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 USD30/35bn via a dual listing on both Hong Kong Exchange and Shanghai STAR board. </p></div><div><p>We have covered various aspects of the deal in our earlier notes, link to which are below.</p></div><div>
<p>In this insight, I'll talk about takeaways from its PHIP filing and updates provided by <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> on the deal structure.</p>
<p></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>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-things-to-clarify-questions-to-ask-falling-fees-margins-cash-flow" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/​Questions to Ask - Falling Fees, Margins, Cash Flow</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-dual-listing-makes-early-index-inclusion-tricky" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Dual Listing Makes Early Index Inclusion Tricky</a></li>
<li><a href="https://www.smartkarma.com/insights/alipay-s-advantage-over-wechat-pay-in-physical-stores" target="_blank" rel="noopener">AliPay’s Advantage over WeChat Pay in Physical Stores</a></li>
</ul></div><div><ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/ant-group-running-neck-and-neck-with-tencent-in-direct-financial-services" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-impact-assessment-of-the-new-rule-for-financial-holding-companies" target="_blank" rel="noopener">Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-peer-comparison-payments-baffling-scale-small-tweaks-for-large-profits" target="_blank" rel="noopener">Ant Group Pre-IPO: Peer Comparison - Payments - Baffling Scale, Small Tweaks for Large Profits</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-peer-comparison-credittech-larger-scale-similar-growth-lower-credit-risk" target="_blank" rel="noopener">Ant Group Pre-IPO: Peer Comparison - CreditTech - Larger Scale, Similar Growth, Lower Credit Risk</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">Ant Group Pre-IPO: First Stab at Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/ant-group-pre-ipo-quick-take-on-ftse-and-msci-s-clearer-guidelines" target="_blank" rel="noopener">Ant Group Pre-IPO: Quick Take on FTSE and MSCI’s Clearer Guidelines</a></li>
</ul></div>

Ant Financial (1051260D CH) plans to raise up to USD30/35bn via a dual listing on both Hong Kong Exchange and Shanghai STAR board. We have covered various aspects of the deal in our earlier notes, link to which are below.
In this insight, I'll talk about takeaways from its PHIP filing and updates provided by Alibaba Group (BABA US) on the deal structure.

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
Ant Group (蚂蚁集团) Pre-IPO: Dual Listing Makes Early Index Inclusion Tricky
AliPay’s Advantage over WeChat Pay in Physical Stores

Ant Group (蚂蚁集团) Running Neck and Neck with Tencent in Direct Financial Services
Ant Group (蚂蚁集团) Pre-IPO: Impact Assessment of the New Rule for Financial Holding Companies
Ant Group Pre-IPO: Peer Comparison - Payments - Baffling Scale, Small Tweaks for Large Profits
Ant Group Pre-IPO: Peer Comparison - CreditTech - Larger Scale, Similar Growth, Lower Credit Risk
Ant Group Pre-IPO: First Stab at Valuation
Ant Group Pre-IPO: Quick Take on FTSE and MSCI’s Clearer Guidelines


Ant Group Pre-IPO: Deal Structure, PHIP Updates, Short-Term Trades

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

<p> <strong><em>*Way Too Early Provision Reduction: </em></strong>Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q20 net income of CNY 8.7 bn – increasing CNY 3.6 bn or 70% linked quarter. One factor, and one factor alone, was responsible for the increase  - provisions were pre-emptively reduced CNY 6.7 bn (29.5%) over the period despite a true decrease in credit risk; </p><p> <strong><em>*Credit Is WEAKER: </em></strong>Net new NPLs have increased CNY 23.0 bn linked quarter or a massive 223.1% on an annualized basis. Assuming the credit break in the PAB portfolio holds – which it likely will given the economic weakness attributed to COVID-19 – reserves would appear light by CNY 178 bn if we assume a 2x NPL ratio. This shortfall represents 62% of stated equity; and</p><p> <em><strong>*Fundamentally Challenged Still:</strong></em> Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. </p>

 *Way Too Early Provision Reduction: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q20 net income of CNY 8.7 bn – increasing CNY 3.6 bn or 70% linked quarter. One factor, and one factor alone, was responsible for the increase  - provisions were pre-emptively reduced CNY 6.7 bn (29.5%) over the period despite a true decrease in credit risk;  *Credit Is WEAKER: Net new NPLs have increased CNY 23.0 bn linked quarter or a massive 223.1% on an annualized basis. Assuming the credit break in the PAB portfolio holds – which it likely will given the economic weakness attributed to COVID-19 – reserves would appear light by CNY 178 bn if we assume a 2x NPL ratio. This shortfall represents 62% of stated equity; and *Fundamentally Challenged Still: Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. 

