Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a> has announced it intends to <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0216/2021021600739.pdf" target="_blank" rel="noopener">spin-off JD Logistics</a> (JDL) by way of a separate listing on the Hong Kong Stock Exchange. The PN15 application proof is <a href="https://www1.hkexnews.hk/app/sehk/2021/103201/documents/sehk21021600660.pdf" target="_blank" rel="noopener">here</a>.</p>
<p>JD.com currently holds 79.12% of JDL. According to the China Insights Consultancy report, JDL is the largest player in China’s integrated supply chain service market, in terms of total revenue in 2019.</p>
<p>Upon completion of the proposed spin-off,  JD.com will continue to indirectly hold more than 50% of the shares in JDL.</p>
<p>There remain a few missing pieces to the spin-off - there are 991 "Redacted" spaces in the PN15. But this will be a big deal. What it may not be, is a big deal to JD.com in the grand scheme of things.</p>
<p>As always, more below the fold. </p>

JD.com (HK) (9618 HK) has announced it intends to spin-off JD Logistics (JDL) by way of a separate listing on the Hong Kong Stock Exchange. The PN15 application proof is here.
JD.com currently holds 79.12% of JDL. According to the China Insights Consultancy report, JDL is the largest player in China’s integrated supply chain service market, in terms of total revenue in 2019.
Upon completion of the proposed spin-off,  JD.com will continue to indirectly hold more than 50% of the shares in JDL.
There remain a few missing pieces to the spin-off - there are 991 "Redacted" spaces in the PN15. But this will be a big deal. What it may not be, is a big deal to JD.com in the grand scheme of things.
As always, more below the fold. 

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>On 22 December 2020 post market close, Hang Seng Indexes (HSIL) released the consultation paper on the "Proposal to enhance 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> as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants had until 24 January to submit their views to HSIL.</p><p>HSIL are scheduled to announce the changes to 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> as a part of the March review on 26 February. There is a high probability that the conclusions of the market consultation will be announced on the same day.</p><p>Given some large new listings since then and the price movements on the stocks, we refresh our list of potential inclusions and exclusions assuming that HSIL go up to 65 names or 80 names.</p><p>In both cases, the turnover is very high in percentage terms and in dollar terms. HSIL will need to implement the changes over 1 year.</p><p>We continue to believe that the market will probably be fine with increasing the number of constituents to 65, but will likely balk at going up to 80 in one shot.</p><p>Financials would see the largest decrease in weight, offset by gains in Information Technology, Consumer Discretionary, Properties, Healthcare, Consumer Staples and Utilities.</p>

On 22 December 2020 post market close, Hang Seng Indexes (HSIL) released the consultation paper on the "Proposal to enhance the Hong Kong Hang Seng Index (HSI INDEX) as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants had until 24 January to submit their views to HSIL.HSIL are scheduled to announce the changes to the Hong Kong Hang Seng Index (HSI INDEX) as a part of the March review on 26 February. There is a high probability that the conclusions of the market consultation will be announced on the same day.Given some large new listings since then and the price movements on the stocks, we refresh our list of potential inclusions and exclusions assuming that HSIL go up to 65 names or 80 names.In both cases, the turnover is very high in percentage terms and in dollar terms. HSIL will need to implement the changes over 1 year.We continue to believe that the market will probably be fine with increasing the number of constituents to 65, but will likely balk at going up to 80 in one shot.Financials would see the largest decrease in weight, offset by gains in Information Technology, Consumer Discretionary, Properties, Healthcare, Consumer Staples and Utilities.

HSI Market Consultation - Name Changes as We Await the Conclusions

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Kuaishou Technology / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Kuaishou will commence trading on Friday, 05 February. Kuaishou priced its IPO at HK$115 and <a href="http://www.aastocks.com/en/stocks/news/aafn-con/NOW.1074361/ipo-news" target="_blank" rel="noopener">opened 1x higher</a> at HK$230 in the grey market and last stood at HK$278.</p></div><div><p>In <a href="https://www.smartkarma.com/insights/kuaishou-ipo-initiation-dancing-to-its-own-tune" target="_blank" data-smartkarma-citation="insights:45032" rel="noopener">Kuaishou IPO Initiation: Dancing to Its Own Tune</a>, we stated that while Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive. In <a href="https://www.smartkarma.com/insights/kuaishou-ipo-thrill-seekers" target="_blank" data-smartkarma-citation="insights:47104" rel="noopener">Kuaishou IPO: Thrill Seekers</a>, we noted that the PHIP which discloses 9M20 results and key operating data for 11M20 reinforces our view that Kuaishou is worth a look. In <a href="https://www.smartkarma.com/insights/kuaishou-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:47381" rel="noopener">Kuaishou IPO: Valuation Insights</a>, we noted that the IPO price range is attractive.</p></div><div><div><div class="content-highlight"><p>Updating for the final IPO net raise, our base-case DCF derived price target of HK$137.42 per share. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis shows that the IPO price is attractive but the grey market price is fully priced. </p></div></div></div>

