Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a> has filed for a listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and reports indicate that the raise will be at least US$2bn.</li>
<li>In line with the <a href="https://www.smartkarma.com/entities/midea-group-co-ltd" target="_blank" data-smartkarma-citation="entities:43993:1" rel="noopener">Midea Group (300 HK)</a> and <a href="https://www.smartkarma.com/entities/s-f-holding" target="_blank" data-smartkarma-citation="entities:44093:1" rel="noopener">S.F. Holding (6936 HK)</a> H-share listings, the discount on the H-shares could be in the 20-25% range.</li>
<li>There will be no Fast Entry in any indices but there will be index inclusions in multiple indices if the raise is larger or once the cornerstone investor lock-up ends.</li>
</ul>



Jiangsu Hengrui Medicine (600276 CH) has filed for a listing on the HKEX (388 HK) and reports indicate that the raise will be at least US$2bn.
In line with the Midea Group (300 HK) and S.F. Holding (6936 HK) H-share listings, the discount on the H-shares could be in the 20-25% range.
There will be no Fast Entry in any indices but there will be index inclusions in multiple indices if the raise is larger or once the cornerstone investor lock-up ends.


Jiangsu Hengrui Pharma (600276 CH): Index Inclusion Post H-Share Listing

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>In this note, we will take a look at the Asia Pacific IPO pipeline for 2025, starting with Hong Kong.</li>
<li>This list has been compiled on a best effort basis from tracking the company filings and through various other sources.</li>
<li>The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.</li>
</ul>


In this note, we will take a look at the Asia Pacific IPO pipeline for 2025, starting with Hong Kong.
This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.


Aequitas 2025 Asia IPO Pipeline - Hong Kong

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Jiangsu Hengrui Medicine / Equity Bottom-Up

<ul>
<li>On the surface, it seems that Hengrui's performance growth in 24H1 is very high, but if excluding the upfront payment from Merck, the Company’s performance actually falls short of expectations.</li>
<li>Our forecast of revenue growth in 2024, 2025, 2026 (excluding Merck’s upfront payment) is 12% YoY, 8% YoY, 15% YoY, respectively. By 2026, Hengrui may still suffer from VBP.</li>
<li>Hengrui is overvalued and reasonable P/E is about 30 (or lower). We also don’t think Hengrui’s valuation should be higher than that of BeiGene. Current high valuation cannot be justified.</li>
</ul>


On the surface, it seems that Hengrui's performance growth in 24H1 is very high, but if excluding the upfront payment from Merck, the Company’s performance actually falls short of expectations.
Our forecast of revenue growth in 2024, 2025, 2026 (excluding Merck’s upfront payment) is 12% YoY, 8% YoY, 15% YoY, respectively. By 2026, Hengrui may still suffer from VBP.
Hengrui is overvalued and reasonable P/E is about 30 (or lower). We also don’t think Hengrui’s valuation should be higher than that of BeiGene. Current high valuation cannot be justified.


Jiangsu Hengrui Medicine (600276.CH) - Share Price Is at Risk of Correction

<ul>
<li>Around RMB5 billion generic drugs would be included in VBP in 2024/2025 (e.g. sevoflurane/Ioversol/butorphanol tartrate). So, the assumption that all the negative effects of VBP have cleared up isn’t correct.</li>
<li>Hengrui’s innovative drugs would lose growth momentum after they reach peak sales. It’s difficult for Hengrui to maintain its scale expansion or achieve the over 20% YoY revenue growth.</li>
<li>Hengrui’s PE would fall below 30 (or even below 20) in the future, which means its valuation would start to enter a downward trend. Current high valuation cannot be justified.</li>
</ul>


Around RMB5 billion generic drugs would be included in VBP in 2024/2025 (e.g. sevoflurane/Ioversol/butorphanol tartrate). So, the assumption that all the negative effects of VBP have cleared up isn’t correct.
Hengrui’s innovative drugs would lose growth momentum after they reach peak sales. It’s difficult for Hengrui to maintain its scale expansion or achieve the over 20% YoY revenue growth.
Hengrui’s PE would fall below 30 (or even below 20) in the future, which means its valuation would start to enter a downward trend. Current high valuation cannot be justified.


Jiangsu Hengrui Medicine (600276.CH) - More Downside Ahead; The Long Logic Doesn't Exist

<ul>
<li>In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.</li>
<li>After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.</li>
<li>Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.</li>
</ul>


In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.
After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.
Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.


China Healthcare Weekly (Mar.1) - Prioritize Big Pharma, Real Ownership of Pricing Power, Hengrui

China

Jiangsu Hengrui Medicine Co., Ltd. develops, manufactures, and markets a variety of medicines and medicine packing materials. The Company's products include anti-tumor medicines, pain-killers, anti-infection medicines, aluminum foil, and other related products.

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Jiangsu Hengrui Medicine (600276 CH)

Aequitas 2025 Asia IPO Pipeline - Hong Kong

In this note, we will take a look at the Asia Pacific IPO pipeline for 2025, starting with Hong Kong where the number of filings have been...

Sumeet Singh