China Archives | Page 8 of 150 | Smartkarma

• Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
• In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
• We also provide an update on how the discounts of Naspers and Prosus have traded.

• Tencent reported a decent set of results for Q1 FY24. Revenue for the quarter was up 2.8% QoQ and 6.3% YoY, ahead of consensus estimates (2.3% & 5.9%).
• The gross margin came in at 53%, 3 percentage points ahead of consensus, and an increase of 7 percentage points on Q1 FY23.
• The gross margin for the Fintech and Business Services segment, which accounts for 33% of revenue, increased by 12 percentage points to 46% (consensus 42.6%).

• Customer management as the largest business began to increase compared to the past two stagnant quarters.
• We believe margin will continue to decline as the company turned its focus to growth.
• We conclude an upside of 41% for March 2025 based on peer companies’ P/S ratios.

• The operating margin in 1Q24 reached the highest since 2Q16, as the gross margins of all businesses improved.
• The growth rate of online advertising is high than our estimate, but the growth rate of FinTech is lower than our estimate.
• We believe there is still an upside of 9% and the price target will be HK$415 for the end of 2024.

• Tencent (700 HK) reported 1Q2024 results today. Both revenues and OP grew 6.3% and 30.0% YoY respectively and beat consensus estimates.
• Though domestic games revenues declined YoY, there were signs of recovery in Tencent’s gaming business. Online advertising saw strong growth despite 1Q being a seasonally weak quarter for Tencent.
• Tencent’s investments in high-margin products have helped boost the company’s margins across all business segments.

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• The final results for the June 2024 index rebal event will be confirmed after market close on Friday 17th May 2024.
• In this insight, we take a look at our latest flow expectations.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• The index changes and indicative weights for the June 2024 index rebal event will be announced after market close on Friday 17th May 2024.
• In this insight, we take a look at the potential index changes and our latest flow expectations.

• Cheerwin is a strong turnaround story with significant earnings growth in 2023 with solid dividend yield. It is the number one player in the inspect repellent sector in China. 
• Cheerwin’s current price is 79% lower than the IPO  price. However, Cheerwin’s shares are up 35% YTD, sharply outperforming Hang Seng index which is up 13.6% YTD.
• We found Cheerwin (6601 HK) using Smartkarma’s Smart Score Screener system. We used the following screening methodology: Market cap – More than $300 million Dividends = 5 only.

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.

• Lippo Karawaci
• Softbank Group

• While its share price has collapsed, China Tourism Group Duty Free (1880 HK) is still facing many challenges and uncertainties which render it unattractive at current level.
• Average duty free spending per customer in Hainan is 46% lower than the peak and 26% lower YoY in Mar 2024, and the downtrend looks to continue.
• The government’s efforts to strike down purchasing agents in Hainan duty free products and the island’s change to a duty-free zone are also negative developments.

• Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
• Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
• Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.

• ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
• Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
• The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed. 

• Cafe De Coral Holdings (341 HK) share price never really rebounded post COVID despite its operating numbers gradually improving. 
• Haidilao International Holding (6862 HK) share price has rallied along with the Hang Seng Index (HSI INDEX) and Hang Seng China Enterprises Index (HSCEI INDEX) but not Cafe de Coral.
• Recent profit alert that, excluding pandemic subsidies, the group’s net profit will rise 470% YoY. 

• The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
• We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
• At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

• The new energy vehicle producers’ ranks changed a lot in April.
• GAC began to sell batteries to outside new energy vehicle producers.
• Kuaishou’s GMV (Gross Merchandise Value) increased by 420% YoY during the Labor Day.

• Breton Technology (1884270D CH) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by CICC and CMB International.
• Breton Technology is a clean energy solution provider in China, focusing on the design, development and commercialization of engineering machinery powered by new energy sources. 
• Such engineering machinery includes battery-electric loaders and wide-body dump trucks, each offering a variety of payload and battery capacities. 

• The “Entrusted Management Agreement” indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and Shanghai Shyndec Pharmaceutical. 
• The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. 
• Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.

• Chongho Bridge (2314866D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
• Chongho Bridge (CB) is an integrated services provider to China’s rural population. It offers rural inclusive credit services, agricultural production services, rural consumer goods and rural clean energy services.
• In this note, we look at the firm’s past performance.

