HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>The message WuXi AppTec hopes to convey in 24H1 report is that the Company isn’t losing orders/customers due to BIOSECURE Act and from 2025 it will return to high growth. </li>
<li>TIDES business growth is below expectations. Whether WuXi AppTec's performance can be reversed is no longer solely depends on fundamentals/industry cycles, but on whether geopolitical risks can be fully resolved.</li>
<li>Regardless of the outcome of 2024 presidential election, securing US supply chain is a already bipartisan consensus. If any Bill does pass in the future, valuation will plummet again.</li>
</ul>


The message WuXi AppTec hopes to convey in 24H1 report is that the Company isn’t losing orders/customers due to BIOSECURE Act and from 2025 it will return to high growth. 
TIDES business growth is below expectations. Whether WuXi AppTec's performance can be reversed is no longer solely depends on fundamentals/industry cycles, but on whether geopolitical risks can be fully resolved.
Regardless of the outcome of 2024 presidential election, securing US supply chain is a already bipartisan consensus. If any Bill does pass in the future, valuation will plummet again.


WuXi AppTec (2359.HK/603259.CH) 24H1- Backlog Looks Good but It May Not Bring a Performance Reversal

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>The CSRC has approved <a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group Co Ltd A (000333 CH)</a>'s application to issue H-shares to be listed 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>. </li>
<li>Under the approval, <a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group Co Ltd A (000333 CH)</a> can issue up to 650.85m shares. Depending on the H-share discount, that could raise up to HK$43.6bn (US$5.6bn).</li>
<li>The IPO is likely to be smaller and will depend on market conditions and the discount demanded on the H-shares. That in turn will determine index inclusion for the H-shares.</li>
</ul>


The CSRC has approved Midea Group Co Ltd A (000333 CH)'s application to issue H-shares to be listed on the HKEX (388 HK). 
Under the approval, Midea Group Co Ltd A (000333 CH) can issue up to 650.85m shares. Depending on the H-share discount, that could raise up to HK$43.6bn (US$5.6bn).
The IPO is likely to be smaller and will depend on market conditions and the discount demanded on the H-shares. That in turn will determine index inclusion for the H-shares.


Midea Group (000333 CH): CSRC Approval ✓; IPO Size Will Depend on H-Share Discount

<ul>
<li>A month out from cutoff for the September rebalance, we see one potential change for the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a> is a potential inclusion while <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a> should be deleted from the ETF.</li>
<li>Shorts have been dropping in <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a> and are near their lows while increasing in <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>. </li>
</ul>


A month out from cutoff for the September rebalance, we see one potential change for the iShares China Large-Cap (FXI) (FXI US). 

China Tower (788 HK) is a potential inclusion while China International Capital Corporation (3908 HK) should be deleted from the ETF.
Shorts have been dropping in China Tower (788 HK) and are near their lows while increasing in China International Capital Corporation (3908 HK). 


FXI Rebalance Preview: One High Probability Change; One More Possible

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

SAI Life Sciences / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sai-life-sciences" target="_blank" data-smartkarma-citation="entities:43724:1" rel="noopener">SAI Life Sciences</a>(SLS) is looking to raise up to US$500m in its upcoming India IPO. The deal will be run by Kotak, IIFL, Jefferies and MS.</li>
<li>SLS is a CRDMO. It provides end-to-end services across the drug discovery, development and manufacturing value chain, for small molecule NCE to global pharmaceutical innovators and biotechnology firms</li>
<li>As per Frost &amp; Sullivan, SLS was the fastest-growing Indian CRDMOs among listed Indian peers in terms of revenue CAGR as well as EBITDA CAGR from FY22 to FY24.</li>
</ul>



SAI Life Sciences(SLS) is looking to raise up to US$500m in its upcoming India IPO. The deal will be run by Kotak, IIFL, Jefferies and MS.
SLS is a CRDMO. It provides end-to-end services across the drug discovery, development and manufacturing value chain, for small molecule NCE to global pharmaceutical innovators and biotechnology firms
As per Frost &amp; Sullivan, SLS was the fastest-growing Indian CRDMOs among listed Indian peers in terms of revenue CAGR as well as EBITDA CAGR from FY22 to FY24.


<ul>
<li>One “unique” feature of China's CXOs is that they like investment more than drug R&amp;D business, but the investment-driven model will result in "interest-to-conflict", which actually “crosses the line”.</li>
<li>RemeGen's shares plummet last week. In current situation of investors' lack of confidence/trust in RemeGen, stock price may not have hit bottom yet, so no need to rush to bottom-fish.</li>
<li>For Kelun Bio, if SKB264 fails to deliver good data, valuation would face the risk of pullback. After the lock-up expiry, there could be opportunity to buy at lower price.</li>
</ul>


One “unique” feature of China's CXOs is that they like investment more than drug R&amp;D business, but the investment-driven model will result in "interest-to-conflict", which actually “crosses the line”.
RemeGen's shares plummet last week. In current situation of investors' lack of confidence/trust in RemeGen, stock price may not have hit bottom yet, so no need to rush to bottom-fish.
For Kelun Bio, if SKB264 fails to deliver good data, valuation would face the risk of pullback. After the lock-up expiry, there could be opportunity to buy at lower price.


China Healthcare Weekly (July.14) - CXO's Disputed Business Model, Remegen Shares Plunged, Kelun Bio

China

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

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WuXi AppTec (2359 HK)