China Archives | Page 7 of 150 | Smartkarma

• Sciclone Pharmaceuticals (6600 HK)‘s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable. 
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
• This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.

• The Hang Seng Index has been rallying for 3 weeks but then last week the rise was halted and the index gave up a good chunk of the gains.
• It seems the index has become quite volatile but this week it could go up again, or otherwise next week, the reversal is imminent given its oversold condition.
• It’s hard to predict if the rally can continue after the bounce, the index seems a bit long-term overbought, albeit short-term oversold. A contradiction, but that is the situation now.

• PDD reported C1Q24 top-line, non-GAAP EBIT, and non-GAAP net income 1.3%, 67.0%, and 80.0% vs. our estimate, and 13.9%, 82.0%, and 94.7% vs. consensus, respectively;
• Temu unit economics improvement drove the 1Q beat. Per order outlay on marketing and fulfilment declined 20-25% qoq, we estimate;
• PDD continues to effectively squeeze merchants for its benefit,while also benefiting from weak consumer sentiment in China and overseas. We maintain BUY,and raise TP to US$172, implying 12.3x CY24 PE.

• Kuaishou reported C1Q24 revenue, IFRS OP, and IFRS Net income inline, 58%, and 78% vs. our estimates; and inline, 67% and 86% vs. consensus
• Company suggested contribution of Generative AI (GAI) to the growth of the advertising business to be substantial;
• We reiterate our BUY rating and raised target price to HK$83, implying 17x PE in 2025.

• Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
• Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
• IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

• Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
• A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition. 
• The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

• Total revenue growth rate climbed up 27% YoY in 1Q24 with all businesses growing strongly.
• Smartphone shipments grew by 34% YoY and achieved global No. 3.
• In 1Q24, the gross margins of all major businesses obviously improved.

• Sun Art Retail (6808 HK)‘s FY24 (fiscal year ending March) numbers were overall unimpressive, with sales down 13% yoy and net loss increasing to RMB1.6bn.
• The new CEO’s strategy is to refocus on SSSG of offline traffic and restore price competitiveness.  April and May SSSG improved. 
• The stock is up 20% since my initial insight on the name in March, and I believe more upside remains.

• In a tough macro environment with travel as perhaps the only bright spot in consumption
• However, equally compelling is the demand negatives of overseas travel as a somewhat luxurious consumption item and tough competition at home;
• Given the stock’s valuation, we maintain the rating as SELL but raise TP to US$45/ADS, implying 2025 PE of 15x.

• FTA’s revenue growth accelerated in Q124 and exceeded management guidance
• Gross and OpInc margins (cash basis) both improved sharply in Q124
• Growth, profitability, mix improved, but FTA no longer so cheap; HOLD

• China International Capital Corporation (3908 HK) is a laggard among the Chinese securities companies. With the rebound in HSI and Shanghai Composite, such divergence should narrow.
• The investment banking business should recover following the rebound in the secondary market and equity valuations. HK’s IPO funds raised are forecast to double in 2024.
• At 0.4x 12-month P/B, the market has deeply discounted CICC’s earnings outlook. However, as earnings recovery will be fast, its share price will react rapidly.

• On the 28th March, Li Zhenfu (SciClone (6600 HK)‘s NED), Assicurazioni Generali (G IM), and concert parties (collectively controlling 36.61%), made an Offer at $18.80/share, a 33.9% premium to undisturbed. 
• The Offer price is bang in line with SciClone’s March 2021 IPO price. Terms were declared final. This is a clean deal.
• The Scheme Document is now out. The Court Meeting will be held on the 19th June. Expected payment on or before the 12 July. FWIW: IFA says fair & reasonable.

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 Vanke
• Lippo Malls Indonesia Retail Trust

• Hong Kong Television Network (1137 HK) has launched a share buyback to acquire a maximum of 100.0m shares (11.25% of shares) at HK$2.15, a 20.8% premium to the undisturbed price.
• The offer is conditional on approval by the requisite majority of shareholders and the approval of the whitewash waiver. There is no minimum acceptance condition, and the offer price is final.
• The offer is unattractive and is an inefficient use of cash to increase the co-founders’ grip on the shares. Nevertheless, the EGM vote is likely to get up.   

• Total revenue rose by 131% in 1Q24 with advertising up by 56% YoY and commission up by 327% YoY.
• In 1Q24, both the operating profit and the operating margin reached record highs.
• The historical price / sales ratios suggests a significant upside. Buy.