• We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
• Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
• Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK). 

• 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), Alps Logistics (9055 JP), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Southern Cross Media (SXL AU). 
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Alumina Ltd (AWC AU). 

• The National Health Commission and eight other departments issued “Opinions on strengthening the capacity building of critical care medical services”. New policy catalysts in the medical device sector arrives.
• Current valuations of weight-loss drug companies have “large bubble”, which have basically priced in all the potential of GLP-1s even based on optimistic assumptions. We advise investors to be rational.
• The price of core raw materials is showing a continuous upward trend, which will inevitably cause certain difficulties for Pientzehuang’s performance growth in 2024. Valuation has more downside ahead.

• The market is satisfied with BeiGene’s 24Q1 performance. The major reason for BeiGene to narrow net loss in 24Q1 was based on strong product revenue growth rather than cost control. 
• Given the varying pace of product promotion/R&D expenditure and the changes of product sales growth, BeiGene’s adjusted loss may achieve breakeven in a certain quarter of this year (e.g. 24Q4).
• BeiGene (6160 HK) is hard to cut costs largely. Sustained overall profitability may not be achieved until 2026 or 2027. But at least, we still see hope for a turnaround.

• China’s two national port companies China Merchants Port (144 HK) and Cosco Shipping Ports (1199 HK) have underperformed, but exports have picked up. We see an opportunity here.
• With a 9.2% increase in container throughput, CSPL even down by 4.8% YTD, underperformed CMPH by 12.9pp. There is room for it to catch up.
• CSPL is also cheaper at 7x and 6.3x PERs for the next two years, making it more attractive on a relative basis.

• We summarize our gleanings from the conference call with Dream International (1126 HK) to better understand growth opportunities and future expansion plans.
• The company is expanding in Indonesia to increase its capacity by 30 million USD ( over 830 million USD). (capacity utilization for FY23:83%).
• Trading at 4x FY24e PE, with an 11.4% dividend yield and a 15-year average ROE of 20%, this is a stock worth exploring. 

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 Jinmao Holdings
• Sunny Optical Technology Group
• Yuexiu Property

• Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
• The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
• Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.  

• Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
• The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). 
• There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   

• 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: HD Hyundai Marine Solution (443060 KS) and ZEEKR (ZK US) have strong IPO debuts.
• Event-Driven developments China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Yichang HEC Changjiang Pharma (1558 HK), CPMC Holdings (906 HK), Alps Logistics (9055 JP), Infocom Corp (4348 JP). 

• A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
• Net SOUTHBOUND buying was +HK11.3bn. Thursday saw a break of the SOUTHBOUND buying streak. 
• The big news in China markets this week was the idea that mainland investors through SOUTHBOUND would no longer be hit with a 20% w/h tax on dividends.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 4.8bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought Kweichow Moutai, banks, Haier Smarthome, etc.
• HUGE week in H vs A (since the 30 April close). This may be colouring foreigner activity in As quite a bit. 

• 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 bouncing VERY hard. Hs outperformed As very strongly.
• As had a chance to catch up. Did not. Liquid Hs outperformed their As by 4.8% from 30-April through 10-May. Wide premia narrowed more than narrow premia.

• Back in September 2023, Jardine Matheson Holdings (JM SP) sold its 28.22% stake in Greatview Aseptic Packaging (468 HK) to Shandong Xinjufeng Technology Packaging (301296 CH) (XJF). 
• Then in November, XJF requisitioned an EGM to spill the board. At the EGM on the 26th January, not one of XJF’s five new proposed appointments were successful.
• XJF has now made a pre-conditional (various PRC approvals) voluntary general Offer at $2.65/share (best & final), contingent on a 50% acceptance hurdle.  Final/special dividends to be added. 

• 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.
• The key stocks mentioned in this regular insight include Melco International Development (200 HK), Sino Land Co (83 HK), and ZJLD Group (6979 HK).

