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 analyse the changes of A/H premium on 136 stocks over the last week.</li>
<li>A/H premium increase was led by consumer Staples and consumer discretionary and industrials sectors.</li>
<li>We highlight A/H premium at 52 week peak: BYD, Xinjiang Gold Wind, Ganfeng Lithium. </li>
</ul>


We analyse the changes of A/H premium on 136 stocks over the last week.
A/H premium increase was led by consumer Staples and consumer discretionary and industrials sectors.
We highlight A/H premium at 52 week peak: BYD, Xinjiang Gold Wind, Ganfeng Lithium. 


A/H Premium Weekly: BYD, Xinjiang Gold Wind, Ganfeng Lithium

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Everbright Environment / Equity Bottom-Up

<ul>
<li>China's special purpose bonds (SPB) issuance by local governments stayed high for 4Q21; but as from NDRC, proceeds of these bonds will be used in 1Q22 to boost economic growth.</li>
<li>NDRC has already made early release of Rmb1.46trn SPB quota for 2022 to local governments, and provided guidance and supervision to ensure speedy and targeted use of proceeds in early-2022.</li>
<li>Both <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> are well placed to capture SPB-funded projects. Yet their valuations are still very appealing despite good YTD performance.</li>
</ul>


China's special purpose bonds (SPB) issuance by local governments stayed high for 4Q21; but as from NDRC, proceeds of these bonds will be used in 1Q22 to boost economic growth.
NDRC has already made early release of Rmb1.46trn SPB quota for 2022 to local governments, and provided guidance and supervision to ensure speedy and targeted use of proceeds in early-2022.
Both China Everbright Environment (257 HK) and China Communications Construction (1800 HK) are well placed to capture SPB-funded projects. Yet their valuations are still very appealing despite good YTD performance.


Special Purpose Bonds in 2022: Benefiting China Everbright Env (257 HK) & China Comm Const (1800 HK)

China Communications Construction / Equity Bottom-Up

3Q21 result of <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> (CCCC) marks another steady quarter with reported growth of 4.9% YoY. We believe the improvement in construction business has been partly offset by weaker toll road operation given the negative traffic impact from higher domestic COVID-19 cases during the summer time. Hence, recurring profit was weaker with a marginal 1.2% decline in 3Q21. Nonetheless, 9M21 vs. 9M19 still sees a steady CAGR of 4.8% in earnings. Also, there is good YoY growth in operating cash flow.We expect a recovery in traffic to bode well for CCCC's investment projects, adding to its good cost management and positive reversal in credit and asset impairments. The encouraging 3Q21 new contract momentum (+57.6% YoY) and the sharp rebound in overseas contracts signed is expected to underpin CCCC's outlook for the next two years. Valuation multiples are clearly still very undemanding - 0.21x P/B, 3.3x PER and 6% dividend yield.

3Q21 result of China Communications Construction (1800 HK) (CCCC) marks another steady quarter with reported growth of 4.9% YoY. We believe the improvement in construction business has been partly offset by weaker toll road operation given the negative traffic impact from higher domestic COVID-19 cases during the summer time. Hence, recurring profit was weaker with a marginal 1.2% decline in 3Q21. Nonetheless, 9M21 vs. 9M19 still sees a steady CAGR of 4.8% in earnings. Also, there is good YoY growth in operating cash flow.We expect a recovery in traffic to bode well for CCCC's investment projects, adding to its good cost management and positive reversal in credit and asset impairments. The encouraging 3Q21 new contract momentum (+57.6% YoY) and the sharp rebound in overseas contracts signed is expected to underpin CCCC's outlook for the next two years. Valuation multiples are clearly still very undemanding - 0.21x P/B, 3.3x PER and 6% dividend yield. 

China Comm Const (1800 HK): Sustaining a Stable Track in 3Q21

We welcome the strong rebound in new contracts signed by <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> (CCCC) in 3Q21, and believe it is set to maintain good momentum on the back of local governments' infrastructure spending and the recovery in overseas demand. New contracts signed for domestic market rose 52.9% YoY while overseas surged 113% in the quarter, fuelling a 57.6% YoY growth in total new contract signed. Such pace looks very encouraging when compared with the 10.2% YoY drop recorded in overall new contracts in 2Q21.With 9M21 new contract value amounted to Rmb1trn, CCCC has already achieved 86% of its annual new contract target, and it looks very likely that actual full-year figure will beat its guidance. We expect urban construction (48% of total 3Q21 new contract) will continue to fuel the growth, as local governments strive to achieve "common prosperity" by improving overall living standard. The acceleration in issuance of special purpose bonds in 2H21 will definitely boost the funding for more infrastructure construction, thus benefiting CCCC's contracts on hand, in our view.

