China Archives | Page 78 of 154 | Smartkarma

• There is a risk that the ¥7,000/share bid for Toshiba Corp (6502 JP) gets pulled/lowered in Round 2 because of due diligence, conditionality, market environment, etc.
• Hutchison Telecommunications Hong Kong Holdings (215 HK)‘s share price was up 33% month to date, on triple the average daily volume. Then promptly sheds 23% on an even larger volume. 
• Even if one assumes that Softbank, Baba, and Cornerstones won’t sell, there is still 45% of SenseTime Group (20 HK) of shares out, worth US$11bn, unlocking next week.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• A few IPOs are lined up in Thailand and South Korea, in addition a number of deals are gearing up for launch.
• There were no major placements last week. Although there are a few large lockup releases soon.

• Chinese e-commerce is having a solid month with most names up 30% in June. Yet this seems more a dead-cat-bounce than a change in direction of the share price momentum.
• While there’s plenty of additional downside to big e-commerce players in e-commerce, smaller ones such as Baozun Inc. (BZUN US) has limited down side with shares trading near 1.0x P/B multiple.   
• Meanwhile Huitongda (9878 HK) is yet to experience the post IPO sell-off and trading at expensive multiples. This raises an opportunity for a Long Bozun Short Huitongda trade.

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.

Fosun International’s revised tender offer is credit positive in our view, signalling the company’s strong willingness to pay and management’s confidence of addressing maturities. We also note positively that the company did not take advantage of the situation by offering to buy back the notes at a discount. We believe the situation is not as bad as the longer-dated FOSUNI ​offshore notes would suggest, with the domestic notes all trading at 99+.

We recommend to accept the tender offer. 

• 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, net inflow over the past week was ~US$1.3bn, split US$0.4bn for Shanghai and US$0.9bn for Shenzhen.
• The largest inflows were into XPeng (9868 HK) and HKEX (388 HK). The largest outflow was in Meituan (3690 HK) and Koolearn (1797 HK).

• 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$1.7bn, split between Shanghai (+US$1.8bn) and Shenzhen (-US$0.1bn).
• The largest inflows were into NARI Technology (600406 CH) and Kweichow Moutai (600519 CH). The largest outflows were in CATL (300750 CH) and Wuliangye Yibin Co Ltd (000858 CH).

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. Fosun International
2. Country Garden Holdings Co
3. Logan Property Holdings
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

• We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.
• There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the ‘sell-only’ Southbound Stock Connect list.
• Some of the stocks that remain in the HSCI could move to the ‘sell-only’ Southbound Stock Connect list since their average market cap drops below HKD 5bn.

• After rising more than 40% since Q4 earnings, Alibaba (ADR) (BABA US) is threatening to break out from a downtrend that lasted a little less than 20 months.
• We think this bounce is quite normal given the fact that the stock lost more than 76% of its value during a challenging time period.
• We remain confident that Alibaba has more downside potential and thinks that this is yet another opportunity to make money on the short side.

• SenseTime Group (STG) raised US$741m in its Hong Kong IPO in Dec 21. The IPO barely made it through and was priced at the bottom of its IPO price range.
• STG is a leading AI software company. STG was the largest AI software company in Asia in terms of 2020 revenue, as per Frost & Sullivan (F&S).
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Just as we analyzed before, things get worse for PAGD. The loss expanded and gross margin declined. The gap between PAGD and its peers (JD Health, Alibaba Health) is widening. 
• PAGD’s Achilles’ heel is its business model/profit model is untenable. The new HMO services system would not help turn things around because China’s national condition is different from the US.
• Being on the wrong track, PAGD’s financial performance is expected to further weaken. We are conservative about PAGD’s outlook. Any brief upwards movement is just dead cat bounce.

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.

• Jingrui Holdings

• The Ping An AH premium has traded around 10% over the last few days – this is near its historical highs and close to where reversals take place from.
• The AH premium of the broader market is below its highs, while the AH premium on large cap financials has been trending lower over the last few months.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last few months.