• Hotel rooms in China decreased by 5.4% compared to the previous year
• H World has maintained its position as a leading hotel operator in China with a diverse portfolio of brands
• Founder Qi Ji’s strong track record in the hospitality industry has contributed to H World’s success in navigating challenges and growing its presence in the industry.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Shouhui Tech (SHOU HK) is looking to raise around US$200m in its upcoming Hong Kong IPO.
• Shouhui Tech (Shouhui) is an online life and health insurance intermediary service provider in China.
• In this note, we talk about the firm’s historical performance.

• Stable cement price, good cost control, and a better base for comparison will lift Anhui Conch Cement (914 HK)‘s profitability recovery in 2-4Q24.  
• Anhui Conch’s earnings outperformed in 1Q24. Its peers are making losses and hence will reduce excess supply. Stabilisation of the real estate market will lower the pressure on demand.
• Net cash equals 46% of the current share price, and its valuations (both PER and P/B) are inexpensive relative to peers and ROE.  

• It’s an exciting 1Q24 result that revenue and GM beat the prior guidance.
• The 2Q24 outlook appears to be better than 1Q24, with revenue expected to increase by 5% to 7% QoQ and GM by 9% to 11%.
• We consider the primary bottleneck is the embargo of EUV machines to China from the Netherlands.

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 Oil And Gas
• Lippo Karawaci
• SJM Holdings
• Softbank Group

• We feel consensus overstates margin pressure for Alibaba’s March quarter results. We expect its group adjusted EBITA to deliver single-digit growth vs. investors’ concern about earnings retreat.
• March quarter should mark start of an earnings recovery cycle in our view, as improving China macro and well-executed business revamp plan put Alibaba back on growth track.
• This also means an end to its multiple contraction which lasted for five quarters. We see 50% upside on double-digit earnings growth and multiple expansion over next 12 months.

• On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
• The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake. 
• The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.   

• IMAX Corp, listed on the NYSE, is a 71% shareholder of IMAX China, a HKEX listed subsidiary – in charge of the release of IMAX films in Greater China.

• IMAX HK is rather illiquid – 7.15 HK is a mere $0.93 USD – with no investor presentations, no earnings calls – again, as is common with ideas in this blog, we are dealing with a company that is more or less “unownable” for most, flies under the radar, and therefore sports a, for a lack of a better word, shite valuation.

• Whilst IMAX Corp, the parent company, trades at ~8x EBITDA, the “backwater” subsidiary IMAX HK, trades at a mere ~5x EBITDA, despite margins being more than 10 pts higher.

• The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
• Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
• WuXi AppTec’s performance recovery is closely related to the pace of Fed’s interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in “dangerous period”.

• A play on higher food and energy prices going forward
• Natural Gas moving up from multi-year lows will support fertiliser prices going forward
• A Low valuation with a solid balance sheet lowers the risk

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.

• ENN Energy
• ENN Natural Gas
• Indofood CBP Sukses
• West China Cement
• Wynn Macau Ltd

• WuXi XDC Cayman (2268 HK) was listed in Hong Kong on 17th Nov 2023 after raising US$470m. Its six-month lockup will expire on 16th May 2024.
• WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• In my last insight (link), I discussed how the rankings had to be monitored closely before finalizing the index change expectations for the June 2024 index rebal event.
• Now that the reference period is complete, I have discussed my final expectations for the June 2024 review. The official index changes will be announced later this month.

• We upgrade Meituan because we believe its success in Hong Kong might be replicable on a global scale. 
• The upcoming autonomous driving (ADS) revolution has deep and fundamental implications in permanently cutting Meituan’s logistic cost;
• We upgrade the stock from SELL to BUY and raise TP to HK$150/share

• Singamas Container Holdings (716 HK) is interesting in that it has a net cash of US$300m (HK$2.35bn), but its market capitalisation is only HK$1.5bn. 
• This is a possible privatisation candidate given the steep discount to cash. The thin trading volume made it difficult to function as a financing platform.
• Business-Wise, it should have passed the trough as global container box plant utilisation is expected to improve in the next two years, driving profitability recovery.

• With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
• There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.