• LI Auto’s decision to push out its BEV launch to 2025 is a delay of multi-faces at a time when China’s EV market is chaotically.
• We keep rating @BUY because LI still possesses the SUV niche, enjoys a healthy margin and have ample cash. 
• We cut TP from US$40 to US$25 and maintain BUY.

• In 1Q24, revenue grew by 17% YoY and e-commerce GMV grew by 28% YoY.
• Both the operating margin and the operating profit reached historical highs in 1Q24.
• We set an upside of 47% and the price target at HK$86.00. Buy.

• Making EV itself doesn’t make money, which is why independents like Nio and XPeng are thinking alternative ways to breakeven;
• Tesla envisioned to make money through scale, of which BYD bettered. Tesla also envisioned to make money from autonomous driving (ADS);
• Nio plans to sell its battery swapping service while XPeng is selling ADS to Volkswagen. Both are experiments aiming at breakeven. Both also have new models to launch.

• The biggest problem of cell therapy in China is the uncertain prospect of commercialization. Medical practitioners also have reservations regarding the usefulness of cryopreserved cells for clinical application.
• Shanghai Cell Therapy could be in a long-term loss making state, and both of its R&D and commercialization capabilities need to be verified. Then, how would investors obtain expected returns?
• Post-Investment valuation already reached above RMB7.1 billion after Series D financing. However, market value of comparable companies are quite low, which makes us worry about stock price performance after 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.

• SJM Holdings
• Softbank Group
• Yankuang Energy Group

• Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment late last week. But the sell-down of Tencent (700 HK) to buy-back Prosus will  continue. 
• Preceding my comments on Naspers (NPN SJ)/Prosus/Tencent are the current setup/unwind tables for Asia-Pacific Holdcos
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Generative AI (GAI) helps capex, no doubt. But key question is whether capex can yield to revenue and profits;
• Content creation industry is sure to realize revenue and profits. iQiyi and NetEase already said so with concreate examples;
• Advertising can realize revenue by better matching of ads inventory and perhaps improve inventory utilization.

• In 1Q24, Trip’s revenue grew strongly by 29% YoY with all business booming.
• China and Trip achieved a lot overseas travelers in March and the Labor Day Holidays.
• However, the stock price has risen 37% in the past three months.

• Online shopping platform play Hong Kong Television Network (1137 HK) (better known as HKTV) has announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
• If successful, the Offer elevates co-founder Ricky Wong’s stake, together with concert parties, to 51.55% (before exercising options), up from 45.75% currently. 
• HKTV has been in the news lately for all the wrong reasons: claims of non-payments to suppliers; and delaying its 2026 target after a 79% decline in FY23’s net profit.

• Mindray’s 2023 growth just hit the low end of our forecast.The good story that “recovery of routine diagnosis/treatment after COVID-19 would drive the growth of MI/IVD businesses” doesn’t hold water.
• Mindray may fail to get back to 20%+ revenue growth in 2024 based on current situation.The Company has to continue to “buy revenue” so as to reverse the declining trend.
• The valuation of about 25-30 PE is reasonable for Mindray, not undervalued. If PE falls to the range of 20-25, we think it is a good place to go long.

• A fortnight ago, I sought access to L’Occitane (973 HK)‘s lesser-known shareholder register, a byproduct of investigative disclosure reports under Chapter 571, s329 of the Securities and Futures Ordinance.
• This is the same register I discussed in Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM; and one also used by proxy solicitors. 
• The register confirms what has been long rumoured about a certain shareholder activist. It is also informative for what isn’t present. 

• Operating profit turned negative in 1Q24 compared to 1Q23 due to the price war and the failure of new model.
• The company disappeared from the industry top-10 list of sales volume and revenue growth slowed down to zero in April.
• All cross-sectional comparisons suggest a Sell rating for the stock.

• Over 92% of CR Beverage’s revenue is from packaged drinking water products, but YoY growth this business is already below industry CAGR, raising concerns about whether future growth will stall.
• The revenue scale/profitability of CR Beverage are far inferior to Nongfu Spring. In terms of cost control, operational efficiency and the strength of supply chain, CR Beverage is lagging behind.
• For low-priced packaging water, the nationwide expansion is not a simple task, which will lead to significant cash outflow. Valuation of CR Beverage should be lower than that of peers. 

• Shulan Health Management (1807987D CH)  is looking to raise around US$150m in its Hong Kong IPO. 
• Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
• In this note, we talk about the firm’s historical performance.

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.

• SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
• Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell. 
• No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK). 
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU). 

• BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
• Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
• We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

• Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
• An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
• Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

• As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
• Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK). 
• Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s buy streak was interrupted again this past week, but they still net bought, as did NORTHBOUND. HK stocks continued their rise with liquid Hs outperforming their As by 3.8%. 
• There were some BIG moves the past two weeks and Average AH Premia are now the lowest in nearly four years vs near 5yr wides less than 12 weeks ago. 

• 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: Modec Inc (6269 JP)‘s  US$535 million secondary offering.
• Event-Driven developments: ESR Group (1821 HK), L’Occitane (973 HK), CPMC Holdings (906 HK), Malaysia Airports Holdings (MAHB MK), I’Rom Group (2372 JP), Great Eastern Holdings (GE SP). 

• Lalatech Holdings, a technology based global logistics company, has updated its application for Hong Kong IPO and disclosed financial results for 2023.
• Lalatech Holdings is aiming to raise up to $1B and the company’s IPO looks imminent in the coming months as cash flow growth accelerated, while margins and profitability improved. 
• My fair valuation of Lalatech Holdings is close to $10B and investors should buy into upcoming IPO given the company’s substantial scale, massive network effects and operating efficiency.

• We are more bullish on PDD’s 1Q24 results on the back of better monetization of domestic e-commerce business and fast and quality growth of TEMU.
• We now expect 1Q24 adjusted earnings to almost double yoy to RMB20 billion, much higher than our previous estimate of 50% yoy growth and exceeding consensus by ~30%.
• Moreover, we believe earnings growth will be steady throughout 2024 instead of slowing down as we thought. 10x FY24 earnings against 80% yoy growth lead us to see 50%+ upside.

• While historically many new inclusions to the HSI have performed disappointingly after their addition, BYD Electronic (285 HK) looks unlikely to follow such a pattern.  
• Its share price has underperformed YTD, absolute PER valuations are not stretched and forward P/B multiple is only at the historical average level. These provide a good buffer.
• Its industry and business are not at structural and cyclical peaks, with further growth prospects from AI-enhanced products and solutions. A 33% surge in 1Q24 earnings also adds comfort.

• Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs. 
• Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

• The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
• This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up. 
• Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

• A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new. 
• The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
• These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down. 

• The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
• But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
• Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.

• The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
• Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
• We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.

• China momentum continues with KWEB breaking out above WEEKLY double-bottom base
• Stocks REPORTING this week that look technically sound include PDD BZ and EH
• In-Depth look at individual leaders in Tencent Holdings, Futu Holdings, and Sony Group

• The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
• We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase. 
• Relatively smaller flows here at 3% one-way with the big flows on the name changes.

• Naspers and Prosus have announced the appointment of Fabrício Bloisi as Group CEO, effective from 1 July 2024. Unlike his predecessor, Bloisi has an entrepreneurial background.
• Prosus and Naspers have sold off on the news. Prosus is down 1.7%, widening the discount by 80bps. Naspers is down 1.3%, widening the discount by 50bps.
• Since Bob van Dijk stepped down in September last year, both discounts have narrowed.

• Tencent reported C1Q24 revenue, IFRS operating profit, and IFRS net income in-line, 9.1%, 26% vs. our estimates and in-line, 16%, 21% vs. consensus;
• Game revenues were below our expectations while advertising was above, leading to a gross margin beat of 2.73ppt, powered by video account and AI. 
• We raised our TP to HK$450 to reflect the shift to better-margin revenue mix and upcoming revenue acceleration.

• JD.com (9618 HK) announced a set of in-line results for 1Q24.  Sales growth was 7% yoy, in-line with my 1Q24 preview.
• Operating profit margin for the core JD retail business declined by 0.5ppt yoy to 4.1%, which is also in-line with my preview. 
• The positive surprise was a big reduction in losses in the JD logistics business, which brought the overall non-GAAP net profit growth to 17% yoy for 1Q24. 

• L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties. 
• The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
• The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.

• In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
• That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
• Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known. 

• On first look, Alibaba Group Holding (9988 HK) missed on margins in 4QFY24 as adjusted EBITA declined by 5% yoy.
• We can give the company the benefit of the doubt given that the important segments of the company are heading into the right direction.  
• Alibaba returned USD13.4bn and USD16.5bn to shareholders in FY23 and FY24, compared to the current market cap of USD197bn

• Giant Biogene (2367 HK) aims to raise up to US$205m via a top-up placement.
• We have followed the company since listing and its recent performance has been great. Although it doesn’t seem to need the cash.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Huafa Property Services Group (982 HK) is currently suspended pursuant to the Takeovers Code. 
• This SOE-backed property management play recently announced its highest-ever earnings.
• Shares have gained ~32% in the past fortnight, touching a three-year high. IF an Offer were to unfold, expect an Offer Price ~10% above the last close. 

