Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Event-Driven

<p><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> and <a href="https://www.smartkarma.com/entities/yto-express" target="_blank" data-smartkarma-citation="entities:20319:1" rel="noopener">YTO Express (600233 CH)</a> announced the former will increase its stake in the latter, from around 10.5% to 22.5%. BABA will purchase shares from YTO's co-founders, who will retain a controlling stake in the express company.</p>
<p>Although YTO's Q2 earnings results were slightly better than we expected, core margins remain depressed, and we do not believe the company's current level of profitability can sustain its medium-term investment plans. </p>
<p>YTO has performed well over the past week or so on surprisingly firm Q2 results and it rose another 10% on the latest news regarding investment from BABA. However, given ongoing pressure on profitability, and the performance of rival <a href="https://www.smartkarma.com/entities/zhejiang-idc-fluid-control-co-ltd" target="_blank" data-smartkarma-citation="entities:18695:1" rel="noopener">Sto Express (002468 CH)</a> after it announced increased investment by BABA in early 2019, we would take advantage of recent strength to SHORT YTO. Within China's express segment, we continue to favor the fundamentals of <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>; a LONG SF Holding / SHORT YTO pair makes sense to us here.</p>

Alibaba Group (BABA US) and YTO Express (600233 CH) announced the former will increase its stake in the latter, from around 10.5% to 22.5%. BABA will purchase shares from YTO's co-founders, who will retain a controlling stake in the express company.
Although YTO's Q2 earnings results were slightly better than we expected, core margins remain depressed, and we do not believe the company's current level of profitability can sustain its medium-term investment plans. 
YTO has performed well over the past week or so on surprisingly firm Q2 results and it rose another 10% on the latest news regarding investment from BABA. However, given ongoing pressure on profitability, and the performance of rival Sto Express (002468 CH) after it announced increased investment by BABA in early 2019, we would take advantage of recent strength to SHORT YTO. Within China's express segment, we continue to favor the fundamentals of S.F. Holding (002352 CH); a LONG SF Holding / SHORT YTO pair makes sense to us here.

Increased Investment from Alibaba a Blessing for YTO Express? Revisit STO Express & Think Again...

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

<div>
<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a> plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. </p>
<p>We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. </p>
<p>In our previous notes, links to which are below, we have covered the company's background and its performance.</p>
<p>In this note, we will focus on some of the finer points of the financial statements. </p>
<p><strong><em>I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.</em></strong></p>
</div><div><div><h3>Our previous coverage on Ant Group</h3></div></div><div><ul style="list-style-type: disc;">
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-what-s-new-about-the-listing-news" target="_blank" rel="noopener">Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors</a></p></li>
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-understand-the-fintech-empire-growth-and-risk-factors" target="_blank" rel="noopener">Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News</a></p></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-first-take-no-1-fintech-from-all-angles" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-numbers-suggest-it-s-more-tech-than-financials" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials</a></li>
</ul></div>


Ant Financial (1051260D CH) plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. 
We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. 
In our previous notes, links to which are below, we have covered the company's background and its performance.
In this note, we will focus on some of the finer points of the financial statements. 
I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.
Our previous coverage on Ant Group
Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors
Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News
Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles
Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials


Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a>/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment volume and transaction volume, respectively, according to iResearch and Oliver Wyman. In <a href="https://www.smartkarma.com/insights/ant-group-ipo-initiation-it-s-a-bug-s-life" target="_blank" rel="noopener">our initiation note</a>, we stated that Ant is a unique market-leading asset with attractive fundamentals.</p><div class="content-highlight"><p>In this note, we provide our forecasts and take the first look at Ant's valuation. Ant is seeking a valuation of $200-300 billion, according to various press reports.  Overall, based on our forecasts and valuation analysis, we think that the rumoured IPO valuation range can be justified.</p></div>

Ant Financial (1051260D CH)/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment volume and transaction volume, respectively, according to iResearch and Oliver Wyman. In our initiation note, we stated that Ant is a unique market-leading asset with attractive fundamentals.In this note, we provide our forecasts and take the first look at Ant's valuation. Ant is seeking a valuation of $200-300 billion, according to various press reports.  Overall, based on our forecasts and valuation analysis, we think that the rumoured IPO valuation range can be justified.