Ping An Insurance – Bank Fundamentals Worsening

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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.

Event-Driven

<ul>
<li>Yesterday (19<sup>th</sup> October 2020), Chinese 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> announced that <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>-owned Taobao China Holding Limited unconditionally agreed to acquire an additional 70.94% interest in A-RT Retail Holdings Limited from its owners, Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).</li>
<li>Immediately after the completion of the agreement, Taobao will own 90.84% of A-RT (including the 19.9% ownership prior to the agreement).  </li>
<li>A-RT owns 51% of Sun Art Retail shares, giving Taobao an indirect ownership of 46.33% of Sun Art Retail shares. Taobao directly holds 20.98% shares of Sun Art Retail and another 5.04% through the 100%-owned New Retail Fund.</li>
<li>Immediately after the completion of the agreement, Alibaba/Taobao will own 72.35% of Sun Art Retail’s share capital.</li>
<li>Earlier today, it was announced that the acquisition was completed yesterday (19<sup>th</sup> October 2020) and triggered a mandatory offer at HK$ 8.10 per share.</li>
</ul>


Yesterday (19th October 2020), Chinese hypermarket operator Sun Art Retail (6808 HK) announced that Alibaba Group (BABA US)-owned Taobao China Holding Limited unconditionally agreed to acquire an additional 70.94% interest in A-RT Retail Holdings Limited from its owners, Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).
Immediately after the completion of the agreement, Taobao will own 90.84% of A-RT (including the 19.9% ownership prior to the agreement).  
A-RT owns 51% of Sun Art Retail shares, giving Taobao an indirect ownership of 46.33% of Sun Art Retail shares. Taobao directly holds 20.98% shares of Sun Art Retail and another 5.04% through the 100%-owned New Retail Fund.
Immediately after the completion of the agreement, Alibaba/Taobao will own 72.35% of Sun Art Retail’s share capital.
Earlier today, it was announced that the acquisition was completed yesterday (19th October 2020) and triggered a mandatory offer at HK$ 8.10 per share.


Sun Art Retail: A Quick Run Through Fundamentals as Alibaba Takes the Helm

GDS Holdings (ADR) / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/gds-holdings-adr" target="_blank" data-smartkarma-citation="entities:23649:1" rel="noopener">Gds Holdings (Adr) (GDS US)</a> plans to raise around US$1.6bn in its secondary listing in Hong Kong.</p></div><div><p>I had covered the background of the deal in my note last week, <a href="https://www.smartkarma.com/insights/gds-holdings-hong-kong-secondary-hot-sector-needs-the-money" target="_blank" rel="noopener">GDS Holdings Hong Kong Secondary - Hot Sector, Needs the Money.</a></p></div><div><p>Given the big difference between the actual and rumoured size of the deal, I have provided a quick update below.</p></div><div><p>We have covered the stock since its IPO in 2016. Links to our previous coverage of the IPO and prior placements are below:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/gds-holdings-ipo-high-market-share-mirage" target="_blank" rel="noopener">GDS Holdings IPO: High Market Share Mirage?</a>, IPO note in Oct 2016</li>
<li>
<a href="https://www.smartkarma.com/insights/nasdaq-gds-placement-visible-growth-additional-ping-an-investment" target="_blank" rel="noopener">NASDAQ:GDS Placement - Visible Growth, Additional Ping An Investment</a>, US$400m placement in Mar 2019</li>
<li>
<a href="https://www.smartkarma.com/insights/gds-placement-accretion-will-take-awhile-to-be-realized-but-deal-dynamics-are-favorable" target="_blank" rel="noopener">GDS Placement - Accretion Will Take Awhile to Be Realized but Deal Dynamics Are Favorable</a>, US$230m placement in Dec 2019</li>
<li>
<a href="https://www.smartkarma.com/insights/gds-placement-momentum-is-still-strong-but-don-t-expect-the-same-kind-of-returns" target="_blank" rel="noopener">GDS Placement - Momentum Is Still Strong but Don’t Expect the Same Kind of Returns</a>, US$400m selldown in Jan 2020</li>
</ul></div>