• Sinotrans (598 HK) has confirmed its plan to issue infrastructure REIT using six warehouse logistics assets as underlying assets, and they represents 7.6% of its total warehouse area.
• The proposed issuance may boost its value by HK$0.16/share, or 7.3% of share price. Should all 4m sq.m. of warehouse assets are securitised, this may nearly double the stock’s price.
• Since Jun, Sinotrans has repurchased 14m H-shares, suggesting positive view on outlook. There will be more to come, and as the shares will be cancelled, EPS will be enhanced. 

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.

• Guangzhou R&F Properties
• Jingrui Holdings

• Due to doctors’ poor diagnosis/limited affordability, commercialization prospects of China autoimmune disease market could be much lower than expected. Internationalization is inevitable, but Keymed is lack of cash for MRCT.
• For CM310 and CM326, their total sales in China could be less than RMB2 billion. For CMG901, it is hard to say if Claudin 18.2 (ADC) would finally be successful.
• As long as Keymed can successfully develop either CM310 or CM326 (key premise), even temporarily only commercializing in the domestic market, the Company has the potential to double in valuation.

• It was a busy Friday with multiple implementations of the June rebalance – FTSE All-World/All-Cap, FTSE China 50/A50/TW50, S&P/ASX, REMX and GDXJ among others.
• We highlight potential upcoming changes to the HSCEI INDEX and LQ45 Index, when Kakao Pay (377300 KS) could be added in MSCI Korea & the Thai Life IPO index inclusion.
• There were large inflows to China and Korea focused ETFs during the week.

• No stock in the sector among major operators has taken a bigger hit than Melco, down over 60% this year.
• The bet is tied to whether Beijing will begin to ease travel bans and lockdowns or not before the end of this year. If so, Melco is very cheap here.
• Performance of its Manila property, the opening of its new Cyprus resorts could carry the company safely until Macau recovery is in place.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• IPO volumes remain subdued across the region, although a number of deals are said to be looking to launch soon.
• Given the recent market volatility, there were no large placements this week.

• Reuters and several other news media outlets reported that Baidu (BIDU US) is planning to sell its stake in iQIYI Inc (IQ US) .
• Baidu has supposedly valued iQiyi at US$7bn, implying US$8.2 per ADR which is at a 78% premium to iQiyi’s last close of US$4.6 per ADR.
• IQiyi reported first-ever operating profit in 1Q2022 driven by huge cost cutting. However, it is yet to be seen if the company could continue to maintain margins without compromising growth.

• China’s motor insurance has been showing signs of growth after years of decline due to deregulations and reforms in the sector.
• Motor insurance tailwind will benefit large players the most. Bullish on PICC P&C since it’s the largest player in motor insurance and to likely benefit the most from the tailwind.
• Bearish on CPIC since its P&C business is much smaller than PICC P&C and Ping An P&C, while its L&H growth continues to be under pressure.  

• China United Lines (CUL HK) is looking to raise around US$300m in its upcoming Hong Kong IPO.
• China United Lines (CUL) is a container shipping company in China. CUL has grown rapidly and its large proportion of vessels being chartered-in, has allowed it to scale its capacity.
• Shipping volume growth was accompanied by topline growth, and margins have been on the uptrend. However, the firm is only a small player in a concentrated market.

• Chinese digital advertising revenue growth has slowed down considerably over the past 4 quarters and Baidu has continued to consistently lose market share to the broader industry.
• Non-Marketing revenue has led the growth for Baidu over the past 2 years and now contributes roughly 26% to Baidu Core (excludes iQiyi) revenue.
• On a PE basis, Baidu is trading at only a slight discount to global giant, Alphabet, which testifies to the negative impact on earnings expectations from Baidu’s growth engines.

• Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants. 
• FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
• The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.

