Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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 Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>The State Administration of Market Regulation (SAMR) formally started the investigation into the anti-monopoly of Alibaba (BABA) and Summoned Ant Group's management again.</li>
<li>JD Digits (JDD) changed CEO in the process of IPO due to the situation its competitor, Ant Group, is facing.</li>
<li>Youzu.com (002174 CN)’s founder was poisoned to death by his subordinate.</li>
<li>Baidu (BIDU) made a poster to call on students and their parents to boycott TikTok.</li>
</ul>


The State Administration of Market Regulation (SAMR) formally started the investigation into the anti-monopoly of Alibaba (BABA) and Summoned Ant Group's management again.
JD Digits (JDD) changed CEO in the process of IPO due to the situation its competitor, Ant Group, is facing.
Youzu.com (002174 CN)’s founder was poisoned to death by his subordinate.
Baidu (BIDU) made a poster to call on students and their parents to boycott TikTok.


China Internet Weekly (28Dec2020): BABA Investigated, Ant Warned, Youzu Founder Poisoned to Death

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul>
<li>The investor rotation into value focusing in on EM and DM banks; our key picks are <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a>, <a href="https://www.smartkarma.com/entities/turkiye-garanti-bankasi-as" target="_blank" data-smartkarma-citation="entities:25026:1" rel="noopener">Turkiye Garanti Bankasi As (GARAN TI)</a>, <a href="https://www.smartkarma.com/entities/commercial-international-bank" target="_blank" data-smartkarma-citation="entities:27625:1" rel="noopener">Commercial International Bank (COMI EY)</a> in EM banks, and <a href="https://www.smartkarma.com/entities/unicredit-spa" target="_blank" data-smartkarma-citation="entities:21234:1" rel="noopener">UniCredit SpA (UCG IM)</a>, <a href="https://www.smartkarma.com/entities/caixabank-sa" target="_blank" data-smartkarma-citation="entities:21255:1" rel="noopener">CaixaBank SA (CABK SM)</a>, and <a href="https://www.smartkarma.com/entities/bper-banca-s-p-a" target="_blank" data-smartkarma-citation="entities:21165:1" rel="noopener">BPER Banca S.p.A (BPE IM)</a> in Southern Europe banks</li>
<li>Exchanges and Big Data, the convergence; <a href="https://www.smartkarma.com/entities/intercontinental-exchange-inc" target="_blank" data-smartkarma-citation="entities:10221:1" rel="noopener">Intercontinental Exchange (ICE US)</a> is strong on recurring revenues, and both ICE and <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> should deliver shareholder value creation from transformative M&amp;A</li>
<li>Potential for premium growth and returns in digital payments; we like <a href="https://www.smartkarma.com/entities/nexi-spa" target="_blank" data-smartkarma-citation="entities:28921:1" rel="noopener">Nexi SpA (NEXI IM)</a>, where we see clear benefits from its M&amp;A, and we see <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US)</a> as a core holding</li>
<li>Digital wealth managers focus on the mass affluent; <a href="https://www.smartkarma.com/entities/finecobank-banca-fineco-spa" target="_blank" data-smartkarma-citation="entities:21188:1" rel="noopener">Finecobank Banca Fineco (FBK IM)</a> stands out in Europe, <a href="https://www.smartkarma.com/entities/xp-inc" target="_blank" data-smartkarma-citation="entities:28619:1" rel="noopener">XP Inc (XP US)</a> is the leader in Brazil but looks over-valued and exposed to increased competition, in our view</li>
<li>Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals</li>
</ul>


