China Archives | Page 65 of 154 | Smartkarma

• Ownership in Alibaba Group Holdings is on the rise among active Greater China managers. 
• Stock price below $100 a catalyst for active Greater China managers to buy back in, with Invesco, JP Morgan and E Fund among those opening positions
• Alibaba remains well behind both TSMC and Tencent on an average weight basis and is the 2nd largest underweight in the Greater China region.

• Meituan’s recent price decline was partly due to the rumors about the social benefit payments.
• First, rumors are unverified statements. There was no such meeting at all.
• Second, the social benefit payment impact is probably controllable. I think the recent price decline provides a chance of adding on the stock. 

• DPC Dash aims to raise around US$100m in its Hong Kong IPO. 
• The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 562 stores across 13 cities, as of Nov 2022.
• In this note, we will talk about the not-so-positive aspects of the deal.

• Kuaishou Technology (1024 HK) reported 3Q2022 results. Revenue grew 12.9% YoY to RMB23.1bn (vs consensus RMB22.6bn) while reported operating losses declined to RMB2.6bn (vs consensus RMB3.1bn) from RMB3.1bn in 3Q2021.
• The company’s domestic business made an operating profit for the first time while there has been significant reduction in operating losses from the overseas business
• Kuaishou’s share price moved up 7% during today’s trade following its earnings announcement and we think there is further upside to the company’s current share price.

• Sector headwinds including supply chain shortage and business interruptions from Covid lockdown is easing.
• More new models in pipeline to drive sales volumes and earnings in 2023E
• Valuation re-rating would be triggered with earning recovery, consensus estimate upgrades, Zeekr ramping up and potentially Zeekr spin off.

• Sunshine Insurance Group (SIG), a life, health and P&C insurance company, aims to raise up to US$1bn in its HK IPO.
• SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
• We have looked at the company’s past performance in our previous notes. In this note, we will talk about the updates from its latest filings.

• Growatt Technology (1833969D CH), a leading PV invertors manufacturer, is pre-marketing a US$500 million HKEx IPO in October, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: The Bull Case and Growatt Technology IPO: The Bear Case. 
• The PHIP which disclosed the 1H22 results and latest developments suggests that Growatt is delivering high growth, profitability and cash generation. 

• Lower losses for investment business and sportswear retailing have contributed to a 48.4% reduction in losses for 1H FY23 at China Dongxiang Group Co (3818 HK).
• The resumption of interim special dividend is a welcoming sign. Inventory clearance, store optimisation, cost reduction and growth at the PHENIX ski wear brands are positive drivers.
• Its market capitalisation of HK$1.88bn represents a steep discount of 79% to its cash and investment portfolio of Rmb8.46bn, and this also means sportswear business is free.

• China Huarong Asset Management (2799 HK) has announced the full conversion of 8.358bn Domestic Shares to H-shares. The increased float could help the stock get added to the MSCI/FTSE indices.
• Depending on when the conversion is completed, the stock could be added to the MSCI China Index at the February QCIR though inclusion in May is more likely.
• There is a high probability of inclusion in the FTSE indices at the March SAIR – though it remains to be seen if that’s to the All-World or All-Cap Index.

• Chindata Group (CD US)’s 3Q22 results beat both revenue and adjusted EBITDA consensus estimates. Chindata raised its full-year guidance for the second time this year.
• Chindata continues to attract rumours of takeover interest, most recently from China Merchants. Its track record of beating guidance, modest leverage and beaten-down rating make it a target. 
• A forward EV/EBITDA multiple of 10.8x, in line with 21Vianet Group (VNET US)’s multiple implied by its founder’s offer (at US$8.20), would imply Chindata’s price of US$8 per ADS.  

• DPC Dash aims to raise around US$100m in its Hong Kong IPO. 
• The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 562 stores across 13 cities, as of Nov 2022.
• In this note, we will talk about the positive aspects of the deal.

• China funeral industry has large growth potential.The total market scale would be about RMB400 billion if based on annual death toll of 10 million and per capita expenditure of RMB40,000.
• Information asymmetry weakens the bargaining power of buyers. Administrative barriers raise the threshold of market access and weaken competition. So, related companies usually have high profitability and return on capital.
• Changes in population structure would have a negative impact on most consumer goods, but demand of funeral industry would continue to rise. Investors would have both alpha and beta superposition.

