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

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Oct 22.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Xiaomi Corporation (1810 HK) (HKD 147.5 million worth of buybacks), China Gas Holdings Limited (384 HK) (HKD 75.9 million worth of buybacks), Sihuan Pharmaceutical Holdings Group Ltd. (460 HK) (HKD 70.2 million worth of buybacks).

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Oct 22.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Xiaomi Corporation (1810 HK) (HKD 147.5 million worth of buybacks), China Gas Holdings Limited (384 HK) (HKD 75.9 million worth of buybacks), Sihuan Pharmaceutical Holdings Group Ltd. (460 HK) (HKD 70.2 million worth of buybacks).

Hong Kong Buybacks: Xiaomi, China Gas, Sihuan

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Oct 8th.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Xiaomi Corporation (1810 HK) (HKD 242.3 million worth of buybacks), China Gas Holdings Limited (384 HK) (HKD 125.0 million worth of buybacks), Tencent Holdings Limited (700 HK) (HKD 105.6 million worth of buybacks).

Hong Kong Exchange publishes share repurchases by listed companies on a daily basis. In our weekly note, we will provide statistics on top repurchases over one week, one month, one quarter and one year periods ended on Oct 8th.In the past 7 days, the top 3 companies that repurchased the most shares from the market were Xiaomi Corporation (1810 HK) (HKD 242.3 million worth of buybacks), China Gas Holdings Limited (384 HK) (HKD 125.0 million worth of buybacks), Tencent Holdings Limited (700 HK) (HKD 105.6 million worth of buybacks).

Hong Kong Buybacks: Xiaomi, China Gas, Tencent

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

We touched base with <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> to seek answers on five questions that we think are of significant interests to investors. These include topics on the impact of the rally in LNG price, mechanism for retail gas price adjustment, outlook for dollar margin, impact on the terminal and processing segment, gas volume availability and the future of the E&amp;P segment. These questions are all well answered by Kunlun's management.Overall, based on our discussions, the impact of higher LNG price on Kunlun's profitability and dollar margin should be manageable. It has secured enough gas sources and there should not be worries on shortage. We also anticipate the earnings volatility caused by the upstream E&amp;P business will be sharply lower in two to three years' time; and with better earnings stability and quality, Kunlun should continue to see re-rating.

We touched base with Kunlun Energy (135 HK) to seek answers on five questions that we think are of significant interests to investors. These include topics on the impact of the rally in LNG price, mechanism for retail gas price adjustment, outlook for dollar margin, impact on the terminal and processing segment, gas volume availability and the future of the E&amp;P segment. These questions are all well answered by Kunlun's management.Overall, based on our discussions, the impact of higher LNG price on Kunlun's profitability and dollar margin should be manageable. It has secured enough gas sources and there should not be worries on shortage. We also anticipate the earnings volatility caused by the upstream E&amp;P business will be sharply lower in two to three years' time; and with better earnings stability and quality, Kunlun should continue to see re-rating.

Kunlun Energy (135 HK): Five Questions to Management Get Answered

<a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> disclosed that it has reached agreement to dispose of its 25% stake in the K&amp;K oilfields in Azerbaijan. Although the transaction is relatively small given that it does not pass the 5% threshold of the listing rule, we still think such a small move has big positive meaning. In our view, the disposal marks an important step in its plan to exit the volatile Exploration &amp; Production segment which dragged on its valuation; and the market should welcome this.The current high oil price environment is good for Kunlun from both an operational and a transactional point of view. We estimate that at crude oil price of US$75/bbl, the E&amp;P segment may bring in an addition of at least Rmb300-400m of pre-tax profit in 2H21. Despite the good share price movement YTD (+73% including dividends), it is still trading on just 11x PER for FY21, the cheapest among its key peers. The removal of a volatile E&amp;P segment from its business portfolio should narrow Kunlun's discount, in our view.

Kunlun Energy (135 HK) disclosed that it has reached agreement to dispose of its 25% stake in the K&amp;K oilfields in Azerbaijan. Although the transaction is relatively small given that it does not pass the 5% threshold of the listing rule, we still think such a small move has big positive meaning. In our view, the disposal marks an important step in its plan to exit the volatile Exploration &amp; Production segment which dragged on its valuation; and the market should welcome this.The current high oil price environment is good for Kunlun from both an operational and a transactional point of view. We estimate that at crude oil price of US$75/bbl, the E&amp;P segment may bring in an addition of at least Rmb300-400m of pre-tax profit in 2H21. Despite the good share price movement YTD (+73% including dividends), it is still trading on just 11x PER for FY21, the cheapest among its key peers. The removal of a volatile E&amp;P segment from its business portfolio should narrow Kunlun's discount, in our view. 

Kunlun Energy (135 HK): Small Move, Big Meaning

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The September rebalance of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.With Hang Seng Indexes looking to get up to 80 <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.Stocks that are ranked towards the top of their Industry group and are potential inclusions are <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-beer-holdings" target="_blank" data-smartkarma-citation="entities:399:1" rel="noopener">China Resources Beer Holdings (291 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>, <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a>, <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>.Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.

The September rebalance of the Hong Kong Hang Seng Index (HSI INDEX) was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.Stocks that are ranked towards the top of their Industry group and are potential inclusions are Smoore International (6969 HK), Nongfu Spring (9633 HK), China Resources Beer Holdings (291 HK), China Resources Mixc Lifestyle Services (1209 HK), Sunac China Holdings (1918 HK), China Gas Holdings (384 HK), JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK), China Hongqiao (1378 HK) and Fosun International (656 HK).Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.

HSI Index Rebalance Preview: Potential Inclusions in December

Hong Kong

China Gas Holdings Ltd. invests in, operates and manages natural gas distribution pipelines.  The Company distributes and sells natural gas to residential, commercial and industrial users, and bottles and sells compressed natural gas.  China Gas also constructs and operates gas stations.

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China Gas Holdings (384 HK)

Hong Kong Buybacks: Xiaomi, China Gas, Sihuan

We highlight the top 3 companies that repurchased the most shares from the market were Xiaomi (1810 HK), China Gas Holdings Limited (384 HK),...

Ke Yan, CFA, FRM

Hong Kong Buybacks: Xiaomi, China Gas, Tencent

We highlight the top 3 companies that repurchased the most shares from the market were Xiaomi (1810 HK), China Gas Holdings (384 HK), Tencent (700...

Ke Yan, CFA, FRM

Kunlun Energy (135 HK): Five Questions to Management Get Answered

The impact of higher LNG price on the dollar margin and profitability of Kunlun's city gas projects should be manageable. Earnings volatility from...

Osbert Tang, CFA

Kunlun Energy (135 HK): Small Move, Big Meaning

The disposal of the Azerbaijan oilfields, though a small transaction, has significant implication. Kunlun will increasingly become a pure gas...

Osbert Tang, CFA

HSI Index Rebalance Preview: Potential Inclusions in December

There could be 10 inclusions to the HSI at the Dec rebalance to help reach the 80 index member count by mid-2022. Index turnover & regulations will...

Brian Freitas

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