The investor rotation into value focusing in on EM and DM banks; our key picks are Credicorp Ltd (BAP US), Turkiye Garanti Bankasi As (GARAN TI), Commercial International Bank (COMI EY) in EM banks, and UniCredit SpA (UCG IM), CaixaBank SA (CABK SM), and BPER Banca S.p.A (BPE IM) in Southern Europe banks
Exchanges and Big Data, the convergence; Intercontinental Exchange (ICE US) is strong on recurring revenues, and both ICE and S&amp;P Global Inc. (SPGI US) should deliver shareholder value creation from transformative M&amp;A
Potential for premium growth and returns in digital payments; we like Nexi SpA (NEXI IM), where we see clear benefits from its M&amp;A, and we see Paypal Holdings (PYPL US) as a core holding
Digital wealth managers focus on the mass affluent; Finecobank Banca Fineco (FBK IM) stands out in Europe, XP Inc (XP US) is the leader in Brazil but looks over-valued and exposed to increased competition, in our view
Risks to our positive views on our themes includes slower than expected growth in digital payments, transactions and increased regulation on big data; a slower than expected global GDP recovery also could adversely impact bank fundamentals


FinTech & Financial Investment Themes 2021

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.

Event-Driven

<a href="https://www.smartkarma.com/entities/huifu-payment-ltd" target="_blank" data-smartkarma-citation="entities:27145:1" rel="noopener">Huifu Payment Limited (1806 HK)</a> is a leading Chinese independent third-party payment service provider which listed on 15 June 2018 to raise net proceeds of HK$1,592.5 million ($205 million) at a market cap of HK$9,386 ($1.2 billion). However, the IPO proved to be disastrous with the shares never trading above the IPO price. On Wednesday, Huifu announced a management-led privatisation offer. The offer includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative (2.709677 new shares in the offeror per scheme share). The cash offer price of HK$3.50 per share is a 26.81% premium to the last trading price of HK$2.76 per share (17 December prior to the trading halt). However, the cash offer price is 53% below the IPO price of HK$7.50 per share. <div class="content-highlight">The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 229.6 million shares or 17.61% of shares outstanding. Disinterested scheme shareholders represent 1,073.6 million shares or 82.39% of shares outstanding which implies the 10% blocking stake is 107.4 million shares or 8.24% of shares outstanding. Due to the combination of the irrecovables and the opportunity for shareholders to exit a poorly performing IPO investment, we believe that the privatisation bid will succeed.  </div>

Huifu Payment Limited (1806 HK) is a leading Chinese independent third-party payment service provider which listed on 15 June 2018 to raise net proceeds of HK$1,592.5 million ($205 million) at a market cap of HK$9,386 ($1.2 billion). However, the IPO proved to be disastrous with the shares never trading above the IPO price. On Wednesday, Huifu announced a management-led privatisation offer. The offer includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative (2.709677 new shares in the offeror per scheme share). The cash offer price of HK$3.50 per share is a 26.81% premium to the last trading price of HK$2.76 per share (17 December prior to the trading halt). However, the cash offer price is 53% below the IPO price of HK$7.50 per share. The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). The offeror and concert parties represent 229.6 million shares or 17.61% of shares outstanding. Disinterested scheme shareholders represent 1,073.6 million shares or 82.39% of shares outstanding which implies the 10% blocking stake is 107.4 million shares or 8.24% of shares outstanding. Due to the combination of the irrecovables and the opportunity for shareholders to exit a poorly performing IPO investment, we believe that the privatisation bid will succeed.  

Huifu Payments’ Management Led Privatisation Bid

<ul>
<li>China Audio-Video and Digital Publishing Association announced the Age Rating of Online Game.</li>
<li>Many online platforms stopped selling cash deposit products.</li>
<li>Online payment amount grew by 28% YoY on the shopping season “December 12”.</li>
</ul>


China Audio-Video and Digital Publishing Association announced the Age Rating of Online Game.
Many online platforms stopped selling cash deposit products.
Online payment amount grew by 28% YoY on the shopping season “December 12”.