• There are three positive signs in online marketing despite the business slowed down.
• For living streaming, both active user base and time spent grew rapidly.
• The operating margin improved significantly to -13% in 3Q22 from -37% in 3Q21.

• ZTO Express Cayman Inc (2057 HK)‘s 63.1% surge in 3Q22 adjusted net profit demonstrated its ability to thrive even amid the challenging operating environment.  
• It is positive on FY23 outlook and believes industry volume can return to double-digit growth. ZTO is confident of market share gain, better cost management and stable pricing. 
• We think its premium valuations are highly justified by strong cash generating ability. The increase of US$500m and lengthening of one year in share repurchase are very welcomed.

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

• Independent shareholders of Lifestyle International Holdings (1212 HK) comfortably voted through the Scheme resolution.
• 94.93% of stakeholders present (and via proxy) voted FOR, with 5.07% voting AGAINST. 
• The last day of trading is the 6 December with payment expected on or before the 30 December. 

• The authorization contracts between Activision Blizzard and NetEase will terminate in January 2023.
• Tencent plans to distribute 91% of its Meituan share as dividend.
• JD Logistics revenue increased by 39% YoY and Net loss decreased to one tenth.

• Lygend Resources & Technology (LR HK) is looking to raise up to US$595m in its Hong Kong IPO.
• Lygend Resources & Technology (Lygend) is a nickel trading and production firm with a portfolio covering multiple areas across the nickel industry value chain.
• In this note, we will revisit our earnings assumptions and share our thoughts on valuation.

• At the end of the review period for the December rebalance, we see JD Health (6618 HK) replacing XPeng (9868 HK) in the FTSE China 50 Index.
• There is a very slim possibility of Longfor Properties (960) being deleted; it could be replaced with either Yum China Holdings Inc (9987) or PICC Property & Casualty H (2328).
• Short interest has stayed rangebound on JD Health (6618 HK) this year, while shorts have gone parabolic on XPeng (9868 HK) over the last few months.

• Lifestyle International Holdings (1212 HK)’s scheme resolution was approved at today’s court meeting – 94.93% of independent share votes cast FOR (2.31% of all independent shareholders AGAINST).
• This is in line with our expectations – in Lifestyle International (1212 HK)’s Wide Spread Heading into the 21 November Vote that despite the wide spread, the offer would succeed.
• At the last close and for the 30 December payment date, the gross and annualised spread to the offer is 2.0% and 20.6%, respectively.

• The revenue growth rate bounced back to 11% YoY in 3Q22.
• The operating margin improved to a historical high at 3.1%.
• We believe the stock price has an upside of 27% for year end 2023.

• Earlier this year, an RMB 22.0bn fundraising was likely blocked by Beijing with the state-backed asset manager, China Cinda pulling out of the deal at the last moment.
• Several media outlets reported last week that Ant Group is pushing ahead yet again with an RMB 10.5bn fundraising effort for its Consumer Finance business.
• This fundraising could yet again face obstacles as Beijing might want Ant Financial Services Group (6688 HK) to surrender a controlling stake in the Consumer Finance business to state-backed firms.

• Lygend Resources & Technology (2245 HK), a nickel play, has launched its IPO to raise up to US$595 million. 
• We previously discussed the IPO in Lygend Resources & Technology IPO: Riding the Wave. 
• In this note, we present our forecasts and look at valuation. Lygend is attractively valued at the IPO price range. We would participate.

• The  R&D direction and field of Ascentage Pharma Group Corp (6855 HK) distinguish it from other domestic biotech companies. The Company has proved its R&D capability after the successful launch of olverembatinib.
• The uncertainties of commercialization performance and R&D risks would make it difficult for Ascentage to achieve break-even. Due to increasing cash flow pressure, Ascentage must first solve the survival problem.
• Considering the Risk return trade-off, we think Ascentage has short-term investment value only when it’s “extremely undervalued”.We suggest that it could be sold in a timely manner to secure gains.

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.

• Anton Oilfield
• China Oil And Gas
• Kawasan Industri Jababeka
• Lifestyle International Holdings

• Hang Seng Index continues its march to 80 names, after which it will commence a march, or a slog, to 100 names in an effort to gain more comprehensive coverage
• Doing so will admit names which move to Hong Kong from New York and will make way for more dynamism and lower SOE weights.
• The three ADDs are Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK), and Haier Smart Home Co Ltd (6690 HK) with a pro-forma combined weight just <1%.