• BABA reported CY1Q24 top line, GAAP operating profit and non-GAAP net income 0.9%, (4.6%) and (6.7%) vs. consensus, and in-line, in-line, (6.9%) vs. our estimate;
• Results reaffirmed our positive view as increased investment is leading to significant improvement in key businesses: (1) Taobao/Tmall stabilized, (2) overseas e-commerce accelerated along with overseas AntFin and Cainiao
• We expect pay-off from its strategy shift in 2H of the year. Spin-off, dividends,and share buy-backs provide valuation support until then.We maintain BUY and US$85 TP, implying 9.5x CY25 P/E.

• Miniso (MNSO) reported C1Q24 revenue in-line with our estimate/consensus. Non-GAAP NI beat our estimate/consensus by 4.2%/2.6%, mainly due to better gross margin from IP sales.
• Company cited pressure on profits in C2Q24 due to store expansion, yet we still believe MNSO can maintain an OPM of 20% for entire 2024
• We maintain a BUY rating on the stock and maintain TP at US$34/ADS

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Medco Energi

• We notice a pickup in consumer acceptance of instrashopping, as result of COVID-cultivated behavior. We notice similar business model worked outside of China (Coupang) for densely populated urban upper-middle-class customers;
• Meituan’s launch of membership is a wise step towards strengthening user stickiness and emphasizing transaction soundness over impulsive buying. Meituan’s portfolio in food, dining, hotel & travel offer unparalleled value;
• We see Meituan’s success in Hong Kong honed a replicable business model targeting single and low priced segment. Consolation on a global scale now seems a possibility.

• Alibaba Group Holding (BABA US)‘s FQ4 announcement portrays a resilient comeback to growth, suggesting the past four years’ challenges barely impacted its dominance in Chinese e-commerce.
• However, a closer look beyond the surface of Alibaba Group Holding (9988 HK)‘s FQ4 results announcement reveals that little has actually changed in recent months.
• Taobao and Tmall face challenges in a tough, stagnant market; AIDC’s growth largely covers for other Alibaba units’ failings, while AliExpress’s expansion cuts into margins.

• Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
• There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
• Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

• Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
• If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
• We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• After a massive recent correction for HK stocks, we are more constructive on the names, and yields there look very attractive.

• Alibaba reported in-line revenue but disappointed adjusted net income for 4QFY24.
• Yet a closer look shows strong core Taobao/Tmall performance was offset by higher-than-expected losses incurred by peripheral businesses.
• We remain convinced BABA is on track to turn around and an earnings upgrade cycle is one or two quarters away. We are buyer at this price.

• The slowdown in Chinese retail sales of apparel seems to have been factored into Vipshop Holdings (VIPS US) 1Q 2024 revenue growth expectations whilst bottom-line is supported by margin expansion.
• With net cash at ~40% of its market cap, the share price should be supported by the ongoing share repurchase program and its inaugural annual dividend policy.
• Its 6.6x NTM PE ratio (~4x ex-cash) seems extremely attractive for a highly cash-generative business set to (conservatively) grow earnings at high-single-digits whilst buying back shares and paying dividends.

• Sunshine Lake Pharma plans to privatize HEC CJ Pharma in the form of merger by absorption with conditions. After privatization, CJ Pharma will be delisted from the Stock Exchange.
• Sunshine Lake Pharma’s pipeline has been “disconnected” from the level of domestic biotech in recent years, and is completely lagging behind the average speed of innovative drug development in China.
• Due to “outdated” pipeline and lack of prospects, even if CJ Pharma is merged into Sunshine Lake Pharma, valuation performance of the new entity would be disappointing in the future.

• Stellantis, the European automotive group, unveiled plans to distribute EVs made by Zhejiang Leapmotor Technology (9863 HK) across Europe, India, Asia Pacific, MEA, and South America via a 51/49 JV.
• This could help  Leapmotor (9863 HK) leapfrog regulatory hurdles and hasten access to EV markets globally by leveraging Stellantis NV (STLA IM) ‘s distribution network and manufacturing facilities.
• Leapmotor could likely qualify and stand to benefit from Indian Government’s recently announced policy initiatives for budget EVs.

• Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO.
• Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.
• We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.