Yum China Holdings  / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> has launched a $2.5 billion secondary listing in Hong Kong. <a href="https://www.smartkarma.com/profiles/rickin-thakrar" target="_blank" data-smartkarma-citation="accounts:1486" rel="noopener">Rickin Thakrar</a> has outlined his views on Yum China’s fundamentals and valuation in <a href="https://www.smartkarma.com/insights/yum-china-secondary-listing-do-the-fundamentals-stack-up-post-2q20-earnings" target="_blank" data-smartkarma-citation="insights:42814" rel="noopener">Yum China Secondary Listing: Do the Fundamentals Stack up Post 2Q20 Earnings?</a>. The H shares will be priced on Friday and are scheduled for listing on 10 September.  </p><p>Like <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> and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, Hong Kong will be a meaningful trading venue for <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK)</a>, driving conversion demand, in our view. Notably, Alibaba’s HK freefloat shares as a percentage of HK-registered shares have risen at an increasing pace and currently stands at 55.9% (vs 11.1% at listing).</p><div class="content-highlight"><p>In this note, we examine Yum China’s potential HK-ADS premium/(discount). Yum China will likely price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. Overall, we think that Yum China pricing its H-shares around a 3.0% discount to its ADSs will be reasonable.</p></div>

Yum China Holdings, Inc (YUMC US) has launched a $2.5 billion secondary listing in Hong Kong. Rickin Thakrar has outlined his views on Yum China’s fundamentals and valuation in Yum China Secondary Listing: Do the Fundamentals Stack up Post 2Q20 Earnings?. The H shares will be priced on Friday and are scheduled for listing on 10 September.  Like Alibaba Group (BABA US) and JD.com Inc (ADR) (JD US), Hong Kong will be a meaningful trading venue for Yum China Holdings Inc (9987 HK), driving conversion demand, in our view. Notably, Alibaba’s HK freefloat shares as a percentage of HK-registered shares have risen at an increasing pace and currently stands at 55.9% (vs 11.1% at listing).In this note, we examine Yum China’s potential HK-ADS premium/(discount). Yum China will likely price its H-shares at a discount to its ADSs to entice investors to participate in the secondary listing. Overall, we think that Yum China pricing its H-shares around a 3.0% discount to its ADSs will be reasonable.

Yum China Secondary Listing: HK-ADS Premium/(Discount) Views

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Hang Seng China Enterprises Index / Event-Driven

<p>With everything almost done and dusted on the HSCEI 2020 dividend futures, the focus has shifted firmly to the HSCEI dividend futures contract expiring in 2021.</p><p>The HSCEI 2021 dividend futures contract has dropped from a high of almost 500 index points in May 2018 and 400 index points in January 2020 to just 278 index points now. The change is mostly driven by Hang Seng Indexes' decision to include WVR securities and Secondary Listings in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, and with COVID-19 contributing to a sharp drop in company earnings.</p><p>The HSCEI 2021 dividend futures are trading near our fair value at the moment. However, there are still many more catalysts that will keep things interesting for the next few months. Further changes in the index composition and the capping applied to WVR securities and Secondary Listings, pressure on megabanks to support the real economy at the expense of profits and shareholder return, and companies that have never paid dividends starting to pay are just some of them.</p><p>We discuss all this in more detail below.</p>

With everything almost done and dusted on the HSCEI 2020 dividend futures, the focus has shifted firmly to the HSCEI dividend futures contract expiring in 2021.The HSCEI 2021 dividend futures contract has dropped from a high of almost 500 index points in May 2018 and 400 index points in January 2020 to just 278 index points now. The change is mostly driven by Hang Seng Indexes' decision to include WVR securities and Secondary Listings in the Hang Seng China Enterprises Index (HSCEI INDEX), and with COVID-19 contributing to a sharp drop in company earnings.The HSCEI 2021 dividend futures are trading near our fair value at the moment. However, there are still many more catalysts that will keep things interesting for the next few months. Further changes in the index composition and the capping applied to WVR securities and Secondary Listings, pressure on megabanks to support the real economy at the expense of profits and shareholder return, and companies that have never paid dividends starting to pay are just some of them.We discuss all this in more detail below.

HSCEI Dividends: Multiple Catalysts to Drive Fair Value Changes

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)

Increased Investment from Alibaba a Blessing for YTO Express? Revisit STO Express & Think Again...

Alibaba Group (BABA US) and YTO Express (600233 CH) announced the former will increase its stake in the latter, from around 10.5% to 22.5%. BABA...

Tracking Traffic

Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

Ant Group filed its prospectus and kick-started its IPO to raise up to USD 30 billion to list on both Hong Kong Exchange and Shanghai STAR...

Sumeet Singh

Ant Group IPO: Valuation First Look

Ant Financial (1051260D CH)/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment...

Arun George

Yum China Secondary Listing: HK-ADS Premium/(Discount) Views

$yum china has launched a $2.5 billion secondary listing in Hong Kong. Rickin was outlined his views on Yum China’s fundamentals and valuation in...

Arun George

HSCEI Dividends: Multiple Catalysts to Drive Fair Value Changes

With multiple catalysts driving fair value estimates, there will be significant trading opportunities in the HSCEI 2021 dividend futures.

Brian Freitas

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