• As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
• The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
• Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

• The HSCEI sees 4 names out, 4 names in. The ADDs are PetroChina (857 HK), Zhongsheng Group (881 HK), Li Auto (2015 HK), Haier Smart Home Co Ltd (6690 HK). 
• The DELETEs are Alibaba Health Information Technology (241 HK), China Gas Holdings (384 HK), Innovent Biologics Inc (1801 HK), and Bilibili (9626 HK). 
• One way volume is just under 4.7% with all the name changes, FAF changes, and capping flows.

• Weimob has emerged from the pandemic stronger and leaner, further consolidating its leadership in China’s e-commerce SaaS market. 
• Drawing insights into the supply side (merchants/brands) on  Alibaba platform, our bottom-up analysis suggests that Weimob potentially has a US$600mn revenue opportunity by 2025.
• We value Weimob at US$3bn assigning 5xPS on its US$600mn revenue by 2025,  implying 25% CAGR over 3-year period. Patience needed to navigate high-inflation environment which pressures growth assets. 

• The Hang Seng Tech Index Review was announced on Friday after the close. There are no name changes but there is decent flow. 3% one-way turnover.
• There are five capping changes and one very large share count change making things interesting.
• All told, this is less impactful than it was last time, and less impactful than the other index rebalances announced. 

• In 2018, shortly after the departure of Wynn founder Steve Wynn, Galaxy bought 4.9% of his shares atUS$175. The shares have been under water. But a new player has entered.
• Gaming, restaurant and sports entrepreneur Tillman Fertitta has just bought 6.1% of Wynn shares setting up a possible play on the shares, or a total takeover move.
• There are three scenarios that could play bullish for Galaxy if Wynn is in play. All auger well for movement on the stock.

• Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. (600436 CH)’s 22Q3 performance was disappointing because its strategy of “stabilizing” performance growth by raising prices has been ineffective.
• Endogenous growth problem would finally be reflected in the decline of company’s valuation. We recommend to think about long-term logic from a broader perspective,not simply tracking performance of individual companies.
• Pien Tze Huang’s valuation still has a lot of downward space. When the bubble bursts or its valuation is lower than Kweichow Moutai, it’s time to go long again.

• The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
• Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

• There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
• Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
• Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

• Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
• The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
• The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash.  In slightly better market conditions, this could be a 6 HKD stock.

• Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
• There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
• There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

• The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation. 
• China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
• The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front,  Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
• There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.

• 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. However, such disclosures are by no means an absolute. 
• These insights may flag those companies where shares have been pledged. Stocks mentioned include Cross Harbour (32 HK), Grand Ming (1271 HK), and Ganglong China Property (6968 HK) 

• Travelsky Technology Ltd H (696 HK) is a system provider for airports in China that benefit from the reopening plan. 
• The company is not sensitive to the oil price and it has low debt which makes it attractive compared to the airlines.
• The stock is trading at a 40% PBR discount to Shanghai International Airport. Historically, the company is trading at a 50% discount to its 5-year high on PBR.

• 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

• Alibaba Group (9988 HK) bounced 7.8% yesterday following an OP beat of 24.4% through cost-controls but overall results were quite disappointing with revenue falling a touch below consensus at RMB 207.2bn.
• Alibaba’s cash cows are growing no more, Thus, the company is focusing on ways to improve its profitability. 
• Meanwhile, the other growth avenues that Alibaba was proudly speaking of have pretty much disappeared with the company forced to cut down investments in these growing businesses.

• China just announced game approval for November batch after one month break. The number of games approved is inline with 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. It is more symbolic than financially material. Sentiments are turning slightly but it is not out of the wood yet.

• Weimob’s share price more than doubled in a month on encouraging 3Q preliminary data and improved sentiment towards China assets
• We explore socio-economic factors resulting in the slow ramp up of China SaaS sector , size Weimob’s TAM by drawing insights from Alibaba and determine its valuation in  two-piece report 
• In the first part, we argue that inadequate cost or efficiency competitiveness of SaaS solutions over existing labor-based or manual processes have been a key drag

• Lifestyle International Holdings (1212 HK)’s vote on Mr Lau’s offer of HK$5.00 per share is at 10 am on Monday, 21 November. The wide spread of 6.6% reflects vote risk.
• Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection). No shareholder holds a blocking stake. 
• Ongoing weak Hong Kong retail sales and peers’ slightly de-rating should lower the vote risk. Headcount test not applicable. While light, we continue to expect the offer to succeed.