We welcome the strong rebound in new contracts signed by China Communications Construction (1800 HK) (CCCC) in 3Q21, and believe it is set to maintain good momentum on the back of local governments' infrastructure spending and the recovery in overseas demand. New contracts signed for domestic market rose 52.9% YoY while overseas surged 113% in the quarter, fuelling a 57.6% YoY growth in total new contract signed. Such pace looks very encouraging when compared with the 10.2% YoY drop recorded in overall new contracts in 2Q21.With 9M21 new contract value amounted to Rmb1trn, CCCC has already achieved 86% of its annual new contract target, and it looks very likely that actual full-year figure will beat its guidance. We expect urban construction (48% of total 3Q21 new contract) will continue to fuel the growth, as local governments strive to achieve "common prosperity" by improving overall living standard. The acceleration in issuance of special purpose bonds in 2H21 will definitely boost the funding for more infrastructure construction, thus benefiting CCCC's contracts on hand, in our view. 

China Comm Const (1800 HK): Exciting New Contract Momentum Fuels Outlook

<a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> (CCCC) has a very solid 1H21 with net profit growth of 88.3% YoY. While the low base in 1H20 has exaggerated the growth rate; relative to 1H19, net profit still increased 18.3%, implying a healthy operational recovery back to pre-pandemic level. The remarkable 28.5% YoY increase in new contract value also demonstrated its strong foothold in the domestic market. All in all, we believe the market should be happy with CCCC's interim result. We believe CCCC will maintain good new contract momentum for the rest of the year as supported by the acceleration of issuance of special purpose bonds by local governments. Having already achieved 58% of its full-year target, there is potential for it to beat its FY21 expectation. The current excellent backlog, which equals to 4.75x its FY20 revenue, also implies that forward earnings are well secured. At 0.2x P/B, 2.8x PER and 6.6% dividend yield for FY21, we believe CCCC is grossly undervalued.

China Communications Construction (1800 HK) (CCCC) has a very solid 1H21 with net profit growth of 88.3% YoY. While the low base in 1H20 has exaggerated the growth rate; relative to 1H19, net profit still increased 18.3%, implying a healthy operational recovery back to pre-pandemic level. The remarkable 28.5% YoY increase in new contract value also demonstrated its strong foothold in the domestic market. All in all, we believe the market should be happy with CCCC's interim result. We believe CCCC will maintain good new contract momentum for the rest of the year as supported by the acceleration of issuance of special purpose bonds by local governments. Having already achieved 58% of its full-year target, there is potential for it to beat its FY21 expectation. The current excellent backlog, which equals to 4.75x its FY20 revenue, also implies that forward earnings are well secured. At 0.2x P/B, 2.8x PER and 6.6% dividend yield for FY21, we believe CCCC is grossly undervalued. 

China Comm Const (1800 HK): A Healthy 1H21 with Full Operational Recovery

China

China Railway Construction Corporation Ltd is a full service construction company.  The Company's services include construction operations, survey design and consulting. China Railway also has manufacturing operations, real estate operations, and logistics. The Company specializes in railway construction.

China Railway Construction Corp (1186 HK)

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China Railway Construction Corp (1186 HK)

A/H Premium Weekly: BYD, Xinjiang Gold Wind, Ganfeng Lithium

We highlight A/H premium increase led by consumer Staples and consumer discretionary and industrials sectors, and stocks at 52 week high: BYD,...

Ke Yan, CFA, FRM

Special Purpose Bonds in 2022: Benefiting China Everbright Env (257 HK) & China Comm Const (1800 HK)

We see local governments' special purpose bonds issuance and uses for 4Q21 and 1Q22 to benefit environmental and infrastructure construction...

Osbert Tang, CFA

China Comm Const (1800 HK): Sustaining a Stable Track in 3Q21

CCCC's flat 3Q21 reflects better construction but lower toll road profit, partly as traffic is disrupted by COVID-19 cases during summer. Outlook...

Osbert Tang, CFA

China Comm Const (1800 HK): Exciting New Contract Momentum Fuels Outlook

CCCC has a fruiful 3Q21 with overall new contract value grew 57.6% YoY, signficantly accelerated from 28.5% in 1H21. The strong rebound in overseas...

Osbert Tang, CFA

China Comm Const (1800 HK): A Healthy 1H21 with Full Operational Recovery

The market should welcome CCCC's 88.3% 1H21 profit growth, and we expect new contract momentum to stay strong. Its backlog covered 4.75x its FY20...

Osbert Tang, CFA

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52-week Range

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