan, which is the last card the US hasn’t yet played. If situation’s really bad,something may happen in Taiwan Strait.

The Asia HY Trade Book for January 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 (ex-Japan) HY and crossover credits.

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
• Powerlong Commercial Management Holdings
• Yuexiu Property

• The Scheme Booklet is now out and Kingston Financial (1031 HK)‘s shareholders can vote on Chu Yuet Wah’s Offer on the 9 February.
• The Cancellation price of HK$0.30/share was a 47.78% premium to the undisturbed prices. It will not be increased. 
• Currently trading at a gross/annualised spread of 5.3%/44.4%, assuming payment on the 10 March. 

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
• Powerlong Commercial Management Holdings
• Yuexiu Property

• Wuxi Biologics Holdings is looking to raise up to US$513m by selling about 1.3% of Wuxi Biologics (2269 HK). 
• This is the company’s 16th placement since it listed in June 2017. 
• In this note, we will discuss deal dynamics, past deal performance, and share the scores on our ECM framework.

• The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
• The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
• In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

• Alibaba (ADR) (BABA US), along with several other Chinese tech names have rallied more than 100% over the past 2.5 months with the Chinese government indicating regulatory crackdowns are over.
• However, we think this could just be a temporary respite for tech names as there’s a lot more to be done in terms of a data security and privacy standpoint.
• Nevertheless, Alibaba Group (9988 HK) is still quite expensive, given that government interventions have pretty much curtailed Alibaba’s avenues for growth in the domestic market.

• The Chinese government may possibly buy minor shares in Alibaba and Tencent.
• JD.com’s long-term competitor, Dangdang, opened a bookstore in JD.com’s app.
• In 2022, both Tencent Video Account’s active user base and time on site reached 80% of We Chat.

• BABA US is up 85% from October lows and continues to trade well in 2023 up 32% in January
• Stock has benefitted from not only improved economic sentiment but also an end to the 2-year crack down on the Internet Sector
• We suggest using call ratios to increase upside leverage prior to earnings release

• Aier launched new hospital acquisition plan. Obviously, Aier hopes to maintain high growth through M&A funds. However, considering its national market layout,Aier is in the final stages of aggressive M&As.
• Based on our data, Aier’s endogenous growth is actually very weak. Once external M&As fail to drive high growth, Aier’s overall performance growth would decline significantly. Aier is grossly overvalued.
• We expect decreasing birth rate after COVID-19. Due to the fundamental changes in the population structure, the valuation system of all assets would be destroyed – The long logic doesn’t exist.

• On 11th Jan 2023, WM Motor Technology Co Ltd announced its intention to merge with Apollo Future Mobility (860 HK) .
• WM Motor failed to list in Hong Kong last year and this is essentially its attempt to undertake a reverse merger at a valuation well below its previous funding rounds.
• In this note, we will talk about the deal dynamics and  take an early look at its implications.

• Qingdao Ainnovation Technology Group (2121 HK) was listed on 27th Jan 2022, with its one-year lockup expiring on 27th January 2023.
• Qingdao AInnovation Technology Group is an AI solutions provider offering full-stack AI-based products and solutions.
• Coming up for one-year lockup expiry are the pre-IPO shareholders. Bulk of them are in the money as some have invested as early as 2018.

• Short video continued to accumulate active users in China and the company’s light-version grew the most rapidly.
• We believe the revenue growth rate will rise from 2Q23 and the company will have positive operating profit from 2024.
• We set the price target at HK$103, which is 44% over the market price.

• Tencent faces formidable resistance at 385 that may not be seen for a while. 385 is where old lows and old highs coincide.
• RSI is extended (ST sell and bounce). Buy volumes are descent but have been drifting since late 2022.
• 385 a good zone to sell cash positions or short to challenge pivot supports outlined. 320 is an intermediate level to hold to keep things glued together.

• China Power International (2380 HK) announced positive profit alert for FY22 at Rmb2.3-2.7bn, vs. Rmb516m losses in FY21. Such guidances are 14-34% ahead of current consensus forecasts.
• Disposal and acquisition gains of Rmb2.15bn are the main contributors. As we see further clean energy injections and coal-fired disposals going forward, there is room for more such gains. 
• Losses for core operations are Rmb300-700m in 2H22, a huge 73.5% YoY reduction. We will not read too much into HoH profitability retreat as this is due to hydropower seasonality.