• OOIL’s (316 HK) macro uptrend remains intact but does exhibit some weak tactical signals for a pullback to the 200 support zone. 270 is the near sell zone.
• Buy volumes on the rise in late May showed a slowing pace and the recent sell down saw sell volumes pick up. Wedge support is due to come under pressure.
• RSI shows support pressure to break post uptick. WTI key levels to hold/break are 115 and 105 as pressure release valves.

• Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
• A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
• The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.

• ClouDr was the largest digital chronic condition management solution provider in China. The company’ application for a HKEx IPO has been approved and plans to raise proceeds of around US$500m.
• The company is well positioned to benefit from growing demand for digital healthcare marketing and services in China driven by increased health awareness, technological advancements and prevalence of chronic conditions.
• In this insight, we examine the company’s business model, segments and financials.

• ZTO Express Cayman Inc (2057 HK) has outperformed industry volume growth in 1Q22 and such trend continues into 2Q22 with good ASP improvement and cost control. 
• Its strong operating cash flow and declining capex will lead to an accumulation of cash over the next few years, adding to the 1Q22 net cash position of Rmb4.1bn. 
• We think the stock’s underperformance against peers not warranted. With a below-sector earnings multiple, leadership position and successful business model, we consider ZTO a “Growth at a reasonable price”.

• After hitting the bottom during the COVID crisis, the only direction left for MINISO Group Holdings (MNSO US) to move is up.
• Given the current valuations, Miniso could generate multi-bagger returns during favourable market conditions.
• In addition, Miniso could help investors generate sizable returns in the short-term on the short side with increased short exposure to Chinese E-commerce.

• Junshi’s fatal flaw is not that it is still suffering loss, or that its founders have no medical background, but that the Company is very short of money.
• Considering the gloomy prospects of etesevimab/VV116, uncertainties in toripalimab and other late-stage candidates, we remain conservative about Junshi’s commercialization outlook. Junshi’s higher valuation than Innovent is not justified.
• Together with unfriendly macro environment, we don’t think heavy investment in R&D/MRCT/commercial development could bring high return as expected.Investors need to be rational about Junshi’s RMB4 billion private placement plan.

• Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK). 
• SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
• There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.

• Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
• Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
• Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it’s still overvalued. The upside potential could be limited.

• Share price of Lonking Holdings (3339 HK) has seen muted reaction to weak industry figures recently but it is still unexciting in near-term, based on our catch-up with the company. 
• It has underperformed industry sales volume in 5M22 across all product categories, with that for wheel loader behind 4pp and excavator by 10pp. Forklift sales were down 18% YoY. 
• Both gross margin and investment income are set to contract in this year, making it highly likely to see significant earnings downgrade after 1H22 result announcement in Aug. 

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.

• Kawasan Industri Jababeka
• Jingrui Holdings
• KWG Living Group
• Road King Infrastructure

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• This week, the highest spreads are Xiamen International Port H (3378 HK), Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU)
• Lowest gross spreads are Yancoal Australia (YAL AU), Hwa Hong Corp (HWAH SP), Virtus Health (VRT AU), Irongate Group (IAP AU), Uniti Group Ltd (UWL AU), AKM Industrial (1639 HK). 

• We think the underperformance of China Power International (2380 HK) (CPI) against the market in this year is unjustified given a projected improvement in profitability.
• CPI has secured coal supply with more than 60% of contracts on annual long-term basis within the benchmark price range. Also, power tariff is expected to be on an uptrend.
• The proposed new management incentive scheme will better align management’s and shareholders’ interests. CPI also indicated good room to lower leverage in this year while sustaining growth. 

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.

• Modern Land China

• IRay’s performance has shown a trend of accelerating growth in 2021/2022Q1, mainly driven by the mobile DR sales during COVID-19 as well as the dental (CBCT) and industrial security businesses.
• The sales of mobile DR would slow down after COVID is under control. The decreasing price due to fierce competition in grassroots markets would finally drag down gross profit margin. 
• The concern is that the market space (DR/dental/industrial fields) is not big, with obvious growth ceiling. So, we lowered our revenue/profit margin forecast and we think iRay is overvalued