Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of December 9th.</li>
<li>We estimate the weekly inflows to be US$1,068.5 million, led by consumer staples, consumer discretionary, health care sectors, and offset by information technology, industrials.</li>
<li>We highlight flows for  Midea, Wuliangye, Shenzhen Mindray, CATL, BYD, Yunnan Energy New Material, BJ-SH High Speed Rail, Goertek, Goodwe, Nari.</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of December 9th.
We estimate the weekly inflows to be US$1,068.5 million, led by consumer staples, consumer discretionary, health care sectors, and offset by information technology, industrials.
We highlight flows for  Midea, Wuliangye, Shenzhen Mindray, CATL, BYD, Yunnan Energy New Material, BJ-SH High Speed Rail, Goertek, Goodwe, Nari.


Northbound Flows (Dec 9th): Midea, Wuliangye, Shenzhen Mindray, CATL, BYD

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Beijing-Shanghai High Speed Ra / Equity Bottom-Up

The announcement by <a href="https://www.smartkarma.com/entities/beijing-shanghai-high-speed-railway-a" target="_blank" data-smartkarma-citation="entities:28433:1" rel="noopener">Beijing-Shanghai High Speed Railway (601816 CH)</a> to adjust its fare from a flat price to a floating range look apparently like a positive move, but we do not see any meaningful impact on its bottom line. The limited upside to the Second Class fare and the small number of Business Class seats suggested that the amount of benefits is immaterial. We estimate that, in a normal year, a 1% change in average passenger yield will only lift its profit by an equal 1%. However, the current consensus earnings forecasts, particularly for FY21, are too optimistic due to challenges including slow traffic recovery, inflexible cost structure and more severe loss at Beijing-Fuzhou Railway Anhui Co., Ltd. At 22.7x consensus EPS for FY21, it is still expensive and we continue to see risk of re-testing levels close to its IPO price of Rmb4.88.

The announcement by Beijing-Shanghai High Speed Railway (601816 CH) to adjust its fare from a flat price to a floating range look apparently like a positive move, but we do not see any meaningful impact on its bottom line. The limited upside to the Second Class fare and the small number of Business Class seats suggested that the amount of benefits is immaterial. We estimate that, in a normal year, a 1% change in average passenger yield will only lift its profit by an equal 1%. However, the current consensus earnings forecasts, particularly for FY21, are too optimistic due to challenges including slow traffic recovery, inflexible cost structure and more severe loss at Beijing-Fuzhou Railway Anhui Co., Ltd. At 22.7x consensus EPS for FY21, it is still expensive and we continue to see risk of re-testing levels close to its IPO price of Rmb4.88.

Beijing-Shanghai High Speed Railway (601816 CH): Adjustment in Fare Price Not of Much Help

It is disappointing to see <a href="https://www.smartkarma.com/entities/beijing-shanghai-high-speed-railway-a" target="_blank" data-smartkarma-citation="entities:28433:1" rel="noopener">Beijing-Shanghai High Speed Railway (601816 CH)</a>'s net profit for 2Q20 declined significantly on a QoQ basis (-36.1%). 1H20 net profit of Rmb530m is just 7.5% of full-year consensus forecasts, suggesting substantial downside earnings revisions. Also, with Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC) making a loss of Rmb1.23bn in 1H20, such acquisition has turned out to be a major drag. We believe the stock is expensive at 43.1x consensus PER. BSHR will continue to face challenges from the moderate pace of traffic recovery, highly inflexible cost structure and drag from BFRAC. We see risk for the stock to re-test levels close to its IPO price of Rmb4.88 given the headwinds.

It is disappointing to see Beijing-Shanghai High Speed Railway (601816 CH)'s net profit for 2Q20 declined significantly on a QoQ basis (-36.1%). 1H20 net profit of Rmb530m is just 7.5% of full-year consensus forecasts, suggesting substantial downside earnings revisions. Also, with Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC) making a loss of Rmb1.23bn in 1H20, such acquisition has turned out to be a major drag. We believe the stock is expensive at 43.1x consensus PER. BSHR will continue to face challenges from the moderate pace of traffic recovery, highly inflexible cost structure and drag from BFRAC. We see risk for the stock to re-test levels close to its IPO price of Rmb4.88 given the headwinds. 

Beijing-Shanghai High Speed Railway (601816 CH): Weaker 2Q20 QoQ Showed the Tough Environment

<a href="https://www.smartkarma.com/entities/beijing-shanghai-high-spe-a" target="_blank" data-smartkarma-citation="entities:28433:1" rel="noopener">Beijing-Shanghai High Speed Railway (601816 CH)</a> (BSHR) reported an 86.3% YoY drop in profit in 1Q20, dragged down by the COVID-19 outbreak and weak performance of its acquisition of Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC). We estimate that loss at BFRAC has more than doubled in 1Q20 and this will continue to put pressure on BSHR.Railway passenger traffic recovery is still bumpy, with national traffic still down by 62.3% YoY in 1-4 May during the Labour Day holidays. We see the consensus forecast of a 15% profit drop (and 26.5% EPS decline due to dilution) in FY20 too optimistic, and is difficult to justify its 31.7x PER for FY20F and 24.6x for FY21F.

