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 monthly Hong Kong Connect flows with our data engine.</li>
<li>We tabulate the top stocks by inflows, outlfows, and holding by mainland investors.</li>
<li>Inflows last month amounted to USD 5.7bn which marks sixth months of inflows. Top three stocks southbound investors bought were Meituan, CNOOC, and Tencent.</li>
</ul>


We analyze the monthly Hong Kong Connect flows with our data engine.
We tabulate the top stocks by inflows, outlfows, and holding by mainland investors.
Inflows last month amounted to USD 5.7bn which marks sixth months of inflows. Top three stocks southbound investors bought were Meituan, CNOOC, and Tencent.


Hong Kong Connect Flows Monthly (May): Meituan, CNOOC, Tencent

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Huarong Asset Management / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-huarong-asset-management" target="_blank" data-smartkarma-citation="entities:968:1" rel="noopener">China Huarong Asset Management (2799 HK)</a>, which is expected to be in contravention of Hong Kong's public float, is contemplating the "full circulation" of some domestic shares. </li>
<li>If implemented, the conversion of these domestic shares would be largely ceremonial.</li>
<li>To date, 28 companies have sought approval to convert their domestic shares and/or unlisted foreign shares into H shares on the Hong Kong exchange. </li>
</ul>



China Huarong Asset Management (2799 HK), which is expected to be in contravention of Hong Kong's public float, is contemplating the "full circulation" of some domestic shares. 
If implemented, the conversion of these domestic shares would be largely ceremonial.
To date, 28 companies have sought approval to convert their domestic shares and/or unlisted foreign shares into H shares on the Hong Kong exchange. 


China Huarong (2799 HK)'s Full Circulation

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

China Conch Environment Protection Holdings / Equity Capital Markets

China Conch Environment Protection Holdings

We believe the spin-off by introduction of <a href="https://www.smartkarma.com/entities/china-conch-environment-protection-holdings-limited" target="_blank" data-smartkarma-citation="entities:34405:1" rel="noopener">China Conch Environment Protection Holdings (CEP HK)</a> by <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> will leave more clarity to the business of both companies. Fundamentally speaking, we think CEP is a solid company with a focus on cement kiln waste treatment services for solid and hazardous waste in China.The key positives for CEP are a leadership position in the industry, excellent new project pipeline momentum and strong relationship with its partners, in our view. However, the key negatives are declining margins, concentrated business lines and small market capitalisation. We estimate that CEP's market cap will be just HK$4.98bn and HK$6.38bn, based on the average PER of the peers (5.9x) and high-end of peers (7.6x).

We believe the spin-off by introduction of China Conch Environment Protection Holdings (CEP HK) by China Conch Venture Holdings (586 HK) will leave more clarity to the business of both companies. Fundamentally speaking, we think CEP is a solid company with a focus on cement kiln waste treatment services for solid and hazardous waste in China.The key positives for CEP are a leadership position in the industry, excellent new project pipeline momentum and strong relationship with its partners, in our view. However, the key negatives are declining margins, concentrated business lines and small market capitalisation. We estimate that CEP's market cap will be just HK$4.98bn and HK$6.38bn, based on the average PER of the peers (5.9x) and high-end of peers (7.6x). 

Conch Environment: Initial Thoughts on the Listing by Way of Introduction

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

What is the key question? Are we at the start of another 12-year bull market in value stocks? That's the duration of the last period when the value style of investing out performed growth in the Asia Pacific region.What is the evidence? Over the last 12-months, the balance between growth and value reversed the dominance that growth has held for much of the last 10-years. Whilst in Q1 2021, we remained cautious about a full declaration that the trend is reversing, we feel that the process is indeed underway and that a multi-year reversal is in progress. This is not just positive for value investors, but increasingly so for Small-Mid Cap investors.Why read this screening note? Q1 2021’s screen performance trumped the market delivering relative outperformance of 26.2%. Of the 27 names presented, 18 stocks delivered positive share price performance with an average increase of 21%, whilst the remaining 9 stocks declined 9.4 %. What is presented? 56 names appear in our Q3 2021 Asia Pacific list providing plenty of opportunity for investors. The average EV/FCF multiple of 5.2x in Q3 2021 compared to 6.3x in Q1 2021 and 5.6x in Q2 2020. The average Free Cashflow multiple on equity is 4.6x in Q3 2021 versus 4.2x in Q1 2021.

What is the key question? Are we at the start of another 12-year bull market in value stocks? That's the duration of the last period when the value style of investing out performed growth in the Asia Pacific region.What is the evidence? Over the last 12-months, the balance between growth and value reversed the dominance that growth has held for much of the last 10-years. Whilst in Q1 2021, we remained cautious about a full declaration that the trend is reversing, we feel that the process is indeed underway and that a multi-year reversal is in progress. This is not just positive for value investors, but increasingly so for Small-Mid Cap investors.Why read this screening note? Q1 2021’s screen performance trumped the market delivering relative outperformance of 26.2%. Of the 27 names presented, 18 stocks delivered positive share price performance with an average increase of 21%, whilst the remaining 9 stocks declined 9.4 %. What is presented? 56 names appear in our Q3 2021 Asia Pacific list providing plenty of opportunity for investors. The average EV/FCF multiple of 5.2x in Q3 2021 compared to 6.3x in Q1 2021 and 5.6x in Q2 2020. The average Free Cashflow multiple on equity is 4.6x in Q3 2021 versus 4.2x in Q1 2021.

Screening the Silk Road: Q3 2021 All Cap Screening - Free Cashflow (FCF)

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For 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>, there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> was a forecast inclusion 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> but was not expected to be included 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>. Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.<a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK). One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.Li Ning Co Ltd (2331 HK) was a forecast inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) but was not expected to be included in the Hong Kong Hang Seng Index (HSI INDEX). Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.JD Logistics (2618 HK) is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

China

China National Building Material Company Limited manufactures cement products. The Company produces silica cements, commodity concretes, cement clinkers, and other products. China National Building Material also produces glass fibers, composite materials, and other products.

China National Building Material (3323 HK)

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China National Building Material (3323 HK)

Hong Kong Connect Flows Monthly (May): Meituan, CNOOC, Tencent

Inflows last month amounted to USD 5.7bn which marks sixth months of inflows. Top three stocks southbound investors bought were Meituan, CNOOC, and...

Ke Yan, CFA, FRM

China Huarong (2799 HK)'s Full Circulation

China Huarong Asset Management, which is expected to be in breach of Hong Kong's public float, is contemplating "full circulation" of some domestic...

David Blennerhassett

Conch Environment: Initial Thoughts on the Listing by Way of Introduction

Conch Environment's key postives are leadership position, good pipeline and strong partner relations. The key negatives are declining margins,...

Osbert Tang, CFA

Screening the Silk Road: Q3 2021 All Cap Screening - Free Cashflow (FCF)

Is it the start of a 12-year bull market in value? That's the duration of the last period when APAC value outperformed growth. Q'1s FCF screen...

David Lepper

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Li Ning and JD Logistics have been added to the HSCEI while Anhui Conch and Shimao Prop have been deleted. Alibaba's weight in the index will be...

Brian Freitas

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52-week Range

Market Cap (USDm)

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