Kuaishou Technology (1024 HK) is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Kuaishou will commence trading on Friday, 05 February. Kuaishou priced its IPO at HK$115 and opened 1x higher at HK$230 in the grey market and last stood at HK$278.In Kuaishou IPO Initiation: Dancing to Its Own Tune, we stated that while Kuaishou’s performance over the track record period is distorted due to various factors, we believe that the underlying fundamentals are attractive. In Kuaishou IPO: Thrill Seekers, we noted that the PHIP which discloses 9M20 results and key operating data for 11M20 reinforces our view that Kuaishou is worth a look. In Kuaishou IPO: Valuation Insights, we noted that the IPO price range is attractive.Updating for the final IPO net raise, our base-case DCF derived price target of HK$137.42 per share. As DCF-based target prices are subject to a wide range of variability, we present a sensitivity table to help investors gauge where target prices could head. Our DCF sensitivity analysis shows that the IPO price is attractive but the grey market price is fully priced. 

<p>There are a lot of changes expected to 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> over the next 6 months.</p><p><a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.</p><p>The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.</p><p>At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.</p><p>There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, JD Logistics, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>'s Douyin and a possible revival of the shelved <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> IPO.</p><p>Then there is the possibility of some large 'homecoming' listings getting included 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> over the next few reviews. <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> as other names on the list.</p><p>In this Insight, we lay out the potential roadmap of upcoming changes to 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> along with the impact on the stocks.</p>

There are a lot of changes expected to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months.Kuaishou Technology (1024 HK) lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are DiDi Chuxing (1284375D CH), JD Logistics, ByteDance (1460967D CH)'s Douyin and a possible revival of the shelved Ant Group (6688 HK) IPO.Then there is the possibility of some large 'homecoming' listings getting included in the Hang Seng China Enterprises Index (HSCEI INDEX) over the next few reviews. Baidu (BIDU US) is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with Pinduoduo (PDD US) and Bilibili Inc (BILI US) as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to the Hang Seng China Enterprises Index (HSCEI INDEX) along with the impact on the stocks.

HSCEI Index Rebalances - The Year of the Ox and of More Change

<p><a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Helped by a strong reception by both institutional and retail investors, Kuaishou is likely to price at the top-end of the IPO price range of HK$105-115 per share, according to press reports. The shares will start trading on 5 February.</p><div class="content-highlight"><p>The stage seems set for Kuaishou to follow the strong post-listing performance of recent tech listings in Hong Kong and the US. Early indications suggest that Kuaishou's grey market price has hit HK$250 per share, slightly more than twice the rumoured IPO price, <a href="http://www.aastocks.com/en/stocks/news/aafn-con/NOW.1073287/ipo-news" target="_blank" rel="noopener">according to Chinese media</a>. Our analysis suggests that a valuation of 2x the rumoured IPO price of HK$115 per share can be justified on stretched but plausible assumptions.</p></div>

Kuaishou Technology (1024 HK) is the second-largest short video platform by average DAUs (daily active users) in 9M20, according to iResearch. Helped by a strong reception by both institutional and retail investors, Kuaishou is likely to price at the top-end of the IPO price range of HK$105-115 per share, according to press reports. The shares will start trading on 5 February.The stage seems set for Kuaishou to follow the strong post-listing performance of recent tech listings in Hong Kong and the US. Early indications suggest that Kuaishou's grey market price has hit HK$250 per share, slightly more than twice the rumoured IPO price, according to Chinese media. Our analysis suggests that a valuation of 2x the rumoured IPO price of HK$115 per share can be justified on stretched but plausible assumptions.

Kuaishou IPO: Is It Worth Twice the IPO Price?

China

JD Health International Inc. operates drug stores. The Company retails Chinese and Western medicines, nutrition products, health care products, and other products. JD Health International markets its products throughout China.

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JD Health International (6618 HK)

JD.Com: Logistics Ops Spin-Off

Since JDH's listing, the stub has increased ~US$18.5bn., equivalent to ~12% of the market cap. The consensus target price is up around 8%. I would...

David Blennerhassett

HSI Market Consultation - Name Changes as We Await the Conclusions

The conclusions of the HSI market consultation could be announced on 26 Feb along with the March review. Given recent large listings and price...

Brian Freitas

Kuaishou IPO: Trading Debut

Kuaishou priced its IPO at HK$115 and the grey market price last stood at HK$278. Our DCF sensitivity analysis shows that the grey market price is...

Arun George

HSCEI Index Rebalances - The Year of the Ox and of More Change

There will be a lot of changes to the HSCEI this year that will impact the sectoral composition and open up trading opportunities on the stocks and...

Brian Freitas

Kuaishou IPO: Is It Worth Twice the IPO Price?

Kuaishou's grey market price has hit HK$250 per share, slightly more than 2x the IPO price of HK$115. Our analysis suggests that this valuation can...

Arun George

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