Beijing-Shanghai High Speed Railway (601816 CH) (BSHR) reported an 86.3% YoY drop in profit in 1Q20, dragged down by the COVID-19 outbreak and weak performance of its acquisition of Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC). We estimate that loss at BFRAC has more than doubled in 1Q20 and this will continue to put pressure on BSHR.Railway passenger traffic recovery is still bumpy, with national traffic still down by 62.3% YoY in 1-4 May during the Labour Day holidays. We see the consensus forecast of a 15% profit drop (and 26.5% EPS decline due to dilution) in FY20 too optimistic, and is difficult to justify its 31.7x PER for FY20F and 24.6x for FY21F.

Beijing-Shanghai High Speed Railway (601816 CH): Poor 1Q20, Difficult to Justify High Multiples

<a href="https://www.smartkarma.com/entities/beijing-shanghai-high-spe-a" target="_blank" data-smartkarma-citation="entities:28433:1" rel="noopener">Beijing-Shanghai High Speed Railway (601816 CH)</a> (BSHR) announced a profit of Rmb11.9bn (+16.5% YoY) in FY19, which is at the high-end of its IPO indicated range. This is primarily driven by lower cost of services and finance cost; but its 5.7% increase in revenue does not look impressive.We see FY20 to be challenging. Not only that the COVID-19 outbreak will drag on its profitability, the inability to raise passenger yield, the slightly higher price tag of acquisition of Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC) and the likely bigger loss at BFRAC are added burdens. Consensus forecasts showed that EPS will NOT return to the FY19 level even in FY22, making the stock difficult to justify a 30.5x PER for FY20.

Beijing-Shanghai High Speed Railway (601816 CH) (BSHR) announced a profit of Rmb11.9bn (+16.5% YoY) in FY19, which is at the high-end of its IPO indicated range. This is primarily driven by lower cost of services and finance cost; but its 5.7% increase in revenue does not look impressive.We see FY20 to be challenging. Not only that the COVID-19 outbreak will drag on its profitability, the inability to raise passenger yield, the slightly higher price tag of acquisition of Beijing-Fuzhou Railway Anhui Co., Ltd (BFRAC) and the likely bigger loss at BFRAC are added burdens. Consensus forecasts showed that EPS will NOT return to the FY19 level even in FY22, making the stock difficult to justify a 30.5x PER for FY20.   

Beijing-Shanghai High Speed Railway (601816 CH): Good FY19 Result Means Nothing for FY20

China

Beijing-Shanghai High Speed Railway Co., Ltd. provides railway operation services. The Company offers high-speed railway and stations investment, construction, operation, and other services. Beijing-Shanghai High Speed Railway provides services in China.

Beijing-Shanghai High Speed Ra (601816 CH)

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Beijing-Shanghai High Speed Ra (601816 CH)

Northbound Flows (Dec 9th): Midea, Wuliangye, Shenzhen Mindray, CATL, BYD

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlight flows for Midea, Wuliangye, Shenzhen Mindray, CATL, BYD.

Ke Yan, CFA, FRM

Beijing-Shanghai High Speed Railway (601816 CH): Adjustment in Fare Price Not of Much Help

Beijing-Shanghai High Speed Railway's fare adjustment will not bring much positive bottom line impact. It is expensive at 22.7x FY21 PER, despite a...

Osbert Tang, CFA

Beijing-Shanghai High Speed Railway (601816 CH): Weaker 2Q20 QoQ Showed the Tough Environment

It is disappointing to see Beijing-Shanghai High Speed Railway (601816 CH)'s net profit for 2Q20 declined significantly on a QoQ basis (-36.1%)....

Osbert Tang, CFA

Beijing-Shanghai High Speed Railway (601816 CH): Poor 1Q20, Difficult to Justify High Multiples

Beijing-Shanghai High Speed Railway (601816 CH) (BSHR) reported an 86.3% YoY drop in profit in 1Q20, dragged down by the COVID-19 outbreak and weak...

Osbert Tang, CFA

Beijing-Shanghai High Speed Railway (601816 CH): Good FY19 Result Means Nothing for FY20

Beijing-Shanghai High Speed Railway (601816 CH) (BSHR) announced a profit of Rmb11.9bn (+16.5% YoY) in FY19, which is at the high-end of its IPO...

Osbert Tang, CFA

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