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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.</li>
<li>We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.</li>
<li>There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.</li>
</ul>


We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.


HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

Analyst

Steve

Equity Bottom-Up

China Overseas Property / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-overseas-property-holdings-ltd" target="_blank" data-smartkarma-citation="entities:22794:1" rel="noopener">China Overseas Property (2669 HK)</a> announced an acquisition on October 11 of a technical consultancy business from China State Construction Development (830 HK), a sister company. </li>
<li>The deal consideration will be not higher than HKD950m, which amounts to a PE ratio of 17.5x based on estimated 2023 earnings of the acquired business.</li>
<li>In the current extremely shaky market, this kind of deal is very damaging to the market confidence of the stock.  Further derating is likely. </li>
</ul>



China Overseas Property (2669 HK) announced an acquisition on October 11 of a technical consultancy business from China State Construction Development (830 HK), a sister company. 
The deal consideration will be not higher than HKD950m, which amounts to a PE ratio of 17.5x based on estimated 2023 earnings of the acquired business.
In the current extremely shaky market, this kind of deal is very damaging to the market confidence of the stock.  Further derating is likely. 


China Overseas Property (2669 HK):  Questionable Acquisition From Sister Company

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

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 Capital Markets

Horizon Construction Development / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/horizon-construction-development" target="_blank" data-smartkarma-citation="entities:35117:1" rel="noopener">Horizon Construction Development (1887128D HK)</a> is looking to raise US$250m in its upcoming Hong Kong IPO.</li>
<li>HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.</li>
<li>In our previous note, we looked at the company’s past performance. In this note, we take a look at the company’s refiled PHIP updates.</li>
</ul>



Horizon Construction Development (1887128D HK) is looking to raise US$250m in its upcoming Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In our previous note, we looked at the company’s past performance. In this note, we take a look at the company’s refiled PHIP updates.


Horizon Construction Dev Pre-IPO - Refiled PHIP Updates - Affected by COVID-19 & Fueled by More Debt

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

China State Construction Development / Equity Bottom-Up

In our last report on <a href="https://www.smartkarma.com/entities/china-state-construction-development-holdings" target="_blank" data-smartkarma-citation="entities:3892:1" rel="noopener">China State Construction Development (830 HK)</a> entitled <a href="https://www.smartkarma.com/insights/china-state-construction-development-830-hk-a-short-term-opportunity-with-tremendous-upside" target="_blank" data-smartkarma-citation="insights:54001" rel="noopener">China State Construction Development (830 HK): A Short-Term Opportunity with Tremendous Upside</a>, we highlighted an opportunity to play the name before its results due to our belief that the company would report a profit alert. With this catalyst playing out now, we see limited upside in the short term.Notable highlights of the result and our conversations with management:<ul>
<li>New orders increased by 76% YoY from 2.5 bn HKD to 4.5 bn HKD in H1 FY21.</li>
<li>A 50 bps increase in gross profit margin from 13.6% to 14.1%.</li>
<li>A stated intention of decreasing net gearing from 38.7% to 10% by the end of FY21. </li>
<li>A goal of paying out 40-50% of the net profits as dividends.</li>
</ul>We believe that the stock has a reasonable valuation of 13x FY21 and 10x FY22 but provides a limited upside.  We expect a drop in profits (in line with previous years ) HoH, but an increase YoY by 70-80%.

In our last report on China State Construction Development (830 HK) entitled China State Construction Development (830 HK): A Short-Term Opportunity with Tremendous Upside, we highlighted an opportunity to play the name before its results due to our belief that the company would report a profit alert. With this catalyst playing out now, we see limited upside in the short term.Notable highlights of the result and our conversations with management:
New orders increased by 76% YoY from 2.5 bn HKD to 4.5 bn HKD in H1 FY21.
A 50 bps increase in gross profit margin from 13.6% to 14.1%.
A stated intention of decreasing net gearing from 38.7% to 10% by the end of FY21. 
A goal of paying out 40-50% of the net profits as dividends.
We believe that the stock has a reasonable valuation of 13x FY21 and 10x FY22 but provides a limited upside.  We expect a drop in profits (in line with previous years ) HoH, but an increase YoY by 70-80%.

China State Construction: Great Numbers, But Taking a Breather for Now

<a href="https://www.smartkarma.com/entities/china-state-construction-dev" target="_blank" data-smartkarma-citation="entities:3892:1" rel="noopener">Far East Global (830 HK)</a>, now known as China State Construction Development Holdings (CSCD), a subsidiary of <a href="https://www.smartkarma.com/entities/china-state-construction-int-l-holdings" target="_blank" data-smartkarma-citation="entities:10038:1" rel="noopener">China State Construction Int'L (3311 HK)</a>, presents an excellent short-term opportunity with an upside north of 50% ( from the current share price of 1.2 HKD).
We like this one-stop façade solution service provider for the following reasons:
<ul>
<li>Strong brand name in the curtain wall business in Hong Kong and Macau.</li>
<li>Margin expansion story due to the phasing out of US/Canada business and HK/Macau and China growth.</li>
<li>Potential for profit alert for H1 2021 and potential to increase dividend payout ratio.</li>
<li>Massive growth opportunity in China.</li>
</ul>
Risk 
<ol>
<li>A downturn estate for China and Hong Kong.</li>
<li>Issues relating to execution in phasing out of the overseas business.</li>
</ol>

Far East Global (830 HK), now known as China State Construction Development Holdings (CSCD), a subsidiary of China State Construction Int'L (3311 HK), presents an excellent short-term opportunity with an upside north of 50% ( from the current share price of 1.2 HKD).
We like this one-stop façade solution service provider for the following reasons:

Strong brand name in the curtain wall business in Hong Kong and Macau.
Margin expansion story due to the phasing out of US/Canada business and HK/Macau and China growth.
Potential for profit alert for H1 2021 and potential to increase dividend payout ratio.
Massive growth opportunity in China.

Risk 

A downturn estate for China and Hong Kong.
Issues relating to execution in phasing out of the overseas business.


China State Construction Development (830 HK): A Short-Term Opportunity with Tremendous Upside

Hong Kong

China State Construction Development Holdings Limited operates as an exterior engineering contractor and solutions provider. The Company offers one-stop curtain wall services. China State Construction Development Holdings operates projects the United Kingdom, United States, Canada, Dubai, Singapore, Japan, Australia, Chile, and other overseas markets.

China State Construction Development (830 HK)

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China State Construction Development (830 HK)

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

There could be nearly 80 adds/deletes for the HSCI in September. That will trigger changes to the Southbound Stock Connect list and increase flows...

Brian Freitas

China Overseas Property (2669 HK): Questionable Acquisition From Sister Company

China Overseas Property (2669 HK) acquires technical consultancy business from sister company China State Construction Development (830 HK) for up...

Steve

Horizon Construction Dev Pre-IPO - Refiled PHIP Updates - Affected by COVID-19 & Fueled by More Debt

Horizon Construction Development (1887128D HK) is looking to raise US$250m in its upcoming Hong Kong IPO. In this note, we take a look at the...

Ethan Aw

China State Construction: Great Numbers, But Taking a Breather for Now

Leading curtain wall solution provider in HK and Macau trading at 13x FY21 and 10x FY22 PE provides a decent dividend yield of 3.5%.

Sameer Taneja