• Alibaba unveiled an upsized buyback plan this week and stock rallied despite a revenue miss
• Sentiment in China is changing with tweaks to the Covid strategy and improving economic outlook
• Call buying has elevated upside vols providing trading opportunites for both directional and volatility traders

• Lygend Resources & Technology (LR HK), a nickel play, is set to open its books for an HKEx IPO to raise US$700-800 million, according to press reports.
• Lygend had the largest nickel ore trading volume in China in 2019, 2020 and 2021, with a market share of 26.8% in 2021.
• The fundamentals are solid as the consolidation of HPL has delivered strong growth and an improved margin profile, at manageable leverage.

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net inflow over the past week was ~US$5.7bn, split between Shanghai (+US$2.98bn) and Shenzhen (+US$2.8bn).
• The largest inflows were into Kweichow Moutai (600519 CH) and Midea Group (000333 CH). The largest outflows were in NARI Technology (600406 CH) and China Yangtze Power  (600900 CH).

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, the net outflow over the past week was ~HK$0.14bn, split (-HK$0.47bn) for Shanghai and (+HK$0.32bn) for Shenzhen.
• The largest inflows were in Tencent (700 HK) and Hang Seng H Share (2828 HK). The largest outflows were inMeituan (3690 HK) and Tracker Fund of HK (2800 HK).

• Revenue began to grow in 2Q23 after the zero growth in 1Q23.
• The operating margin improved to 12.1% in 2Q23 versus 7.5% in 2Q22.
• We believe the stock has an upside of 38% and a price target of HK$108.

• Taste Gourmet Group (8371 HK)  reported its H1 2023 result with profit of 32 mn HKD up 28% YoY, backed by subsidies due to restrictions earlier in the year.
• Net cash rose by 52 mn HKD (almost 12.4% of market capitalization) to 117 mn HKD HoH (28% of market cap). Nine mn HKD in subsidies are outstanding.
• The company declared 4.8 cents of dividend (9.1% annualized yield), in addition to repurchasing and canceling >2% of the shares outstanding recently.

• Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance and peer comparison. In this note, we will look at assumptions and share our thoughts on valuation.

• 3Q22 is probably the worst quarter for Anhui Conch Cement (914 HK) in this cycle. Demand has picked up sequentially, with 4Q22 average cement price up 7% QoQ.
• It expects the spending of special purpose bond proceeds and possibly push forward of 2023 quotas to benefit infrastructure demand. The stabilisation of property market also helps.
• Cost management efforts will soon pay off, providing room for recovery in margin. Solid financial position with net cash equals to 34.5% of share price is an added strength.

• Tencent announced to transfer 958 million shares of Meituan as a special dividend
• This distribution is similar to the previous JD distribution in Dec 2021
• The transfer of Meituan shares can provide potential two entry points of the stock. 

• Inner Mongolia Baotou Steel Union Co. Ltd., the world’s largest rare earth mining company, is still pressing for a significant price increase from its only customer even though the buyer’s shareholders rejected two previous proposals.
• Higher prices for Baotou Steel Union’s output of the key materials for green technologies could lead to a broader price increase for the minerals.
• China has the world’s largest deposits of the 17 closely related rare earth metals.

• The headlines of sweeping changes in the property market easing and Xi’s G-20 meetings to signal the thawing of foreign relationships were the main drivers of the continued rally early in the week.
• What has been very different in this rally is the robust Southbound Inflows indicating strong interest from mainland investors but (yes, there is always one) it does not tie up the sharp rise in short-end HIBOR.
• The HIBOR rise could be due to the drawdown of the large-margin loan in support of this rally. I have not found data to support or rebuff such a thesis.

• The distribution business is stable, but it’s difficult to achieve high growth/profits due to industry trend. Therefore, the valuation of this business is hard to increase.
• The performance of pharmaceutical manufacturing business is important, which largely determines the overall profit margin. But it actually depends on what the subsidiaries can contribute, who are facing different challenges.
• China Resources Pharmaceutical may need to improve its vision of asset selection and its ability to judge and grasp the long-term trend of the industry. The current valuation isn’t attractive.

• Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK). 
• Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
• First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.

• In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
• The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue” 
• With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
• In this note, we talk about the implications of the deal.

• Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program. 
• The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
• B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.

• Tencent (700 HK) reported 3Q2022 results yesterday. Revenue decreased 1.6% YoY to RMB140.1bn (vs consensus RMB140.0bn) while adjusted OP declined 0.2% YoY to RMB28.4bn.
• Revenue from both Internet VAS and Online Advertising declined YoY during the quarter. Social networks revenue declined YoY for the first time by 1.9%.
• Tencent also announced that it will distribute majority of its shareholding on Meituan (3690 HK) to its shareholders in dividends similar to the special dividend of its stake in JD.com.

• Revenue decreased by 1.6% YoY in 3Q22, less than a decrease of 3.1% YoY in 2Q22.
• A governmental media gave positive comment to game industry for first time.
• We believe the stock has an upside of 52% for year end 2023.

• Tencent Music (TME US)  reported 3Q2022 results yesterday. Revenue declined 5.6% YoY to RMB7.4bn (vs consensus RMB7.0bn) while adjusted OP for the quarter increased 14.0% YoY to RMB765m.
• Revenue from social entertainment services decreased 20% YoY which was partially helped offset by 18.8% YoY increase in online music services revenues.
• GPM and OPM improved due to huge spending cuts on content, revenue sharing and S&M and we are yet to see if TME can sustain this without compromising user growth.

• Beijing Sinohytec Co Ltd (688339 CH) (BSH) is looking to raise up to US$400m via its H-shares listing.
• BSH provides fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks mainly for commercial vehicles, such as buses and trucks.
• We looked at the company’s past performance in our previous note. In this note, we’ll talk about valuations.

• Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
• This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
• Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata. 

• Chinese government outlined 16 steps to support the property industry on Nov 11
• The newly released measures clearly show that the government has reversed its attitude toward property industry, which may trigger the end of the downcycle.
• During the property sector rebound, Country Garden Services (CGS) can be a good investment. The company has a solid track record and shows attractive valuation.

• Chindata Group (CD US)  is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
• At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
• Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

• Yunkang Group (2325 HK) was listed on 18th May 2022, with its six month lockup expiring on 17th November 2022.
• Yunkang Group is a medical operation service provider in China and as per F&S, had a market share of 3.7% in China’s medical operation service market as per 2020 revenue. 
• Coming up for six-month lockup expiry are the controlling shareholders and cornerstones. With protracted lockdowns underway in China, this stock has continued to benefit, currently trading 86.3% above IPO price. 

• China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
• The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK). 
• CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges. 

• Micro-Tech Nanjing Co Ltd (688029 CH) would face lower-than-expected performance growth in 2022, but the logic of import substitution and increasing demand for endoscopy consumables would help drive future growth.
• Centralized procurement is a problem, but Micro-Tech’s leading position of endoscopy consumables in China is stable, which wouldn’t be easily affected by centralized procurement when compared with other domestic companies.
• The valuation of Micro-Tech should be lower than Mindray and Sonoscape, since these two companies have much better performance (both growth and profitability), product competitiveness, business layout and outlook.

• In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
• The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
• Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

• NetEase and Activision Blizzard will possibly terminate their cooperation next January.
• Singles’ Day sales were not very successful for e-commerce apps such as Alibaba and JD.com.
• IQiyi announced a revenue share rule to short TV series producers, including cost per mille and membership fee.

• We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
• Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
• Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

• Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

• Early this year I was quite pessimistic on Hong Kong stocks.
• But since then the Hang Seng is down another 20% or so. A lot of stocks with 9-10%+ dividend yields are laying around.
• I should have been a bit quicker writing this up, but then you are getting it for free.

• Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable. 
• We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
• Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B. 

• Hutchison China MediTech Ltd (HCM US) (Hutchmed) didn’t perform well. Its cash holdings could last about two and a half years considering the cash burn rate.
• Hutchmed’s three major commercialized products would all face different challenges. Feedbacks from FDA/MAA cast a shadow on the Company’s internationalization prospects. 
• According to the current speed of pharmaceutical innovation, Hutchmed’s R&D efficiency/productivity is not satisfactory. The current pipeline does not have core competitiveness. Bearish on 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.

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