Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p>On the 18 October, hypermarket operator <a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1019/2020101900089.pdf" target="_blank" rel="noopener">announced</a> <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> had entered into a SPA with the Mulliez family, the completion of which would give Alibaba's direct/indirect control of 71.98% into Sun Art from 31.13% currently, triggering an Unconditional Mandatory General Offer.</p>
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<p>The MGO price would be $8.10/share, a 2.14% premium to last close. Any dividend paid or declared would reduce the Offer Price.</p>
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<p>The SPA had limited conditions and was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1019/2020101900982.pdf" target="_blank" rel="noopener">completed</a> on the 19 October. The Composite Doc was expected to be issued by the 9 Nov, 21 days from the initial announcement, but owing to usual slippages, the despatch date was delayed.</p>
<p>The Composite Offer and Response Document is now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1127/2020112700011.pdf" target="_blank" rel="noopener">out</a>. The first close is the 18 December, and assuming you tender immediately, payment would be on or around the 8 December. The IFA (Somerley) considers the Offer NOT fair and NOT reasonable.</p>
<p>Sun Art is trading through terms at $8.25/share, although down from its $9.45 close on the day of the Offer announcement. There's nothing to do here on the MGO unless pricing closes in on the near-term hard floor of $8.10, as it did last week.</p>
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<p>More below the fold.</p>
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On the 18 October, hypermarket operator Sun Art Retail (6808 HK) announced Alibaba Group (9988 HK) had entered into a SPA with the Mulliez family, the completion of which would give Alibaba's direct/indirect control of 71.98% into Sun Art from 31.13% currently, triggering an Unconditional Mandatory General Offer.


The MGO price would be $8.10/share, a 2.14% premium to last close. Any dividend paid or declared would reduce the Offer Price.


The SPA had limited conditions and was completed on the 19 October. The Composite Doc was expected to be issued by the 9 Nov, 21 days from the initial announcement, but owing to usual slippages, the despatch date was delayed.
The Composite Offer and Response Document is now out. The first close is the 18 December, and assuming you tender immediately, payment would be on or around the 8 December. The IFA (Somerley) considers the Offer NOT fair and NOT reasonable.
Sun Art is trading through terms at $8.25/share, although down from its $9.45 close on the day of the Offer announcement. There's nothing to do here on the MGO unless pricing closes in on the near-term hard floor of $8.10, as it did last week.


More below the fold.


Sun Art (6808 HK): Offer Doc Out. Not Fair And Reasonable

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<p>Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%</p><p>However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  </p><p>In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.</p><p>We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.</p><p>The list is headed by <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>, one of the standout domestic holdings within the Health Care sector, followed by <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> and <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a> .</p><p><em>Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  </em></p><p><em>Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn</em></p>

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by Jiangsu Hengrui Medicine (600276 CH), one of the standout domestic holdings within the Health Care sector, followed by China Tourism Group Duty Free Corp Ltd (601888 CH) and Luxshare Precision Industry (002475 CH) .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

China's Next Generation:  Diversifying Away from Tencent and Alibaba.

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<p>Despite the excitement over <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way to Alibaba’s valuation in the near term. However, Alibaba continues to invest heavily around the New Retail theme, both in Freshippo store expansions and through several recent investments in SunArt and Dufry. This implies that Alibaba is now pretty much committed to its New Retail strategy, and so far, seems to be happy with its progress. We do not see any major downside of New Retail for now either.</p><p>In this note, we take a deep dive into Alibaba's new retail businesses, in particular, Freshippo. </p>

Despite the excitement over Alibaba Group (BABA US)’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way to Alibaba’s valuation in the near term. However, Alibaba continues to invest heavily around the New Retail theme, both in Freshippo store expansions and through several recent investments in SunArt and Dufry. This implies that Alibaba is now pretty much committed to its New Retail strategy, and so far, seems to be happy with its progress. We do not see any major downside of New Retail for now either.In this note, we take a deep dive into Alibaba's new retail businesses, in particular, Freshippo. 

Alibaba: New Retail Is Exciting but Too Small For Now

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.</p><p>This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.</p><p>In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.</p>

Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

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

Pop Mart International Group L / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/pop-mart-international-group-limited" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">POP MART (POP HK)</a>  plans to raise around US$200-300m in its Hong Kong IPO.</p></div><div><p>Pop Mart (PM) is the largest and fastest growing pop toy company in China, in terms of 2019 revenue and revenue CAGR over 2017-19. PM had a 8.5% market share by retail value, making it the largest player in the pop toy retailing market.</p></div><div><p>In our previous insights, we spoke about the positive/negative aspects, peers and valuation, and undertook store and product reviews: </p></div><div><ul style="list-style-type: disc;">
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<a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-the-positives-expanding-portfolio-wider-distribution-explosive-earnings-growth" target="_blank" rel="noopener">Pop Mart Pre-IPO - The Positives - Expanding Portfolio+Wider Distribution= Explosive Earnings Growth,</a> and</li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-the-negatives-is-it-a-brand-owner-or-just-a-retailer" target="_blank" rel="noopener">Pop Mart Pre-IPO - The Negatives - Is It a Brand Owner or Just a Retailer?</a></li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-peer-set-and-valuation" target="_blank" data-smartkarma-citation="insights:41850" rel="noopener">Pop Mart Pre-IPO - Peer Set and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-quick-note-on-the-ground-pop-up-stores-are-effective" target="_blank" rel="noopener">Pop Mart Pre-IPO Quick Note - On the Ground - Pop-Up Stores Are Effective</a></li>
</ul></div><p>In this note, I’ll talk about the updates from the PHIP.</p>

POP MART (POP HK)  plans to raise around US$200-300m in its Hong Kong IPO.Pop Mart (PM) is the largest and fastest growing pop toy company in China, in terms of 2019 revenue and revenue CAGR over 2017-19. PM had a 8.5% market share by retail value, making it the largest player in the pop toy retailing market.In our previous insights, we spoke about the positive/negative aspects, peers and valuation, and undertook store and product reviews: 

Pop Mart Pre-IPO - The Positives - Expanding Portfolio+Wider Distribution= Explosive Earnings Growth, and
Pop Mart Pre-IPO - The Negatives - Is It a Brand Owner or Just a Retailer?
Pop Mart Pre-IPO - Peer Set and Valuation
Pop Mart Pre-IPO Quick Note - On the Ground - Pop-Up Stores Are Effective
In this note, I’ll talk about the updates from the PHIP.

Pop Mart Pre-IPO - PHIP Updates - Still Riding on past Expansion

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba Group Holding (BABA US)

Sun Art (6808 HK): Offer Doc Out. Not Fair And Reasonable

From an arb standpoint, there is very little to do here. Alibaba taking control of this hypermarket chain is positive. Sun Art also appears...

David Blennerhassett

China's Next Generation: Diversifying Away from Tencent and Alibaba.

China exposure is becoming more concentrated in a small number of large cap stocks. We identify the next generation of China stocks by analyzing...

Steven Holden

Alibaba: New Retail Is Exciting but Too Small For Now

Despite the excitement over Alibaba’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way...

Supun Walpola

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

A rule change that admits Secondary listings and Chapter 18A listed Biotech stocks to the Southbound Stock Connect could see Alibaba, JD and...

Brian Freitas

Pop Mart Pre-IPO - PHIP Updates - Still Riding on past Expansion

POP MART (POP HK) plans to raise around US$200-300m in its Hong Kong IPO. It is the largest and fastest growing pop toy company in China, in terms...

Sumeet Singh

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