China Internet Weekly (21Dec2020): Online Games Rated by Age, Online Platforms Banned from Deposit

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Third-party service provider <a href="https://www.smartkarma.com/entities/huifu-payment-ltd" target="_blank" data-smartkarma-citation="entities:27145:1" rel="noopener">Huifu Payment Limited (1806 HK)</a> was listed on the 15 June 2018 at <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0614/01806_3366860/e102.pdf" target="_blank" rel="noopener">HK$7.50</a>/share. The IPO was discussed in <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh</a>'s insight <a href="https://skr.ma/9JNGu" target="_blank" rel="noopener">Huifu Payment IPO Review - Regulation May Take Away a Major Source of Income</a>. He recommended avoiding the issue - that was a great call.
Shares were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1218/2020121800101.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading this past Friday "pursuant to the Hong Kong Code on Takeovers and Mergers". Shares last changed hands at HK$2.76/share. 
At the time of listing, Huifu had about 2% market share of third-party payment in China. Its market share compared to <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> and Tenpay's 34.7% and 25.1% respectively at the time, according to the prospectus (<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0601/ltn20180601025.pdf" target="_blank" rel="noopener">page 88</a>).  
The eleventh-hour failure to list Ant has been copiously discussed here on Smartkarma, including my two kuai worth in <a href="https://skr.ma/X4WWM" target="_blank" rel="noopener">Party Poopers: Reining In China's Internet</a>. Huifu would also be captured under this increased regulatory oversight on tech companies and micro-lending.
At the time of Huyifu's listing, the most commonly asked question was how does Huifu compete against other third-party payment service providers such as Tenpay and Ant.
That remains the key question.
More below the fold.

Third-party service provider Huifu Payment Limited (1806 HK) was listed on the 15 June 2018 at HK$7.50/share. The IPO was discussed in Zhen Zhou, Toh's insight Huifu Payment IPO Review - Regulation May Take Away a Major Source of Income. He recommended avoiding the issue - that was a great call.
Shares were suspended ahead of trading this past Friday "pursuant to the Hong Kong Code on Takeovers and Mergers". Shares last changed hands at HK$2.76/share. 
At the time of listing, Huifu had about 2% market share of third-party payment in China. Its market share compared to Ant Group (6688 HK) and Tenpay's 34.7% and 25.1% respectively at the time, according to the prospectus (page 88).  
The eleventh-hour failure to list Ant has been copiously discussed here on Smartkarma, including my two kuai worth in Party Poopers: Reining In China's Internet. Huifu would also be captured under this increased regulatory oversight on tech companies and micro-lending.
At the time of Huyifu's listing, the most commonly asked question was how does Huifu compete against other third-party payment service providers such as Tenpay and Ant.
That remains the key question.
More below the fold.

Huifu Payment (1806 HK): Early Withdrawal?

China

Ant Group Co., Ltd. develops online payment platforms. The Company produces credit system and financial services platforms which provide consumers and small businesses with safe and convenient inclusive financial services globally. Ant Group provides its services worldwide.

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Ant Group (6688 HK)

China Internet Weekly (28Dec2020): BABA Investigated, Ant Warned, Youzu Founder Poisoned to Death

The State Administration of Market Regulation investigated Alibaba and Summoned Ant Group's management. JD Digits (JDD) changed CEO in the process...

Ming Lu

FinTech & Financial Investment Themes 2021

Our key 2021 investment themes and ideas in EM and S Europe banks, exchanges and data providers, digital payments companies and digital wealth...

Victor Galliano

Huifu Payments’ Management Led Privatisation Bid

Huifu announced a privatisation offer which includes a cash alternative (HK$3.50 cash per scheme share) and a share alternative. We believe that...

Arun George

China Internet Weekly (21Dec2020): Online Games Rated by Age, Online Platforms Banned from Deposit

Authorities announced the Age Rating of Online Game. Many online platforms stopped selling cash deposit products. Online payment amount grew by 28%...

Ming Lu

Huifu Payment (1806 HK): Early Withdrawal?

Shares are currently suspended, so there's nothing to be done as such. An Offer, possibly from the CEO, may be on the cards.

David Blennerhassett

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