• Despite a slightly flatter revenue/margin trajectory outlook, we remain optimistic that ATRenew’s differentiated pre-owned consumer electronics transactions and services platform in China will continue to drive outsized growth in transaction volumes, sales, fees, and profits over the long run.
• While RERE has meaningfully outperformed recently, we believe current levels for the stock still provide investors with an attractive entry point, as awareness and appreciation of the company’s business model, growth prospects, competitive positioning, and valuation disconnect increasingly take hold.
• Despite what we believe to be conservative inputs/assumptions, our DCF model suggests a wide disconnect between ATRenew’s fundamentals and the stock’s current price.

• NIM is continuing to decline, from ~2.5% at its recent peak to ~1.8% in the most recent quarter. This may be from higher rescheduled loans.
• Loan growth ascent is strangely steady, and not indicative at all, of any business cycle. This alone is a concern, for true visibility of figures.
• Impairment costs do not suggest concern on underlying credit metrics, but with far higher loan balances in the past few years, this is an even greater worry.

• Café de Coral faced challenges during COVID-19 but is now showing signs of recovery with the removal of restrictions and return of tourists
• If revenues and operating margin return to pre-pandemic levels, the stock could trade at a favorable P/E ratio and dividend yield
• Strong shareholder confidence through additional share purchases indicates Café de Coral is poised for success in the post-pandemic market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

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.

• Adaro Energy
• Greentown China
• Vedanta Resources

• CaoCao Inc (1646553D CH) is looking to raise around US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are Huatai, ABC International, and GF Securities.
• CaoCao Inc (CaoCao) is a ride-hailing firm incubated by the Zhejiang Geely Holding Group (Geely).
• According to Frost & Sullivan (F&S), the firm has consistently ranked as the top three ride hailing platforms in China based on gross transaction value (GTV) between 2021-2023.

• Concurrent with its HK$34/share VGO, L’Occitane (973 HK)‘s disinterested shareholders may be entitled to a share scrip alternative. IF afforded, up to 5% of shares out can participate.
• The big unknown is whether you receive shares of the levered-up Bidco, at some as yet undetermined scrip ratio; or keep shares of L’Occitane as-is.
• To trigger the rollover option, 10% of disinterested shareholders need to express interest by the 15th May (a Hong Kong holiday btw). A deadline without details. 

• We believe total revenue will grow by 7% YoY in 1Q24 and faster in the remaining three quarters of 2024.
• We believe EPS will grow by 41% to HK$3.80, which is higher than the market consensus.
• The stock has risen by 26% since our last Buy rating, but there is still an upside of 9% till the end of 2024.

• We believe revenue will grow by 6% YoY in 4Q24, but by 11% for FY2026 (roughly 2025 calendar year).
• We believe Alibaba has been actively raising its revenue growth, but this the effect cannot be seen in the short run.
• We conclude the stock has an upside of 46% and a price target of US$120.

• With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
• The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.

• The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
• Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
• For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting. 

• CPMC Holdings (906 HK) has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from ORG Technology Co., Ltd. A (002701 CH). 
• Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission. 
• An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.

• In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
• We also evaluate which drivers are likely to generate future improvements
• Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view

• China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame. 
• Even though New Oriental Education & Techn (EDU US) had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.
• My sector top pick is China Beststudy Education Group (3978 HK), as valuation is lower and growth is higher, though it has a much smaller market cap..

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
• In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.

• With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) in June. All changes are migrations from/to the STAR 100 Index.
• One way turnover is estimated at 3.4% resulting in a one-way trade of CNY 4.5bn (US$630m). There is a lot to trade from passive trackers, especially on the inclusions.
• The potential adds have outperformed the potential deletions by ~18% over the last month with Hangzhou EZVIZ Network (688475 CH) and APT Medical (688617 CH) moving higher.

• The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX). 
• We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
• The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

• 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: Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Southern Cross Media (SXL AU), Qantm Intellectual Property (QIP AU), Probiotec Ltd (PBP AU), China TCM.
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Jastec Co Ltd (9717 JP).

• A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday. 
• Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action. 
• The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes. 

• The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
• The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
• Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

• With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
• We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
• The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

• Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
• At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
• According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.

• 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 consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
• HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 2.3bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought CATL, Shenzhen Mindray, some financials.
• As outperformed Hs on Monday and Tuesday (when both were open), then Hs rocketed on Thursday and Friday. As will have to catch up early in the week.

• Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.
• The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.
• Shijiazhuang Yiling Pharmaceutical’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.