Gds Holdings (Adr) (GDS US) plans to raise around US$1.6bn in its secondary listing in Hong Kong.I had covered the background of the deal in my note last week, GDS Holdings Hong Kong Secondary - Hot Sector, Needs the Money.Given the big difference between the actual and rumoured size of the deal, I have provided a quick update below.We have covered the stock since its IPO in 2016. Links to our previous coverage of the IPO and prior placements are below:

GDS Holdings IPO: High Market Share Mirage?, IPO note in Oct 2016

NASDAQ:GDS Placement - Visible Growth, Additional Ping An Investment, US$400m placement in Mar 2019

GDS Placement - Accretion Will Take Awhile to Be Realized but Deal Dynamics Are Favorable, US$230m placement in Dec 2019

GDS Placement - Momentum Is Still Strong but Don’t Expect the Same Kind of Returns, US$400m selldown in Jan 2020


GDS Holdings Hong Kong Secondary - Going Big. Will Almost Become Net Cash, for a While.

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<p>After moderating in August, headline express sector volume surged in September. Total parcel volume grew by 44.6% last month, and key inter-city volume was up almost 50%. </p>
<p>Pricing remains weak, however. For all express shipments, ASPs fell by 12.2%, and the companies that report monthly numbers all reported YoY ASP declines of between 15% and 31%.</p>
<p>In other express sector news: <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> pre-announced Q3 losses, we check on how <a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US)</a>'s Hong Kong IPO has fared so far, and we note (again) <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> massive scale relative to its Chinese peers -- and it's incredible year of growth. </p>
<p>We continue to rate SF Holding BUY as we expect it to continue to gain share from peers. We also recently upgraded <a href="https://www.smartkarma.com/entities/best-inc" target="_blank" data-smartkarma-citation="entities:25494:1" rel="noopener">BEST Inc (BEST US) </a>to BUY on our expectation that it could become an attractive target once sector M&amp;A takes off. Meanwhile, ZTO remains a SELL in our view. </p>

After moderating in August, headline express sector volume surged in September. Total parcel volume grew by 44.6% last month, and key inter-city volume was up almost 50%. 
Pricing remains weak, however. For all express shipments, ASPs fell by 12.2%, and the companies that report monthly numbers all reported YoY ASP declines of between 15% and 31%.
In other express sector news: STO Express (002468 CH) pre-announced Q3 losses, we check on how ZTO Express (ZTO US)'s Hong Kong IPO has fared so far, and we note (again) S.F. Holding (002352 CH) massive scale relative to its Chinese peers -- and it's incredible year of growth. 
We continue to rate SF Holding BUY as we expect it to continue to gain share from peers. We also recently upgraded BEST Inc (BEST US) to BUY on our expectation that it could become an attractive target once sector M&amp;A takes off. Meanwhile, ZTO remains a SELL in our view. 

TRACKING TRAFFIC/Chinese Express: Pricing Still Weak | STO Q3 Profit Warning | ZTO HK IPO Update

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 (9988 HK)

Ant Group Pre-IPO: Deal Structure, PHIP Updates, Short-Term Trades

Ant Group plans to raise up to USD35bn in its IPO. We have covered various aspects of the deal in our earlier notes. In this note, I'll talk about...

Sumeet Singh

Ping An Insurance – Bank Fundamentals Worsening

PING AN INSURANCE: PING AN BANK Reported A Completely Manufactured 3Q20 Earnings Result, Cutting Provisions Despite Substantially Weaker Credit

Thomas J. Monaco

Sun Art Retail: A Quick Run Through Fundamentals as Alibaba Takes the Helm

Sun Art is one of the largest hypermarket operators in China, with over RMB 95 billion revenue and RMB 4.6 billion OP. The company operates...

Oshadhi Kumarasiri

GDS Holdings Hong Kong Secondary - Going Big. Will Almost Become Net Cash, for a While.

Gds Holdings (Adr) (GDS US) plans to raise around US$1.6bn in its secondary listing in Hong Kong. I had covered the background of the deal in my...

Sumeet Singh

TRACKING TRAFFIC/Chinese Express: Pricing Still Weak | STO Q3 Profit Warning | ZTO HK IPO Update

Although volumes bounced back in September, pricing remains weak. We retain our BUY ratings on SF Holding and Best Inc, while ZTO Express remains a...

Tracking Traffic

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